Small Business Loan Information
HCCDC has received funding from the Nebraska Microenterprise Partnership Fund and the HUD Rural Housing Economic Development in order to offer business loan funds through a microloan fund. The microloan fund will be available in amounts up to $25,000 for small and start-up businesses that will create or retain at least one position for every $25,000 loaned. The intermediate loan fund has not yet been capitalized, but will be available in amounts up to $150,000 to new or expanding businesses that will create or retain at least one position for every $35,000 borrowed.
Loan Program Goals:
Make quality loans to businesses that will succeed in repayment of the loan so the loan pool will continuously revolve. HCCDC Business Development Center staff and Loan Board will work closely with local banks to identify business projects that have a good potential to succeed.
HCCDC Business Development Center will provide gap financing to assist the businesses and package with other resources such as local banks, Center for Rural Affairs and NENEDD loan funds.
Interest income from all funds will be used to defray the costs of staff salary, training, and loan administration.
Encourage job creation/retention.
Loan Priorities back to top
Loans will be made to new and existing businesses as well as to community development projects. Loans will only be made to projects that demonstrate the financial ability to repay the loan and/or provide sufficient assets to collateralize the loan.
The following priorities will apply:
The creation of quality jobs for tribal residents of the Reservation
Indian-owned businesses on or near the Reservation
Projects contributing directly to the economy on the Reservation
Projects furthering community development on the Reservation
Projects that will move HCCDC's Loan Fund towards self-sufficiency.
Service Area back to top
Any new or existing business or community development project that is located on or near the Winnebago Indian Reservation will be eligible to apply for a loan. Also, any Omaha, Santee Sioux, or Ponca Tribal member who lives on or near their respective reservation and who lives within the state of Nebraska who has an existing business, or has interest in starting a new business, will also be eligible to apply for a loan. "On or near the Indian Reservation" includes all areas within the legal boundaries of the Reservation, as well as those communities where a person living on the Reservation and seeking employment could reasonably be expected to commute to and from work in the course of a work-day.
Eligibility Criteria back to top
All applicants must meet the following eligibility requirements to be considered for a loan from the Fund:
The applicant must be at least 21 years of age.
The person must have their business/project in the designated service area and it must remain in that area for the life of the loan.
The business activity must be legal.
The business must be licensed/registered if required by state and/or tribal law.
The applicant must consent by agreement to their respective tribal court jurisdiction to abide to the Loan terms and agreement.
The loan must be for investment in the business, for working capital purposes, or for the purchase of fixed assets.
No funds of any kind shall be provided to entities engaged in or profiting from the manufacture or sale of alcoholic beverages.
The person must have a strong commitment and capacity to pay the loan back on time.
Generally speaking, the borrower must have a debt/equity ratio no larger than 5:1.
All Board members, Committee members, officers, and employees of HCCDC and their immediate household members shall be excluded from consideration for any loan or grant from the Fund.
All applicants shall provide their Tribal Enrollment numbers.
Fees, Rates, & Terms back to top
A 1.5% loan origin fee, which in no case will be less than $25.00, will be charged on all loans. This will be paid at the closing of the loan. Minimal fees may also be charged for required technical assistance and the client shall pay all other expenses in relation to the loan i.e., credit reports, closing costs, etc.
2. Mandatory $25.00 application fee:
Payable to HCCDC when the Loan Application is submitted.
This fee is non-refundable.
The Loan Committee can make loans to eligible borrowers at interest rates and under conditions determined by HCCDC Loan Fund to be most appropriate in achieving the goals of HCCDC. However, loans will have a minimum annual interest rate of three (3) points above the current New York Prime Rate, but in no event may the annual interest rate be above twenty (20) percent. Should the New York Prime Rate fall below six (6) percent, the minimum interest rate is not required to be raised above 9% if to do so would compromise the ability of the Fund to implement its strategy.
4. Loans between $500.00 and $1000.00:
Shall be at a rate not less than 17%, and will automatically be assessed $25.00 for loan origination, and this loan must be paid in full within one (1) year.
Loan terms for amounts above $1000.00 in value will generally not exceed seven (7) years. However, terms will be established by the Loan Committee and will be determined based on the purpose of the loan, expected repayment ability of the borrower, and the useful life of the assets being offered as collateral.
