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Receive a presentation from the Solano Economic Development Corporation on the small business Revolving Loan Fund program funded with Solano County American Rescue Plan Act (ARPA) Coronavirus State and Local Fiscal Recovery Funds (SLFRF)
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Published Notice Required? Yes_______ No___X___
Public Hearing Required? Yes_______ No ___X___
DEPARTMENTAL RECOMMENDATION:
The County Administrator’s Office (CAO) recommends the Board of Supervisors receive a presentation from the Solano Economic Development Corporation on the small business Revolving Loan Fund program funded with Solano County American Rescue Plan Act (ARPA) Coronavirus State and Local Fiscal Recovery Funds (SLFRF).
SUMMARY:
Solano County received a direct federal funding allocation under the ARPA SLFRF program of $86,949,405. These funds are intended to provide support to the County in responding to the economic and public health impacts of COVID-19 and impacts on our communities, residents, and businesses.
Beginning in spring 2022, the Board of Supervisors heard several presentations from Subject Matter Workgroups regarding recommendations for projects funded by ARPA, including a workgroup on small businesses. Ultimately, based on the workgroup recommendation, the Board allocated $4,000,000 toward a Revolving Loan Fund (RLF) implemented by the Solano Economic Development Corporation (EDC).
The RLF was a new program in Solano County and must follow the significant administrative requirements of ARPA. As such, the program took time to implement correctly, including communication with the US Treasury to ensure the program was meeting all of the terms of ARPA funding, transitioning the program from the ARPA category of Negative Economic Impacts to Revenue Recovery, researching other RLF programs in California, identifying the areas of the County and businesses most impacted by COVID, hiring of staff, drafting policies and procedures, conducting a required Request for Proposals process to identify the lenders, and agreeing upon the application terms between EDC, the County, and the lenders. While this did take significant time before loan applications were available, it was in the best interest of the County, the EDC, and the eventual business partners to ensure the funds were meeting all the terms of the funding source.
The program began accepting applications on February 15, 2024. As of March 5, 2024, Solano EDC has received 24 loan applications with an approximate average loan application amount of $45,000. Loan applications have been received from businesses located in every city in Solano as well as businesses located in the unincorporated area. Twenty-two (92%) of the applications are from minority owned businesses, and businesses represent a range of industries including agriculture, restaurant/hospitality, nonprofit, security, consulting, child care, and retail. Three loans have already been fully approved and one is pending approval.
FINANCIAL IMPACT:
Solano County received a direct federal funding allocation of $86,949,405 under the ARPA SLFRF program of which $4,000,000 was allocated under the Treasury Category of Revenue Recovery for the RLF Program. This item provides an update only and has no fiscal impact.
DISCUSSION:
In February 2022, the Small Business Subject Matter Workgroup brought forward several project options for Board consideration, including a proposal of $2 million for a Revolving Loan Fund. In addition, other projects the workgroup proposed included expanding business advising, providing culturally competent business advising, business translation services, a business incubator program to grow businesses which included grants for businesses to grow, and peer advisory groups. These projects were selected to build upon the previous COVID related small business programs that were available, such as the Paycheck Protection Program (PPP) and multiple small business grant programs that were funded via CARES Act and a variety of funds from cities across the County.
Ultimately, in May 2022, the Board of Supervisors allocated $4 million of ARPA SLFRF toward a small business Revolving Loan Fund (RLF) with $3.6 million for direct loans and $400,000 for administration, including administration by both Solano EDC and the lenders. The fund was originally established under the Treasury Category of Negative Economic Impacts, however, after extensive investigation on RLF programs and restrictions imposed by the Treasury with implementing a RLF under the Negative Economic Impact Treasury Category, in October 2022, the Board recategorized the project under Revenue Recovery. This allows all loans to be fully funded by ARPA and funds being paid back to be reloaned, extending the reach of the RLF beyond the initial ARPA expenditure period.
Since its initial approval, the Solano EDC worked with the County on the development of several key components of the program including:
• Finalizing the scope of work and payment terms for the contract between the County and the Solano EDC which was executed July 1, 2023.
• Identifying the structure of the program, including researching and aligning with best practices in the field, identifying businesses that would most benefit from the program, and outlining the partnership between the Solano EDC, the Napa Solano Small Business Development Center (SBDC), and the lenders.
• Preparing necessary procurement documentation and undergoing lender selection, including negotiating terms between the three successful lenders who responded to the Request for Proposals, and developing and agreeing upon a uniform lender agreement.
• Developing materials with translation into Spanish, including outreach materials, the application, policy materials for businesses, etc.
Key terms of the RLF include:
1. Loan amounts of $25,000 to $125,000 over a 5-year term with no prepayment penalty.
2. Interest at a fixed rate of 6%.
3. Minimum credit score of 630
4. Loan application fee of $250 which is only payable if a business qualifies for a loan. Borrowers who complete an assessment and counseling with the Napa Solano SBDC shall receive a rebate of $250 for the loan application fee.
5. Businesses must demonstrate impact from the COVID-19 pandemic, which can be demonstrated in a variety of way, be located in Solano County, and be in operation before December 31, 2021.
Of note, most other RLFs in California have interest rates of prime plus 1-3% which currently equates to interest rates of 9.5-11.5%. In addition, most RLFs require collateral, equity, and closing costs up to 5% of the total loan amount. In addition, the credit score of 630 is significantly below the 680 credit score required for most small business loans.
Solano EDC is partnering with the Chambers of Commerce throughout the County as well as the Solano County Farm Bureau, and the Napa Solano SBDC to outreach and inform businesses about the program. In addition, the Solano EDC is also working with the economic development staff in each of the cities through the Economic Development Task Force. A program manager is available to provide technical assistance to the businesses in completing the application, if necessary. The Napa Solano SBDC is providing business advising to assist businesses in meeting their goals and paying back their loans, allowing the funds to be reloaned withing the community.
Based on early successes, it is anticipated that the full amount will be loaned by December 2024.
ALTERNATIVES:
The Board could choose not to receive the presentation. This is not recommended as the Board has asked to receive a status update on the RLF.
OTHER AGENCY INVOLVEMENT:
The County Administrator’s Office has been working closely with the Solano EDC on the terms of the RFL. The Auditor Controller’s Office and County Counsel reviewed the contract between the County and Solano EDC.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION