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HomeMy WebLinkAboutPolicy GuidelinesCITY OF MIAMI LENDING POLICY GUIDELINES A City of Miami Commercial Loan can only be approved tc assist an identifiable small business concern (SBC) in accomplishing a sound business purpose. Whether the SBC is a proprietorship, partnership or corporation is not paramount to the elicibiiity determination. Eligible and Ineligible Small Business Concerns For purposes of a Revolving Loan Fund (RLF) loan, a business may qualify for consideration provided it meets the following criteria: 1. Business is located or locating within the boundaries, of the City of Miami 2. Business and/or Principals do not demonstrate the financial ability to obtain financing for the business with or without the participation of Local, State or Federal Government, through their direct or guaranteed loan programs. 3. Business is an equal opportunity employer. 4. Business is not relocating jobs, except where the loan applicant is forced to relocate due to circumstances beyond their control (i.e. government intervention, building demolition, etc.). S. Project involves no negative environmental impacts. 6. Project, impacts an adequate number of jobs (as defined by 24 CFR 209 (b)(1)(i)) to be created and/or retained. 7. Potential for jobs created are to be filled by City of Miami residents wherever possible. A First Source Hiring Agreement with the City of Miami will be required. 8. The business' ability to repay the loan. DENIAL OF LOANS Loans will generally be denied for the following reasons: 1. If the funds are otherwise available on reasonable terms: (a) From the disposal at a fair price of required by the applicant in the conduct of or not reasonably necessary to its potential (b) Through the use of personal credit and/or the owner, partners, management, stockholders of the applicant, (c) From other Government agencies which specifically for the applicants' type of (d) From other known sources of credit; or assets not its business growth, resources of principal provide business, credit or 2. For unsatisfactory credit history during the last twelve (12) months. 3. If a bankruptcy as discb.rged less than twelve (12) months 4 ago. the loan Paying who are sustain would be for the purpose of: off a creditor or creditors of the applicant inadequately secured and are in a position to a loss, Providing funds for distribution or payment to the owner, partners, or shareholder of the applicant, Refunding a debt owed to a small business investment company, or Replenishing working capital funds previously used for such purposes; Paying of any tax lien or liability. 5. If the loan will provide for free funds for speculation in any kind of property, real or personal, tangible or intangible; 6. -If the applicant is a charitable institution or non-profit enterprise, except for cooperatives which carry on a business activity for the purpose of obtaining pecuniary benefit for their members in the operations of their otherwise eligible small business concern; 7. If the applicant is a newspaper, book publishing company, magazine, or similar enterprise; 8. If any of the gross income of the applicant, (or any of its principal owners) is derived from gambling activities, except for those small firms which obtain less than one third of their gross income from income or commission from the sale of official state lottery tickets under a state license; 9. If the purpose of the loan is to provide funds to an enterprise primarily engaged in the business of lending or investments or to any otherwise eligible enterprise for the purpose of financing investments not related or essential to the enterprise. 10. Ifthe purpose of the loan is to finance the acquisition, construction, improvement, or operation of real property. 11. If the effect of the granting of the financial assistance_ will be to encourage monopoly or will be inconsistent with the accepted standard of the American system of free competitive enterprise. 12. If the Applicant and/or its principals are in a default status with previous financial commitments to the City of Miami or are indebted to the City of Miami. 13. If the Applicant and/or its principals have been debarred from doing business with federal, state, county or local governments. 14. If the proceeds of the loan will be used for moving an eligible business when the move is solely for the purposes of obtaining the benefits of borrowing from the RLF. MINIMUM AND MAXIMUM AMOUNTS LOANED 1. The minimum amount loaned will be $10,000.00 2. The maximum amount loaned for working capital will be $25,000.00 The maximum amount for the purchase of equipment will b $35,000.00 4. The maximum combined loan amount shall not exceed $35,0000.00. 00- SG? TERMS Repayment term shall be as follows: a) Working Capital - Up to five (5) years b) Equipment - Up to the economic life of the assets involved, not to exceed the IRS depreciation limits (See IRS Instructions for Form 4562) and not longer than seven (7) years_ INTEREST RATES The interest rates of the City of Miami's RLF loans per annum. EQUITY GOALS/REQUIREMENTS All loans shall be matched with the commercial loans participation. requirements will be: a) Existing Businesses experience greater capital matching is - These are than 2 year required. shall be 6 & applicant's monies or other_ Matching participation - businesses having operating s. A minimum of 20 % of b) Businesses Relocating into Economic Opportunity Zones - Existing businesses (as defined above) relocating into one of the Economic Opportunity Zones identified by the City of Miami in its Five Year Consolidated Plan, will be required to match at least 15 % of the capital requirement. JOBS CREATION OR RETENTION: All loans will require a job created or retained for every 535,000.00, or parts thereof, loaned. There shall be a minimum requirement of one (1) low/moderately low-income job retained or created for a loan of less than $35,000.00. In the case of job retentions, the applicant must identify why the borrowed funds are required to retain the job. All applicants will be required to execute a First Source Hiring Agreement with the City of Miami, stating that City of Miami residents will have a preference over all applicants for any jobs created as a result of the granting of the loan. 4H - 8C7 OTHER CONSIDERATIONS: 1. Married applicants shall sign Unlimited Guaranties including their spouses, even if they are no: part of the Company requesting the funds. 