PROGRAM: Created within the Cincinnati Small Business Loan Fund in order to provide capital for fixed assets and working capital and eligible refinancing to small businesses located in the City of Cincinnati. The purpose of the “Grow Cincinnati Fund,” is to encourage the expansion and increase the capacity of small business by providing “gap” debt financing and access to technical assistance. Funding is available to successful growing or qualified emerging small businesses. Loans made under the category of this fund are made, administered and serviced by the Grow America Fund, Inc. (herein referred to as “GAF”) under the parameters of the U.S. Small Business Administration’s regulations and procedures, with input and direction from the City of Cincinnati and Planning Staff.
City staff must make the determination that each loan must meet one of the eligible activities stipulated in the CDBG Entitlement Program Regulations 24 CFR Part 570 and detailed in part VII Project Eligibility of these Guidelines. Each loan must also meet one of the following National Objectives as mandated by the CDBG program:
1. Job Creation/Retention: funds are used to finance businesses, which create or retain permanent jobs, the majority of which are filled by Cincinnati residents from low to moderate-income households. In the case of job creation, at least 51 percent of new jobs created must be filled by individual from low to moderate-income households as defined by HUD. In the case of job retention, either 51 percent of the retained jobs or 51 percent of refilled turnover positions must be filled with individuals from low to moderate-income households. The business must maintain on file, and submit to the City as required, an Income Verification Form for each employee hired meeting the low or moderate-income criteria. In case of jobs are to be “available to” low to moderate income person(s), the assisted business must take such actions as the City deems appropriate to insure that low and moderate income persons receive first consideration for filling such jobs.
2. Low-Moderate Income Area Benefit: funds are used to assist projects, which provide or expand the availability of goods and services to an area with a majority of low to moderate-income residents.
3. Prevention/Elimination of Slum and Blight: funds are used to assist rehabilitation of structures in a blighted area undergoing comprehensive revitalization in accordance with an urban renewal plan or to rehab structures determined to constitute “spot blight.” Spot blight is conditions determined to be public health or safety hazards. Assistance may be for acquisition, demolition or rehabilitation financing.
PROGRAM GOAL: To encourage the expansion and increase the capacity of small business by providing “gap” debt financing and access to technical assistance.
TYPE OF ASSISTANCE: Loan funded by the Grow America Fund, Inc.
TYPICAL STRUCTURE: The financing structure for each loan may vary based upon each applicant’s request. Typically financing shall not exceed 90% of the funds needed to finance a project. The remaining balance must consist of private sector financing, with at least 5-10% owner equity. The loan is made only when the applicant is able to demonstrate the ability to repay the loan in a reasonable period of time.
MAXIMUM AMOUNT: Grow Cincinnati Loans cannot exceed $1,000,000 per business. It is anticipated that most loans made by GAF under the Grow Cincinnati Loan Fund will not exceed $250,000.
REPAYMENT/ RATES/ FEES:
1. Principal and interest payments are made on a monthly basis
2. Deferred principal and/or interest payments may be considered if necessary to make financing feasible.
3. Interest rates for loans made by GAF under the Grow Cincinnati Loan Fund will be based upon the credit and repayment ability of the applicant borrower and in most cases will be equal to the prime rate plus 1.50% as published in the Wall Street Journal, in effect at the beginning of the first day of each fiscal quarter.
4. The maximum term for loans made by GAF under the Grow Cincinnati Loan Fund will be 25 years for real estate, 10 years for equipment and working capital. The term of the loans will be determined by the life of the assets financed.
5. Loans with terms of less than 15 years may be repaid in full at any time without pre-payment penalty, loans with longer terms have a nominal prepayment penalty in the first three years following the date of the loan closing.
6. GAF will close each loan made under this program. For each loan, GAF may charge fees related to the closing provided that such charged fees are fees permitted by SBA guidelines. The Grow America Fund, Inc will service each loan made under the Grow Cincinnati Loan Fund.
INCENTIVES: Loans provided toencourage the expansion and increase the capacity of successful growing or qualified emerging small business by providing “gap” debt financing and access to technical assistance.
BENEFITS: The program provides a benefit for small businesses who create jobs, provide a low-moderate income area benefit, and prevent/eliminate slum and blight.
ELIGIBILITY: Business Ownership: For-profit business enterprises located or proposing to locate within the City limits of Cincinnati are eligible to apply.
Business Size: Borrowing entities must meet the Federal Small Business Act definition of a “Small Business.” For most businesses, this means average sales over the past three years of less than $5 million and fewer than 500 employees. Certain industries may exceed these guidelines (e.g., construction and wholesaling) and still be a “Small Business” as defined by the Act.
ELIGIBLE/INELIGIBLE USES:
Eligible Uses- Working capital (inventory, receivable, contract financing and operating capital), building and/or land acquisition, construction and/or renovation and equipment, and refinancing which provides a substantial cash flow benefit to the Borrower.
Ineligible Uses - Loans to social service agencies that provide for the care and/or rehabilitation of people, religious institutions, or other non-profit service providers; Venture capital investmen; Loans to private clubs with restriction on membership or patronage; Loans prohibited by any City Administrative Regulation, local, state or federal law
APPROVAL: With input and direction from the City of Cincinnati Department of Community Development and Planning staff, Grow America Fund, Inc. under the parameters of the U.S. Small Business Administration’s regulations and procedures is the approval authority for all Grow Cincinnati Loan Fund loans.
Applicant businesses must complete a loan application and submit all business financial and business background information. This information is necessary to determine if the applicant meets the eligibility requirements of the program and can repay the proposed loan.
1. Applicant submits application with required financial statements and business and/or personal documentation.
2. City staff (Development Officer of his/her designee) pre-screens the application for eligible location, CDBG national objectives, reviews financials and business documentation as provided for completeness and schedules a site visit to the business.
3. City staff coordinate with GAF staff and transitions the application to GAF staff.
4. GAF staff performs necessary financial analysis, verifies credit information of all applicants, requests additional documentation as needed and completes the loan summary and credit write-up for review to the City’s Development Officer.
5. GAF loan committee makes final lending decision.
6. SBA authorizes or declines the loan as approved by GAF.
COMMITMENTS: Upon loan approval, a written commitment to lend will be sent to the applicant and copied to City staff, and GAF will complete the appropriate SBA processing documents. No loan will be closed without evidence that the terms and conditions of the loan approval have been met.
Any material change in the financial condition of the applicant, collateral or the guarantor may result in the commitment being withdrawn. GAF loans under the Grow Cincinnati Loan Fund should be closed within 30 days of SBA approval.
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Contact: Gerald Fortson, Development Officer
Phone: (513) 352-1926
Fax: (513) 352-6257
gerald.fortson@cincinnati-oh.gov
