Updated: Jul 15, 2020
By Steven Davidson
The US has not yet won the fight against the Coronavirus, but we continue as a nation to push forward and live life as normally as we can. Small businesses, however, have been given one of the greatest challenges --- how to ensure they aren’t destroyed by loss of business. The federal government has provided some relief through the CARES act with its Payment Protection Plans and Employee Retention Tax Credit, but many businesses either need more or did not even qualify.
For those in this situation, there is hope in the state’s systems to give them relief they so desperately need. California is one of the many states where cities are looking for ways to keep businesses alive. As it begins to slowly and cautiously reopen the state, there appears to be a light at the end of the tunnel. Even so, small businesses are going to need a lot of help while they are forced to wait until they can resume their normal operations. While they wait, they still need to look for programs to provide them with the capital or freedom they need. Here are a few ways businesses can take advantage of California aid.
San Francisco Shared Spaces Program
Overview: Though this does not provide capital for businesses directly, San Francisco (SF) is providing a way for business owners to bring in some revenue while the city continues its plan for a safe reopening. In a release from the office of the mayor of SF, the city will begin a shared spaces program, which allows businesses to apply for a permit to use public right-of-ways to operate business activities like curbside pick-up and other retail activities. The program is expected to be available mid-June of 2020.
Requirements and Guidelines: So far, the program is vague about how to qualify for or use this program, as it was just released recently, but here is what we know so far:
● Spaces available for use include sidewalks, full or partial streets, parks, public plazas and other public spaces
● All activity is subject to San Francisco’s Public Health Order
● Businesses can apply for a no-cost permit to use the program
● Businesses are responsible for complying with social distancing and other coronavirus safety requirements (offering hand sanitizer, limiting customer-employee contact, facemasks,) as well as equal accessibility (such as required by the ADA)
● Permits may extend to allow them to be used for outdoor seating when Health Order allows it
● So far the program seems to apply to SF only, but may be expanded or adopted by nearby cities in the future
Why it Matters: Due to uncertainty of a Coronavirus reappearance, this is a safe way for SF to resume some economic activity while maintaining the safety of its citizens. It allows for non-essential businesses to begin the process of reopening without having to use retail spacing. It is a good compromise between public safety and economic security.
Apply: Program updates will become available at SF.gov. Other cities are considering and implementing likeminded approaches, so small businesses in California should routinely check their government websites for updates.
City of Los Angeles Small Business Emergency Loan Program
Overview: Los Angeles has initiated a microloan program for small businesses in need of immediate funding during the Coronavirus pandemic. The loan is for between $5,000 and $20,000 and includes three options for repayment. The City of Los Angeles has provided the terms and requirements for applying to this program. For more information, click here.
Terms of the Loan:
● Limit set between $5,000 and $20,000
● Interest Rate Options
Determined based on analysis of applicant and subject to Loan Committee approval
18 month term: 0% interest with 6 month deferment
Up to 5 year term
--For profit businesses: 3% interest rate with up to 12 month deferment
--For tax-exempt businesses: 2% interest rate with up to 12 month deferment
● No application, administration, or loan fees
● Must be used only for working capital
● No Credit minimum
● Must be located in a commercial-use building within City of LA
● Must have less than 100 employees
● Show negative impact from Coronavirus and that they will make their best effort to return to normal business operations with current employees
-Must show loan amount would have been earned through normal profits
● Business Tax Registration Certificate with LA’s Office of Finance from before March 01, 2020 required
● Reasonable personal credit history and explanation for any significant previous dips
● Collateral requirements to be evaluated individually
● All owners with at least 20% ownership must guarantee the loan,
● Include cosigner (if necessary)
● Owners must include three months of bank statements and itemized budget for loan
Application: City of LA Emergency Microloan Application
California Tax Relief Options
Overview: California is providing businesses extensions for filing taxes and relief from payment in some situations. California’s Department of Tax and Fee Administration announced the details on how the program applies to different business types.
Due Dates for Tax Filers: California has shifted the due dates of taxes for businesses in need. Here are the new dates for when filings must be turned in:
● Quarterly Filers: first quarter tax returns have been extended to July 31, 2020 to be due with second quarter filings
-Prepayments against second quarter sales and tax obligations are still due May 26,
2020 and June 24, 2020
● Annual Filers: deadline of July 31, 2020 remains the same
● Monthly Filers: taxpayers reporting less than $1 million in tax on returns will have April and May 2020 taxes deadline extended 3 months each. No interest or penalties will accrue so long as they are paid August 31 and September 31, respectively.