2. Collateral assignment of Life Insurance policies will be requested from every applicant's principal(s). The face amount of the policy shall be at least equal to the original loaned amount. No exceptions of this rule will be allowed. 3. Commercial Insurance Policies naming the City of Miami as loss payee in an amount of 120% of the loan amount shall be required from every applicant, i.e. fire, loss .,ncome, liability, etc. All policies shall provide City with mandatory written notices in cases cancellation or material change. of the of 4. In the cases of cooperation agreements involving banks or other institutions and the City of Miami, the City of Miami will have an equal standing as the other financial institutions as far as the collateral position of any and all real property or equipment pledge as security for the loan. 5. Loans for Equipment will require UCC filings. The City of Miami must be in the first security position on these. assets. 6. Once the loan is closed, recipient may not pledge, transfer, hypothecate, encumbrance or dispose of any asset purchased in whole or in part with funds from the City of Miami, without the written approval from the City of Miami. 7. The City of Miami may impose late fees if the business does not pay on a timely manner. IN-HOUSE LOAN UNDERWRITING The Department of Community underwrite all loan package original and a copy of the submitted, as part of a loan the City of Miami. Development (DCD) will receive and s. The applicant shall submit an entire loan package. All documents application will become property of The following process will be followed: 1. All packages will be date and time stamped when received. 2. The package will be reviewed for completeness against the list of Documents and General Requirements shown on Attachment I. If any package is found to be incomplete, the agency that prepared the loan package will be sent a letter via fax indicating the missing item(s). A copy of the letter will be sent to the applicant. The agency submitting the loan package will be given five (5) working days to Submit the missing item(s); if at the end of this period, the agency has not submitted the item(s), the entire package will be returned to the agency indicating that the application is closed. A copy of the letter returning the package will be sent to the applicant. It will be the agency's responsibility to obtain the missing items and to resubmit the package as a new _ application. 3. The Agency preparing the loan application will obtain the necessary credit reports and perform the underwriting tasks within a period of 30-days. 4. If DCD's underwriters agree with the loan request, DCD will prepare its recommendations for submission for the next feasible loan committee meeting. A copy of the recommendations will be given to the agency that submitted the loan package and to the applicant. 5. If DCD's underwriters do not agree with the loan package as presented, DCD will prepare conclusions and / or recommendations to the agency and the applicant for their response. If the response from the applicant is not received within five (5) working days, the application will be closed. APPROVAL PROCESS The Loan Committee will review all applications for loans from the RLF. The Loan Committee can recommend approval or deny any loan application. If the Loan Committee denies a loan application, the applicant and the agency that prepared the loan package will be advised in 00- SG? writing with an explanation as to why the loan was denied. This will close the case file as far as the City of Miami is concerned. If the agency and the applicant rework the loan and wish to have it re -considered, it will be considered a new application. The applicant will have to submit a new application and package for the revised loan to be underwritten. If the Loan Committee approves the loan application, the loan is then forwarded to the State of Florida Financial Oversight Board for its approval. If the Oversight Board approves the loan, closing will take place within 10 workdays after the Oversight Board approval. APPLICATTONl, FEE There will be a non-refundable application fee of $75.00. This Application Fee must accompany the loan package. The - Application Fee will be cashed when the package is accepted for" underwriting. SERVICING The City of Miami will service all loans made from the City's RLF. The City reserves the right to sell the loan or transfer the loan or the servicing of the loan at its discretion. Appendix I - Documents and General Requirements + Business Information 1. Business Loan Application. 2. Authorization for Services. 3. Business Financial Statements for the last two tax years. 4 Tax Returns (Federal Income Tax, State Income Tax," State Intangibles Tax, Property Tax) for the last two tax years. 5. Current Financial Statement of Business with supporting Bank Statements (not older than 90 days). on- 867 6 Inventory of Fixtures and Equipment- owned listing description, serial number, year purchased, condition and estimated current value. 7. History of Business including detailed Business Plan with 3-Year Projections. Agency assisting the applicant with the loan package must review, modify and indicate concurrence with the Business Plan submitted by the Applicant. 8. Detailed Statement on use of Loan Proceeds. 