05-19-2020 - AGENDA ITEM 06 CONSIDERATION OF ESTABLISHMENT OF A WEST COVINA COVID-19 SMALL BUSINESS LOAN PROGRAMAGENDA ITEM NO.6
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AGENDA STAFF REPORT
City of West Covina I Office of the City Manager
DATE: May 19, 2020
TO: Mayor and City Council
FROM: David Carmany
City Manager
SUBJECT: CONSIDERATION OF ESTABLISHMENT OF A WEST COVINA COVID-19 SMALL
BUSINESS LOAN PROGRAM
RECOMMENDATION:
It is recommended the City Council approve the proposed guidelines for the West Covina COVID-19 Small
Business Loan Program and authorize the City Manager to prepare the necessary loan documents and reporting
requirements consistent with Department of Housing and Urban Development requirements.
BACKGROUND:
In response to the Coronavirus Disease (COVID-19) global pandemic, California State Governor Gavin Newsom
and County of Los Angeles Public Health Department (LA County) has issued health orders to address the issue.
On March 19, 2020, Governor Newsom issued Executive Order N-33-20 directing all State residents to Stay at
Home and ordered the closure of all bars, nightclubs, wineries and breweries with restaurants restricted to
takeout/drive-thru/delivery. Subsequently, LA County has issued several health orders regarding the closure of
businesses.
LA County's first "Safer at Home" health order was issued March 19, 2020, requiring the closure of all theaters,
entertainment centers, fitness centers, wineries, breweries, tap rooms, bars and nightclubs (that do not serve food),
and restaurants were restricted to drive-thru, take-out, or delivery. LA County then revised the order on March 21,
2020, requiring the closure of all non -essential businesses until April 19, 2020. The health order was then revised
on April 10, 2020, extending the "Safer at Home" and closures of non -essential business until May 15, 2020.
On May 4, 2020, Governor Newsom issued California's Reopening Resilience Roadmap sharing the five stages to
reopen the economy. On May 8, 2020 LA County allowed the reopening of several non -essential businesses in
Stage 2 of their Roadmap to Recovery (including; clothing retailers, florist, music stores, book stores, dealership
showrooms).
As of May 13, 2020, Los Angeles County has become the state's epicenter of the COVID-19 with approximately
half of the cases statewide, as such, LA County intends to extend the Safer at Home order with modifications. The
exact extent of the modifications is not known as of the drafting of the staff report.
The impact of the global pandemic on the local business economy has led to record level unemployment, loss of
revenues, and business closures. While the State and County orders will be phased out, slowly allowing for certain
businesses to open, the future of West Covina businesses are uncertain
In a response to this local emergency, City Staff have worked to connect businesses to federal and state sources of
funding such as the Small Business Administration (SBA) loans made available through the Coronavirus Aid,
Relief and Economic Security (CARES Act) and business assistance and counseling through authorized SBA
resource partners (Small Business Development Centers). While these resources have been critical in helping local
businesses navigate the pandemic, more help is needed to help prevent further job losses for Low -and -Moderate
Income people and the closure of small firms.
To assist local businesses, the City of West Covina has developed the West Covina COVID-19 Small Business
Loan Program (WCSBL-COVIDI9). The Program provides a one-time forgivable loan (after 1 year) of $10,000 to
eligible West Covina businesses which were negatively impacted by the economic shutdown resulting from the
COVID-19 pandemic either through loss of sales, lost or reduced workforce or temporary closure.
A resource that many cities are using throughout California to fund job retention/creation programs is the
Community Development Block Grant (CDBG) Funds from the U.S. Department of Housing and Urban
Development (HUD). CDBG allows the use of funds for economic development programs that are in compliance
with one of their national objectives to benefit to low- and moderate —income individuals, or aid in the prevention or
elimination of slums or blight.
On July 18, 2017, the City Council adopted the CDBG 2017-2018 Action Plan, which allocated $325,000 for the
Business Assistance Loan Program. The program was implemented but no loans were awarded. As such the
$325,000 funds are available as intended for the Business Assistance Loan Program.
DISCUSSION:
In response to the economic impact the COVID-19 pandemic staff is recommending that the original $325,000 be
targeted towards small businesses that have been impacted by the pandemic.
The following are the proposed framework for the WCSBL-COVIDI9 program:
• Funding:
The program will utilize the already allocated $325,000 CBDG funds for economic development efforts for
the program.
• Program Requirements:
The following are the proposed requirements for applicants and use of funds:
o $10,000 Loan
o Loan is forgiven after 1 year (If in compliance)
o Must Retain 1 full-time employee (FTE) equivalent
• Employee must be of low- or moderate -income
o Eligible Business:
• For -profit, independently owned local business
• Must be a small business
• Have a physical establishment within the City of West Covina (in commercial area)
• Have current West Covina business license
• Business has been operation at least one prior to March 19,2020
• Meet the national objective to creating/retaining jobs benefitting persons of low to moderate -income in
the City.
