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CITY OF MUSKEGON
ECONOMIC DEVELOPMENT REVOLVING FUND
PROGRAM POLICIES AND GUIDELINES
PURPOSE
The purpose of the City of Muskegon Revolving Loan Fund is to promote economic
development in the City of Muskegon through the provision of capital for new and
expanding locally-sited businesses, with a speciaf emphasis on minority and female
entrepreneurship. The Revolving Loan Fund is intended to supplement but in no way
replace conventional financing sources. ‘
POLICY
Financing will be-made available for sound business purposes where there is a
reasonable expectation of repayment, but where conventional lenders are unwilling or
unable either to accept the total risk or to make financing available under terms and
conditions which the applicant can afford. Priority under the program will be assigned to
ventures with conventional participation and minimal use of public funds either for the
project itself or for supporting public improvements. Principal and interest repayments
on loans from the Fund will revert to the Fund for support of similar activities.
In extraordinary circumstances, the Fund may be used to finance public improvements
necessary to support private developments, where those improvements are critical to the
success of the project, and where the overall developmerit will result in creation of
permanent, full-time jobs. The Fund, however, is intended to be permanent and self-
sustaining, and no disbursements should be made without the expectation of full and
timely repayment.
I. ELIGIBLE ACTIVITIES
Loans from the Revolving Loan Fund can be used to finance acquisition and
development, including land acquisitions as weil as rehabilitation, modernization,
and conversion of existing facilities and purchase of machinery and equipment.
‘Working capital loans will only. be made if essential to the creation or retention of
_ jobs. Project must conformgic ‘local zoning and/or building codes.
Loans may be used to finance industrial, commercial and muiti-family residential
development which is conformance with the properties and restrictions
established for this program.
A. Industrial Development
1. Job Creation or Retention — It shall be a goal to establish or
retain one permanent job for Muskegon residents for each
$15,000 in financing provided by the Fund. Projects involving
the hiring of City residents or long-term unemployed will be
more favorably considered.
2. Project Location — Preference will be given to industrial
projects which promote sound land use planning in one or
more of the following ways: (i) location of a new industry in an
industrial park; (ii) relocation of an industry to achieve
conformance with an official land use plan; (iii) reuse,
renovation, or modemization of facilities currently located in
areas appropriately zoned.
3. Type of Industry — Priority will be assigned to growth industries
with little or no negative impact on the environment.
B. Commercial Development
1. Job Creation or Retention — !t shall be a goal to establish or
retain one permanent job for Muskegon residents for each
$15,000 in financing provided by the Fund. Projects involving
the hiring of City residents or long-term unemployed will be for
favorably considered.
2. Project Location — Preference will be given to financing for
commercial development projects to be located either in the
downtown, or on the lakefront and in conformance with official
land use plans. Also, preference will be given to projects
involving the renovation or preservation of historic or
architecturally significant structures.
3. Type of Business — Priority will be assigned to commercial
development which contributes to a diversification of the area
economy, with little or no negative impact on the environment.
C. Residential Development a
aw.
Preference will be given to financing for market rate commercial
housing to be’ located in the downtown. Also preferences will be
given to projects involving the renovation of preservation of
historic or architecturally significant structures.
i. LOAN POLICIES
A. Assistance from the Revolving Fund may be made available in the form of
loans or loan guarantees, under terms established by the City
Commission with the advice of the Loan Fund Advisory Committee. All
loans should be secured by assets having a value equal to or exceeding
the loan amount. No loan or loan guarantee shail be extended if funds
are otherwise available from private lenders or other federal agencies on
terms which will permit the accomplishment of the project.
It is the City’s intent that the RLF loan portfolio be well diversified.
Accordingly no single loan or series of loans to a single recipient will be
allowed which exceeds twenty percent (20%) of the net collectible assets
of the Revolving Loan Fund, with the exception of a significant public
— private partnership project {in which case the amount may exceed
20%).
The applicant shall provide at least twenty percent (20%) equity in the
total business or project. It is the intent of this program that loans be
made to supplement
(but not replace) private financing where such
private financing alone is insufficient to make otherwise worthwhile
projects feasible. Accordingly, no loan will be made unless private
financing equal to at least fifty percent (50%) of the total project cost has
been secured (or can be confirmed contingent upon RLF loan approval).
