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.

Goals & Objectives of RLF

The goal of the RLF is to create or retain private-sector jobs, particularly for low- and moderate-income persons.

The objectives of the RLF are to

  • To identify and promote economic development goals within Oxford’s Comprehensive Plan
  • Stimulate the expansion of the City’s economic base
  • Provide gap financing for projects where private sector and other public sector financing and owners’ equity are insufficient to cover project costs
  • Provide below-market interest financing for projects that have concomitant public benefit

Requirements for RFL Loans

The minimum standards for projects utilizing the RLF portfolio are as follows:

Job/Cost Ratio
For each Thirty-five Thousand Dollars ($35,000) loaned, one full-time equivalent job must be created within 12 months of project completion. For loans under Thirty-five Thousand Dollars ($35,000), one full-time equivalent job must be created within 12 months of project completion.

Proportion of Low and Moderate-Income Jobs
A majority (51%) of the jobs created by the total of all projects financed with RLF monies must be directed to low and moderate income persons, or, a majority (51%) of the jobs retained by the total of all projects financed with RLF monies must be directed to low and moderate income persons. A low and moderate annual wage shall not exceed the most recent U.S. Department of Housing and Urban Development Section 8 Housing Income Limits for a family of four (4) for Butler County. The RLF staff will update the city website annually with the most recent HUD income limits.

Leverage Ratio
In no circumstances does the RLF provide more than 50% of the financing for a project; the applicant business is required to have at least 10% owner equity.

Eligible Activities
Eligible types of loans include the following:

  • Fixed asset loan for the acquisition and/or improvement of land, buildings, machinery and equipment, including new construction or renovation of existing facilities, demolition and site preparation.  (Loan terms should not exceed the life of the asset);
  • Working capital loans are eligible, however, they will be reviewed on a case-by-case In the event of a declaration of emergency by the governor of Ohio or the city manager of Oxford, working capital loans may be considered more broadly.

Ineligible Activities
Ineligible loan activities of uses of RLF funds include financing of existing debts, non-capital equipment and training costs;

Other Standards
Once a loan has been approved and the project is completed, the borrower shall not change the location of the business, nor plant facilities nor offices, out of the City of Oxford. Any such changes or relocation shall constitute a default under the loan agreement and all sums advanced by the RLF shall be due immediately.


Financing Policies


Private Funding Requirement
There must be “necessary and appropriate determination” for utilizing the RLF:

  • Inability on the part of the business to afford conventional interest rates
  • Inability on the part of the business to afford a conventional down payment
  • Inability of the business to obtain favorable terms

The RLF is not intended to be a substitute for private capital.  It is, therefore, required that the business consult first with a private lending institution for financing. Applications for RLF are considered only when the bank is unwilling to make the loan or if the conditions of the loan place too significant of a financial strain on the business. Proof of this must be provided at the time of application.

Loans for fixed asset financing are preferred.

In the event of a declaration of emergency by the governor of Ohio or the city manager of Oxford, this requirement may be suspended.


Average Loan Size
Minimum loan amount shall be $10,000. It is recommended the maximum loan amount shall not exceed 1/3 of the RLF balance. Loan amounts and interest rates are set by the CIC Loan Committee and are set as deemed necessary and appropriate for each application.

Term of Loan
The RLF program financing will be offered for a term determined to be necessary and appropriate, but no longer than the life of the asset financed.

  • Machinery and equipment: Terms will generally be for five (5) to seven (7) years for machinery and equipment. This term will vary depending on the life of the asset(s) and the financing needs of the business. A business may be offered a term up to ten (10) years for machinery and equipment
  • Real Estate: A business may be offered a term of up to fifteen (15) years for real estate

Rate of Interest
The interest rate to be charged by the RLF will be dependent on the financing needs of the business for the project.


Loan Security
Loans are secured in one or more of the following manners:

  • Mortgage position on the real estate involved in the project;
  • Lien position on the equipment involved in the project;
  • Personal guaranty of owner(s);
  • Depending on the assets purchased, additional collateral may be required in order to secure a

Planned Use of Interest and Application Fees
The interest payments will be returned to the RLF for relending. The loan application fee, Two Hundred Fifty Dollars ($250.00), will defray the cost of the credit analysis. The interest earned on the investment account will defray the cost of administration. In the event of a declaration of emergency by the governor of Ohio or the city manager of Oxford, this fee may be waived.


