California Relief Program for Struggling Small Businesses
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As part of California’s efforts to help businesses during the pandemic, the state has set aside $475 million for the California Small Business COVID-19 Relief Grant Program, which will issue grants ranging from $5,000 to $25,000 to targeted small businesses. Not everyone will qualify, but your business may so read on.
The grants are based upon annual gross revenue, as reported on 2019 tax returns, as follows:
- $5,000 for business with revenue between $1,000 and $100,000
- $15,000 for business with revenue between $100,000 and $500,000
- $25,000 for businesses with revenue between $500,000 and $2,500,000
Revenue is generally determined based on your 2019 tax returns. For example, on line 1c of Forms 1120 (C Corporations), 1120S (S Corporations, and 1065 (Partnerships), line 3 of Schedule C (sole proprietors), or line 12 of Form 990 (non-profits). Unfortunately, rentals reported on Schedule E are not eligible, but farming businesses do qualify.
Businesses with over $2.5 million in 2019 revenue will not qualify.
This particular grant is targeted for California small businesses established pre-pandemic with revenue under $2.5 million. Sole proprietors and independent contractors are eligible, as well as corporations, LLCs, partnerships and non-profits. In addition:
- The business must have been operating on or before June 1st, 2019, so new businesses are not eligible.
- The business must be currently active and operating even if just in survival mode due to lockdown orders.
- The business must have been impacted by the health and safety restrictions brought upon by the pandemic, which would include closures or business interruptions.
Only one business per ownership group is eligible, and the business with the highest revenue is the only business that can apply. So, for example, you cannot cherry-pick a business with under $2.5 million in revenue. Additionally, churches, lending businesses, and rental real estate business are ineligible. There are also some other restricted industries, which are explained at the website referenced below.
Not every applicant is expected to receive a grant. Awards will be prioritized based upon multiple criteria, including:
- Business in heavily pandemic impacted industries such as restaurants, bars, hair/nail salons and barbers, gyms, retail, etc.
- Businesses located in areas most impacted by the pandemic.
- Underserved small business groups, including businesses owned by women, minorities, veterans, as well as those located in rural and low-to-moderate income communities.
Use of Grant Funds
The funds are intended to be used for expenditures incurred due to the pandemic, including payroll, health insurance, sick leave, costs of complying with health and safety guidelines, re-opening costs, and more. There are some ineligible expenditures, such as employee bonuses, severance pay, taxes, personal expenses, and others. Additionally, a grant recipient who also has received funding through the PPP loan or other grants programs cannot use the same expenses for these funds.
The state will begin accepting applications on December 30th, and the first round will close on January 8th, with anticipated approval notifications set to start around January 13th. There will be a second round of applications also. Those who submit but do not receive approval with the first round will automatically be considered for the second round. This is not a “first come, first served” process, so you do not have to submit on the first day of round one.
The state is utilizing Lendistry as the administrator of the program. More information as well as how to apply is at www.CAReliefGrant.com, which you should review if you think you qualify and want to start the process.
Should I Apply?
If you are a business with revenue under $2.5 million, you should consider applying, but keep in mind that not everyone will be awarded a grant. If your business is thriving during the pandemic, you may want to devote your time elsewhere. Your odds of receiving a grant are increased if you are a woman/minority/veteran-owned in a hard-hit industry, so if you are really struggling, I would say you should definitely apply.
We’re Here to Help
Especially during these uncertain times with multiple different programs, we are here to help. Please feel free to reach out to your JLK Rosenberger team member if you need help with the application or determining if you qualify for this new grant. You can also reach Tim Johnson at 949-860-9892 or click here to contact us. We look forward to speaking with you soon.