WICHITA COUNTY ECONOMIC DEVELOPMENT, INC.
REVOLVING LOAN FUND (WCEDRLF)
GUIDELINES
PURPOSE
The purpose of the Wichita County Economic Development, Inc. Revolving Loan Fund (WCEDRLF) is to foster economic development within Wichita County, Kansas. The objective of this fund is to promote rural economic development and/or job creation projects. The WCEDRLF shall be used to stimulate economic growth by leveraging as much private capital as possible for the following economic activities.
REQUIREMENTS
To be eligible for Revolving Loan funding, applicant(s), and the applicants’ ownership if applicable, must reside in Wichita County, Kansas, unless the applicant will create a minimum of ten (10) new full-time equivalent jobs, with 70% of those new FTE jobs being held by residents of Wichita County.
ELIGIBLE ACTIVITIES
All projects must demonstrate that they are economically viable. Business start-up, expansion and retention projects are all eligible activities. The objective of creating and retaining permanent private-sector jobs requires that the overall project feasibility and job creation potential be emphasized. The focus of the WCEDRLF is to promote growth while supporting development which diversifies the county’s economy.
INELIGIBLE ACTIVITIES
Ineligible activities consist of such activities as: debt refinancing without an expansion, speculative land purchases, projects of residential nature, transfer of ownership without expansion and 100% working capital loans. These are examples and not intended to be all inclusive. Each activity will be evaluated on a project by project basis.
APPLICATION PROCESS
Applications will be accepted at any time and will be reviewed by the Wichita County Economic Development, Inc. Loan Review Committee and/or Great Plains Development, Inc. This analysis will be done within 45 days after a completed package is received and a recommendation will be submitted to the Wichita County Economic Development, Inc. Board of Directors. Application approval/disapproval will be made by the Board of Directors at their normal monthly board meeting.
USES OF CAPITAL
Loans must be used to promote economic development and/or job creation projects, including, but not limited to, start-up costs, business incubator projects, and business expansion.
DISPOSITION OF FUNDS
Funds will be disbursed on a requisition basis. Proper documentation of expenses will be required before WCEDRLF funds are disbursed.
GEOGRAPHIC BOUNDARIES
To be eligible for WCEDRLF funds, the business project shall be located within Wichita County, Kansas.
FINANCING POLICIES
All projects funded with WCEDRLF funds will require supplemental funding. WCEDRLF funding will be provided only to the extent necessary for a feasible project. A feasible project is a project which expects to generate sufficient income to pay operating expenses and debts and compensate for depreciation of equipment and facilities.
Depreciation must be based on allowable depreciation schedules as set forth by the United States Internal Revenue Service. Borrowers whose analysis of projects show feasibility without WCEDRLF funds should not apply for WCEDRLF funds.
Borrowers or project owners must demonstrate the availability and commitment of other sources of funding prior to the first advance of WCEDRLF funds.
LEVERAGE
The purpose of the WCEDRLF is to stimulate as much private capital leverage as possible. The following leverage requirements will be considered:
1. For all loans a minimum of 20 percent will be required.
2. Some projects may use uncollateralized assets of the business as a leverage match. In no case shall all non cash items be used as leverage. All assets must be appraised to assist in determining the value of the non cash match.
3. WCEDRLF funds can be used as leverage to match SBA loans, EDA funds, FHA, or other public and private grants/loans.
COLLATERAL
1. The WCEDRLF will take a full collateral position in all loan packages. The priority will depend on the number and the type of private capital involved.
2. A second priority position is acceptable when it is subordinated to a bank or other financial institution and the value of the collateral is sufficient to secure the position.
3. Fixed assets will be valued at their appraised value. Appraised value will be established by local standards and written appraisals may be required.
LOAN LIMITS
The minimum loan amount will be $5,000 from the WCEDRLF. It is the intention of the WCEDRLF to assist as many economic development projects as possible with the proceeds of this fund.
APPLICATION DEADLINE: None
RATE OF INTEREST: Minimum - 2%; Maximum - no more than New York Prime.
The Loan Review Committee recommends an interest rate be set on a quarterly basis for all loans that are submitted to Wichita County Economic Development, Inc.’s Revolving Loan Fund. The rates will be based off of the published New York Prime on January 1st, April 1st, July 1st, and October 1st of each year.
Interest rates are:
- 3% under prime for loans accompanied by an Irrevocable Letter of Credit
- 2.5% under prime for all loans if we have the 1st Lien position
- 2% under prime for all loans that we have the 2nd Lien position
Note: All other collateral positions will be considered on a case by case basis. Value of the collateral must be sufficient to secure the position. For all loans a 20% leverage is required.
