BERKELEY, Calif. – California is launching a new loan program to help the state’s nearly four million small businesses needing access to funds as federal relief money runs out and a new project stimulus bill remains stuck in Washington.
The California Rebuilding Fund began accepting applications at noon Friday for loans of up to $100,000 with an interest rate of 4.25% over five years. To qualify, small businesses must have 50 or fewer full-time equivalent (FTE) employees and 2019 revenues of less than $2.5 million.
The program is a public-private partnership involving governments, commercial banks and twelve Community Development Financial Institutions (CDFIs) that are obligated to reach under-resourced communities and help businesses that may be too small or risky to qualify for a normal large bank. loans.
The idea was developed by a team of UC Berkeley professors Laura Tyson and Adair Morse.
“We were trying to figure out how to help local governments and state government stretch the limited amount of funds they have to reach as many of the four million small businesses in the state of California,” Morse said. , Associate Professor of Finance at UC Berkeley’s Haas School of Business.
“Our original plan was to lend a billion dollars,” Morse said, “The fund is set up to continue, so we’re going to start with a thousand loans. And soon next year, we could get up to to 5,000, and we hope to do four to five times that.”
For some businesses, that’s good news as the federal government scrambles to pass another pandemic relief bill.
Larry Tang is the owner of ATG Escape Rooms in Concord. He says the business opened three months before the pandemic and went from a booming new business in corporate events to a virtual shutdown.
“It hit us very hard because in the past 7 months we couldn’t do absolutely anything,” Tang said.
It wasn’t over. By combining small grants and a PPP loan, Tang and his COO were able to pivot to create virtual escape rooms online.
“We even did three days for a client in Australia,” said Chuck Wojack, the operations manager.
They were thrilled to hear California’s announcement on Friday about the launch of a new small business loan program.
“We are very happy to hear that Califonria is offering this and we will definitely apply and research this,” Wojack said.
As Calfiornia counties tighten restrictions with rising infection rates, some companies are reluctant to take on debt.
“We’ve all seen our revenues drop by at least 50%,” said Laurie Thomas, executive director of the Golden Gate Restaurant Association. “I haven’t spoken to anyone who would be interested in taking on more debt. Certainly at a rate of 4%. PPP loans if not canceled are either 2 to 5 year loans at a maximum rate of 1 %.”
More grants and forgivable loans would be welcome. But for now, any lifeline brings hope.
“If this loan comes in to be able to help us, we would be able to stay afloat,” Tang said, adding that they plan to apply for loans from the California Rebuilding Fund.
Jana Katsuyama is a reporter for KTVU. Email Jana at [email protected] and follow her on Twitter @JanaKTVU or Facebook @NewsJana or ktvu.com.