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HomeMy WebLinkAboutR-1998-015 Agreement / Community Development / Block Grant (CDBG) WAME LoansRESOLUTION NO. R-98- 1 5 A RESOLUTION authorizing and directing the City Manager and the City Clerk of the City of Yakima to execute an Agreement with the Washington Association of Minority Entrepreneurs, Inc., a nonprofit corporation, for the purpose of administering, managing, and overseeing Yakima's participation in the Washington State Department of Community, Trade and Economic Development's Development Loan Fund Minority and Women -Owned Business Loan Program. WHEREAS, in 1998 the City has reserved $50,000 in Community Development Block Grant ("CDBG") funds for business loans under the Washington State Department of Community, Trade and Economic Development's Development Loan Fund Minority and Women -Owned Business Loan Program ("DLF Loan Program"); and WHEREAS, the purpose of the DLF Loan Program is to assist with the expansion and start-up of minority and women -owned businesses through low interest loans; and WHEREAS, the City requires careful administration, management and oversight of its participation in the DLF Loan Program; and WHEREAS, the Washington Association of minority Entrepreneurs, Inc. ("WAME"), is willing to provide the City with DLF Loan Program administration, management and oversight in accordance with the terms and conditions of the attached Agreement; and WHEREAS, the final approval or denial of all loan applications made under the DLF Loan Program shall rest with the City Council "Economic Development Committee"; and WHEREAS, the City Council deems it to be in the best interest of the City of Yakima to enter into an Agreement with WAME in accordance with the terms and conditions of the attached Agreement, now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: The City Manager and the City Clerk of the City of Yakima are hereby authorized and directed to execute the attached and incorporated Agreement with the Washington Association of Minority Entrepreneurs, Inc., a nonprofit corporation, for the purpose of administering, managing, and overseeing Yakima's participation in the Washington State Department of Community, Trade and Economic Development's Development Loan Fund Minority and Qk)rc./WAME loan pace./pm Women -Owned Business Loan Program. The final form of the Agreement shall be approved by the City Attorney. aol/'ri m a ADOPTED BY THE Cl'I COUNCIL this u , day of ' N 1998.. ATTEST: City Clerk John Puccinelli, Mayor Development Loan Fund Administration Agreement THIS AGREEMENT (hereinafter the "Agreement") is made and entered into by and between the City of Yakima, a Washington State municipal corporation (hereinafter the "City") and Washington Association of Minority Entrepreneurs, Inc., a nonprofit corporation (hereinafter the "Contractor"). WHEREAS, in 1997-98 the City has reserved $50,000 in Community Development Block Grant ("CDBG") funds for business loans under the Washington State Department of Community, Trade and Economic Development's Development Loan Fund Minority and Women -Owned Business Loan Program ("DLF Loan Program"). WHEREAS, the purpose of the DLF Loan Program is to assist with the expansion and start-up of minority and women -owned businesses through low interest loans. WHEREAS, the City requires careful administration, management and oversight of its participation in the DLF Loan Program. WHEREAS, the Contractor is willing to provide the City with DLF Loan Program administration, management and oversight in accordance with the terms and conditions of this Agreement. WHEREAS, the City and the Contractor find that it is mutually beneficial to enter this Agreement for loan administration, management, and oversight services. NOW, THEREFORE, pursuant to RCW Chapter 39.34 and in consideration of the mutual covenants, promises, and agreements set forth herein, it is agreed by and between the City and the Contractor as follows: 1. Scope of Services. Contractor shall administer, manage and oversee the City's participation in the DLF Loan Program. These services shall include the following: a. Contractor shall administer all DLF loans in accordance with the City of Yakima Minority and Women Business Loan Program Policies and Loan Terms. A copy of these Policies and Loan Terms is attached hereto as "Attachment A" and incorporated herein by this reference. b. Contractor shall administer all DLF loans in accordance with the general DLF Loan Policies and Guidelines as developed by the Washington State Department of Community, Trade and Economic Development ("CTED"). A copy of these Policies and Guidelines is attached hereto as "Attachment B" and incorporated herein by this reference. Page 1 (1k(agr/C1)13G/Sunnysidc contract3/pm January 15, 1998 c. Contractor shall implement and administer the DLF loan application process set forth in attached and incorporated "Attachment C." d. In accordance with Attachment C, Contractor shall establish and utilize a Loan Review Committee as approved by the City Council to review loan applications and recommend approval or denial of potential DLF loans from City CDBG funds. The City, through the City Council "Economic Development Committee," retains final authority to approve or deny any loan application. e. Contractor shall take all necessary steps to ensure that loan recipients remit all loan repayments in a timely manner. f. Contractor shall take all steps necessary to ensure that proper oversight and monitoring are exercised regarding the use of the City's CDBG funds for the DLF Loan Program. 