SMALL BUSINESS REVOLVING LOAN FUND

Transcription

1 THE CITY OF LAWRENCE Community Development Department 225 Essex Street, Lawrence MA Tel (978) Fax (978) SMALL BUSINESS REVOLVING LOAN FUND June 2012 Small Business Revolving Loan Fund 1 Policies and Procedures & Application

2 TABLE OF CONTENTS Introduction 3 Section I. Program Goals & Objectives 5 Section II. Eligibility and underwriting standards 6 Section III. Loan Application Process Summary..11 Section IV Administration of the Revolving Loan Fund...12 Loan Review Committee Staff Support Loan Selection & Approval Process Loan Servicing Source of Funds to Cover Administrative Costs Other Requirements Application Loan Application Form 21 Attachments Small Business Revolving Loan Fund 2 Policies and Procedures & Application

3 ABOUT THE CITY OF LAWRENCE SMALL BUSINESS REVOLVING LOAN FUND PROGRAM The Community Development Department and the City s Economic Development Coordinator have developed a financial and technical assistance program designed to promote economic growth and job creation by assisting small businesses. The SMALL BUSINESS REVOLVING LOAN FUND PROGRAM is designed to promote through gap financing the growth and expansion of businesses committed to Lawrence. The purpose of the SBRLF is to provide financial assistance to qualified for-profit businesses and not for profit social enterprises identified as being important to the City of Lawrence. The loan fund targets businesses and social enterprises that will diversify and strengthen the local economy and encourage the creation and retention of jobs while addressing the goals set forth in the Consolidated Plan. The program will target: 1. existing small businesses currently located in Lawrence which are interested in expanding and improving their enterprises; 2. existing small businesses currently located outside Lawrence which are interested in relocating to Lawrence; and, 3. new small businesses which are interested in establishing themselves in Lawrence. Examples of businesses deemed a priority by the City are: a.) High technology, manufacturing, service companies with high growth and job creation potential that will diversify and strengthen the local economy. The SBRLF seeks to encourage the expansion of existing industry clusters and emerging new clusters; b.) Micro-enterprises which will provide sustainable employment opportunities to the unemployed and underemployed, particularly young people; c.) Green businesses that will contribute to achieving a sustainable environment in Lawrence. Examples of such businesses include recycling and deconstruction; d.) Social enterprises created by well established not for profit organizations. A qualified social enterprise business is one that achieves a primary social or environment mission utilizing for profit business methods; e.) Retail establishments within the downtown Essex Street and Broadway corridors. Small Business Revolving Loan Fund 3 Policies and Procedures & Application

4 The SBRLF encourages the leveraging of conventional and private investment in the form of fixed asset and working capital investments. The SBRLF is not intended to compete with private lenders, but instead enhance and support a business s normal banking relationship. The SBRLF generally provides loans in 3 primary categories: a.) Micro loans- $1,000 to $5,000; b. Social enterprise loans - $5,000 to $25,000; and c.) Conventional loans- $10,000 to $50,000. The loan ranges are structured at interest rates and loan maturities that encourage business development and sustainability and facilitate reinvestment while providing for the recapitalization and growth of the Fund. The Fund perpetuates a positive and proactive business and social climate that encourages the retention and expansion of existing businesses, helps to attract desirable new businesses and improves the quality of life for the residents of the city. Small Business Revolving Loan Fund 4 Policies and Procedures & Application

