Village of New London
Revolving Loan Fund Requirements
|
Please read carefully before
completing an application!
State and federal guidelines require
that certain stipulations must be met for revolving loan fund projects to go
forward. Please read the following list
of requirements to ensure that your application is complete and that your
project can meet these requirements.
1.
The
application must be filled out completely.
Further,
it must contain additional information, including:
·
For every fixed cost in the project, a third party cost certification (contractor's estimate, vendor's
equipment price quote).
·
For all other sources
of funds besides the RLF (banks, equity, etc.), evidence that the funding
is committed and maximized, by letter (for loans) or bank statement (for
equity). Letters from sources of other
loans must quote interest rate, term, conditions, and security position.
·
For existing businesses, financial statements for the past three years.
·
Projections for the next three years which include debt
service on the proposed RLF loan and any other loans. Projections must include profit and loss
statements and a balance sheet (assets and liabilities).
·
The projections should show that the requested RLF interest
rate and term are needed in order to keep debt service low enough to realize a
reasonable return on investment (measured as profit after taxes divided by
tangible net worth, and by total assets). If a higher interest rate can be absorbed and
you can still realize a reasonable return, we will negotiate for the higher
rate or, in some cases, shorter term.
2.
Additional information may be helpful to get a loan
approved. This includes resumes of principal(s), information on
product and market, and a business plan.
For start-ups, this information is required
in order to help the RLF Board reach an informed decision. Free help in developing business plans and
financial statements is offered by the Service Corps of Retired Executives
(SCORE) in Huron County. Also, Huron County applicants
may use the Small Business Development Center in Ashland.
3.
Your project must meet the following minimum criteria:
·
One full time
equivalent job created or, in special cases, retained for every (state
requirements allow up to $25,000) or more loaned. (The less funding required per job created,
the better.)
·
One dollar
minimum of other funding for every RLF dollar, with at least ten percent of
fixed costs in cash equity recommended.
·
The majority
of jobs created must be held by persons who, at time of employment, certify in
writing that they are from low to moderate income households. If, for some reason, your project results in
a majority of employees above the
income thresholds, the only fallback is to have documentation that all persons interviewed, whether they were
hired or not, completed an income eligibility form, and that the majority of
those interviewed were from low to
moderate income households.
·
All household income (from both spouses if husband and wife
work) is included. For Huron County, the Village of New
London
current
maximum income to qualify for low-moderate income, based on households size,
is:
1 in household: $30,400
5 in household: $46,900
2 in household: 34,750 6 in household: 50,400
3 in household: 39,100
7 in household: 53,850
4 in household:
43,450 8
in household: 57,350
802/05
·
Project must be within the
Village of New
London.
·
Project must not involve relocation of any jobs within Ohio, or business
must inquire about potential for a waiver.
·
Eligible fixed asset
costs include real estate, construction of buildings and on-site
improvements, and heavy equipment (usually with a life of over five years).
·
Speculative projects not tied to specific businesses and job
creation are ineligible.
·
RLF funds cannot pay for expenditures made before loan
approval and closing.
4.
You must clearly document your need for RLF funding, providing evidence that the project cannot go
forward without RLF funds, at the requested interest rate and term. This documentation takes one of two forms:
a.
A letter from your bank or lender stating that they will
fund a portion of the project, but will not finance more than a specified
maximum amount, and citing an interest rate and term for that loan. Their loan should be contingent on your
receiving funds from the RLF to "fill the gap". You must also demonstrate that your business
cannot reasonably contribute any more equity than the amount you cite in your
application. The remaining needed funds thus represent the "gap"
which must be filled with RLF funds.
-OR-
b.
Your three-year projection may indicate that if
your project were financed in total by a private lender at a quoted interest
rate and term, you cannot realize a reasonable return on your investment, and
the lower rate offered by the RLF for a portion of the project will make the
difference for your "bottom line".
Documentation of this type usually requires two sets of projections: one
with the RLF loan repayments at a lower rate for part of the project and
showing a reasonable return, and one showing conventional interest rates for
the whole financing package and indicating a negative or unacceptably small
return.
5.
Construction financed by
the RLF and costing over $2,000 must incorporate federal (not Ohio) prevailing wages for laborers doing the
work. If private funds, bank funds, or
equity finances construction and RLF funds are used for other activities (real
estate, equipment), prevailing wages need not be paid.
6.
All projects are subject to environmental review procedures requiring review and comment
periods ranging from approximately three weeks to over one month, depending
upon the impact of your project. No
funds, either from the lender, equity, or RLF, can be
obligated and expended before the comment period is over. Your project must thus be timed so that it
does not begin before your application is reviewed and approved, you have
signed the legal documents, and the environmental comment period has been completed. This process can take three months or longer,
depending upon the complexity of the project.
7.
If your project is funded, you will be required to sign a
loan agreement which will include security and collateral agreements. These documents will include:
·
The loan document, including job creating and project goals.
·
A promissory note.
·
Security agreements, such as UCC equipment liens and/or a
subordinated mortgage.
·
In many cases, a personal guarantee.
8.
Projects involving acquisition of real estate will require
that certain procedures be undertaken subject to the federal Uniform Relocation
and Property Acquisition Act. Make sure
to consult with the RLF administrator prior to entering into any agreement for
real estate acquisition.
9. If your project is
funded, you will have to provide documentation of compliance and
performance. The following will be required of you:
·
Evidence of
total project expenditures as proposed (invoices, canceled checks).
·
Evidence of
hiring (income certifications for all employees hired, with over 51% from
low-moderate income households).
·
In many cases,
quarterly financial statements will be required during the loan period.
·
If the RLF
funds construction, labor payrolls will be required, as well as on-site laborer
interviews.
10. Applicants may be subject to personal credit
reviews.
11. There is a one
hundred dollar ($100.00), non-refundable fee payable when the pre-application
is completed and returned.
·
Successful applicants will be billed for direct loan
processing costs (mortgage and security filings, credit reviews, appraisals,
and other minimal direct costs if any).
REMEMBER! The
RLF is intended to be a lender of last resort.
Other sources, such as private lenders, should be consulted first. Also, be prepared for loan application,
review, and processing to take two to three months or more. This is unavoidable in most cases, due to
environmental review procedures which require public comment periods, and due
to additional required procedures, including a meeting of the RLF
Administrative Board, subsequent review by the Ohio Department of Development,
and City Council approved. It is best to
maintain close contact with the RLF administrator during the application and
review process.
If you have any questions,
contact the RLF Administrator
Ben Kenny – Wilson
Forney
WSOS Community Action Commission,
Inc.
219 South
Front Street
P.O. Box 590
Fremont, Ohio 43420
(419) 334-8911
(800) 775-9767
(419) 334-5124 - fax
btkenny@wsos.org