2. Term of Agreement. Unless sooner terminated by either party in accordance with Section 3, the term of this Agreement shall be from January 1, 1998 through 12:00 p.m., December 31, 1998; provided, however, that in the event that additional funding for the DLF loan program becomes available to the City, the parties may agree to extend this Agreement for two (2) additional one (1) year periods. In no event shall this Agreement extend beyond 12:00 p.m. on December 31, 2000. 3. Termination. Either party may terminate this Agreement, with or without cause, by giving the other party ten (10) days written notice of termination. 4. Consideration. In consideration of all services performed for the City by Contractor pursuant to this Agreement, for each completed loan transaction Contractor shall be permitted to retain from the borrower the necessary loan fee of 3.0% of the loan value (including a $100 loan application fee) and any other appropriate closing costs as permitted by state and federal law. 5. Annual Audit and Quarterly Financial Statements and Performance Reviews. Within thirty (30) calendar days of the end of each quarter during the term of the Agreement, the Contractor must provide the City with a quarterly financial statement and quarterly performance review regarding the Contractor's activities undertaken pursuant to this Agreement. The Contractor must provide the City and the City Council "Economic Development Committee" with an annual audit by March 1, 1999; March 1, 2000 (if Agreement is extended); and March 1, 2001 (if Agreement is extended). The quarterly financial statements, quarterly performance reviews, and the annual audit must be prepared by a certified public accountant who is acceptable to the City. Page 2 (Ik)agr/CDBG/Sunnyaldc mntmct3/pm January 15, 1998 6. Compliance with All Laws. The Contractor shall perform all services required pursuant to this Agreement in full compliance with all applicable federal, state, and local ordinances, codes, regulations, statutes, and laws. 7. Inspection of Records/Documents. The City and any duly authorized representative shall have the right, upon seventy-two (72) hours advance notice, to inspect and audit all records/documents maintained by the Contractor in connection with the services rendered pursuant to this Agreement. 8. Status of Contractor. The Contractor and the City understand and expressly agree that the Contractor is an independent contractor in the performance of each and every part of this Agreement. Contractor and its employees and volunteers shall make no claim of City employment nor shall claim any related employment benefits, social security, and/or retirement. 9. Taxes and Assessments. Contractor shall be solely responsible for and shall pay all taxes, deductions, and assessments, including but not limited to, sales tax, federal income tax, FICA, social security tax, assessments for unemployment and industrial injury insurance, and other deductions from income which may be required by law or assessed against either party as a result of this Agreement. In the event the City is assessed a tax or assessment as a result of this Agreement, Contractor shall pay the same before it becomes due. 10. Non -Discrimination. During the performance of this Agreement, the Contractor shall not discriminate on the basis of race, age, color, sex, religion, national origin, creed, marital status, political affiliation, and/or the presence of any sensory, mental, or physical handicap. This provision shall include but not be limited to the following: employment, promotion, demotion, transfer, recruitment, advertising, layoff, termination, rates of pay, compensation, and selection for training. 11. No Insurance. It is understood the City does not maintain liability insurance for Contractor and its elected officials, officers, agents, employees, and volunteers. 12. Insurance Provided by Contractor. a. Commercial Liability Insurance. On or before the effective date of this Agreement, the Contractor shall provide the City with a certificate of insurance as proof of commercial liability insurance in the amount of One Million Dollars ($1,000,000.00) that clearly states who the provider is, the amount of coverage, the policy number, and when the policy and provisions provided are in effect (any statement in the certificate to the effect of "this certficate is issued as a matter of information only and confers no right upon the certificate holder" shall be deleted). Said policy shall be in effect for the duration of this Agreement. The policy shall name the City, its elected officials, officers, agents, and employees as additional insureds, and shall contain a clause that the insurer will not cancel or change the insurance without first Page 3 (Ik)agr/CD6G/Sunnyside contrac13/pm January IS, 1998 giving the City thirty (30) calendar days prior written notice (any language in the clause to the effect of "but failure to mail such notice shall impose no obligation or liability of any kind upon the company" shall be crossed out and initialed by the insurance agent). The insurance shall be with an insurance company or companies rated A -VII or higher in Best's Guide and admitted in the State of Washington. The Contractor shall also provide the City with a true and correct copy of the said insurance policy on or before the effective date of this Agreement. b. Directors and Officers Liability Insurance. The Contractor shall obtain Directors and Officers Liability insurance policy with a minimum limit of One Million Dollars ($1,000,000.00) and a maximum retention of Five Thousand Dollars ($5,000.00). On or before the effective date of this Agreement, the Contractor shall provide the City with a true and correct copy of said insurance policy. The definition of insured under said policy shall include