CARLSBAD — After weeks of input and discussions with small businesses and several business organizations, the Carlsbad City Council approved a $5 million loan program in response to the fallout from the COVID-19 pandemic.
The program will make available at least $4.4 million for loans with a tentative launch on May 25, although it could be sooner, according to David Graham, the city’s chief innovation officer, during the council’s May 5 meeting.
Applicants must hold a valid business license as of March 1, 2020, be in good standing with the city and funds can cover rent, payroll, mortgage interest and utilities. Applicants who have applied for federal assistance are eligible but may not also apply to the city for a loan to cover costs for which they have already received federal assistance.
“We are definitely still in a time of economic uncertainty and will be for some time,” Graham said. “There’s definitely a benefit for a public loan program.”
The recommendations came from the city’s ad hoc subcommittee, which was formed on April 7, of Mayor Matt Hall and Councilwoman Priya Bhat-Patel. Carlsbad joins several other municipalities across the county in offering loans to small businesses such as San Marcos, Oceanside, Poway and San Diego County, to name a few.
“We gave a lot of thought on this,” Hall said. “We spent a lot of time listening to the community … to tailor this to what, I think, the business community needs.”
Carlsbad approved two proposals, which include micro and economic recovery loans.
The eligibility requirements include businesses with gross revenue of $2 million or less, have 15 or fewer employees for loan amounts between $5,000 and $10,000.
The first payment could be deferred for up to 90 days and with 0% interest if paid back within 6 months, 1% in 12 months and 2% in 18 months. Those loans will be between $5,000 and $10,000.
According to Graham, there are about 2,700 non-residential businesses with gross revenue of $2 million or less. With the microloan program, the city estimates 150 to 300 loans and the council approved allocating $1.5 million for microloans.
As for the recovery program, those requirements include businesses with gross revenue of $3 million and with 50 or fewer employees. The loan amounts will be between $10,000 to $25,000.
Interest rates, meanwhile, will be 2% if paid back within 12 months and 3% within 30 months. Graham said about 3,600 non-essential businesses fall under the recovery requirements and the city estimates between 80 to 200 loans.
However, the city approved a longer deferment period, which is up to 180 days for both loan programs.
“The investment is at or above what the other cities are doing,” Graham said. “When we have engaged the vast majority have said $25,000 or less in loans. The next highest group said $50,000 or less.”
The council also approved $250,000 for a joint marketing strategy, $250,000 to be held as a contingency and $50,000 each for mediation services and city lessee relief. The contingency can be re-allocated back into the loan program, Graham said.
Hall said a survey by the city regarding federal assistance for local small businesses showed 77% applied for the Emergency Injury Disaster Loan (EIDL) program and 75% for the Paycheck Protection Program.
Additionally, the city will contract the loan program to a third party, which is expected to be selected by May 15.