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May 6, 2020

COVID-19 UPDATE: "Restore Illinois" Plan To Reopen Illinois' Economy; SBA Guidance On PPP Borrower Certification

We continue our efforts to keep you informed of key legal developments relating to COVID-19. Last week, we commented on the Governor’s extension of the Stay-At-Home Order and highlighted the social distancing requirements in the Order for essential businesses and manufacturing companies. Today, we focus on Governor Pritzker’s phased plan to reopen Illinois’ economy, as well as updated guidance on the SBA Paycheck Protection Program. For our previous updates, please see HERE.


Yesterday, Governor Pritzker announced his administration’s “Restore Illinois” phased plan to reopen Illinois’ economy (see HERE). The plan will reopen the economy incrementally over five (5) phases, with Illinois being divided into four (4) geographic regions for this purpose: Northeast (Chicago and suburban counties), North-Central, Central, and Southern. Each phase has threshold requirements, guided by public health metrics, which must be satisfied before moving to that phase. Each region can progress through phases independently, as long as that region has met the criteria to do so.

As of May 1st, all regions in Illinois are in Phase 2. Based on current data, the Governor announced that a region could move into Phase 3 as early as May 29, 2020. Detailed descriptions of the phases follow:

  • Phase 1 - Rapid Spread: The rate of infection among those tested and the number of patients admitted to the hospital is high or rapidly increasing. Strict stay-at-home and social distancing guidelines are put in place, and only essential businesses remain open. Every region has experienced this phase once already (based on the Governor’s original Stay-At-Home Order) and could return to it if mitigation efforts are unsuccessful.
  • Phase 2 - Flattening: The rate of infection among those tested and the number of patients admitted to the hospital beds and intensive care unit (“ICU”) beds increases at a slower rate, moving toward a flat and even a downward trajectory. Non-essential retail stores reopen for curb-side pickup and delivery. Illinoisans are directed to wear a face covering when outside the home, and can begin enjoying additional outdoor activities like golf, boating and fishing while practicing social distancing. To varying degrees, every region is experiencing flattening as of early May.
  • Phase 3 - Recovery: The rate of infection among those tested, the number of patients admitted to the hospital, and the number of patients needing ICU beds is stable or declining. Manufacturing, offices, retail, barbershops and salons can reopen to the public with capacity and other limits and safety precautions. All gatherings limited to 10 or fewer people are allowed. Face coverings and social distancing are the norm.
  • Phase 4 - Revitalization: The rate of infection among those tested and the number of patients admitted to the hospital continues to decline. All gatherings of up to 50 people are allowed, restaurants and bars reopen, travel resumes, child care and schools reopen under guidance from the Illinois Department of Public Health (“IDPH”). Face coverings and social distancing are the norm.
  • Phase 5 - Illinois Restored: With a vaccine or highly effective treatment widely available or the elimination of any new cases over a sustained period, the economy fully reopens with safety precautions continuing. Conventions, festivals and large events are permitted, and all businesses, schools, and places of recreation can open with new safety guidance and procedures in place reflecting the lessons learned during the COVID-19 pandemic.

Midwestern states like Illinois and Wisconsin (which has a stay-at-home order through May 26, 2020) currently have reopening plans that will not commence until late May. Indiana, Kentucky, and Ohio have varying plans to reopen businesses during the month of May. Indiana has perhaps the most aggressive plan which allows restaurants and bars to reopen indoor services, with restrictions, starting May 11, 2020.


As reported in our prior updates, many small businesses have found the SBA’s Paycheck Protection Program (“PPP”) incredibly helpful to meet their emergency cash flow needs — especially payroll costs — during this crisis. In particular, the fully guaranteed PPP loans are attractive because they can be forgiven, do not have the traditional underwriting requirements of other SBA programs and have a streamlined application process.

However, in the rush to get funds to eligible borrowers as soon as possible, many details were left unanswered. Almost daily, the U.S. Department of the Treasury (the “Treasury”) and the SBA have been updating the frequently asked questions (“FAQs”) on the Treasury’s webpage (see HERE), and the SBA has published several interim rules on specific topics. We have been fielding questions from clients on various issues and have issued written updates — such as on the affiliation rules and on how to maximize the forgivable portion of the loan — as guidance becomes available. Today, we highlight a few recent clarifications by the SBA on borrower certifications, as well as forthcoming guidance in the coming days.

In their PPP applications, borrowers are required to make several certifications, including that the “current economic uncertainty makes the loan request necessary.” Lenders are not required to request detailed documentation to support these certifications, and PPP borrowers have interpreted this phrase subjectively given the lack of guidance from the SBA or Treasury.

After its initial launch, the media highlighted cases of PPP loans being approved for publicly traded companies and national non-profits with access to capital from endowments or other sources. Since then, several companies that applied for and received PPP loans have returned the funds or declined to accept them.

In its FAQ #31 published on April 23rd, the SBA and the Treasury reminded borrowers to carefully review this certification:

[A]ll borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application…. Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.

FAQ #31 also provided that any borrower who applied for a PPP loan prior to April 24th and repays it in full by May 7th will be deemed to have made the certification in good faith. Yesterday, in FAQ #43, the SBA extended the “safe harbor” for a business to return its PPP funds until May 14th. The SBA also noted that it “intends to provide additional guidance on how it will review the certification prior to May 14, 2020.” Also, in FAQ #39, the SBA announced that it will review all loans in excess of $2 million, following the lender’s submission of the borrower’s loan forgiveness application and that additional guidance would be forthcoming on this issue.

As of this writing, no such guidance has been issued on either issue; however, we encourage clients to reach out to us with questions on how to interpret FAQs #31 and #39 based on their current situation.

Finally, we note that, earlier today, in FAQ #45, the SBA and Treasury confirmed that:

An employer that applied for a PPP loan, received payment, and repays the loan by the safe harbor deadline (May 14, 2020) will be treated as though the employer had not received a covered loan under the PPP for purposes of the Employee Retention Credit. Therefore, the employer will be eligible for the credit if the employer is otherwise an eligible employer for purposes of the credit.

We highlighted the Employee Retention Credit in last week’s update (see HERE).

We will continue to send periodic updates on topics that may be helpful to your businesses. If you have a particular issue that you’d like us to address or if you’d like to be removed from the distribution list, please let us know.

Feel free to contact us with any questions.

Gery Chico, Jon Leach, and Alpita Shah

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