Petaluma launched lending program for small businesses

Petaluma businesses may soon secure thousands in financial assistance through a forthcoming city-funded microloan program expected to disburse a quarter-million dollars to help struggling small business owners stay afloat.

The City Council Monday unanimously approved the Small Business Loan Program, aimed toward businesses with fewer than 50 employees that were unsuccessful in securing federally-funded paycheck protection program, or PPP, loans.

This potential financial lifeline comes as the city’s businesses approach ten weeks of shelter-in-place and more than a week of some limited, curbside retail operations. Even as the county looks to gain authorization from the state to further reopen, Chamber of Commerce CEO Onita Pellegrini says the financial losses among the small business community remain significant and far-reaching.

“I don’t know if you could find very many businesses in town that couldn’t use extra financial help at this moment,” Pellegrini said. “Many of our small retailers are still closed, there’s still a massive need out there.”

Unlike the federal PPP loan, the city’s program does not specify any payroll protection requirements or include language regarding retaining or re-hiring employees. Among Petaluma’s small business community, many have already gone through rounds of worker lay-offs in order to keep the lights on amid weeks of closure and an inability to access federal aid.

Economic Development Manager Ingrid Alverde said the city steered clear of adding payroll protection requirements in order to give businesses maximum flexibility in choosing how to use the funds.

“Our goal is to help the businesses stay healthy, and they’re going to employ the people they’re going to employ,” Alverde said. “We want businesses to decide what makes the best sense for them, and we definitely trust our businesses to employ and respect our community workforce.”

The up to five-year and 0% interest loans will range from up to $5,000 to $15,000, depending on business size. The total $250,000 in loan funding will be sourced from the city’s General Fund, which staff says they expect to be replenished via direct repayments within three to five years. Exchange Bank, Sonoma County’s largest Small Business Administration lender, will administer the loans.

Alverde said local business’ ability to secure federal PPP loans has been “hit and miss,” leaving many local owners in the lurch following more than two months of closures and significantly dwindled business. However, the city currently does not have complete data listing how many Petaluma businesses have received federal loans.

Alverde said the program could help about 25 small businesses, though the actual number will depend on the number of applications and the approved loan sizes.

“We’re kind of getting to that point where businesses that haven’t had any assistance are not going to be able to remain viable,” Alverde said. “We don’t want to sit back and watch them go out of business, this is the right thing to do for our city and to preserve our businesses.”

Eligibility requirements include holding an active business license filed before 2020, showing historical profits and demonstrating financial hardship stemming from the novel coronavirus pandemic and shutdown.

Businesses with the equivalent of 10 or fewer full-time employees can apply for up to $5,000, whereas businesses between 11 and 50 employees are eligible for up to $15,000.

Although several popular retailers recently opened for curbside operations and as restaurants and bars prepare for outdoor operations if approved by the state, these significant milestones in reopening won’t erase months of financial injury. Pellegrini said not only are businesses unable to open their doors in need of help, but those preparing to reopen are looking at new costs associated with adapting to new health and safety standards.

“These businesses now have to cut their clientele to socially-distance and add staff that do practically nothing but sterilize,” Pellegrini said. “Everything is going to be handled differently, and there are expenses that come with that, too.”

Loan recipients will have until July 2021 to begin repaying their loan balance, with smaller businesses fixed to a three-year schedule and larger businesses required to repay over five years.

Loans that become “uncollectable” will be written off per Finance Department procedures and accounting guidelines, according to a staff report, and the city is relying on an expected future federal funding round for future replenishment to the General Fund.

Applications opened Tuesday with the first of a two-part review scheduled for June 1. Businesses should start receiving the funds about two weeks later.

(Contact Kathryn Palmer at kathryn.palmer@arguscourier.com, on Twitter @KathrynPlmr.)