COVID-19: City launches emergency loan program for small businesses
Manhattan Beach City Council on Tuesday evening unanimously approved an emergency loan program to help small businesses struggling to stay afloat during the pandemic.
The program will provide $ 250,000, drawn from the city’s general fund reserves, to be disbursed in the form of loans of $ 10,000 to businesses that employ 50 people or less. The highest priority will be given to independent businesses that have been closed due to COVID-19, and then to independent businesses that have been restricted due to the pandemic.
City Councilor Steve Napolitano said the city must take action because the federal government failed to do so.
“It’s not just a well-intentioned program to make us feel good and get our names known,” Napolitano said. “It’s about supporting the companies we know and love and want to stay in business. We put ourselves in the shoes of what others should be doing and they don’t. The federal government should have another stimulus package that has been delayed. If there is another, so much the better. In the meantime, we have people who are suffering, and everybody is saying, ‘Oh, I wish so-and-so was still here, I wish so-and-so was still here.’ They will say it after the fact, when we could have stepped in and done something.
City Councilor Hildy Stern echoed Napolitano’s comments, noting that the federal government’s inability to provide more assistance to small businesses and employees forced to shut down required the city’s intervention.
“It hasn’t been done, so we recognize the need for it,” she said. “If we can see that there are companies out there that need $ 10,000 just to try to hold on, it’s so important, then … we can do it.”
Loans can only be used for payroll, lease or mortgage payments, utilities, and accounts payable. Recipients must use the loan funds for the benefit of businesses physically located in Manhattan Beach.
“Tis its rationale who generated this money in the first place? Said City Councilor Joe Franklin. “Eleven percent of our income comes from sales taxes and trading fees from the very companies we are trying to help. So by all means, we must help.
Loans will be available on a first come, first served basis. Businesses must have business licenses issued before the onset of the pandemic and cannot be in a residential area.
Businesses cannot have any outstanding code violations, tax liens, or defaults, and loans must be secured by personal guarantees, promissory notes, or homeowners’ real estate guarantees. Franchised businesses will also be considered, but with a lower priority than independent businesses.
The interest rates will be linked to the Government’s Local Agencies Investment Fund (LAIF) plus 0.5%. LAIF’s most recent three-month average is 0.63 but is subject to variation so the interest rate is likely to be between 1.2% and 1.6% with repayment to begin 100 days after the local state of emergency has been lifted and full reimbursement made within three years. The final approval authority for each loan will be either the city manager or a subcommittee of city council.
A few residents expressed their opposition to the loan program. Alex Kirschenbaum argued that local government should not play the role of a banker.
“How do you plan to protect the city from liability when you give a loan to a business and [another business] that you refused another suing you? ” he said. “If this loan opportunity is so good, why don’t the local banks do these loans? If it’s not a good risk for them, why is it a good risk for the city? When did the citizens of Manhattan Beach vote to use your city’s reserves for a small business loan program? While I recognize that everyone involved has their hearts in the right place, don’t you see the conflicts of interest you face in having local business loans approved by two city council members? All of the city council members ran saying they would be fiscally prudent. Why is this changing now? ”
Mike Simms, local restaurateur and president of the Manhattan Beach Downtown Business and Professionals Association, said the program should be seen less of a loan program than an investment. He calculated that $ 220,000 of every $ 1 million in Manhattan Beach sales goes to taxes.
“I have no skin in this game because it is limited to companies with less than 50 employees and all of my companies have more than 50 employees,” Simms said. “But if there’s one business we can save – hopefully many more – it’s a lifeline for them. An empty storefront is detrimental to our community. There’s a lot on Manhattan. Avenue right now; I’m talking to the salespeople who are next to each one of them, and they’re wondering if they’re going to stay in business, as these are just blockages.
Napolitano recognized some risk in issuing loans, but said the potential benefits of the loan program far outweighed its cost.
“It is not without risk, we understand that,” he said. “But in the scheme of things, it’s not a lot of money for us, unlike what it will mean for them, to keep their doors open…. Yes, we are not a bank. But FEMA for a pandemic isn’t coming, so something needs to be done to help these people, and we’re trying to do whatever we can. ”
City Councilor Richard Montgomery said the city was responding to an emergency.
“I want to remind everyone, we are in a pandemic, folks,” he said. “It’s not an earthquake, not a flood or a tornado. It’s a pandemic; we don’t have an end date in sight …. We’re talking about helping businesses. I don’t think the city is going to lose our AAA rating because we have one or two people who maybe – maybe – can’t pay the loan back. I trust the people we have worked with and have come here to give them a chance and say “We support you” and not just lip service. ”
Help also comes from the private sector. Skechers President Michael Greenberg last week launched the Skechers Restaurant COVID Relief Fund, which offers up to $ 500,000 in matching donations for every dollar donated to help restaurants in downtown or North Manhattan Beach. .
Although the city’s loan program does not have such geographic restrictions and is not limited to restaurants, Franklin suggested that the city explore the possibility of obtaining matching funds from Skechers for part of the program. loan.
“It would be a multiplier,” he said. “So maybe this is something we can explore.”
Mayor Suzanne Hadley expressed reluctant support for the loan program. She said it was a symbolic gesture of support for local businesses, but expressed concern that the city was getting “into the lending business” and able to collect business debts. .
“It won’t be easy for anyone in this town to have to collect, so I don’t want anyone to delude themselves that it’s going to be a lot of happy talk in six months or a year, when some of these loans don’t. ‘Getting there will be really tough, “Hadley said.” So I’m only on board because it’s a pandemic … Time is running out. ” emergency