9. Provide list of Fixtures and Equipment to be purchased accompanied by three (3) detailed quotations for each item listed. 10. Cash Flow Projections and impact on Financial - Statements reflecting infusion of loan proceeds. Agency assisting the applicant with the loan package must review, modify and indicate concurrence with the Cash Flow Projections submitted by the Applicant. 11. Copies of Pending Contract or Sales Orders and pending Purchase Orders. 12. Copy of Lease or Letter of Intent to Lease executed by the landlord or legal representative. 13. Copies of Business Documents: Partnership Agreements, Articles of Incorporations, current Certificate of Good Standing, current Fictitious Names Registry, etc. 14. Copy of the Business' current Certificate of Use, Occupational License (City and County), State License (as appropriate) . 15. Employment Compliance Form for Job Creation f Retention Goals. 16. First Hiring Source Agreement with the City of Miami. • 17. Current (in forms specified by the City of Miami) and Projected Employee Data. 00- 867 18. Executed and undated IRS Forms 8821 - Tax Information Authorization and Form 4506 - Request for Transcript or Copy of Tax Form Personal Information 1. Completed Personal Financial Information Form (not older than 90 days). 2. Personal Income Tax Returns filed for the last two (2) years including: W-2, Schedule C for sole proprietorship, Form 1065 for partnerships and K-ls for S-corporation stockholders. 3. Personal Resume of principals of applicant. 4. Executed and undated IRS Form 8821 - Tax Information Authorization and Form 4506 - Request for Transcript or Copy of Tax Form. 5. If any of the principals has experienced any credit problems especially during the last twelve (12) months, a satisfactory explanation of these problems must be provided with the application. Other 1. Copy of Warranty Deeds of all Real Estate owned by Business and/or Guarantors and copy of closing statements evidencing original purchase. 2. Evidence of Tax Assessment Values and any existing appraisals not older than 6 months. The appraiser must be State Certified and have at least two years of having been licensed. 3. Evidence of existing mortgage balances and copy of corresponding mortgage documents. 4.Written evidence of updated insurance coverage on property owned. 00- 8G7 Commercial Lending Program _ Scope of Work for Participating Agencies 1. Prepare and Complete all sections of the "Technical Assistance Intake Checklist" and the (Attachment I). Original document is to be kept by Agency in the Applicant's File. 2 If conclusion of Step 1 above is that applicant qualifies to receive assistance, applicant should complete the "Technical Assistance Request for Assistance Form." (Attachment II). Original document is to be kept by Agency in the Applicant's File. 3. Compile all required documents to prepare and complete the loan application. (Attachment III). Documents to be included in Loan Package and Submitted to the City of Miami for Loan Underwriting. 4. Prepare (or review, modify and endorse the applicant's) Business Plan and projections of the impact of the loan proceeds on business profitability. To be submitted to the City of Miami for Loan Underwriting. 5. Assist the business with the preparation of the "Employment Compliance Form for Job Creation / Retention Goals" (Attachment IV). To be submitted to the City of Miami for Loan Underwriting. 6 Prepare an Executive Summary of the Loan Application explaining and justifying the approval of the loan. To be submitted to the City of Miami for Loan Underwriting. 7. Submit the Loan Package to the City of Miami for Underwriting and Loan Approval. 8. Respond to the City Staff's request for missing documents or additional information that will enhance the likeliness of the loan being approved. 9. Participate in the presentation of the loan to the City's Loan Committee. 10. Work with applicant in revising the loan application and package if the City's Loan Committee issues a denial. f► 867 11. Participate as advisor to applicant at the time the loan closing occurs. 12. Provide monthly monitoring of applicant's operations during the first (1") year of the loan. Monitoring visits are intended to review the borrower's utilization -.of the loan proceeds and to determine if the business plan's objectives are being achieved. City of Miami staff may participate in these monitoring meetings. 13. Prepare and submit a report by the 5th (fifth) calendar day of the month following the visit communicating to the City of Miami the results of the monthly monitoring (See Attachment V). 14. Provide quarterly monitoring of applicant's operations during the second and subsequent years of the loan. City of Miami staff may participate in these monitoring_ meetings. ` 15. Prepare and s.v..,mit a :`_port by the 5th (fifth) calendar day of the month following the quarterly visit communicating to the City of Miami the results of the quarterly monitoring (See Attachment V). 16. On the anniversary of the loan, the agency will obtain copies of the business licenses, will keep these copies in the project file and advise the City of Miami, as part of its quarterly report that the business is operating with` active licenses. The agency will make these available to City of Miami staff for review. 17. On an annual basis, the agency will solicit the Tax Returns filed by the business (Federal Income Tax, State Income Tax, State Intangibles Tax, Property Tax), will' keep these copies in the project file and advise the City of Miami, as part of its quarterly report that the business has filed all the pertinent tax returns. The agency will make these available to City of Miami staff for review. .The agency should review these returns and compare them to the information obtained during their quarterly monitoring meetings. 18. In the event of a loan default, the agency originating the loan must participate in the mitigation and/or recovery efforts. 00- SG"