Procedures for Making Loans

PURPOSE: This rule provides guidelines for making of loans by the Historic Preservation Revolving Fund. (1) The department may loan money from the fund only after it has been determined a loan is the best way to preserve an historic property. Loans may be made to pay for all or part of costs associated with purchase, stabilization, rehabilitation, development, marketing, maintenance, or restoration of an historic property. (2) Loans may be made to the property owner, or to any other person, corporation, governmental entity, or to a nonprofit organization registered with the secretary of state; provided, that the property owner approves of the loan and a security interest in the real property can be provided to the department. (A) Loans to individuals may be made for properties requiring stabilization in order to qualify for financing from a commercial bank, savings and loan, or other financial institution. (B) Loans to for-profit corporations may be made only in cases of extreme endangerment, shall be of short-term duration, and shall be repaid immediately upon obtaining alternate financing. (C) Loans to governmental entities and nonprofit organizations may be made for preservation purposes as deemed appropriate by the department. (3) Acquisition, stabilization, rehabilitation, development, marketing, maintenance or restoration projects, or a combination of these, for properties that fail to meet the requirements of 10 CSR 90-3.020(1) shall not be eligible for a loan from the fund. (4) Loans will be considered upon application submitted to and approved by the department. Each application for a loan must provide all available information relating to the following loan criteria: (A) Economic Feasibility—applicants must provide a detailed outline of the project being funded and adequately demonstrate the ability to generate sufficient income from the project to repay the requested loan. Adequate demonstration may be established by submission of the following information: 1. Total amount of funding required to complete the project; 2. Total amount of funding being requested from the revolving fund; 3. How and why the money being requested from the fund is necessary for preservation of the property’s historic character; 4. How additional funding for the project will be obtained, including what other funding sources money has been requested from, what other sources have approved funding for the project, and the terms and conditions of other funding; 5. Evidence of the current appraised value of the property (preferably by an appraisal less than six (6) months old) and estimated appraised value of the completed project; 6. A complete description of the project and intended use of all funds, including description of the current condition and use of the property, description of proposed rehabilitation and use of the property, all contractor’s cost estimates for rehabilitation and all architect’s plans for rehabilitation; 7. Proposed methods of loan repayment (for example, if repayment depends on fundraising, a complete description of fund-raising plans); 8. Proposed collateral to secure repayment to the fund; and 9. Any other information pertinent to the feasibility of the proposed project or repayment of the loan from the fund; (B) Financial Strength, Stability, and History of Applicant—applicants must adequately demonstrate sufficient financial strength and stability to assure repayment of the requested loan. Adequate demonstration may be established by submission of information necessary to assess the financial strength and stability of the applicant, including: 1. For individuals, unincorporated businesses and closely held corporations— A. A current credit bureau report on all loan applicants, guarantors, or company principals; B. Signed current personal financial statement for all loan applicants, guarantors, or company principals; C. Dun & Bradstreet corporate rating (if available) and company’s financial statements for the past three (3) fiscal years (If statements are more than six (6) months old, include the most recent quarterly statement available and the matching quarterly statement from the previous year.); D. Tax returns for the previous three (3) years; and E. Projections for two (2) years (balance sheet and income statement, with appropriate justification of projections); 2. For publicly held corporations— A. Dun & Bradstreet corporate rating; B. Corporate financial statements for the past three (3) years (If statements are more than six (6) months old, include the most recent quarterly statement available and the matching quarterly statement from the previous year.); and C. The most recent annual corporate report; 3. For governmental entities— A. Moody’s bond ratings; and B. Fiscal reports for the previous year(s) up to three (3) years depending upon size of annual budget and population served; and 4. For nonprofit organizations— A. Financial statements for the previous year(s) up to three (3) years prepared by an accountant or signed by the president; and B. Tax information including letter indicating 501(c)3 status (Note: All financial statements should include balance sheet, income statements and any supporting schedules. If not prepared by an accountant, financial statements should be signed by the company’s president or treasurer. Financial statements from any parent or affiliate company should be submitted as outlined in this rule.); (C) Other Liens or Mortgages on Property—disclosure of all present existing, as well as reasonably anticipated, liens or mortgages, or both, on the property and the effect on the security interest to be granted to the department; (D) Availability of Additional Financial Assistance—disclosure of all known additional financial assistance available for the project; and (E) Resumes of Project Management—give experience and qualifications of architect, contractors, and project supervisor. (5) Each application shall be reviewed by the department in accordance with the criteria set forth in section (4) of this rule. Additionally, the department also shall consider the status of the property to be benefitted by the loan in accordance with the criteria set forth in 10 CSR 90-3.020(2)(A), (B), and (E)–(I). Using these criteria, the department will determine whether the loan application is acceptable and whether a loan from the fund for the subject project would be prudent and appropriate use of fund monies. (6) Loan applications may be denied on the sole basis of availability of funds. (7) The department shall notify the applicant in writing of its determination on the application. (8) For those loan applications determined by the department to be acceptable as a prudent and appropriate expenditure of fund monies, the department will notify the applicant of the available loan terms. (9) Unless expressly waived by the department, the terms for every loan, at a minimum, shall include: (A) Interest Rate—all outstanding loan balances shall be charged a rate of interest considered by the department to be appropriate, but in no event lower than one and one-half percent (1 1/2%) below the New York prime interest rate. This rate is to be established at the time the loan agreement is signed by the loan recipient. Lesser interest rates on loans to nonprofit organizations may be allowed at the department’s discretion; (B) Period of Repayment—a period for repayment shall be established by the department equal to the minimum length of time required to repay the loan; (C) Promissory Note—execution of a promissory note setting forth applicable repayment terms, interest rate, and terms of default; (D) Loan Agreement—execution of a written agreement to loan monies from the fund upon the terms, conditions precedent, warranties, affirmative covenants, events of default, and other applicable and enforceable provisions established in the loan agreement; (E) Deed of Trust—execution and recordation of a valid instrument granting the department a security interest in the real property being benefitted by the loan or other real property provided as security for the loan; and (F) Title Insurance—a title insurance policy naming the department as insured shall be secured by the loan recipient. (10) In addition to the minimum loan terms set forth in section (9), all loans to incorporated entities shall include the following terms: (A) Corporate Resolution—a resolution duly passed by the board of directors authorizing the execution and delivery of all necessary loan documents; (B) Corporate Attorney’s Letter of Opinion—a written legal opinion certifying that the borrower is authorized to enter into the loan agreement; (C) Corporate Certificate of Good Standing—certification from the Missouri secretary of state’s office that the corporation is currently registered and in good standing in Missouri; and (D) Personal Guarantee—written guaranties of repayment executed in favor of the department by all company principals and their spouses owning twenty percent (20%) or more of equity and key management employees. (11) In addition to the minimum loan terms set forth in section (9), all loans to governmental entities shall include a resolution duly passed by the board or other governing body authorizing the execution and delivery of all necessary loan documents. (12) The department shall establish all other terms upon which a loan may be made for each individual project. (13) Terms of all loans must be approved in writing by the director of the Department of Natural Resources. The department will not be obligated to loan any money until a loan agreement has been signed by all parties. (14) Any property benefitting from a loan by the fund shall be subjected to covenants meeting the requirements of section 253.405 of the Historic Preservation Revolving Fund Act. AUTHORITY: section 253.035, RSMo 2016.* Original rule filed May 28, 1992, effective Jan. 15, 1993. Amended: Filed March 26, 2018, effective Nov. 30, 2018. *Original authority: 253.035, RSMo 1961, amended 1967, 1983, 1993, 1995.