Franklin-Southampton Economic Development, Inc. and the SunTrust Foundation Small Business Loan Guidelines

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1 Franklin-Southampton Economic Development, Inc. and the SunTrust Foundation Small Business Loan Guidelines Program Sponsors and Key Stakeholders The Micro Loan Program (MLP) is sponsored by the SunTrust Community Foundation and administered by Franklin Southampton Economic Development, Inc. (FSEDI). Key Stakeholders in the program will include Franklin Southampton Economic Development, Inc., the Franklin Redevelopment and Housing Authority, the Franklin Southampton Area Chamber of Commerce, and Paul D. Camp Community College. A representative from each of these organizations will assist in promoting the Franklin Southampton Micro Loan program, as well as consider and make recommendations on applications received. Other key community groups such as the Downtown Franklin Association will be made aware of the program as a potential funnel of applicants as the program develops. Program Purpose The Program s primary goal is to provide loans for the establishment, stabilization, and expansion of small businesses licensed or to be licensed and located in the City of Franklin or Southampton County. The intent of this program is to assist business owners and other individuals possessing the capability to operate successful businesses, and to assist microenterprises suffering from a lack of credit due to economic circumstances. Priority consideration will be given to economically disadvantaged persons, minority, and women owned businesses qualifying for participation in this program when funds are limited. Eligibility A. Minimum of 18 years of age. B. A current bank account in the name of the business, the business owner, or a representative capable of cashing/administering the loan award. C. Owns or operates a business within the corporate limits of the City of Franklin or Southampton County.

2 Eligible Activities A. Working capital to include inventory, receivables, and operating capital. B. Equipment and machinery purchases and installation costs. C. Furniture and fixture purchases. D. Training for employees/staff. E. Collateral will be required for all loans and may include personal guarantees, cosigners, equipment security liens, life insurance pledges, real estate loans and vehicle assignments. Outside collateral will be permitted to overcome most perceived deficiencies. F. Borrowers will be expected to invest a minimum amount of cash equity as part of their project financing. These amounts are generally 10 percent and may be higher or lower if approved by the committee. Non Eligible Activities Businesses involved in any type of gaming operations, gambling, pornography, illicit or illegal activities, or any affiliated activity are not eligible for Micro Loan funds. If any business funds, and subsequently derives any portion of their revenue from previously mentioned activities prior to repaying all principal and interest on their Micro Loan, the business shall be deemed to be in default of their Micro Loan agreement. Financing Policies A. Loans will be available at current prime interest rate plus one (1) points. B. The amount of funds provided through the MLP shall be no less than $250 and not exceed $5,000. The maximum loan amount may be subject to waiver based on the particular circumstance and at the discretion of the Loan Review Committee. C. Loan terms will range between twelve months and three years. D. Term is negotiable based on individually affordable payments, but will be no greater than three years without special waiver by the Loan Review Committee. E. The applicant must show the ability to service the debt. The credit history of borrowers and guarantors of the loan must be satisfactory based on credit review. F. Borrowers will be expected to invest a minimum amount of cash equity as part of their project financing. These amounts are generally 10 percent and may be higher or lower if approved by the committee. G. Loan payments will be amortized in equal payments over the term of the loan.

3 H. There is no pre-payment penalty and any payment in excess of the current amount due will be applied to the principal of the loan. I. Failure to repay the loan on the agreed schedule will result in the entire loan amount being due and payable immediately unless prior arrangements have been made and approved to renegotiate the terms of the loan. J. The loan payment will be considered late when the scheduled loan payment has not been made on or before the due date. Late payments over a grace period of 30 days will incur appropriate fees. Loan payments over 90 days delinquent will be considered in default, and will incur appropriate action. The applicant shall be responsible for FSEDI s costs of collection, including reasonable attorney fees. K. Additional funding may be made available for families making less than $47,000 per year via the Franklin Redevelopment and Housing Authority. Credit Requirements A. All loan applicants must be of good character and provide authorization for FSEDI to secure a credit report and verify all financial information provided. B. All loan applicants must possess a favorable credit history with no outstanding judgments, collections, or seriously delinquent accounts. Previous bankruptcies will be a consideration for loan approval provided three years have passed and verifiable new accounts have been established. C. All loan applicants must demonstrate sufficient management or industry expertise or experience and commitment for a sound successful operation. Loan Conditions and Requirements A. All existing applicants must demonstrate sufficient available capital so that with the Micro Loan, the business can operate on a stable financial basis and show that probable future earnings will be sufficient to meet the loan repayment terms. B. All new business loan applicants must evidence availability of sufficient resources to meet startup expenses and initial operating costs in addition to showing future earnings sufficient to meet monthly Micro Loan payments. C. The project must meet the overall goals of the program. D. The business currently must employ no more than 20 full-time or equivalent individuals having full or part-time positions. E. Borrower must agree to periodic on-site visits and monitoring of records by FSEDI staff and/or representatives.

