Purpose of the Program
The purpose of The ONE Fund program is to provide small business loans that result in long-term job creation and increased commercial development activity throughout Clark, Floyd, Jefferson, Scott, and Washington counties. Small businesses make up nearly half of U.S. private-sector employment, and they play a vital role in supporting the overall economy as they are responsible for creating nearly two-thirds of net new jobs. In general, small businesses face much greater hurdles accessing credit to support business growth. The ONE Fund will serve as a “lender of last resort” with the goal of assisting small businesses to successfully launch, scale, and ultimately become “bankable”.
The objective of The ONE Fund is to increase the capacity of the local economy by providing small businesses a financing source to help grow, maintain, and sustain their operations, which will add value to the southern Indiana region as a whole.
Eligible borrowers under the RLF Program include for-profit businesses only, and can be sole proprietorships, partnerships, corporations or LLCs with proposed activities to be located within Clark,Floyd, Jefferson, Scott, and Washington counties. Businesses may be new or established. All benefiting businesses must remain in the project area for the life of the loan, or agree to an accelerated loan repayment.
Allowable Lending Activities
The allowable lending activities for The ONE Fund RLF program include:
Land costs, including engineering, legal, grading, testing, and site mapping; and related costs associated with acquisition and preparation of land;
Building costs, including real estate, engineering, architectural, and legal; and related costs associated with acquisition, construction, and rehabilitation of buildings;
Machinery and equipment costs, including delivery, installation, and engineering, architectural, legal, insurance, and related costs;
Other costs contributing directly to the value of project’s fixed assets;
Working and start-up capital;
Purchase of a business, if the need for RLF financing is sufficiently justified and documented in the loan application materials. Acceptable justification could include acquiring a business to substantially save it from imminent closure or acquiring it to expand it with increased investment.
Prohibited Lending Activities
The following activities are not eligible uses of RLF funding:
- Acquisition of an equity position in a private business;
- Subsidizing interest payments on an existing RLF loan;
- Providing a loan that would result in the relocation of jobs outside of The ONE Fund’s service area;
- Enabling a borrower to acquire an interest in a business either through the purchase of stock or through the acquisition of assets, unless sufficient justification is provided in the loan documentation. Sufficient justification may include acquiring a business to save it from imminent closure or to acquire a business to facilitate a significant expansion or increase in investment with a significant increase in jobs. The potential economic benefits must be clearly consistent with the strategic objectives of The ONE Fund;
- Providing funds to a borrower for the purpose of investing in interest-bearing accounts, certificates of deposit, or any investment unrelated to the RLF objectives;
- Refinancing existing debt, unless Recipient sufficiently demonstrates in the loan documentation a “sound economic justification” for the refinancing (e.g. the refinancing will
- support additional capital investment intended to significantly increase business activities);
- Serving as collateral to obtain credit or any other type of financing;
- Purchase or financing of rolling stock;
- Providing a loan to support a business deemed as “high risk” by The ONE Fund. Examples of businesses deemed “high risk” include but are not limited to: adult entertainment products or services, drug paraphernalia, gambling, harmful products, or any service or product deemed illegal within the state of Indiana.
How much can be borrowed?
The minimum loan amount is $2,000. The maximum loan amount is $20,000. All loans are at the discretion of the Loan Committee.
Repayment is to be made directly to The ONE Fund. Loan payments will be made monthly on the first of the month, and will begin one full calendar month from the date of loan disbursement (e.g. if the loan closes on 9/15, the first payment will be due 11/1). Repayment is considered late if it is received after the 15th day of each month and a late fee of 10% will be assessed.
Interest rates will be determined at the time the loan is given and will be fixed for the term of the loan. The interest rate for loans from this RLF will be the U.S. Prime Rate plus 2%. The Prime Rate is the prime interest rate quoted in the Wall Street Journal at the time the loan is issued.
Minimum Credit Score
Borrower is required to have a minimum credit score of 625 to be considered for a loan from this fund.
The terms for loans will be as follows:
- Machinery and Equipment: 5 years
- Working Capital: 2 years
- Brick and Mortar and Real Estate: 7 years
- Application Fee: $100
- Administrative Fee: 2% of loan amount
- Late Payment Fee: A late payment will be construed as any payment which is not postmarked or
- transferred electronically by the 15th day of each month. The penalty charge will be 10% of the current
- scheduled payment.
- Loan Modification Fee: $200
The ONE Fund requires all borrowers to provide at least 10% equity participation. Equity may be in the form of a cash reserve, or the documented value of fixed assets specifically purchased for use in the business.
Collateral requirements will be based on the merit of each loan request and will vary for each loan. Examples of appropriate collateral include liens on inventory, receivables and/or fixed assets. Other additional securities may be identified by the Loan Committee to ensure that all RLF loans are well collateralized.
A personal guarantee from all owners of the business will be required to secure a loan.
Credit Not Otherwise Available
The ONE Fund cannot be used to substitute available private capital, and potential borrowers must demonstrate that credit is not otherwise available. RLF funds will not be disbursed until written evidence to this effect has been received. This would be in the form of a bank declination letter (or equivalent documentation), or a letter indicating that the bank can only finance a portion of the money that the borrower needs.
Job Cost Ratio
The ONE Fund’s targeted job/cost ratio is one job created or retained per every $10,000 of proceeds used. For sole proprietorships, the job/cost ratio requirement may be waived through Loan Committee approval.
The following documents are required to be submitted by the loan applicant to complete the application package. Please use this checklist as a guide when assembling your application package.
Completed Loan Application
- Full Credit Report for all business owners (must be a full credit report from Experian, Equifax or TransUnion. All individuals residing in the US are entitled to one free credit report per year)
- Articles of Incorporation (if applicable)
- Bank Declination Letter (or letter stating that only a portion of the needed capital can befinanced)
- Most recent two (2) years of tax returns (if two years of business tax returns are not available,then applicant must submit the most recent two years of personal tax returns)
- Financial Statements for the 2 most recent fiscal years, as of the most recent month-end of the current year (does not apply to start-ups)
- Personal financial statement for all business owners
- A Full-Scope Business Plan including granular, 3-Year Financial Projections
- Collateral information
- Sources of other required funds (if applicable)
- Budget for the use of funds:
- If funds are being used to purchase equipment or materials, a quote or bid from reputable vendors must be provided. The ONE Fund recommends at least three quotes to ensure the best value is found.
- If funds are being used to repair equipment, an assessed value of the equipment to be repaired must be provided along with quotes for the purchase of a new piece of equipment. If the cost to repair is higher than the cost to purchase new, a written justification for the repair must be provided.
- If funds are being used to purchase real estate, a letter from the listing agent outlining the current status of the property, annual taxes, assessment, listing price, and appraisal must be provided.
- If funds are being used for any form of construction or renovation project, a quote or bid from reputable contractors must be provided. The ONE Fund requires three quotes to ensure the best value contractor is hired.
- If funds are being used for working capital, a cash flow statement from the most recent 3 years must be provided. If the business is new, a 2-year pro forma financial forecast must be provided.