-June return date remains July 31, 2020
Small Business Relief: Businesses which report less than $1 million in taxes automatically qualify for the relief option. Relief includes a three-month extension period for taxes originally due on July 31, 2020. If taxes are filed within this period, no interest or penalties will be added.
Small businesses with less than $5 million in taxable annual income can also use a payment plan for sales and use tax liability. The plan is 12 months and for up to $50,000 of sales and use tax liability. To qualify for zero interest, the plan must be paid in full by July 31, 2021. You can make a request for the payment plan here.
Relief for Larger Businesses: Businesses that have over $1 million in tax liability do not automatically qualify for the relief option. However, they may make a request for an extension to file returns through the CDTFA online services account. Once logged in, there is an option for filing an extension, where you must put “disaster occurred” as preventing timely filing. All of these requests are evaluated on a case-by-case basis.
Small Business Disaster Relief Loan Guarantee Program
Overview: The Small Business Finance Center has provided a loan guarantee program to help businesses overcome economic injury caused by Coronavirus. A loan guarantee is when a third-party assumes the obligation for a debt or loan in case of default to protect the credit of both parties to the loan. It applies to businesses with between 1-750 employees and provides a loan guarantee for up to 95% of the current loans for small businesses.
Requirements: To qualify for the program, the business must be an established entity Sole-Proprietorship, Corporation, Limited Liability Corporation) and meet the following requirements:
● Have between 1-750 employees
-Not available for individuals directly, primary borrower must be small business
-Loans in the name of an individual will need proof of sole-proprietorship
● Show damages as a result of the coronavirus
● Business activity must be eligible under North American Industry Classification System
-Must also be located in a declared disaster area (California has been declared.)
Terms of the Guarantee:
● Guaranteed for up to 7 years
● Guarantees up to 95% of the loan
● Negotiable loan interest rates
● Qualifications based on lender criteria
● Loan proceeds must be used for continuance of business or to cure economic injury
Why This is Helpful: Banks and other lenders will be more willing to allocate capital when there is significant backing that a default will not result in a loss. Borrowers can use this program to get more money to keep their businesses afloat during full or reduced business activity.
Application: To apply for this program, a list of certified lenders has been offered by Small Business Finance Center. They warn businesses against applying through anywhere, but an approved lender, to avoid scams and fraud.
Programs to Keep an Eye On
Many of the programs offered by California and the cities within it have either closed their applications or exceeded their fund limits. Though they are not currently viable options, it is worth staying updated on them in case they become available again.
SF HELP Loan: The SF HELP is a loan program which provides up to $50,000 at 0% interest for small businesses in SF. Businesses must:
● Be in good standing;
● Generate an annual revenue under $2.5 million;
● Have at least 3 years left on their lease; and
● Show at least a 25% drop in revenue since January 1, 2020
The period to apply for the loan has closed, but seeing as SF was a hot zone for the virus, it is not unreasonable to assume the program might reopen to help businesses during the slow recovery process.
SF Neighborhood Mini-Grants: For many areas of SF, the opportunity to apply for these grants has passed, but there are still parts of the city that are eligible to apply. The grants are for between $1,000 - $10,000 for businesses in historically underserved communities and women- owned businesses. To qualify, they must be for-profit in SF with a valid permit or license and show at least a 25% loss in revenue. You can check your eligibility with San Francisco’s Mini-Grant page.
Magic Johnson Loan Program: Former star point guard for the Lakers has recently announced over $100 million in funding for minority and women-owned businesses. Johnson states that his goal is to help those who did not qualify for programs like the Paycheck Protection Program or Employee Retention Credit. Details about the specific qualifications and whether this will extend beyond California have yet to be released, but those in the LA area and most likely California at large will benefit from his contribution.
Santa Clara Small Business Grant: The initial funds may have already been used up, but Santa Clara’s city council has approved for another wave of funding. Another $300,000 has been added to the original grant fund of $500,000 and there are plans for more funding moving forward. The grants are for either $5,000 for essential businesses or $10,000 for non-essential businesses. They are available to small businesses which have between 1-25 employees, show negative impact from Covid-19, and have been operating in Santa Clara for at least one year.
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