The Yucaipa City Council met on Oct. 12, for a regular city council meeting. During this meeting Housing and Economic Development Analyst Caroline Velarde updated the council members on the COVID-19 related proposal for the Small Business Assistance Loan to Grant Program. After the discussion, council approved the items that staff was recommending.
“The early beginnings of this program began on May 27, when council approved the submittal of an application to the County of San Bernardino requesting Community Development Block Grant Coronavirus (CDBG-CV) funds for a small business financial assistance program,” said Velarde.
The city of Yucaipa is considered a Cooperative City which means it partners with the county to implement the federal CDBG program.
Velarde said, “We were provided $202,897 in CDBG funds by the county. Since then, staff has been working with county staff to develop the program under a very specific set of CDBG guidelines and requirements which are necessary in order to utilize the funds for a small business assistance program.”
“Under the proposed program, small businesses with six to 500 employees may be eligible to receive a working capital loan of up to $10,000 to help retain its workforce by using the funds to assist with day-to-day operating expenses,” said Velarde.
Specifically, the program aims to assist eligible small businesses retain their workforce in the retention of at least one full-time equivalent (FTE) employee from a low to moderate income household for at least six months. The income limits are adjusted for family or household size in San Bernardino County.
Velarde continued with, “In addition to meeting the income limits for the low to moderate FTE and having between six and 500 employees, the business must be located in Yucaipa, be a for-profit, have an active business license of at least six months, have the ability to repay the loan should it not turn into a grant, and be negatively affected by the COVID-19 closures and exhaust all other forms of financial assistance.”
As part of the program, approved businesses will sign a loan agreement with the city which has a loan term of 18 months and a 0% interest rate. In addition, 100% of the loan amount will be converted to a grant if the business complies with the retaining the low to moderate FTE for a continuous six month period. If the business does not comply, by failing to retain the FTE for six months, the business must repay the initial installment that will be equal to one-half of the loan amount to the city.
“Businesses that don’t have the FTE at the time of application are still eligible but will have six months from the date of the agreement to rehire. The city will disburse the loan in two installments. One-half will be disbursed up front and the remaining half will be disbursed if the business complies. The reason for the two disbursements is to minimize the financial loss to the city because under the CDBG guidelines, funds loaned to noncompliant businesses are not eligible for reimbursement,” said Velarde.
There is a two-step application process and the city has partnered with the Inland Empire Small Business Development Center (IESBDC) to serve as the primary reviewer for the full application package. If approved, the first step includes a pre-application form which is to be submitted during the pre-applications period of Oct. 13 through Nov. 2. The second step is a pre-award underwriting phase, during which approved applicants will be asked to submit more extensive documentation including tax returns, payroll documents and employee employment verification.
There have been 26 businesses in the city of Yucaipa that have expressed interest in applying to the program so far. It is estimated that the city can assist 18 businesses through this program. Velarde said that it was possible that most, if not all businesses that meet the qualifications could be awarded funds.
Of the $202,897 in CDGB funds provided by the county to the city, approximately $187,000 will be used towards this program and between $15,000 and $16,000 will be used for staff cost.
With 26 businesses showing interest, Mayor David Avila mentioned that he was aware of a couple more businesses interested also but they haven’t made a final decision yet to put in an application for the loan to grant funding.
The item passed with three members voting as Mayor Pro Tem Denise Allen and Councilmember Bobby Duncan were absent.