the Contractor, its individual directors, officers, trustees, employees, and volunteers. Said policy shall have a retroactive date on or before the effective date of this Agreement. Coverage under said policy shall remain in full force and effect for a three (3) year period after the expiration/termination date of this Agreement with the same retroactive date either through renewal policies or "tail" coverage on the current policy. c. Commercial Automobile Liability Insurance. On or before date this Agreement is fully executed by the parties, WAME shall provide the City with a certificate of insurance as proof of commercial automobile liability insurance with minimum liability limit of One Million Dollars ($1,000,000.00) combined single limit bodily injury and property damage. The certificate shall clearly state who the provider is, the amount of coverage, the policy number, and when the policy and provisions provided are in effect (any statement in the certificate to the effect of "this certificate is issued as a matter of information only and confers no right upon the certificate holder" shall be deleted). Said policy shall be in effect for the duration of this Agreement. The policy shall name the City, its elected officials, officers, agents, and employees as additional insureds, and shall contain a clause that the insurer will not cancel or change the insurance without first giving the City thirty (30) calendar days prior written notice (any language in the clause to the effect of "but failure to mail such notice shall impose no obligation or liability of any kind upon the companyt. shall be crossed out and initialed by the insurance agent). The insurance shall be with an insurance company or companies rated A -VII or higher in Best's Guide and admitted in the State of Washington. d. Fidelity Bond. Employee Dishonesty coverage or a fidelity bond will be obtained in the amount of Fifty Thousand Dollars ($50,000.00). The policy will cover claims resulting from employee theft of money associated with the performance of this contract. The policy will be written on a blanket basis coverng all employees, or upon prior approval by the City, on those employees having access to funds. A copy of the policy will be furnished to the City. e. Workers' Compensation. The Contractor agrees to pay all premiums provided for by the Workman's Compensation Act of the State of Page 4 pklagr/CBBG/Sunnyside contract3/pm January 15, 1993 Washington. Evidence of the contractors workers' compensation coverage will be furnished to the City. The contractor holds the City harmless for any injury or death to the contractor's employees while performing this contract. 13. Indemnity and Hold Harmless. The Contractor shall protect, defend, indemnify, and hold harmless the City, its elected officials, agents, officers, and employees from any and all claims, demands, damages, losses, liens, liabilities, penalties, fines, lawsuits, judgments, awards, costs, and expenses (including attorney's fees and disbursements) arising directly or indirectly from or out of, relating to, or in any way connected with the services provided by the Contractor pursuant to this Agreement. 14. Non -Waiver. The failure of either party to insist upon strict performance of any provision of this Agreement or to exercise any right based upon a breach thereof or the acceptance of any performance during such breach shall not constitute a waiver of any right under this Agreement. 15. Assignment. This Agreement, or any interest herein, or claim hereunder, shall not be assigned or transferred in whole or in part by the Contractor to any other person or entity without the prior written consent of the City. In the event that such prior written consent to an assignment is granted, then the assignee shall assume all duties, obligations, and liabilities of Contractor as stated herein. 16. Severability. If any portion of the Agreement is changed per mutual agreement or any portion is held invalid, the remainder of the Agreement shall remain in full force and effect. 17. Integration. This written document constitutes the entire agreement between the parties. No changes or additions to this Agreement shall be valid or binding upon either party unless such change or addition be in writing and executed by both parties. 18. Notices. Unless stated otherwise herein, all notices and demands shall be in writing and sent to the parties at their addresses as follows: To City: To Contractor: Glenn Valenzuela, Director Comm. & Econ. Development 129 North Second Street Yakima, WA 98901 or to such addresses as the parties may hereafter designate in writing. Notices and/or demands shall be sent by registered or certified mail, postage prepaid. Such notices shall be deemed effective when mailed or hand -delivered at the addresses specified above. Page 5 (lk)agr/CDDG/Srnmysldc conlracl3/pm January 15, 1998 19. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Washington. 20. Venue. The venue for any action to enforce or interpret this Agreement shall lie in the Superior Court of Washington for Yakima County, Washington. 