HomeMy WebLinkAbout14- Community Development CITY
OF SAN BERNARDIkJ - REOUE:, r FOR COUNCIL AC1 .JN
From: KENNETH J. HENDERSON pct: APPROVAL OF AGREEMENT FOR
�� CONSULTANT SERVICES FOR SMALL
Dept: COMMUNITY DEVELOPMENT ',"A FEB -f '''' 3. BUSINESS LOAN PROGRAM AND
RELATED ACTIVITIES
Date: February 2, 1988
Synopsis of Previous Council action:
In July, 1987, the Mayor and Common Council approved an agreement with
Mr. Val Mahabir for the provision of professional services related to
the Small Business Loan Program assumed by City from the San Bernardino
Economic Development Council.
Recommended motion:
ADOPT RESOLUTION
Signature
Contact person:
Ken Henderson Phone: 5065
Staff Report Ward: 1-7
Supporting data attached:
$22 , 000.00
FUNDING REQUIREMENTS: Amount:
Source:
ACCT. N0. 121-545-53150'—V
(ACCT. DESCRIPTION) U G REPAYMENTS
Finance:
�y
Council Notes:
CITY OF SAN BERNARDIHO - REQUEbT FOR COUNCIL ACTION
STAFF REPORT
In December, 1986, the Mayor and Common Council approved the
establishment of a small business loan program and appropriate
program guidelines to be administered by the Community Development
Department. Assumption by City of various loan, lease and
lease/purchase agreements from the San Bernardino Economic
Development Council was included as part of the Council action taken
establishing and capitalizing this economic development program.
Roughly six (6) months passed before the various agreements
administered by San Bernardino Economic Development Council (SBEDC)
were formally transferred to the City. Much of the delay was caused
by a very close review by HUD of the agreements assumed by the City
and the Economic Development Program guidelines and procedures
developed by staff and approved by the Mayor and Common Council.
In July, 1987, the Mayor and Common Council approved an agreement
(for a six (6) month period of time) for professional services to be
rendered in connection with the City's small business loan program
and related activities. During this time, staff and the consultant
engaged in the following activities:
1. A review of the agreements assumed by City from SBEDC and a
restructuring of these agreements, where appropriate (this
process is still ongoing) .
2 . Development of procedures, information packets and application
forms for the small business loan program in accordance with
policies established by the Mayor and Common Council. A copy
of the above is attached to the staff report.
3 . Orientation of Economic Development Program Committee members.
4. Initial development of marketing strategy for Economic
Development Program.
5. Processing of various loan applications for consideration by
Economic Development Program Committee.
6. Development of UDAG application for the "Sunwest" and "Club"
projects.
For the first six (6) months of this fiscal year, the Community
Development Loan Officer has processed loans for the rehabilitation
of single family dwelling units totalling $270, 393 . Another $49,600
has been loaned to owners of multifamily dwelling units for
rehabilitation and upgrading individual units ($319,993 for both
programs) . Without the services of the consultant, the incumbent of
the permanent, full-time loan officer position assigned to the
department cannot assume the loan processing responsibilities for
the small business loan program. Additionally, it is important to
note that the loan officer plays an integral role in the servicing
and collection of the loan programs described above.
2-2-88 2
As is readily apparent, the services of the small business loan
consultant are sorely needed if the momentum recently established is
expected to continue (the Mayor and Common Council recently approved
the first two (2) EDP loans to Woman to Woman OB/GYN Medical Group,
Inc. , and Meal Management, Inc. ) . Moreover, a number of activities
relating to marketing, training and technical assistance need to be
permanently established. The consultant is expected to spearhead
departmental efforts in this regard.
I recommend adoption of the resolution.
t Ll.—,
Kenneth J. Henderso
Director of Community Development
KJH/lab/0740
2-2-88
2-2-88 3
0
1 RESOLUTION NO.
2 RESOLUTION OF THE CITY OF SAN BERNARDINO AUTHORIZING THE
EXECUTION OF AN AGREEMENT WITH VAL MAHABIR TO PROVIDE SMALL
3 BUSINESS LOAN ASSISTANCE AND LOAN OFFICER SERVICES FOR THE
COMMUNITY DEVELOPMENT DEPARTMENT.
