BERKELEY, Calif. - California is launching a new loan program aimed at helping the nearly four million small businesses in the state that need access to funds, as federal relief money runs out and a new stimulus bill remains stalled in Washington.
The California Rebuilding Fund began accepting applications at noon Friday for loans of up to $100,000 with a 4.25% interest rate over five years. To qualify, small businesses must have 50 or fewer full-time equivalent employees (FTEs) 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) which are obligated to reach out to under-resourced communities and help businesses that might be too small or risky to qualify for normal big bank loans.
The idea was developed by a team of UC Berkeley professors Laura Tyson and Adair Morse.
"We were trying to figiure out how to help the local governments and state government to stretch the limited amount of funds that they had to reach as many of the four million small businesses in the state of California," said Morse, an Associate Professor of Finance at UC Berkeley's Haas School of Business.
"Our original plan was to lend a billion dollars," said Morse, "The fund is set up to keep going, so we'll start with a thousand loans. And pretty soon into next year we may get up to 5,000, and we hope to do four to five times that."
For some businesses, it is welcome news as the federal government struggles to pass another pandemic relief bill.
Larry Tang is the owner of ATG Escape Rooms in Concord. He says the company opened three months before the pandemic and went from a booming new business in corporate events to virtual closure.
"That has hit us very hard because definitely for the past 7 months we couldn't do anything at all," said Tang.
It wasn't game over. By patching together small grants, and a PPP loan Tang and his operations manager were able to pivot to create online virtual escape rooms.
"We even did a three-day for a client in Australia," said Chuck Wojack, the operations manager.
They were thrilled to hear California's announcement Friday about the launch of a new small business loan program.
"We're super happy to hear that Califonria is offering this and we will for sure be aplying and seeking that out," said Wojack.
As Calfiornia counties tighten restrictions with growing covid infection rates, however, some businesses are reluctant to take on debt.
"We've all seen our revenues drop at least 50%," said Laurie Thomas, Executive director of the Golden Gate Restaurant Association. "I haven't spoken to anyone who's interested in taking on any more debt. Certainly at a rate of 4%. The PPP loans if they're not forgiven are either 2-5 years 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," said Tang, adding they plan to apply for the California Rebuilding Fund loans.
Jana Katsuyama is a reporter for KTVU. Email Jana at firstname.lastname@example.org and follow her on Twitter @JanaKTVU or Facebook @NewsJana or ktvu.com.