21. Approval. Each party shall approve this Agreement by resolution, ordinance, or otherwise pursuant to the laws of the governing body of each party. The attested signatures of the City Manager of Yakima and the President of the Washington Association of Minority Entrepreneurs, Inc., below shall constitute a presumption that such approval was properly obtained. CITY OF YAKIMA By;�. R. A. Zais, Jr., City Manager Date: ! t? V`? S'' ATTEST: City Clerk City Contract No. 9f -/y Resolution No. R- 9f -AS" Page 6 pk)agr/CDDG/Sunnyside conlract3/pm January 15, 1998 WASHINGTON, ASSOCIATIO1 OF MINORITY pi REP13rE JEURS, INC. By: „ Luz an Gutrrez, Preskrent/CEO 7 Date:=`�'�"' ,•-a ATTACHMENT A CITY OF YAKIMA MINORITY AND WOMEN BUSINESS LOAN PROGRAM POLICIES AND LOAN TERMS PROGRAM GOAL The purpose of this loan program is to support the expansion and start-up of the City of Yakima's minority- and women -owned businesses that are certified by the Washington State Office of Minority and Women's Business Enterprises (OMWBE). ADMINISTRATION OF THE PROGRAM This loan program was authorized under state law in 1993 and amends sections of the law pertaining to the Washington State Development Loan Funds under RCW 43.168. The Washington State Department of Community, Trade and Economic Development has responsibility for overall administration of the program. Except for final loan approval, responsibility for project development, loan approval, and loan servicing will rest with the Contractor. GEOGRAPHICAL AREA SERVED The program will serve the City of Yakima. ELIGIBLE BORROWERS The loan funds are for City of Yakima businesses that are certified by the Washington State OMWBE. This certification process establishes that the firm is owned and controlled by one or more minorities and/or women. Firms may be organized as proprietorships, partnerships or corporations. These loan funds are not a substitute for private financing or financing that is available to the firm from other government -supported programs such as the Small Business Administration or the Washington State Linked Deposit Program. The underlying policy is that these funds address the lack of access to financing historically faced by minority- and women -owned businesses. To be eligible to apply, a business owner must: • Demonstrate ability to repay the loan. • Show that the loan will result in the expansion of private business in the community. • Create or retain jobs for low- and moderate -income individuals at a ratio of one job per $25,000. • Undertake a commercial business venture. • Be certified by State OMWBE. Loans will conform to all applicable requirements of the Community Development Block Grant Program, including job creation or retention for low- and moderate -income persons, services to low- and moderate -income persons, labor standards, environmental review and others. (1k)agree/attach Women Bus. loam Program/pm ELIGIBLE AND INELIGIBLE USES OF FUNDS The loans made under this program will generally be under $50,000, with the emphasis on loans under $25,000. Loan funds can be requested for start-up costs, inventory, purchase of equipment, working capital, assistance in securing contractor bonding, and technical assistance in such areas as marketing, accounting, and management. Borrower needs that are unrelated to growth of the business (examples: refinancing equity, existing loans or past -due payables or funding past operating losses or taxes) are not eligible for loan funds. Loans which improve the position of another creditor are also generally not eligible. ABILITY TO REPAY THE LOAN The borrower and the business plan must demonstrate the business venture is likely to be successful. To make this decision, the following factors will be considered. 1. The borrower has direct, successful experience in the business; has developed business skills in at least some of the areas important to its success such as production, marketing and fiscal management; and/or has developed skills important to this business venture through experience in a responsible management position of another firm. 2. The borrower has prepared a well conceived, realistic plan for the business or its expansion that shows the availability of working capital to sustain and support its growth. 3. The borrower has developed an ongoing support program (such as management assistance, ongoing counseling, or other) to shore up areas in which he or she lacks experience. This technical assistance is an eligible loan expense. 4. The borrower has a credit history that demonstrates the capacity to meet commitments. (Any delinquency or default in the payment of taxes or charging off of personal, undisputed debt will disqualify an applicant.) 5. The borrower is current, or is operating under a plan, in fulfilling all state and federal tax requirements. FINANCIAL RISK The borrower must have a meaningful financial investment in the business. This can be in the form of cash, equipment needed by the business that has been purchased by the borrower, real property needed by the business venture, or other investments material to the business. The amount of this investment will depend on the size of the venture, the need for working capital, and the financial circumstances of the borrower. If the borrower or business has liquid assets that are otherwise not committed or needed for working capital, they must be contributed to the project. OTHER LOANS If the project costs exceed $50,000, the borrower is responsible for seeking participation from other loan sources in the financing of the project. SECURITY AND COLLATERAL A security interest in all reasonable personal and business collateral will be required. Examples of business collateral that will be considered to secure the loan include IIIOagr /attach Womcn Ons. I P ngmn/pm equipment, real estate and inventory. All personal assets of owners with a 20% or greater ownership interest in the business. LOAN TERMS AND CONDITIONS 1. Loans from $5,000 to $50,000, with emphasis on transactions under $25,000. 2. If the project cost is over $50,000, participation by other loan sources must be maximized. 