5 Section I. Program Goals and Objectives The goal of this program is to stabilize and expand the City's economic foundation and tax base by promoting growth of small enterprises. The SMALL BUSINESS REVOLVING LOAN FUND PROGRAM is expected to provide significant benefits to the City in addition to generating economic growth. These benefits include: neighborhood stabilization -- by promoting small business growth in marginal areas of the City where the potential for deterioration is greater than in other neighborhoods and where the presence and growth of small business will aid in the prevention or elimination of further decay; and, neighborhood services - by promoting small businesses which benefit underserved areas of the City and which may generate other residential and commercial investment; and, job creation/retention -- by requiring program participants to hire Lawrence residents if new hiring is part of the participant's plan. The purpose of the SRLF will be to provide loans to small businesses which will create a healthier economic base in the City and create jobs, which will in turn enhance the quality of life for all residents and business owners in the City. The primary source of the funding for the SBRLF is the HUD Community Development Block Grant program and program income generated from loans in the SBRLF. As such the SBRLF will be administered in accordance with all applicable Federal Regulations, and in particular 24 CFR , 202, 205, 206 (Eligible Activities), 24 CFR (National Objectives), and 24 CFR (Public Benefit Standards). The Community Development Department will be guided in applying these and other applicable regulations by HUD s Economic Development Toolbox and by the National Development Council (a HUD Technical Assistance Provider) Textbook, ED 405. Small Business Revolving Loan Fund 5 Policies and Procedures & Application

6 Section II. SBRLF Eligibility and Underwriting Standards The following Requirements, Evaluation Criteria and Underwriting Standards will be used by the Program Administrator within the Community Development Department and the Loan Review Committee to evaluate loans, make approvals, and set terms and conditions for the loans. HUD Requirements 1. National Objectives Criteria - Funds borrowed under this program must be expended on a project which will satisfy one or more of the national objectives of the Community Development Block Grant Program. The relevant national objective, as outlined in CFR 24 Part , for an economic development assistance activity is benefit to low and moderate income persons, which can be met by either job creation or provision of services to a low and moderate income population. 2. CDBG Eligibility - Funds borrowed must be used for an eligible activity as outlined in: 24 CFR Part (a) Special Economic Development Activities (non-profits) 24 CFR Part (b), (c) Special Economic Development Activities (for-profits) 24 CFR Part (o) Assistance to Microenterprises 24 CFR Part (a)(3) Commercial rehabilitation 3. Public Benefit Test Funds provided under Section (a) must meet a Public Benefit requirement as described below. Public Benefit Standards for Individual Activities An activity is considered by HUD to provide insufficient public benefit and can not be assisted with CDBG funds if: The amount of CDBG assistance exceeds $50,000 per full-time equivalent (FTE), permanent job (created or retained) or $1,000 per LMI person to which goods and services are provided by the activity; In addition, an activity would be considered to have an insufficient benefit if it consists of or includes: General promotion of the community (as a whole); Assistance to professional sports teams; Assistance to privately-owned recreational facilities that serve a predominantly higher income clientele where the benefit to users clearly outweighs the benefit of jobs created or retained; Acquisition of land for which a specific use has not been identified (i.e., land banking); or Small Business Revolving Loan Fund 6 Policies and Procedures & Application

7 Assistance to a for-profit business owner that is the subject of unresolved findings of noncompliance related to previous CDBG assistance. Aggregate Public Benefit Standards Activities, in the aggregate, must either: Create or retain at least one FTE, permanent job per $35,000 of CDBG funds used; or Provide goods and services to an area where the number of LMI persons served by the assisted business amounts to at least one LMI person per $350 of CDBG funds used. Certain activities can be excluded from the aggregate standards (as discussed in (b)(2)(v)). 4. Financial Underwriting Requirement HUD requires that there be financial underwriting of any assistance to private businesses. While not mandatory, HUD has published underwriting guidelines in Appendix A of 24 CFR 570. The objectives of the underwriting guidelines are to ensure: (1) that project costs are reasonable; (2) that all sources of project financing are committed; (3) that to the extent practicable, CDBG funds are not substituted for non-federal financial support; (4) that the project is financially feasible; (5) that to the extent practicable, the return on the owner's equity investment will not be unreasonably high; and (6) that to the extent practicable, CDBG funds are disbursed on a pro rata basis with other finances provided to the project. The City of Lawrence will use the HUD guidelines in undertaking its underwriting in this program. City of Lawrence Requirements 1. Eligible Businesses - Eligible Existing Businesses should have a net worth not in excess of $2 million and an average net profit less than $750,000 during the previous two years. Eligible New Businesses must demonstrate a high likelihood of success. 2. Cash Flow Requirement - Applicants will be required to produce current financial statements and financial forecasts which indicate that they will have adequate cash flows to support all debt created by the project. Small Business Revolving Loan Fund 7 Policies and Procedures & Application

