Congress Heights Community Training & Development Corporation Microloan Launch April 11, 2009 10:00am
Today s Agenda Overview of Project Purpose Target Businesses The Microloan Program Terms Credit and Collateral On Going Borrower Support Access to Capital Document Preparation The Business Academy (Education and Training) Workshops Counseling and Advice Peer Roundtables Questions and Answers
Eligibility Requirements Small Business Concerns Domiciled in the District preference categories: (1) Businesses whose owner(s) are District residents (2) East of the River CBEs (3) Commitment to hire CDC trainees Most business types Non Profit For Profit Sole Proprietorship Partnerships Corporations Start Ups (> 1yr) or Established Good Standing with Federal and District (compliance and taxes) Fully Insured, where applicable At least one rejection by a traditional lending institution If approved, carry life insurance for the term of the loan
Ineligible Businesses Consumer and Marketing Cooperatives Academic Institutions Gambling Concerns Wholesale Auto Inventory Financing Speculative Concerns Lending or investment institutions Multi level marketing or pyramid sales Bars, any establishment for the principal purpose of dispensing alcoholic beverages
Ineligible Applicants Past due on school loans Notified by Federal Government of ineligibility for federal loan programs
Interest Rates and Terms Fixed rates for the term of the loan Prime rate + 4% to 6% based on collateral and creditworthiness (determined during underwriting) Loans amortized on a 360 day basis with no prepayment penalty Terms vary from 90 days (working capital) to 36 months (equipment)
Uses of Funds Eligible Working Capital Payroll Marketing Operating Expenses Receivables Financing Inventory Supplies Furnishings and Fixtures Equipment Ineligible Uses Down Payment on Real Estate Refinance Existing Debt Personal Use Owner s Salary or Draw Payroll Taxes Leasehold Improvements Buy Out of any stockholder or equity holder
Maximum Loan Amounts For established businesses (at least one year of sales and one year of business taxes) $25,000.00 Start Ups with a written business plan $15,000.00 Start Ups without a business plan at application $7,500.00 Minimum loan amount $500.00
Loan Amounts Loans between $1,000 $4,999 Terms up to 12 months No collateral requirements Loans between $5,000 $19,999 Terms up to 24 months Personal guarantee of each owner with 10% equity Collateral requirements Business Plan Joint Check Agreement for receivables financing Loans between $20,000 $25,000 Terms up to 36 months Personal Guarantee of each owner with 10% equity Collateral requirements Joint Check Agreement for receivables financing
Fee Structure Direct Loan costs are borne by applicant Application/Administration Fee $150.00 Closing/Filing Fees due at loan closing Credit Analysis $25 per signatory Contribution Fee $100/yr life of loan $15 late fee $35 returned check
Questions
Application Process Intake Consultation Technical Support Loan Application Submission Board Decision Underwriting
Supporting Documentation Application Form Business Plan Financial projections to include monthly cash flow for 12 months, balance sheet, income statement Personal Financial Statement (each owner) 3 years business tax returns 3 years personal tax returns Year to date financial statements 3 years financial statements List and Valuation of Collateral Proposed use of proceeds Proof of insurance Denial Letter from traditional lending institution
Underwriting Criteria Five General Principles Determine applicant s needs, not desires Identify appropriate collateral Match loan terms with long and short term needs Match repayments with cash flow Five Cs of Credit Cash Flow Credit Collateral Conditions Character
Questions