6. Late Fee:
If HCCDC does not receive any payment within 15 days of when due under the terms of the Note, the Borrower shall pay HCCDC a late fee of 5% of the payment due for each and every late payment, in addition to the accrued interest.
7. Bounced Check Fee:
Borrower agrees to pay a $25.00 fee for each bounced check.
Loan Amounts & Collateral Requirements
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1. Loan amounts:
No loan will ever exceed 25% of the total capital of the loan fund. The maximum dollar value of any loan is $50,000.
2. Collateral requirements:
The Loan Committee will consider the merits and potential economic benefits of each loan request. When appropriate, financing may be secured by liens or assignment of rights in the assets of borrowers in accordance with the following principles:
To encourage the participation of other lenders and investors, HCCDC's lien position may be subordinated and made inferior to liens securing other loans made in connection with the project.
In projects involving direct working capital loans, HCCDC will normally obtain collateral such as a first lien on inventories, receivables, fixed assets or other available assets of the borrower, i.e. a lien on the borrower's home. Such liens may be subordinated only to existing liens of record and other loans involved in the project.
HCCDC may also require security in the form of assignment of patents, licenses, and other assets with a realizable value.
For Loans valued under $1,000.00. The applicant must provide collateral for seventy-five (75%) of the loan's face value. These loans must be paid in full within one (1) year.
Applicant's who choose to utilize their on-going employment as collateral shall sign and agree to make loan payments through a payroll deduction by executing the "Payroll Deduction Authorization" form.
Hazard, liability, and flood insurance will be required where appropriate. Life insurance will be required on all principals and key employees of the business. Any owner with a 20% or more ownership interest is considered a principal for the purposes of this policy. All insurance policies will be assigned to HCCDC.
Personal guarantees may also be required from principal owners when the Loan Committee determines that sufficient collateral is not available for the loan.
Maximum collateral including ongoing employment, or, co-signor commitment form endorsed by co-signor to cover the terms of the loan agreement.
Equity in business of at least twenty (20) percent.
Generally, loan amounts in excess of $1000.00 will not exceed 90 percent of the value of the collateral offered.
(The Loan Committee will determine the discounted value of the collateral. If a potential borrower cannot offer complete collateral coverage but the Loan Committee feels the project is viable and will further the mission of the HCCDC, the amount that is not covered must be set aside from equity capital in an Unsecured Loan Fund. This fund will be in addition to the Loan Loss Reserves Fund.)
Application Process back to top
1. Pre-loan Counseling.
All start-up businesses and businesses with less than 18 months of cash-flow history must first meet with a business counselor to determine if they are ready to apply for a loan.
To be considered for a loan, all applicants must submit a completed application.
The following information is required to complete the application:
(Downloadable Forms are underlined)
HCCDC Loan Fund Application Form (right click and save link as)
Personal Financial Statement (right click and save link as)
Summary of financing needs (right click and save link as)
Description of collateral
Last three years financial information on the business with an acceptable debt-to-net income ratio of not more than 35%.
Personal and business tax returns for the last three years.
Copies of any licenses or certifications required to operate the business.
Business plan complete with marketing plan and projected financial profitability (debt-to-net income ratio must not exceed 35%).
3. HCCDC Loan Manager Review.
Once an application is received it will be reviewed by HCCDC's Loan Manager. The Loan Manager will complete the following steps in reviewing an application:
A. Determine if application is complete.
B. Request additional information if necessary.
Such additional information may include the following, when applicable:
i. Appraisals - required for land and building offered as collateral. The appraisal must be less than 6 months old and provided by a certified appraiser. This requirement may be waived if the applicant can verify the value of the land and building through the use of another documented form and the form gains Loan Committee approval.
ii. Lease agreements - required for applicants leasing property for use of their business, or applicant will be receiving lease income on a property involved in the project.
iii. Buy/Sell agreements -required if the project includes the purchase of property, an existing business, or any other fixed asset that may be used as collateral.
iv. Construction estimates -required for any construction costs in the project.
v. Financing commitment letter - required if borrower is relying on additional forms of financing for a portion of the project (e.g., banks, investors, family $$, etc.).
vi. Corporation documents - required documents for all corporations include Articles of Incorporation, By-laws, certificate of good standing from the Secretary of State office, corporate resolution authorizing the company to borrow the loan funds and designating specific offers as signatories.
vii. Bonding and Insurance documents as necessary for the project.
