Georgia Department of Community Affairs CDBG Economic Development
Georgia Department of Community Affairs _______________________________
-
Upload
benjamin-hyde -
Category
Documents
-
view
27 -
download
0
description
Transcript of Georgia Department of Community Affairs _______________________________
![Page 1: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/1.jpg)
Georgia Department of Community Affairs
_______________________________
Georgia Mountains Regional Commission
Round Table
March 5, 2013
![Page 2: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/2.jpg)
Page 2
History & Background of State Small Business Credit Initiative (SSBCI)
• Component of Small Business Jobs Act, bi-partisan legislation signed into law on Sep. 27, 2010
• $1.5 billion set aside for SSBCI, managed by U.S. Treasury, to strengthen state-run lending programs to support small business
• Georgia’s allocation is $47,808,507
• Requirement for the state to generate overall 10:1 leverage
![Page 3: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/3.jpg)
Page 3
Advantages and Opportunities for Georgia Lenders
• Credit enhancements to strengthen bank loans
• Delegated lending - Lenders manage underwriting process
• SSBCI program - quick turnaround and streamlined format
• Opportunity for CRA credit
![Page 4: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/4.jpg)
Page 4
Advantages and Opportunities for Georgia Lenders
• Opportunity to improve Safety and Soundness reviews▪ A distinguished panel of state and federal regulators participating
in the roll-out of the SSBCI on 5/23/12 indicated a general consensus that lenders participation in the SSBCI Program is viewed positively by Safety & Soundness and Consumer Compliance Examiners. This resource panel continues to provide advice and assistance as program implementation progresses.
• Georgia Department of Banking and Finance; Federal Reserve; Federal Deposit Insurance Corporation; and Office of Comptroller of Currency.
![Page 5: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/5.jpg)
Page 5
What Does Georgia SSBCI Offer?
• Three initiatives available to private lenders to expand small business lending
GCAP (Georgia Capital Access Program) - $2 million
(Risk reserve pool funded with borrower/lender fees matched with SSBCI funds)
SBCG (Small Business Credit Guarantee) - $17.8 million
(50% loan guarantee with a conversion option into a risk reserve pool offering up to 80% reimbursement)
Georgia Funding for CDFIs - $20 million
(Loan participation program specifically designed for underserved SBs)
Proposed: Georgia Loan Participation Program - $8 million
(Purchase participation up to 25% of enrolled loans ranging from $100,000 up to $5,000,000.)
![Page 6: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/6.jpg)
Page 6
SSBCI – General Eligibility Criteria
• Loan proceeds can be used for eligible “business purposes”, including:Start-up costsWorking capitalBusiness procurement, franchise feesEquipment & inventoryPurchase, construction, renovation, or tenant
improvements of eligible place of business
![Page 7: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/7.jpg)
Page 7
SSBCI – General Eligibility Criteria
• Refinancing is not eligible; however, renewals are eligible under certain conditions…as one example…performing lines of credit that balloon and become due…new balance must increase by at least10%
• Passive real estate investment generally is not eligible. However, exceptions may apply based on owner occupancy (60% for new construction, 51% for acquisition or renovation of existing building).
![Page 8: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/8.jpg)
Page 8
SSBCI – Eligibility Criteria (cont.)
• Eligible small businesses include corporations, partnerships, joint ventures, cooperatives, sole proprietorships, state-designated charitable & other non-profit institutions.
• SBs generally defined as 500 or fewer employees
• SSBCI participation generally limited to $500,000 or less, with exceptions and target amounts tailored for each program
• Participating lenders and borrowers will be required to provide certain assurances and certifications as required by US Treasury SSBCI guidelines.
![Page 9: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/9.jpg)
Page 9
GCAP (Georgia Capital Access Program) – What It Is
• GCAP provides portfolio insurance to lenders by matching insurance premiums to be paid, by the borrower and lender, into a loan loss reserve fund for each loan enrolled.
