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Six
County
AOG
Business Loan Programs
The Six
County Association of Governments offers two (2) different
revolving loan programs, the Targeted Business Assistance
Fund (TBAF) and the Revolving Loan Fund (RLF).
The following is an outline of each program.
Target Business Assistance Fund (TBAF)
In September 1994 the Six County Economic
Development District (SCEDD), in association with Six
County Association of Governments (SCAOG) was granted
funds from the .Rural Community Assessment and
Demonstration Program (RCAD).. The purpose of the grant
was and is to develop a program that will encourage
start-up businesses to utilize vacant buildings or
targeted locations.
SCOPE
OF WORK
Traditional programs
require the utilization of a conventional building or
space. In rural areas travel becomes a major factor for
start-up or expanding businesses. The requirement of a
single location or space becomes very difficult in
establishing a successful program which serves the entire
region. In addition, a conventional type structure may not
meet the needs of certain businesses. Also, most local
elected officials will not commit to real estate
investment due to the liabilities and expenses associated
with ownership. Several prime industrial sites in addition
to vacant commercial and industrial buildings exist in the
Six County Region.
Vacant structures
deteriorate the longer they remain empty. Once
dilapidated, they become liabilities rather than assets.
Most industrial sites SIX COUNTY TARGETED BUSINESS
ASSISTANCE FUND require the establishment of driveways,
parking lots, drainage, etc. Incidental costs associated
with these developments often inhibit start-up or
expansion opportunities.
By providing incentives,
many entrepreneurs can start or expand their business,
create jobs, and be encouraged to utilize vacant existing
buildings or targeted industrial sites.
The RCAD funds helped
establish the TBAF program which provides these
incentives. Structures or sites approved for this program
serve as a business incubator for the county in which they
are located.
GUIDELINES
The TBAF program is a
business incubator and serves as an incentive to encourage
start-up or expanding businesses to utilize vacant
existing buildings or targeted industrial sites. The
following are administrative goals to ensure the success
of the program:
·
TBAF encourages the use of existing
vacant Buildings or an industrial site targeted by the
county for development.
·
The
program maintains flexibility of funding making it easy to
utilize.
·
Repayment
of funds from recipients is expected.
·
A
match is required of:
o
Building
and/or property owners.
o
Recipients
of the SCTBAF.
·
The
TBAF serves as a carrot to encourage start-up or expanding
businesses only.
·
The
program requires the participant’s business plan to be
reviewed by the Small Business Development Center.
·
The
target amount of TBAF participation is $10,000 maximum per
project.
·
The
TBAF program targets projects with the potential of
providing family sustaining wages and long term
employment.
TBAF may be utilized for, but not limited to the following:
·
Structural improvements provided the
owner of such structure waives payment for rent,
utilities, etc. for a period of time and/or other
arrangements agreeable to all parties.
·
Costs
associated with site preparation and development, provided
these costs are deducted from asking price of the property
and matched by the property owners as agreed upon by the
Six County Loan Administration Board (LAB).
·
Rent.
·
Utility
connection fees.
·
Costs
associated with utilities, telephones, computers, Fax
machines, etc.
·
The
time frame for use of TBAF resources is based on financial
strength as determined by the Six County Loan
Administration Board.
Loan recipients are encouraged in, but not limited to, the
following business classifications:
·
Light manufacturing.
·
Services.
·
Distribution.
TERMS
AND CONDITIONS
Upon LAB approval, each recipient will enter into a contract with
the Six County Economic Development District. Terms and
conditions of loans from the TBAF will be determined on a
case by case basis based upon the strength of an
applicant’s cash flow projections, available capital,
level of job creation, wages, plus other factors contained
in their business plan. Recipients will provide a personal
guarantee and secure the loan with equipment and/or other
available assets. An acceptable credit history is also
important. The borrower will pay any out-of pocket loan
costs and an origination fee of 1.5% due at closing.
Building/Site
Qualifications
All buildings and/ or sites must be approved by the Six County
Economic Development District prior to SCTBAF
participation. Owners of the building and/or site will:
·
Agree to terms and conditions in
advance.
·
Hold
the SCEDD, LAB, SCAOG, SBDC, their boards, staff, county
commissions, mayors, special interest representatives, and
county economic development administrators harmless.
·
Provide
a match as determined by the TBAF.
REGULATIONS
The SCEDD, in affiliation with the SCAOG, is responsible for the
financial administration of the TBAF, while the SBDC
provides business support services. The Six County
Technical Committee, in which the SBDC has representation
and Six County Loan Administration Board reviews and
approves applications as directed by the SCEDD. Other
regulations governing the TBAF program are:
·
A single audit is to be conducted
yearly.
·
Project
funding requires at least a two (2) week drawdown period.
·
The
TBAF program adheres to all Equal Employment Opportunity (EEO)
guidelines.
·
Copies
of receipts and payment checks for expenditures during the
1st six months of this loan are required for submission to
certify funding.
Revolving Loan Fund (RLF)
The Six County Revolving Loan Fund has been established by the
Six County Economic Development District. It was created
with monies from Housing and Urban Development, the
Economic Development Administration and USDA. The primary
purpose of the fund is to create permanent, long-term jobs
within Juab, Millard, Piute, Sanpete, Sevier and Wayne
Counties by providing “gap” financing to qualified
businesses for eligible activities.
Who
can borrow from the RLF?
In order to qualify to borrow money from the RLF the project must
meet the following requirements:
·
The project must create or retain
permanent, long-term jobs.
·
Funding
with satisfactory terms and conditions must be unavailable
from conventional lending sources.
·
Private
lenders must be willing to participate in funding the
project with the loan fund for at least 50% of the project
costs.
·
The
jobs must be created within the Six County area.
How
can the funds be used?
The following types of projects are eligible:
·
Purchase and development of land and
facilities.
·
Construction
of new buildings.
·
Renovation
of existing building.
·
Purchase
of machinery and equipment.
·
With
some restrictions, answer working capital needs.
How
much can I borrow?
Maximum RLF participation is 40% of the total project cost,
usually not to exceed $150,000. Other lenders will need to
provide the balance of financing.
The borrower is required to participate with no
less than 10% equity in the project.
What
is the rate of interest?
Loans are made at fixed interest rates. The rate on individual
loans may vary, but the rate is generally near or above
the prime rate of commercial banks.
What
are the repayment terms?
Repayment terms are flexible: up to 20 years for capital assets,
10 years for machinery and equipment, and 5 years on
working capital. Equal monthly payments for principal and
interest are the normal method of repayment and loans are
generally on a simple interest basis.
What
collateral is required to secure the loan?
The loan may be secured by a second mortgage or by a lien on
assets purchased with loan proceeds.
What
strings are attached?
As noted, the purpose of the RLF is to assist in job creation and
retention. The borrower therefore agrees to create
permanent, long-term jobs. Other federal civil rights,
environmental and construction regulations are also to be
complied with and monitored. A borrower will be assisted
in meeting these requirements.
What
fees am I required to pay?
The applicant pays all out-of-pocket closing costs.
There is also a 1.5% origination fee due at loan
closing.
Are
there any other requirements?
The following will usually be required:
·
Business plan and financial
projections.
·
Personal
guarantees of principals.
·
A
periodic financial statement after the loan is granted.
·
Key
man life insurance.
·
Evidence
of sufficient cash flow to pay loan.
·
Good
credit history.
Examples
of Possible Loan Structures
·
10% equity + 40% RLF + 50% private
lender
·
10%
equity + 30% RLF + 60% private lender
·
15%
equity + 30% RLF + 55% private lender
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