Chicago was launched last month a $ 100 million low interest loan fund made up of $ 25 million from the city and the rest of the private sector. On day one, the fund received over 4,500 requests for a total of $ 150 million in loan assistance, according to Crain’s Chicago Business, a business information service.
In Kansas City, Missouri, a private company $ 5 million Low-interest loan program run by AltCap, a community development finance institution, launched last week. He received over 600 loan requests in 72 hours – a response that Ruben Alonso, president of AltCap said, was a bit shocking.
“It’s with the SBA programs having already been announced and the banks being able to lend,” he said. “But we always have that type of response. And I think that reflects how dire the situation is with these small businesses. “
Economic development agencies in several states, including Connecticut, Michigan and Florida, have also made money available for small businesses hit hard by the pandemic.
The Michigan Economic Development Corporation, for example, created a $ 20 million fund which will be split between small grants (up to $ 10,000) and low interest loans (between $ 50,000 and $ 200,000).
The Michigan fund can support some 1,100 companies, a fraction of the estimated 117,000 service companies that Democratic Gov. Gretchen Whitmer has demanded to close to the public, said Josh Hundt, director of business development and executive vice president of the company. .
His team knew the fund wouldn’t reach everyone, he said, but wanted to withdraw the money quickly in the hopes that the federal government would step in later. “It was a first option, to be able to support some of our toughest – hitting companies,” he said.
City leaders mainly set up relief funds to keep Main Street’s reserves afloat until they could get federal help, said Joseph Parilla, a member of the Metropolitan Policy Program at the Brookings Institution. , a Washington, DC-based think tank.
“The funds were aimed at stabilizing businesses that couldn’t go more than a month without some relief,” he said.
Many small businesses were vulnerable even before the pandemic hit. About 29% of small businesses in a typical city are unprofitable, and 47% have two weeks or less of cash on hand, according to a 2019 JPMorgan Chase & Co. clients of the Chase merchant bank.
And some businesses may not be able to take advantage of the huge new paycheck protection program that the SBA launched last week.
“The paycheck protection program (…) is much more generous, much more forward-looking, than I have seen the federal government do in the past,” said Sandy Baruah, president. Managing Director of the Detroit Regional Chamber of Commerce and former Director of the SBA under President George W. Bush. “But there are holes.”
Certain types of associations, such as commercial leagues and social clubs, are not eligible. Some small businesses do not use a lender approved by the Small Business Administration, and banks seem to prioritize their current customers for federal loans.
The Independent Restaurant Coalition, an advocacy group formed to help restaurants affected by the pandemic, warned Congress that loans won’t work for his industry. And some small businesses have bad credit, incomplete financial records, or other accounting issues that can prevent them from qualifying, according to lenders and business leaders.
The $ 350 billion Congress approved for the program was quickly distributed. Banks and credit unions have lent at least $ 5.4 billion on the first day of the program, tweeted SBA administrator Jovita Carranza. Members of Congress are mobilize to authorize an additional $ 250 billion for the program this week.
Small business owners can also apply for another SBA loan, an economic disaster loan advance of up to $ 10,000. Disaster loan advances do not have to be repaid, while paycheck protection loans are canceled if companies keep their employees on their payroll for eight weeks and use the money to pay the bill. payroll, rent, mortgage interest or utility bills.
The struggles of Sacramento
Sacramento officials launched a million dollar zero interest loan program March 18, a day before Democratic Governor Gavin Newsom ordered Californians to stay home. The response to the fund, like the response to others across the country, was immediate.
“In the first half hour, we had already received around 175 applications,” said Leslie Fritzsche, the city’s senior economic development project manager.
After two days and over 1,400 applications (and thousands of other projects), Sacramento officials have closed the application period.
The city announced the 101 recipients of the fund last week, all companies with 25 or fewer full-time employees. They will receive loans of up to $ 25,000.
Ison’s $ 12,160 loan will help her pay her bills and keep workers on the payroll until she gets federal help, she said. “We still have rent, we still have utilities, we still have vendors to pay. ”
Although it is a lifeline for local small businesses, the municipal fund may not be replenished. There was initially talk of expanding the fund, Fritzsche said. “Then our budget situation became a bit clearer, and it was hard money to allocate. “
Cities and states will struggle to pay for new aid as businesses remain closed and tax collections go down. Unlike the federal government, the vast majority of states must balance their budgets, which prevents them from spending a lot on aid programs during an economic downturn.
Fritzsche noted that other sources of small business assistance have proliferated in the Sacramento area, from federal loans to GoFundMe campaigns. And his team refers applicants who haven’t secured a city loan to the Sacramento Asia-Pacific Chamber of Commerce, which will put those companies in touch with federal and state help.
The Sacramento Asian Pacific Chamber and the Sacramento Metro Chamber of Commerce have also launched a hotline for business owners who speak English, Spanish, Vietnamese or Mandarin.
The groups are trying to help business owners make sure they qualify for loans, said Amanda Blackwood, president and CEO of the Subway Chamber.
“If you don’t have blank books, if you have tax problems, if you have credit problems, applying for a loan can be a difficult experience,” she said.