• Each financial institution establishes a separate loan loss reserve account in the name of, and managed by, the State.
![Page 10: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/10.jpg)
Page 10
GCAP – How It Works • Borrower & lender make contributions to loan loss
reserve account, from 2% to 7%. (Borrower may pay lender’s contribution & vice versa; contributions may be financed.)
• Georgia SSBCI funds (GCAP) will match borrower & lender contributions to loan loss reserve account at 1:1 ratio, but cannot exceed 7% match (SSBCI statutory limitation).
• In case of default on enrolled loans, claims may be made against the loan loss reserve account for loss of principal and up to 90 days of accrued, but unpaid, interest.
![Page 11: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/11.jpg)
Page 11
![Page 12: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/12.jpg)
Page 12
Total Project Cost $1,500,000
- Private Bank Financing $1,350,000
- Borrower Equity $ 150,000
- GCAP enrolled loan amt $ 500,000 (amts > $500k require exception)
Lender/Borrower Fee $ 20,000 (assuming 4% fee)
GCAP Match $ 20,000
Total $ Placed in Reserve $ 40,000
GCAP CASE SAMPLE – Bldg Expansion & Inventory for Small Business
![Page 13: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/13.jpg)
Page 13
SBCG (Small Business Credit Guarantee) What It Is
• The (“SBCG”) Program provides a 50% loan guarantee with a conversion option.
• The conversion option under the loan guarantee enables financial institutions to build a Risk Reserve Pool (RRP) held by the State in a centralized fund.
• Enrolled loans are covered with a 50% loan guarantee; loans converted to the RRP can be covered up to 80%.
• SSBCI funds are leveraged with private capital from eligible lenders (banks, credit unions, qualified private lenders, and CDFIs).
![Page 14: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/14.jpg)
Page 14
SBCG – How It Works • Borrower fees – 2% first 12 months, 0.5% annually
thereafter (paid at closing and beginning of year for term loans, deducted pro-rata as advances are made on LOCs)
• Targeted to borrowers with 500 or fewer employees. Maximum loan amount generally $500,000, with exceptions.
• Max terms for SBCG guarantee: Lines of credit - 24 months Amortizing loans – 48 months
• Deficiency guarantee – Lender must diligently pursue collection from borrower prior to filing claim.
![Page 15: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/15.jpg)
Page 15
SBCG – How It Works (cont.)
• Financial institutions will be incentivized to leverage private lending at 10:1 through the conversion option.
Financial institutions decide when to convert their 50% loan guarantee to the RRP. Upon conversion, annual fees are waived.
10% of the balance on a converted loan will be transferred to the RRP.
Under the RRP, the lender may receive up to 80% reimbursement for losses on individual credits.
Reserves can cover losses on any enrolled loans.
RRP will be held by State, not lenders.
![Page 16: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/16.jpg)
Page 16
![Page 17: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/17.jpg)
Page 17
SBCG Case Sample – Accounts Receivable for Software Small Business
50% Guarantee Pool
Risk Reserve Pool
Total Project Cost $250,000
- Conventional Bank $200,000
- Borrower Equity $ 50,000 - SBCG Guaranteed Amt $100,000
Initial Fee – 2% $2,000 NA
Annual Fee ½ of 1% of guarantee balance
$0
Contribution to RRP assuming loan balance of $180,000 at the end of Yr 1
$20,000 (10% of loan balance plus initial fee)
![Page 18: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/18.jpg)
Page 18
GA Funding for Community Development Financial Institutions (CDFIs) – What It Is
• GA Funding for CDFIs is a loan participation program specifically designed to increase access to capital for Georgia’s underserved small businesses (minority- and women-owned small businesses, and small businesses located in low- and moderate-income, minority, and other underserved communities).
• CDFIs are private financial institutions certified by the U.S. Treasury to provide credit and financial services to underserved markets and populations.
