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HomeMy WebLinkAboutExhibit AEli JD Department of Housing & Community Development City of Miami CITY OF M IAM I Economic Development Loan Fund Program GUIDELINES, FORMS, SCOPE OF WORK Updated 10-2018 Economic Development Loan Fund ("EDLF") Program Lending Policies and Guidelines The City of Miami has established an Economic Development Loan Fund ("EDLF") Program in accordance with the goals and objectives outlined herein. The EDLF Program, which will be administered by the City of Miami ("City") Department of Housing and Community Development ("DHCD"), will be capitalized using Community Development Block Grant ("CDBG") funds authorized under 24 CFR 570. Purpose The goal of the Economic Development Loan Fund Program is to provide businesses with financial assistance to support the retention and creation of jobs for low to moderate income City residents. The EDLF Program is designed to fill the financing gap between private debt financing and private equity. Funds are provided to create economic benefit through the creation/ retention of jobs in the City, and to assist in the conversion of existing businesses to employee ownership, mainly through worker cooperatives. Eligible Area The EDLF Program is available to businesses located or planning to locate within the boundaries of the City. Loans are Evaluated Based on a Project's • Financial viability • Potential to create or retain jobs • Management quality* • Community economic impact • Capacity to leverage funds from other sources • Potential to increase sales and economic development • Ability to repay loan • Readiness to proceed * Business conversions from owner to employees for a worker cooperative to cmploycc owncrship will receive special consideration. An organizational development support plan will be required where the business will indicate how cmploycc owncrs arc transition to managcmcnt Icvcl positions. shares are not just held by a select group of managers or supervisors, but all workers. The worker cooperative management step-up should have an accountability loop that starts and ends with worker -owners. Eligible Use of Funds and Activities Loan funds can be used for: • Purchase and Installation of machinery, equipment, furniture, fixtures • Leasehold improvements or expansions Updated 10-2018 • Technology infrastructure • Renovation, improvement and expansion • Inventory • Financing for employee -owner conversions to cooperatives Note: • The use of funds for construction activities such as renovation, improvement and expansion will trigger a requirement that prevailing wages be paid for all labor (Davis Bacon Wage Rates). Ineligible Use of Funds Funds cannot be used for the purpose of: • Paying off a creditor or creditors of the applicant who are inadequately secured and are in a position to sustain 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. • Paying of any tax lien or liability. • Refinance loans made by other lenders. • Projects which are not consistent with the City's economic development program Eligibility Criteria A business may qualify for consideration provided it meets the following criteria, if applicable: • Business is located or locating within the boundaries of the City of Miami. • Business and/or Principals demonstrate that financing is not otherwise available on terms or conditions that would permit completion and/or successful operation or accomplishment of the project activities to be financed. • Business is an equal opportunity employer. • 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.). • Project involves no negative environmental impacts. • Project impacts an adequate number of jobs, as defined by 24 CFR 209 (b)(1)(i), to be created and/or retained for low to moderate income people. • All applicants shall grant City of Miami residents hiring preference over all applicants for any jobs created as a result of the loan. • The business ability to repay the loan. • Applicant must be willing to comply with all regulations, guidelines and policies as they relate to the program. Updated 10-2018 Loan Criteria Job Creation and Retention: • All loans will require applicant to create or retain one, full time, permanent job for every $20,000.00, or parts thereof, loaned. • At least fifty one percent (51%) of all jobs created or retained must be made available to low and moderate income persons as defined by HUD under Section 8. Job Creation • Jobs must be created within six (6) months of the loan closing if loan is not used for rehabilitation or leasehold improvements or the total project does not include rehabilitation or leasehold improvements. • Jobs must be created within eighteen (18) months of the loan closing if loan is used for rehabilitation or leasehold improvements or six (6) month after the completion of the rehabilitation/improvements, whichever is less. Job Retention • The applicant must give details on why the borrowed funds are required to retain the jobs and demonstrate that without the assistance, the jobs would be lost. • Applicable to Business conversions to employee ownership. Loan Amount Minimum: $20,000.00 Maximum: $80,000.00 • A HUD environmental review must be conducted and completed prior to disbursing funds. Note: Higher loan amounts may be approved in a case by case basis by the City of Miami Commission. Loan Terms Repayment term shall be as follows: a) 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. b) Others: Fully amortized between three (3) to seven (7) years c) Special Circumstances: Longer repayments may be considered on a case by case basis Interest Rates The interest rates of the City of Miami's EDLF loans shall be 0% - 3% per annum, based on the cash flow of the business. Updated 10-2018 Match Requirements All loans must be matched by the applicant's funds. Matching participation requirements will be: Capital: Applicant must match a minimum of 20% of capital needed for project. Equity: Applicant must have at least 20% equity in business. Special considerations will be provided to business conversions to employee ownership Special Target Areas Special Target Areas as defined in the City of Miami Consolidated Plan or approved by the City of Miami Commission for this loan program and may have different guidelines from the ones detailed above. Application Fee There will be a non-refundable application fee of $100.00. This application fee must accompany the loan application package. The application fee will be cashed when the package is accepted for underwriting. Program Requirements: • Applicants and their spouses shall sign Unlimited Guaranties, even if the spouse is not part of the Company requesting the funds. This requirement may be waived for business conversions to employee ownership. • Commercial Insurance Policies naming the City of Miami as loss payee in an amount acceptable to the City of Miami Risk Department. All policies shall provide the City with mandatory 30 days written notices in cases of cancellation or material change. • Unless otherwise approved by the Housing and Loan Committee and/or the City of Miami Commission, all loans will require a collateral position of any and all real property or equipment pledge as security for the loan. • Loans for equipment will require UCC-1 filings. • 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. • The City of Miami may impose late fees if the business does not pay on a timely manner. • If a business does not meet its minimum employment requirements, then the City shall call the loan payable within 30 days. Non -recommended Loans Loans will generally not be recommended for approval for the following reasons: • If the requested funds are otherwise available on reasonable terms: a) From the disposal at a fair price of assets not required by the applicant in the conduct of its business or not reasonably necessary to its potential growth, b) Through the use of personal credit and/or resources of the owner, partners, management, or principal stockholders of the applicant, Updated 10-2018 c) From other Government agencies which provide credit specifically for the applicants' type of business, or d) From other known sources of credit; • For unsatisfactory credit history during the last twelve (12) months. • If a bankruptcy was discharged during the last twenty four (24) months. • If the loan will provide funds for speculation in any kind of property, real or personal, tangible or intangible; • 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; • If the applicant is a newspaper, book publishing company, magazine, or similar enterprise; • 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; • 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. • If the purpose of the loan is to finance the acquisition of real property or land. • If the Applicant and/or its principals are indebted to the City of Miami. • If the Applicant and/or its principals have been debarred from doing business with federal, state, county or local governments. • 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 EDLF. Appeal Process Applicant's will have 10 business days from the receipt of the letter not recommending the loan to appeal the decision. The applicant can provide additional documents at that time for consideration of the underwriting committee. If the loan is not recommended a second time, there will be no further appeal entertained from the applicant. Loan Approval All loans made strictly under the policies of the EDLF program will be recommended for approval by the Housing and Commercial Loan Committee. If the Housing and Loan Committee denies a loan application, the applicant will be advised in writing with an explanation as to why the loan was denied. All loans not meeting the EDLF program guidelines will require an additional approval by the City Commission. Updated 10-2018