New loan program offers lifeline to small businesses in Santa Clara County

As California’s small businesses face continued COVID-19 restrictions, a new small-business loan program aims to help keep the doors open a while longer.

The California Rebuilding Fund supports small businesses in economically disadvantaged and historically under-banked areas. Businesses with 50 or fewer full-time equivalent employees and $2.5 million or less in gross revenues in 2019 are eligible to apply.

The fund offers loans of up to $100,000 and is not associated with the federal Paycheck Protection Program (PPP) or the Small Business Administration. Loans through the program are set to be paid back on 3- or 5-year terms, with a 4.25% fixed annual interest rate.

On Nov. 30, Gov. Gavin Newsom announced an additional $12.5 million in funding for the program, increasing the lending power to $125 million for small businesses throughout the state.

“This pandemic had an impact on almost every small business in the country, no matter the industry, no matter their location, no matter their business model,” Beth Bafford, vice president of syndications and strategy of Calvert Impact Capital in Bethesda, Md., told San José Spotlight.

Calvert, a nonprofit investment firm, worked with California groups to determine the best way to support businesses at the local level, Bafford said.

“A lot of them needed access to risk capital, access to low-cost funds and a way to lend to small businesses that was not encumbered by their balance sheets,” Bafford said.

Calvert collaborated with local community leaders, organizations and volunteers statewide via the California Small Enterprise Task Force, offering access to free legal resources and technical support. The efforts led to the creation of the California Rebuilding Fund to ensure small businesses had quick access to loans.

Since the fund’s launch Nov. 20, Bafford has seen applicants from throughout the state, with more than 75% having fewer than five employees.

As of Nov. 24, there were 336 loan applicants in Santa Clara County of 1,800 total in 44 counties statewide.

Luz Urrutia, CEO of the San Jose-based CDFI Opportunity Fund, who worked with the Silicon Valley Community Foundation to distribute $1.5 million in grants to small business owners impacted by COVID-19 over the first two months of shelter in place, is now helping business owners obtain loans.

“PPP is not enough, EIDL (Economic Injury Disaster Loans) is not enough and the people that need (government assistance) didn’t get it,” she said. “We need to give people money not just for payroll, but to get people money for working capital.”

Urrutia said the goal was to assist the 4 million small businesses across the state. The fund raised money from banks and philanthropy funding, including the Estate Bank of California, which are providing the first launch with 95% guarantee. As of Nov. 24, the fund was up to $88.5 million in loan requests. A second round of loans will be offered once more money is raised.

San Jose Councilmember Johnny Khamis, who represents District 10, told San José Spotlight the majority of the small business owners he’s heard from struggling throughout the pandemic operate hair salons and restaurants.

“They want to open up, they want to open for business,” he said. “In lieu of opening for business, I think that this is a good step, at least, a band-aid on the problem.”

As the head of the Economic Development Committee for San Jose, Khamis said he worried about retailers and small businesses even before the pandemic. Now he says he’s never been more worried.

“This loan will help people weather the next few months while the vaccines are distributed,” he said. “But, in the end, people need to go back and shop — otherwise, these loans aren’t going to get paid, and these retailers are going to go out of business.”

Dennis King, director of the Silicon Valley Small Business Development Center, said while a loan program like this could help small businesses, it’s simply one tool and has its limitations.

“It’s not a miracle drug, it’s not going to alleviate poverty and it doesn’t solve all the answers for the businesses that are struggling,” he said. “There are a number of other tools out there — I think the challenge for the small business owners is to do an appropriate mix-and-match, seeing what their options are.”

King strongly recommends small business owners look to organizations such as the Silicon Valley Small Business Development Center, Women’s Business Center and SCORE for free counseling and advice.

“The local businesses hire local people and help define the community,” he said.

San Jose will host a webinar at 3 p.m. Dec. 1 about the program and guidelines for applying. More information can be found here.

Contact Grace Stetson at [email protected] and follow her @grace_m_stetson on Twitter.