November 24, 2020
Hot Topic Tuesday — Small Businesses Shift Focus to State Economic Relief
As congressional negotiations surrounding another round of PPP remain stalled, some states have begun introducing their own small business loan programs to ensure local businesses have access to the funding they need to recover and keep local economies strong. One such program, the California Rebuilding Fund, began accepting applications last Friday for loans of up to $100,000.
Unlike PPP, California Rebuilding Fund loans are not forgivable. The loans will need to be paid back over a 3- or 5-year term with a fixed annual interest rate of 4.25%. The loans are also limited to small businesses that have 50 or fewer full-time equivalent employees, 2019 revenues of less than $2.5 million, and an economic hardship caused by COVID-19 which has materially impacted business operations.
Once a Rebuilding Fund loan applicant has submitted an online pre-application, they will be matched with a participating Community Development Financial Institution (CDFI) lender who will guide them through the process of completing a full application. Eligibility will then be determined based on the borrower’s financial qualifications, which are set by the lender. If approved, the loan will be made through that community lender and the borrower will continue to work with them throughout the life of their loan.
New Mexico, Alaska, and Pennsylvania have also recently expanded their small business development efforts. The $400 million Small Business Recovery Loan Fund for New Mexico small businesses has been open since August 5, 2020, but remains mostly untapped. Alaska was having similar problems with its AK CARES Act grants until they recently changed their program to allow small business owners with EIDL and PPP loans access to the funds. Finally, just a few weeks ago, Pennsylvania’s Governor announced four new low-interest loan programs for small business expansion in certain counties.
Although none of these state programs have proven to be a viable replacement for federal aid, they are certainly helping struggling small businesses that cannot wait any longer for another round of PPP to be approved by congress.