APPENDIX VII.
RESOLUTION NO. 1339
A RESOLUTION REVISING THE SMALL BUSINESS LOAN POLICY
WHEREAS, the City Council established a Small Business Loan Program with a policy outlining the procedures for loaning of the monies that had accumulated in the Small Business Loan Fund in Resolution Number 1203 dated May 24, 1993, and
WHEREAS, the City Council desires to continue this program and stimulate development of business in the City, and
WHEREAS, a Council-appointed committee has reviewed the current policy and made recommendation for changes to the Small Business Loan Policy,
NOW, THEREFORE BE IT RESOLVED that the policy set forth in Exhibit A is adopted as the Small Business Loan Policy.
PASSED BY THE COMMON COUNCIL OF THE CITY OF COTTAGE GROVE AND APPROVED BY THE MAYOR THIS 11TH DAY OF MAY, 1998.
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/s/____________________________ |
/s/________________________ |
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Richard Meyers, City Manager |
Darrel Williams, Mayor |
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Dated: 5-12-1998 |
Exhibit A
CITY OF COTTAGE GROVE
SMALL BUSINESS LOAN POLICY
Background and Purpose
This policy is adopted to establish criteria for the use of funds returned to the City of Cottage Grove from Xentek, Inc. This program was initially established through the use of Community Development Block Grant Funds and it is the desire of the Mayor and City Council to see that these funds continue to be used for community improvement.
Goals
• To create or retain approximately one full time job per $15,000 loan.
• To encourage private investment within the City of Cottage Grove.
• To improve the general appearance of the community.
• To preserve the historical and architectural character of the community.
Qualifications of Borrower
• Business must be located within the City of Cottage Grove.
• Borrower must meet the standards for loan approval including the ability to repay the loan.
• Borrower must demonstrate that they have attempted to secure financing from two other sources.
• Borrower does not necessarily need to own the real property in which his/her business is located.
Eligible Uses
• Purchase of an existing business.
• Startup costs for commercial and industrial ventures.
• Acquisition of machinery and equipment.
• Working capital.
• Land acquisition and improvements.
• Building costs for remodels, new construction and related expenses.
Ineligible Uses
• Costs incurred before loan approval.
• Projects inconsistent with comprehensive plan or zoning.
• Refinancing or payoff of loans made by other lenders.
• Projects qualified to receive all needed funds from other sources.
Preferred Industries
Light Industry (Examples)
Food production machinery manufacture
Secondary wood products manufacture
Specialized machine development
Commercial/Enterprise (Examples)
Retail Establishments
Tourist facilities
Cottage industries development
Historic Preservation (Examples)
Historic Building Renovation
Maximum Loan
The maximum loan for any borrower will be the lessor of:
• Available Small Business Loan Fund balance
• $50,000
Credit Requirements
• Cash-flow sufficient to service debt
• Personal guarantees of the principals
• Adequate collateral to secure the loan
• Positive credit history
Interest Rate
Interest will be set at the Federal Treasury Note rate of the same maturity, but not less than 4% per annum, and determined at the time of loan approval.
Other Financing Policies
• Loans made under the terms of this program will ordinarily not be under $2,500.
• Not more than 25% of the loan portfolio will be for working capital. Working capital loans will generally only be made in conjunction with fixed assets.
• Loan term may not exceed the remaining useful life of the assets financed, or 10 years, whichever is less.
• Repayment will normally be accomplished in equal monthly installments, including principal and interest.
Fees and Costs
There is a non-refundable $150 application fee. A 1.5% loan fee is charged at time of closing, against which the application fee is credited. Borrower pays costs of recording, escrow, title insurance and other incidental closing costs, if any.
Loan Process[
• Applicant submits a completed loan application with attachments and a non-refundable $150 application fee.
• Application is reviewed by the Small Business Loan Review Committee to determine eligibility.
• Recommendation for approval or denial made to City Council.
• If approved, City prepares loan documents and disburses funds to approved loan applicants.
General
• This loan may generally take a subordinated security position behind the private lender.
• Borrower is required to furnish adequate collateral, in the City’s judgment, to secure this loan.
Non-Transferability of Loans
The City’s loan may not be assumed in any business transaction. If the business or real or personal property serving as collateral for the loan (other than inventory) is sold or transferred in any manner, the City’s loan is immediately due and payable.
