Foster City launches business loan program | Local News
To provide short-term assistance to businesses so they can stay in the city and prevent the deterioration of commercially zoned properties in light of COVID-19, Foster City officials are creating a new program to provide loans of up to $25,000.
Eligible borrowers in the Revolving Business Loan Program would pay back their loans in negotiable monthly installments lasting no longer than five years at a prime interest rate. Loan amounts can be less than the $25,000 maximum. The program is being funded through a $100,000 grant from Gilead Sciences and $100,000 from the Community Benefits Funds from Foster City, according to city documents. The city will look for more outside funding in the coming weeks.
The Foster City Council passed the resolution 4-0, with Councilwoman Richa Awasthi absent for the item, at its meeting last week and first began looking at the loan program in September and directed city staff to develop options. The council decided to explore and approve its loan program because of the length of COVID-19 and the negative effect on businesses as they try to recover. Many businesses in Foster City are suffering through COVID-19 regulations on capacity sizes, a downturn in revenue and uncertainty over local and state help.
Members of the council agreed that the city needed to approve its loan program to help the business community. They spent most of their loan program discussion time figuring out how strict the requirements should be for eligibility and how to ensure the loan repayment.
The council decided that the loan program’s eligibility requirements would include: small businesses must operate physically in Foster City, be open for at least three years, have no violations, legal action or bankruptcies, have between one to 25 workers and can demonstrate COVID-19 has affected their business. The city at its meeting also amended the initial resolution to require that businesses applying for loans should not have late payments to the city more than four times in the past seven years, have no delinquent payments of more than 60 days to the city and have a personal guarantee to ensure the security of a loan.
A personal guarantee would require the loanee to put up personal assets as collateral. The council picked a personal guarantee to include in its loan program because it was the strongest option to ensure repayment. The personal guarantee would also not cost the loanee as much to submit as other options. The council decided the personal guarantee would not dissuade all potential loanees because it is relatively common in leases and other loans. The council considered other options like a line of credit guarantee.
Councilman Sam Hindi said picking a personal guarantee for getting payment was acceptable and ensured people would apply and be approved for the program. He felt any other personal guarantee restrictions would decrease the number of people interested in the program and ensure no one would qualify.
“I think for the amount of money we are extending, it’s more than sufficient,” Hindi said.
Foster City in the past year has provided businesses with financial help through a Paycheck Protection Program, Economic Injury Disaster Loans and other outside grants to address COVID-19 concerns. Earlier in the year, city staff also reached out to businesses at Edgewater Plaza, Beach Park Plaza and Foster Square to discuss concerns due to COVID-19. The city found many small businesses and property managers were worried about rent, future payments and local regulations that would hurt business. The city also decided to waive specific permit fees and city renewal fees for some Foster City businesses…
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