3. Loan fees will include an application fee of $100. A loan fee of 3.0% of the loan value is payable at closing, with credit given for the application fee. The loan fee can be financed as part of the loan so long as other financial participation requirements of the borrower have been met. 4. Interest rate is fixed at the prevailing prime rate plus 3% for direct loans. If another lender is participating in the project, the loan rate will be at par with that lender's rate. 5. Stepped payments and deferrals may be negotiated if justified by the particular circumstances of the loan. 6. Working capital loans repayment terms may be up to 5 years. 7. Loans for equipment may be repaid up to a term up to 10 years. 8. Loans with a repayment term over 5 years may have a balloon clause that will allow for the adjustment of the loan's interest rate and encourage refinancing in the commercial market, if possible. pkjagrcc/attach Women Bus. loan Program/pm ATTACHMENT B • nT I? LOAN POLICIES AND GUI ELINES PROGRAM GUIDELINES for the Washington State Development Loan Fund Minority and Women -Owned Business Lending'Initiative • Introduction • The goal of this initiative, incorporated as a component of the Development Loan Fund Program, is to support the expansion and start-up of minority and women -owned businesses that are certified by the Washington State Office of Minority and Women's Business Enterprises (OMWBE). This initiative was authorized under state law in 1993 and amends sections of the law pertaining to the Washington State Development Loan Fund under RCW 43.168. A. AMOUNT OF FUNDS AVAILABLE • The DLF Program has received funding authority of up to 52 million for the initiative. B. APPLICATION GUIDELINES 1. Application Deadline Applications may be submitted any time during the program. 2. Application Requirements An application to the Development Loan Fund's Minority and Women -Owned Business Lending Initiative must be on behalf of a specific business project An eligible jurisdiction may submit more than one application at anytime. Applicants requesting 55,000 to 550,000 must meet the requirements of the initiative. Applications for more than $50,000 also require participation by another lender. Applications of 5100,000 to 5750,000 must meet regular DLF review and underwriting requirements. • An application will consist of: a. An application signed by the authorized chief administrative officer of the local jurisdiction; b. Documentation supporting the need for the assistance and job impact; c. Confirmation/documentation of authority of the business to enter into the transaction; d. Evidence of adherence to the jurisdiction's adopted Citizen Participation Plan including at least two well-publicized public hearings; and e. Assurance that all CDBG Program requirements will be met l . C. ELIGIBILITY GUIDELINES 1. Eligible Borrowers The financing assistance available through this lending initiative is targeted to businesses that are certified by the OMWBE. The certification process establishes that the firm is minority or woman - owned and controlled. All borrowers from non -entitlement areas of the state must be OMWBE certified prior to presentation of the loan to the DLF Committee. DLF loans to certified businesses are exempt from distressed area requirements of the regular DLF Program. Firms may be organized as proprietorships, partnerships or corporations. Tobe eligible, the certified business must be undertaking a commercial venture (not governmental or nonprofit).' 2. Eligible Activities These loan funds are not a substitute for private financing orfnancing that is available to the firm from other government -supported programs such as the Small Business Administration or the Washington State Linked Deposit Program. The underlying policy is: these funds will fill credit gaps. The loans under this program will generally be under $50,000, with the emphasis on loans under $25,000. Loan funds can be requested for start-up costs, inventory, purchase of equipment, real estate (including remodeling and facade improvements), working capital, assistance in securing contractor bonding, and technical assistance in such areas as marketing, accounting, management, and others. 3. Ineligible Activities, • Borrower needs that are unrelated to growth of the business (examples: refinancing equity, -existing loans, or past due payables or funding past operating losses or taxes) are not eligible for loan funds. Loans which improve the position of the another creditor are also generally not eligible. D. METHOD OF FUNDING DISTRIBUTION Applications for DLF funds under the Minority and Women -Owned Business Lending Initiative will be evaluated by staff who, in turn, will make recommendations to the DLF Committee for approval or denial based on the following guidelines: 1. Need for Assistance --the assistance requested is "appropriate" for the project. 2. Job Creation --permanent jobs created or retained as a result of the project will be made available to low- and moderate -income persons. 3. Ability to Repay the Loan—the borrower and the business plan must demonstrate the business venture is likely to be successful. To make this decision, the following factors will be considered: -- The borrower has direct, successful experience in the business, has developed business skills in at least some of the areas important to its success (such as production, marketing, and fiscal management), and/or has developed skills important to this business venture through experience in a responsible management position of another firm. Page 2 of 4 • -- The borrower has prepared a well conceived, realistic plan for the business or its expansion that shows the availability of working capital to sustain and support its growth. -- The borrower has developed an on-going support program (such as management assistance, on- going counseling, or other) to shore up areas in which he or she lacks experience. This technical assistance is an eligible loan expense. — The borrower has a credit history that demonstrates the capacity to meet commitments. (Any delinquency or default in the payment of taxes or charging off of personal, undisputed debt will disqualify the applicant). -- The borrower is current, or is operating under a plan, In fulfilling all state and federal tax requirements. 