LOAN GUIDELINES
To meet
eligibility requirements, a small business should be a for-profit entity that
meets SBA guidelines.
(Under special circumstances and subject to written request and approval,
the Department will consider loans to larger businesses and to not-for-profit
corporations.) Small businesses
eligible to apply for a CSBG Loan are: proprietorships, partnerships, subchapter S corporations, or
regular corporations. Financial
institutions are not eligible.
The
following assurances are required when the Grantee provides CSBG loan funds
directly to a private sector entity (also, see CSBG Loan Program Rules for more
detail):
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CSBG may participate in up to 49
percent of the total loan application. The remaining participation in the
venture should substantially include conventional financing from a licensed
Illinois lending institution.
The benefiting local government also may participate in the project.
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Eighty to 90 percent of the portion of
the total loan obtained through a licensed Illinois lending institution may be
guaranteed by the SBA 7(a) program.
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The interest rate for the CSBG loan
portion shall:
a. if CSBG grant funds, have a fixed rate of no
more than five percent (5%) or;
b. at the grantee’s option, the interest rate to
the borrower may be set at loan inception at a rate not to exceed one-half
(1/2) of the Prime Interest Rate (National Prime Rate as shown on that date in
the Wall Street Journal). This calculated rate would become the loan’s fixed
interest rate for a one-year period.
Thirty (30) days before the annual anniversary date of the loan, the
Grantee shall notify the borrower of the interest rate to be charged for the
next year (base on ½ of Prime at date of notice).
The annual interest rate under this flexible option shall never exceed
the original interest rate (ceiling) and the Grantee may set a minimum (floor)
interest rate of five percent (5%) or less for the duration of the loan
c. if CSBG recaptured funds, have a fixed rate of
no more than 7.5%.
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Job creation requirements for the CSBG
Loan Program are as follows:
a.
Businesses accepting CSBG loan funds must hire at least one new
full-time equivalency (minimum 37 ½ hour work week, averaged annually) CSBG
eligible employee for each $10,000 or any portion thereof of CSBG monies
borrowed.
Minimum
Example:
$
1-$10,000
1 Job
$10,001-$20,000
2 Jobs
$20,000-$30,000
3 Jobs, or
b. The Department will allow, based on presentation
of written verifiable jobs (to be created) and salary data submitted as part
of its loan application, the Grantee set the amount loaned per job at
seventy-five percent (75%) of the entry level salary for each proposed job up
to a maximum of $20,000 per job.
(For example: an entry level salary of $40,000 would warrant lending of
$20,000, a $20,000 entry salary would warrant lending of $15,000; a $7,000
entry salary would warrant lending of $5,250.)
The Department will, upon written request, consider the inclusion of
fringe benefits (e.g., health
insurance) in the salary calculation.
(Combining (a) and (b) of this subsection is not allowed.
The Grantee must choose one method or the other.)
c.
If part-time employment is involved in the created jobs under either
(a), (b) or (c) of this subsection, the full-time equivalency shall be no more
than two employees making up one 37 ½ hour work week.
d.
A hiring schedule must be a part of each loan agreement. The required hiring must be completed
within the first 24 months of the loan, with at least 50% of the new employees
hired in the first 12-month period.
For purposes of this hiring timeframe, the loan is considered
consummated on the date the borrower first receives the loan funds.
e.
The job positions of CSBG eligible clients created by the loan must be
retained and filled by an eligible client for at least 24 months from the date
the job was first created.
Grantees should attempt to retain the availability of the loan-created jobs
for CSBG eligible clients over the full loan term maintaining professional
contact (e.g. Workforce Investment Act job referrals, Targeted Job Tax Credit
Program) with the business and tracking the jobs.
Grantees, through their individual loan agreements, may negotiate more
restrictive hiring requirements.
f.
The Grantee shall have the right to review the borrower’s employment
verification records at the time of the loan closing to establish the pre-loan
employment level in order to assure that no personnel cuts were made by the
business in anticipation of the pending loan and its hiring requirements.
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The term of the CSBG loan may not
exceed 10 years.
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The CSBG financing must be committed
prior to the closing of other financing.
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CSBG funds loaned may be used to
purchase machinery, equipment or inventory or to provide working capital.
CSBG Category “D” funds may not be used to purchase or improve real property. This real property restriction does
not apply to loans made with “Recaptured Loan Funds” (repaid principal from
previous CSBG loans).
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Recaptured funds must be used by the
Grantee to make other loans subject to these guidelines.
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All specific provisions of the CSBG
Loan Program stated herein and in the Loan Program Rules must be met and take
precedent over these abbreviated provisions.
