COVID-19 Crisis Management Guide: Los Angeles Small Businesses
Part 2 – L.A. City Business Assistance
What is the Los Angeles Small Business Emergency Microloan Program?
The City of Los Angeles, Economic and Workforce Development Department (EWDD), will offer eleven million dollars ($11,000,000.00) in loans, ranging from $5,000 to $20,000 per loan, through the Small Business Emergency Microloan Program. Eligibility will require that the applying company be located within the City of Los Angeles and have a valid Business Tax Registration Certificate with the Office of Finance.
Like the S.B.A. Disaster Loan, the EWDD Microloan fund will be disbursed to credit worthy businesses and business owners, who have operating histories evidencing an ability to repay. The application will also require applicants to specify their intended uses of the loaned funds, which must be utilized for reasonable and eligible working capital expenses, i.e., job retention. The Microloan Program has its own website and online application that can be accessed here: https://ewddlacity.com/index.php/microloan-program
While there are no application fees, the loan terms are much shorter than compared to the S.B.A. product, with terms of 6 months to 1 year with no interest, or up to 5 years with interest of 3% to 5%, depending on credit worthiness. Traditional underwriting will apply here as well, with required loan documentation including recent tax statements of the applying company, personal financial statements of its owners, a schedule of liabilities/debt, and a current profit and loss statement demonstrating past profitability, which will indicate an ability to repay.
While there is no specific cap on how many employees a business can have in order to apply, the program is designed to target businesses with around 20 employees or less. While this may be good news for some, the size of the Microloan Program, is just that, micro. An $11,000,000.00 total fund amount, and $5000-$20,000 per applicant, will hold the L.A. business community up for about a month. Then you can just tack that debt onto businesses who never wanted to incur such debt in the first place, and shouldn’t have needed to, if perhaps we were more prepared for the crisis on the federal level.
Nevertheless, the same problems exist here as they do with the S.B.A. Disaster Loan Program, forcing businesses who will be struggling to restart after the pandemic with additional debt and related interest, regardless of whether you characterize it as “low interest”, will be a heavy burden that many businesses will not be able to shoulder, even in the short term. Utilizing the Work Sharing Program is vital for small businesses.
Our trial run of the application site uncovered good functionality. The application was relatively user friendly and straight forward, hopefully allowing most people to complete the application without the need of assistance. Remember that a critical aspect of the program is to assist the applying businesses to retain their employees, allowing workers to keep their jobs during the ongoing viral outbreak. So the information you provide on the number of employees your business currently has, and the number of those employees the Microloan will allow the business to keep, will be very important in the determination of your loan eligibility and the applicable loan amount. With that being said, if you do apply for, and accept, an EWDD Microloan, your commencement of business after the “safer at home” emergency ordered quarantine will be that much more financially difficult. Let’s hope for better COVID-19 loan programs, with longer repayment terms, lower interest rates, and the potential for waiver of part, or all, of the loan depending on funding usage. To learn more about the Disaster Loan Program, read our previous blog.
We hope the information provided is helpful to you as you ponder your next moves in this ever-changing environment. If it makes you feel any better, we’re in the same boat, right next to you trying to figure out how these damn paddles work. Keep checking back in with us, as we will continue posting about available business assistance programs at the city, state, and federal levels. Follow up with the Team at Venerable Injury Law for more information regarding small businesses during this crisis!
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