4. Financial Risk --the borrower must have a meaningful financial investment in the business. This can be in the form of cash, equipment needed by the business that has been purchased by the borrower, real property needed by the business venture, or other investments material to the business. The amount of the borrower's investment will depend on the size of the venture, the need for working capital, and the financial circumstances of the borrower. -- If the borrower or business has liquid assets that are otherwise not committed or needed for working capital, they must be contn'buted to the project. 5. Other Loans—if the project costs exceed $50,000, the borrower is responsible for seeking participation from other loan sources in the financing of the project. .4 6. Security and Collateral --a security interest in all reasonable personal and business collateral will be required. Examples of business collateral that will be considered to secure the loan include equipment, real estate, and inventory. -- All personal assets of owners with a 20 percent or greater interest in the business must also be made available to secure the loan, including homes. -- If all reasonable collateral available to the owner(s) and business have been pledged or offered as security for the loan, lack of collateral will not disqualify the borrower. -- Personal guarantees will be required for all persons or entities holding 20 percent or greater ownership interest in the business. E. LOAN TERMS The following loan terms apply to DLF financing made available to certified businesses: 1. Loans may range from $5,000 to $100,000 with emphasis on smaller transactions. 2. If the project cost is over $50,000, participation by other loan sources must be maximized. Page 3 of 4 • 3. Loan fees will include an application fee of S100. A loan fee of 3 percent of the loan amount is payable at closing, with credit given for the application fee. The loan fee can be financed as part of he loan so long as other financial participation requirements of the borrower have been met. 4. The interest rate is fixed at the rate determined by the loan committee, but not less than 4% per annum, for direct loans. 5. Stepped payments and deferrals may be negotiated if justified by the particular circumstances of the loan. 6. Repayment terms will include: — Loans for working capital may be repaid over a term of up to 5 years. -- Loans for equipment may be repaid over a term of up to 10 years. -- Loans for real estate may be repaid over a term of up to 15 years. -- Loans with a repayment term of over 5 years may have a balloon clause that will allow for adjustment of the loan's interest rate and encourage refinancing in the commercial market if possible. F. USE OF DLF MINORITY AND WOMEN -OWNED BUSINESS LENDING INITIATIVE PROGRAM REVENUES Businesses receiving assistance through this DLF lending initiative aie required to make principal and interest payments. Up to two percent of program income, including principal, interest, and investment earnings received by the fund, may be used for DLF Program administration. The balance of program income will be made available for future loans through the DLF Program. Page4of4 ATTACHMENT C APPLICATION PROCESS PRE -APPLICATION ASSESSMENT Applicant makes an appointment to meet with the Contractor Business Loan Specialist prior to submitting an application, and a qualifications assessment is made based on the following: • The business concept. • Probable use of funds. • Preliminary review of most recent financial report. • Possible collateral. • The program fit (with specific eligibility requirement and HUD requirements). • How to structure the proposal. If the pre -application assessment results are positive, the applicant and the Contractor will begin to prepare a loan application. There is no commitment at this time to fund a loan. A record of this and future meetings will be kept. LOAN APPLICATION A. The loan application will include a minimum of the following: Proprietorships/Partnerships 1. A signed and dated application which authorizes the Contractor to obtain the applicant credit report. 2. A personal financial statement. 3. Past three years' personal tax returns, including all schedules. 4. Copy of partnership agreements, if applicable. Corporations 1. A signed and dated application by the guarantor (the major stockholder(s) of the corporation) which authorized the Contractor to obtain the guarantor's credit report. 2. The last three years' profit and loss statements with balance sheets and the most recent quarterly statement, if applicable. 3. The last three years' tax returns, including all schedules (business and personal). Page - 1 (Ik) greet ttnch C/Women'e Business 2/pm B. Upon satisfactory review of the credit report and the basic financial information submitted, the applicant will provide and, if necessary, receive assistance from the Contractor to complete the following: 1. 24 -month cash flow projections. 2. Market and financial assumptions, with sources noted, for cash flow projections in narrative form. 3. Statement of management abilities and experience. 4. A statement explaining current business management practices of the applicant. C. In addition, the following information may be required: 1. A lead bank "Letter of Intent" for loans over $50,000. 