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BUSINESS DEVELOPMENT LOAN PROGRAM 1 Adopted 7/15/2003 A. Program Description 1. Purpose The Business Development Loan Program (BDLP) funds provide resources for gap financing to induce industrial and commercial ventures expanding or relocating to the Lewiston area; to encourage new investment and maximum utilization of existing vacant and underutilized buildings; and, to promote the economic well being of Lewiston by helping to finance projects with maximum private sector investment. The Program funds will be used to ensure that high quality jobs will be created or retained, the Lewiston industrial base is broadened, and the proposed industrial or commercial use is compatible with the City’s physical and social environment. In reviewing the employment impact of proposed loan recipients, priority will be assigned to those projects creating or retaining jobs. Preference, whenever possible, shall be extended to Lewiston residents for those jobs. For the purposes of these guidelines the term "project" means the subject of the loan request. 2. Loan Program The maximum commitment of the BDLP may be up to Forty (40%) percent of the total loan package. The level of funding will be determined by the Lewiston Auburn Economic Growth Council (LAEGC) or Administrative Agent with final approval with the City Council. The minimum participation in each loan shall not be less than $10,000 and the maximum shall not exceed $500,000. B. Administration 1. The Lewiston-Auburn Economic Growth Council (LAEGC) will serve as the administrative agent on behalf of the City of Lewiston as outlined below: a. Provide general marketing of the program; b. Assist applicants with packaging of development proposals; c. Provide annual loan activity reports and audits to City Administration and recommend program improvements, if appropriate; and, d. Fulfill all necessary loan servicing and reporting requirements; and, deposit all loan repayments (P & I and late fees) as designated by the City’s Director of Finance. 2. The City Council may adopt amendments to the Business Development Loan Program Management Plan by majority vote of the City Council. 3. The Finance Director of the City of Lewiston will issue all checks for loan disbursements. ---PAGE BREAK--- BUSINESS DEVELOPMENT LOAN PROGRAM 2 Adopted 7/15/2003 C. Administrative Agent (Growth Council) It will be the responsibility of the Growth Council to review the financial package and determine the level and terms of the loan. 1. It is the responsibility of the Growth Council to complete the application requirements, to determine the eligibility of the applicant, negotiate the terms and conditions of the loan and to review the financial package with the participating lending institution(s). Administrative Agent will also provide management of the loan portfolio as directed by the City Administration. 2. The Growth Council will be responsible for ensuring that the following underwriting standards have been met: a. that the project costs are reasonable; b. that all sources of project financing are committed; c. that to the extent practicable, BDLP funds are not substituted for private sector project investment; d. that the project is financially feasible; e. that to the extent practicable, the return on the owner’s equity investment will not be unreasonably high; and f. that to the extent practicable, BDLP funds are disbursed on a pro-rata basis with other finances provided to the project. 3. LAEGC will be compensated for its administrative work as follows: a. Loan Origination fee of 1% of the loan with a not to exceed fee of $5,000; b. Administrative fee will be negotiated between LAEGC and the City and included in the Borrower’s interest rate. D. Eligible Activities 1. Site Purchases 2. Site Development All site development costs associated with construction, rehabilitation or redevelopment of a facility or building including site cleaning, site grading, landscaping, utility installation and/or relocation, and moving costs related to the move to a new facility. ---PAGE BREAK--- BUSINESS DEVELOPMENT LOAN PROGRAM 3 Adopted 7/15/2003 3. Construction a. All costs associated with the construction, renovation, or rehabilitation of new or existing buildings including construction contracts and development costs. b. All pre-approved "soft" costs associated with items D. 1, 2 and 3 including legal, engineering, architectural, real estate appraisal, accounting, closing costs, origination fees, points, and interest on interim financing. 4. Working Capital 5. Machinery and Equipment E. Application Procedures 1. Applicants can obtain loan forms from the Growth Council via fax, e-mail or in person. Administrative Agent will negotiate the terms and conditions of the loan and will assist applicants with the application process. 2. The application will be analyzed by Growth Council to determine eligibility before submitting the request to City Administration. 3. Growth Council is responsible for making a judgment based on the creditworthiness of the applicant, loan terms and conditions, and the level of BDLP funds to be committed to the proposed project. 