OCEANSIDE — The City Council approved a $1.18 million loan program on April 22 to provide short-term gap funding to businesses until they receive federal funding.
Staff created the loan program after receiving direction from the council on April 1.
San Diego County health officials issued a series of orders beginning March 16 that ordered the closure of dine-in restaurants, bars, event spaces and nightclubs until eventually expanding to all non-essential businesses. Like businesses across the county, many businesses in Oceanside are struggling financially as a result.
Businesses had some options for help. The federal Small Business Administration offers loans to small businesses affected by disasters like the COVID-19 pandemic. Because of the high volume of applications coming from all over the country, many businesses are still waiting for federal financial help as the SBA continues to process those applications.
On April 16, SBA announced appropriation for the financial help had been exhausted and new applications were no longer accepted.
City staff reached out to several businesses to see where they stood in the process.
So far, 22 businesses have applied for the SBA COVID-19 Economic Injury Disaster Loan (EIDL) program, with only one approved as of April 8 but not yet funded and two more having received their loan advance on April 14.
There were 17 businesses that applied for the Coronavirus Aid, Relief, and Economic Security (CARES) Act Paycheck Protection Program (PPP), with only one business being approved as of April 16.
Due to the delay in receiving federal funds, several council members wanted to get cash to businesses as soon as possible while they wait.
The program allocates $1.18 million from the General Fund interest earnings, an amount than could assist a minimum of 59 local businesses.
The program’s framework will include loans ranging from $2,500 to $20,000. Loans between $2,500 and $5,000 will have zero interest, and loans from $5,001 to $10,000 will have 1.5% interest if repaid in 180 days. Loans from $10,001 to $20,000 will have 2.5% interest if repaid within 180 days, 3% if repaid within one year, and 3.25% if repaid within two years.
The program will apply to independently owned, consumer-oriented businesses in retail sales and consumer services that are located in Oceanside and were mandated to close or significantly alter business activity due to COVID-19. The businesses must be open to the general public without age restrictions. The loans will only be made available to businesses that have applied for SBA or EIDL funding but have not received disbursements.
Councilmember Chris Rodriguez has been pushing for the small business loan program since the April 1 council meeting. Rodriguez originally asked for $3 million for the program and said at the April 22 meeting that he would like to see the approved $1.18 million as “phase one.”
City Treasurer Victor Roy and his office did not support the business loan program due to the “high risk” it has on the city’s future financial status and suggested the council wait until its budget meeting on April 29 before considering such a program.
He also argued that it is “misleading” to say it is the city’s responsibility to use emergency funds for such a loan program.
“City emergency funding is used only for city necessities, services and repairs,” Roy said.
Rodriguez pointed out that though the loan program may come with risk, the city can’t afford to lose its businesses either.
“If those businesses fail, we’re going to be cutting a whole lot more,” Rodriguez said.
The program was approved 4-1, with Councilmember Esther Sanchez opposed. Like Roy, she expressed concern regarding how such a program could affect the city.
“My biggest concern is that we don’t even know what we’re going to have to cut to be able to do this,” Sanchez said. “We don’t know when this is going to end, and our first priority is to our residents.”
According to Sanchez, allocating $1.18 million to help only 59 businesses would be a “drop in the bucket” in terms of how many businesses in the city need help, but could mean delays in 911 calls, keeping parks closed, cutting off after-school programs and more layoffs.