8 3. CDBG Funds Not To Replace Private Sources - Applicants will be required to document that the requested financing from the SBRLF was not obtainable, in full or in part, from other sources. 4. Commitment of Other Funding - Applicants will be required to document that other sources of funding are committed. 5. Reasonableness of Costs - Applicants will be required to document the reasonableness of project costs by providing estimates, appraisals, and quotations as appropriate. 6. Return on Equity Investment - The expected return on the equity investment cannot be unreasonably high for the project. 7. Job/Cost Ratio The City will seek job/cost ratios greater than the HUD public benefit standards with priority to applicants that intend to create at least one job created for each $25,000 of RLF investment at a minimum. 8. Equity Participation - The minimum amount of equity required is 10% of the total project funding required. Documentation of this equity contribution will be required 9. Security - The borrower must secure loans made by the RLF through security interests in business assets and real estate (as applicable). RLF funds are intended to be gap financing and may be subordinate to the primary lender. Personal guarantees for the repayment of funds will be required. 10. Applicant Costs - Direct costs of loan processing (closing costs, appraisal fees, credit checks, etc.) are the responsibility of the borrower. The applicant(s) will also be charged a $200 non-refundable application fee. 11. Business Location - Loan recipient businesses must reside, or have entered into an acceptable lease arrangement to reside, in the City of Lawrence prior to receipt of funds. 12. Outstanding Tax Liability - The applicant (or any entity under the control of the applicant) must not have any outstanding tax liability to the City, State, or Federal Government other than current bills and approved payment schedules. Applicants may not be debarred from participation Federal programs. 13. Applicant Presentation - The applicant will be required to make a presentation to, and answer questions from, the Loan Review Committee to demonstrate the applicant s knowledge of the business, understanding of financial issues, and why the project has a reasonable chance of success. In addition to the preceding underwriting criteria, the Committee will use the information from this presentation to make a decision to award or deny the loan. Small Business Revolving Loan Fund 8 Policies and Procedures & Application

9 Loan Terms All loans are made subject to the availability of funding The specific loan terms and amortization periods will be based on the nature of the borrower s operation, useful life of the assets, the number of jobs created or retained as well as the terms offered by the private sector financial institution participating in the project. The City retains the right to adjust individual terms in order to facilitate a successful SBRLF project. In general: a.) The term will not exceed the average useful life of the assets being financed. b.) The loan term will be the lesser of the average useful life of the asset being financed or the term; c.) Working capital loans: 5 years maximum/5 year amortization; d.) Machinery and equipment loans: 7 years maximum/7 year amortization; and e.) Commercial real estate (owner occupied): 5 years/amortization of up to 20 years, with a balloon payment after 5 years. Payment Terms - Principal& Interest payments shall be made monthly commencing on the first of the month following closing unless the loan is closed late in the month, in which case payment would begin on the first of the following month. The loan committee may approve different payments terms as long as such terms are commercially reasonable and prudent. Interest Rate - Interest on loans will be fixed at the prime rate plus 2 ½ points at time of approval. Loan Sizes - The minimum loan size the Lawrence SBRLF will consider is $1,000 and the maximum shall not exceed $50,000. a.). For existing businesses, the maximum loan amount shall not exceed $50,000 or 50% of the project, whichever is less. b.) For start-ups, the maximum loan amount shall not exceed $25,000 or 50% of the project, whichever is less. c.) For social enterprises, the maximum loan amount shall not exceed $25,000 Under exceptional circumstances the Loan Committee may approve an SBRLF loan as the sole source of funds to assist in the establishment of a social enterprise that will have an immediate and direct effect on job creation for the target population or expansion or attraction of a business in a targeted industry with significant job creation potential. The loan committee may approve different investment and collateral terms as long as such terms are commercially reasonable and prudent. Small Business Revolving Loan Fund 9 Policies and Procedures & Application