2. Franchise disclosure form and sample franchise agreement for a franchise project. 3. A performance bond and an "assignment of proceeds and contract" for construction projects. 4. A copy of the contract and an "assignment of proceeds and contract" for contract financing (factor financing). 5. A letter of intent to lease. Note: Other items may be requested at the discretion of the Contractor and receipt may be a condition of approval or closing. LOAN UNDERWRITING MEMORANDUM Once the application is complete, the Contractor will prepare a loan memorandum. The analysis in the loan memorandum will be based upon the following: A. Analysis of the five C's of credit. 1. Character - analyze how credit has been handled in the past. Inquire as to any criminal record. Any felony conviction related to financial matters may disqualify an applicant. 2. Capacity - determine that the projections are reasonable and attainable, thus giving the ability to repay. 3. Capital - analyze the equity invested. 4. Collateral - evaluate the collateral offered. 5. Conditions - analyze overall economic climate as it relates to interest rates and inflation and market for the product or service. B. Evaluate for HUD eligibility requirements (necessary and appropriate and attainment of a HUD national objective). C. Evaluate the lien search and the preliminary title. Page - 2 (k)agree/attach C/Nemen's Business 2/pm LOAN APPROVAL The Contractor's Loan Review Committee will meet monthly, or more frequently when required, and consists of five members. The purposes of these meetings is to review loan applications and to make recommendations regarding approval or denial of loans. Members of the Committee will possess experience in small business lending and be reflective of the general community. A. A loan package is prepared by the Contractor and is then presented to the Committee for recommended approval, decline, or hold for more information. B. Any loan approval recommendation of the Committee is then forwarded to the Director of the City's Community and Economic Development Department for his recommendation regarding approval or denial of the loan. C. The recommendations of the Committee and the Director shall then be submitted to the City Council "Economic Development Committee" for final loan approval or denial. D. Within a week of loan approval by the City Council "Economic Development Committee," a letter shall be prepared by the Contractor outlining key loan terms. Within 30 clays, a commitment letter is prepared by Contractor for review and signature by City Manager and is issued to the borrower listing all the conditions that must be met prior to closing and disbursement. E. Minutes of all Loan Review Committee meetings will be kept. F. Any commitment made initiates the establishment of the loan file record. The initial information recorded will include the amount of funds committed and the source of commitment. CLOSING When the loan commitment letter is countersigned by the borrower and the Contractor has certified all the loan conditions are met, the Contractor will prepare the closing documents for execution by the borrower and/or the City Manager. The closing checklist is as follows: A. Legal Documents. 1. Promissory Note. 2. Security Agreement. 3. Personal Guaranty(s) (if applicable). 4. Assignment of Leases and Rents (if applicable). 5. Subordination Agreement(s) (if applicable). B. Perfection of Collateral 1. UCC -1. 2. Deed of Trust (if applicable). 3. Title Policy (if applicable). 4. Vehicle Title and Registration (if applicable). Page - 3 (Ili/agree/attach cmomen'. Business 2/pm 5. Collateral Insurance. 6. Appraisal (if applicable). C. Support Documents 1. No Adverse Changes (current financial statement). 2. Borrowing Resolutions. 3. Opinion of counsel. 4. Proof of Taxes Paid and Licenses Current. D. Compliance Forms 1. Jobs Contract (if applicable). 2. Environmental Review (if applicable). When all necessary closing documents have been obtained/executed and the closing is complete, the Contractor will: A. Request and obtain a check from the City that is issued jointly to the Contractor and the borrower for the loan amount (if multiple disbursements are part of the loan agreement, then disbursements will be made in accordance with the terms of the Commitment Letter). B. Execute the joint loan check with borrower and disburse loan proceeds to borrower less the loan fee and any reimbursement of closing costs which shall be retained by the Contractor. C. File all collateral perfection with the appropriate authorities. D. Forward the originals of all loan documents to the City Clerk's office for safekeeping. SERVICING After all loans are closed and disbursed, the Contractor will: A. Maintain a loan filing system, using standard department format. 1. Applications. 2. Closing Documents. 3. Approval and Analysis. 4. Servicing. 5. Collateral and Perfection. 6. HUD -related Items. Page - 4 (Ik)agres/ ttach CMonsen'e Business p/pm B. Maintain a payment collection system. 1. Bill on the first of the month (quarter, annual, other) for payment on the tenth of the month. 2. Record and determine application of payments. 3. Maintain payment histories. 4. Courtesy calls on the tenth day after payment due to remind of late penalty. 5. Late penalty applied if more than 15 days late. 6. If one payment late, phone and/or site contact to be made. 7. If two payments late, appropriate action will be taken to determine a plan to bring the loan current. 8. If three payments are late, the Contractor shall prepare a letter of transmittal to the City Community and Economic Development Director outlining the situation, steps taken to collect thus far, and stating the amount outstanding. 