_______________________________ georgia department of community affairs metro atlanta chamber of...
TRANSCRIPT
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Georgia Department of
Community Affairs
Metro Atlanta Chamber of CommerceAugust 2, 2012
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History & Background of State Small Business Credit Initiative (SSBCI)
• Component of Small Business Jobs Act, bi-partisan legislation signed into law on Sep. 27, 2010
• $1.5 billion set aside for SSBCI, managed by U.S. Treasury, to strengthen state-run lending programs to support small business
• Georgia’s allocation is $47,808,507
• Requirement for the state to generate overall 10:1 leverage
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Advantages and Opportunities for Georgia Lenders
• Credit enhancements to strengthen bank loans for small businesses
• Delegated lending - Lenders manage underwriting process
• SSBCI program - quick turnaround and streamlined format (days)
• Opportunity for CRA credit
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Advantages and Opportunities for Georgia Lenders
• Opportunity to improve Safety and Soundness reviews▪ A distinguished panel of state and federal regulators participating
in the roll-out of the SSBCI on 5/23/12 indicated a general consensus that lenders participation in the SSBCI Program is viewed positively by Safety & Soundness and Consumer Compliance Examiners. This resource panel continues to provide advice and assistance as program implementation progresses.
• Georgia Department of Banking and Finance; Federal Reserve; Federal Deposit Insurance Corporation; and Office of Comptroller of Currency.
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What Does Georgia SSBCI Offer?
• Three new initiatives available to private lenders to expand small business lending
GCAP (Georgia Capital Access Program) - $10 million
(Risk reserve pool funded with borrower/lender fees matched with SSBCI funds)
SBCG (Small Business Credit Guarantee) - $17.8 million(50% loan guarantee with a conversion option into a risk reserve pool offering up to 80% reimbursement)
Georgia Funding for CDFIs - $20 million
(Loan participation program specifically designed for underserved SBs)
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SSBCI – General Eligibility Criteria
• Loan proceeds can be used for eligible “business purposes” including:
Start-up costsWorking capitalBusiness procurement, franchise feesEquipment & inventoryPurchase, construction, renovation, or tenant
improvements of eligible place of business
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SSBCI – General Eligibility Criteria
• Refinancing is not eligible; however, renewals are eligible under certain conditions … as one example… performing lines of credit that balloon and become due … new balance must increase by at least 10%
• Passive real estate investment generally is not eligible. However, exception should at least 51% of existing commercial RE be occupied by owner).
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SSBCI – Eligibility Criteria (cont.)
• Eligible small businesses include corporations, partnerships, joint ventures, cooperatives, sole proprietorships, state-designated charitable & other non-profit institutions.
• SBs generally defined as 500 or fewer employees
• SSBCI participation generally limited to $500,000 or less, with exceptions and target amounts tailored for each program
• Participating lenders and borrowers will be required to provide certain assurances and certifications as required by US Treasury SSBCI guidelines.
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GCAP (Georgia Capital Access Program)
• Provides risk reserve pool for lender by matching a required fee (2% to 7%) paid by the borrower, lender or combination, into a loan loss reserve fund for enrolled loans
• SB loans of $500,000 or less (exceptions possible)
• In case of default on enrolled loans, claims may be made against the loan loss reserve account for loss of principal and up to 90 days of accrued, but unpaid, interest
• Borrower/bank fee may be financed through resulting loan.
• Up to 100% of covered loan balance losses can be claimed.
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Total Project Cost $1,500,000
- Private Bank Financing $1,350,000
- Borrower Equity $ 150,000
- GCAP enrolled loan amt $ 500,000 (amts > $500k require exception)
Lender/Borrower Fee $ 20,000 (assuming 4% fee)
GCAP Match $ 20,000
Total $ Placed in Reserve $ 40,000
GCAP CASE SAMPLE – Bldg Expansion & Inventory for Small Business
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SBCG (Small Business Credit Guarantee)
• The (“SBCG”) Program provides a 50% loan guarantee with a option to convert to risk reserve pool .
• Enrolled loans are covered with a 50% loan guarantee; loans converted to risk reserve pool can be covered up to 80%.
• SSBCI funds are leveraged with private capital from eligible lenders (banks, credit unions, qualified private lenders, and CDFIs).
• Max terms for SBCG guarantee: Lines of credit - 24 months Amortizing loans – 48 months
• Deficiency guarantee – Lender must diligently pursue collection from borrower prior to filing claim.
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SBCG Case Sample – Accounts Receivable for Software Small Business
50% Guarantee Pool
Risk Reserve Pool
Total Project Cost $250,000
- Conventional Bank $200,000
- Borrower Equity $ 50,000 - SBCG Guaranteed Amt $100,000
Initial Fee – 2% $2,000 NA
Annual Fee ½ of 1% of guarantee balance
$0
Contribution to RRP assuming loan balance of $180,000 at the end of Yr 1
$20,000 (10% of loan balance plus initial fee)
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GA Funding for Community Development Financial Institutions (CDFIs)
• GA Funding for CDFIs is a loan participation program specifically designed to increase access to capital for Georgia’s underserved small businesses (minority- and women-owned small businesses, and small businesses located in low- and moderate-income, minority, and other underserved communities).
