Hollister Council is changing rules on lending to new downtown businesses

After failing to attract start-up entrepreneurs and calling for more flexibility, it will assess each applicant’s needs on a case-by-case basis.

What may have seemed Like an innovative May 2nd idea to boost start-up businesses in downtown Hollister by providing low-interest loans to restaurants, commercial/non-kitchen businesses, handicap upgrades, and sidewalk improvements, Hollister turned out not to The case was officials told the city council on Oct. 3 that only two applicants had filled out the loan documents. The city was willing to offer loans at 2% for up to 15 years.

At the May 2 meeting, the council directed city officials to establish a low-interest business loan program for all eligible businesses in the Downtown District. The goal of the program is to boost economic growth, increase inner-city vibrancy, and create jobs that improve the living conditions of the community’s residents.

“The business loan program is funded by the General Fund and was made possible by revenue replacement funding from the American Rescue Plan Act,” Dave Mirrione, deputy city manager, told BenitoLink.

On October 3, Council member Tim Burns called the plan to provide loans from a $2 million pool a case of “overthinking” by the council. To qualify for a loan of up to $50,000 for retail or non-kitchen businesses and up to $150,000 for restaurants, the building owner had to co-sign the loan. This proved to be an insurmountable sticking point in securing the loans, so that requirement was immediately removed.

Of the 12 people who showed interest in the program, only two applied; They were not satisfied with some of the details and asked the Council to consider changes.

Three new business owners told the council how they would advance their branches without the loans, but after pouring much of their own money into their businesses, they needed more than the city was offering and called for a different approach to the loan approval process.

Priscilla and Mike Jones, owners of Mmmm churros! referred to themselves as High school friends who have been married for 18 years and moved to Hollister from East San Jose in 2018. In July 2020 they opened their own shop specializing in handcrafted vegan churros in a variety of flavors. Because they operated as a hut Grocery store, they prepare the churros at home and sell them online. However, they cannot sell groceries at their new building at 7th and San Benito Streets, Priscilla Jone said.

She said they own the building so they don’t need a co-signer.

“The problem is that there is not enough money for the renovation that we need as a commercial kitchen,” she said. They had asked for the maximum amount of $150,000 but said they needed $300,000. “We’re not going to open with the $150,000 loan that we have.”

Mike Jones added: “We appreciate it [the $150,000 loan] won’t get us there. We would appreciate it if you could look into this and perhaps it can vary from business to business and business needs. Other companies have different requirements than we do. We invested in the building because we wanted to invest in Hollister.”

They said they are involved in community art projects, including a new one mural on the side of their building by the artist Venecia Prudencio.

“Our business brings about 25 jobs to the city,” Priscilla said. “Our contractor is ready to go. The city has the plans. As soon as we have the money, the contractor said it would be ready in three and a half months.”

Edgar and Diana Mayorca recently opened Café con Leche on Monterey Street across from the Superior Court. He said they had renovated the premises themselves and wanted to apply for a loan, but the builder would not co-sign.

“We put up our home as collateral and our equity is greater than $150,000,” Edgar Mayorca said. “At the moment we have four employees and we are doing well. We just need permission from you [for the $150,000 loan].”

Raul Escareno almost closed his Mangia Italian cuisine, located at 1709 Airline Highway, due to COVID. Not only did he manage to survive the pandemic, but he also planned to take over the closed Hollister Bar and Grill on the corner of San Benito and Fifth Street. His plans for an upscale restaurant, The balerhave been slowly relocating due to renovations required by the city, mostly in the scullery, where he installed new dishwashers and erected a wall to block a door into the lobby next door.

“Downtown can be a bit sloppy, but if we add more stores we kind of lift the vibe, we make it a little bit more family-oriented,” he told the council. “I put my other business down as collateral. I don’t owe her anything. I paid out $120,000 in cash in one year.”

It took the city two years to approve the permits while also investing its own money.

“I don’t need any help building it,” he said. “I need help with working capital. I would really appreciate it if you removed the landlord because once businesses like ours get up and rolling they will thrive. If you could remove the landlord right away, two of us could start. If I get the money now, I can open with a big bang.”

City Manager Brett Miller said the council instructed staff to record that the building owner must also sign the documents. He said building owners are not willing to take the risk when a restaurant goes out of business and they will have to dispose of the kitchen appliances if the next operation is not a restaurant.

The City Attorney considered other ways to secure the loans, such as B. An existing loan from the property owner with the city or the listing of equipment, houses or vehicles as security.

Burns was concerned that so few people had applied in five months. He asked if it would be more helpful if the city had an ombudsperson instead of a staff member to help applicants. He hinted that the task might be too challenging for a single employee.

He also admitted that he “led the charge” for insisting that property owners co-sign the loans, saying, “We have not been successful … we need to look at other alternative forms of security from the business owner versus the property owner.” .”

Councilwoman Dolores Morales suggested making loans more open so business owners could prioritize their needs over construction requirements. Councilor Rolan Resendiz asked how the city would recoup the cost of the Americans with Disabilities Act or Sidewalk Improvements Without Collateral. He said property owners, not business owners, would benefit from these improvements and wanted to reorganize the program because “we’re not going to recoup the cost of these improvements. I prefer to buy kitchen appliances and use them for things that we can use to recoup costs.”

Councilor Rick Perez said business owners should not worry about the cost of sidewalk repairs because the city owns sidewalks and it is the city’s responsibility to repair or make them handicapped accessible. He also said the loans had to be “timely” because “we can’t stop the flow of money because [without it] it keeps them and us from growing. We have to find the solution as soon as possible.”

The interest rate of 2% over 15 years remains unchanged according to Miller. Instead of requiring the homeowner to co-sign, applicants can now use collateral to guarantee the loans. The most important change in the program, Miller said, is “All loan applications over $150,000 must go to the council,” he said, adding that applications can be submitted immediately.”

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