4 F. The borrower must agree to submit required monthly, quarterly, and annual financial reports, employment reports, tax withholding reports, and employee income certification reports as requested, as well as personal and business tax returns and personal financial statements. G. The borrower must agree to participate in business training/technical assistance as needed. H. The loan must comply with all other terms and conditions of the loan approval and must be consistent with the approved sources and uses of funds. Application Process A. Request an application packet from Franklin Southampton Economic Development, Inc. by mail or in person at 601 N Mechanic Street, Suite 300 or by at acotton@franklinsouthamptonva.com (Subject: Micro Loan Application) B. Submit completed application packet. C. Be prepared to attend a meeting with the Loan Review Committee to discuss the loan request and answer any questions. Application and Borrower Information Application will be made to FSEDI for eligibility screen and processing. The application should include: A. Completed application form, including Public Information Disclosure Statement and Credit Disclosure Authorization. B. Marketing and business plans. C. The applicant s personal and business financial statements for the last two years, or if business has operated for less than a year, most recent financial statement, and checking account statements for the last six months. D. Resumes of owners and top management team identifying management expertise and capabilities. E. Two-year projected pro-forma balance sheets, income and cash flow statements, if available. F. Supporting information to substantiate the need for funds, including but not limited to: estimates, quotations, receipts, contracts, orders, invoices, payables, etc. G. Copies of last four quarterly withholding tax reports filed and business/personal income taxes filed for previous 2 years.

5 Upon receipt of the application by FSEDI, it will be reviewed for further processing. Referrals for subsequent technical assistance will also be made. Should the application satisfactorily meet program guidelines, loan packaging will commence. Completed loan packages will be submitted for review to the Loan Review Committee. FSEDI will then close and service said loan. Additional Conditions A. Proof of purchase of the item(s) for which the loan was approved must be submitted within the timeframe agreed upon in the loan documents (generally in the form of a receipt). B. Acknowledgement of FSEDI and the SunTrust Foundation (the source of the loan fund) in any business correspondence or publicity mentioning the item(s) purchased. C. Submission of periodic progress reports during the course of the loan repayment and at the end of the loan term at intervals individually determined by the Loan Review Committee and set forth in the loan agreement. Fee Structure Application Fee a $50 non-refundable fee payable to FSEDI will be paid by each applicant once an application has been submitted to FSEDI.

6 Franklin-Southampton Economic Development, Inc. and the SunTrust Foundation Small Business Loan Application Purpose: Franklin Southampton Economic Development endeavors to assist businesses in the City of Franklin and Southampton County by granting small loans for capital purchases or training for employees. It is the intent that FSEDI manage the program thru the use of conventional lending practices and charge a nominal interest rate. Date of Application: I. Applicant Contact Information: Applicant Name and Title: Social Security Number: Business Name and Address: Telephone Number: Address: Fax Number: Website: EIN: Name and Address of business owner, if other than the Applicant: How long has the business been in operation in the City of Franklin or Southampton County? How many employees does the business currently have? (full time) (part time) Number of projected employees: (full time) (part time) How many City of Franklin or Southampton County residents does the business employ?

7 Partners or Proprietors with 20% or greater interest: Name Address Phone # Ownership % Social Security # Describe your company: Attach a recent Balance Sheet and an Income and Expense Statement for your company s last fiscal year.