• http://www.cdfifund.gov
![Page 19: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/19.jpg)
Page 19
GA Funding for CDFIs – How It Works • Designed for borrowers with 500 or fewer employees and
target loan amounts of $100,000 to $250,000.
• State will accept subordinated collateral position behind other project lenders.
• CDFIs encouraged to offer lower interest rates on SSBCI loans, for lower blended rate to borrower.
• To meet US Treasury SSBCI thresholds, CDFIs are encouraged to leverage SSBCI funds (ideally $10:$1 private/SSBCI).
• All loans will have a minimum $1:$1 public:private investment through bank participation or other private funds. Loans will be required to meet no less than a 1:1 ratio on a per loan basis.
![Page 20: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/20.jpg)
Page 20
GA Funding for CDFIs – Two Options
• State will enter into performance-driven, contractual relationship with CDFIs. Participating CDFIs will earn fees for underwriting, closing, and servicing SSBCI loans, and may participate in one of two capacities:
Loan originator/servicer – State forwards SSBCI funds directly to borrower. Receivables are returned to the State.
Contracting entity – State forwards SSBCI funds to CDFI; CDFI loans SSBCI funds to borrower. CDFI may retain SSBCI loan payments and revolve these funds into future SSBCI projects, subject to State SSBCI regulations and approval by US Treasury.
![Page 21: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/21.jpg)
Page 21
GA Funding for CDFIs Case Sample – Bldg renovation & equipment for restaurant
Total Project Cost $600,000
- Private Bank Financing $440,000
- Borrower Equity $ 60,000
- CDFI (with SSBCI funds) $100,000
Terms Private bank – 1st lien on bldg & equip; State: second lien
Bank interest rate: 6%; CDFI interest rate: 5%
Contracting entity CDFIs retain and revolve interest and principal payments into new SSBCI projects.
Originator/servicer CDFIs receive principal & interest payments and remit them to state CDFI fund.
Both contracting entity & originator/servicer CDFIs earn fees for loan underwriting, closing and servicing.
![Page 22: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/22.jpg)
Page 22
GA Funding for CDFIs Case Sample – Construction or Acquisition of Building
Total Project Cost $600,000 Interim Financing
- Private Bank Financing $300,000
- Borrower Equity $ 60,000
- CDFI (with SSBCI funds) $240,000
Terms Private bank – 1st lien on bldg & equip; State: second lien
Bank interest rate: 6%; CDFI interest rate: 5%
Upon take out by SBA 504 Debenture, contracting entity CDFIs retain and revolve interest and principal payments into new SSBCI projects. *Interim Financing must be greater than 90 days.
Originator/servicer CDFIs receive principal & interest payments and remit them to state CDFI fund.
Both contracting entity & originator/servicer CDFIs earn fees for loan underwriting, closing and servicing.
![Page 23: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/23.jpg)
Page 23
Proposed: GA LPP (Georgia Loan Participation Program) – What It Is
• Proposed to Treasury January, 2013 - anticipate to implement in April, 2013.
• GA LPP with SSBCI funding will be used to purchase a portion of a loan originated by an approved lender to a small business borrower.
• GA LPP will purchase up to 25% of the loan originated by the approved lender.
• DCA will purchase a participation from enrolled lenders in loans ranging from $100,000 to $5,000,000.
• GA LPP may be used for interim bridge financing, including SBA 504.
![Page 24: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/24.jpg)
Page 24
Proposed: GA LPP – How It Works
• A Master Loan Participation Agreement is executed between the primary lender and DCA.
• Underwriting is performed by the primary lender that is shared with DCA to streamline the approval process of the purchased participation
• The lender closes the loan and sells a position to DCA.
• DCA will be in the subordinate lien position and the primary lender will have first claim to all recoveries.
• The lender keeps all its standard fees. There are no additional fees to use the GA LPP.