10 Prohibited Uses of Funds - a. Loan guarantees b. Acquisition of non-owner occupied commercial real estate c. Payment of back taxes or fines d. Revolving lines of credit e. Assistance to night clubs, social clubs, and liquor stores f. Prohibited uses identified in HUD regulations g. Other activities that the City may identify as inappropriate for the SBRLF Program Small Business Revolving Loan Fund 10 Policies and Procedures & Application

11 Summary of Application Process Section III Loan Application Process 1. Program Administrator or staff conduct Initial Interview to a. Determine applicant's eligibility b. Brief applicant on program standards and criteria c. Provide list of required materials 2. Applicant submits Pre-application which will include a. Project description and cost summary b. Company financial statements balance sheet and profit and loss statement c. Description of company principals 3. Program Administrator or staff review pre-application a. If proposed use and applicant s financial statements indicate a loan can be supported the borrower is invited to submit a full application b. If the proposed use do not meet the SBRLF criteria or the pre-application documents including financial statements do not indicate a loan can be supported the applicant is advised of the deficiencies 4. If invited at Step 3 the applicant completes and submits a full application to the CDD along with a non refundable application fee of $ The program administrator completes a review of the application. 6. The program administrator makes a recommendation to the Loan Committee. 7. The Loan Committee convenes to render a decision. 8. Upon approval by the Loan Committee the Program Administrator prepares a commitment letter signed by the Community Development Director to the applicant listing the terms and conditions of the loan with a request for written authorization to proceed with processing the loan. 9. If the Loan Committee does not approve the application the Program Administrator prepares a letter explaining the disapproval. 10. The Community Development Department prepares the closing documents. 11. Closing 12. Loan Administration, including required quarterly borrower reports during term of loan Small Business Revolving Loan Fund 11 Policies and Procedures & Application

12 Application Requirements After an interview with CDD staff each potential borrower will be required to initially complete the City s Pre-Application. Staff will review the Pre-Application to determine if it meets the general intent and purpose of the SBRLF. In evaluating the preapplication, staff will consider whether the project/loan: o Meets the targeting criteria and is in one of the target industries o Demonstrates a reasonable assurance of repayment o Is consistent with the portfolio job/cost ratio established for the SBRLF o Leverages private dollars (minimum of 2:1 target for the SBRLF portfolio) Once the above pre-application criteria are sufficiently met, the potential borrower will be invited to submit the following checklist of items to complete the application process: o Application fee of $200 o Completed SBRLF application o Letters of decline from Financial institutions and/or letters of support from Financial Institutions for a portion of the project o Current credit report o Past three years of business and personal tax returns, all schedules o Three years of business financial statements, to contain at a minimum, balance sheets and profit & loss statements o Personal financial statement dated not more than three months prior to the loan application. (Required for each principal with 10% or more ownership in the applicant company, and may be required for individuals with management responsibilities) o Business plan with financial projections o Proof of hazard and liability insurance o Accounts receivable and accounts payable aging schedules, dated the same date as most recent business financial statement o Debt schedule of fixed obligations o Collateral listing to secure loan o Financial projections, generally to include: description of the assumptions behind the financial projections, a projected cash flow for a minimum of 12 months, a projected balance sheet and income statement for a minimum of 12 months o Two year pro forma financial projections o Two year pro forma cash flow projections o Itemization of current jobs and demonstration of job creation as a result of the loan. The loan committee may accept and consider additional documentation as long as such documents demonstrate that the proposed loan will be commercially reasonable and prudent. It is acknowledged that not all checklist items will apply to each loan applicant and that certain situations may require additional items not on the list. Small Business Revolving Loan Fund 12 Policies and Procedures & Application

