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HomeMy WebLinkAbout03-Community Development Dept: Community Development REQUE~T FOR COUNCIL AC"r' ?N .- " Ir::;; Direct'R'EC'O. - A::nl.ltll_f~ Amendment to Small Business Loan ^,' Program Guidelines -- establishing Eal FEB -5 P>', 3: jC Mayor & council as approving authority for EDP small business loans. CIT_ OF SAN BERNARDIr _., - From: Kenneth J. Henderson, Date: February 5, 1987 r~h, /',lff1 Synopsis of Previous Council action: On December 8, 1986, the Mayor and Common Council adopted Resolution Number 86-486 approving and adopting guidelines established for the implementation of small business loan program. Recommended motion: J Move to approve amendment to Economic Development Program (EDP) Guidelines establishing Mayor and Common C~uncil of the City of San Bernardino as approving authority for EDP small business loans. Contact pinon: Kenneth J. Henderson Phonal 3R3-5lJ65 Supporting deta ettached: Staff Report; EDP Guidelines Ward: 1-7 FUNDING REQUIREMENTS: Amount: N/A Source: (ACCT. NO.) (ACCT. DESCRIPTION) Finance: Council Notes: n.OIII Agenda Item No, ~ CITOOF SAN BERNARDIO - REQUEO' FOR COUNCIL AC1()N STAFF REPORT On December 8, 1986, the Mayor and Common Council adopted Resolution 86-486 approving and adopting the Economic Development Program Guidelines and establishing same for the City of San Bernardino Small Business Loan Program. On December 27, 1986 and again on February 2, 1987, Council requested that the guidelines be amended establishing the Mayor and Common Council as the approving authority for all EDP loans. The requested amendment has been accomplished and is submitted for approval. Said amendment is set forth under the -Loan Committee- section of the guidelines (specifically the last paragraph of the guidelines) Staff recommends adoption of form motion. ~~q~ Kenneth J. Henderson Director of Community Development 2/5/87 7$00"_ o o o o THE CITY OF SAN BERNARDINO COMMUNITY DEVELOPMENT DEPARTMENT ECONOMIC DEVELOPMENT PROGRAM "GUIDELINES" FOR SMALL BUSINESS REVOLVING LOAN FUND The Economic Development Program (EDP) is established to enhance economic activity, encourage the growth of small business and to promote the physical revitalization of City of San Bernardino as a whole, with particular emphasis in economically depressed areas. The major goal of this program is to improve the overall economic growth and availability of jobs, goods and services to all city residents. General ProQram Features 1. The maximum amount of EDP participation in a single project is $50,000, the minimum loan is $10,000. Loans for amounts less than $10,000 will be considered on a case by case basis for equipment purchases only. 2. The EDP will fund a loan for no more than thirty-five percent (35%) of the total project. 3. The minimum matching requirement of private financing to EDP injection is one dollar ($1.00) private financing for each one dollar ($1.00) of EDP financing. 4. The business concern (loan applicant) must have been in business for at least three (3) years, unless there is strong evidence of recent experience in the same or an allied business. 5. Loans for business start-ups will be considered on an exception basis, and only in conjunction with Small Business Administra- tion assistance for same. Economic Development Program assis- tance in most instances will be used to assist the client in meeting Small Business Administration Loan Equity requirements. 6. The interest rate is negotiable, but shall not be less than five-percent (5%). 7. The maximum loan term and repayment conditions shall be deter- mined on a case by case method, based upon the financial status of the borrower, i.e., cash flow analysis. In addition, the loan terms and conditions of a participating financial institu- tion may also be a basis for determining loan term and repayment conditions. 8. Matching funds must be placed in loan proceeds for disbursement. matching funds are provided by a (e.g., Bank), the matching funds institution. an escrow account with the EDP However, in cases where the private lending institution may be disbursed by that ~/'111 - o o o o 9. Matching funds may consist of a bank loan, or any other funds from a non subsidized source. 10. Economic Development Program resources shall not be allocated, divided or set aside for individual properties prior to loan submittals. Funding is on a first-come first served basis. 