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BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY
5 OF SAN BERNARDINO AS FOLLOWS:
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SECTION 1. The Mayor is hereby authorized and directed to
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execute on behalf of said City an Agreement with Val Mahabir to
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provide small business loan assistance and loan officer services ,
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a copy of which is attached hereto , marked Exhibit "A" , and
10 incorporated herein by reference as fully as though set forth at
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length.
12 I HEREBY CERTIFY that the foregoing resolution was duly
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adopted by the Mayor and Common Council of the City of San
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Bernardino at a meeting thereof , held on
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the J day of , 1987 , by the following
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vote , to wit:
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AYES: Council Members
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NAYS:
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ABSENT:
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City Clerk
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2-2-88 1
Agreement With Val Mahabir-SBA
1 The foregoing resolution is hereby approved this day
2 of 1987 .
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4 Mayor of the City of San Bernardino
5 Approved as to form
and legal content:
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C' Attorne
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2-2-88 2
AGREEMENT
1
2 THIS AGREEMENT is made and entered into this day of
3 , 1988, by and between the CITY OF SAN
4 BERNARDINO, a municipal corporation, 300 North "D" Street, San
5 Bernardino, California, referred to as "City" and VAL MAHABIR, an
6 individual, referred to as "consultant" .
7 City and consultant agree as follows:
8 1. General Description of Work to be Done. City hereby
9 retains consultant to perform the job of Loan Officer, Small
10 Business Loan Program and engage in certain economic development
11 and marketing activities, in accordance with guidelines as
12 established by the Mayor and Common Council and the Director of
13 Community Development, a copy of which is attached hereto as
14 Exhibit "1". Such services shall include but are not necessarily
15 limited to the following:
16 (a) Consultant shall review, analyze and make written
17 recommendations to the Loan Review Committee with respect to
18 individual applications for financial assistance.
19 (b) Consultant, under general direction, shall market
20 the Community Development Department Economic Development Small
21 Business Loan Program through meetings with local lending
22 institutions, design of appropriate brochures and close
23 coordination with Small Business Administration and the Minority
24 Business Development Agency.
25 (c) Provide technical assistance to eligible small
26 businesses including, but not limited to, financial management,
27 inventory control and marketing.
28 (d) Participate in the development and submission of
2-2-88 1
1 Urban Development Action Grants (UDAG) , Economic Development
2 Administration (EDA) grants for use by City in locally approved
3 community development, economic development and redevelopment
4 projects.
5 (e) Consultant shall engage in other compatible
6 activities in accordance with guidelines as established by the
7 Mayor and Common Council and the Director of Community
8 Development.
9 2 . Termination of Agreement. Either party may terminate
10 without cause and for any reason this agreement by giving fifteen
11 (15) days advance written notice of termination to the other
12 party.
13 3. Term. The term of this agreement is for a maximum of
14 six (6) months, commencing on or about February 1, 1988, and
15 continuing for one-hundred, eighty (180) consecutive days
16 concluding on or about June 30, 1988.
17 4 . Provision for Payment. Payment to consultant for
18 services provided under this agreement shall be at the rate of
19 $20.98 per hour and in no event shall exceed $839.00 per week. In
20 addition, consultant shall be reimbursed for the use of his
21 personal automobile at the rate of $0.25 per mile for necessary
22 and appropriate activities. Consultant shall maintain
23 appropriate insurance on his automobile for use as business
24 related transportation and shall provide evidence of same to the
25 Director of Community Development, (hereinafter "Director") .
26 Consultant shall maintain and file with the Director a record of
27 hours expended on assigned duties and the Director of Community
28 Development shall submit a claim or request for payment to the
2-2-88 2
1 Finance Department every two (2) weeks. Consultant shall provide
2 services for at least one-hundred, sixty (160) hours per month.
3 Notwithstanding the foregoing, consultant shall devote all hours
4 necessary to implementing the Community Development Department
5 Economic Development Small Business Loan Program and other
6 activities as described hereinabove. Consultant shall assume and
7 pay all out-of-pocket expenses and costs of performing services
8 under this agreement and City shall not be liable for such costs
9 and expenses without the advance written notice of the Director.
10 5. Amendments. This agreement may be amended or modified
11 only by written agreement executed by both parties.
12 6. Assignment. Consultant's rights under this agreement
13 shall not be assigned by consultant to any other person, firm, or
14 corporation without the prior written consent of the City.