No more than thirty percent (30%) of total project costs should be
provided by the Revolving Fund for a new business, or forty percent
(40%) of total assets for expansion of an existing business. “Total
Assets” as used here includes those assets anticipated to be purchased
or constructed with proceeds of the requested loan. Interest rates will
normally be set at one-half of the prime rate (as quoted in the daily Wall
Street Joumal) plus two percent (2%). The term of a loan shall not
exceed five (5) years, or three-fourths of the estimated economic life of
the structure, whichever is less. A loan to a tenant.may not extend
beyond the unexpired term of the lease, excluding any options to extend
the term of the lease that have not been exercised prior to loan approval.
Applicants will be required to submit a business plan, financial
statements, including balance sheets, income statements, and supporting
statements, for the applicant's three (3) most recent fiscal years. A credit
check will be conducted on all applicants and may be used in determining
the applicant's credit worthiness. In addition, the City will require
submission of projected pro forma balance sheets and income
Statements, cash flow, and supporting statements of the applicant on a
quarterly basis. Applicants may also be -required to submit additional!
information as determifiéd by the City or the Advisory Committee.
Loan conditions will include the following, as determined by the City:
4, Fire, hazard, and normal business insurance on all assets for the
term of the loan;
2. Subordination of the applicant’s shareholder debt and all debts of
shareholders to the loan;
3. Restrictions on salaries and dividends during the term of the loan;
4. Personal guarantees (including spouses and security in other
assets);
5. Such other conditions as the City determines are necessary to
assure the safety and soundness of the loan.
6. Favorable credit check;
7. Adherence to the City of Muskegon’s Affirmative Action policies
and goals, including submission of an up-to-date affirmative action
plan; and
8. Current and projected employment profile detailing place of
residence, racial and gender characieristics, and employee
classifications.
F. Loans will be approved only on the condition that the applicant not
relocate facilities or employment outside of the City of Muskegon during
the term of the loan. To the extent possible, loans will be approved only if
it can be demonstrated that the collateral exceeds the loan amount.
G. Principal and interest payments will commence on the date(s) set by the
City. The applicant must submit quarterly financial statements in
conformance with Generally Accepted Accounting Principles (GAAP).
ADDITIONAL LOANS
The RLF is intended to be a one time financing.source for business start-ups and
expansions. Requests for additional financing from the RLF will only be
considered under extraordinary circumstances. Such requests, in addition to
meeting all of the aforementioned loan criteria, will be considered only if (a) at
least fifty percent (50%) of the original loan balance has been repaid; and (b) all
payments required under the original loan repayment schedule were made in a
timely fashion.
LOAN FUND ADMINISTRATION
Prior to making any loan commitment from the Revolving Fund, the City will first
obtain the advice of the Loan Fund Advisory Committee (LFAC), a committee of
five members appointed by. jhe Mayor and Commission approval. Membership
on the committee will be as follows:
A. Two representatives from the City Commission;
B One representative from area financial institutions;
C. One public sector representative; and
D The Finance Director or Designee.
V. EXTRAORDINARY CIRCUMSTANCES
A. It is the intent of the City Commission that all loans conform to the policies
and guidelines outlined herein. Accordingly, each loan application
submitted to the City Commission for approval must include a summary
“scoresheet” indicating whether or not the proposed loan adheres to each
of the specific policies and guidelinesin this document.
Notwithstanding the above, it is recognized that the assets of the
Revolving Loan Fund may be used for projects or purposes not
contemplated here or for loans that do not meet all of the policies and
guidelines outlined. In such cases, approval by a two-thirds majority of
the City Commission will be necessary. Commission approval shall be
required for the use of funds for public improvements, purchase of land or
equipment by the City, or other public purposes.
91-86e
Economic Development Revolving Loan Fund Policy 1
Aye ndment M0O2- mel) 8-27-91
Adopted June 11, 2002.
tox. Kets
Gail A. Kundinger
Eity Clerk
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