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HomeMy WebLinkAboutRexburg Revolving Loan Guidelines Proposed Update 8-2-23Rexburg Revolving Loan Guidelines Context In an effort to bridge the gap between business and their financial needs in Rexburg and traditional lending opportunities, the City of Rexburg created a Revolving Loan Fund (RLF). This fund was intended to be used primarily for businesses that could not qualify or attain traditional funding in full or in part from traditional lenders. This fund is managed by a City partner, East Idaho Central Planning & Development Association (DBA The Development CompanyALTURA). To date, some questions exist about the lending criteria. Does the business have to be in Rexburg City limits? Can a business use the fund for working capital and/or inventory? How much money can be out on loan at one time or how much should be held in reserves? This document will answer these questions and give clearer guidelines so that the City, the Development Company ALTURA, and loan applicants will be able to act on behalf of this resource in the best possible terms for continued growth and success. Parties City of Rexburg, the Development CompanyALTURA, other lending partners and applying business Vision Goal To ensure the most meaningful and resourceful use of the current monies held in the Rexburg Revolving Loan Fund. Process Overview The money is the City of Rexburg’s. The City of Rexburg has contracted with the Development CompanyALTURA to manage the fund in the most transparent process possible based on the criteria set forth by the City and it’s Elected Officials. The process will have these major steps: 1. The City of Rexburg will contract with the Development Company ALTURAto manage the Rexburg RLF. 2. The Development CompanyALTURA will make available and accept applications for the RLF based on the outlined criteria in this document. 3. The City of Rexburg will make available existing funds to the Development Company ALTURA used for loans. 4. The Development CompanyALTURA will make the City, specifically the Mayor, CFO and Economic Development Director, aware of applications made to the Rexburg RLF ahead of processing them through the Development Company’s ALTURA loan committee. Notification will be submitted by email with all proposed terms. 5. After loan is approved, the Development CompanyALTURA will notify the above mentioned people at the City through email with the final terms of all contracts. Specific Guidelines These guidelines will direct the City and the Development CompanyALTURA as they interact with potential applicants. 1. The business must be in the City of Rexburg city limits or approved by Rexburg City Council. 2. This loan will not be used for working capital or inventory loans. 3. The loan can be used for the following: a. The purchase, refinance, construction, or remodeling of buildings for the business given that: i. Land can be considered as part of the loan for construction. ii. The business has and pays for a certified appraisal. 1. An appraisal within 12 months may be accepted. 1.2. A Brokers Price Opinion (BPO) may be considered as sufficient to establish value if approved by the CFO, Mayor, and Economic Development Director together. iii. The amount for buildings will not exceed 75% loan to value. 1. If partnered with another bank or lending source, the loan to value may not exceed 90%. iv. The rate will typically be a minimum of Prime +2. At times when the market rates do not align well with the prime rates, the CFO, Mayor, and Economic Development Director together may agree to reduce the rate to as low as Prime. v. The term will be a 20 year amortization, after 10 years, applicant must seek traditional lending or reapply. v.1. The CFO, Mayor, and Economic Development Director together may approve a loan term to be increased from 10 years to 20 years. vi. The City must be in no lower than 3rd position on the asset. vii. The business must have two separate and independent Personal guarantors. 1. Personal equipment may be considered as collateral. b. The purchase of equipment for the business given that: i. The business provides a verifiable quote or invoice of the equipment’s value. ii. The amount for equipment will not exceed 60% loan to value. iii. The business must collateralize the equipment with a UCC filing of claim. iv. The City of Rexburg must have first position. v. The rate shall be a minimum of Prime +3. At times when the market rates do not align well with the prime rates, the CFO, Mayor, and Economic Development Director together may agree to reduce the rate to as low as Prime. vi. The term shall be a 5 year maximum. vii. The business must have two separate and independent Personal guarantors. 1. Personal equipment may be considered as collateral. c. The request for lower interest will be considered given that: i. The applicant is providing a minimum of 30 net new jobs to the City. ii. The pay rate of said jobs is a minimum of 200% of present or current Madison Per Capita Income (PCI). Formatted iii. PCI for Madison County, Idaho was $15,40620,983 for 20142021. iv. Applicant must meet all other criteria listed above. These loans are not normally available to city employees or their spouses to avoid inherent problems that may arise from this relationship and to avoid potential bias that may exist or be perceived to exist. If the Development CompanyALTURA Loan Committee feels like the loan would be a viable loan, a loan may be considered for employees or their spouses as long as all loan criteria as noted above is met. Last updated 9/13/18 8/2/2023 Formatted: Not Highlight Formatted: Not Highlight