15 7. Relationship of Parties. Consultant is acting as an
16 independent contractor, and not as an employee of the City. In
17 the performance of personal services pursuant to the provisions
18 of this agreement, consultant shall not be supervised, or under
19 the control or authority of any City officer or employee. Any
20 direction by any City employee shall be limited to broad
21 objectives or goals of the project or program to be accomplished
22 and not to the details and procedures to accomplish such
23 objectives or goals. Changes or modifications of said objectives
24 and goals may be made by written recommendations of either party
25 subject to the concurrence of the other party in writing.
26 8. Hold Harmless. Consultant hereby agrees to, and shall
27 hold City, its elective and appointive boards, commissions,
28 officers, agents and employees, harmless from any liability for
2-2-88 3
1 damage or claim for damage for personal injury including death as
2 well as from consultant 's operations under this agreement .
3 Consultant agrees to , and shall defend City and its agents and
4 employees from any suit or actions at law or in equity for
5 damages caused or alleged to have been caused by reason of
6 consultant 's performance hereunder , including any claims that may
7 arise against city by reason of consultant 's legal relationship
8 with City being categorized as other than that of an independent
9 contractor .
10 9• Entire Agreement . This Agreement and any documents or
11 instruments attached hereto or referred to herein integrate all
12 terms and conditions mentioned herein or incidental hereto , and
13 supersede all negotiations and prior writing in respect to the
14 subject matter hereof . In the event of conflict between the
15 terms , conditions or provisions of this Agreement , and any such
16 document or instrument , the terms and conditions of this
17 Agreement shall prevail .
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1 IN WITNESS WHEREOF , the parties have executed this
2 agreement on the day and year first above written .
CITY OF SAN BERNARDINO
3 ATTEST:
4 By
Mayor
5 City Clerk
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7 CONSULTANT
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9 By Val Mahabir
10 Approved as to form
11 and legal content:
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13 Ci torne
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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 Program 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 an escrow account with the EDP
loan proceeds for disbursement. However, in cases where the
matching funds are provided by a private lending institution
(e.g. , Bank) , the matching funds may be disbursed by that
1
institution.
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 May Apply
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 loan proceeds is one (1)
job for each $10, 000 in loan proceeds. Each project will be
reviewed on a case by case method.
Eligible Activities
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 HUD 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
2. Purchase of equipment.
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) (non-voting)
Community Development Department
3
2. Manager (or his/her designee)
Wells Fargo Bank of San Bernardino
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. Final
approval of the loan application, if granted, will be made by the
Mayor and Common Council of the City of San Bernardino.
KJH/lab/0250
4
WAR�,��
4 � 7
CI - - I,.; . BERNARDINO
' D,IN`
o'
CITY OF SAN BERNARDINO
COMMUNITY DEVELOPMENT DEPARTMENT
"SMALL BUSINESS LOAN FUND PROGRAM"
(Information Package)
Issue Date 09/18/87
Revision: 1st Issue
300 North "D" Street, Fifth Floor, San Bernardino, CA 92418
714/384-5065
SMALL E INESS LOAN PRr;RAM
T A a L E 4 F C 2 X T Z K T a
ITEM PAGE NUMBER
SECTION I -- OVERVIEW
Introduction 1
Background 2
Purpose 2
SECTION II -- LOAN CONDITIONS
General Program Features 5
Participation Criteria 6
Eligible Activities 6
Who May Apply 7
Selection Criteria 7
Collateral 8
SECTION III -- APPLICATION PROCESS
Process 9
Inquiry/Pre-Application 9
Submission of Financial Data 9
Initial Analysis 10
Site Visitation it
Detailed Analysis 12
Recommendation 12
Finalizing the Loan 13
SECTION IV -- APPLICATION FORMS
Pre-Application
Part 1 -- Personal History
Part 2 -- Personal Financial Statements
Part 3 -- Company History
Loan Application
Resolution of Board of Directors
(Sample Exhibit)
INFORMATIO PACKAGE -- Set ton 1
"Overview"
Introduction
The City of San Bernardino Community Development Department
is providing loan opportunities under its current Small
business Revolving Loan Fund.
These opportunities are restricted to small businesses
operating within the City limits, particularly those wholly
owned or under significant control by female and minorities.
The Loan Fund will make available, loans in the amount of
$10, 000 to $50,000 to eligible businesses. It is considered
that businesses engaging in lawful activities and proving
financial integrity, overall sound business practices and
solvency are good candidates for Loan Fund participation.
