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Costa Mesa will launch an emergency loan program to help specific small businesses hurting financially from months long business closures due to the coronavirus pandemic.
The City Council voted 6-1 Tuesday night to start a $250,000 emergency loan program to help keep small businesses devastated economically in the city alive.
“I do think that this kind of program is a life preserver for many of our small businesses that are right now really drowning and so everything that we can do to help to restore Costa Mesa businesses I’m for,” said Mayor Katrina Foley in support of the program.
Councilmember Allan Mansoor was the lone dissenter.
“I think it’s ironic that we’re talking about loaning money to businesses but we won’t let them open and they’re closing every day,” Mansoor said. “It’s too late. This loan isn’t going to help those businesses that are already closing. We need to get these businesses open now today.”
Foley said the loan would help businesses reopen.
The quarter of a million dollars will come from federal funds for coronavirus relief known as CDBG-CV funds which are part of the CARES Act, a $2 trillion federal stimulus package to assist individuals, businesses, state and local government and public services hit by the economic fallout of the pandemic.
Costa Mesa is also working on getting additional CARES Act money for the program through federal grants as well as through donations.
To be eligible for the loan, businesses must meet a list of requirements that include having less than 12 employees, an annual revenue of $400,000 or less, and a physical storefront with an active business license within the city.
Businesses interested in the program cannot have received money through the federal Paycheck Protection Program or the Economic Injury Disaster Loan Emergency Advance loan. Non-essential businesses such as retail and restaurants will be given preference.
The maximum loan amount will be $30,000 with a maximum loan term of five years depending on the amount of money borrowed. For loans between $1,000 to $10,000, business owners will be charged a two percent interest rate. For loans greater than $10,000, borrowers will be charged a three percent interest rate.
Businesses would have four months from when the loan is issued before they have to start repayment. The city is hoping to help at least nine businesses with the program with the initial $250,000 in funding.
The city will work with the Small Business Development Center, a federally funded network that helps small businesses, and the Main Street Launch Community Development Financial Institution, which provides loans to small businesses in California.
The Small Business Development Center will help develop and market the loan program and Main Street will administer the loans and determine the loan awards. While the development center is working for free, Main Street will receive 15 percent of the funding for the program to administer the loans.