9. Propose to the City Community and Economic Development Director all loan modification terms. 10. Maintain record of all borrower contacts. C. Maintain tickler files for date -sensitive compliance items. 1. UCC -1. 2. Insurance. 3. Jobs Report. 4. Annual Financial Statements. 5. Annual Site Visits. 6. HUD Close-out form D.: Compliance Reports and Action. a) Jobs Report - Quarterly report form (mailed two weeks after the end of the quarter, due back within another two weeks) demonstrating completion of progress toward completion of the Jobs Contract. b) Upon completion of the Jobs Contract, Planning and Development staff completes the HUD Close-out Form. c) Request for semiannual, in-house financial statements mailed two weeks after the end of the half year due back within another two weeks. d) Requests for annual financial statement mailed on March 1 due back by May 1. e) Annual site visits are performed after receipt of annual financial statement. Site visit report filed by the Contractor within two weeks Page - 5 (lk)s Hach C/Women'e Buemess 2/pm of visit. The Contractor, if needed, can substitute at their discretion other visits to the site for this purpose. f) UCC's, if needed, are to be renewed before the date of expiration. ADMINISTRATIVE PROCEDURES A. The Contractor will provide a quarterly report to the City Community and Economic Development Director summarizing the: 1. Monthly collections. 2. Problem collections. 3. Loan Activity. 4. Interest earned on account where loan payments are deposited. B. Cash Management Practices: 1. Establish and maintain an interest-bearing checking account at a local bank. The account shall have two signatories required for checks. 2. Deposit daily, or no later than the day after receipt, all loan payments in this account. 3. Disburse from this account all loan proceeds. Page - 6 (1k)agree/attach C/Women'e Business 2/pm BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No.: For Meeting of: January 20, 1998 ITEM TITLE: Authorize the City Manager to approve a contract between the City of Yakima and the Washington Association of Minorities Entrepreneurs (WAME) to administer the City's Minority and Women Owned Business Lending Initiative. SUBMITTED BY: Glenn Valenzuela, Director of Community and Economic Development (575-611 CONTACT PERSON/PHONE: William Cook, Neighborhood Development Services Manager (575-6111) SUMMARY EXPLANATION: On October 6, 1997, the Department of Community and Economic Development solicited proposals, through a Request for Proposal (RFP) process for qualified organizations or businesses to implement the City's Minority and Women Owned Business Lending initiative. The Department received one response to the RFP from the Washington Association of Minority Entrepreneurs. City Council, at their meeting on November 18, 1997, approved a resolution entering into a contract with the Washington State Department of Community Trade and Economic Development, committing $50,000 of 1998 Community Block Grant Funds (CDBG) for participation in this program for fiscal year 1998. With approval of this resolution, Council will authorize the City Manager to execute the attached contract with WAME to administer the City's 1998 Minority and Women Owned Business Initiative. The contract requires WAME to carry commercial liability and automobile insurance, Directors and Officers liability insurance, proof of workers compensation coverage for all employees, and a fidelity bond for the amount of the contract ($50,000). We had originally proposed a requirement that the contractor obtain a stand-by letter of credit or performance bond for $50,000, but after discussions with our insurance representative at Sedgwick, we understand that, 1) a letter of credit or performance bond would be very difficult to obtain for this project 2) the required Directors and Officers liability insurance should be sufficient to protect the City in the case of errors and omissions or misappropriation of federal funds. Also, we had originally proposed the contractor submit audited quarterly financial statements, but in conversations with the state it was agreed that quarterly fmancial reports and an annual audited financial statement would be sufficient. All loans to be funded through this program must be approved by Council's Economic Development Committee. Resolution X Ordinance Contract Other Specify Funding Source: 1998 Community Development Block Grant Funds APPROVAL FOR SUBMITTAL: City ager STAFF RECOMMENDATION: Authorize City Manager to execute, on behalf of the City of Yakima, an agreement with the Washington Association of Minority Entrepreneurs, a contract to administer the City's Minority and Women Owned Business Lending Initiative. BOARD/COMMISSION RECOMMENDATION: COUNCIL ACTION: u1-15"118 1111! 12:31 FAA 1 5119 248 91)1)7 SEW:11'10i JAMES 4; From: Joel Pearson Date: 01/15/98 To: William Cook Time: 12:32 PM Company: City of Yakima FAX #: 575-6176 RE: WAME Contract When Deb Krautwurm and I met with you last week, you presented an overview of your relationship with WAME in the distribution of Community Block Grant funds. Our feeling was that a performance bond would be difficult, if not impossible, to obtain for this situation and would not be needed if you had other insurance coverage in place. A standby letter of credit serves the same purpose as a bond and we do not see the need for one. You require fidelity coverage to protect against theft Of grant funds by employees of WAME and Directors and Officers coverage to protect against errors and omissions claims which could include improper allocation of funds. VOICE: 509-248-7480 FAX: 509-248-9007 (dJUU1