BCEDA REVOLVING LOAN FUND

OVERVIEW

The Revolving Loan Fund is for “gap financing” of business ventures that create new jobs.

INFORMATION SHEET

Baldwin County Economic Development Alliance (BCEDA) will accept and consider applications for loans from the Revolving Loan Fund (RLF) for projects that will significantly benefit rural areas within Baldwin County, Alabama. It is the intent of the funds from the RLF program to serve as seed money to generate economic development. BCEDA will work with local lenders and others to maximize the leverage of the RLF dollars so that the result is the maximum possible economic development. It is the further intent of BCEDA to use the RLF program to supplement, but not compete with, capital that may already exist within the communities. The BCEDA Loan Committee will review all applications and provide recommendations to the BCEDA Board. The BCEDA Board will make all decisions regarding loan approvals, authorizations and denials. The BCEDA Board is also responsible for all actions and decisions regarding the RLF.

LOAN QUALIFICATIONS

1. Business Ventures a. Corporations b. Partnerships c. Sole Proprietorships 2. Public Authorities and Public Bodies 3. Non-Profit Entities 4. Tribal Authorities

Applicants must demonstrate that the projects to be financed will result in private sector job creation or retention and will contribute to the economic development of rural areas in Baldwin County.

TYPES OF PROJECTS/ACTIVITIES ELIGIBLE FOR RLF FUNDING

Projects include, but are not limited to:

• Industrial Development • Small Business Expansion • Small Business Start-Up • Business Incubators • Business and Industrial Infrastructure • Training Facilities

Activities include, but are not limited to:

• Acquisition, or construction of industrial and commercial buildings and structures. • Purchase of capitalized machinery and equipment with a useful life of at least five years. • Acquisition of real property for economic development purposes only. • Rehabilitation of deteriorated buildings occupied by the borrower.

TYPES OF PROJECTS/ACTIVITIES INELIGIBLE FOR RLF FUNDING

• Refinancing of existing debt or payment to business owners or partners. • Activities determined to be for investment purposes. • General improvement loans related to normal replacement needs of a business and unrelated to business expansion/job creation. • Agricultural production costs (i.e., cultivation, production, harvesting). • Vehicles used for general purposes or that may be considered for personal use. • Projects without any supplemental financing. • Construction projects of a residential nature. • Illegal activities and legalized activities (e.g. gambling casinos) that in the opinion of the BCEDA Board adversely affect RLF interests. • Projects in which any director, officer, general manager, supervisor, or employee of BCEDA, or close relative thereof, is an owner, stockholder, partner, or director, or which would create a conflict of interest, potential of conflict of interest, or any appearance of a conflict of interest. • Projects in which the recipient of a loan, would, as a condition of loan approval, purchase or lease any real property, materials equipment or services from BCEDA, its subsidiaries, or affiliates. • Projects or activities that pay the salaries of any employee of BCEDA, its subsidiaries, or affiliates.

TYPES OF FINANCING AVAILABLE

Fixed Asset Financing:

Land, buildings, equipment, office and work equipment. Infrastructure improvements.

Working Capital Financing:

Available in a limited amount only in conjunction with other RLF financing.

LOAN TERMS AND CONDITIONS

Amount

In order to maintain the goal of providing “gap financing,” the RLF will not participate in more than 50 percent of the total amount that is needed for a project. The maximum amount of a single loan may not exceed $200,000 or 50 percent of the entire project costs, whichever is less, and the minimum loan amount is $20,000. The job cost ratio for the project should average at least $20,000 per job of RLF funds.

Interest Rates

The maximum interest rate for loans made from the RLF is the prime rate as published in the Wall Street Journal on the date of loan closing. Generally, dependent of loan security, loans will bear a rate that is one percent less that the prime rate. The minimum interest rate will be three percent.

Repayment Terms

Repayment terms will not exceed 10 years. The following maturates will be used as a general guideline:

Building 10 years Real Estate 10 years Equipment 5 to 7 years (or anticipated life of equipment) Working Capital 6 months to 5 years

The BCEDA Loan committee will provide a recommendation on term options on a project-by-project basis.

Fees

BCEDA will be responsible for the collection and payment of all fees and costs associated with the loan. All proposed fees and other charges associated with loans will be deposited to the appropriate account to be used to administer the program. A list of proposed fees as outlined:

a. The applicant is responsible for all legal costs associated with the loan. Legal costs consist of loan closing fees to the BCEDA RLF attorney, which will be assessed at the normal and customary charge for this service, plus any required recording fees, and/or title insurance premiums.

b. The applicant may be asked to pay a one-time loan processing fee of up to 1.5% of the loan amount due at the time of closing to the RLF, such fee is to be deposited to the BCEDA RLF account to help pay for administrative costs. c. The applicant must pay for any required appraisal fees charged by an acceptable certified appraiser to the BCEDA RLF Program. d. Loan servicing charges will not exceed an amount equal to the sum of one percent per year of the outstanding principal on the first day of each year on each loan.