8 II. About the Loan: Describe your financial objective for this loan: Amount requested: $ What is the basis of your estimated cost? Have other resources been obtained for this project? If so, please describe: If FSEDI is unable to provide the requested funding, will the business still strive to attain the objective? Describe how this Micro Loan will enhance the business: _ What Loan Terms should FSEDI consider for this application and why? Does the project involve the acquisition of existing building(s) or land? Yes: No: If Yes, has site control been established? Yes: No: If Yes, what type of site control has been established? option to purchase lease purchase

9 Does the project consist of additions or renovations to existing buildings? Yes: No: If Yes, please summarize the nature of the improvements: Has any construction, rehabilitation, or renovation activity occurred to date which is included in the total project cost? Yes: No: If Yes, please state the extent and cost of the activity undertaken and what percent it represents of the total work to be done: III. Sources and Uses of Financing: Source of Funds: Name Amount Term Rate Private _ Other Public _ Other Source _ Other Source _ Equity _ TOTAL Use of Proceeds: Description Working Capital Land Acquisition Amount

10 Building Acquisition Equipment Acquisition Repairs/Renovations Building Construction Equipment Installation Other Construction Costs Leasehold Improvements Miscellaneous Professional Fees Payoff Existing Debt Other (Specify) TOTAL IV. Zoning and Infrastructure: The proposed use of the project meets all governmental zoning and subdivision regulations. Yes: No: (If No, please explain.) There is adequate capacity for the utilities, sewage, and drainage available for the building. Yes: No: (If No, please explain.) There is adequate off-street parking to meet the needs of the business. Yes: No: (If No, please explain.)

11 V. Disclosure Information: List businesses in which you had an ownership interest in the past 10 years: Company Name Address Taxpayer ID# List any loans you had in the past 10 years of more than $5,000: Bank Borrower Amount Date Status (paid, current, default) Have you received any government assistance (i.e., direct loans, guaranteed loans, grants) from Federal, State, or Local sources including but not limited to any loans which were guaranteed by these sources? Bank Borrower Amount Date Status (paid, current, default) Have you been involved with bankruptcy proceedings, insolvency, bank work-out forced or friendly liquidation and the disposition of those activities? Yes: No: (If Yes, please explain, listing parties involved.)

12 Have you been convicted of any crime or had any judgment filed against them, currently pending? Yes: No: (If Yes, please explain, giving details regarding results, judgments, or penalties.) Do you have delinquent tax authority obligations (IRS, State Sales, Real Estate, Property, etc.) or liens or judgments that were the result of any of these previous tax authority obligations? Yes: No: (If Yes, please explain.) VI. Confidentiality of Records: I (we) request that information provided by me (us) and developed by the lending agency, or its staff or agents, with respect to this application for financial assistance be designated Confidential and not open for public inspection. This includes the disclosure of tax or financial information; assessment of the creditworthiness or financial condition; records obtained by the lending agency in connection with the monitoring or servicing of an existing project; proprietary information; and information regarding investors, current and potential. To the best of my (our) knowledge, the above information is accurate, true, and correct. I (We) understand that any false or misleading information I (we) provide may lead to my (our) disqualification from this program. I (We) authorize the lending agency and others on its behalf to gather, collect, and verify any and all information about me (us) furnished in connection with this application or which it believes is advisable and which relates to this application and loan. The information that may be verified includes, but is not limited to, the following: employment, pensions, mortgages, deposits, and any other income; personal or business loans; hazard insurance; and further, to obtain a credit report. If this application is approved, I (we) will be obligated by the promissory note I (we) will sign and the lending agency will give me (us). This application remains the lending agency s property, whether or not this application is approved. Applicant s Signature Co-Applicant s Signature Applicant s Name/Title Co-Applicant s Name/Title Date Date

13 VII. Loan Program Guidelines Agreement: I, the undersigned, agree that, should this application be approved, I will adhere to the Loan Program Guidelines and meet all requirements set forth by FSEDI. _ Name and Title Date Please submit completed application to: Franklin Southampton Economic Development, Inc. 601 N Mechanic Street Suite 300 Franklin, VA For additional information, please contact Ashley Cotton at (757)