Borrower:

Existing businesses, start-ups with over 50% equity contribution, no real estate investment or development projects, no financing entities

Lender:

Valley Economic Development Center (VEDC), a not for profit California corporation with charitable designation pursuant to the IRC Section 501(C)(3)

Amount:

$45,000 - $450,000

Purpose:

Small Business Loans, on a secured basis, to businesses on Citywide basis, subject to provision of Public Benefits; Accounts Receivable support, equipment, inventory, tenant improvements; subject to prevailing wages

Availability:

Available now

Maturity:

The stated maturity of each Small Business Loan, shall be determined on a case-by-case basis, however, such maturity date shall not exceed seven (7) years.  No prepayment penalty.

Fees:

3 pts plus out-of-pocket costs

Interest Rate:

Borrowers shall pay VEDC City interest rate at the Yield for ten year US Treasury Bill plus 4.25%, per annum, payable on a monthly basis in arrears.

The index of the Yield for ten-year US Treasury Bill may be adjusted quarterly at VEDC’s discretion and promptly advised to Borrower.

Amortization:

The Small Business Loans shall amortize monthly, with up to a fifteen (15) years amortization schedule, through the stated maturity of each Small Business Loan.

Funding Mechanism:

Funds will be made available through controlled disbursements to vendors or, in the case of working capital, controlled amounts for payroll and operating expenses.

Collateral:

Collateral (cont’d):

The Collateral shall consist of the following:

1. A UCC-1 perfected security interest in the each and every collateral provided in conjunction with the Small Business Loan, subject to the following limitations:

Equipment, alone, may provide for a 100% of Collateral, subject to Loan to Value constraint provided hereinafter.

Example:  

                  Collateral:     ARs:   $100,000   Value   $35,000  

                             Inventories:   $200,000   Value   $70,000

                             Equipment:    $400,000   Value   $260,000

Maximum Loan amount:           $365,000

Commercial Real Estate with maximum LTV of 65% based on a current appraisal, excluding vacant land and land under construction.

Underwriting, Servicing & Collection:

VEDC shall provide all services to the Small Business Loan Program, with respect to (i) underwriting, (ii) documentation, (iii) servicing and (iv) collections.

DSC Ratio:

The borrower for each Small Business Loan shall demonstrate ability to generate Net Operating Income, before taxes and debt service, at 1.2:1.00 of debt service for the aggregate of debt amount outstanding.

Guarantee:

Each Small Business Loan should be guaranteed for on-going debt service and repayment by corporate and personal guaranty of the respective borrower(s) with 20% or more ownership.

Reporting:

On a quarterly or monthly basis, with respect to each and every Small Business Loan, borrower shall provide VEDC with financial statements and on an annual basis, tax returns.

Collateral Insurance

Requirements:

The Collateral provided for each Small Business Loan, consisting of real assets (inventory and equipment) should be insured in accordance with the VEDC’s insurance requirements.

Program Lenders:

The VEDC will engage with the LABAP service providers for the later to serve as originators of this Small Business Loan program, subject to their expertise and the extent of contribution.

Public Benefits:

The Small Business Loans, each shall meet either or a combination of the following public benefits:

o         Creation and retention of permanent jobs, with wages at least at not less than the prevailing Living Wage Ordinance, with 51% of the jobs to be for low to moderate-income workforce.