Foster City creates loan program for struggling businesses

Each loan will be up to $25,000 for now but the limit may increase if more funding becomes available. Gilead Sciences, which is based in the city, has already donated $100,000 to the program to be used as seed money while city staff work with other partners to secure additional funding for the program. Staff also plans to use $100,000 from the city’s community benefit fund for the program.

“We wanted to test this out and not open up a big liability for us, but really be able to help some of the businesses with the money we have,” said Vice Mayor Sanjay Gehani. “If we’re able to acquire some more funding we’d like to come back and see if we can expand that to have some bigger loans.”

To be eligible for the program, a business must have maintained a physical storefront in the city for at least the past three years and also be in good standing with the city. That means the business does not owe money to the city in the past seven years, there are no outstanding code violations, no legal action and no bankruptcies.

The loans will neither be available to elected officials, city staff nor their relatives.

The repayment term on the loans will be no longer than five years and the interest rate will be below market, Hall said. Staff will be looking for loan applicants with a business net worth to loan ratio of 5:1 and a business income to loan ratio of 1.5:1.

As for collateral coverage, applicants can put up personal property, though most will likely have a letter of credit from a bank that guarantees 1.5 times they value of the loan and staff will hold that letter of credit until the funds are repaid, Hall said.

Gehani said the terms of the loans are “tighter than what’s out there today” to minimize risk. Some councilmembers wondered if the terms might be too tight, but they ultimately agreed to move forward with the terms as drafted and revisit them if fewer businesses than expected apply to the program.

Hall said other cities in the region have created similar programs with Hayward having established one that most closely mirrors Foster City’s program.

The council, in April, approved $530,000 in grants for small businesses affected by the pandemic in the city, with each grant totaling no more than $10,000.

In other business, the council on Monday unanimously approved an agreement with the owner of an affordable housing complex that will allow about 74 tenants facing displacement to stay in their homes for one additional year.

Essex Property Trust, owner of Foster’s Landing Apartments, entered into an agreement with the city in 1986 to rent 15% of the 490 units in the complex at below market rates. That deal is expiring in phases starting at the end of this year when rents for some of the below-market-rate units will go to market rates. For some of those residents, that means a rent hike from as little as $500 per month to as much as $2,300 per month — far more than they can afford.

Essex and the city over the next year will split the difference between the current and market rate rents with the city paying no more than $400,000. During that time, residents will pay the same rent they pay now.

Councilmembers said Essex does not appear to be interested in extending the affordability covenants for the below-market rate units beyond one year. Councilman Jon Froomin said Foster’s Landing residents can’t expect the city to negotiate another extension on the affordable units, though he didn’t entirely rule out the possibility.

“I do not want to inflate expectations of our residents in Foster’s Landing,” he said. “The solutions we were able to find were going to be short term in nature. … I believe this extension should be used by the residents to do everything in their power with the assistance of staff to find a housing situation that is within your means.”

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