13 Borrowers will be approved based upon a reasonable assurance and determination of repayment ability and potential economic benefit to the community, the number and quality of jobs to be created, and the amount of taxes generated. Credit Reports Standard commercial credit reports on all principals owning 10% or more of a business under consideration for a loan and the business are required. The credit reports will be provided by the borrower and submitted with the loan application. Adverse credit deficiencies that would cause the underwriter to question the ability of the potential borrower to repay the loan may be deemed a valid reason for declining the loan request. A summary review of the results of the credit reports will be included in the loan writeup. Costs of credit reports will be borne by the borrower, whether or not the loan is approved. The borrower will be provided an opportunity to address adverse credit information that may be relied to deny a loan request and the loan committee will consider such information in reaching a final decision. A borrower whose application is denied may not reapply within 6 months after the date of denial. The loan committee may defer a decision in its sole discretion to permit an applicant to correct deficiencies in the application. Appraisal Reports Where existing fixed assets or real properties are being used as primary collateral, an appraisal or other valuation determinations will be obtained. The cost of the appraisal will be borne by the applicant, whether or not the loan is approved. Environmental Reviews The borrower will be required to comply with all applicable environmental laws and statutes for the Commonwealth of Massachusetts. The CDD staff will completed the HUD required environmental review with project information provided by the borrower. Collateral Requirements Loans will be secured to the fullest extent possible as a secondary source of repayment to protect the interests of the SBRLF. The SBRLF will obtain a perfected interest in a borrower s assets, including outside assets of related parties as appropriate. Loans may be secured with the following types of assets: o Real property o Machinery and equipment o Inventory o Accounts receivable o Stock pledges o Patent and other intellectual properties o Securities Small Business Revolving Loan Fund 13 Policies and Procedures & Application

14 o Intangibles o Personal and/or corporate guarantees A personal guarantee will normally be required of any principal having a 10% or more ownership in the company being considered. Personal guarantees may be collateralized with liens or property. Appropriate hazard and liability insurance shall be required, and life insurance may be considered depending on the size and nature of the transaction and the health and ages of the principals. The City of Lawrence will be named as a Loss Payee on the appropriate insurance policies. Trust deeds will be obtained and supported by lenders title positions in those cases where real property is pledged as collateral. Liens on all personal property will be perfected by UCC-1 filings. UCC searches will be conducted to determine encumbrances and to ensure SBRLF obtains the desired lien position. Small Business Revolving Loan Fund 14 Policies and Procedures & Application

15 Outreach and Public Information Section IV. Administration of the SBRLF The Community Development Department and the Mayor s Economic Development Director will advise the business community and citizens of the Lawrence regarding the availability of the SBRLF. The Community Development Department will advertise in local newspapers, and brief bankers and business organizations. A summary of the program will also be on the City s web site. From time to time the City will hold public information meetings to explain the program and obtain community input. Community Development Department Staff Review Administration of the SMALL BUSINESS REVOLVING LOAN FUND PROGRAM will be the responsibility of the Community Development Department working in coordination with the Mayor s Economic Development Coordinator. Under the direction of the Community Development Director, the Revolving Loan Fund program administrator will be responsible for, credit analysis, financial analysis (including documenting the financial analysis required for the use of CDBG funds), making recommendations of financing terms to the Loan Committee, loan processing, loan packaging and loan monitoring. Legal requirements including the preparation of closing documents, promissory notes and collateral filings will be the responsibility of the City Attorney or independent counsel procured with program funds. The first part of the application process will be an interview with the potential applicant conducted by the program administrator or a member of his/her staff. The interview will be used to explain the program, gain an understanding of the company and the proposed project, and make a preliminary determination if a pre-application would be warranted. If, as a result of the interview, there is a potential for a viable application, the program administrator will invite a pre-application, which will include: a project description and cost summary, company financial statements, and a description of company principals. The program administrator will analyze the information using the National Development Council (NDC) guidance forms on pages 54 and of NDC ED 405, and will either advise the applicant a loan cannot be made or invite the applicant to submit a full application Upon receipt of a full loan application and a determination that a complete package has been submitted the program administrator will undertake a complete review using NDC Ed 405. Loan Recommendation Write-up The program administrator prepares a loan recommendation write-up for the Loan Committee. The SBRLF loan write-up summarizes the key aspects of a loan. Generally, the loan write-up will include the following: o Summary of the firm s history Small Business Revolving Loan Fund 15 Policies and Procedures & Application