Creditworthiness
The RLF program is a lending program for healthy and expanding small businesses. Loans will be made to businesses with a good credit history and excellent potential to fulfill loan obligations. A thorough credit analysis will be performed on every loan applicant by the City or the Butler County Community Development Department.

  • Applicants must demonstrate ability to operate the business
  • Applicants must have enough capital so that, with a RLF loan, the borrower can operate on a sound financial basis.
  • Applicants must show that the proposed loan is of sound value or so secured as to reasonably assure repayment.
  • Applicants must show that the past earnings record and/or future prospects of the company indicate ability to repay the loan and other debt out of


Loan Selection Priorities
Loans will be given for the expansion of existing City businesses and to businesses wishing to establish themselves in Oxford. Priority will be given to projects which will have a substantial economic development impact on the community.


Special Financing Techniques
All loan payments shall be made on a monthly basis. The City may, at its option, approve “interest only” payments on any RLF loan for up to one (1) year from the date of the initial loan. The City may, at the request of the borrower, renegotiate the terms of the loan where unforeseen circumstances have arisen which make renegotiation necessary.

RLF Administration

Under the direction of the City Manager, the Economic Development Department will administer the RLF program for the City of Oxford. The RLF administration is substantially in compliance with federal regulations for the CDBG program.

Loan Administration Board and Loan Committee
The Oxford Community Improvement Corporation (CIC) will serve as the loan administration board.

  • The CIC will, by majority vote, appoint three of their members, including the Executive Director, to the RLF Loan Committee which will review the loan request and conduct an analysis of the loan application.
  • The CIC Board will review the recommendation of the RLF Loan Committee and recommend approval or disapproval to City Council. If more applications are received than funds available, the CIC shall rank the applications according to priority and that ranking will be submitted to the City Council. The City Council makes the final decision on the loan based upon the recommendation of the CIC.

The CIC will review any changes in these procedures for the RLF program. Such changes will then be brought to the City Council which will adopt them by resolution.


Staff Assistance
The Economic Development Department (RLF staff) will assist the CIC and potential loan applicants. This department is responsible for client relations, application review, credit analysis, loan packaging, processing and servicing. In addition:

  • The department will monitor compliance with this Revolving Loan Fund Program and all governing Regulations of HUD. 
  • The department shall report each year on the success of the RLF program by reporting the annual amount of money loaned from the RLF fund, the number of new businesses that utilized RLF funding, and the number of full time equivalent jobs created or retained by RLF loan recipients that continue to do business in Oxford. 
  • The department shall annually update the most recent S. Department of Housing and Urban Development Section 8 Housing Income Limits for a family of four (4) for Butler County in the RLF application
  • The department is also responsible for maintaining all accounting records of the RLF

Any legal work needed is performed by the City of Oxford’s legal counsel.


Recapitalization Strategy 
The RLF program continually uses principal and interest revenues as they are received from outstanding loans to replenish the fund and to make loans to other eligible borrowers. Because of the nature of the Fund, shorter-term loans are preferred; a longer term means that the Fund will not be replenished as quickly. All monies shall remain in the account until the amount reaches the sum needed to loan to the next applicant [minimum: Ten Thousand Dollars ($10,000)].

There are two strategies to accelerate recapitalization of the RLF: (1) Offer a lower interest rate for a shorter term loan; (2) Encourage machinery and equipment loans which typically have shorter (5-7 years) terms.

Sources of Funding to Cover Administrative Costs
When payment on a loan is made, the RLF is replenished. Interest on the investment account, interest earned on RLF loans and loan fees are sources of funding to cover administrative costs for the RLF program. In addition, up to twenty percent (20%) of CDBG monies may be used for administrative costs, including the RLF program.

The application fees are intended to cover the cost of the credit analysis. Loan principal and interest are to make other loans. Interest earned on the account may be used to cover staff expenses to operate the RLF (e.g., advertising expense).

