After robbers hit the Hollywood restaurant Los Balcones del Peru in a wave of protests against police brutality on Saturday night, owner Jorge Rodriguez considers himself lucky enough to laugh at him.
“He took the most expensive wine we had and left,” Rodriguez said, adding that the man had left the restaurant untouched. “Looks like he has an appetite for red wine. He did not touch the white skin. “
Rodriguez maintains a dismal sense of humor even as he struggles to maintain his business with the help of life.
This restaurant is located on Vine Street, a few steps from ArcLight Cinemas. Like other businesses that cater to tourists, Los Balcones is beaten severely by COVID-19, a disease caused by coronavirus. “January is when we start getting all travelers from Asia and Europe,” Rodriguez said. “We never get that traffic.”
Reliable customers trickled in and out, but the number of employees dropped from 43 workers to seven. He was unable to open limited seating until early July. Restaurants receive the Paycheck Protection Program money from the federal government, but it will soon disappear, with the return of normal business a distant prospect.
Millions of small businesses in California and throughout the country are in the same trouble. Their livelihoods have been threatened by COVID-19 locking and scarcity of business traffic. Then, for many people, there comes a loss of income from curfews or damage due to looting .. Loans are hard to come by and the prices are very expensive.
Looking to provide a lifeline, the Bay Area group created in March launched an ambitious California program to raise $ 1 billion in capital to help healthy small-scale companies survive the next few months.
Community lenders, law firms, universities, philanthropists, small business groups and volunteers have joined as California Small Business Task Force to raise funds to provide cash to maintain working capital and other important expenses until – everyone hopes – a better economy increases customer spending next year.
“We are trying to prevent or reduce the number of people in the line of bread,” said Susan Mac Cormac. A corporate lawyer and partner at the international law firm Morrison & Foerster, Mac Cormac helped come up with a task force plan, which he considered important to prevent a wave of poverty. “We cannot overcome the economic problems of COVID-19 and the murder of George Floyd without being able to provide jobs in [low-income] community, “he said. “And the only people who employ people in this community are micro businesses.”
In a March survey by the advocacy and education group Majority of Small Businesses, 44% of small business owners said they had to be closed forever without immediate financial assistance. Many receive loans that can be forgiven under the CARES Act passed by Congress. But big blob Federal emergency loans, money diverted to fast food chains, hotels and other companies that have large bank relations and resources to hire expensive lawyers, accountants and lobbyists.
“Federal and state funding does not reach the companies that need it most,” Mac Cormac said. “But the need is huge.”
The expected high default rate for small business recovery loans translates into interest rates “well above normal time,” said Adair Morse, a finance professor at UC Berkeley’s Haas School of Business. For the worst hit areas, he estimates tariffs “in the order of 25% to 30%, if not more.” So the loan program “must at least be subsidized in part by the government or philanthropy,” he said.
The California task force began primarily to offer advice to small businesses. Another early catalyst was Adam Werbach, environmentalist and entrepreneur in the Bay Area. “Everyone feels devastated by a pandemic, so we gather resources and skills to make ends meet.” Students at UC Berkeley law school set up a hotline. The task force creates, is well organized, comprehensive resource guide and post it online.
After deficiency in the federal aid program it became clear, Mac Cormac and his volunteer colleagues decided that advice was not enough. More access to low-interest loans is needed. Even more.
The federal salary protection program defines a company with up to 500 employees as “small.” The California program is for businesses with no more than 75 employees. Most recipients will have far less than that, organizers said. The $ 1 billion program, called the Small Business Rebuilding Fund, is basically a loan program, not a grant program.
Morse from Berkeley’s Haas School helped arrange the program. The main objective is to reduce the interest rates for small business owners to realistic levels while “eliminating the risk” of investment for those who are dealing with money.
That requires guarantees of government loans and leather lenders in the game. Applicable businesses must demonstrate that they will be “feasible” after a period of disparity. “By using limited taxpayers’ money, we need to do it in a way that maximizes the return to the economy, so that the current government debt supports economic growth,” Morse said.
California Governor Gavin Newsom has set aside $ 50 million for the seed program, with another $ 50 million in his budget for legislative approval. The loan program will help small businesses access these funds. This group lobbied Congress to add money to a small business loan program that funds could use. The California group also collects money from philanthropic organizations.
Kiva, a San Francisco-based crowdfunded loan distributor for “no bank account” small businesses around the world, will manage the program. Loans will be collected, in Wall Street style, with collections assessed for risk rather than individual loans. Commercial lenders will be repaid first, final philanthropy. Some grants will be given to businesses that can demonstrate a strong business plan. Law firms including Morrison & Foerster and the Cooley Silicon Valley power station offer pro bono advice.
Mac Cormac said people from seven states have so far approached the California group to learn about the program and maybe create their own program.
It takes effort and cooperation, said Mark Herbert, California representative for Small Business Majority. If small businesses cannot get access to capital, and soon, “the effects of the ripple and economic devastation that will follow will be incalculable,” he said. “But I’m an optimist. I hope that policy makers and other leaders will do everything in their power to ensure we have the tools to prevent that from happening.”
A billion dollars is a lot of money, said restaurant owner Rodriguez. “But it’s a lot cheaper than letting all these businesses collapse.”
