'Most efficient vehicle': UC Berkeley professors create California Rebuilding Fund for small businesses

To help small businesses recover from the effects of the COVID-19 pandemic, faculty members from UC Berkeley’s Haas School of Business and UC Berkeley School of Law collaborated to develop the California Rebuilding Fund. The California Rebuilding Fund is a new public-private partnership established by a commitment from California Infrastructure and Economic Development Bank, or IBank, to ensure that small businesses are receiving the resources needed to adapt to "these challenging economic times," according to its website. “The pandemic has disproportionately hit small businesses and their very survival is at stake,” said Janet Yellen, Haas professor emeritus of business administration. “Often, they don't have relationships with regular banks and are underserved by the financial system.” After looking at recovery efforts in Chicago and New York, Yellen found that a similar public-private model could be developed in California to provide loans for small businesses in underserved communities. Yellen said she then joined forces with Haas professor Laura Tyson, associate professor Adair Morse and Berkeley Law lecturer Susan Mac Cormac Taylor, who were working on developing a similar framework. The resulting California Rebuilding Fund engages with the private sector to allocate affordable loans for small businesses through Community Development Financial Institutions, or CDFIs, a class of organizations that serve low-income communities. “Some (CDFIs) are banking organizations and they’ll be able to make affordable loans to businesses that have been affected in these communities and essentially sell them or fund them,” Yellen said. To be eligible for the fund, businesses must have experienced direct economic hardship as a result of the COVID-19 pandemic in a way that materially impacted their operations. Additionally, businesses must have 50 or fewer full-time employees and a gross revenue of less than $2.5 million per year, according to Yellen. In addition to the loan, the program provides businesses with a free resource guide that includes county-by-county guidance on reopening and the latest information on commercial eviction moratoriums, according to the website. Free virtual office hours staffed by expert lawyers are also available for businesses to get specific questions answered. According to Mac Cormac Taylor, the California Rebuilding Fund is the “most efficient vehicle” to aggregate capital for small businesses in a way that is both flexible and low cost. Mac Cormac Taylor added that the fund uses governmental support and philanthropic capital as a “catalyst” to help businesses stay intact. Yellen echoed Mac Cormac Taylor’s sentiment and said businesses are the “lifeblood” of communities and an important tax base for the cities that house them. “For the health of the localities and for the health of these communities, the fund makes sure that these businesses survive and have access to the resources that they need to continue in business,” Yellen said. “The health of our society and these communities is really at stake here.”