Another round of local small business stimulus
Here’s one thing this week to watch in city hall… a presentation about LFUCG’s Small Business Stimulus Program in 2021.
📺 - Watch this presentation live on March 16, 2021 at 1:00pm on LexTV
Why should you care?
If you care about the resiliency of Lexington’s small businesses during and after the COVID-19 pandemic, you should pay attention to this presentation.
As the third major federal stimulus of the COVID era - the American Rescue Plan - rolls out, cities across the country are taking steps to support small and locally owned businesses. Lexington is no exception - the City has rolled out two rounds of stimulus for small businesses since the start of the pandemic.
But why is another program like this needed? Even though American Rescue Plan contains funding targeted to small businesses and has made adjustments to the Paycheck Protection Program to make it more accessible, most small businesses still have yet to see stimulus support. This is especially true for Black and Hispanic-owned businesses.
During this presentation, the Council will discuss another local round of small business stimulus being proposed by Council Member Preston Worley. Half of this funding will be reserved for women and minority-owned businesses.
What does the program look like?
This program would look similar to the city’s past small business stimulus programs during the COVID-19 pandemic. It would allocate $5M to provide forgivable loans to small businesses owned and operated in Fayette County
This program would differ from past programs by using forgivable loans - instead of reimbursements - to help businesses maintain or increase employment/payroll.
Like the past programs, this version would have a goal of dispersing 50% of funds to minority and women-owned businesses and would be managed by Commerce Lexington.
In order to qualify, businesses and nonprofits must be based in Fayette County with a maximum of 50 employees (100 for employees). They also have to be in good standing with the city and state and have been in operation since January 1st of this year.
What is different from previous programs?
The main change in this third installment of the local stimulus program is that it is now a forgivable loan program instead of a reimbursement program.
Forgivable loans will be made to businesses for up to $25k each to maintain or expand payroll.
Loan forgiveness will be based on goals that are set by the businesses in their application.
After January 1, 2022, businesses that have met or exceeded the employment/payroll goals they set in their application will have 100% of the loan forgiven.
If businesses fail to meet these goals, they will be required to repay the loan.
There is also a change in how the program is managed. Commerce Lexington, the program manager for this and past stimulus programs, would receive a 50% higher administrative fee than in the previous rounds.
This higher administrative fee would allow Commerce Lexington to hire additional staff, as indicated in the presentation.
This administrative fee will increase from 5% to 7.5% - totaling $375,000 across the $5M project.
How can I apply for the program?
To apply, you have to be a business owner or nonprofit director that is eligible. If you meet the requirements, you will be able to apply online during two three-week application windows.
The application will include:
Registration information with the Kentucky Secretary of State and Lexington business license number
A listing of any federal or local funding received related to the COVID-19 crisis and how those funds were used
A plan for utilizing requested funds to maintain or increase payroll.
Applications will be directly received by Commerce Lexington.
Commerce Lexington’s Access Loan Program Committee will review applications and decide the award amount.
Funding will be distributed by Traditional Bank.
What steps are being taken to ensure equitable access to the program?
Like previous stimulus programs, this program will focus on very small, locally-owned businesses with the goal of reaching 50% of businesses owned by women or minorities.
Businesses or nonprofits that are at least 51% owned/managed by women or people of color will be given preference for 50% of applications.
In previous stimulus programs, 35% of funds awarded went to women-owned businesses, and 26.7% went to minority-owned businesses. 20.8% went to companies owned by white men.
By race and ethnicity, 58% of grants awarded went to white-owned companies. 13.4% went to nonprofit organizations, 13.2% went to black-owned businesses, 2.5% went to Latinx-owned companies, and 12% went to companies owned by Indian, Asian, Palestinian, African, or other individuals.
According to 2017 data from Commerce Lexington, 48% of businesses in Fayette County employ less than 5 people.