16 o Management ability o Product o Production capability o Market conditions o Financing Source and use of funds Discussion of how the proposed SBSBRLF loan is not replacing private lender funding sources o Repayment ability o Environmental issues o Loan summary Loan request (amount, monthly amortization, and term) Interest rate Use of funds Loan fees, including appraisals, credit reports, environmental reports Collateral description and details, including secured position of the SBSBRLF. Purpose of the loan Public benefit of the loan (jobs retained/created, located in an enterprise zone, project s economic impact) Job/cost ratio: Divide the total loan amount by the number of jobs created and/or saved as a result of the loan o Recommendation based on analysis of the business industry, its place in that industry, financial analysis, and ability to repay, under the criteria establishes by the Lawrence SBRLF. Loan Committee The Small Business Loan Committee as described below will render final approval for all requests for assistance from the Revolving Loan Fund. The SBRLF Loan Committee is responsible for reviewing loan applications referred from the CDD staff. The Committee is responsible for approving loans, making all substantive loan modifications, determining necessary and appropriate loan collection or compliance actions, and overseeing SBRLF loan policies. The Loan Committee will include members with business experience and finance experience representing both the public and private sector. The SBRLF Loan Committee will consist of a minimum of seven members and a maximum of nine members. 3 of the members shall be permanent, one will be a member of the City Council appointed by the President of the City Council for a two-year term, with the balance being appointed for a 2-year term by the Mayor. The Loan Committee members will include: PERMANENT POSITIONS: Small Business Revolving Loan Fund 16 Policies and Procedures & Application

17 a.) The Mayor s Director of Economic Development or his designee b.) Community Development Director or his designee c.) The City Attorney or his designee TERM POSITIONS: d.) A member of the City Council e.) An accountant f.) A Banker from financial institution with a branch in Lawrence g.) A Lawrence Business person or qualified resident from Lawrence h.) A representative of one of the State s economic development agencies or of a regional economic development organization i.) Such other person as the Mayor shall appoint to achieve the necessary number A quorum shall require 5 members, 2 of whom are permanent members. The Committee will conduct meetings upon the request of the Community Development Department to review all loan applications or to review and discuss program policies and performance. The Committee shall serve as both the loan approval entity and a policy advisor. As such the Loan Committee may recommend substantive policy and procedure modifications. The Community Development Department will review and analyze all applications, and then issue a Loan Analysis and Recommendation to the Loan Committee. The Committee will review this Analysis and Recommendation, and five affirmative votes of the board shall be required for approval of all loans. Loan Approval Criteria The Loan Committee will use the following criteria in reviewing loan applications to determine credit worthiness: o Management capability o Innovative technology or product o Demonstrated repayment ability o Equity commitment o Available collateral coverage o Credit worthiness of applicant o Business plan o Leveraging of other funding o Job creation/retention o Economic impact o Availability of other funds The Loan Committee may also consider other criteria as long as such are commercially reasonable and relevant. The Loan committee may require pre or post closing technical assistance as a condition of the loan. Procedures for Loan Approvals Small Business Revolving Loan Fund 17 Policies and Procedures & Application