The Loan Fund will be operated in a manner consistent with
normal banking practices. However, lenient terms and rates
of repaying loans are negotiable. This being dependent on a
variety of factors considered at the sole and absolute
discretion of the City, following or during a normal review
process. The onus to prove credit worthiness rest solely
with the loan candidate. This must be accomplished through
the submission of adequate financial statements and other
data that demonstrates good business practices and acumen.
The City Community Development Department will be available
to provide services to eligible businesses in preparing for
the review process. Technical assistance in developing the
best and most appropriate conditions for favorable loan
transactions will also be provided.
Each business wishing to be considered for loans must initi-
ate the process by completing the attached Pre-application
form and submitting same to the City Community Development
Department. Prior to completing the Pre-application form,
the prospective borrower should carefully read this entire
package. Any questions regarding this package must be
directed to:
Val Mahabir, Economic Development Consultant
Community Development Department
300 North "D" Street, Fifth Floor
San Bernardino, Calif. 92418
(714) 384-5065
The above named individual will answer questions and direct
the process through to its final stages of review by the Loan
Committee. The Mayor and Common Council of the City of San
Bernardino will render final approval on any and all loan
applications.
Note: The loan candidate may not consider as bona fide any
offer or action in approving a loan application other than
those specifically made/taken by the Mayor and Common
Council.
Page -1-
Small Business Loan Fund ogram ,
Information Package -- Seztion 11 OvervL.4
Page -2-
Background
The Loan Fund program is authorized under the U.S. Department
of Housing and Urban Development (HUD) , Community Development
Block Grant program pursuant to title 1 of the Housing and
Community Development Act of 19874, as amended.
The City of San Bernardino has established the Loan Fund as
part of its economic revitalization program under the direc-
tion of the Community Development Department. The economic
revitalization program is targeting several areas within the
City limits for infusion of capital. This revitalization
effort is also extended to individual businesses that can be
characterized as being deprived of conventional loan oppor-
tunities and privileges unless augmented by adjunctive loans,
or those experiencing hardship due to a disparity between
financial needs and available, affordable loans.
The City Community Development Department through its Econo-
mic Development Program (EDP) has undertaken efforts to
enhance economic activity, encourage the growth and
development of small businesses and promote economic
revitalization within the City limits. This effort is
specifically targeted to economically depressed areas as
identified by the Mayor and Common Council . Through this
program the City government intends to improve its overall
economic growth, thereby promoting bona fide job opportuni-
ties and the availability of quality goods and services.
The efforts at revitalization and specific targeting of small
businesses, particularly those owned by female and minor-
ities, for loan consideration provides a unique opportunity
for business growth and residual opportunities for the City.
Purpose
The purpose of the Loan Fund program is twofold:
I. To make available sums of money to small businesses on a
low interest, long term loan basis. It has historically
been evident that small businesses find it exceedingly
difficult to obtain affordable loans. Conventional
lending institutions, for the most part, provide market
rate, short term loans usually requiring up to twenty
percent (20%) downpayment. The Loan fund, with no such
downpayment requirement will offer a significant relief to
the loan seeker.
The City will create mechanisms for financing the appro-
priate types of small businesses. These mechanisms are
designed to screen-in sound businesses whose concepts and
practices will afford the best use of the small sums
available.
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Small Business Loan Pro<, .m
Information Package -- Section 1, Overview
Page -3-
a) One such mechanism is the concept of filling the
"financing gap" that is created when lending institu-
tions find it infeasible to provide long term loans.
Succinctly stated, this concept will allow borrowers to
receive long term loans from banks or savings and loan
institutions. The City may provide loans to small
businesses where it can be demonstrated that the
financing of the business project will become infeas-
ible without City participation. Usually, conventional
lending sources may find a project very attractive, but
because of limitations in its loan portfolio (regulated
and evaluated by the Federal Reserve and Comptroller of
the Currency) , or perceived high risk relating to
collateral or maturity, may not be able to provide long
term financing. In such a situation, the City can
"step-in" and increase the collateral cushion with
regard to the loan by decreasing the loan (from conven-
tional sources) to value ratio. This is done by the
City simply providing a portion of the overall loan
request (filling the gap) under a subordinated mort-
gage. The lending institution may now find this type
of long term loan both feasible and attractive since it
can now provide a smaller loan against the same net
value. The City will provide one dollar ($1.00) of
loan funds to every one dollar ($1.00) provided by the
private lending sources.
b) Another mechanism is in the provision of Technical
Assistance (TA) to "client" businesses. Technical
Assistance will be provided where it is demonstrated
that the business concept and general business practice
is good but in need of "fine-tuning". The City's sole
concern is to reduce any risk in its "investments". The
City will exercise its prerogative in securing its
finances through every means available. This includes
providing Technical Assistance in the areas of
financial management, inventory control and marketing.