CITY OF COTTAGE GROVE
SMALL BUSINESS LOAN APPLICATION
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APPLICANT: |
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Business Name ____________________________________ Telephone # ______________ |
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Address ________________________________________________ Fax # ______________ |
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_____________________________________________________________________________ |
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Applicant’s Contact Person _______________________ Position _________________ |
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Business I.D.# ______________________________________________________________ |
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How long has this firm been in continuous operation?_________________________ |
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When did the firm start operations? _____ Current number of employees _______ |
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List all banks utilized by firm and names of contact person(s)_______________ |
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_____________________________________________________________________________ |
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Number of jobs to be created _____ or retained _____ as a result of this loan |
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TYPE OF LOAN REQUEST: LOAN FUNDS WOULD BE USED FOR |
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[] Purchase an existing business |
[] Startup costs |
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[] Purchase of Equipment/Machinery |
[] Purchase of Land/Building |
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[] Construct/Remodel Building |
[] Working Capital |
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ESTIMATED PROJECT COSTS: |
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Land |
$_____ |
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Buildings: New Construction [] Modify Existing [] |
$_____ |
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Machinery and Equipment |
$_____ |
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Working Capital |
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Wages |
$_____ |
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Inventory |
$_____ |
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Other |
$_____ |
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TOTAL |
$_____ |
$_____ |
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PROPOSED SOURCES OF PROJECT FUNDING: |
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Equity (Unencumbered verified value) |
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$_____ |
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Private Loans: |
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Source: _______________________________________________ |
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$_____ |
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Source: _______________________________________________ |
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$_____ |
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Commercial Bank Loans: |
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Bank (Branch) _________________________________________ |
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$_____ |
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Other (Specify) |
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Source: _______________________________________________ |
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$_____ |
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City of Cottage Grove Small Business Loan |
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$_____ |
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Total.................................................. |
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$_____ |
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WORK FORCE DATA: |
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Please list existing job titles and number of employees for each position |
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1. __________________________________________ Number of Employees ___________ |
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2. __________________________________________ Number of Employees ___________ |
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3. __________________________________________ Number of Employees ___________ |
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4. __________________________________________ Number of Employees ___________ |
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5. __________________________________________ Number of Employees ___________ |
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APPLICANT’S REVIEW AUTHORIZATION: |
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I certify that the responses within this application are true and accurate to the best of my knowledge. I have read and understood the Small Business Loan Policy and will retain a copy of the policy in my records. I understand that this application is used only to determine eligibility. In the event that the loan request is subsequently approved, I agree to comply with all applicable federal, state, and local laws, regulations, and policies. |
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______________________________ |
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Name/Title |
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______________________________ |
Date _________________ |
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Signature |
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CITY OF COTTAGE GROVE
LOAN APPLICATION ATTACHMENTS
• Letter of refusal from at least two sources, one of which must be a commercial lending institution.
• Complete Business and Marketing Plan.
• Personal financial statements current within 90 days, of all principals (owners, officers, guarantors).
• Personal income tax returns for most recent three years, for all principals.
• Business financial statements and tax returns for most recent three years if applicable.
• Proof of organization: copy of assumed business name filing, partnership agreement, or certificate of incorporation.
SMALL BUSINESS LOAN POLICY PROCEDURES
Finance Director
• Coordinate, direct and set procedures for the loan fund actions
• Receive loan requests
• Maintain current application forms
• Review loan applications with Small Business Loan Review Committee and furnish evaluation to City Council
• Disburse loan funds within 7 working days after approval and collect fees
• Set up billing procedures and provide required statements to loan recipients
• Notify City Attorney of any loan payment that is 45 or more days overdue
• Collect delinquent payment charges of $50 or 5% of payment amount, whichever is greater, on each payment that is not received within 10 calendar days after due date
• Contract with outside consultants for assistance as necessary for proper administration of the program
City Attorney
• Prepare or approve loan contracts, notes, and other loan documents
• Prescribe and prepare documents required for securing collateral and renewing collateral filings as necessary
• Prepare letters, legal notice of default and accomplish foreclosure or other necessary proceedings on accounts referred by the Finance Director as delinquent for 45 or more days (as directed by City Manager)
• Provide information and advice on legal aspects of program
Small Business Loan Review Committee
• Meet when necessary to review loan application
• Make recommendation to Council and staff for loan application approval or rejection within 30 days of receipt
Committee Guidelines for Review of Applications
• Applicant and loan request meets the qualifications and guidelines set out in the policy
• Applicant has included all required attachments
• Adequate collateral is available as security for the loan
• Cash flow is adequate to service the debt
• Profits generating from ongoing operations