Montgomery County Revolving Loan Fund
To establish a revolving loan fund (RLF) in Montgomery County to benefit new and existing businesses that operate within Montgomery County limits and to assist communities in removing derelict structures. An original investment of $250,000 by the Montgomery County Board from the General Revenue Fund (allocation of money generated from sale of coal rights) will be used to start the fund budget year starting December 1, 2006.
Objectives of Revolving Loan Fund:
Create and retain permanent private sector employment,
Encourage small business start-ups and expansions,
Stimulate investments in the county,
Leverage public and private investments,
Aid municipalities in removing derelict buildings and salvaging municipally-owned buildings.
Acquisition of land, buildings, and fixed equipment,
Working capital and inventory,
Site preparation and construction, reconstruction, or installation of buildings and fixed equipment,
Clearance and demolition, removal or rehabilitation of buildings, and improvements.
Reimbursing expenditures made prior to approval of the loan,
Buildings (or fixed equipment not essential to the business) and/or
General Information Concerning Revolving Loan Fund
Eligible Parties for Requesting Revolving Loan Funds:
Financial institutions can request RLFs for specific projects for parties they represent. The request will be in the form of a participation agreement between the lead financial institution and the RLF fund. Funds will be allocated on a pro rata share of the presented project cost with the County’s portion not exceeding 33%.
Availability of Funds:
Loans are subject to availability of funds.
Allowable Request Amounts:
Only requests between $5,000 and $50,000 will be considered. In the event the RLF board views the project as exceptional due to the number of employees or other measurable impact, the RLF board has the right to increase the maximum request amount. However, the revolving loan cannot exceed 33% of the total project costs.
Interest Rate Charged to Financial Institution for Participation:
RLF rate to financial institutions is fixed at 2% throughout the duration of the participation agreement. The RLF board has the right to change the RLF interest rate as needed. However, changes in the interest rate will only affect future requests. The RLF interest rate will be used to cover the costs of administration. If adjustments to the RLF interest rate are made, renegotiations on the share of the percentage that is maintained by the administrator and the Montgomery County Board will be done at that time.
Guideline for Rate Charged by Financial Institution to End User of RLF:
Financial institutions may not charge more than 4% above the RLF rate to end user of revolving loan funds on the revolving loan share of the loan. Therefore, the total interest rate of the RLF share of the loan cannot exceed 6%.
The repayment schedule will be determined by the financial institutions, and presented in the request for revolving loan funds. Any changes to original terms of the repayment schedule must be approved by the RLF board.
Method of Repayment:
Payments by financial institutions will be split. The principal will go back into the RLF account established by the Montgomery County Board, making those funds available for future participation agreements. The RLF interest rate paid by financial institution for participation will be paid directly to the administrator to cover the costs of administration.
Terms of Participation:
The terms of the participation agreement will vary depending upon the collateral and use of funds. As a guide, a maximum of 20 years on real estate, 10 years on equipment and 7 years on working capital will be allowed.
Collateral for Participation:
Collateral must be more than sufficient to cover the participation amount. Collateral, the security pledged for the repayment of the loan, must equal the amount of monies borrowed. Verification of the value of the collateral must be supplied in the form of independent appraisals; deeds, titles, etc.
Requirements of Requests for Revolving Loan Funds
Capital Requirements & Analysis:
The revolving loan fund board and County will review the capital position of the borrower to make sure it is adequate. The County’s portion of the total loan will not exceed 33 percent.
Job Creation/Retention Guideline:
Create or retain one full-time permanent position for every $20,000.00 requested.
Demonstration of Need for Funds:
The lead financial institution must demonstrate that they have reviewed and approved the borrower’s financial condition and business plan and have found evidence of collateral necessary to justify the loan.
Insurance Requirement on Collateral:
Maintain adequate insurance on the pledged collateral. The participating financial institution must verify adequate insurance is maintained on the pledged collateral.
Comply with All Applicable Laws, Regulations, and Ordinances:
Comply with all applicable local, state and federal laws, regulations and ordinances.
Recalling of Participation:
Participation can be recalled in the event that jobs are lost due to relocation of part or all of the business outside Montgomery County. The rate of recall is based on $20,000.00 per job lost due to relocation. The RLF board will decide if a recall is necessary. The RLF board will notify parties that are up for discussion concerning this issue at least 48 hours prior to the meeting. Written notice of a decision concerning this issue will be sent within 30 days of a decision by the RLF board to all parties involved.
For additional information, including an application, please contact Valerie Belusko at 217-851-4332.