Small business grants overshadow loan program in COVID-19 response

A closed sign on the window of a beach sports store during the initial outbreak of COVID-19 in Encinitas on April 9, 2020.

Which would you choose: free money you get to keep, or money you need to pay back with interest?

That was the easy decision some small businesses got to make when California rolled out two financial assistance programs around the same time in late 2020, according to a recent report from the Little Hoover Commission, an independent oversight agency.

In response to businesses struggling with the pandemic, Gov. Gavin Newsom unveiled a small business loan program called the California Rebuilding Fund in late November 2020.

About a week later, Newsom said the state would also distribute grants to small businesses affected by the pandemic.

“Loan funds can’t compete with free money,” said Scott Wu, executive director of California’s IBank, a financing agency within the Governor’s Office of Business and Economic Development, which provided the initial cash for the fund.

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