C. Order credit report.
D. Contact business and personal references.
E. Identify environmental issues.
(The Loan Manager will determine the level of environmental assessment needed, if any, and make sure the assessment is completed. If an assessment is necessary, the applicant will pay for any associated fees.)
F. Prepare Loan Fund Credit Memorandum (CM).
Once the Loan Manager has identified that an application is complete, they will prepare a CM to be presented to the Loan Committee. This summary will include discussion on the following:
i. HCCDC Loan Fund Application summary
ii. Loan description
iv. Projected economic impact of project
v. Portfolio impact
vi. Strengths & Weaknesses
4. Loan Committee Review.
The Loan Committee will review and approve or deny all loan applications. The process for review are as follows:
Review complete loan applications to determine the strength of the project. Five areas will be considered when evaluating a loan request:
i. Ability to repay the loan. This will include evaluating the businesses past ability to generate cash flow and pay debts, projected sales and income of the project relative to expenses, the amount of equity the applicant would contribute, and the applicant's credit history.
ii. Market factors. Consideration will be given to the market environment that the applicant will be subject to and the applicant's marketing strategy.
iii. Management ability. The background and experience of key personnel, including management and owners, will be evaluated.
iv. Collateral. The amount and type of collateral being offered will be evaluated.
v. Furthering the mission of the HCCDC. The project must, and the extent to which it does so will be taken into consideration.
Evaluate loan to determine to what extent it will further the mission of the HCCDC. All projects must further the goals and mission of the HCCDC in order to be approved.
Evaluate affect of loan on overall portfolio to determine whether providing the loan would lead to an imbalanced portfolio. Other things such as amount of loan for working capital, exposure to a single borrower or industry, and amount of loan relative to the existing capital base of the Fund will be considered.
Attend Loan Committee meeting and make a loan decision based on the committee's findings and Loan Manager's CM.
Provide written notice for internal purposes through use of Loan Request Summary Form and to inform the applicant of their loan decision.
Make recommendations to the Board of Directors regarding the advisability of making loans to potential borrowers, setting forth specific loan conditions, restructuring of loans, and/or collection procedures, and carry out other duties as assigned to it by the Board.
5. Appeal Process.
If an applicant should disagree with the decision of the Loan Committee, an appeal can be made according to the following process:
A written request to appeal a loan decision must first be made to the Loan Committee within thirty (30) days of the date of the first denial letter. The written request must state why the appeal is being made. The applicant will have an opportunity to meet directly with the Loan Committee within thirty (30) days of the written appeal to state their case in person, should they desire. The Loan Committee will again provide written notice of their decision to the applicant.
If the loan is denied a second time, the applicant may appeal directly to the HCCDC's Board of Directors. This appeal must be made in writing within thirty (30) days of receiving the second denial letter from the Loan Committee. Again, the applicant will have a chance to meet in person with the Board of Directors, if they desire. If the loan is denied a third time, all appeals will be exhausted and the loan will no longer be considered.
Post-Loan Approval, Loan Closing
and Disbursement Process
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1. Prepare Loan Agreement.
Once a loan is approved by the Loan Committee, the Loan Manager will draw up the loan agreement. The loan agreement will describe the terms of the loan, security required, events of default, reporting requirements of the borrower, loan disbursement schedule, and other requirements related to the project and the Loan Committee's approval.
2. Loan Approval Session.
Once the loan agreement has been prepared, the Loan Manager will meet with the borrower(s) to review the terms of the loan and loan policies and procedures. The Borrower will also be informed of additional documents, certifications, letters of commitment, insurances, etc. that are required prior to the loan closing.
3. Prepare Closing Documents & Schedule Loan Closing Date. The Loan Manager will prepare the closing documents. For all loans this will include a promissory note, a security agreement, and an authorization for electronic funds transfer. Additional closing documents may include personal guarantees, lease or contract assignments, technical assistant agreement, payroll deduction agreement, or other agreements that may be stipulated by the Loan Committee as a condition of the loan. Once all documents are prepared and additional requirements from the borrower are satisfied, a closing date will be set.
4. Loan Closing.
Loan closings will ordinarily take place at the HCCDC offices, unless otherwise set up by the Loan Manager. At the loan closing, the Loan Manager and borrower meet together to review and sign the loan documents. The manager will review the process for requesting funds and making payments.