In addition, the interest rate adjustment for job creation, capped at 1 ˝%, is as follows:
- 1-5 jobs ˝% Deduction
- 6-10 jobs 1% Deduction
- 11 jobs and up 1 ˝% Deduction
TERM OF LOAN: For asset loans
-Maximum - 10 years, based on asset life
For working capital
-3-7 years based on repayment ability
REPAYMENT: Scheduled to fit the business plan
LEVERAGE: -RLF will fund up to, but not more than 80% of the total project, up to $50,000.00.
-Uncollateralized assets can be used in leverage.
-100% non-cash match is unacceptable.
-Loan to value of 1:1 preferred.
PROJECT TIME PERIODS: Maximum of 18 months for project completion from award date. WCEDRLF funds that have not been requisitioned within 2 years will be canceled, unless the Wichita County Economic Development, Inc. Board of Directors has approved an extension in writing.
PERSONAL GUARANTEES: May be required for adequate security of WCEDRLF funds.
SPECIAL CONSIDERATIONS
Although all projects that meet the minimum requirements will be considered, special considerations will be given to those projects that:
1. Have demonstrated funds are not available from other sources (SBA, 504 loans, or exclusive bank financing).
2. Have shown they will create and/or retain jobs while maintaining the ability to meet debt service.
3. Create primary jobs in the private sector which will spin-off additional new manufacturing service and retail sector jobs.
4. Have exceeded the minimum leverage requirements.
5. Will complete their project in less than 18 months.
LOAN CLOSING FEES
Charges to the borrower are as follows:
- Origination Fee: Actual
- Appraisal Fee: Actual
- Title Insurance: Actual
- Closing cost, including legal: Actual
- Mortgage and UCC filing fee: Actual
- Environmental Studies: Actual
- Escrow Fee: Actual
PROJECT MONITORING/LOAN SERVICING
Loan recipients will be required to participate in business training/consultations provided by the Small Business Development Center at no cost to the borrower. Frequency of consultations will be determined by the Loan Committee on a case-by-case basis, but shall be conducted at least quarterly.
Projects will be monitored by Wichita County Economic Development staff and/or Loan Committee who will evaluate project accomplishments. Great Plains Development, Inc. may assist with quarterly progress reports from project management. Minimum documentation which must be included in these reports is: timeliness of payment, current profit/loss statements, current balance sheets, and up-to-date insurance policies. Annual financial statements will be required from all principles owning 20% or more of the business.
Any loan in arrears shall be brought to the immediate attention of the Loan Committee. Loans determined delinquent will be brought to the attention of the Loan Committee and project managers shall be sent notices five (5) days after payment is due. If payment is not made within five (5) days, a second notice shall be sent. At the fifteen (15) days mark, a telephone call shall be made to determine the problem, followed by an immediate site visit if necessary. If it is determined a restructuring loan is required, it shall be done within thirty (30) days thereafter.
Loans shall be determined to be automatically in default if more than ninety (90) days pass without payment, subject to review by the Loan Committee. Foreclosure proceedings shall be initiated by Wichita County Economic Development, Inc. legal counsel if instructed by the Board.
ADMINISTRATION OF THE FUND
No more than 10% of grant funds received will be used to cover operating expenses of the Wichita County Economic Development, Inc. Revolving Loan Program. Operating expenses include the costs of administering the revolving loan fund and the provision of technical assistance to project owners. All proceeds in excess of those needed to cover authorized expenses, as described above, must revert to the revolving fund and be available for re-lending for eligible projects. Annual budgets setting forth the costs in operating the WCEDRLF will be established by the Loan Committee and reviewed by the Wichita County Economic Development, Inc. Board of Directors.
LOAN SERVICING FEES
Loan servicing fees will be reasonable and appropriate for each project but not in excess of one (1) percent per year on the outstanding principal on the first day of each year on each loan to the project.
AUDIT
The WCEDRLF will be audited annually. Costs that are incurred for this annual audit will be paid from the WCEDRLF administration budget. Audit reports will commence one year after the fund is capitalized and at the same time as the Wichita County Economic Development, Inc.’s annual audit.
APPLICATION/PROMOTION OF WCEDRLF
Wichita County Economic Development, Inc. staff will promote, screen, and receive applications. The WCEDRLF Loan Committee will review applications and recommend to the Wichita County Economic Development, Inc. Board of Directors approval or denial of WCEDRLF applications. The final approval or denial of the application rests solely with the Board of Directors of the Wichita County Economic Development, Inc.
CONFLICT OF INTEREST
The WCEDRLF will abide by the Conflict of Interest Policy adopted by the Wichita County Economic Development, Inc. Board of Directors on July 27, 1999.
AMENDMENTS TO THE WCEDRLF
From time to time, amendments to this plan may be necessary. Amendments will be considered by the Board of Directors of Wichita County Economic Development, Inc.. Only those amendments which are consistent with the general purposes of this plan will be considered.
