LOAN INTEREST SUBSIDY (LIS) PROGRAM GUIDELINES

Transcription

1 LOAN INTEREST SUBSIDY (LIS) PROGRAM GUIDELINES Delray Beach Community Redevelopment Agency June 25, 2010

2 INTRODUCTION Loan Interest Subsidy (LIS) Program A Loan Financing Cost Subsidy Program for Business Loans Businesses in the City of Delray Beach Community Redevelopment Area (CRA) may be eligible for an incentive known as the Loan Interest Subsidy Program (LIS). This incentive is instituted to expedite interior and exterior improvements, additions to buildings and qualified equipment purchases. The Delray Beach CRA would invest its capital in return for fulfilling the following: improving both the perception of the area and the property values/marketability of surrounding properties; expanding and improving older and underutilized buildings to increase commercial and residential intensity; help small businesses improve and grow; and promote job creation in the CRA District The LIS incentive program is a grant payment of a portion of a loan s financing costs, for loans that a business uses to improve its space/building, to modernize its operation, to construct an addition to an existing building, or to purchase qualified equipment to improve the business venture. The Delray Beach CRA would pay for the interest charges on a loan for the first five years, up to a specified limit. Businesses are required to pre-qualify for the loan with a financial institution before applying for the LIS Program. HISTORY The success of the CRA s community redevelopment efforts is largely dependent upon the economic vitality of the area. The CRA Plan Overall Needs section outlines the importance of projects aimed at increasing job growth and generating activity in the commercial areas of the CRA District, as well as the CRA s commitment to promoting economic development activities through business development grants. In addition, the Downtown Master Plan emphasizes the importance of the creation of new office space and business activity in the CRA District in order to attract a year-round day-time population of business people that would help support the downtown merchants and downtown restaurants. As a result, the CRA Plan Community Improvement section includes Economic Development Incentive Programs to catalyze investment, to promote opportunities for new and expanding businesses, and to create jobs. DESCRIPTION OF THE INCENTIVE The Loan Interest Subsidy (LIS) incentive is a grant contribution program where the Delray Beach CRA would pay for a portion of a Business Loan s financing costs in which the proceeds of a loan are used to improve a business situated within the CRA District and create jobs. The CRA would pay for 100% of the financial institution s interest fees for the first five-year period of a loan, not to exceed specified limits; however, assistance is limited to loan interest rates that do not exceed 200 basis points (2%) over the prime rate, floating monthly. The payment of the loan s interest rate would be made directly to the financial institution. Loan term shall be at least five years. 2

3 GRANT LIMITS Applications for the Loan Interest Subsidy Program will be accepted during a five-year period commencing July 1, 2010 and ending June 30, The applicant may be eligible for other incentives from the Delray Beach CRA, when available. Funding limits are as follows: a) Limits of Interest Fee Payment: The CRA shall pay up to a $50,000 of loan interest fees for businesses located within the CRA s Redevelopment Sub-Area 3, the CBD-RC Zoning District, and the portion of the CRA s Redevelopment Sub-Area 5 north of George Bush Boulevard. The CRA shall pay up to $25,000 of loan interest fees for projects located within all other areas of the CRA District. b) Loan Default: the CRA is not obligated to pay any interest beyond the five year term, even in the event of a loan default by the borrower. c) The CRA will not be responsible for any principal payments for the bank loan for any period of time. ELIGIBILITY REQUIREMENTS a) Eligible Business must be located within the Delray Beach Community Redevelopment Area b) A Business must either own the property or have an executed long-term lease for the location in the eligibility area. Long-term lease shall not expire before the grant s last payment is due. c) Minimum loan amount shall be $50,000 and one new job must be created for each $50,000 borrowed. d) Grant Approval by CRA Board and the approval of the Grant Agreement by the CRA Board must occur before the jobs are added. e) A business that enters into a Grant Agreement with the CRA must add the jobs within a specific time frame after the execution of the Grant Agreement by the CRA, as determined in the Grant Agreement. If the jobs are not added within the specified time frame, the grant approval would be void and all grant payments would stop. f) The following entities are not eligible for this program: Restaurants, Bars, Financial Institutions, Real Estate Developers, and not-for-profit entities. g) Use of loan funds are limited to the following: o Site acquisition o Site improvements, including exterior building improvements, grading, street improvements, utilities, parking lots and landscaping; o Construction of new facilities or modernizing, renovating or converting existing facilities; o Acquisition of machinery and equipment with useful life greater than 10 years o Certain professional fees (architectural, engineering, etc) 3