4. a. The Citizen Application Review Committee Will consist if five members of the Lewiston-Auburn Economic Growth Council Loan Committee who represent Lewiston, a City Councilor, and the City Administrator. The Assistant City Administrator for the Development will serve as ex-officio, non-voting member. b. Members of the Citizen Application Review Committee will serve on this Committee with terms concurrent to their respective terms of office members of the City Council, City Administration, or LAEGC Loan Committee. c. This committee will receive he application, review the application, and make its recommendation on the application. Should the recommendation be affirmative, then it would be forwarded to the City Council for their deliberation. The only action the council can take is to approve the recommendation, deny the recommendation or refer the recommendation back to the Citizen Review Committee. F. Terms and Conditions 1. Loan Conditions The specific conditions with respect to loan underwriting will be incorporated in the Commitment letter, the promissory note and any other security instrument deemed necessary ---PAGE BREAK--- BUSINESS DEVELOPMENT LOAN PROGRAM 4 Adopted 7/15/2003 and applicable. The conditions are as follows but are not limited to: • Junior liens on Real Estate, Business or Personal; • Business and Personal Assets; • Accounts Receivable; • Personal Guarantees; • Financial Reports, Business and Personal; • Insurances, General Liability, Hazard and/or Life; • Non Relocation from the City; and • Jobs Creation or Retention. 2. Loan Terms The loan terms will be negotiated but the amortization shall not exceed the term of the lending institution's financial commitment nor the useful life of the collateral: • Real Estate maximum 20 years; • Machinery and Equipment maximum 15 years; and • Working Capital maximum 7 years. 3. Rate The minimum interest rate will be based on the City of Lewiston’s cost of borrowing plus program administration costs. Interest charges shall accrue on the disbursed loan proceeds. 4. Use of Proceeds Loan funds may only be used to carry out the agreed upon work, for eligible activities noted in Part D above. 5. Project Loan Note At the time of the loan approval, the applicant will be required to execute a promissory note and any and all other necessary documentation for the full amount of the BDLP loan. 6. Loan Security The Administrative Agent will determine the adequacy of the security for the BDLP loan. 7. Default The loan may be declared in default and immediately due in full including all principal, interest, late and legal fees, when any of the following occurs: a. In the event that a property or property assisted with BDLP funds is sold, transferred in ownership or otherwise encumbered without prior approval from City Administration. ---PAGE BREAK--- BUSINESS DEVELOPMENT LOAN PROGRAM 5 Adopted 7/15/2003 b. If the project has not commenced within a period of six months from the date of closing. c. If the borrower transfers any one or the other of its business assets securing the loan or relocates outside of the City of Lewiston or ceases its operations. d. If the borrower files a petition in bankruptcy or if an involuntary petition in bankruptcy shall be filed against the borrower and not dismissed within thirty (30) days or if a receiver or liquidator for any of the borrower's property shall be appointed or if there shall be an assignment for the benefit of the borrowers' creditors. e. If any payment of principal or interest which is delinquent and continues for a period in excess of thirty (30) calendar days. f. If the security of the loan is transferred by the borrower or if any part of the note or legal instruments are compromised without prior approval by City Administration. 8. Insurance The borrower is required to maintain hazard, liability and other insurances as required to protect the interests of the City on the project for the full term of the note and for an amount equal to the total value of all security interest held on the project by the City. G. Selection Criteria For Participation in the BDLP 1. Consistency with the BDLP overall purposes; 2. Extent of direct benefit to Lewiston residents in terms of creating high quality jobs and job retention, where preferential hiring to Lewiston residents is obligated (when all other factors are consisted equal); 3. Maximum feasibility of project and creditworthiness of the development proposal; 4. Maximum use of private sector investment; 5. Compatibility with the environment, compliance with local ordinances and comprehensive plan and other community objectives; 6. Proven management ability of the applicant to complete the project. H. Loan Agreement After a loan application has been approved, a formal loan agreement will be prepared by Administrative Agent and reviewed and approved by the City Attorney. The loan agreement will clearly state all of the terms of the loan, including any special conditions that may be required. The loan agreement will be signed by the Lewiston City Administrator, the applicant[s], and guarantor[s] after all details have been resolved to the mutual satisfaction of both parties.