Program Application Contents

Section 540 Section 540.140  Program Application Contents Applications must address the following items: a)         Needs Within the Local Capital Market – Provide information on the local financial markets, including banking philosophy in the area, constraints imposed on development by local lending policies of financial institutions and the availability of private capital to invest. Describe how the local revolving loan fund project shall be designed to directly address those constraints that have been identified. Show the extent to which the local demand for public loans justifies the size of the grant being requested. AGENCY NOTE:  The Department will be looking for examples of absence of lending in certain geographical areas, relatively high or floating interest rates for all or certain types of loans because the bank's costs of funds is high or variable, unavailability of loans that are a longer term (greater than five years) because the bank's deposits are also short term, and unavailability of lending capital or limits on the size of available capital.  A deposit to investment ratio of less than 20% would indicate a conservative posture of local banks.  A weak entrepreneurial environment or low number of new business start ups in an area would indicate problems or weaknesses in the ability of conventional lenders to serve borrowers and business financing needs. b)         Business and Job Development Strategy – Identify the types of eligible borrowers which are to be served and the geographic area to be served such as:  supporting entrepreneurial and self-employment opportunities; serving local area low-income and unemployed residents; serving individuals within a county, multi-county area, statewide, etc.; or assisting those who are unable to secure credit from conventional sources. Also list the job development goals of the RLF project, for example, the expected ratio of new full-time or part-time businesses or jobs created by a borrower to the amount of RLF proceeds provided. c)         Staffing and Management Activities – Describe the procedures and demonstrate the capacity to manage and operate the RLF locally. Describe how the project shall carry out loan packaging and processing, servicing, tracking repayments, and collection processes. Provide proof of authority to operate a revolving loan fund, including, as appropriate, articles of incorporation, by-laws, and a resolution of the board of directors of the organization authorizing participation. d)         Individual Loan Standards – Describe the parameters under which RLF loan financing shall be provided to a borrower. Identify the types of loans anticipated (for example deferred loans, debt with equity features or others), the interest rates to be charged, allowable uses of funds, and length of loans expected. e)         Budget and RLF Capital Management Strategy – Identify the amount and from what source(s) the Project Operator shall provide a match for the Department's grant, at least equal to one-half the amount of the grant from the Department, which shall serve as the source(s) of capital to start the RLF. Describe how these other financing sources shall be induced to participate. f)         Financial Evaluation – Describe procedures to assure that eligible borrowers which shall be financed from the local RLF shall undergo an evaluation and state the qualifications, experience, and responsibility of the parties involved in this process. g)         Loan Agreement – Describe elements of the loan agreement, loan security and collateral, and insurance requirements, so as to assure adequate protection of the use of funds. Describe the role the Project Operator shall play in establishing terms for the loans and in monitoring the progress of the loan. Describe procedures for handling defaulted loans. h)         Marketing Activities – Show how the RLF project shall be adequately marketed to eligible start-up businesses. Detail clearly the outreach activities, types of local application materials, direct advertising, community discussions, or linkages with potential referral sources. i)          Business Assistance Strategy – Describe mechanisms to be used to assure that borrowers (start-up business owners receiving financial assistance) have received business training and education, or have completed a Self-Employment Training Course, have a business and finance plan, and have experience in the proposed business area. In addition, identify support service mechanisms to provide ongoing management support, technical assistance, and guidance to the start-up business.