California Governor Gavin Newsom today announced the launch of The California Rebuilding Fund (the Fund), a program built to support California’s smallest businesses so they can adapt, reopen, and recover from the effects of COVID-19.
The California Rebuilding Fund is a public-private partnership that drives capital from private, philanthropic and public sector resources – including a $25 million anchor commitment and $50 million guarantee allocation from the California Infrastructure and Economic Development Bank (IBank) – to Community Development Financial Institutions (CDFIs). With this new Fund, California’s CDFIs will be better able to help under-banked small businesses recover and reposition themselves to survive the realities of the COVID-19 marketplace. The Fund will seek to distribute funds equitably across the state.
Eligible small businesses must have 50 or fewer full-time employees and less than $2.5 million in annual revenue to meet the Fund’s standard underwriting guidelines. Loans to small businesses could have a 5-year term with a 4.25 percent interest rate, with an interest-only period for the first 12 months, and fixed monthly payments for the remainder of the term. No upfront fees will be charged to the small business and loan proceeds can be used as flexible working capital.
The California Small Enterprise Task Force (CASE Force), a consortium of legal, financial, and nonprofit professionals, is leading the development and implementation of the Fund, which is being arranged by Calvert Impact Capital and will be administered by Kiva Capital Management.
“It is important to help small businesses in our most under-resourced communities that have been hardest hit by the pandemic and make up an essential part of California’s economy,” said Suz Mac Cormac, lead of the Morrison & Foerster pro bono team advising the Fund and the firm’s efforts with CASE Force. “Small businesses can lead the recovery from this pandemic but not without a concerted effort to reach and support them.”
Morrison & Foerster co-founded CASE Force and spearheaded the Fund’s innovative structure as a pro bono project with guidance from a variety of partners. The team worked tirelessly to establish the Fund seeking over $1 billion in debt financing in the form of credit facilities and promissory notes from private foundations, family offices, financial institutions, and other lenders and accredited investors in order to provide capital to CDFIs that will quickly deploy the money as loans to California businesses in need.
Since its launch in April 2020, CASE Force published a comprehensive free resource guide, and hosted more than 30 weekly office hour sessions, where small businesses can access live support from lawyers and financial professionals.
In addition to Suz, the Morrison & Foerster team advising the loan fund was led by Corporate partner David Lynn; Finance partner Mark Wojciechowski, senior counsel Joe Gabai, and of counsel Kelley Howes; Tax partner Tony Carbone and of counsel Linda Arnsbarger; and associates Kaela Colwell, Jesse Finfrock, Maureen Linch, Aisulu Masylkanova, Olga Terets, Michael Santos, John Tawadrous, and Jeff Xu.
Starting on November 20, California businesses seeking funding and support can apply at www.CALoanFund.org.