County considers revolving loan guidelines

The Lincoln County Commissioners are reviewing proposed guidelines for a revolving loan fund to be administered for economic development by the Lincoln County Port Authority.

On Wednesday, state Department of Commerce economic development specialist Eric Hanson provided the commissioners with a list of suggestions for governing the fund. The proposed loan fund consists of $254,000 and started with a $200,000 federal grant obtained by the county in 2000 and loaned out to help a Libby businessman establish a paving business.

The Community Development Block Grant helped Don Brown buy the equipment needed to start up Kootenai Paving in 2000. With the sale of the business earlier this year, the loan has been paid back with interest.

Because the port authority is a public agency, all federal rules and regulations attached to CDBG money will apply, Hanson told the commissioners. That includes criteria requiring benefits for people of low to moderate income and adherence to Davis-Bacon wage standards if the money is used for construction.

To avoid wage issues, the county may decide to use the money only for equipment, real estate and operating capital, Hanson said. A 1:1 private sector match from either personal cash equity or a bank loan will be required, he said. A minimum equity requirement of 10 percent of total project costs will apply.

Loan amounts would be based on the number of jobs created, with a ratio of $25,000 to $35,000 for each job created within two years.

Hanson recommended terms of 15 to 20 years for real estate, five to 10 years for equipment and one to seven years for operating capital. He suggested that the county might want to set a maximum loan amount, such as no more than 75 percent of the total loan fund, and a minimum amount of $10,000 to $25,000.

Eligible activities for loans may include new construction, building expansion or rehabilitation, equipment, operating capital, land acquisition, housing projects and economic development projects that generate employment.

The fund should focus on manufacturing, value-added businesses, technology firms and related industries, Hanson said. He recommended staying away from retail businesses that may have local competition.

Loan applications would include a business plan, projected financials for the next three years, the last three years of business and personal tax returns, the last three years of income statements and balance sheets for the company, sources and uses of funds, a commitment letter from a bank and proof of existing equity or cash equity.

Loans would be reviewed by a loan committee appointed by the port authority board. Hanson recommended a committee of five or six people. The committee could consist of part or all of the port authority board, he said.

Issues Hanson said should be considered when reviewing applications include the overall strength of the business proposal, the number and quality of jobs created, the overall impact on the area and the benefit to the county as a whole, the ³five Cs² of character, commitment, capacity, capital, conditions and collateral, bank commitment, whether the business is a startup or existing with preference going to existing businesses, the socio-economic impact on the local area, and whether the business is relocating from another area.