The 2021-22 Budget: Small Business Grants - California
JANUARY 25, 2021
The 2021-22 Budget:
Small Business Grants
L E G I S L AT I V E A N A LY S T ¡¯ S O F F I C E
Pandemic¡¯s Effect on Small Business
Most Businesses in California Are Small Businesses. For example,
according to data from the U.S. Census, 90 percent (about 700,000) of all
employers in California had fewer than 20 employees.
Coronavirus Disease 2019 Pandemic Severely Disrupted California¡¯s
Economy. The pandemic has forced many businesses to reduce their
operations or close. Businesses in the travel, retail, food and hospitality,
health and wellness, and personal care services sectors have been especially
impacted. Nonprofit organizations and self-employed individuals also have
been impacted by the pandemic. For example, most indoor arts and cultural
organizations, such as museums and theaters, have been closed during the
pandemic and face financial hardship.
L E G I S L A T I V E A N A LY S T ¡¯ S O F F I C E
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Federal Pandemic Relief to Small Businesses
California Small Businesses Have Received Over $100 Billion in
Federal Pandemic-Related Financial Assistance. The federal government
has provided a significant amount of financial assistance for small businesses
affected by the pandemic. Among the largest federal programs are the
Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan
(EIDL) program. In 2020, California small businesses and nonprofits received:
?? $68.6 billion in PPP loans¡ªwhich are forgivable and tax-exempt.
?? $34.5 billion in EIDL loans¡ªwhich have to be repaid.
?? Small business owners also benefited from several changes to federal
tax laws.
?? The December 2020 stimulus package extended the EIDL program,
allowed small businesses and nonprofits to apply for a second PPP
loan beginning in January 2021, and created a new grant program for
performing arts venues.
More Than 620,000 California Businesses Received PPP Loans
Through August 2020. The federal Small Business Administration (SBA)
reports that just over 620,000 small businesses and nonprofit organizations
in California received PPP loans in the first round that closed in August.
The average PPP loan was $110,120. We estimate that small businesses in
California that received a PPP loan contribute roughly $800 billion to the state
economy.
L E G I S L A T I V E A N A LY S T ¡¯ S O F F I C E
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State Business Relief:
California Relief Grant Program
Despite having more limited resources, the state also provided
pandemic-related financial assistance to small businesses. In December
2020, the state created the California Relief Grant program to award grants to
small businesses and nonprofits. This program was created very quickly and
very limited information about the program is available. Our analysis reflects
our best understanding of the program based on the limited information
available to date. We may update our analysis as the administration makes
more information available.
Grants Up to $25,000 for Small Businesses Affected by Pandemic.
The California Relief Grant program awards grants to businesses and
nonprofits with annual revenues below $2.5 million. The grant amounts vary
based on the entities¡¯ annual revenue:
?? Annual revenue $1,000 to $100,000: $5,000 grant.
?? Annual revenue $100,000 to $1 million: $15,000 grant.
?? Annual revenue $1 million to $2.5 million: $25,000 grant.
Eligible entities must be in operation¡ªor have a clear plan to re-open
once the state and county permits re-opening of the business¡ªand they
also must certify that their operations were affected by the pandemic and will
comply with conditions limiting how the funds may be used.
L E G I S L A T I V E A N A LY S T ¡¯ S O F F I C E
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State Business Relief:
California Relief Grant Program
(Continued)
Targets Underserved Businesses Affected by Pandemic. Grants
are not awarded on a first-come, first-served basis. Instead, the program
determines which applicants will receive a grant by scoring their applications
based on the following factors:
?? The change in revenue for the months of April through September
2020 compared to those same months in 2019.
?? The location of the business.
?? Whether the business is in an especially affected industry, such as
travel, retail, food and hospitality, health and wellness, and personal
care services.
?? Whether the business is considered underserved. An underserved
business is (1) at least 51 percent owned by a woman, person of
color, or a veteran and (2) located in a rural or low-to-moderate
income area. (Whether both conditions have to be met or whether
these are two different classes of underserved business is unclear.)
Program Established Very Quickly. The Governor announced the
creation of a California Relief Grant program on November 30, 2020. The
Office of the Small Business Advocate (CalOSBA) in the Governor¡¯s Office
of Business and Economic Development received $500 million in Disaster
Response-Emergency Operations Account (DREOA) funds on December 17,
2020 to create the program. CalOSBA quickly selected a third-party vendor,
a community development financial institution (CDFI), to administer the grant
program. The CDFI received $25 million, or 5 percent of the total amount, to
administer the program. The program began accepting applications for the
first round of grants on December 30, 2020¡ªjust one month after it was first
announced. How much planning or stakeholder outreach occurred over this
period is not clear.
L E G I S L A T I V E A N A LY S T ¡¯ S O F F I C E
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