BUSINESS ATTRACTION LOAN
GUARANTEE PROGRAM
ADOPTED JUNE 6, 2002
1. Purpose:
The BUSINESS ATTRACTION LOAN GUARANTEE PROGRAM is a loan guarantee program administered by the Mason Downtown Development Authority (“MDDA”) to assist new business start-ups within and relocation of existing enterprises to the Downtown Development District.
This loan guarantee program is designed to be used in conjunction with other financing/funds such as bank loans and investment by the business owner.
MDDA will guarantee only a portion of the borrowed funds, but the guarantee can be an integral part of a business’ overall financing package, leveraging and attracting significant amounts of private sector dollars and mitigating a lender’s repayment or collateral risk.
2. Loan Guarantee Criteria:
Size: A loan guarantee will not exceed $25,000 or 16% of the loan being guaranteed, whichever is less
Leveraging: There must be at least six dollars invested in a project for every dollar of the loan guaranteed by MDDA
Non-refundable Application Fee: $100 to be paid at time of application for a guarantee
Length of Guarantee: Not to exceed five years
Terms of underlying loan: Term of loan not to exceed five years. Amortization of loan not to exceed fifteen years
3. Collateral:
The borrower will indemnify and hold harmless MDDA from any and all loss suffered as a result of a lender enforcing the guarantee obligation of the MDDA. This indemnification will be secured. Collateral for the loan guarantee indemnification may include liens on real property, machinery and equipment, lease assignments, inventory and/or receivables.
4. Guarantees:
Personal guarantees of the loan guarantee indemnification will be required.
The applicant will covenant that all applicable real and personal property taxes will be paid prior to the imposition of interest or penalties during the term of the guarantee.
5. Authorization:
By signing and submitting an application for a loan guarantee, the applicant authorizes MDDA to verify the applicant’s past and present employment earnings records, bank accounts, stock holdings and any other asset balances that are needed to process the loan guarantee application and further authorizes MDDA to order a consumer credit report and verify other credit information, including past and present mortgage and lender references. The applicant also authorizes the lender to share with MDDA any such information obtained by the lender. This information will only be used by MDDA to process the loan guarantee application.
6. Underwriting process:
A signed application will be submitted to the MDDA Executive Director who will review the application to determine if it is complete. The Director will submit a completed application to the MDDA executive committee for review. The executive committee will then refer the completed application to the MDDA board of directors with a recommendation. The MDDA board will attempt to rule on an application within 60 days after the completed application has been submitted.
7. Eligibility:
To be eligible, the applicant must be starting a new business within the Downtown Development District, relocating a business to the District or expanding a business so as to add a business location within the District.
Applications will be considered from those planning to purchase a building as well as those who intend to lease a building. Applicants must have a written commitment for a business location within the Downtown Development District before an application will be considered.
8. Use of Proceeds:
Proceeds of a loan to be guaranteed by MDDA, in conjunction with private sector dollars, may be used for real estate acquisition, furniture, machinery and equipment, trade fixtures, leasehold improvements, signage, inventory, working capital and such other use or uses as may be approved by MDDA. Loan proceeds cannot be used to refinance existing debt. The assets for which the proceeds are disbursed together with their replacements must be maintained within the MDDA District until the guarantee has been released. Multi-location businesses shall use loan proceeds only for assets which are sited within the MDDA District.
9. Conditions of eligibility:
a. Validly existing borrowing entity in good standing with the State of Michigan.
b. The applicant must agree to retain the activity being financed for the term of the loan being guaranteed. Sale or transfer of the borrower or the borrower’s business or the removal of the business from the MDDA District will constitute a default of the loan guarantee indemnification.
10. Application process:
An applicant will complete an application substantially in the form attached and deliver it with all necessary attachments and exhibits to the MDDA Executive Director.
The application will be reviewed by MDDA Executive Director who will notify the applicant whether or not the application appears to meet the program objectives and will be accepted for consideration.
11. Application contents:
a. Application substantially in the attached form
b. A narrative description of the proposed business including a detailed description of funding needs and proposed funding sources, the proposed use of funds, and jobs to be created
c. Identification of the proposed location for the business together with evidence of land control
d. A business plan outlining the nature of the proposed business and its financing needs and containing income and expense projections for at least five years
e. Copies of any application for private financing with all supporting documents
f. Financial statements for last two years for a business proposing to relocate or expand
g. Financial statements for the borrower and any proposed guarantors
h. Authorization to verify financial information and employment and to obtain credit reports
i. A commitment from a lender setting forth the terms of the proposed loan and the
lender’s requirements with respect to an MDDA guarantee.
12. Historic District Commission:
Many of the buildings in the Downtown Development District are also in the Historic
District. The City’s Historic District Ordinance requires that certain building modifications be approved by the Historic District Commission (HDC). Upon preliminary approval by MDDA of a loan guarantee application, the applicant will apply, as required, for HDC approval. The MDDA Director will assist the applicant in applying to the HDC for a certificate of appropriateness by providing the applicant with the necessary forms, by obtaining answers to any questions the applicant may have, and by facilitating the process wherever possible.
13. Approval:
MDDA may issue a preliminary approval of the loan guarantee application. Final approval of a loan guarantee will be made only if MDDA has received a final commitment from each private lender investing in the project. Final approval will be in writing and will include all closing requirements and loan guarantee covenants then known to MDDA.
14. Closing:
MDDA will execute and deliver its guarantee on the date of loan closing with the private lender involved in the project whose loan is being guaranteed. At closing, the applicant will execute all closing documents required by MDDA including such Assurance Statement as MDDA may require. The applicant will pay all filing and/or recording fees necessary to create or perfect any interest in the collateral.
15. Guarantee Reserve Fund:
is prudent and appropriate in connection with the contingent liability undertaken by MDDA as a result of a loan guarantee. This amount shall be so designated on the financial books and records of MDDA in accordance with recognized accounting practices at the time the guarantee is executed and delivered. MDDA may adjust this amount periodically as it deems appropriate based on the performance and standing of the applicant at the time of review. To facilitate this review, the applicant will be required to allow MDDA to review the applicant’s financial records as requested by MDDA and to provide MDDA with such reports as reasonably requested by MDDA.
16. Assistance of MDDA:
The MDDA director will refer the applicant to resource persons or entities known by MDDA who may assist the applicant in preparing the application and supporting documents.
17. Discretion of MDDA:
Each applicant will
understand that MDDA may, in its sole and absolute discretion, approve or
reject any application.