Update - 03/18/21
CM Worley introduced Council Aide Christine Baker’s presentation by explaining the basic rationale for this round of small business aid. Instead of being for an emergency situation where the city was just trying to keep businesses open and maintaining jobs, this round has recovery and economic expansion in mind, as well as still helping struggling businesses. Small business recovery and expansion, he said, is good for the city because more wages equals more payroll taxes to the city. Employees who have their basic needs met through employment benefit the city’s overall economy with their increased spending power.
CM Plomin asked if the loans were still forgivable if all of the goals or benchmarks are not obtained and if there could be a sliding scale for repayment if not.
CM Worley answered that he agreed and that business should only have to pay back what they were able to do. For example, if a business said they would add five, but only added four employees, they should only have to pay back what they didn’t use for that fifth employee. He said this isn’t a grant like before, but doesn’t want this program to end up being punitive if businesses don’t meet their benchmarks.
CM Ellinger asked about the timeframe and how applicants would be selected.
CM Worley said they’re still working out the details for the timeframe. If Commerce Lex and Access Loan Fund agree on a funding source with the City, they would do a special report-out in 2-3 weeks, which would give Commerce Lex time to get everything ready for a roll-out. Worley said he expected the federal money to come in within a month and recommended funding the first 2.5M with budget stabilization money to be reimbursed as soon as the city receives the federal money.
As for applications, instead of receiving and selecting applications on a first come first served basis, this time the city will set a timeframe to receive applications and determine which ones best fit the program and how much in loans they will get after the deadline closes. The loan limit would be $25,000.
Also, due to increased admin costs, Access Loan Funds fees will increase from 5 to 7.5%.
VM Kay was supportive but had concerns about the program’s details, including the criteria for selection, the fee increase, and how else the federal money would be used.
CM Bledsoe explained that Access would need to hire administrative support for this rollout. Last time they didn’t and it was a big strain on the staff and volunteers there. She also said they could consider using half of the proposed 5M at 7.5% and considering the rest later.
CM Lamb had similar concerns to VM Kay. She asked about a special committee for a resolution on this topic. She said she wouldn’t be able to support this today without having more information, especially on how money is being taken and reimbursed from the budget stabilization fund. She also wanted to hear Access’s opinion on the fee increase.
Tyrone Tyra, from Access, detailed how big of a lift this program was last time. He said it took 100% of his time, often for 12-15 hours per day. During the day he and his team would work to process applications and at night would reply to applicant’s questions or help the city with finding any info left out of applications. He said that although the volunteers were able to provide help, they really needed more paid admin employees.
CM Fred Brown said he liked the program, but was still uneasy expanding it to 5M, adding that he wanted to know about the details and how many businesses the city is expecting to assist.
Due to time constraints, CM Bledsoe suggested calling a special meeting on April 6th or making a motion to put this item on the docket for April 6ths Work Session for a vote.
CM Moloney asked if the city knew how much they’re getting from the federal stimulus. He said he expects it will be a lot more, but wanted to know how this program came up with the number 5M.
CM Worley explained the 5M was doubling from last time and not directly tied to federal funds because the city is thinking they’ll receive significantly more. He said 5M was aspirational and he would be open to discussion about the number, but that he believed the amount to be adequate to address business needs.
CM Moloney urged the group to consider how much admin fees they pay for other services and reminding them 7.5% was still less than usual.
CM James Brown made a Motion to move discussion to April 6th’s Council Work Session where any questions or amendments could be addressed. The Motion was seconded by CM Ellinger. All Committee members voted in favor.
Want to get involved? Here's how.
Email Council.
Reach out to relevant service or advocacy organizations -good options for this issue would be Commerce Lexington, Downtown Lexington Partnership, and Urban League of Lexington.
Apply to be on a Board or Commission - good options with vacancies (as of 3/14) for this issue would be: Economic Development Investment Board, Industrial Authority Board, and the Lexington Center Corporation Board of Directors.