![Page 25: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/25.jpg)
Page 25
Proposed: GA LPP – How It Works (continued)
• Loan servicing is performed by the primary lender, which shares proportional debt payments with DCA.
• Rates, fees and terms are determined by the primary lender.
• DCA may provide a lower interest rate than the primary lender for a limited period of time in order to improve the borrower’s debt coverage ratio.
• Primary lender has unconditional right to repurchase the participation sold to DCA at any time.
![Page 26: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/26.jpg)
Page 26
Getting Started – What You Need to Know
• Application and Vetting Process for
Participating Lenders
• Program Participation Agreements
• Loan Enrollment Procedures
• Transaction Documents
• Reporting Requirements & Compliance
![Page 27: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/27.jpg)
Page 27
Georgia SSBCI Vetting Process – GCAP, SBCG, & Proposed GA LPP
• Eligible Lenders for GCAP & GA LPP (banks, CDFIs, and credit unions) and SBCG (banks, CDFIs, credit unions, qualified private lenders) will be evaluated on following criteria:
Adequate management & lending experience Financial capacity and ability Additional lender criteria for SBCG private lenders
• DCA will partner with GA. Department of Banking & Finance to ensure participating financial institutions are sound.
![Page 28: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/28.jpg)
Page 28
Georgia SSBCI Vetting Process - CDFIs
• CDFIs seeking participation in GA Funding for CDFIs will be evaluated on the following criteria: Legal structure (min two yrs as Georgia-based corporation,
CDFI Treasury certification) CARS Rating or equivalent info (management capacity,
business history/service area, underwriting)
• Participation as a contracting entity has additional requirements Qualified non-profit, non-depository CDFIs Respond to RFQ
![Page 29: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/29.jpg)
Page 29
Application Steps – GCAP, SBCG, O & S CDFIs and GA LPP*• Interested lenders visit Georgia SSBCI website (
www.georgia-ssbci.org) or contact DCA to acquire applicable lender application package.
• Lenders complete application package and submit to DCA to request approval as participating SSBCI lenders.
• Upon review of application, DCA will notify lender of approval status via e-mail, with digital copy of formal PPA. Lender signs PPA and returns PPA to DCA for execution/signature by State.
• PPA contains terms and limitations of state and federal SSBCI regulations.
GA LPP – Interested Lenders contact SSBCI staff
![Page 30: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/30.jpg)
Page 30
Next Step – Enrolling Loans
• Lender determines if borrower is good candidate for SSBCI funding (meets basic eligibility requirements and just outside of lender’s normal underwriting guidelines).
• Lender reviews Borrower Certification Form and SSBCI requirements with borrower.
• Lender performs underwriting.
• Lender submits required loan documentation to State.
![Page 31: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/31.jpg)
Page 31
Transaction Documents
General Forms Applicable to All GA SSBCI Lenders
• Borrower Certification and Enrollment Form
• Loan Filing Form and Lender Certification
![Page 32: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/32.jpg)
Page 32
SSBCI Reporting Requirements
• Lenders will supply required information to the State; State will forward required reports to US Treasury.
• Quarterly Reports Total amount and use of allocated funds, program income
generated, and charge-offs SBCG lenders also required to file monthly reports
• Annual Reports Transaction-level data for each SSBCI-backed loan, plus
subsequent private financing for OCSP loans
![Page 33: Georgia Department of Community Affairs _______________________________](https://reader036.fdocuments.in/reader036/viewer/2022062517/56812f96550346895d9513e6/html5/thumbnails/33.jpg)
Page 33
For more info, contact:
Holly Hunt, SSBCI Program Manager
(404) 679-3144; [email protected]
Timothy D. Smith, SSBCI Program Specialist
(404) 679-0568; [email protected]
Joanie Perry, Division Director
(404) 679-3173; [email protected]
Brian Williamson, Deputy Commissioner
(404) 679-1587; [email protected]
www.georgia-ssbci.orgFax: (404) 679-1583