City offers $10,000 loans to small businesses. But how far will that go?

Charlotte’s smallest businesses can soon apply for loans of up to $10,000 to help them cope with a flailing local economy amid the coronavirus pandemic.

The Charlotte City Council approved a $1-million economic relief package Monday night to support micro-businesses, defined as those with five or fewer employees.

But even as council members voted 10-1 to kick-start the stimulus effort, they acknowledged the program’s deep shortcomings. City Council member Braxton Winston cast the dissenting vote, urging Charlotte officials to be “very precise” and effective in disbursing limited funds.

“This program was specifically designed for those micro-businesses that are not going to get capital from other sources,” City Council member Dimple Ajmera said. “I know this is not a lot of money for small businesses ... but this is going to last them, at least, so they can survive the difficult time that we have right now.”

The assistance, backed by federal Community Development Block Grant money, is tailored for micro-businesses in Charlotte’s “opportunity corridors” — areas such as Beatties Ford Road and Eastland that city leaders hope to rejuvenate through economic development.

City Council did not specify at its virtual meeting what criteria would be used to evaluate eligible micro-businesses or how and when the loans could be spent, such as for rent, utilities or payroll expenses.

‘We’ve got to try’

Charlotte Mayor Vi Lyles said there was “some amount of consistency” in creating a program that closely echoes the micro-business stabilization fund Mecklenburg County commissioners approved last week. Micro-businesses in Charlotte and Mint Hill are not allowed to participate in the county’s program, because of restrictions tied to using the federal grant money.

“The micro-businesses was a gap that was identified because the county did not fund it,” Lyles said.

Yet Charlotte City Council member Tariq Bokhari questioned if $1 million could make an impact for struggling micro-businesses, noting individual loans would cover only about a week’s worth of expenses. Although he ultimately supported the program, Bokhari said his gut reaction was to vote against the effort.

”It almost feels like winning the lottery for those (businesses) who are going to get it in our town — not our entire town,” Bokhari said. “I’m very skeptical we’ve done our homework the right way.”

Mayor Pro Tem Julie Eiselt said the City Council could not delay helping vulnerable micro-businesses, many of which cannot pivot their products and services to respond to COVID-19 needs.

”If we try to get this perfect, we will certainly fail,” Eiselt said, reflecting on what she called an imperfect federal stimulus package. “We know we’re not going to be able to help /everyone in the community, but we’ve got to try to help some.”

City Council member Matt Newton said Charlotte should continue to pursue additional relief options for small businesses.

”We can’t stop here,” Newton said. “I hope this is the start of a conversation, and we don’t end it with this vote tonight.”

Charlotte’s revenue shortfalls

The City of Charlotte is grappling with its own major financial challenges due to COVID-19.

City Manager Marcus Jones revealed Monday the city would implement an indefinite hiring freeze as a cost-saving measure, except for first responders at the Charlotte-Mecklenburg Police Department and the Charlotte Fire Department. Assistant city managers can still approve positions “deemed necessary,” said city spokesperson Cory Burkarth.

Charlotte will eliminate vacant positions and continuously review costs in the next fiscal year, Jones said.

“As this continues, there’s a concern about us being able to staff all of our operations,” Jones told the City Council.

Jones said Charlotte’s $650 million general fund could experience revenue shortfalls of almost $14 million. That figure doesn’t incorporate the premium pay for certain city employees that is in effect during the local emergency declaration, Jones said.

Hospitality revenues — /such as tourism taxes from hotels, rental cars, and prepared food and beverages — will also plummet into mid-summer without a return to normal until April 2021, Jones said based on national analyses.

“We’re in this uncharted water right now, and I’m not sure where we’re going to end fiscal year 2020,” Jones said.

It’s unclear how Charlotte might use its financial reserves to combat steepening economic blows for city services and small businesses. Jones said the city is “trying to be financially responsible,” emphasizing Charlotte’s bond rating is not in jeopardy.

Bokhari urged his colleagues to be fiscally sharper as the pandemic escalates. He described financial forecasts, including potentially millions of dollars in lost sales tax revenues, as “frightening.”

“We haven’t even begun to see the long-term impacts that we’re going to have to deal with,” Bokhari said.

This story was originally published April 14, 2020 at 9:37 AM.