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DIRECT LOAN PROGRAM
The MRLF will make low interest subordinated loans to for-profit businesses
for the expansion or startup of microenterprises for the purchase of machinery
and equipment, property improvements and rehabilitation, and some working
capital. The MRLF may lend from $1,000 up to a maximum of $20,000. The
MRLF will consider providing working capital and inventory loans if the
necessity is demonstrated and adequate security is available.
Loans made in excess of $8,000 (and up to the limit of $20,000) will
require a 50% contribution from the entrepreneur, in the form of equity,
loans, third party investments, or other sources. For example, an entrepreneur
in need of $20,000 in capital for a business start-up or expansion would
be able to access $10,000 from the MRLF.
For a loan amount of less than $8,000, the MRLF would be able to function
as the sole source of capital.
ELIGIBILITY FOR ASSISTANCE
With the exception of taverns, all types of microenterprises in St. Lawrence
County will be eligible for consideration. A microenterprise is defined
as those businesses with five or fewer employees, at least one of whom
is the owner. However, each borrower must qualify as a low-moderate income
person as defined by the Department of Housing and Urban Development.
The only exception to this requirement is when the project will create
new jobs and the borrower guarantees that 51% of the jobs will be filled
by low-moderate income persons.
No applicant may qualify who exceeds, at the time of the application,
the applicable Small Business Administration size criteria.
No applicant may qualify who can secure the needed funds from other sources
on reasonable terms.
PROGRAM CONSIDERATIONS
Each loan application will be reviewed and acted upon within the framework
of the following program considerations, which reflect the policies of
the MRLF's administrator, the St. Lawrence County Local Development Corporation
(LDC), and the conditions of grants received from the US Department of
Housing and Urban Development through St. Lawrence County (when applicable).
A. Hiring Policy
In order to assist Microenterprise entrepreneurs in locating trained low-
and moderate-income employees, the County will require that entrepreneurs
first approach the County's Workforce Investment Act (WIA) program for
employees. While not requiring entrepreneurs to hire WIA participants,
it is expected that WIA participants will be given serious consideration.
B. Amount, Interest Rate, and Term
Loans will be in the amount of $1,000 to a maximum of $20,000. However,
each loan amount, interest rate, and term will be based on a financial
analysis and the particular needs of the project.
Loans at or above $15,000 will be required to increase the firm's employment
by at least one full-time job (or equivalent).
C. Equity Contribution
The LDC will encourage applicants to provide an equity contribution to
the project. In-kind labor, materials, and/or services may satisfy this
private equity contribution. The amount of equity contribution required,
if any, will be determined when analyzing the project.
D. Participation to Other Lenders
The LDC will encourage participation from conventional lending institutions
but realizes that it may be the sole participant. Each project will be
analyzed for the appropriateness of other lending participants. When other
lenders participate, the LDC loans may be subordinate to the interest
of other lenders.
E. Ability to Repay:
Loans will be approved by the LDC only if the project is feasible, the
financial projections are attainable, and the supporting documentation
and financial statements are acceptable.
F. Collateral Security:
The LDC shall seek such reasonable and sufficient security for loans it
makes and may for any reason deny access to funds based on its sole determination
of the risks involved and the sufficiency of the security available. Normally,
the security required will take the form of second mortgages, liens on
equipment and machinery, assignments of accounts receivable, raw material
and finished goods inventories, and personal assets. Unsecured or insufficiently
secured loans will not be approved.
G. Repayment Schedules:
Normally working capital loans will be for three years; equipment loans
for five years; and construction loans from five to ten years.
H. Project Monitoring:
Small Business Development Center (SBDC) staff will provide follow-up
services to borrowers on a quarterly basis, or more frequently as determined
by the LDC in relation to each individual loan. The SBDC will also expedite
services to any borrower who is two (2) months delinquent and may provide
other expanded services that may lower the risk the LDC may undertake
when loaning funds to small businesses by providing additional training
to the customer.
I. Loan Servicing:
The LDC's fiscal agent will receive all monies due from applicants under
the LDC on a monthly schedule. Any fees incurred from the collection services
provided shall be charged through to the applicant as a surcharge on the
loan's debt schedule.
J. Application Fee
There will be a $100 non-refundable fee due upon return of the completed
application.
LOAN PROCEDURE
Subject to the limitations described above and consonant with any rules
and regulations established by the LDC and St. Lawrence County, loan procedures
are as follows:
- Prospective applicants should contact the Local Development Corporation
for application information. The LDC will screen applicants for program
eligibility. Most applicants will be required to participate in the
Small Business Development Center Program, which consists of one-on-one
business plan assistance. Those businesses that have existed successfully
for a significant period of time, and/or who have been determined to
have adequate business operational knowledge with a good business plan,
may be waived from the Small Business Development Center at the discretion
of the LDC. There is no fee for participation in the Small Business
Development Center Program.
- A completed application must be filed by each applicant (accompanied
by a $100 non-refundable application fee).
- The LDC contracted credit analyst (underwriter) will conduct a
credit analysis of the applicant.
- Along with performing the credit analysis, the underwriter will
also review the business plan using standard underwriting procedures
with the understanding that typical Microenterprise projects are higher
risk loans than those usually given by banks.
- The underwriter then makes a recommendation to the LDC Committee.
The Committee is made up of the Board membership of the LDC.
- The LDC's attorney will prepare the documents for closing.
- Closing and disbursement of funds.
It is the goal of the program to have loan authorization (or rejections)
take no more than eight (8) weeks after receipt by the LDC's contracted
credit analyst of a completed application.
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