Since the coronavirus swept into Silicon Valley last spring, Denise Russell鈥檚 race to save her San Jose salon has stretched into a marathon. It started with a $103,020 Paycheck Protection Program loan. Then came a federal small business Economic Injury Disaster Loan for $159,000. Now, she鈥檚 applying for a $15,000 state grant and another PPP loan 鈥� all while fighting the state for .
鈥淭hey make it so complicated,鈥� said Russell, whose Special FX Salon & Day Spa was closed for seven months in 2020. 鈥淭hey鈥檙e constantly changing the rules. I mean, it鈥檚 a nightmare.鈥�
Russell spent thousands on medical-grade sanitizer and a parking lot salon, but she only brought in around $350,000 of the more than $1 million in revenue she expected last year. Across the state, business owners staring down similarly daunting numbers warn of an 鈥溾�� that could claim a third or more of small businesses, with service sector employers and those owned by women and people of color at .
Amid winter closures triggered by record virus cases, California kicked off an unprecedented small business rescue plan. Federal loan programs have already injected more than $83 billion into California businesses, and the state is rolling out its own grants, loans and tax relief. Still, business owners warn that it鈥檚 not enough, especially after widespread technical glitches and confusion about eligibility, programs that have at times favored bigger companies and nagging questions about interest or funding restrictions.
鈥淭hese are unheard-of numbers when it comes to cash for small businesses,鈥� said Mark Herbert, vice president of California operations for national advocacy group Small Business Majority. 鈥淏ut it鈥檚 also important to understand the scale of the need. 鈥�
A $4.5 billion relief plan
Beyond high-profile clashes over pandemic reopening rules is a fundamental question that has vexed state and federal officials: whether to inject more direct aid now, hopefully staving off mass commercial evictions and bankruptcies, or focus on longer-term economic stimulus.
With his $4.5 billion budget plan, Gov. Gavin Newsom aims to do both. Among the proposals: $575 million in cash grants, $630 million in tax relief and $135 million in low-interest loans. The administration included $1.5 billion for zero-emission vehicles and $500 million for housing development, contending those funds would spur clean-energy and construction jobs
鈥淪mall businesses are the backbone of our economy,鈥� Newsom said during a Jan. 5 . 鈥淚 recognize the headwinds. I recognize the stress. I recognize all that you have been put through over the course of the last year.鈥�
California鈥檚 approach has national implications. Janet Yellen, a member of Newsom鈥檚 , is the nation鈥檚 new . Isabel Guzman, director of California鈥檚 Office of the Small Business Advocate, to lead the U.S. Small Business Administration. California Labor Secretary Julie Su is to serve as the No. 2 official at the U.S. Department of Labor.
Back in Sacramento, economic recovery efforts will be helmed by Newsom鈥檚 and Clinton administration alum Dee Dee Myers. State lawmakers are also fighting for additional small business aid. Sen. Anna Caballero, a Democrat from Salinas, has championed a larger $2.6 billion small business grant program with .
鈥淚鈥檓 a big supporter of community aid right now,鈥� Caballero said. 鈥淧art of that is we need to get people back to work.鈥�
Mind the gaps
One challenge 10 months into the pandemic is that no one knows for sure how much damage has already been done.
From February to April, 3.3 million small businesses nationwide vaporized, according to a Stanford Institute for Economic Policy Research 鈥� a 22% overall drop, but a 41% drop for Black-owned businesses, 32% for Latinos, 26% for Asians and 25% for women. In California, 30% of small businesses remained closed in November, and 鈥渢housands鈥� shut down permanently, according to a by state oversight agency the Little Hoover Commission.
Last spring, millions of businesses scrambled to get a piece of the $669 billion federal Paycheck Protection Program, which doled out 617,216 loans totaling $68.3 billion in California, Small Business Administration records show. It was a frenzy that strained the state鈥檚 hundreds of local small business groups and highlighted existing racial disparities in access to capital, as well as costly tools like online sales software to stay safe and competitive in a pandemic.
鈥淲e had an influx of people reach out that needed just the fundamentals,鈥� said Dene鈥� Starks, education director of Elk Grove鈥檚 four-person Black Small Business Association of California. As big banks fast-tracked applications for the and , her group helped small businesses get federal tax numbers and open bank accounts.
Brian Rauso managed to cut through the red tape for a PPP loan worth $82,250 for his Green Cheek Brewing Co. in Orange County. The company was still forced to lay off dozens of its 49 employees after opening a second location in January. A $1,000 grant from Orange County helped build an outdoor patio this summer, and he鈥檚 got a $150,000 emergency loan in reserve.
With the businesses closed again as the virus rages in Southern California, Rauso worries government aid is 鈥渢oo little, too late.鈥� The bigger issue, he said, is when he can reopen, and whether the business will still be bound by highly specific . For now, Green Cheek has indefinitely shelved plans for a third location, and Rauso has watched three former employees move out of state for lower costs of living.
鈥淐OVID, unfortunately, it鈥檚 like turning the lights on in the middle of the night and seeing what鈥檚 really going on,鈥� Rauso said. 鈥淚t鈥檚 exaggerated all the problems that have been there.鈥�
New loans
As small business owners try to keep their heads above water, policymakers, philanthropists, attorneys, banks and academics have come together behind the scenes to try to fill gaps in patchwork aid programs. It鈥檚 a tall order, especially to reach the state鈥檚 smallest businesses. But if it works, those involved say it could change the way small business lending is done in California and kickstart new jobs as the state economy recovers.
The public-private launched late last year is small by the scale of recent federal loan program, but it鈥檚 4.25% interest loans are designed to be paid out by local that can reach more small businesses. A separate $35 million Dream Fund in Newsom鈥檚 proposed budget would offer additional capital to entrepreneurs from underrepresented groups to start new businesses.
鈥淲e need to try to stem the bleeding. But we also wanted to start planning and thinking about, 鈥楬ow do we identify long-term strategic priorities?鈥欌�� said Herbert of Small Business Majority, who helped develop the Rebuilding Fund. 鈥淭hat鈥檚 a piece of infrastructure that鈥檚 not just built for the emergency, but has tremendous implications in the future.鈥�
Unemployment numbers and new business starts in the coming months will test which programs are making a dent for small businesses. For now, with her San Jose salon still closed, Russell is among those branching out. She鈥檚 already raised money from two private investors to start the wine company she always imagined at her home in Morgan Hill.
鈥淚鈥檓 a workaholic. I had to figure out how to divert my negative energy,鈥� she said. 鈥淭hat would have never happened had the status quo continued.鈥�
CalMatters is a nonprofit, nonpartisan media venture explaining California policies and politics.