• Be in good standing with the City (no liens or judges or outstanding code enforcement violations).
• Have or register for a DUNS number
o Eligible Use of Funds:
• Labor Expenses (excluding owner)
• Rent & Utilities
• Overhear Expenses (insurance, maintenance, etc.)
• Business Services (website development) to increase capacity to carryout business activities
• Business Inventory & Supplies
• Capital or Equipment purchases necessary for business operation (excluding vehicles)
• Business are required to identity their intended use of funds using the application process.
o Businesses that have received/pending receipt of other federal funding will have to disclose to the City during
application process and will be subject to additional loan requirements.
. Application Process:
Applications can be submitted online or via email at www.westcovina.org/Smallbusinessloan.
Loan applications will be reviewed by City staff on an ongoing basis until all funds are disbursed on a first
come, first served bases. If the City determines that additional information or supporting documents are
needed to review an application, then the application is not considered complete. Funding may be released
within two weeks of approval. The City reserves the right to deny an application for funding.
Additional restrictions apply and all funds are subject to CDBG and Coronavirius Aid, Relief, and Economic
Security (CARES) Act guidelines.
The WCSBL-COVID19 shall cease providing small business grants when any of the following criteria are
met: 1) when the Governor lifts the Stay at Home order and all restrictions on local businesses, including
on -site dining, 2) when the City's local emergency order issued on March 16 is no longer in effect or 3)
program funds are exhausted.
. Required Documents:
Furthermore, consistent with CDBG requirements, a loan agreement must be executed between the City and
the business recipient. If a forgivable loan is awarded, the business will need to agree to participate in
ongoing Federally required monitoring. The City may ask businesses to periodically submit documents that
support the use of funds and reports on the impact grant funds have had on their businesses.
At the time this report was completed, HUD does not have guidelines/requirements published regarding the use of
CDBG funds for business loans during the COVID-19 pandemic. Staff has developed the proposed guidelines
using HUD requirements for financing economic development projects and will make any necessary
adjustments/changes to the proposed guidelines should HUD release requirements.
OPTIONS:
The City Council may consider the following alternatives:
1. Approve the West Covina COVID-19 Small Business Loan Program and authorize City Staff to development
the guidelines and issue small business loans in the amount of $10,000 to West Covina based businesses.
2. Provide changes to the proposed guidelines to the West Covina COVID-19 Small Business Loan Program and
authorize City Staff to finalize the guidelines and issue small business loans in the amount of $10,000 to West
Covina based businesses.
3. Provide alternative direction regarding aspects of the Program.
Prepared by: Paulina Morales, Economic Development and Housing Manager
Fiscal Impact
FISCAL IMPACT:
CDBG Funds will be utilized for the West Covina Small Business Loan Program (COVID-19). Impact to the
CDBG funds will be based on the approved projects, however, will not impact funding for other CDBG
programs/services. There will be no impact to the City's General Fund.
Attachments
Attachment No. 1 - Draft Application
CITY COUNCIL GOALS & OBJECTIVES: Achieve Fiscal Sustainability and Financial Stability
Engage in Proactive Economic Development
ATTACHMENT NO. t
WEST COVINA City of West Covina
CV-SBL
w EST COVINA COV IO-11 1444 W. Garvey Avenue, South 1 (626) 939-8417
SMALL BUSINESS LOAN
WEST COVINA COVID-19 BUSINESS LOAN PROGRAM APPLICATION
Owner Information
Applicant Name:
Business Owner First and Last Name(s):
Email: Phone Number:
Home Address:
City:
State/Province: Postal Code:
Are you a citizen or permanent resident of the United States? Yes [ ] No [ ]
Business Information
Business Name:
DBA or Tradename (If Applicable):
Business Address:
Tax ID Number or SSN:
DUNS Number:
*If your business does not have a DUNS number, you can register for it at httos://fedgov.dnb.com/webform/
Business Date Incorporated (MM/DD/YYYY):
Is the United States the principal place for residents for all employees of the Applicant?
