Many small businesses in San Francisco and (Chris Victorio | Special to the S.F. Examiner).

New SF HELP loan product for small businesses provides model for California

The state needs to find ways to help low-income communities during the COVID-19 crisis

By Paulina Gonzalez-Brito and Nathanial Owen

California has long been a bellwether state for where the country will head, and San Francisco is often at the vanguard of innovative solutions that can be adopted on a statewide level. This has been especially true since the federal government shift that began in 2017 — and such inventiveness is more critical than ever during the current COVID-19 crisis. This is our state’s watershed moment in creating equitable opportunity for all Californians.

Such inventiveness is needed because the April 23 bipartisan Congressional passage of Round Two of the Paycheck Protection Program (PPP) measure once again ignored the needs of low-income communities of color locally and across California. Rather than addressing the inequities of Round One, the bill’s set-aside furthered what amounts to yet another giveaway to big banks and their preferred customers.

To avoid re-redlining practices, we must ensure that a greater number of community-lending institutions are eligible to disburse funds and hold banks accountable to track race, gender and neighborhoods (census tract) of the borrowers who apply to receive loans. If we learned anything from the first round of PPP loans, it is that minority business owners have a harder time getting loans than their white counterparts. As an example of how the PPP loan program has badly failed small businesses owned by people of color, a survey of 500 small businesses owned by Latinos — conducted by the U.S. Hispanic Chamber of Commerce and the League of United Latin American Citizens — found that only 97 had received PPP loans.

When banks fail to serve communities of color, Community Development Financial Institutions (CDFIs), such as MEDA’s own loan fund called Fondo Adelante, play a critical role in filling this gap. But, here again, the PPP loan program failed to allow for CDFIs to serve small businesses owned by immigrants and people of color. Under the new bill, specific set-asides were created for banks with assets under $10 billion, but this grouping already makes up 97% of banks nationwide, rendering such “set-asides” basically moot. Meanwhile, the list of authorized lending institutions was not expanded to include all CDFIs. This means that 95% of banks are now authorized to lend, yet only 8% of the nation’s CDFIs — responsible lenders that have the deepest roots in communities of color — have been authorized to distribute funds.

To address the current gaps with federal government assistance, MEDA has worked locally with the City of San Francisco and the California IBank to design and implement the San Francisco Hardship Emergency Loan Program (SF HELP). The goal is to disburse at least $4 million to help around 200 small businesses across San Francisco. Best of all, this is a 0% interest loan program for our most vulnerable small businesses struggling to access financing from the federal government. Available loans will be up to $50,000, with terms of up to six years. We expect to roll out our iteration of SF HELP in early May.

The small businesses that will be supported by SF HELP are the backbone of California’s economy. These are African American-owned eateries. Neighborhood salons. Latino-owned in-home child care centers.

According to the Small Business Administration, there are 8.7 million minority-owned businesses across the land. Many are sole-proprietor entrepreneurs. This fact cannot be disputed: if our minority-owned businesses fail, the U.S. economy fails. SF HELP protects underresourced entrepreneurs in our city, essential due to the continued shortcomings of PPP in supporting our communities of color.

The SF HELP model should be replicated across California, as a means to provide stopgap funding so all small businesses have a chance to survive the current COVID-19 economic crisis. To this end, the California Reinvestment Coalition calls on Governor Gavin Newsom to invest an additional $200 million to the IBank loan program and $100 million in emergency grants to California’s small businesses and entrepreneurs, including ventures owned by undocumented immigrant entrepreneurs. By quadrupling the state’s investment in the IBank loan program, California will open the door for scaled partnerships with local municipal governments, community foundations and banks to ensure that 0% loans are made available to tens of thousands more small businesses across our state.

The Governor must rise to meet the challenge of this moment and invest in the economic vitality of historically marginalized small businesses. Our state does not have to look helplessly on as the federal government flounders and fails to deliver relief to vulnerable commercial ventures. California can lead the way once again in this crisis by prioritizing our most cherished and at-risk small businesses.

It’s called equity.

Paulina Gonzalez-Brito is executive director of the California Reinvestment Coalition (CRC). Nathanial Owen is director of Fondo Adelante, the CDFI community lending arm of the Mission Economic Development Agency (MEDA) in San Francisco.

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