As Unemployment Claims Approach 2 Million, California Incentivizes Small Businesses To Keep Paying Employees

Updated 5:32 p.m.

As small businesses cut operations and lay off workers amid a global pandemic, California Gov. Gavin Newsom on Thursday announced relief packages to help those businesses stay afloat and continue paying employees. 

The Small Business Administration is providing up to $10 million in forgivable loans to companies and nonprofits with fewer than 500 employees that continue payroll, Newsom said. 

According to the SBA’s website, the loans will be “fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities.” At least 75% of the forgiven amount must be used to pay employees. Applications open April 3.

The state is setting aside $50 million for “micro-loans” for businesses that do not qualify for the SBA loans, Newsom said. 

The governor also announced California businesses with less than $5 million in annual taxable sales may defer and use up to $50,000 in sales tax as an interest-free loan. Businesses generally collect sales taxes and remit it to the state quarterly.

“In essence, it is a bridge loan,” Newsom said. “The money you’ve already collected, you will not have to pay the state for 12 months. No penalties, no interest.” 

Small businesses are also eligible for disaster assistance from the federal government. 

The announcement comes as unemployment claims continue to surge. Newsom said the state is seeing an average of 111,000 new claims each day. Overall, the state Employment Development Department has reported 1.9 million new claims for unemployment insurance since March 12. 

Newsom also announced onwardca.org — a website created by Fresno-based tech company Bitwise — where laid-off employees can go to be matched with a job during the crisis.