Yes[ ] No[ ]
Program Requirements Checklist:
Number of full-time equivalent (FTE) employees (including owners and independent
contractors):
Existing Jobs: Full -Time: Part -Time:
Will you be retaining at least one FTE employee for the next year? Yes [ ] No [ ]
WEST COVINA City of West Covina
CV-SBL
WEST COVINA COVID-19 1444 W. Garvey Avenue, South 1 (626) 939-8417
SMALL BUSINESS LOAN
Does your business have a commercial storefront? Yes [ ] No [ ]
Does your business have an active City of West Covina Business License? Yes [ ] No [ ]
If yes, provide Business License number:
Does your business have any unresolved municipal code violations and/or delinquent
penalties? Yes[ ] No[ ]
Does your business have any existing loan/grant with the City? Yes [ ] No [ ]
Loan Criteria:
1. Business Type: Indicate which category of business your business fall into:
[ ] Independently owned retail, restaurant, cafe, or gastropub
[ ] Single locally -owned franchise of retail, restaurant, cafe, or gastropub
[ ] Other eligible business type
2. Length of time your business has been in continuous operation in the City:
[ ] More than 3 years
[ ] 1-3years
[ ] Less than 1 year
3. COVID-19 Financial need and Community Development Block Grant (CDBG)
Objectives — Note: At time of loan issuance business may be asked to provide city
with requested support documents for the responses provided below as needed to
verify
a. Have you experienced reduced revenue/cash flow of at least 20% since the
COVID-19 outbreak in March 2020 compared to this same time -period 12
months prior, or compared to January and February of the 2020 calendar
year?
Yes[ ] No[ ]
b. Is your business experiencing significant financial solvency issues as a result
of COVID-19 pandemic?
Yes[ ] No[ ]
c. Will the current finances of your business in combination with a $10,000 loan
allow your business to remain open (or re -open following easing of
restrictions) for a minimum period of at least 90 days following awarding of the
loan?
Yes[ ] No[ ]
WEST COVINA City of West Covina
CV-SBL
WEST COVINA COVID-19 1444 W. Garvey Avenue, South 1 (626) 939-8417
SMALL BUSINESS LOAN
d. As a result of the COVID-19 pandemic, have you had to layoff, furlough, or
reduce the number of weekly working hours of one or more employees
considered low -moderate income as defined in Attachment A of this
application?
Yes[ ] No[ ]
e. Will the loan be used all or in part to pay wages of an employee that is
considered low -moderate income as defined in Attachment A of this
application, or otherwise used to meet the CDBG requirement of hiring or
maintaining at least one low -moderate income job?
Yes[ ] No[
Use of Funds:
Purpose of Assistance
[ ] Payroll
[ ] Lease/Mortgage Interest
[ ] Utilities
[ ] Business Inventory and Supplies
[ ] Capital or equipment purchases necessary for the business operation, excluding
vehicles
[ ] Other:
Additional Financing Sources:
Have you applied and received federal assistance funding (e.g. Payment Protection
Program, Economic Injury Disaster Loan)
Yes[ ] No[ ] If yes, when? Amount:
Have you applied and are awaiting federal assistance funding (e.g. Payment Protection
Program, Economic Injury Disaster Loan)
Yes[ ] No[ ] If yes, when?
Requested Amount:
Please note that if your business has or does receive any federal financial assistance,
you will need to provide documentation of the amount received and it will impact the
loan amount your business can qualify for.
WEST COVINA City of West Covina
CV-SBL
WEST COVINA COVID-19 1444 W. Garvey Avenue, South 1 (626) 939-8417
SMALL BUSINESS LOAN
Miscellaneous:
1. Has your business ever filed bankruptcy or defaulted on any debts?
Yes[ ] No[ ] If yes, when?
2. Does your business use or store any hazardous materials, or produce toxic waste?
Yes[ ] No[ ]
3. Is your business a party to any claim of lawsuit?
Yes[ ] No[ ]
4. Does your business owe any taxes for years prior to the current year?
Yes[ ] No[ ]
This City of West Covina reserves the right to change the program guidelines based on any
requirements imposed by the U.S. Department of Housing and Urban Development (HUD).
I/We HEREBY CERTIFY that the aforementioned facts are true and correct. Furthermore, if
approved, I/We will provide additional documentation and certification of the information
provided on the application form prior to loan issuance. I/We will be liable for all costs
incurred through the program if any information provided is determined to be false and/or
incorrect which may have initially qualified me/us for the West Covina Small Business
Forgivable Loan Program.
Signature Title Date
Signature Title Date
Please contact Pauline Morales in the Community and Economic Development Division at
626-939-8417 or pmorales(a)westoovina.oro for further information on Economic
Development projects.
WEST COVINA City of West Covina
CV-SBL
WEST COVINA COVID-19 1444 W. Garvey Avenue, South 1 (626) 939-8417
SMALL BUSINESS LOAN
ATTACHMENT A: LOW -MODERATE INCOME GUIDELINES
For purposes of this application, "low -moderate income" persons and jobs are those whose
household income is at or less than 80% of the Median Household Income for Los Angeles
County, as defined under the CDBG 2020 Program Income Guidelines listed below:
Number of Persons in
Household
Maximum Combined
Household Income
1
$63,100
2
$72,100
3
$81,100
4
$90,100
5
$97,350
6
$104,550
7
$111,750
8
$118,950