4 o Construction contingency, not to exceed 10% of construction costs h) Business Loans may not be used for working capital or inventory, consolidating debt or repaying debt, refinancing, or franchise fees. i) Mortgage Loans for Real Property are not eligible for assistance under the LIS Program. j) The LIS incentive is contingent on funding availability, CRA Board approval, and the execution of a Grant Agreement by the CRA and the Applicant, and is not to be construed as an entitlement or right of a business owner, a property owner or applicant. Businesses in the CRA areas are not eligible for CRA funded programs when such funding conflicts with the goals expressed in the CRA Redevelopment Plan. k) Business must be in operation and jobs must be and remain in place at all times during the first five years of the loan term. l) The Applicant may not employ or retain any company or person, other than a bona fide employee working solely for the applicant, to solicit or secure the grant award, and not pay or agree to pay any person, company, corporation, individual or firm, other than a bona fide employee working solely for the applicant, any fee, commission, percentage, gift, or any other consideration contingent upon or resulting from the award or making of the grant award. m) Upon grant approval, the property must remain free of all municipal and county liens, judgments or encumbrances of any kind under the terms of the agreement. PROCEDURES FOR IMPLEMENTATION 1. Prior to application submittal, a preliminary review of proposed construction plans, if any, must be completed by the CRA and the City Planning & Zoning Department. The CRA reserves the right to approve the architectural and site design, if any. 2. Application Process All applicants are strongly encouraged to meet with CRA staff in order to determine eligibility before submitting an application. Applications to the LIS Program will not be considered until all required documentation is submitted to the CRA office. Application packets must include the following documentation: a. Loan commitment letter from Financial Institution. Applicants must pre-qualify with the financial institution on their own before applying for the LIS Program. b. Completed / executed Application Form c. Copy of executed multi-year commercial lease; or proof of ownership of the property. d. Business Plan, including executive summary and five-year financial projections of revenues and expenses after the improvements are completed. e. 3-year historical financials including Balance Sheet and Profit & Loss statements for each year. f. List of jobs to be created and filled, including brief job descriptions and employees weekly schedule. g. Additional items as required in the Application Form 4

5 3. Approval of Funding Request Once eligibility is verified and all required documentation has been submitted, CRA staff will present the funding request to the CRA Board of Commissioners for approval. Staff will notify the applicant and landlord of approval, if granted. 4. Grant Agreement Following approval of the Grant Application by the CRA Board of Commissioners, the CRA and the Applicant shall negotiate and enter into a Grant Agreement which will clarify the terms and conditions of the LIS Grant, subject to the approval of the CRA Board of Commissioners. 5. Grant Payment Payments of loan interest will be made annually to an escrow account, and will begin at Loan Closing. The financial institution may draw interest payment from the escrow account after it has received principal payment from the borrower. The Financial Institution shall provide a schedule of payments for the first five-years of the loan, including Beginning Loan Balance, Annual Debt Service, Interest, and Principal for each year. 6. Site Visits CRA staff will conduct a site visit before payments begin in order to verify that the business is in operation. Staff may also conduct unannounced site visits periodically in order to ensure compliance with the terms of the grant agreement. 7. Reporting By accepting the grant, the applicant agrees to comply with any reporting procedures deemed necessary by CRA staff to verify that the required job positions are properly fulfilled and maintained. Reporting may include, but is not limited to, payroll records, work schedules, and reporting forms. 8. Discontinuation of Payment The receipt of past payments is not a guarantee of future payments. The CRA retains the right to discontinue payments when the borrower defaults on its commitment to the financial institution. PROGRAM INQUIRIES Please direct inquiries on the Loan Interest Subsidy Program, including obtaining a complete application packet, to the following: Economic Development Director Delray Beach CRA 20 North Swinton Avenue Delray Beach, FL For website information go to 5

6 LOAN INTEREST SUBSIDY PROGRAM I have read completely and understand the program, including the application guidelines and grant reimbursement process. Business Name Applicant Signature Date Applicant Name (First and Last) Property Owner Signature Date Property Owner Name (First and Last) 6

