$1 million in COVID19 emergency short term loans to small businesses to be considered by Elk Grove

As part of their response to the COVID19 pandemic, the City of Elk Grove will consider making a pool of  $1 million available for short term loans to small businesses. The matter will be heard during the Wednesday, April 8 Elk Grove City Council meeting.

The program, which would include an initial $1 million, would be made available through city deposits in community-based banks that would then be loaned qualifying local businesses. Even though the city does make some of its monies available to community-based banks, the city council needs to approve further deposits as these specific funds would yield no returns.

The purpose of the deposits is to provide small businesses, primarily in Elk Grove, access to a line of credit they might not otherwise have at their disposal. The report stressed that even though the city will not receive interest on the deposit, the banks will guarantee the return of the principal and will assume the risk of the loans.

Although the interest charged to borrowers was not specified, the report implied because the city was not earning interest, the loans would be at low rates. Borrowers will also have a three to six month grace period where no principal and interest payments will be due.  

The term of the city's deposit, which will initially be with Tri-Counties Bank, is for 18 months. The program could be expanded to an additional $1.5 million within 90 days of the first deposit and include other local banking institutions.

The program will be promoted by the city's economic development department and the Sacramento-based business advocacy group Region Business under a program called LIFT. That program encourages area municipalities to deposit funds in community-based banks to extend credit to locally-based small businesses.   

Wednesday's meeting will be held via teleconference and starts at 6 p.m.

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