The Milton City Council approved on Tuesday, May 7, revisions for a small business development loan program. A revised application for the program was also approved.
City Administrator Al Hulick said revisions to the program had “been in the works for a while.”
He described the program as a “different type of funding mechanism” for commercial property.
The program began in 2012 and was created in conjunction with both First Community Bank and Bank of Milton, he said.
The city made an initial investment of $15,000 from the general fund, and the banks each contributed $5,000, Hulick said, giving the program a starting balance of $25,000.
According to Hulick, the program was created “to help those who may not have capital funding or equity at hand to make 30 percent down, so this program would allow the community to partner with those businesses.”
After the program was created, Hulick said, it was not “well utilized,” and the city was “not getting the word out.”
Revisions, he said, would make the program’s parameters more robust.
“This is a traditional loan in which the city would provide a partnership to provide a catalytic opportunity,” Hulick said.
He described the program as self-sustaining.
“As the money is put back, it grows as interest is accrued,” Hulick said.
“There is somebody already interested,” he said.
According to a memo from Finance Director Dan Nelson to council, the city’s Small Business Development (SBD) loan program was created to provide loans that would improve, create or expand small businesses in Milton.
Since 2013, Nelson wrote, the program had been “sparsely utilized.”
To make the program more “applicable and sustainable,” and increase transparency, Nelson wrote, several program guidelines were being recommended for revision, as follows:
• repayment term shall be no more than seven years with equal monthly payments, including principal and interest.
• the interest rate shall be set at the prime rate at the time the council approves an application.
• the program shall not loan out more than $12,500 per application, representative of 50 percent of the beginning balance.
• the applicant shall have a minimum of 10 percent equity or securitized stake in the business assets. The requirement is to prevent fully leveraged transactions.
• the applicant shall sign a personal guarantee.
Both banks participated in making the recommended revisions, Nelson wrote.
Further literature supplied to council defined the program as “a partnership” between the city, Bank of Milton and First Community Bank.
Under a heading of “maintenance and improvement,” stated goals included: encouraging public and private efforts to maintain and improve the community; promoting the attractiveness of downtown Milton as a preferred location to live and operate a business, and encouraging maintenance and improvements to existing buildings to prevent or eliminate deterioration.
Under a heading of “preserve downtown stability and property values,” stated goals included: maintaining the city’s downtown appeal and preserve property value by encouraging owners to renovate businesses, and create and update living units.
To be eligible, applicants must have a project within the city of Milton; commence building within 90 days of the loan closing and complete the project within one year of the closing date, and comply with applicable city building codes and zoning standards.
Concurrent applications from a single applicant are not allowed, unless for separate properties. Applicants may apply for additional loans for another project after the initial project is completed.
Eligible projects include, but are not limited to: land or building acquisition, professional design and architectural services, interior or exterior renovations, structural repairs, building expansions and construction of new facilities, improvements necessary to bring a property up to code, and other activities deemed appropriate by the council.
Non-eligible activities include: removal of property improvements without replacement, purchase of goods sold by the business, roof repairs or replacements with some exceptions, time and labor compensation to members of an applicant’s immediate family, among others.
Program terms and conditions
Among terms and conditions, applicants will be required to submit a business plan and projected financials for a three-year period. Financial statements from the previous three years and a commitment letter from a financial institution are also required.
For projects requiring site plan approval, applicants will need to provide to-scale drawings of proposed improvements, including interior and exterior changes to a building, a construction schedule and associated estimated costs, and a materials list.
For those seeking more than $5,000 in funding, verification that the applicant has sought conventional financing, through a loan or line of credit, is required.
The city council has the authority to approve or deny loans on a case-by-case basis.
A four-page application was also approved by council.