18 When a loan is approved, the Community Development Director will sign a commitment letter prepared by the program administrator stating the terms and conditions of the loan commitment. It will also state this commitment is based on the continuing representation by borrower that there have been no material adverse changes in the operation or condition of the borrower since statements and information has been submitted to the Community Development Department as part of the SBRLF process. If any such material adverse changes have taken place, this commitment may be declared void and not in effect. Any such adverse changes undisclosed by borrower prior to closing may be deemed an event of default after closing. A sample commitment letter is attached to this guidance. Upon acceptance of the terms and conditions of the loan by signature on the commitment letter the program administrator will take appropriate steps to prepare the necessary closing documents. All loans shall be obligated, secured, recorded, and otherwise contracted by commercially reasonable and appropriate standards. The borrower's business activities and the use of the loan proceeds must be in accord with all pertinent laws and regulations. Funds will be disbursed after all appropriate closing documents are properly executed. The SBRLF will require invoices, requisitions, or other satisfactory evidence of approved uses of loan proceeds prior to and as a basis for disbursement of funds. Loan Servicing The program administrator will be primarily responsible for monitoring repayment of all loans. Upon completion of a loan closing, the program administrator will verify establishment of a loan account with the bank and will notify the borrower of his/her account number and repayment schedule. The program administrator will also notify the borrowers of reporting requirements. In general, a Borrower will provide the following reports each quarter: 1. An Income and Expense Statement for the previous quarter; 2. A quarterly balance sheet; 3. Status of job creation, if required; 4. A description of any problems affecting the business, which may influence its ability to repay the loan or meet job creation requirements. Additional reports may be required. The Community Development Department will also conduct site visits no less often than annually. The program administrator will review the servicing bank's monthly statements regarding the status of loan repayments due from each borrower. The program administrator will issue a letter requesting immediate payment for any accounts that are 30 or more days overdue. To remedy delinquent accounts, the Community Development Department may either: Small Business Revolving Loan Fund 18 Policies and Procedures & Application

19 1. Declare the account in default, and refer it to legal counsel to pursue Legal remedies; or 2. Negotiate a Forbearance Agreement for which the Economic Development Coordinator will provide analysis and recommendations. The Community Development Department will be responsible for monitoring employment increases which are tied to the provision of loan assistance. This function will be completed by means of a quarterly mailing and an annual site visit. Defaults will be handled by legal counsel who will be responsible for recovering the balance due to the RLF from the defaulting client. Methods for handling default might include: foreclosure, petitioning of estate and involvement with the bankruptcy process. Defaults will be managed by the program administrator and may include formal legal action with referral to legal counsel under contract with the CCD. Such legal actions may include but are not limited to attachment of assets and accounts, receivership, foreclosure and involvement with a bankruptcy proceeding. Source of Funds to Cover Administrative Costs Administrative costs of the RLF program will be financed by Community Development Block Grant (CDBG) program income funds within the RLF and program income generated by future loans. Other Requirements Civil Rights No RLF loan applicant will be denied a loan on the basis of race, age, national origin, religion, sex, or physical handicap. The Office of Economic Development will monitor applicants by means of quarterly labor status reports and site interviews with employees. Applicants with detectable deficiencies in employment practices will be allowed thirty days to correct such deficiencies. Continued failure to correct deficiencies may lead to suspension or termination of assistance. All RLF loan applications are required to state both current and projected employment estimates in their loan package. Environment The Office of Planning & Development will also function as the environmental review agency for each loan application. Relocation Access to the RLF will be limited to businesses currently located in the City of Lawrence; businesses seeking a loan to finance relocation to the City of Lawrence; and new businesses seeking in establishing themselves in Lawrence. Should a business client move from the City of Lawrence prior to maturation of its loan, the business shall immediately be required to reimburse the principal balance of the loan. Small Business Revolving Loan Fund 19 Policies and Procedures & Application

20 Access for the Handicapped The Office of Planning & Development will review the proposed use of loan proceeds with the applicant and, if applicable, ensure that plans for construction projects include the necessary elements for provision of accessibility to the handicapped. Small Business Revolving Loan Fund 20 Policies and Procedures & Application