5. Disbursement of Funds.
Borrowers must submit a letter of request for loan funds. The letter must describe the exact use of the funds and supporting documentation. Funds will be provided only when they are needed. Whenever possible, loan funds will be disbursed directly to vendors and suppliers. The loan agreement will describe any special requirements governing the disbursement of funds, such as those related to working capital or construction loans.
Loan Payment & Monitoring back to top
1. Loan Payments.
Borrowers will make payments to the appropriate HCCDC account at the bank branch specified by HCCDC on or before the due date. All borrowers who agree to a loan must establish an Automatic Check Handling (ACH) account with the specified bank. The ACH account offers payment expediency and shall be enforced by the Loan Manager.
2. Financial Reporting Requirements.
Financial statements will be required according to the loan agreement. During the first year of a loan, new businesses typically will be required to submit a monthly income statement and balance sheet. Existing businesses may not be required to report as often, but at a minimum, all borrowers will be required to provide annual financial statements. Copies of tax returns will also be required annually for all borrowers.
3. Phone Contact & Site Visits.
Borrowers receiving their first loan should be contacted within 30-60 days after the first disbursement to verify that they have used the loan proceeds for the specified purpose, and determine whether they need any additional technical assistance. Individual borrowers will be contacted periodically by phone to monitor the status of their business and provide technical assistance if needed. The Loan Manager will visit the site of each borrower at least once a year. This visit will include inspection of collateral, verification of the use of loan proceeds, and answering any questions the borrower may have concerning their loan.
4. Monthly/Quarterly Loan Review.
The Loan Manager shall prepare a monthly loan status report to measure the overall fund account. An aggregate report will be conducted quarterly. This report will review the loan fund and to determine compliance with loan terms and any applicable Federal requirements. This will include a verification of insurance, monitoring and renewal of UCC filings as required, and compliance with any technical assistance agreement. The Loan Manager shall prepare and present this report to the Loan Committee on a quarterly basis.
The quarterly report shall contain the following:
Total capital not on loan or committed.
Total capital on loan and fully disbursed.
Cost of investor funds, present interest spread of capital on loan and capital in holding accounts.
Capital available for lending based on liquidity requirements.
Maximum loan to any single borrower and their related entities.
Loan loss reserve level and as a percentage of exposed capital.
Detailing of available capital by amount term, and cost.
Detailing of investments due to be repaid within 90 days.
Listing of each loan including the following:
|Name of Borrower
|Original Amount of Loan
|Collateral and Value
Late Payment & Collection Procedures
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1. Late Fee.
Payments that are not received by the 10th day past a scheduled payment date will be assessed a $25 late fee.
2. 1st Collection Letter.
If payment is not received by the 10th day past a scheduled payment date, the first collection letter will be mailed to the borrower. The borrower will also be contacted by phone.
3. 2nd Collection Letter.
If payment is not received within 30 days of the scheduled payment date, a second collection letter will be mailed. The Loan Manager will visit the borrower to discuss the situation.
4. Letter of Default.
If payment is not received after 60 days of the scheduled payment date and the borrower has failed to address the issue with the Loan Manager, a letter of default will be issued to the borrower.
If payment is not received after 90 days from the scheduled payment date and no payment plan has been agreed to with the borrower, then the loan will be considered in default and legal proceedings against the borrower will be pursued. Recovery will be pursued to the full extent of the law.
HCCDC may utilize outside collection agencies if all past efforts to collect money due have been exhausted.
The Executive Director has discretionary authority to submit delinquent debts (over 90 days) to an outside collection agency.
6. Loan Restructuring.
Borrowers with past due, delinquent, or defaulted loans will be considered for restructure if the borrower is in contact with the Loan Manager and only if the restructuring benefits the goals of the HCCDC.
7. Loan files and documentation.
The Loan Manager will maintain a separate file for each loan made. These files will include all loan documents, documentation of contact with the borrower, relevant Loan Committee documents, required reporting documents, payment information, and any other documents relevant to the loan. Files are confidential unless an explicit release is obtained from the identified borrower. Files shall be maintained for five years.
The aforementioned Loan guidelines are subject to change without prior notice. All Loan guidelines policies and procedures are subject to amendment, revision, and or termination with the approval of the director of HCCDC. Lastly, the Loan Fund shall follow all rules and regulations and all other applicable federal, state, private foundation, and local laws and regulations as identified by those funds derived from a Grant Program Agreement.