California Rebuilding Fund

* THE FUND SHALL BE MANAGED AND CONTROLLED BY ITS PRIVATE SPONSORS AND IS INDEPENDENT OF THE STATE OF CALIFORNIA.

The California Rebuilding Fund is a public-private partnership that is aggregating funding from private, philanthropic, and public sector sources – including a $25 million anchor commitment from IBank – to address the capital and advisory needs of California’s small businesses as they reopen and recover from the COVID-19 health and economic crisis. This program is built to serve the smallest of small businesses that make up an essential part of the California economy, and will focus on historically under-resourced communities.

Why is this needed? California small businesses employ almost 50% of the state’s workforce and are vital to restoring economic activity, retaining quality jobs, and driving development in communities most affected by COVID-19. A University of California at Santa Cruz found that by April 2020, the United States had 22 percent fewer small business owners compared to two months prior. California losses have been even greater. Yet, despite these devastating effects on small business operations, many will be able to retool, rebuild, and reopen if they can access affordable credit.

To receive information on the California Rebuilding Fund for Small Businesses/Borrowers,
sign up HERE.

To receive information on the California Rebuilding Fund for Donors,
sign up HERE.

To receive information on the California Rebuilding Fund for CDFIs,
sign up HERE.

California Rebuilding Fund Small Business Resources

California Rebuilding Fund Small Business Resources

*Calvert Capital is the Arranger of the CA Rebuilding Fund and Kiva Capital Management, LLC is the Fund Manager. The State of California has committed an anchor investment to the Fund.

For California Rebuilding Fund information including program overview, business requirements, the application portal and more, please visit: www.CALoanFund.org

Frequently Asked Questions

California Rebuilding Fund

Q: What is the California Rebuilding Fund?

A: The California Rebuilding Fund has been created to aggregate funding from private, philanthropic, and public sector sources – including an anchor commitment from IBank – to address the capital and advisory needs of California’s small businesses as they re-open and recover from the COVID-19 health and economic crisis. The California Rebuilding Fund is intended to serve the smallest of small businesses that make up an essential part of the California economy.

Q: Why is this needed?

A: California small businesses employ almost 50% of the state’s workforce and are vital to restoring economic activity, retaining quality jobs, and driving development in communities most affected by COVID-19. A University of California at Santa Cruz study found that by April 2020, the U.S. had 22 percent fewer small business owners compared to two months prior. California losses have been even greater. Yet, despite these devastating effects on small business operations, many will be able to retool, rebuild, and reopen if they can access affordable credit.

Q: How will it work?

A: Once the California Rebuilding Fund launches, small businesses will be able to seek loan capital through a central online portal where they will complete a pre-application that, if a favorable initial eligibility determination is made, will match them with a participating community lender. The lender will verify eligibility for a small business loan and invite the business to submit a full application. Once underwritten and approved, the lender will draw from the California Rebuilding Fund, make the small business loan, and subsequently transfer the majority of the small business loan to a special purpose vehicle (“SPV”). The money to make the loans to the community lenders will come from participating banks, corporations, foundations, philanthropists, government entities and/or non-profits interested in joining with the State of California to support this effort. The capital provided to fund the small business loans will be in the form of loans to the California Rebuilding Fund, which will be secured by the equity interest of the California Rebuilding Fund in the SPV.

Q: Who is involved?

A: This Fund could involve:

  • State of California: IBank is providing multiple sources of credit support to crowd in private capital and keep the cost of funds to the small businesses affordable. The State will also activate its network of Small Business Development Centers (“SBDC”) to provide tailored technical assistance and business advisory support to the small business community.
  • California-based community lenders: A group of community lenders across the state will originate and service small business loans for the California Rebuilding Fund. Each lender will also provide critical pre- and post-loan advisory support to businesses in their community. Each organization is certified as a Community Development Financial Institution (CDFI) and has decades of experience lending in under-banked and under-resourced areas.
  • CASE Task Force: The Fund has been designed with the support of the California Small Enterprise (CASE) task force, a collaboration of volunteer leaders across sectors and industries who have come together to support the small business community during and beyond the COVID-19 crisis. In addition to its work on the Fund, CASE has been providing free legal resources and support to California small businesses since March through office hour sessions and a free resource guide that is updated regularly.
  • State Chambers and Small Business Advocates: The Fund is being supported by statewide chambers and small business advocates who will be supporting the effort by conducting outreach, education, and business assistance to small businesses interested in participating.
  • National nonprofit partners: Calvert Impact Capital is acting as the lead arranger, supporting with Fund management, and capital raising. Kiva Microfunds (“Kiva”) will be the sole owner/member of the California Rebuilding Fund and the SPV, and Kiva Capital Management LLC, a wholly owned subsidiary of Kiva, will serve as Fund administrator. Community Reinvestment Fund, USA (“CRF”) is serving as the Technical Services Provider through their proprietary platform, Connect2Capital, which provides a common portal for loan applications, data management and tracking.
  • Banks and other institutions: This Fund will be made possible by banks, corporations, and other institutional capital providers interested in lending money to the California Rebuilding Fund to support California’s smallest businesses. Loan capital from these institutions will provide loan capital for the Fund and benefit from credit support from the IBank.
  • Philanthropy: Philanthropic entity lenders and donors can participate by providing grants or low-interest subordinate loans to the California Rebuilding Fund to ensure that the loan product to the small businesses is as affordable as possible. Funds will also go to support the capacity and operations of the participating non-profit community lenders.
  • Legal counsel: The Fund is being supported pro bono by Morrison & Foerster.

Q: What are the loan terms for small business loans in the California Rebuilding Fund?

A: The loan terms are as follows.

Loan Terms
Maximum Loan Amount
The maximum available loan amount is $100,000 or up to 100% of your business’ average monthly revenues for three months prior to the COVID pandemic outbreak (in 2019 or early 2020), whichever is less. The maximum loan amount available under this program is $100,000.

An example of how your maximum loan amount is calculated
To determine your business’s average monthly revenue for an estimate of potential loan size, the lender may use the following:

September 2019 Revenues: $10,000
October 2019 Revenues: $15,000
November 2019 Revenues: $20,000
Based on the above-referenced example, the average revenues for the period is $15,000 so 3-months of average revenues would be $45,000. In this example, the maximum loan size would be $45,000.

Please note that the actual size of the loan for which you may be approved will be determined by the lender after review of your business’s documentation and financial information. The amount of the loan for which you are ultimately approved may be less than the amount indicated by the example above. If the average monthly revenues for your business for the 3-month period is greater than $100,000, the maximum loan size will be $100,000.

Interest Rate
The current fixed annual interest rate for loans issued under the program will be 4.25%. The interest rate will be fixed for the life of the loan.

If there is a change in the Wall Street Journal Prime Rate, the interest rate on loans offered under this program after such change may increase or decrease, but any change would not affect loans already approved. Any updates to the rate will be communicated through this website.

Repayment
There are two different types of loans offered under this program: one with a 60-month repayment schedule, and the other with a 36-month repayment schedule. Your eligibility for the type of loan for which you qualify will depend on your financial qualifications, which will be determined by the lender.

60-Month Term Loans

The repayment details of loans offered with a 60-month repayment schedule include:

For months 1 – 12: Interest-only payments; you will be making monthly payments only on the interest charged on the loan
For months 13 – 60: Principal and interest payments; your monthly payments will include interest and principal based on a 48-month fully amortizing schedule

For more information and examples, go HERE.

Q: How is the Program structured?

A: The California Rebuilding Fund is planned to be a sole member Public Benefit LLC managed by Kiva Capital Management that will execute loan agreements from financial institutions and other lenders, as well as accept donations for the Fund. The CDFIs will lend to small businesses and transfer 90-95% of the loans to one of two SPVs established by the Fund. One SPV will hold loans backed by an existing IBank Guarantee Program and the second SPV will hold loans that benefit from first-loss support from the IBank. The California Rebuilding Fund will not be a fund in the traditional sense. It is planned to be an entity that acts as a lender to CDFIs to provide them with affordable liquidity less constrained by their balance sheet.

