Casselton Businesses May Apply for N.D. Opportunity Fund Loans
The North Dakota Opportunity Fund is accepting applications for small business loans to assist with start-ups and expansions. Led by the City of Mandan, a consortium of 38 municipalities including Casselton was approved in late 2012 for a $9.7 million allocation from the U.S. Treasury Small Business Credit Initiative for the loan participation program for small businesses.
Since loan documents were approved in November, the N.D. Opportunity Fund loan committee has approved financing for six businesses. More loan applications are welcome.
Business projects need to be located in or provide benefit to a participating city or tribe to be eligible for the loan program. Participating municipalities are the cities of Almont, Beach, Beulah, Bismarck, Bowman, Carson, Casselton, Crosby, Dickinson, Dodge, Dunn Center, Fargo, Garrison, Glen Ullin, Halliday, Hazelton, Hazen, Hebron, Hettinger, Killdeer, Lincoln, Linton, Mandan, McClusky, Minot, Mott, New England, New Salem, Regent, Sentinel Butte, Steele, Turtle Lake, Underwood, Watford City, West Fargo, Williston and Wilton, as well as the Standing Rock Sioux Tribe.
The Lewis and Clark Regional Development Council serves as the loan program administrator. LCRDC Director of Commercial Lending Brent Ekstrom explains that the new loan program complements traditional commercial lending services and helps businesses by reducing owner equity requirements. Where banks may require 20 or 30 percent cash upfront for beginning businesses, this program requires a minimum 10 percent down and fills the gap between what a bank will lend and what the entrepreneur has available. “The program will help launch new businesses and grow existing ones that otherwise might not happen because the business may not have enough funds to invest in the project,” Ekstrom says.
As dollars are loaned to businesses, repayments from recipients will replenish the program fund, allowing it to revolve and continue to provide assistance for years to come.
To apply and for more information, contact the Lewis and Clark Regional Development Council at 701-667-7620 or send an e-mail to firstname.lastname@example.org. Lenders in participating communities may also request training sessions to become certified to participate in the program.
LOAN PROGRAM PARAMETERS
Eligible Uses. Uses for loan funds may include:
- construction of commercial buildings,
- working capital,
- franchise fees
- purchase, construction, renovation or improvements of an eligible place of business, and
- interim financing for Small Business Administration loans under its 504 loan program.
It is not limited to manufacturing, processing or other businesses that generate new wealth. Lending is allowed to retail and service businesses, too. Loans are allowed on real estate if primarily owner-occupied, but not if generally for sale, lease or investment.
Other ineligible uses include:
- refinancing of existing debt,
- any payment of taxes,
- reimbursement of an equity injection,
- purchase of an business ownership interest beyond the physical assets, and
- the unguaranteed portion of SBA-guaranteed loans.
Credit Criteria. Businesses must:
- show the ability to service the debt and conduct business,
- show a commitment to the project,
- provide satisfactory payment history with other lenders/creditors
- have a satisfactory credit history, and
- offer acceptable collateral.
Rates. The N.D. Opportunity Fund loan participation program offers rates ranging from 4 percent to market rate. Projects that have the highest development impact or provide assistance to under-served persons, or businesses impacted by natural disaster, are eligible for the most attractive rates.
Terms. The length of a loan varies by asset type: 10 to 20 years for real estate, 3 to 10 years for machinery and equipment, 1 to 5 years for inventory and working capital, and about 18 to 24 months for construction loans.
Fees. The borrower is required to pay a $100 application fee and up to a 2 percent origination fee with payment required for all hard costs including mortgage filing fees, lien fees, title searches and credit reporting fees.
Collateral. All loans must be secured. Security arrangements are determined on a project-by-project basis. The program will allow for loans of up to 100 percent of the value of collateral.
Loan Maximums. The N.D. Opportunity Fund cannot loan more than $1 million to any business nor can it provide financing for more than 50 percent of the proposed project costs. The program targets an average borrower with fewer than 500 employees and cannot be extended to borrowers with more than 750 employees.
Private Lending. A private lender must have at least 20 percent of the financing for the business project at risk. The private lender will typically originate a senior loan and the N.D. Opportunity Fund will provide for a second, subordinate loan to the same borrower.
Private Leverage. The program must ultimately leverage the federal dollars to generate at least $10 in new small business investment for every $1 of support through the N.D. Opportunity Fund.