Supplemental Financing

RLF loans are limited to gap financing and will finance up to 50 percent of a project. Supplemental financing of 50 percent of the cost of the project may be required. Of the supplemental financing a minimum of 10 percent of new equity infusion must be provided by the project owner. Evidence of availability of supplemental financing will be required prior to advance of RLF funds.

Security

BCEDA will work with the potential borrower to determine security that is adequate for the term of the loan. The nature of the collateral pledge by the loan application shall be determined by the BCEDA Loan Committee on a project by project basis. Generally, security will consist of a first lien position on real property. If the same security is used in joint financing, the RLF will require a parity position with other lenders.

Other types of security include:

1. Letter of credit from acceptable financial institution. 2. Machinery and equipment which has a developed market. 3. Accounts receivable and inventory for short-term loans. 4. Securities issued by the Federal government or its agencies. 5. Patents

The loan recipient will be required to maintain fire insurance and flood insurance if necessary, on secured assets. In some cases, credit life or key man insurance will be required with the RLF as loss payee. Personal guarantees from partners or majority stockholders may be required for all corporate or partnership borrowing where the equity requirement is not met by cash.

APPLICATION PROCESS:

All applicants for RLF funding will be required to complete a pre-application to determine eligibility and then a full application form (Microsoft Word Format) (Adobe Acrobat .pdf format), providing data which demonstrates that their proposed projects are economically feasible and will provide benefits to rural areas, either through job creation or infrastructure improvements. Information required from each applicant is attached as Exhibit I.

During the initial loan review, a determination will be sought as to whether or not the proposed project meets the goals and objectives of the RLF Program. If so, required information will be obtained and the process of credit analysis of the project will begin. Upon successful completion of the steps in the credit analysis of the project and upon subsequent approval by the RLF Loan Committee, The RLF attorney will close the loan and all legal documents will be properly filed and recorded. The RLF records will include an accurate accounting and source documentation to support each transaction involving the RLF. In addition, annual performance reports will be prepared for each project comparing actual accomplishments during the reporting period to the objectives established for the project. The RLF Program commits to the establishment of other required reporting procedures in accordance with USDA regulations.

If real property or other fixed assets are pledged to the RLF by the borrower, professional appraisals will be required on all loans. A list of approved appraisers will be compiled in the service area and the RLF Loan Committee will choose an approved appraiser’s list. The BCEDA Loan Committee will be responsible for securing an appraisal from the borrower to establish the value of assets pledged.

Upon approval of a loan by the RLF Loan Committee, a loan commitment letter shall be mailed to the applicant. The applicant will have ten (10) working days from the date of the commitment letter to accept the terms and requirements of the loan. The RLF staff will have thirty (30) calendar days from the date of approval by the Loan Committee to work with the applicant to develop loan documents to meet the terms of the loan and execute the applicable closing documents. In the event the RLF staff cannot execute the loan closing within thirty (30) calendar days, the RLF Loan Committee shall have the discretion to authorize an additional thirty (30) calendar days. The decision will be based on the particular circumstances of the project. Prior to loan closing, the RLF staff shall ensure that the specific closing conditions have been met and all documents related to closing have been reviewed. In the event the RLF staff is unable to close the loan within sixty (60) calendar days, then the RLF commitment to fund the loan shall be withdrawn. The Chairman of the BCEDA Loan Committee, RLF attorney, and the RLF administrator shall handle the RLF loan closing where all terms of the loan including repayment terms will be discussed in detail. An amortization schedule will be furnished to the applicant with scheduled principal and interest costs for the term of the loan. All closing costs will be the responsibility of the applicant. The RLF attorney will record all applicable loan-closing documents in the appropriate place of filing. All original loan documents shall be housed in the RLF administrative offices in a safe and secure location. RLF loan proceeds will be disbursed from the RLF account with the presentation of acceptable documentation as required by the loan documents. The RLF administrator will be authorized to disburse RLF funds upon presentation of proper documentation. For security purposes, two (2) signatures of authorized BCEDA Directors will be required on any disbursement checks as authorized by the RLF Loan

LOAN MONITORING

Loan monitoring will require regular reporting by the loan recipient. This includes:

1. Annual income statements and balance sheets. Depending on the nature of the project and security arrangements, BCEDA reserves the right to require the submission of annual financial reports as audited by a certified public accountant.

2. Periodic management information reports. Management reports will be required on an annual basis beginning six months after the advance of RLF funds and continuing annually thereafter for a period of three years or until completion of the project, whichever is the later period. Management reports will include (i) information of the number of jobs created or retained during the reporting periods, (ii) a comparison of accomplishments during the reporting period to the objectives established for the project, and (iii) problems, delays, or adverse conditions and a statement of action taken or contemplated to resolve the situation. BCEDA reserves the right to require these reports on a more frequent basis if it is determined to be in the best interests of the RLF.

3. Telephone contact and site visits. A minimum of twice annually, an RLF representative will initiate a phone call to review performance and issues. On-site visits will be conducted annually to verify and evaluate the use of RLF funds.

The loan committee for presentation to the entire BCEDA Board will compile an annual review and report of the outstanding loans of the RLF.

ALL SUBMISSIONS MUST BE SIGNED AND DATED

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