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Sacramento's COVID small business loans struggled to reach underserved neighborhoods

Sacramento Bee logoSacramento Bee 6 days ago Alexandra Yoon-Hendricks, The Sacramento Bee

Apr. 7—Last summer, Sarom Doeuk was one of thousands of small business owners who received a modest loan from the city, but she almost missed out on the pandemic relief money.

"I didn't know about it either, one of the customers told me," said Doeuk, the Cambodian owner of Sarom's Southern Kitchen. "I was surprised when he told me, and I thought he was just joking around, but he told me just go to the (city) website. ... I didn't know about this (loan) but definitely helped."

Small businesses like Doeuk's — located in an under resourced neighborhood in Old North Sacramento and owned by a person of color — are exactly the sort the city hoped to target in a planned $10 million loan program last summer. But chambers of commerce representing Sacramento's diverse corridors worry Doeuk's near-miss reflects a similar scenario countless eligible small businesses experienced.

Despite a stated goal from city staff to distribute at least 75% of the forgivable loans ranging from $2,500 to $25,000 to businesses located in disadvantaged neighborhoods, only about 38% of funding went to those businesses. For some business leaders, it symbolizes continued disinvestment in communities that were already struggling before the pandemic.

The funding goal came after many in the business community criticized the city's first round of zero interest small business loans, which distributed about $1 million to applicants on a first-come first-serve basis just days after the coronavirus pandemic forced statewide stay-at-home orders. Most of that money went to businesses in Midtown and downtown, while those in lower-income neighborhoods-of-color were overlooked.

"(The application period) opened Thursday, and by midnight Friday they had to close it because they were overwhelmed by the number of responses," said Cathy Rodriguez Aguirre, president and CEO Sacramento Hispanic Chamber of Commerce. "A lot of the more diverse corridors, by the time they were aware of it, it was gone and there was no funding left."

In its second round of funding, the city "pivoted pretty significantly," said Leslie Fritzsche, the city's economic investment manager. Applications were streamlined, and translated into multiple languages. The timeframe to apply was expanded to two weeks, and ethnic chambers of commerce held webinars ahead of time to prepare businesses. City staff joined radio shows to get the word out, and called businesses back if their application was incomplete or incorrectly filled out.

Rodriguez Aguirre said those changes during the second round of funding demonstrated the city's commitment to address earlier criticisms. It was an attempt by the city to "level the playing field," said Pat Fong Kushida, president and CEO of the Sacramento Asian-Pacific Chamber of Commerce, but the results show there is still significant room for improvement when it comes to reaching struggling businesses in poorer communities of color.

"What we need to change fundamentally is to build more infrastructure and a systemic approach on how we get wealth generation in these minority and immigrant communities, and how we get resources and training to them consistently," Fong Kushida said.

In the subsequent fall and winter months, Rodriguez Aguirre said, her chamber has found many small businesses in under resourced neighborhoods that would've benefited from the loans and never applied for a variety of reasons. Several, for example, didn't even have email addresses, she said. Some businesses didn't have important tax documentation immediately on hand, Fritzsche said.

"The best way to reach out was one-on-one interactions, a grassroots effort to talk to businesses," Rodriguez Aguirre said, "but it happened after these loan programs and funding had already went out. Businesses were like, 'Oh, we didn't know about that.' "

The city had initially planned to offer $10 million worth of small business loans, Fritzsche said. In the end, Sacramento distributed about $8.8 million, and approved every applicant that qualified. "We actually thought we would be oversubscribed with more loan applications than we would have money to fund," she said.

Though it's hard to pinpoint exactly why fewer businesses applied than expected, Fritzsche said, it suggests there are likely opportunities to boost outreach.

Though the city failed to meet its goal of 75% of funding going to disadvantaged communities — which would've amounted to more than $6.5 million — there were some bright spots, Fritzsche said.

Six out of ten businesses that received a loan of any amount were located in a disadvantaged neighborhood. Of the 1,309 loans distributed, 58% were to minority-owned businesses, and 76% to microenterprises, meaning businesses with five or fewer employees.

As California begins to lift restrictions and businesses begin the long recovery process, Fritzsche said there are plans to open applications again for another round of small business loans, likely funded by federal dollars. Sacramento is expected to get another $121 million in stimulus funding, as part of a new COVID-19 relief package signed by President Joe Biden last month.

Fritzsche said city staff plan to continue tweaking the application and outreach process to reach businesses in low-income communities of color. For instance, city staff might consider distributing the funds simply as grants than forgivable loans, since some business owners hesitant are to the idea of applying for a loan.

"These are communities where the businesses are the anchors, the ones that keep the neighborhood vibrant and growing," Rodriguez Aguirre said. "When you invest in these small businesses there, you're investing in an entire neighborhood."

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