Revolving Loan Fund

GOALS AND OBJECTIVES

The Revolving Loan Fund was established to provide financial assistance to new or expanding businesses in Montgomery and to secure public benefit for the residents of Montgomery by developing a stronger economic base and expanded job opportunities. Use of the funds is governed by a variety of rules and regulations mandated by the State and Federal agencies that provided the original grants to the Village as well as by policies adopted by the Village Board.

The mission of the Revolving Loan Fund is as follows:

  • To assist short-term economic development by supporting projects that create and retain jobs.
  • To encourage growth and involvement of area financial institutions through joint efforts to make feasible projects which would otherwise not be undertaken.
  • To assist long-term economic development by supporting projects which protect the existing tax base and which seek to expand it.
  • To insure the financial and programmatic integrity for the Revolving Loan Fund through appropriate due diligence in the use of the funds.

STRATEGY

The following strategy describes the way in which the Revolving Loan Fund will achieve its
stated goals.

  • Eligible Uses of Funds. Funds will not be disbursed nor used for activities not considered as eligible under the effective regulations. Funds may be used to assist for-profit and not-for-profit firms to carry out economic development projects. Generally, funds will be loaned to the borrower at agreed upon terms.
  • The borrower may use the funds for land acquisition; acquisition, construction, reconstruction, installation or rehabilitation of commercial or industrial buildings, structures and other real property, equipment and improvements; and working capital expenses, limited to the following: inventory, employee salaries, general operational expenses and advertising/marketing expenses.

Funds may not be used to help service or refinance existing debt. In addition, the funds may be used to finance public facilities and improvements in support of economic development activities.

  • Geographic Area. Recaptured funds will be expended for projects which are located in the corporate limits of the Village of Montgomery or which are outside those limits and for which an annexation agreement is executed.
  • Targeting of Funds. As stated, the Revolving Loan Fund was established to provide financial assistance to new or expanding businesses in Montgomery and to secure public benefit for the residents of the Village by developing a stronger economic base and expanded job opportunities with special emphasis on minority and female owned businesses. Assistance is available to service commercial sector, industrial and retail business.
  • How Applications are Generated. The application process is initiated by contacting the Office of the Village Administrator at the Village Hall.

MANAGEMENT PLAN

  • Decision Making Process. The fund is managed by an independent Board of Directors appointed by the Village President with advice and consent of the Village Board. Recommendations are made by this Board to the Village Board. The Village Board maintains full responsibility for the funding actions.
  • Revolving Loan Fund Staffing. The Revolving Loan Fund will receive staff support from the Village Administrator. Services will include all record keeping, i.e. applications, meeting notes, loan documents, etc. In addition, Village staff will be responsible for maintaining all budget and financial records required to meet the Village’s audit needs.

As indicated, application process is initiated through contact with the Village Administrator’s Office at Village Hall. The applicant’s project is first considered by the Village Administrator to determine if the project will satisfy all of the State and federal requirements. If there are problem areas, the Village Administrator will assist the applicant in effecting satisfactory resolution. When it is determined that the project satisfactorily addresses all of State and Federal compliance areas, the projects will be considered as pre-qualified for the Revolving Loan Fund.

The Village Administrator and or professional consultants are available to advise applicants on meeting pre-qualification requirements and to assist in assembling the final documents required by the Board.

  • Loan Servicing and Monitoring. The Village is responsible for monitoring for continuing compliance with provisions of loan agreements with all borrowers. In the case of an incident of non-payment, the Village has enforcement and corrective actions included in
    the loan documents. If a loan is 20 days past due, a documented telephone contact is made. If a loan is 40 days past due, a written notification is forwarded to the company. If the payment is more than 60 days past due the matter is referred to the Village Attorney.

POLICIES

  • Borrowers should generally be established companies under existing owners who wish to expand or new owners of established firms.
  • Start-up businesses will be funded when owner equity investment and/or previous successful entrepreneur experience are sufficient to make success a reasonable probability.
  • A deposit of $2000 will be required upon submittal of borrower documents for review. This deposit will be refunded at the time of closing on the loan. However, if after the application has been made, the borrower does not actually take the loan, the deposit will be kept and added to the Revolving Loan Fund to pay for the consultant and legal fees accumulated during the process.
  • In any case, the borrower shall be responsible for the cost of filing fees, recording fees, title search, etc. that are not part of the loan itself.
  • Any or all fees and deposits may be waived at the discretion of the Montgomery Board of Trustees.
  • Any type of business may be funded that can legally be operated in Montgomery except pure real estate projects.
  • Uses of borrowed funds can be for long-term assets, including real estate, short-term assets and permanent working capital.
  • Two or more lenders should participate in every project.
  • The Revolving Loan Fund will rely on the lead lender for due diligence and it will make commitments only following completion of due diligence.
  • Revolving Loan Fund participation in any project may not exceed 50 percent of the total project.
  • Term, rate and collateral will be determined by the Board, within guidelines and limitations provided by program requirements, or Village Board action. Acceptable collateral may include a subordinated position. Generally, the term for working capital will be 5 years; equipment purchase 7 years; and, land and/or building 10-15 years.
  • Job creation requirements will be satisfied through the creation or retention of one full time equivalent job for up to $15,000 of Revolving Loan Fund assistance.
  • Revolving Loan Funds must principally benefit low and moderate-income persons. At least 51 percent of fund must be used to benefit low and moderate income persons as per criteria distributed by the Illinois Department of Commerce and Community Affairs. Benefit is documented by either WIA income eligibility or completion of the Income Certification Form.

ASSURANCES

  • Administrative Costs. Administration of the Revolving Loan Fund includes accounting for repayments to the fund, monitoring continuing compliance and assistance to prospective borrowers in the application process as well as project development. Up to 10 percent of annual revenue to the Fund may be used to cover administrative costs. All RLF funds used for administrative costs will be documented.
  • Low and Moderate Income Benefit. The use of Revolving Loan Funds must principally benefit low and moderate-income persons. At least 51 percent of the jobs created or retained, per project, must be for funds must be for low and moderate-income persons as defined by HUD Section 8 Income Limits. Benefit is documented by either WIA income eligibility or completion of Income Certification Forms.
  • Semi-Annual Reports. The Village of Montgomery will report semi-annually to the Department of Commerce and Community Affairs on the status of the Revolving Loan Fund.
  • Changes to Recapture Statement. The Village of Montgomery will submit any changes to the Department of Commerce and Community Affairs for its approval.