Referral to "outside" professionals (at a cost to the
business) may also be warranted, particularly in the
areas of business planning and insurance.
The City may refuse to provide loans to businesses if
such businesses do not avail themselves of the Techni-
cal Assistance including referral to "outside"
professionals.
Because of the small amount of funds available and the
need to stimulate the economy of the City, including
the creation of jobs, the City must insist on financing
business projects that are low risk and those that can
provide a high rate of return on the City's "invest-
ments". This program of Technical Assistance is de-
signed to do just that.
Page -3-
Small Business Loan Progre
:reformation Package -- Section 1, Overvie
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Note that purely speculative ventures vill be dis-
couraged except where strong partnerships with private
lending institutions and the Small Business Administra-
tion are demonstrated. Start-up businesses vill be
considered on a case-by-case basis in joint participa-
tion with the Small Business Administration. In both
these situations, the Technical Assistance that is
warranted may prove to be more significant (in terms of
effort) and time consuming than the City can/vill
provide.
2. The other purpose of the Loan Fund is in the stimulation
of the local economy. The Loan Fund will be used as a
tool of economic development within the City limits and as
such may be targeted to particular areas or included in
other development/redevelopment efforts.
The City's efforts at stimulating and revitalizing the
local economy will encompass the development of new growth
areas, sustaining and maintaining established developments
and rehabilitating dilapidated areas and structures. This
effort places a requirement on the Loan Fund to encourage
and facilitate the growth and development of businesses,
expansion and sustenance of ongoing businesses and the
revitalization of "at risk" businesses. The Mayor and
Common Council of the City of San Bernardino have under-
scored the above stated efforts by creating a plan ("Pro-
ject Renaissance") that would lead to the revitalization
of targeted neighborhoods. The effectuating of such a
plan will call upon the use of City resources and finances
through various City Departments.
The main goal of the Loan Fund in the above mentioned
efforts will be in:
a) The creation and retention of jobs for low and moderate
income individuals.
b) Increasing the production of quality goods and services
to City residents.
C) Enhancements of current goods and services.
d) Control and elimination of structural blight and
degradation.
e) Promotion of general and social well-being of City
residents.
/lab
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SMALL BUSINESS LOAN PROGRAM
(Information Package)
SECTION II
"Loan Conditions"
TOTE: This section of the eackage outlinb the basic
preparation that governs the making of loans to businesses.
Prior to considering the actual loan application process, the
borrower should read this section carefully to determine
whether he/she can meet the conditions that must be met in
order that an application be considered.
general Program Features
I . The maximum amount of Economic Development Program (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 Administration assistance for same. Economic
Development Program assistance 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 = be less
than five-percent (5%) .
7 . The maximum loan term and repayment conditions shall be
determined 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 institution may also be a basis
for determining loan term and repayment conditions.
S . Matching funds must be placed in an escrow account with
the EDP loan proceeds for disbursement. However, in
cases where the matching funds are provided by a private
lending institution (e.g. , Bank) , the matching funds may
be disbursed by that institution.
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.
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Small Business Loan Progre
.reformation Package -- Sec.4on II, Loan t Aitions
Page -2-
1 1. Applicants will be charged a loan processing fee equal to
one percent (1%) of the amount of financial assistance
requested.
PARTICIPATION CRITERIA
Eligible Activities
As stated above, the two (2) main purposes of the City's Loan
Fund program are:
1. To make long term, low interest loans available to small
businesses; and
2 . To stimulate and revitalize the local economy.
In order to carry out these stated purposes, certain func-
tions and activities must be in concert with said purposes.
The following is intended to provide potential borrowers with
a summary of the types of activities that are allowable under
the Loan Fund program.
