10APR2020 RKF attorneys put together a summary update of the current programs available in California in response to the COVID-19/Corona virus pandemic.
California financial relief packages in response to COVID-19
In tandem with federal initiatives such as the Paycheck Protection Program and an expanded EIDL program, the State of California and its municipalities have rolled out their own list of initiatives to financially support businesses struggling from the economic impact of COVID-19. Below is a short summary of some of the more current financial and technical assistance programs available for small businesses provided on a state and local level.
California Infrastructure and Economic Development Bank (IBank) Small Business Disaster Relief Loan Guarantee Program
The State of California is allocating $50 million to the Small Business Finance Center at California’s IBank to mitigate barriers to capital for those small businesses that do not qualify for federal funds (including business in low-wealth and immigrant communities). The terms of the loan are minimal - 95% of the loan is guaranteed for up to 7 years, and the applicant must show that their small business has used the loan for business continuance or to cure “economic injury” as a result of the COVID-19 pandemic.
To qualify, small businesses must show they are located in California and have from 1-750 active employees that have been negatively impacted or experienced disruption by COVID-19. Nonprofits automatically qualify for the disaster relief loan guarantee program as well.
To apply, qualifying business owners may apply directly with a participating lender. It should be noted however that the list of participating lenders is fluid and changes from time to time.
California Capital Access Program
Otherwise known as CalCAP, this loss reserve program is tailored for small businesses and may provide up to 100% coverage on losses as a result of certain loan defaults. The program encourages banks and other financial institutions to make loans of up to $5 million to small businesses that have difficulty obtaining financing and acts as a form of loan portfolio insurance.
To qualify, borrows must show that they are classified as a small business under U.S. SBA guidelines, employ fewer than 500 full time employees, have a business purpose that is classified in the NAICS codes list, and that the primary business and at least 51% of the employees or its income, sales or payroll, comes from business in the state of California.
In order to enroll, prospective borrowers must contact a participating lender.
Los Angeles Microloans
Los Angeles is offering microloans to small businesses in amounts between $5,000 and $20,000 with no repayment penalties and no loan, admin or application fees. The term extends between six months and five years. The interest rate is 0% for a term of between six months and one year and between 3% and 5% for loans with a term of between one year and five years. Borrowing limits extends to $11 million.
To be eligible, businesses must have a Business Tax Registration Certificate with the City of Los Angeles’ Office of Finance that was filed prior to March 01, 2020, have reasonable and responsible personal credit history, show historical profits would have been sufficient to service the requested debt, and that they have been impacted by the COVID-19 outbreak.
To apply, prospective borrowers should contact their local lenders.