by Director of Fondo Adelante Nathanial Owen
When in March Congress passed the Paycheck Protection Program, simply referred to as PPP in the news, the idea was that small-business owners could keep their employees on payroll as their venture was sustained during the unprecedented COVID-19 crisis. Unfortunately, PPP failed to live up to its expectations.
MEDA heard innumerable stories from Mission District entrepreneurs that either they never heard back from their bank, funds were evaporated as they waited in the queue or that they were not able to apply through their local Community Development Financial Institution (CDFI). These ventures were those most in need, running the gamut from beauty salons and corner produce markets to in-home daycare providers and janitorial services. Such small businesses are the lifeblood of the Mission — and neighborhoods nationwide, especially in communities of color.
Where did the majority of these PPP loans go? To larger businesses able to leverage their relationship with big banks.
A second iteration of PPP was then passed by Congress, hoping to remedy the shortcomings of Round 1; however, while better, its funding is still not fully getting where it is needed most, completely leaving out myriad undocumented business owners across the country. Furthermore, Round 2 of PPP perpetuates the unwieldy and confusing rules of the program, with many businesses daunted by the prospect of not being able to have their loans forgiven and thus being saddled with tens of thousands — even hundreds of thousands — of dollars of debt they must repay within two years. Add this on top of the fact that PPP is sized to only cover payroll and overhead for eight weeks, a timeframe already shorter than the crisis itself. The San Francisco Bay Area is already into its 11th week of shelter-in-place, and even the fortunate small businesses that are reopening are facing an economic environment worse than anything since the Great Depression. So eight weeks’ worth of financial assistance is not nearly enough to save our small businesses, particularly minority-owned businesses, which have far less in cash reserves to sustain them.
That’s why the City of San Francisco Office of Economic and Workforce Development (OEWD) decided to partner with MEDA to design and implement a program that could address the gap. OEWD came to MEDA based on our proven track record of disbursing responsible loans in low-income communities of color (MEDA’s CDFI, Fondo Adelante, offers loans in the nine-county Bay Area.) Fondo Adelante also became one of the first CDFI lenders in the state to participate in the California I-Bank’s 95% State Loan Guarantee Program in response to COVID-19. Leveraging both the partnership with OEWD and the State Loan Guarantee Program, Fondo Adelante has now launched the San Francisco Hardship Emergency Loan Program, which will be known by the easier name of SF HELP. And the name says it all.
Succor will be provided via 0% interest loans of up to $50,000, with repayment terms of up to six years. Furthermore, all payments will be deferred until January 2021.
SF HELP was unveiled on June 4, with Inquiry Forms available at medasf.org/SFHELP. There is a two-week deadline (11:59 p.m. June 18) to submit that form. There will then be a lottery to choose which small business may apply for an SF HELP loan; this lottery will include a preference for low- and moderate-income-owned businesses and small businesses in historically underserved/distressed census tracts. The lottery will also ensure that a significant portion of the funds go to long-standing small businesses in our city.
To ensure small businesses left out of PPP will now have a fighting chance to survive the challenges presented by COVID-19, eligibility is much broader for SF HELP assistance. As an example, undocumented business owners with an Individual Taxpayer Identification Number (ITIN) may apply.
All businesses must show a minimum 25% loss of revenue due to COVID-19, plus have less than $2.5M in annual revenues. Additionally, a PPP loan must not have been received, since one of the goals of SF HELP is to provide support for businesses completely left behind by the federal government’s response.
SF HELP loans may be used for a wide variety of purposes, including: payroll; rent; other fixed expenses, such as insurance and utilities; inventory; and working capital.
While SF HELP cannot solve all of the issues facing San Francisco’s small businesses, it is a definite step in the right direction and will save many minority-owned ventures. It’s called equity.