What may have seemed like an innovative idea back on May 2 to encourage start-up businesses in downtown Hollister by providing low-interest loans to restaurants, commercial/non-kitchen businesses, disabled-access upgrades and sidewalk improvements turned out not to be the case when the Hollister staff told the city council Oct 3 that only two applicants completed the loan documents. The city was prepared to offer loans at 2% for up to 15 years.
At the May 2 meeting, the council directed city staff to establish a low-interest business loan program for all eligible businesses located in the Downtown District. The program’s intent is to stimulate economic growth, increase the vibrancy of the downtown area, and create jobs that will improve the living conditions of residents in the community.
“The business loan program is being funded through the General Fund and was made possible as a result of the American Rescue Plan Act’s Revenue Replacement funding,” Dave Mirrione, assistant city manager, told BenitoLink.
On Oct. 3 Councilman Tim Burns called the plan to provide loans from a pool of $2 million a case of “over-thinking” on the part of the council. In order to qualify for a loan of up to $50,000 for retail or non-kitchen businesses and up to $150,000 for restaurants, the owner of the building was required to co-sign the loan. That proved to be an insurmountable sticking point in being able to secure the loans, so they immediately removed that requirement.
Of the 12 individuals who showed interest in the program, only two applied; they were not happy with some of the specifics and asked the council to consider changes.
Three new business owners told the council how they were moving ahead with their establishments without the loans but after pouring much of their own money into their businesses they needed more than the city was offering they requested a different approach to the loan approval process.
Priscilla and Mike Jones, owners of Mmm Churros!, described themselves as high school sweethearts who have been married 18 years and moved to Hollister from East San Jose in 2018. In July 2020 they opened their home-based business that specializes in hand-crafted vegan churros in a variety of flavors. Because they have been operating as a cottage food business, they prepare the churros at home and sell them online. They cannot, however, sell food at their new building at 7th and San Benito streets, Priscilla Jone said.
She said they own the building, so they do not need a co-signer.
“The issue is the money is not enough for the renovation 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 we have.”
Mike Jones added, “We appreciate it but it [the $150,000 loan] won’t get us to the finish line. We’d appreciate it if you could look into it and maybe it can be on a business-by-business basis and what the business needs are. Other businesses have different needs than what we have. We invested in the building because we wanted to invest in Hollister.”
They said they’re involved in community art projects, including a new mural on the side of their building by artist Venecia Prudencio.
“Our business will bring about 25 jobs to the city,” Priscilla said. “Our contractor is ready to go. The city has the plans. As soon as we get the money the contractor said he would be done 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 renovated the space themselves and want to apply for a loan, but the building owner won’t co-sign.
“We are putting up our house as collateral and our equity is greater than the $150,000,” Edgar Mayorca said. “At the moment we have four employees and we’re doing good. We just need an approval from you guys [for the $150,000 loan].”
Raul Escareno almost closed his Mangia Italian Kitchen, located at 1709 Airline Highway, because of COVID. He not only managed to survive the pandemic but made plans to take over the shuttered Hollister Bar and Grill on the corner of San Benito and Fifth streets. His plans for an upscale restaurant, The Baler, have moved slowly because of renovations required by the city, mainly the scullery where he installed new dishwashing machines and built a wall to block off a doorway into the lobby next door.
“Downtown can be a little sloppy but as we add more businesses, we kind of elevate the atmosphere, we make it a little more family oriented,” he told the council. “I have put my other business up as collateral. I don’t owe anything on it. I paid off $120,000 in one year in cash.”
It has taken two years for the city to approve permits while investing his own money.
“I don’t need help with the construction,” he said. “I need help with working capital. I would really appreciate it if you would remove the landlord because once businesses like ours get up and rolling they’re going to be successful. If you could remove the landlord right now two of us could get started. If I can get the money now I can open with a big bang.”
City Manager Brett Miller said the council directed staff to include that the building owner also had to sign the documents. He said building owners were not willing to take the risk if a restaurant goes out of business and they have to dispose of the kitchen equipment if the next business is not a restaurant.
The city attorney looked into other options to secure the loans such as the property owner having an existing loan with the city, or listing equipment, homes or vehicles as collateral.
Burns was concerned that so few people had applied in five months. He asked if it might be more helpful if the city had an ombudsperson rather than a staff member to help applicants. He implied that the job might be too big a challenge for a single staff member to handle.
He also admitted he “led the charge” for insisting property owners co-sign the loans, saying “we’ve not been successful…we need to look at other alternative forms of collateral from the business owner versus the property owner.”
Councilwoman Dolores Morales suggested the loans should be more open so business owners could prioritize their needs beyond construction requirements. Councilman Rolan Resendiz asked how the city would recoup the costs of the Americans with Disabilities Act or sidewalk improvements without any collateral. He said the property owners, not the business owners, would receive the benefits of those improvements and wanted to reorganize the program because, “we’re not going to recoup the costs of those improvements. I’d rather get kitchen equipment and put it towards things we can recoup the costs.”
Councilman Rick Perez said business owners should not be concerned with the cost of repairing sidewalks because the sidewalks belong to the city and it’s the city’s responsibility to repair them or make them disabled-compliant. He also said the loans needed to happen “in a timely manner,” because “we can’t stop the money flow because [without it] it’s stopping them and us from growing. We need to find the solution as soon as possible.”
The interest rate of 2% over 15 years remains the same as before, according to Miller. Now, instead of the property owner having to co-sign, applicants can use collateral to guarantee the loans. The main change in the program, said Miller is “any loan requests that are over $150,000 will need to go to council,” he said, adding that applications can be submitted immediately.”
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