Finances and Taxes

COVID-19 Grants and Loans for Small Businesses in California

Caleb Newquist Editor-at-Large, Gusto 
view of golden gate bridge

Update on January 6, 2021: The application deadline for the California Small Business COVID-19 Relief Grant Program has been extended to January 13, 2021.

Another stimulus bill has passed, and with it comes another massive allocation of funds for the Paycheck Protection Program (PPP). That’s the good news. In California alone, over 600,000 businesses have participated in the PPP so far, securing proceeds of over $68 billion to help keep their employees on the payroll and pay for other expenses. 

The bad news is that many businesses will, for one reason or another, forgo the program, fail to qualify for it, or need funds beyond what they can qualify for. Businesses still need options beside the PPP, and that’s what this post is all about. We’re going to cover some of the ways California businesses can secure capital either as a supplement to PPP funds, or as an outright alternative. 

California Small Business COVID-19 Relief Grant Program 

Applications close on January 13, 2021, so get moving!

A recent program that should be a great help to many California small businesses is the California Small Business COVID-19 Relief Grant Program. Launched on December 30, 2020, the program provides grants between $5,000 $25,000 based on annual revenue.


First things first, let’s look at the eligibility requirements for the program. A small business or non-profit that wishes to apply for a grant must meet all of the following conditions:

  • Must be an “eligible small business” as defined by the program. Eligible businesses include: 
    • a sole proprietor, independent contractor, C-corporation, S-corporation, LLC, or partnership that has annual gross revenue of at least $1,000 and less than $2.5 million based on the most recently filed tax return, or 
    • a nonprofit (i.e., registered 501(c)(3) or 501(c)(6) organizations) having yearly gross revenue of at least $1,000 and less than $2.5 million based on the most recently filed Form 990
  • Operating since at least June 1, 2019.
  • Must be currently operating or have plans to re-open when California allows business to resume operations. 
  • Must be impacted by COVID-19 and health and safety restrictions as a result of the pandemic.
  • Must provide organizational documents including tax returns, a copy of the filing with the California Secretary of State or local municipality such as Articles of Incorporation, Certificate of Organization or Government-issued business license.
  • Must provide an acceptable form of government identification.
  • Applicants with multiple businesses can only apply for one grant for the entity with the most revenue.

How grant recipients are chosen

First, applications will be reviewed to ensure eligibility, followed by a scoring based on “COVID-19 impact factors incorporated into the Program’s priority criteria.” Those priority criteria include:

  • Geographic distribution based on COVID-19 health and safety restrictions including California’s Blueprint for a Safer Economy, and the New Regional Stay at Home Order.  
  • Industries most impacted by the pandemic.
  • Underserved small business groups including businesses majority-owned and operated by women, people of color, veterans, and those in low-to-moderate income and rural communities.

Ineligible businesses

The grant program lists types of businesses that will not be able to participate. Those ineligible businesses are:

  • Those without a physical location in California 
  • Nonprofits not registered as either a 501(c)(3) or 501(c)(6) 
  • Government entities (other than Native American tribes) or elected official offices
  • Businesses primarily engaged in political or lobbying activities[1]
  • Passive businesses, investment companies and investors who file a Schedule E on their personal tax returns 
  • Churches and other religious institutions[2] 
  • Financial businesses primarily engaged in the business of lending, such as banks
  • Businesses engaged in any activity that is illegal under federal, state or local law
  • I’m going to just quote this one directly: “Businesses of a prurient sexual nature, including businesses which present live performances of a prurient sexual nature and businesses which derive directly or indirectly more than de minimis gross revenue through the sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature.” 
  • Businesses that may be considered predatory in nature such as rent-to-own businesses and check cashing businesses
  • Businesses that restrict patronage for any reason other than capacity
  • Speculative businesses
  • Businesses that have an 10%+ owner of the equity interest who has 
    • been convicted of or had a civil judgment rendered against them in the past three years; 
    • started any form of parole or probation for committing fraud or a criminal offense in connection with doing business while under contract for a public transaction; 
    • violated federal or state antitrust laws, committed embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, or receiving stolen property, or
    • 4) is presently indicted for or otherwise criminally or civilly charged by a federal, state or local government entity with committing any of the things mentioned above 
  • “Affiliated” companies[3]

How to apply

In order to be considered, businesses must submit required documentation. This was alluded to above, but just to make clear, a business must provide:

  • A completed, signed and certified application. Here’s a step-by-step guide for businesses. Here’s one for nonprofits.
  • The business’s financial information. The most recently filed tax return (either 2019 or 2018) and a copy of its filing with the California Secretary of State, or local municipality for one of these: Articles of Incorporation, Certificate of Organization, Fictitious Name of Registration or Government-Issued Business License.
  • Government-issued ID: Driver’s license or passport will do nicely.


For the first round of the programs, the following deadlines apply:

  • Applications opened on December 30, 2020
  • Applications close on January 13, 2021 
  • Approval notifications will begin on January 13, 2021

Second round information was not available as of this writing. We’ll update this post as soon as it’s made known. Get all the information on the program at

The California Rebuilding Fund

In November, California Governor Gavin Newsom announced the launch of the California Rebuilding Fund, a public-private partnership loan program that will focus on serving small businesses impacted by the pandemic. 


