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HomeMy WebLinkAboutMinutes - January 24, 2023 SSLODI CITY COUNCIL SHIRTSLEEVE SESSION CARNEGIE FORUM, 305 WEST PINE STREET TUESDAY, JANUARY 24, 2023 A.Call to Order / Roll Call An Informal Informational Meeting ("Shirtsleeve" Session) of the Lodi City Council was held Tuesday, January 24, 2023, commencing at 7:02 a.m. Present: Council Member Bregman, Council Member Khan, Council Member Nakanishi, Mayor Pro Tempore Craig, and Mayor Hothi Absent: None Also Present: City Manager Schwabauer, City Attorney Magdich, and City Clerk Nashed B.Topics B-1 Receive Information about Proposed Hometown Microloan Program for Lodi Startups and Micro Businesses and Provide Direction (CM) Business Development Manager Astrida Trupovnieks provided a presentation regarding the proposed Hometown Microloan Program. Specific topics of discussion included goals of the program, policies and procedures of the program, eligible borrowers, loan requirements, eligible actives, loan process, and collaboration with San Joaquin Small Business Development Center. Council discussion ensued with Ms. Trupovnieks and City Manager Schwabauer regarding City of Lodi definitions of common words that relate to program, possible State or federal funding, business plans, fees, budgeted City funds for the program, the proposed loan board, possible liabilities and risks of the program, funding sources, and the possibility of utilizing Community Development Block Grant funds. San Joaquin Small Business Development Center Les Fong provided public comment on the item. Lodi Chamber of Commerce Director and CEO J.P. Doucette provided public comment on the item. C.Comments by Public on Non-Agenda Items None. D.Adjournment No action was taken by the City Council. The meeting was adjourned at 8:03 a.m. ATTEST: Olivia Nashed City Clerk Economic Development in Lodi Creating Conditions for Economic Growth for Lodi Micro Business HOMETOWN MICRO LOAN PROGRAM FOR THE CREDITWORTHY BUT NOT QUITE BANKABLE Presentation Outline 1) Goals and Objectives 2) Loan Policy and Administrative Procedures Manual-Essential! 3) Hometown Microloan Program Fundamentals HOMETOWN MICRO LOAN PROGRAM FOR THE CREDITWORTHY BUT NOT QUITE BANKABLE Goal #1 To assist credit-worthy but not quite bankable minority, women, low-income veteran Lodi entrepreneurs and other small business owners achieve economic growth by providing small-scale loans for business purposes Objective: Provide short-term loans of up to $50,000 to creditworthy Lodi entrepreneurs and small businesses that are not being well-served by traditional lenders HOMETOWN MICRO LOAN PROGRAM FOR THE CREDITWORTHY BUT NOT QUITE BANKABLE Goal # 2 To provide applicants with a path towards becoming eligible for additional business loans from traditional sources by establishing a positive credit history Objective: Extend terms that “help level the financial playing field” for under- capitalized Lodi entrepreneurs and small businesses, including lower interest rates and lower fees HOMETOWN MICRO LOAN PROGRAM FOR THE CREDITWORTHY BUT NOT QUITE BANKABLE Goal # 3 To enhance loan success by requiring Lodi entrepreneurs and undercapitalized businesses To receive coaching and technical assistance provided by the San Joaquin County Small Business Development Center (SBDC) as a condition to receiving a loan Objective: Applicants in-training must participate in regular meetings to facilitate repayments, continue their practical financial education, and access a support network HOMETOWN MICRO LOAN PROGRAM FOR THE CREDITWORTHY BUT NOT QUITE BANKABLE Goal # 4 To establish Lodi as an entrepreneurial and small business-friendly community Objective: Microloans and small business technical assistance will serve as an entrepreneurial and small business retention and business attraction tool HOMETOWN MICRO LOAN PROGRAM FOR THE CREDITWORTHY BUT NOT QUITE BANKABLE Goal # 5 To capitalize a Revolving Loan Fund, and encourage the creation of Lodi’s own community-based nonprofit in the future dedicated to improving access to capital for Lodi businesses Objective: Loan 100 percent of the initial capital within three years, establish a self-replenishing pool of money utilizing interest and principal payments on old loans to issue new ones, and attract outside sources of capital from local lenders LOAN POLICY AND PROCEDURES MANUAL Financing Policies Organizational Structure Underwriting Criteria Loan Administration Eligible Borrowers Make -up of Loan Committee Underwriting Criteria Grid Intake Eligible Activities Authority of Loan Committee Capital Pre-application Loan Size Conflict of Interest Cash Flow Application Interest Rates Timing of Policy Review and Update Credit/Character Underwriting Process Terms Establish Auditing Collateral Closing/Disbursement Fees Set Accounting Standards Business Plan Loan Servicing/Monitoring Equity and Collateral Requirements Review Loan Performance Repayment Plan Problem Loans and Delinquencies HOMETOWN MICROLOAN PROGRAM FUNDAMENTALS CONDITIONAL APPROVALS REQUESTED Eligible Borrowers Loan Requirements Eligible Activities Start-ups in the City of Lodi Personal credit (600 or above) (or current on all liabilities) Equipment and Vehicles Small business (10 or fewer employees) Collateral required based on loan size when available/ UCC filing on business assets Interior/exterior improvements Located within Lodi city limits Minimum equity injection of 10 percent for start-ups Working capital/Inventory Half of fund’s investment targeted to minority, veterans,low income & women-owned business Financial statements & business plan Life/Fire/Safety Improvements/Environmental clean-up Borrowers unable to access Traditional bank financing Historical or Projected Debt Service Coverage Ratio of 1.00x Engineering and design (pre-project costs) Majority ownership by U.S citizens or legal residents Personal Guarantee Feasibility Studies HOMETOWN MICRO LOAN PROGRAM FOR THE CREDITWORTHY BUT NOT QUITE BANKABLE Loans to Micro Businesses $5,000-$50,000 •Fixed interest rates (suggest not less than federal funds rate usually 3 points lower than prime) •Variable terms including life of loan, equity, collateral •Low fees to cover cost of processing, underwriting and executing loan; Cost-sharing approach between borrower, City and County will be explored; Grant-funded fees will be explored LOAN PROCESS (ESTIMATED 30 TO 90 DAYS) •Intake Needs Assessment Eligibility •Preapplication •Application Portal •Loan Packaging •Underwriting •Credit Memo from Underwriter and Recommendation •Loan Committee •Loan Closing/Disbursement •Loan Servicing and Monitoring ORGANIZATIONAL STRUCTURE LOAN POLICY & ADMINISTRATIVE MANUAL TO GOVERN Loan Packaging •SJRLF Underwriting •NDC Loan Committee •7 members Loan Approval/Denial •City Manager LOAN ADMINISTRATION PARTNERSHIP AGREEMENT WITH SAN JOAQUIN RLF -Loan Policy & Administrative Procedures to govern -Staff dedicated to loan administration -Underwriting provided by National Development Council -Active management of accounts -Regular loan performance reporting HOMETOWN MICROLOAN PROGRAM TIMETABLE January 24, 2023 Receive consensus on goals/objectives Receive conditional approval on recommendations February 2023 Preparation of Loan Policy and Administrative Procedures; Negotiate Partnership Agreement March 2023 Seek City Council approval of resolution, contract with SJRLF and Manual April 2023 Access to Capital Meeting for potential borrowers; selection of Loan Committee May 2023 Application Portal activated; technical assistance activated by SBDC