Revolving Loan Fund
Summary/Planned Projects to be Financed
Through a revolving loan fund (RLF) created with United States Department of Agriculture (USDA) Rural Development— Rural Business Development Grant funding as well as financial contributions from various City lending institutions, the City of Washington will be able to provide gap or partial financing to small- and medium sized businesses who have demonstrated a financial need and want to expand, create, or relocate a business to Washington. The purpose of the program is to help create or retain jobs and assist in providing businesses with the opportunity to expand.
An applicant for RLF funding must be a corporation, limited liability corporation, partnership, or sole proprietorship that has established a financing need that cannot be met through other funding sources. The fund is intended to leverage funding available through commercial lenders.
• Businesses must be for-profit and have a brick-and-mortar location (no home occupations).
• Home occupations are eligible if the funding would be utilized to establish a new business location.
• Businesses must be located east of Ernest Street due to USDA geographic criteria.
• Businesses should retain and/or create jobs as a result of the loan.
• Existing businesses shall not be overdue on any sales tax filing statements (if applicable).
• Acquisition of real estate, either land and/or buildings
• Purchase of new or used machinery and equipment
• Support for the use of new technologies, growth industries, and/or high-tech firms
• Inventory and working capital
• Small business development, including start-ups
Length of Loan
The maximum length of any loan will be 10 years. However, the RLF evaluation committee can allow a term up to 15 years on a case-by-case basis.
The interest rate for monies secured through this program shall have a fixed rate of interest of 3%. Occasionally, the RLF evaluation committee will change this rate depending on cash flow needs on a case-by-case basis or changing market trends.
Basic Loan Structure
The Washington RLF is intended to complement traditional lending institutions or other financing sources in the financing of the project. RLF participation cannot exceed the lessor of 40% of the total project cost or $20,000. The remaining 60% or more must be provided through a combination of a lending institution, other financing sources, and/or equity investment. The applicant will contribute a minimum cash or acceptable equity injection in the amount of 10% with the remaining financing provided by a lending institution.
Adequate collateral is required of all applicants. This may include a building mortgage, liens on machinery and equipment, life insurance, and/or current assets of the applicant.
The Washington RLF will obtain personal guarantees of those who have 20% or more ownership of the applicant.
A one-time not-to-exceed fee of $200 will be assessed against all loans at the time of closing. This helps offset all legal services required in the drafting of loan documents by the USDA Rural Development office. The only other application fee is for the United Commercial Code filing.
The Washington RLF Committee will conduct a thorough review of the applicant’s financial paperwork. Funding is available on a first-come, first-serve basis. The City of Washington may schedule an onsite visit to the business to allow the committee to fully understand the current and future business operations.
Following approval of the loan by the RLF Committee, the City of Washington will prepare the necessary paperwork to submit to the USDA Rural Development Office in Galesburg, Illinois. The USDA Rural Development Office will make the final determination whether to approve or deny the request. If the loan is approved, funds are sent to the City of Washington RLF account. The City of Washington will then contact the applicant and make arrangements to disperse the funds.
Policies Regarding Delinquent RLF Accounts
The City of Washington will refer delinquent accounts to the Washington RLF Committee for action when all routine methods for solving the delinquency have been exhausted. The RLF Committee will regularly, and no less than annually, review the status of delinquent accounts. When in the opinion of the committee and the Washington City Attorney there is no likelihood of collecting the debt, the committee shall vote to remove the account from the City of Washington’s accounting records and any existing security interests may or may not be released.