Legislature Approves ‘Bridge’ Loans for Businesses Damaged in L.A. Riots

The Legislature on Monday passed and sent to Gov. Pete Wilson a bill to provide state-backed loans to help businesses damaged in the Los Angeles riots rebuild even before federal disaster aid arrives.

The measure, by Assemblyman Willard H. Murray (D-Paramount), sailed through the Assembly and Senate with only a single vote in opposition. The bill will take effect as soon as Wilson signs it. He is expected to do so today.

The legislation expands a program that is available only to victims of natural disasters.

The program works by providing state funds to back private “bridge” loans granted by banks to businesses that are awaiting disaster loans from the federal Small Business Administration. When the SBA loan money arrives, the banks are repaid and the state guarantee expires.

If the SBA denies the loan application, the state guarantee may extend for as long as seven years.

In most cases, the state will guarantee up to 95% of the amount of the bridge loans. The state will provide 100% guarantees in cases where business records needed for a loan application have been destroyed or cannot be retrieved because the government has restricted access to a damaged building.

The maximum loan guarantee will be $200,000.

Jeanne Winnick, a spokeswoman for the state Commerce Department, said several banks have pledged millions of dollars in bridge loans that will be available as soon as the governor signs the bill.

Business owners may apply for the loans through banks or two Small Business Development Corporations in Los Angeles, Winnick said.