11. Applicants will be charged a loan processing fee equal to one percent (1%) of the amount of financial assistance requested. Who Mav Aoolv Applications will be accepted from small, minority and female-owned businesses to physically improve commercial property and commerce within the City limits. In certain rare cases, funding may be considered for economically viable businesses. These businesses may be sole Proprietorships, Partnerships or Corporations. Selection Criteria Loan proceeds are to be used for commercial rehabilitation, pre- servation and economic development activities which further the City's overall economic development strategy. Loan consideration shall be based on the following criteria: 1. Creation of jobs (low/moderate income). 2. Retention of jobs (low/moderate income). 3. Provision of increased goods and services in the City. 4. Retention of goods and services in the City. 5. Provision of physical improvements to eliminate blight. The desired ration of increased jobs to job for each $10,000 in loan proceeds. reviewed on a case by case method. Eliaible Activities loan proceeds is one (1) Each project will be Eligible activities as defined under Section 570.202(a) and (b) and 570.203 of the CDBG Regulations dated October 31, 1984, and as they may be amended by BUD include, but are not limited to, the follOW- ing: 1. Interior and/or exterior rehabilitation, restoration or altera- tion of commercial properties. a) Leasehold Improvements b) Seismic Improvements c) Other Improvements 2. Purchase of equipment. .J/:r/! 7 - - o o o o 3. Purchase of commercial property for expansion of an ongoing business. 4. Working capital, if secured by physical assets, e.g., real property or equipment. 5. Business expansion activities. 6. Refinancing of existing debt (non-construction).* *The Community Development Department must first determine that such activities are necessary or appropriate to carry out an economic development project under Section 570.203 Activities. The Community Development Department must first find that such financ- ing is necessary and appropriate to achieve the recipient's community development objectives. Collateral The collateral shall be identical to that required by the partici- pating lending institution, where said collateral is adequate to cover both loans, with the City willing to subordinate its rights to the lending institution when necessary. Additional collateral shall be required in cases where that held by the lending institu- tion is not adequate to cover the City's interest. Such collateral may be, but is not limited to, Trust Deeds, Equipment Liens, and personal guarantees provided by the principals of the business. In cases where a private lender is not participating in the project, collateral must be adequate to cover the EDP loan. Construction 1. All construction work must be performed under the guidelines of the Davis-Bacon Act, which requires that all construction employees are paid at least the prevailing wage for his/her job classification. 2. The City shall not be responsible for the quality of workmanship on construction activities or equipment purchases utilizing the proceeds of the EDP. The borrower is responsible for the selection of all contractors and vendors. However, the City will make periodic inspections to ensure that the contracted work has been performed and/or equipment has been delivered as specified. The Loan Committee The EDP Loan Fund Advisory Board reviews all loan proposals which have been recommended for funding by CDD staff. The committee is comprised of eight (8) members, as follows: 1. Director (or his/her designee) Community Development Department, 2. Manager (or his/her designee) Wells Fargo Bank of San Bernardino (non-voting) ~b-/?1 o o o o 3. Manager (or his/her designee) Bank of America, San Bernardino Branch 4. Manager (or his/her designee) Home Savings Bank of San Bernardino 5. Manager (or his/her designee) Fist Interstate Bank of San Bernardino 6. Manager (or his/her designee) Price Waterhouse of San Bernardino Certified Public Accountant 7. District Manager Golden State Insurance Company San Bernardino Office 8. Director, Institute for Training and Development San Bernardino Community College All loan applications must be approved by a majority vote of the committee in order to proceed to final processing. The loan committee shall meet a minimum of one (1) time per month. Dates to be determined by the Committee. The actions of the Loan Committee are recommendatory only. approval of the loan application, if granted, will be made Mayor and Common Council of the City of San Bernardino. Final by the KJH/NNllb file: edcproguideline ~Jf?