Council approves microloan program

EL CENTRO – Eligible businesses impacted by the COVID-19 pandemic will have the opportunity to apply for microloans of up to $10,000 thanks to federal funds the city recently was awarded.

A total of $200,000 in Community Development Block Grant loans will be made available as part of the program whose guidelines the City Council unanimously approved during its regular meeting Tuesday.

Those guidelines established the loan program’s eligibility requirements, which include thresholds for family income levels, staffing levels, and business types, to name a few.

“The Program provides affordable financing to eligible businesses to start up or expand,” the guidelines stated. “The Program is useful for small businesses as the loan terms are flexible and can be tailored to the needs of the business.”

The loans are also eligible to be forgiven if the borrower meets one of two conditions, Economic Development manager Stacy Mendoza said during Tuesday’s meeting.

Those conditions include the borrower being able to retain the equivalent of one fulltime employee for six months after the loan is awarded, or being a sole-proprietor who is able to remain in business six months after the loan is awarded, Mendoza said.

Some of the business eligibility requirements include being located within the city’s limits, having been in operation for at least six months, not employing more than the equivalent of five full-time employees, having a valid business license and being able to prove economic hardship.

The loans can be used, among other things, to compensate staff, lease space, purchase inventory supplies, equipment and refinance debt, Mendoza said.

The loan guidelines prohibit their use for the payment of prior loans, personal expenses or non-business-related debt, Mendoza said.

Businesses that have been awarded, have applied for or are pending approval of Coronavirus Aid, Relief, and Economic Security (CARES) Act funds are also ineligible for the city’s microloan program, she said.

The CDBG funds were part of an overall $333,375 award that the city received as part of the CARES Act. Previously, the council had approved an amendment to its CBDG program spending plan to incorporate the $333,375.

The city will assign two staff members to help process the loans, and expects it will take about 20 days from when the loan applications are submitted to when the funds are distributed, the guidelines stated.

Income thresholds established by the

U.S. Department of Housing and Urban Development require that loan applicants do not earn an annual income that exceed 80 percent of an area’s median income, which for El Centro is about $55,000, Mendoza said.

That means the annual income level for an eligible loan applicant who is single could not exceed $39,150, the guidelines stated. For a family of two, that threshold would be $44,700, and for a family of five it would be $60,400.

Applicant will be able to use income levels based on the current year, and make adjustments related to the pandemic’s impacts, Mendoza said.

The local Small Business Development Center will also be providing loan application assistance for those interested to apply, she said.