IRS FTB UPDATE: COVID-19: IRS and CAL FTB Tax file and pay deadlines extended to July 15, 2020.
COVID-19 has hammered our southern California economy, as a large portion of businesses – and workers – are now in hibernation. No one really knows when we can all just get back to what we were doing before. This is a crisis like no one has ever seen.
Emergency Small Business Loan Program
And in response the city of Los Angeles has announced an emergency loan program where small business owners may apply and borrow from $5,000 to $20,000 – Which the city promises will have very fast processing and funding time frames.
Caroyln Hull, general manager of the Economic and Workforce Development Department notes that “Small businesses are the backbone of our economy, and the whole purpose is to help these businesses at a very difficult time.” This department has been charged with running the new Los Angeles small business lending program.
The loan fund now totals $11 million and is expected to provide financial assistance to between 550 to 2,500 small businesses. This will depend on the type of applicants. The main criteria are that small business applicants must have between one to 500 employees. The loans come with no- to low-interest rates and there is no application fee. However, applicants must meet basic underwriting criteria.
Small Business Loan Requirements
Here is what small business applicants may need to know to determine if this could be a good fit:
Credit – Principal business owner(s) must have a reasonable and responsible personal credit history and an acceptable explanation for any derogatory marks. Bankruptcies are not necessarily reasons for rejecting the loan application. Any debt write-offs must be at least 12 months old.
Cash Flow – Businesses borrowers must show that historical profits were (1) adequate to service the requested debt and; (2) have been adversely impacted by the COVID-19 outbreak.
Location – The primary business operations of the small business borrower must be located within City of Los Angeles boundaries. To determine this, see the City of LA online zoning tool at http://zimas.lacity.org.
Microloan Use of Funds – The loan proceeds must be used for “reasonable and eligible working capital expenses” and for job retention (rather than, for example, new equipment, expansion or advertising).
Collateral – Collateral requirements will be evaluated on a case-by-case basis (collateral is when existing equipment or vehicles are used as additional security which may be seized by the lender in case of default).
Required Guarantors – Generally, any business owners holding 20% or more ownership in the entity receiving the loan must offer a personal guarantee. This applies to stockholders or those holding a percentage ownership in LLC’s.
Co-Signer – Co-signors with reasonable credit and sufficient income to re-pay the loan may be included as additional guarantors to strengthen the loan application.
Application Fees – There are no Application Fees
Los Angeles Emergency Small Business Loan Terms
After approval, small business owners should expect that the general loan terms will be
- Loan amounts from $5,000 to $20,000;
- Annual interest rates of 0% to 5% depending on credit worthiness, collateral, co-signors and other factors;
- Terms range from 6 to 60 months;
- The main purpose of the city of Los Angeles small business emergency loan program is to retain low-income jobs; the loans are not intended as an unsecured credit facility. This means that the city requires that the funds are used for limited purposes (below) and prefers applicants with significant collateral.
- Display need and cash flow – Principal owners of the business will need to show that (1) their company was affected by the coronavirus outbreak; (2) that they have made money in the past and; (3) that their historical profits are adequate to repay the loans. Funds from the loan can be used only for “reasonable and eligible working capital expenses” which could mean supplies and salaries, but not a new display case or tenant improvements.
- Credit requirements – The principal business owner must have a “reasonable and responsible personal credit history,” which means that although credit a few bad records may not disqualify applicants, they must have an acceptable explanation for anything derogatory. Owners who have stakes of 20% or more in their business must personally guarantee the loan, with a co-signer allowed to make up for applicants with a weak credit history.
On Line Business Loan Application
Steps to take and documentation needed to apply for the small business loan – Complete an online loan application and provide one year of business tax returns or an interim business financial statement if that is not possible. The city also wants to see a personal financial statement, one year of personal income tax returns and three months of bank statements.
See more at https://ewddlacity.com/index.php/microloan-program and apply at https://cloud.bmisw.com/CityOfLA/Account/Login?ReturnUrl=%2FCityOfLA%2FWorkflow%2FEnter%2FMicroloan_Begin
Links and more information – Businesses that meet the basic qualifications can apply online. Additional information is available on the Los Angeles City Small Business Emergency Microloan Program website and via email at EmergencyLoans@lacity.org or call or call 213-744-7130 The city is also encouraging business owners to review its coronavirus resilience tool kit at https://ewddlacity.com/images/business/COVID19_BusinessResilienceToolkit_v4.pdf).
Free QuickBooks Loan Application Help (QuickBooks Online or QuickBooks Desktop)
QB-LA QuickBooks Los Angeles can help – we offer free assistance to small businesses applying to the Los Angeles City Small Business Emergency Microloan Program. Just contact us by emailing asap@qb-la.com or call 310 281 6161. We will be especially helpful for those with QuickBooks Desktop or QuickBooks Online accounting systems (for example, these accounting systems may often require updating or generating various financial statements and reports).
