When California became the first state to go into COVID-19-related lockdown in late March, Morrison & Foerster San Francisco-based corporate partner Susan (Suz) Mac Cormac was alarmed by what she knew would be a devastating impact on the state’s small businesses. Her concern was compounded by the fact that, while government relief programs were enacted, they might not be reaching the businesses that needed it the most.
“We are going to have bread lines,” Suz told the San Francisco Chronicle.
Indeed, small businesses were not getting relief anywhere near as quickly as they needed to—if at all. For one thing, the federal government was overwhelmed, with CARES Act legislation requiring it to dole out, in just a few weeks, 20 times the $30 billion in loans that it usually processes annually.
Another problem was the criteria that the federal government established for businesses to qualify for its first round of loans. Those rules defined “small” as fewer than 500 employees, resulting the loans being “gobbled up in days—including by nearly 300 privately traded companies and by other not-so-small businesses like the Los Angeles Lakers,” the San Francisco Chronicle reported.
And so Suz led MoFo’s co-founding of the California Small Enterprise Task Force (CASE Task Force), a consortium of legal, financial, and nonprofit professionals working together to connect California small businesses with the resources they need during the COVID-19 pandemic.
The Loan Fund
The CASE Task Force is in the process of forming the California Small Business Rebuilding Fund, which will direct low-interest loans to California small businesses affected by the COVID-19 pandemic, with a focus on minority, immigrant, and women-owned business. MoFo’s pro bono client, Kiva Microfunds, has agreed in principal to own and manage the fund. San Francisco-based corporate associate Kaela Colwell is working with Los Angeles-based corporate partner Zeeshan Ahmedani on this.
The fund is raising $1 billion in low interest debt financing to provide capital to Community Development Financial Institutions (CDFIs) that can quickly deploy the money as loans to California businesses in need. CDFIs were launched in 1973 to respond to the long history of bank discrimination against minority communities.
Kiva Microfunds, as a 501(c)(3) public charity, will seek donations and grants in order to keep interest rates low and cover potential defaults by businesses that are unable to recover. In addition, this philanthropic contribution will give the CDFIs the ability to extend non-payment of interest from three to six months, thus avoiding defaults, for strong businesses and entrepreneurs who need help bridging a gap until the economy reopens.
The fund expects to work in partnership with local, municipal, and regional initiatives in the state in order to help maximize the opportunity for low‑interest rebuilding loans to California small businesses.
A Resource Guide Is Born
The CASE Task Force’s first project was a resource guide for small businesses. Kaela initiated the guide’s format. She says one of the first things that came up on the calls with her early CASE Task Force teammates was the need to get the guide out as soon as possible because the financial and technical resources available to small businesses impacted by the pandemic were constantly changing and the information in the resource guide would quickly go stale.
“For each small-business resource that we listed, I focused on answering two questions: whether the business would be eligible for the resource and how the business could benefit from the resource,” Kaela says.
“Then Brett Morrison, a MoFo client relations manager, and his team jumped in and polished up the guide and helped us to figure out where it should be posted. Now it has a home on the Berkley Law School website.”
A team of MoFo lawyers, staff, and summer associates Cesar Bystrom, Dara Pilgrim, and Monica Hicks updates the resource guide each week. Michael Paul Santos, a MoFo associate based in San Francisco, has facilitated the resource guide’s maintenance and expansion.
Virtual Group Office Hours
Shortly after the CASE Task Force was formed, it began to organize weekly virtual group office hours, during which attorneys shared information and answered questions posed by small businesses in a “town hall” format. Initially, MoFo attorneys staffed these sessions, providing CARES Act, employment, tax, and real estate expertise with help from Damien Specht, Tina Reynolds, Jill Feldman, Jesse Finfrock, Ossie Cousins, Jenny Tseng, and Maureen Linch. San Francisco-based Alfredo Silva has participated in office hours and helped to coordinate Spanish-language translation efforts.
The MoFo team then recruited other law firms to join the effort, while MoFo attorneys, including Alfredo and Olga Terets, a San Francisco-based MoFo associate, continued to moderate the sessions.
“I think we can confidently say that we have so far reached more than 500 small businesses through those weekly programs,” said Brett.
Brett describes the office hours as a virtual twist on a conventional pro bono clinic, without the formal intake process.
“Unlike a clinic, we’re not assigning individual attorneys to work on a specific case to conclusion,” he explained. “It’s public access. There’s a panel of attorneys and other professionals with different specialties and backgrounds. They take on the small-business-participants’ questions.”
Brett and Kaela also said that, for them, the office hours have been particularly gratifying.
“There have been hundreds of small businesses logging off at the end of some of the calls and they all seem so appreciative,” Kaela says.
To view the growing list of COVID-19 related pro bono matters, visit this special section of MoFo’s coronavirus resource center.