7 Date of Application: 1. Applicant First and Last name: 2. Business Name: 3. Is the Business tax exempt? 4. Business Address in the CRA District: APPLICATION FORM LOAN INTEREST SUBSIDY PROGRAM 5. Mailing Address: 6. Phone: Fax: Federal ID#: 9. Monthly Rent: 10. Landlord Name Company Name: Owner s First and Last Name: 11. Landlord SSN/EIN: 7

8 12. Landlord s Contact Information: a. Mailing Address: b. Telephone: Fax: c. Landlord s Was this business previously located at another site: Yes No Dates: 14. Business previous Address: 15. Business Size: a. Number of employees: b. Net profit for the past year: c. Total sales revenues for the past year: 16. How many years has the business been in operation? 17. What is the business structure? Sole proprietorship Limited partnership General partnership Corporation Subchapter S corporation 8

9 18. Currently, what is the main source of financing for the company? Debt capital (loans) from commercial bank Mortgage capital from business investments Loans from friends and family Mortgaging personal property Venture capital investments Equity, stocks Bank line of credit Personal savings Trade credit Other (explain) 19. What are the main applications of the above financing? Building or facility Equipment and furniture Inventory Working capital (operating expenses) Reserve for contingencies Other 20. If tenant improvement or construction project is required, please provide project information: a. Brief Description of project: b. Property Control Number: c. Zoning District: d. Existing Use of Property: 9

10 e. Size of the improvement: sq. ft. f. Total project cost: $ 100% Site Acquisition costs: $ % Construction cost (NOTE): $ % Other : $ % Other : $ % NOTE: A detailed description of Construction Cost must be attached to the application. 21. What is the loan amount that the applicant business has been approved for? $ 22. What is the intended use of the new loan: 23. Incentive Information: Will the business likely Increase Property Values? Is there an increase in square footage of leasable space to the property? Will the business help attract additional tenants to the area? Explain: 10

11 Will the improvements to the property have a substantial visual impact? Explain: Will the business Increase the City s employment base? 24. Employment information: a. How many total employees will be working upon occupancy? b. How many new jobs will be created because of the new or renovated space? c. Are any jobs being lost due to downsizing? 25. If Construction is involved, when is it anticipated that construction could begin, assuming the project receives assistance from this program? (A project schedule must accompany the application) 26. Include with this application: a. Description of the business; b. Description of proposed improvement to the property, if any; c. Project Site Plan; d. Project Floor Plan; e. Exterior Elevations if applicable; f. Preliminary project and completion schedule; g. Resume of business owner(s); h. List of all jobs and corresponding anticipated salaries; separate the qualifying jobs from the non-qualifying jobs; provide copies of employee management contracts, and other contract types of jobs located within the space of the business; i. Business and financial Information: i. Business Plan ii. Last three years financial statements, including Balance Sheet and Profit & Loss Statement iii. Last three years of tax returns iv. Mortgage information on property (If applicable) 11

12 v. Copy of executed multi-year lease agreements with landlord (if applicable) vi. Itemized cost of tenant improvements, identifying costs covered by tenant and costs covered by landlord vii. Letter of Commitment from lending institution Provide a minimum of 3 copies of the completed application and 3 copies of all required documentation. The Loan Interest Subsidy (LIS) Program benefits are contingent on funding availability, approval by the CRA Board of the Grant Application, and the approval and execution of the Grant Agreement by the CRA Board of Commissioners, and are not to be construed as an entitlement or right of a property owner or applicant. Properties in the CRA areas are not eligible for City/CRA funded programs when such funding conflicts with the goals expressed in the CRA Redevelopment Plan. The CRA may obtain an analysis by a third party or outside firm hired by the CRA to evaluate the application. I understand that a CRA staff person will visit my business on a monthly basis or as otherwise deemed appropriate to verify that staffing and operating requirements are being adhered to. I understand that this application is not a guarantee of assistance. I understand that if this application is incomplete, it will not be processed. Applicant s Signature Date Printed Name Title Please note that the Delray Beach CRA is a public agency. As such, the CRA is governed by Section , et.seq., Florida Statutes, the Florida Public Records Law. Any documents provided by the Applicant may be subject to production by the CRA, upon receipt of a public records request, subject to any exemptions provided by Florida Law. 12

13 CRA REDEVELOPMENT SUBAREAS 13