Updated: Oct 12, 2021
PPP (Paycheck Protection Program), Business Licensing, and Lease Workouts
By: Megan Lopp Mathias, Founding Partner and Toulaye Ba, Law Clerk
On Wednesday, February 10th, Megan Lopp Mathias of Lopp Mathias Law was called upon and honored to give a Small Business Solutions to COVID presentation to the Jefferson Park Chamber of Commerce, focusing on the PPP (Paycheck Protection Program), business licensing in Chicago, and lease workouts.
The number of active business owners in the U.S. fell by 3.3 million—or 22 percent—from February to April 2020, the National Bureau of Economic Research (NBER) reported in June. That was the largest decline on record, and it affected nearly all industries. Minority-owned companies were especially hard hit. Black-owned enterprises experienced a 41 percent drop in trade, Latino-owned businesses saw a 32 percent decline, and Asian-owned businesses saw a 26 percent decrease. Additionally, immigrant business owners saw a 36 percent loss in business, and women-owned businesses experienced a 25 percent drop in trade, the NBER found.
A year later, small businesses are still struggling back to solid ground, some not making it. Surviving COVID requires tenacity, a new approach, innovation, and quite possibly a little help from a trusted lawyer and small business consultant like Megan.
And if you're not quite ready to get in contact, here are some Small Business Solutions to COVID (downloadable version also available below) to keep you informed in the meantime.
Why would we provide a resource like this free of charge?
Short answer: Because we care about you and your small business.
Long answer: While we hope to be your trusted lawyer and/or business consultant someday if not already, we are dedicated to making sure you have the insight you need to make informed decisions in the meantime. During these unique and challenging times, the business and legal communities should work together to uplift each other to survive (and thrive) through the pandemic.
Happy small business-ing! We're here for you.
Download the Lopp Mathias Law: Small Business Solutions to COVID presentation, here:
Small Business Solutions to COVID:
The PPP (Paycheck Protection Program)
The Paycheck Protection Program was established by the CARES Act as a way to support businesses during COVID. The program provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. The funds can also be used to pay interest on mortgages, rent, and utilities for the business. If your loan was issued prior to June 5, 2020 then it would have a maturity of two years. Loans issued after June 5, 2020 have a maturity of five years.
Wondering, "Can I apply?" Luckily, the answer is quite possibly yes, as the loan has a far reach. Small businesses with 500 or less employees can benefit from the program. Non-profits, veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors are eligible if they also meet program size standards.
The program is specific in how the loan should be used.
These are the items that are considered payroll costs and can be payed for with the loans:
Compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation
Cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips)
Payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal
Payment for the provision of employee benefits consisting of group health care coverage, or group life, disability, vision, or dental insurance, including insurance premiums, and retirement
Payment of state and local taxes assessed on compensation of employees
For an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation
The following is not considered payroll and will not be forgiven if used with the loan:
Any compensation of an employee whose principal place of residence is outside of the United States
The compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary
Federal employment taxes imposed or withheld during the applicable period, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees
Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127)
PPP Fast Facts:
•PPP loans have an interest rate of 1%.
•Loans issued after June 5, 2020 have a maturity of five years.
•Loan payments will be deferred for borrowers who apply for loan forgiveness until SBA remits the borrower's loan forgiveness amount to the lender. If a borrower does not apply for loan forgiveness, payments are deferred 10 months after the end of the covered period for the borrower’s loan forgiveness (either 8 weeks or 24 weeks).
•No collateral or personal guarantees are required.
•Neither the government nor lenders will charge small businesses any fees.
•If you do not use PPP for these purposes, your PPP loan will not be forgiven, and you will be required to pay back the loan. Businesses have up to 24 weeks from the date you received the loan to spend the funds and be eligible for loan forgiveness.
Business Licensing in Chicago
Due to COVID-19, effective Thursday, March 19, 2020, all Department of Business Affairs and Consumer Protection (BACP) licensing and permits will be conducted virtually/online and offices will be closed to the public until further notice.
Business licenses with an expiration date between March 15, 2020 and June 15, 2021, will hereby be considered active until July 15, 2021. Accordingly, licenses will have until July 15, 2021 to renew without paying a late fee.
Complete a Business Information Sheet pre-application form that includes information such as name, ownership information, legal structure, detailed description of all business activities, etc.
A zoning review is conducted to determine if your business activity is permitted in the zoning designation of your business location.
Depending upon the license type, an inspection may be required by one or more City departments prior to license issuance.
Some occupations are exempt from City licensing if the occupation/profession is licensed by the Illinois Department of Financial and Professional Regulation. IDFPR Division of Professional Regulation, IDFPR Division of Banking, and IDFPR Division of Financial Institutions are examples of different categories that are licensed by the Illinois Department of Financial & Professional Regulation.
A contract provision that relieves the parties from performing their contractual obligations when certain circumstances beyond their control arise, making performance inadvisable, commercially impracticable, illegal, or impossible.
Determining whether this covers issues arising from Covid-19 is a question of interpretation and is fact-specific.
A provision that may be included in a commercial or residential property lease. It entitles the tenant to suspend rent payments or pay only a portion of the rent until a landlord completes property repairs.
A lease buyout is an agreement in which a tenant or landlord pays to break the lease for the remainder of its term. For example, if a tenant has a one year lease, but they need to move out after six months, they can agree to a lease buyout with the landlord to break their lease. The amount of the lease buyout is almost always less than the added cost of the rest of the lease. Landlords may also wish to engage in a lease buyout if they wish to use the leased property for other purposes. They might buy out a tenant's lease if they wish to refurbish a unit or live in it themselves. States and cities have different rules about the lease buyout process, so tenants and landlords should be familiar with local law before engaging in a lease buyout agreement. (https://www.century21.com/glossary/definition/lease-buyout)
Give a few months of free rent, but add those months to the back end of the term (e.g. 2 months of free rent immediately, make your remaining lease term 26 months instead of 24 months).
Give a few months of free rent and pay that free rent back over the remaining term.
If your business is not severely impacted, you can ask for a rent discount for the next few months (e.g. 50% rent).