21 SBRLF LOAN APPLICATION Small Business Revolving Loan Fund 21 Policies and Procedures & Application

22 SMALL BUSINESS REVOLVING LOAN FUND LOAN APPLICATION FEE $200 (non-refundable) I. GENERAL INFORMATION Name of Business: Current Address: Proposed Address: Telephone: ( ) Date Business Established: Bank of Business Account: Loan to Be in Name of Tax ID # Number of Employees: Current: Full Time: Part Time One Year After Loan is made: Full Time Part Time NOTE: Please fill out the attached Jobs Reporting Sheet and return it with this application. II. MANAGEMENT (Proprietor, Partners and Stockholders with 20% or more ownership in business) NAME ADDRESS %OWNED Soc. Sec.# Small Business Revolving Loan Fund 22 Policies and Procedures & Application

23 III. TOTAL PROJECT COST Real Estate Acquisition $ Leasehold Improvements $ Acquisition of Machinery and Equipment $ Working Capital $ Inventory $ Total Project Cost $ IV: PROPOSED FINANCING Bank Loan $ % of total SBRLF Loan $ % of total Equity $ % of total Total $ V. EXHIBITS - The following information must accompany this completed and signed application form before your loan request can be processed. 1. Brief history and description of business (one page or less). Businesses less than two years old must provide a business plan. 2. Detailed description of project and use of loan proceeds. 3. Personal financial statement (attached) for each owner + past 3 years tax returns. 4. Business financial statements (past three years and current within 90 days), aged accounts receivable and payable List current within 90 days. 5. Three (3) year income and cash flow projections with explanations. - 1st yr. By month, years 2 and 3 by quarter. 6. Breakdown of proposed cost with written estimates from contractors or suppliers. Purchase agreement, when applicable. Small Business Revolving Loan Fund 23 Policies and Procedures & Application

24 7. Confirmation of matching contributions, if any 8. A completed Jobs Reporting Sheet (attached) Small Business Revolving Loan Fund 24 Policies and Procedures & Application

25 VI. APPLICANT'S CERTIFICATION I/WE certify that all information in this application and all information furnished in support of this application are true and complete to the best of my/our knowledge and belief. Verification may be obtained from any source named, and I/we agree to submit a personal credit check. I/we further agree to all the terms and conditions of this program including reimbursement of the Office s legal and processing expenses for this loan request. Signature Date Signature Date Small Business Revolving Loan Fund 25 Policies and Procedures & Application

26 JOBS REPORTING SHEET Company Date Please fill out all columns if you are using this sheet as part of an application for an economic development assistance program. If you are using this sheet to report on employee status per an active jobs agreement, only columns (1), (2), and (3) are required. (1) (2) (3) (4) (5) (6) General Salary Current Projected Projected Projected Position Employees Employees Employees Employees Description as of in 1 year in 2 years in 5 years (Date) Totals Small Business Revolving Loan Fund 26 Policies and Procedures & Application

27 SBRLF Statement of Equity Participation I, do hereby pledge an equity participation in this CDBG assisted program in the amount of to be made in the form of: Signed: Print Name: Title: Small Business Revolving Loan Fund 27 Policies and Procedures & Application

28 Small Business Revolving Loan fund Tax and Liens Sheet Program Applicants must fill this sheet out and have it signed by appropriate departments prior to receiving grants and/or loans from the City programs. Name of Applicant Name of Business Name of Current Property Owner if Different Current Home Address Current Business Address Property Owner Business Address Proposed Business Address Name of Proposed Property Owner if Different Applicants Home Tel Number Property Owner Business Address Applicants Business Tel Number Tax Collector (Tax & Demo Stamp Signature Date Liens) Water Dept Inspectional Services (Water & Sewer) Stamp Signature Date (Trash Tickets) Stamp Signature Date All sign offs must include department stamp, signatures, and date. No photocopies will be accepted. Small Business Revolving Loan Fund 28 Policies and Procedures & Application