I . Interior and/or exterior rehabilitation restoration or
alteration of commercial pgpe �es. This item refers to
general property improvements of or relating to the kinds
that will effect changes to the physical structure of the
building in which business is conducted. These
improvements may include adjustments to overall size and
internal structure of the building; efforts at restoring
to original type or quality; refurbishment of dilapidated
structures, and; seismic improvements.
2 . Purchase of equipment This item refers to the purchase
of all fixed assets other than land or building which is
used in the management and operation of a business.
Title to the equipment may be held as security on loan
obtained.
3 . Acquisition of land for business expansion. This item
refers to those situations where an ongoing business
needs to expand its facilities onto adjacent land. This
expansion must relate to the existing business under same
management and ownership.
4 . Acquisition of building= This item refers to either the
lease or purchase of facilities for an ongoing business.
Relocation of business within the City limits from
outside or from another location within the City are
desirable expenses under this item.
5. Working capital. This item refers to the capitalization
of inventory, meeting of day to day expenditures for a
specified period of time (especially in those cases
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"*mall Business Loan Progra,
_nformation Package -- Section II, Loan CL-.Jitions
Page -3-
where contracts or receivables are unduly delayed) . This
type of capital must be secured by real property, equipment
or assignment of contract. Working capital loans will be
made only in rare instances.
6. Furniture and fixtures. This item refers to those
accoutrements, desk tables and chairs that are either
directly or indirectly used in the management and opera-
tion of a business or enhances the general beauty of the
facilities.
7. Refinancing of existing debt. This item refers to those
situations wherein a business may determine that it is
over-encumbered thereby affecting its cash flow. In this
situation the City may, in cooperation with the original
lender, determine ways of restructuring and refinancing
the loan.
Who May Apply?
The Loan Fund program is designed exclusively for small
businesses located or seeking to locate within the City of
San Bernardino. These businesses may either be in the form
of a Sole Proprietorship, Partnership or Corporation. Small
businesses as discussed herein relates to those businesses
that have a net cash value of $500,000 or less and employs
twenty (20) people or less. Normally, these businesses would
be characterized as those in which the owner(s) is/are
directly involved with the management and operation of the
business. Additionally, it is preferred that the owner(s) be
female or minority (as defined by the Federal Bureau of
Statistics) .
To be considered as being located in the City, a business
must possess a valid City business license to operate within
the jurisdictional boundaries of the City. Those businesses
seeking to locate within the City must have filed for a City
business license and even so, will be granted a loan only
upon qualification and provided an actual physical location
is evidenced.
Selection Criteria
Businesses will be provided loans on a first-come, first-
served basis, provided they conform to the basic goals and
tenets of the Loan Fund program, and meet general guidelines
outlined under General Program Features and Participation
Criteria sections of this package. The critical test that
each business must meet is credit-worthiness as determined on
the basis of a normal credit analysis.
To be considered as a good candidate for Loan Fund considera-
tion, a business must demonstrate the following:
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";mall Business Loan Progri
.information Package -- Sec,..ion II, Loan t._.iditions
Page -4-
1. A willingness to create a minimum of one (1) additional
(new) job for every $10,000 in loan proceeds.
2 . That jobs be primarily geared to those City residents who
generally face hardship in obtaining employment. A
"first source" hiring agreement may be entered into with
the local Job Training Program.
3 . That features are present within the business plan that
are profitable to the business for retaining employees.
Such features relate primarily to employee benefit
packages.
4 . That the provision of goods and/or services will be
increased in production and improved in quality as a
result of the loan.
5. That there is an adequate market to support any increases
in the production of goods and/or services.
6. Primary outlets for goods and/or services will be within
City limits as a first resort.
7 . General and enthusiastic participation in the City's
efforts at combating blight and moreover promoting the
aesthetic value of the business environment.
Collateral
Each business that is selected must be prepared to provide
the City with adequate collateral as security for loans. The
collateral shall be identical to that required by the parti-
cipating 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 institution 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.
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SMALL BUSINESS LOAN PROGRAM
"Information Package"
SECTION III
"Application Process"
A2olication Process
Applying for a loan under the Loan Fund program follows a
seven (7) step process. (Note: If a prospective borrower has
a ;,= commitment from a bank and has already provided the
bank with the same or similar information, such information
may be used in this process, with the bank and the borrower
agreeing to such, thereby reducing or eliminating certain
steps in this process) .
I . Inqu iry/Pre-application: This step requires the pro-
spective borrower to initiate the process by contacting
the City Community Development Department by telephone or
personal visit.
