The City of Saint Paul has proposed a $ 2.3 million fund that will offer grants of $7500 to 300 qualified businesses located in the city. $50,000 is allocated towards expenses of partner organizations that help businesses access these funds
Key elements of the Bridge Business Fund
- The business must have had between 1 and 20 FTE employees
- If a sole proprietor, it must be the primary source of income for the owner
- The business has less than $2 million in annual gross income
- The business operation is primarily retail oriented
- The business must be independently owned, and not a chain or franchise, with 4 or fewer locations within the city.
- The businesses were ordered to close or had significantly reduced its business by a state of Minnesota executive order in 2020
- Commercial or residential real estate businesses
- Subsidiaries or affiliates of a business dominant in its field (chain or franchise businesses)
- Businesses that can conduct all or most of its businesses remotely
- Independent consultants
- Residential based businesses
- Businesses whose primary source of revenue is from business to business transactions
Applications are scheduled to open April 8, 2020 and evaluated on a rolling basis starting April 19, 2020.
If approved applicants will be notified within 10 business days and payment made approximately another 10 days after the execution of the agreement.
The city estimates that there are around 700 businesses that could match these criteria and so the program is estimated to reach close to half of these businesses. There were around 15000 workers employed by these businesses.
Based on initial conversations with a wide range of businesses I offered a tool to help evaluate these kinds of COVID business assistance programs. The tool evaluates a program based on the size of the business, the capacity of the business to use the program, the debt capacity of the business, capacity building for business support organizations, and intentional efforts at including groups traditionally marginalized such as minority owned businesses. To date five kinds of programs have been proposed nationally: forgivable loans with an employment condition, low interest long term loans, freezing of fixed costs such as mortgage, rent, utility payments, protections against predatory lending and grants with or without an employment condition. The programs evaluated below are those in generic form and not necessarily a particular program offered by a government. This framework is applied to evaluate the Business Bridge Fund proposed by the City of Saint Paul.
First, the city is commended for offering the program as a “grant” as many small businesses do not have the capacity to take more debt. In doing so it can serve as a component of a larger package of products a business can access – for example a larger low interest SBA loan up to $2 million dollars. This allows businesses in the city to take advantage of state and federal programs using the grant component for soft costs not covered in the other programs.
Second, the city is commended for trying to complete the process within a month as many businesses might be defaulting rent or mortgage payments in April. Given the staff capacity at PED currently working on programs such as Neighborhood and Cultural Star programs, this commitment to a speedy implementation is much appreciated.
Third, by offering a wide range of uses for the grant the city is helping businesses retool, say from a sit-down restaurant to develop takeout and delivery capacity.
Fourth, the city shows its strong commitment to businesses because it has practically emptied out funds from all business support programs to deal with this emergency.
Fifth, it is important that the program allocates funds for business assistance partners as many of these providers are being overloaded with requests for assistance during the crisis.
Suggestions for the Bridge Business Fund
- Consider awarding grants “up to” $7500 for three reasons – it allows smaller requests, corrects for applications written to fit the grant criteria and it could reach a larger number of businesses.
- In evaluating proposals ensure that microbusinesses with revenue under $250,000 get a fair share of funding.
- Consider allowing businesses without employees to also access the grant. There may be a legal reason for the job component the way the original source city funds are set up, but the HRA board could provide the necessary exemption. I know a hard-working immigrant female business owner who is the sole owner, cook, waitress and cashier in a small restaurant paying $3000 in monthly rent. She will be excluded from this grant program and possibly will have to close and lose the over $100,000 she has invested in her business.
- Consider opening the program beyond retail businesses. For example, there are home health care businesses in trouble. An immigrant owner of a home health care business who employs many independent contractors shared the challenges of surviving during this crisis.
- A portion of the grants could be allocated to home based businesses who have been actively in business during the last six months and fitting the range of business sectors covered.
- $50,000 allocated to business assistance partners to execute 300 grants implies $166 per grantee. A typical nonprofit will be spending at least 3-5 hours per business assisting the business and many more hours working with that business to ensure long term success. External funding could help support capacity building efforts of CDCs during this time. Opening the grant to more groups as suggested here will also increase the workload for both community partners as well as city staff.
- Corporate and other foundations should increase the capacity of this fund to at least $5 million so that this lifeline to businesses can extend for a few months.
- The city should explore funding from the federal, state and foundation communities to replenish its general business assistance fund which currently will be depleted with this program. In the longer term, the city needs at least a $ 10 million business assistance fund to attract, retain and grow businesses and increase the tax base in the city. It will have a very strong case after the current program is implemented and evaluated.
- To bring about intentional inclusion in this grant program, consider intentional around allocating a percentage of the grants to businesses in the Cultural Destination Areas. A lot of recent progress has been made in business development and workforce employment gains in these parts of the city. All that stands to be lost in the current crisis. An intentional investment will help stop the bleeding. A broader perspective around inclusion citywide is also needed for women owned, veteran and disabled owned businesses.
- Since this program will be implemented on a rolling basis it is important that all impacted businesses get information on the program and not the most connected.
- The city should consider protections for small businesses against predatory lending. There has been a noted increase in predatory lending targeting minority and immigrant owned businesses. For example, it took over six grueling months for a group of lenders to help an African immigrant female owned business in Little Africa escape the snares of a predatory lender who charged her over 200 percent in interest and fees. In the heart of the COVID crisis at payoff time, the predatory lender increased the amount by $5000 rather than giving the borrower a break.
Small Business Borrower Bill of Rights (http://www.borrowersbillofrights.org/)
- The Right to Transparent Pricing and Terms: A borrower has the right to have the cost and terms of any financing being offered presented to them in writing and in a form that is clear, complete, and easy to compare with other financing options, so they can make the best decision for their business.
2. The Right to Non-Abusive Products: A borrower has the right to expect that the financing products offered by a lender will not trap his/her business in an expensive cycle of re-borrowing.
3. The Right to Responsible Underwriting: A borrower has the right to expect a lender is offering financing based on underwriting practices that assess the ability of the borrower’s business to succeed and repay.
4. The Right to Fair Treatment from Brokers: A borrower has the right to honest, transparent, and impartial communications with a broker regarding loan options, conflicts of interest, fees, and the financing options available.
5. The Right to Inclusive Credit Access: A borrower has the right to fair and equal treatment when seeking a loan including protections guaranteed under the Equal Credit Opportunity Act.
6. The Right to Fair Collections Practices: A borrower has the right to be treated fairly and respectfully throughout a collections process and the right to protections like those guaranteed under the Fair Debt Collection Practices Act.