City of Oxford Business Revolving Loan Fund (RLF)

For Oxford Entrepreneurs

Since 1986, the City of Oxford has provided low interest rate loans to qualified for-profit businesses in Oxford. To determine if you might be interested, here are a few details regarding the City’s loan program.

1) How can the loan funds be used?

Loans are provided for purchase of equipment or real property, or for building improvements. Loans for working capital (inventory and accounts receivable), or to repay other loans do not qualify. The business must be located within the City limits. In most cases, the business should already be in existence with the loan being for expansion purposes. Under the program, a loan for a new start-up business generally is considered only if the owner demonstrates a track record of successfully managing a similar business.

2) Can the City lend me the entire amount I need for the project?

The City loan is not intended to be your primary funding source for the cost of the project — your primary funding source would be your bank, which would generally provide 50%-70% or more of the project cost. The City requires the borrower to invest a minimum of 10% cash, which must be the owner’s equity, not funds loaned to the business by the owner. Generally the City can provide a loan for the remaining difference (known as “gap” financing) — for example, a loan of 20%-40% of the project. (The maximum the City can loan is 50% of the project.)

3) How much can I borrow?

Generally we can structure loans where the City’s portion can be up to $50,000, or up to $350,000 with the assistance of additional state funding. Under the program, the minimum size loan the City can provide is $10,000.

4) What are the interest rate and term of the loan?

The interest rate will be a fixed rate over the term (length) of the loan. Interest rates are very attractive and are below the current market rate for business loans. The term and the rate of the loan will vary based on the assets being purchased, the nature of the business, the economic environment, and the current market rate environment. Generally terms for equipment loans range from 5-7 years (up to a maximum of 10 years), and building acquisition or construction loans are for up to 15 years.

5) What are some of the requirements of the program?

The state loan program was established under a federal program in order to stimulate economic development, and for the purpose of creating jobs. Therefore, to meet this national objective, generally for every $10,000 loaned one full-time equivalent job must be created. Loans for the construction or improvement of real estate are required to employ construction workers at federal prevailing wages. The project must not have already been started — the state does not approve loans after the purchase has occurred or the construction has begun.

6) How do I apply?

Because the funds are provided by the state, the use of the funds must meet state requirements and therefore, the application process involves completing both a pre-application and a full application. The pre-application provides for quick screening. This is to save time from preparing the full application if a candidate’s financial position or other factor would disqualify them. The full application requires additional information. The state requires the submission of previous years’ tax returns and financial statements, projected financial statements, and usually a written business plan. Where it may benefit you, we suggest you to obtain assistance from your accountant or CPA in preparing this financial information required by the state. The state also requires the city to perform an environmental review of the project to comply with federal regulations. Additionally, a non-refundable application fee must accompany the application.

7) How long does it take to process a loan?

Because of the application and the environmental review requirements discussed above, the process can take 60 days or more. An applicant can accelerate the process by providing complete paperwork in a timely manner.

8) Will collateral and a personal guarantee be required?

Under the state program the loans must be collateralized, generally by a mortgage on real property, or a perfected lien for equipment. A personal guarantee from the borrower will be expected.

9) What are the state requirements after I have obtained my loan?

In addition to keeping current on the monthly loan payments, the borrower will be responsible for the periodic submission of records to the City to demonstrate job creation in order to meet the state requirement. This may include the number of applicants for each new position created, as well as the number of actual full-time equivalent positions created. The City may also wish to examine the subsequent annual financial statements and/or tax returns of the business.

10) How do I obtain further information?

Contact the City at 513-524-5238 and we will be pleased to answer any questions you may have, and provide you with pre-application and full application packets.