Area businesses starting to ask about federal Payroll Protection Program because of COVID-19

Area businesses starting to ask about federal Payroll Protection Program

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Angie Hibben, president and CEO of the Oswego Area Chamber of Commerce, said there already has been some interest about $350 billion in federal emergency loans available for small businesses that the U.S. Congress approved last week to help keep workers on payroll during the coronavirus pandemic.

Hibben said she’s aware of some businesses already consulting their accountants about whether it would be a wiser business decision for them to try to take a loan through the program to keep loyal workers retained or to lay off those employees. She said some businesses still are hesitant about taking out the loans, however.

“Because they don’t know how long this is going to be and if they’re going to be able to pay [the loans] back,” Hibben said. “You don’t know how long it’s going to take for them to recover.”

The Paycheck Protection Program – which is part of the Coronavirus Aid, Relief, and Economic Security, or CARES Act – is meant to provide cash-flow assistance through 100% federally guaranteed loans to small businesses or 501(c)3 nonprofits with fewer than 500 employees who maintain their payroll during the COVID-19 emergency. Businesses who have been affected by the coronavirus outbreak between Feb. 15 and June 30 would be able to apply for the loans.

The maximum loan amount through the program is two and a half times the business’s monthly payroll up to
$10 million. Those loans would have a maximum interest rate of 4%, according to the plan.

The program also is meant to help small businesses cover rent, mortgage and utility expenses through the loans. Individuals who operate as sole proprietors, independent contractor or are self-employed would also be eligible for the loans.

Hibben said there still are a lot of unknowns for eligible businesses because the country hasn’t experienced anything like a global pandemic before. One of those concerns is how this could affect state unemployment contribution rates for small businesses looking at cutting even just a few employees out of a small staff to begin with, she said.

Under normal circumstances, employers are required to pay a certain percentage – or unemployment tax rate – per employee, based on that employee’s earned wages per quarter, to contribute to the Illinois state unemployment fund.

According to the Illinois Department of Employment Security, start-up businesses begin at a contribution rate of 3.125% an employee, per quarter. From there, tax rates for employers depends on the number of unemployment claims made against the employer in previous years.

“So unless the government makes it so that [business owners] are not taking this huge hit on unemployment … this program may save some of these companies,” Hibben said.

The plan would be retroactive to Feb. 15 to help get workers who may have been laid off already back on payroll. It also includes possible forgiveness of up to eight weeks of payroll based on employee retention and salary levels, no U.S. Small Business Administration – or SBA – fees and between six months and a year of loan deferrals.

The program is different from SBA disaster relief loans, because disaster relief loans sometimes require collateral for loan amounts of more than $25,000. Businesses also generally must have no other source of credit to be eligible for the disaster loan as opposed to a loan through the Paycheck Protection Program.

Hibben said this type of loan program could be a great thing if it ends up being a good way for local businesses to keep already trained and loyal staff.

“Nobody wants to lose good staff,” Hibben said.

Small businesses may apply for the Paycheck Protection Program at any lending institution approved to participate in the program through the SBA, which may include the banks the businesses already use or a nearby bank, according to documents from the U.S. Senate Committee on Small Business and Entrepreneurship.

Bob Cormier, executive vice president for Home State Bank out of Crystal Lake, said there aren’t a lot of details about the program yet and how local banks’ involvement is supposed to work – like how or whether a bank is supposed to ensure businesses who are requesting the loans are meeting those requirements with retaining employees, for example. He said businesses are not yet able to apply for those loans with Home State Bank because there isn’t much that banks can do yet without those final rules set in place for those loans.

Cormier said he is hopeful that banks should be getting more guidelines and clearer guidance from the SBA and the U.S. Treasury within the next week.

“So we’re waiting, like every business, anxiously to see what those specifics are,” Cormier said.

Rose Treml, executive director of the Sycamore Chamber of Commerce, said the chamber continues to communicate with its members via email, phone calls and even text message as businesses keep looking for more information about the program. She said the chamber wanted to make sure that gathered information is sent directly to their inboxes in the meantime.

“We’re waiting to hear exactly what the U.S. Small Business Association has in mind and how it’s going to work,” Treml said.

Hibben said this is a good time for businesses to work on their business plans and to calmly solicit advice from trusted accountants and financial advisers. She said she has also seen a lot of businesses getting creative even without staff working right now, like getting products ordered anyway for staff to come back and fulfill those orders at full steam.

Treml said that, aside from packaging supply company The Suter Company hiring more temporary workers, she hasn’t heard of a lot of businesses hiring during the COVID-19 outbreak “but we haven’t heard of a lot of people being laid off, either.” She said she encourages the public to continue visiting their local chamber’s website for more information about supporting local businesses – including ordering from restaurants and getting deliveries from local boutiques – during this difficult time.

Treml said she also wants to urge the public to keep up with compliance for the state’s stay-at-home order and to continue helping neighbors and those who are most vulnerable.

“We’ll get there,” Treml said. “We’ll get through this.”

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