At a minimum, businesses must meet the following criteria to be considered eligible:

  • 50 or fewer full-time equivalent (FTE) employees prior to March 2020[4]
  • Gross revenues of less than $2.5 million in 2019
  • Experienced economic hardship due to the COVID-19 pandemic that has resulted in a “at least a significant reduction in revenues” since January 2020
  • Returned or sustained, for at least one month, at least 30% of its pre-pandemic revenues when compared to a similar period in 2019
  • Had positive net income—excluding depreciation and amortization—for 2019
  • Been in operation since June 2019 and currently operating at the time of application
  • Main operations or headquarters located in California and loan will be used to support California operations

Ineligible businesses include those that are: prohibited by law, speculative in nature, gambling, lobbying, and passive real estate investment.

Loan terms

Here some important details about the loans, just in case you’ve never borrowed money before.

Maximum loan

The maximum loan available is $100,000, or up to 100% of the business’s average monthly revenues for three months prior to the pandemic, whichever is less. Lenders will ultimately decide how much each business is qualified to borrow. 

Interest rate

The annual interest rate on the Rebuilding Fund loans is a fixed 4.25%. This will not change over the life of the loan.

Repayment schedule

Repayment for the Rebuilding Fund loans may be on either a 36- or 60-month schedule. Your business’s eligibility for the type of loan will depend on its financial qualifications.

Use of proceeds

Businesses can use the loan proceeds for pretty much anything business-related[5] except to refinance another loan from a community lender. Refinancing high interest debt is allowed, however. How a business plans to use the proceeds will need to be documented during the application process.

Borrower fees

There may be some 3rd party fees involved, but the maximum will be $250.

Collateral and other guarantees

Specific collateral (i.e., assets pledged to repay the loan if you default) is not required, however, a first or second lien will be placed on business assets that will be filed by the lender. Any owners with greater than 20% ownership will have to sign a personal guarantee.


There is no penalty for prepayment. Yay.

Credit criteria

Lenders participating in the program will be analyzing some general credit criteria of the applicants. The criteria used may vary from lender to lender, but will be based on:

  • Ability to repay the loan in full
  • The ability to make loan payments, based on total monthly payments as a ratio of 2019 revenue earned, must be at least 25%
  • No owners or guarantors currently involved in an active bankruptcy
  • No delinquencies greater than 30 days in January or February 2020
  • No more than one delinquency greater than 60 days
  • No discharged bankruptcies from March 1, 2019 through February 29, 2020
  • No owners or guarantors subject to a repossession or foreclosure in the last 36 months
  • No outstanding tax liens against owners or guarantors
  • No outstanding child support owed by owners or guarantors

Although there is no minimum credit score for the California Rebuilding Fund loans, lenders may set a score limit at their discretion.

Getting started

If the California Rebuilding Fund sounds like a good fit for you, get started by filling out the pre-application to get prescreened for eligibility. If your business is eligible, you’ll be matched with a CDFI.  

California CDFIs

Community development financial institutions (CDFIs) are another great way for small businesses in underserved communities to obtain the capital they need. CDFIs are certified by the U.S. Department of Treasury, and backed by the CDFI Fund.  

What kind of organization can a CDFI be?

CDFIs can take many forms, including banks, credit unions, loan funds, microloan funds, nonprofits or venture capital providers.

California CDFIs and the Paycheck Protection Program

The Consolidated Appropriations Act, 2021 (aka the stimulus bill that became law on December 27) set aside $2 billion in PPP funds specifically for CDFIs. If you’re interested in participating in the PPP, but don’t have a current, traditional banking relationship, here’s a list of California CDFIs that participated in the first round, which makes them prime candidates to participate in round two. 

In addition to CDFIs that are facilitating PPP loans, the new stimulus earmarked $12 billion for CDFIs outside of the PPP funds. So if you’re familiar with a CDFI that isn’t participating in PPP, the organization may still have access to new federal stimulus funds.

How to find a California CDFI near you

The Opportunity Finance Network (OFN) is a nationwide association of CDFIs that helps them access capital and advocates on their behalf. OFN itself is also CDFI.

OFN has a very useful CDFI Locator that can be filtered by state so you can easily find California CDFIs that are OFN members. Or, you can use this comprehensive CDFI list (updated in November 2020) to find CDFIs in your area. 

Whether or not you’re looking for a PPP loan, CDFIs are committed to providing underserved businesses with the access to capital they need, so even if you aren’t interested in access a PPP loan, your local CDFI may have other options that suit your needs.

California is home to over 4 million businesses, the vast majority of which are not fast-growing technology companies that have a seemingly endless supply of venture capital. Right now, many small businesses still have an acute need for capital to keep navigating the pandemic. PPP is a good solution for many, but for others, it may not be an option. Knowing that there are additional resources available, especially in underserved communities, can empower those to take more control of their business, and support their employees in the process.

[1] Regardless of whether such entities qualify as a 501(c)(3) or 501(c)(6)

[2] Ditto as Footnote 1

[3]As defined in 13 C.F.R. § 121.103; if you think this might be you, better talk to a lawyer

[4] Includes affiliates and businesses with common ownership

[5] Per the website, that includes: “working capital, inventory, marketing, refitting for new social distancing guidelines, operating and emergency maintenance, property taxes, utilities, rent, supplies, and other appropriate business purposes.”

Updated: January 8, 2021

Caleb Newquist
Caleb Newquist Caleb is Editor-at-Large at Gusto. In 2009, he became the founding editor of Going Concern, the one-of-a-kind voice on the accounting profession, serving in the role for 9 years. Prior to Going Concern, Caleb worked as a CPA for nearly 6 years in New York and Denver. He lives in Denver with his wife, two daughters, and two cats.


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