An initial assessment of the loan candidate is made to
determine whether the applicant has the necessary back-
ground and experience to demonstrate that the business can
be successful. The assessment will also cover whether
the applicant is of good character, with appropriate
references. A determination will be made as to whether it
is in the interest of the City and the loan candidate to
proceed with the processing of the loan application. A
Pre-application is taken for this purpose (see Section 4) .
If the prospective borrower cannot/does not qualify under
this initial assessment, he/she may be (a) referred to
outside professionals to provide assistance in developing
their business, its ideas/concepts or overall business
plan; (b) provided technical assistance by the Community
Development Department (this will be done in limited
scope) , or; (c) refused any further consideration on the
basis that the business is not in keeping with the general
conditions applicable.
2. Submission of F r ncial Data: This step requires the
prospective borrower to provide the Community Development
Department with financial data on their current business
and project cost. These data will be provided in the form
of a year ending balance sheet and profit and loss state-
ments for the past three (3) years, cost estimates for any
construction, and an operational pro forma showing income,
sources of income and expenditures.
As assessment will be made to determine whether all the
data were submitted and are appropriate to the business
and contemplated project. This data must be submitted in
standard accounting format and be reflective of the time
period under consideration.
If the information submitted is not complete, accurate or
otherwise appropriate, the Community Development Depart-
ment will either (a) place project consideration on hold
until relevant data is submitted including any update or
corrections; (b) refer the prospective borrower to the
appropriate outside professionals for assistance in
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'mall Business Loan Progr,
Information Package -- Section III, Application Process
Page -2-
developing and completing the necessary data; (c) provide
"in-house" technical assistance if minor adjustments or
interpretations are needed, or; (d) return data items to
the prospective borrower in cases where the data submitted
is entirely non-relevant and prospective borrower has
resources and expertise to complete same.
If after assessment, the Community Development Department
determines that all data are complete and relevant to the
project, the application process will continue to the next
step.
3 . Initial Analysis: In this step, an initial analysis will
be performed on the data submitted. Consideration will be
given as to whether the data is complete in terms of if
figures are computable within the entire statement. Also,
an initial determination on project feasibility will be
conducted.
An assessment of project feasibility is the main concern
in this step. At this stage, the Community Development
Department must determine whether the project warrants
further consideration or is a waste of time and effort.
The assessment will determine whether the business is
experiencing positive net worth and profit and also
whether there is an adequate sales/service volume. Such a
determination will give a green light for further con-
sideration, since it is an initial indication that the
business may be able to support the loan.
If it is determined at this point that the project is a
negative prospect, the Community Development Department
will either (a) refer the prospective borrower to outside
professionals for help in either proper business planning
or in assembling data in a correct manner; (b) provide
"in-house" technical assistance if minor adjustments or
interpretations are needed (some technical assistance may
also be provided in the area of financial management and
marketing) ; (c) conduct discussions by telephone with
individuals responsible for preparing financial statements
or those providing financial planning advice to the
prospective borrower (these discussions must first be
approved by the prospective borrower and will be limited
to inquiries on items submitted to the Community Develop-
ment Department for clarification purposes only) , and; d)
refusal of loan if it is determined on the basis of data
received that the business is poorly managed and operated
and that the loan will encumber a bad debt on the City.
If it is determined from the data submitted that the
consideration represents a positive prospect for a loan,
the application will continue to the next step in the
process.
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mall Business Loan Progra
Information Package -- Section III, Application Process
Page -3-
4 . Site Visitation: In this step Community Development
Department personnel will visit the business site for
purposes of (a) completing the interview process, and; (b)
structuring the deal.
An assessment will be made of whether (a) the site is
proper and the principals with whom the City will conduct
business are appropriate (this will entail a tour of the
facilities to determine its appropriateness, exact infor-
mation on company background, principals, current obliga-
tions, liens, mortgages, fixed assets, working capital,
etc. ) , and; (b) how the loan can be structured if further
consideration is given. This will entail further attempts
at "penciling-out" a deal, giving consideration to source
and use of funds, and also current debt service level. A
discussion will also be held on loan feasibility in order
to let the prospective borrower know where he/she stands.