The capital planned to be raised to support the Fundincludes:

  1. Senior debt: loans provided by banks and other institutional lenders to leverage the subordinate capital and increase the amount available for lending.
  2. Subordinate debt: loans provided by foundations or other mission aligned institutions to leverage the senior lenders and keep the cost of capital to a minimum for small businesses
  3. Grants and donations: provided by philanthropic organizations to support the Fund and the community lenders to keep the borrowing costs to the small businesses to a minimum.

 

Q: What does the product look like? What businesses are eligible?

A: Loans to the small businesses could have a 5-year term with a 4.25 percent interest rate, with an interest-only period for the first 12 months and fixed monthly payments for the remainder of the term (these are preliminary terms and subject to change as the Fund is being created, but the goal will be prime +1). There are no upfront fees charged to the small business and loan proceeds can be used as flexible working capital. Small businesses are eligible if they have 50 or fewer full-time employees and less than $2.5 million in annual revenue and meet the Fund’s standard underwriting guidelines. Eligibility and terms will be made available on the Fund’s website in the coming weeks.

Q: What does success look like?

A: The California Rebuilding Fund is partnering with economists from the Haas School of Business to evaluate the impact of the Fund. In the long-term, both the microeconomic and macroeconomic impacts are intended to be measured. Microeconomic analysis will provide the direct net benefit, estimating the impact of the Fund on small business participants in terms of survival, jobs, and sales growth, and profitably compared to a proper counterfactual. Because all outcomes imply further positive spillovers to the community, a macroeconomic analysis also is intended to be conducted, estimating the effect of the Fund on community well being at large. Both the microeconomic and macroeconomic impact assessments will allow the study of the extent to which the Fund preserves livelihoods and wealth-building opportunities for low income communities. In the near-term, capital access will be measured to determine whether the Fund meets its target goals and loan performance as a proxy for business success.

Q: Why is this an effective strategy?

A: Top-down relief efforts are not reaching community-level businesses in economically distressed communities and yet these are the organizations without sufficient reserves or safety net to survive this economic crisis without targeted support. This effort leverages existing infrastructure in communities – CDFIs and the network of business advisory organizations – to effectively channel capital and support to under-resourced communities. CDFIs have small but mighty financial pipes that work, have been built over decades, and can get capital to communities that exist outside of the traditional financial system.

The Fund will initially be targeted toward small businesses with fewer than 50 full time employees and those in economically distressed communities because the federal response has struggled to reach community-level small businesses and even when they have, the federal efforts are insufficient. These businesses were already suffering from lack of access to affordable credit prior to COVID and will continue to as traditional lenders pull back. If we do not intentionally create the right resources for these businesses this crisis will wipe out an entire segment of our economy. We need to move quickly and ensure that the economic recovery is equitable.

Q: What are the business requirements to be eligible for loans from the California Rebuilding Fund?

A: To be eligible for a California Rebuilding Fund loan, a small business must meet the requirements detailed below. Please note that the pre-application should be completed and submitted by the owner of the business with the largest ownership interest, and that all owners with more than 20% ownership will be required to attest to the information provided.

The following criteria is the minimum required for a business to be considered eligible for a loan under this program:

The business must have employed 50 or fewer full-time equivalent (FTE) employees prior to March 2020; please note: any and all affiliates are counted in this total, including businesses with shared ownership;
The business must have had gross revenues of less than $2.5 million in 2019;
The business must have suffered a direct economic hardship as a result of COVID-19 which has materially impacted operations (as evidenced by at least a significant reduction in revenues since January 2020);
The business must have returned to or sustained, for at least one-month, at least 30% of pre-COVID revenues relative to a similar period in 2019;
The business must have demonstrated positive net income in 2019 (not including depreciation and amortization expenses);
The business must have been in operation since at least June 30, 2019; and
The main office or headquarters for the business must be in California. The loan must be used to support only a business’s California operations
The community lender will review each business’s financial condition and underwrite based upon the following general credit criteria and based on financial information provided by guarantor(s) and/or beneficial owners, which may vary based on lender:

The guarantor’s ability to pay back the loan in full;
The ability to make debt payments from revenues earned (monthly business debt service, including this new loan, to 2019 revenues ratio must be less than 25%);
Neither the guarantor nor any of the beneficial owners is involved in an active bankruptcy
No 30+ day delinquencies in January or February of 2020;
No more than one 60+ day delinquency;
No charge offs and no discharged bankruptcies from March 1, 2019 through February 29, 2020;
Neither the guarantor(s) nor any of the beneficial ownerships has been the subject of a repossession or foreclosure in the past 36 months;
There are no outstanding tax liens or judgments against the guarantor(s) or beneficial owner(s), unless subject to an active payment plan for at least the past six (6) consecutive months; and
There is no outstanding unpaid child support owed by the guarantor(s) or beneficial owner(s).
There is no minimum credit score that is required under this program. Each community lender may set its own credit score limits for the loan applications it reviews.

[INELIGIBLE BUSINESSES]

Businesses that are NOT eligible include, but are not be limited to:

Firms engaged in activities that are prohibited by federal law or applicable law in the jurisdiction where the business is located or conducted
Business engaged in speculative activities that develop profits from fluctuations in price rather than through the normal course of trade
Facilities primarily used for gambling or to facilitate gambling
Businesses or firms engaged primarily in lobbying activities
Passive real estate investments

Contact the California Rebuilding Fund

Questions regarding potential partnership, please contact us.

 

 

DISCLAIMER:

THE ABOVE INFORMATION OUTLINES THE FRAMEWORK FOR A POTENTIAL SMALL BUSINESS NON-PROFIT LENDING VEHICLE IN WHICH IBANK HAS RECEIVED PRELIMINARY APPROVAL TO PARTICIPATE. NO SMALL BUSINESS LOANS WILL BE AVAILABLE UNTIL ALL STEPS TO FORM THE VEHICLE ARE COMPLETE. FORMATION AND OPERATION OF THE FUND REMAINS IN PRELIMINARY STAGES, IS SUBJECT TO CHANGE, AND THERE CAN BE NO ASSURANCES OF WHEN OR IF FORMATION WILL BE COMPLETE.

THIS SUMMARY OR WEBSITE SHALL NOT CONSTITUTE EITHER AN OFFER TO SELL OR AN OFFER TO PURCHASE SECURITIES. ANY PARTICIPANT IN THE FUND SHOULD REVIEW CAREFULLY WITH THEIR OWN LEGAL AND TAX ADVISORS THE DEFINITIVE DOCUMENTS IN CONNECTION WITH THE FUND BEFORE PARTICIPATING IN THE PROGRAM. THE FUND SHALL BE MANAGED AND CONTROLLED BY ITS PRIVATE SPONSORS AND IS INDEPENDENT OF THE STATE OF CALIFORNIA.

Contact the California Rebuilding Fund

Questions regarding potential partnership, please contact us.

 

DISCLAIMER:

THE ABOVE INFORMATION OUTLINES THE FRAMEWORK FOR A POTENTIAL SMALL BUSINESS NON-PROFIT LENDING VEHICLE IN WHICH IBANK HAS RECEIVED PRELIMINARY APPROVAL TO PARTICIPATE. NO SMALL BUSINESS LOANS WILL BE AVAILABLE UNTIL ALL STEPS TO FORM THE VEHICLE ARE COMPLETE. FORMATION AND OPERATION OF THE FUND REMAINS IN PRELIMINARY STAGES, IS SUBJECT TO CHANGE, AND THERE CAN BE NO ASSURANCES OF WHEN OR IF FORMATION WILL BE COMPLETE.

THIS SUMMARY OR WEBSITE SHALL NOT CONSTITUTE EITHER AN OFFER TO SELL OR AN OFFER TO PURCHASE SECURITIES. ANY PARTICIPANT IN THE FUND SHOULD REVIEW CAREFULLY WITH THEIR OWN LEGAL AND TAX ADVISORS THE DEFINITIVE DOCUMENTS IN CONNECTION WITH THE FUND BEFORE PARTICIPATING IN THE PROGRAM. THE FUND SHALL BE MANAGED AND CONTROLLED BY ITS PRIVATE SPONSORS AND IS INDEPENDENT OF THE STATE OF CALIFORNIA.