Resources

State of California and City of Los Angeles Offer Businesses Additional Coronavirus Relief as Loans and Highlight Existing Loan Programs for Small Businesses

April 3, 2020

California businesses

The State of California and the City of Los Angeles are providing emergency assistance for California small businesses. These grants and loans are separate from incentives and programs being offered by the U.S. Small Business Administration. The State is also reminding businesses of existing small business loan programs that affected businesses can utilize.

Information about the programs and how to apply is set forth below.

State of California Loan Programs

1. The California Disaster Relief Loan Guarantee Program—COVID-19 is a loan program that was created in partnership with the Small Business Finance Center (SBFC) and Financial Development Corporations (FDCs) that allow small businesses (defined as having 1-750 employees) and eligible non-profits that have suffered due to the COVID-19 pandemic to borrow money to cover businesses continuation costs such as rent and payroll. The loans are guaranteed up to 85% to 95% of the value of the loan for a period of up to seven years.

Who is eligible?

  • Small Businesses located in California with 1-750 employees that have been negatively impacted or experienced disruption by COVID-19
  • Eligible Nonprofits

What can loan funds be used for?

  • Continuance of business operations, including but not limited to rent and payroll.

How much can a business borrow?

  • Loan limits and interest rates are to be negotiated between the lender and borrower.

How do businesses apply?

  • Qualifying small business owners may apply directly with a lender (the list of lenders has not yet been announced) or obtain additional information by contacting one of the participating FDCs from this list.

2. The State of California has also highlighted its existing California Capital Access Program for Small Business as an option for small businesses (defined as 1-500 employees) to obtain loans during the COVID-19 crisis.

Who is eligible?

  • A business classified as a small business under U.S. Small Business Administration guidelines
  • Employs fewer than 500 full-time equivalent employees
  • The business purpose is one of the industries listed in the North American Industry Classification System (NAICS) codes list
  • The primary business and at least 51% of its employees or its income, sales or payroll, comes from business in California.
  • Business activity resulting from the bank’s loan must be created and retained in California

What can loan funds be used for?

The Program ensures loans made to small businesses for the following:

  • Land acquisition
  • Construction or renovation of buildings
  • Start-up costs
  • Equipment or inventory purchases
  • Capital projects
  • Working capital

What are the loan terms?

The maximum loan amount is $5 million and the maximum enrolled amount is $2.5 million.

  •  Individual borrowers are limited to a maximum of $2.5 million enrolled over a three-year period.
  • Loans can be short- or long-term, have fixed or variable rates, be secured or unsecured, and bear any type of amortization schedule.
  • Lenders and borrowers each contribute between 2% and 3.5% of the total loan amount to the lender’s CalCAP SB loan loss reserve account.
  • CPCFA contributes an amount equal to the lender’s fee to the CalCAP SB reserve account and an additional amount for businesses located in Severely Affected Communities (SAC).

How do businesses apply?

Businesses can apply here.

The City's Program

The City of Los Angeles has established the Los Angeles City Small Business Emergency Microloan Program to assist small businesses located in the City.

Who can apply?

  • For-profit and tax-exempt businesses in the City of L.A. with 100 or fewer employees that have been (1) negatively impacted by the COVID-19 outbreak and (2) will make their best effort to continue or re-establish their business operations and employees.

What can loan funds be used for?

  • The loan proceeds must be used for working capital only.

What are the loan terms?

Loan Limits

  • $5,000 to $20,000

Interest Rates

  • Option 1: 0% for a term of up to 18 months,
    with repayment deferred for up to six months
  • Option 2: 3% for a term of up to five years,
    with repayment deferred for up to 12 months (for-profit businesses)
  • Option 3: 2% for a term of up to five years,
    with repayment deferred for up to 12 months (for tax-exempt businesses)

How do businesses apply?

Eligible businesses can apply here.

We will continue to supplement this alert as more information on the programs become available. For more information, please contact Ashley R. Fickel or your Dykema relationship attorney.

Stay ahead of emerging issues with Dykema's COVID-19 Legal Resource Center and subscribe to all relevant publications so you can easily leverage information, stay up to date on evolving developments, and better position yourself for success.

As part of our service to you, we regularly compile short reports on new and interesting developments and the issues the developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments are always welcome. © 2020 Dykema Gossett PLLC.