At this stage of the process, the Community Development
Department is still collecting information and providing a
somewhat reasonable path to follow when conducting a de-
tailed analysis and finalizing the application for con-
sideration. The borrower would therefore be required to
submit additional information on which this anaylsis will
be based. These include a copy of each of legal structure
charter or licenses (such as Fictitious Name Statement,
Partnership Agreement or Articles of Incorporation) ;
income tax returns for the last three (3) years;
certificate of life or disability insurance; lease
agreement; franchise agreement (if applicable) ; evidence
of sales/service contracts or agreements, and; any
operating licenses or permits.)
If it is determined that the deal is a negative prospect,
the Community Development Department may (a) place the
project on hold for additional or revised information; (b)
refuse the loan on the basis of information received and
inform the company's principals as soon as possible; (c)
provide technical assistance which at this time may be
limited to source and use of funds analysis, cash flow and
debt service analysis which may ultimately lead to re-
structuring the deal; (d) refer the business to outside
Professionals for a possible wide array of consulting,
including proper business planning and management; (d)
discuss the deal with any participating lending source for
purposes of restructuring the deal or informing them of
the City's position, and; (f) restructure the deal.
If it is determined that the deal constitutes a positive
prospect, Community Development Department personnel will
so inform the prospective borrower and return to the
Office to perform a detailed analysis of the facts
collected before finalizing any recommendations.
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.sall Business Loan Progra,.
Information Package -- Section III, Application Process
Page -4-
S. Detailed Analysis: In this step of the process, Community
Development Department personnel will conduct a detailed
analysis of data submitted, particularly including
financial statements. The analysis would seek to
determine whether the company's cash flow is greater than
its debt service. Finally, the Community Development
Department will require the business to complete the
application process by agreeing with and signing the final
application as is completed by Community Development
Department personnel.
In assessing whether cash flow is greater than debt
service, the Community Development Department will analyze
whether the business has adequate working capital, trends
and projections are consistent and supportive of the com-
pany's health and whether the quality of the debt reflects
proper planning and loan conditions. The assessment will
further examine the company's balance sheet, profit and
loss statements and perform certain financial ratio
analysis to determine its financial and management
structure.
(Note: The ratio analysis will only be used as an aid in
the process. The Community Development Department will
use this form of analysis together with analysis of cash
flow and operating cycles in order to assess risk to the
City. )
If it is determined that the Community Development Depart-
ment should/would not recommend the deal to the Loan
Committee, the business will be immediately contacted to
(a) review the analysis and either allow it to challenge
the conclusions of the analysis or provide new or updated
data; (b) provide technical assistance which at this time
will entail a complete review of the business; (c) offer
to restructure the deal, or; (d) refuse the loan applica-
tion altogether.
If it is determined that the deal is viable, the Community
Development Department will prepare a recommendation for
review by the Loan Committee and final approval by the
City's Mayor and Common Council.
6. Recommendation: In this step, the Community Development
Department will have been reasonably assured that the
company can repay its debt to the City and complies with
other standards for the loan.
The recommendation to the Loan Committee and the City's
Mayor and Common Council will include back-up documenta-
tion that demonstrates the company's cash flow is greater
than its debt service; the company is fundamentally sound;
the company's new debt will increase its sales/service and
profits; the new profits (as a result of the loan) will
pgp' -17-
Ball Business Loan Progre A"
.nformation Package -- Secxion III, Applit tion Process
Page -3-
increase cash flow; the compoany will increase job oppor-
tunities and have in place mechanisms that promote reten-
tion, and that the principals are of good character and
worthy of a loan.
If it is determined that a recommendation cannot/ should
not be made to provide the company a loan, the Community
Development Department will so inform the company and
state reasons for same.
If it is determined that a recommendation can be made to
provide the company with a loan, the application and all
supporting documentation will be provided for Loan
Committee review (see attachments for meeting times and
dates) . If the Loan Committee approves the loan, it is
then forwarded for final consideration by the Mayor and
Common Council of the City of San Bernardino.
7. Finalizing the Loan: Having received a favorable
disposition of the process, the Community Development
Department will contact the borrower for final processing
of the loan package. This constitutes the loan agreement
and all attendant considerations. This package will be
constituted of covenants and other considerations that are
designed to protect the interest of the City. The
borrower is required to sign the loan agreement.
After appropriate signatures to the agreement, the City
will begin processing payments in accordance with the
appropriate schedules. The borrower will make debt
service payment to the City of San Bernardino Finance
Department in accordance with the appropriate accounting
and schedules.
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