 

Loan Approval Process

 

  1. The applicant business must contact the RLF staff and express interest in applying for a Once the RLF staff determines that the business and the project meet the eligibility requirements and a loan of this type is suited to their needs, an initial interview is arranged.
  2. During this interview, or shortly thereafter the business should present the Revolving Loan Fund staff with a completed application that includes the following:
    • Completed Application Form which will list existing jobs, jobs to be retained or created, and job classification. (Appendix A)
    • Application fee 
    • Pro forma statement for the length of the desired loan 
    • Financial statements from previous three years, including balance sheets, profit and loss statements, interim financial statements 
    • Federal tax returns from previous three years
    • Personal financial statements, tax returns, and resumes of principals (Appendix B)
    • Business agreement paperwork (i.e. articles of incorporation, operating agreement, partnership agreement, franchise agreement, etc.) 
    • For existing businesses: License, two years income statement proformas, franchise agreement, corporate resolution 
    • For new businesses: Business plan, start-up balance sheet, 3 year personal income balance sheet, 12-month cash flow statement
    • Bank commitment letters 
    • Corporate Resolution 
    • Real estate purchase agreement and construction cost budget/equipment invoices
    • Evidence of available equity
    • A copy of their three credit reports, available free annually from annualcreditreport.com
    • Other documentation as listed in RLF Loan application (or as deemed necessary by the RLF administration)
  1. The application and financial statements are reviewed by the RLF staff to determine if the necessary and appropriate qualifications are The staff then reviews the company’s ability to repay the loan, and formulates a recommendation to the CIC Loan Committee.
  1. The CIC Loan Committee approves or disapproves the request for a loan and sets the terms of the loan agreement based on the financing policies stated in this The CIC Loan Committee also determines the manner in which the loan shall be secured.
  1. Upon approval, a recommendation is made by the CIC Board for resolution to City Council for their approval. 
  1. Upon receipt of the Council resolution approving the loan, the RLF staff proceeds in having the following documents executed:
    • Commercial Note
    • Loan Agreement
    • Security Agreement; if applicable
    • Mortgage Agreement; if applicable
    • Guaranty Agreement; if applicable
    • Signed copies of Agreement of Compliance and Assurance of Compliance for Nondiscrimination (Appendices C & D)
    • Non-displacement Compliance Agreement (Appendix E) 
    • Community Reporting Compliance Agreement (Appendix F)
    • Any other documents deemed necessary to protect the interests of the Loan

Loan proceeds for the purpose of purchasing equipment are not released until the equipment is in place and has been inspected by the RLF staff

 

Other Requirements

 

Environmental Requirements
The City shall perform its environmental review at the time of formal application. The purchase of machinery and equipment is exempted from further review. Renovation and expansion of buildings for substantially the same use is categorically excluded. If it is determined that a Finding of No Significant Impact or an Environmental Impact Statement must be prepared, an outside consultant will prepare the report. The RLF borrower will be required to pay the cost of preparation, unless sufficient administrative funds are available from the CDBG formula allocation to cover the environmental review. Any identified adverse environmental impacts will be discussed with the borrower, the engineer and the contractor in an attempt to minimize the impact.

Clearance procedures for environmental requirements and historic properties are handled through the State agencies at the time of application submittal. Prior to loan closing, the project must be in compliance with local and state environmental requirements.

The City participates in the federal flood insurance program. It will not lend money for construction in any flood plan designated pursuant to this program.

Default Requirements
A RLF loan project must be within the city of Oxford. Included in the loan agreement will be a statement of default. The statement provides that the debtor shall keep the collateral separate and identifiable at the address shown and will not remove the collateral from the address without the City’s written consent. The debtor shall be in default under the loan agreement if any representation or statement made to the City proves to have been false in any respect. Attachments:

  • Application Form
  • Personal Financial Statement
  • Agreement of Compliance
  • Assurance of Compliance for Nondiscrimination
  • Non-displacement Compliance Agreement
  • Community Reporting Compliance Agreement
  • Job Benefit Verification Form


Fill Out Revolving Loan Fund Pre Application



Revolving Loan Fund FAQ

Loans are provided for the 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 is generally considered only if the owner demonstrates a track record of successfully managing a similar business.

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.)

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.

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.

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.

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 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.

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.

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.

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.

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.