Hendrick County Economic Development Partnership

Micro Enterprise

PROGRAM

Philosophy:

The Hendricks County Economic Development Partnership (Partnership) Microenterprise Revolving Loan Program (MRLP) is being created to carry out the organization’s mission: to increase compatible investment in Hendricks County by existing and new businesses. The Partnership accomplishes its mission by fostering a public-private cooperative spirit that provides cohesive leadership for countywide marketing and development. The Partnership hopes to achieve its mission through the MRLP by fostering an entrepreneurial spirit and encourage economic self-sufficiency through the start-up and growth of small business and self-employment opportunities in Hendricks County. In an effort to expand the diversity of the economic base in Hendricks County, loan priority will be given to women and minority-owned businesses.

Eligibility:

Criteria to determine eligibility for the MRLP:

1. Submission of a draft business plan

2. Principal business location and residency in Hendricks County

3. Applicant/business owner must be 18 Years of age or older

4. MRLP funds will be used for permitted business purpose

5. Business is structured legally in the form most suitable for the business

6. Business Plan demonstrates need for MRLP financing, and projects sufficient income to repay interest and principal within designated time period

Loan Applications Process:

Application - The business owner is responsible for completing the loan application. The MRLP staff can provide assistance with the loan application and the Business Plan.  Verification - The MRLP loan review committee obtains a credit report from a credit-reporting agency prior to the loan review committee meeting. A minimum of (3) three business and three (3) personal references must be listed and verified on the application. All credit and personal references will be checked. A site visit may be made to the business to verify business address and type of activity.

Loan Application Contents

1. Income Statements and Balance Sheets, business income tax returns (federal & state) for up to the prior 3 years

2. Personal Financial Statements & Copies of personal tax returns (federal & state) for up to the prior 3 years

3. Resume of each principal

4. Source and Use of funds

5. Description of collateral used to secure financing

6. Description of the business

7. Credit Report

8. Agreement to on-going business counseling

Restrictions

1. Paying Property Taxes

2. Paying personal or business income taxes

3. Acquiring land

4. Paying off credit card debt

5. Promoting religious or specific ideological beliefs or activities

6. Funding business which are not socially acceptable in the local community

Analysis of the market

1. Marketing and business strategy

2. Organizational plan

3. Measurable financial objectives, and description of how loan will help accomplish the financial objectives

4. All applicable and appropriate local, state, and federal licenses, permits, registrations, and other papers and reports of business income for tax purposes. If a client has not yet reported business income, they must prove they are in the process of contracting the services of an accountant to begin reporting their business income.

Loan Review Committee:

Committee Membership - The MRLP loan committee (hereafter referred to as "Committee") is made up of a representative of the Partnership, a banker, an accountant, a small business owner, and an elected representative from an incorporated town.

Loan Decisions - After a review of the information, the Committee will examine each application that is brought before them and agree to either approve or deny the loan. Loan requests that receive favorable votes from at least three of the five voting members of the Committee will be granted a loan. The applicant will be notified of the decision of the Committee by letter within three (3) business working days. If approved the applicant will be notified as to whom to contact to process the loan. If denied, the applicant will be notified that they may resubmit another application after a thirty (30) day waiting period.

Amount of the Loans:

No loan shall exceed $10,000.00.

Additional Fees:

A $25.00 application fee will be required.

Type of Loans:

Installment loans with amortization schedules not to exceed five years.  Interest is calculated on the basis of a year of 365/360 days and actual days elapsed.

Loan Terms:

The interest rate on installment loans will be determined by the Committee and the business owner and will be from prime to prime plus 4 points. Prime will be the highest rate reported by the Wall Street Journal for Money Center Banks. The Committee and the business owner will determine the specific length of the payback for a business.

Collateral:

MRLP may require collateral of an amount equal to the loan. The following are acceptable collateral:

1. Automobiles

2. Business equipment and machinery

3. Real estate

4. Savings accounts

5. Inventory

6. Receivables

7. General Business Intangibles

8. Other personal property of value

Guarantor:

All business owners will be required to sign a personal guarantee. If a business qualifies for a loan but lacks sufficient collateral, the business owner may also have another individual guarantee the loan. The guarantors will be held responsible for paying back the loan in the event the applicant fails to repay the debt.

Loan Closing:

Loan Documentation - At the time a loan is approved by the Loan Review Committee, the Partnership will prepare a commitment letter specific to the transaction which will confirm to the details of the loan as approved, and which will outline for the borrower the documents which will be necessary in order to close the loan.  Closing - The Partnership will draw up a set of documents to close with the borrower, including a promissory note, resolutions and all collateral documents.  The Partnership will draw up or create a payment book or invoice for Partnership to invoice the borrower. The borrower will need to show proof of collateral and other necessary documents for closing.  The Partnership will give the borrower the loan amount by check. The Partnership will be drawing funds from a segregated account named “Microenterprise Loan Program.”

Loan Administration/Monitoring:

Administration - A payment book or invoice will be drawn up with the borrower's name and Partnership's name on the invoice. The Partnership will invoice the borrower on a monthly basis. Principal and interest due on installment loans will be payable monthly in equal installments by the borrower. The borrower would make payments to the Partnership. Upon receiving the payment from the borrower, the Partnership will record the payment of (P+I).  Monitoring - The Partnership’s Executive Director will conduct a site visit shortly after the check is issued to verify that the loan proceeds were used as stipulated in the loan application. Monthly loan payments are due on the due date specified for each month. A grace period beyond the due date stated on the promissory note will be given to each borrower and payments received during the grace period will not accrue a late fee.  The Executive Director will contact any borrower who fails to make a payment on the due date. The Executive Director will determine if the borrower will be able to make the payment prior to the end of the loan grace period. If it is determined by the Executive Director that the borrower will be unable to meet the loan payment due date the Executive Director will schedule a visit to the business by a Committee member. The Committee member will try to assess the problem and recommend steps and provide assistance from MRLP to the borrower to help resolve the problem. The Committee member will inform the Executive Director of the steps which the borrower is taking to resolve the situation. The Executive Director will inform the entire Committee of the situation and the actions being taken by the borrower and Partnership to help resolve the problem.  If it is deemed justified by the Committee, the borrower will submit quarterly financial statements to Partnership Board of Directors until the borrower is able to meet the monthly loan payments. Every effort will be made to work with the borrower to avoid going into default.  The Executive Director will prepare a monthly report listing all accounts 30 or more days delinquent. The Committee and Partnership Board of Directors will use the report to assess the help being provided to the borrower.

Loan Application