• CDFIs are private financial institutions certified by the U.S. Treasury to provide credit and financial services to underserved markets and populations.
• http://www.cdfifund.gov
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GA Funding for CDFIs – Two Options
• State will enter into contractual relationship with CDFIs. Participating CDFIs will earn fees for underwriting, closing, and servicing SSBCI loans through participating in one of two capacities:
Loan originator/servicer – State forwards SSBCI funds directly to borrower. Receivables are returned to the State
Generally for-profit CDFI’s attached to commercial banks
Contracting entity – State forwards SSBCI funds to CDFI; CDFI loans SSBCI funds to borrower. CDFI may retain SSBCI loan payments and revolve these funds into future SSBCI projects.
Generally non-profit CDFI’s operating independently
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GA Funding for CDFIs Case Sample – Bldg renovation & equipment for restaurant
Total Project Cost $600,000
- Private Bank Financing $440,000
- Borrower Equity $ 60,000
- CDFI (with SSBCI funds) $100,000
Terms Private bank – 1st lien on bldg & equip; CDFI: second lien
Bank interest rate: 6%; CDFI interest rate: 5%
Contracting entity CDFIs retain and revolve interest and principal payments into new SSBCI projects.
Originator/servicer CDFIs receive principal & interest payments and remit them to state CDFI fund.
Both contracting entity & originator/servicer CDFIs earn fees for loan underwriting, closing (customary) and servicing (1% of balance payable monthly)
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Getting Started – What You Need to Know…
Applications, Program Participation Agreements, Loan Enrollment Procedures, Transaction Documents, and Reporting Requirements & Compliance …
www.georgia-ssbci.org
No nonsense Delegated Lending means days until lender can begin to enroll SB loans …
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For more info, contact:
Holly Hunt, SSBCI Program Manager
(404) 679-3144; [email protected]
Brian Williamson, Assistant Commissioner
(404) 679-1587; [email protected]
www.georgia-ssbci.orgFax: (404) 679-1583
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Opportunity Zones
State Job Tax Credit
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Opportunity Zones O.C.G.A. 48-7-40.1(c)(4)
• General Strategy▪ Encourage local governments to use existing
redevelopment statutes in an innovative fashion to revitalize blighted commercial, industrial and adjoining residential areas
▪ Reward local governments and businesses that undertake such revitalization with access to maximum State Job Tax Credits
▪ Operate state-wide, wherever eligible revitalization and redevelopment needs occur (rural, urban and suburban).
▪ Support bottom up, locally driven initiatives through local collaborative partnerships
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Promising Uses for Opportunity Zones
• Declining commercial corridors• Pockets of older commercial and industrial
areas with outdated facilities and buildings in otherwise affluent counties
• Deteriorating in-town neighborhoods adjoining older industrial areas (state EZ allows tax abatement on rehabilitated housing)
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Opportunity Zone Requirements
• Allows DCA to designate as an “Opportunity Zone”, an area within or adjacent to one or more contiguous census block groups with a 15% or greater poverty rate, where the area is part of an Enterprise Zone OR Redevelopment Plan adopted by the local government and the area displays underdevelopment, general distress and blight.
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Tax Incentives• State designation of an Opportunity Zone
allows: ▪ ANY businesses (including retail) within the area
to qualify for the State’s maximum job tax credit▪ Lower job creation threshold to 2 jobs to qualify
for the state’s maximum job tax credit of $17,500 per job over 5 years (3,500 per year)
▪ Allow credit against 100% of income tax liability, with excess credit available to claim against payroll withholding
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Example of OZ Credit Usage Jobs Created Credit Tax Liability Withholding
Year 1 2 $ 0Year 2 3 $7,000 $1,200 $5,800 Year 3 3 $10,500 $1,000 $9,500 Year 4 4 $10,500 $1,500 $9,000 Year 5 4 $14,000 $1,700 $12,300 Year 6 5 $14,000 $2,100 $11,900 Year 7 5 $10,500 $2,050 $8,450 Year 8 6 $7,000 $1,800 $5,200 Year 9 6 $7,000 $1,750 $5,250 Year 10 6 $3,500 $1,450 $2,050 Year 11 7 $3,500 $1,600 $1,900
Year 12 7 $ 0 $ 0 TOTALS $87,500 $16,150 $71,350
In the above example, a Job Tax Credit of $87,500 is generated, with the business able to utilize all of the credit
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Application, regulation, maps and more available at:
www.dca.ga.gov/oz
For questions on Metro Atlanta OZ please contact:
Dr. Eloisa Klementich, CEcD (404) 614-8291
For general questions on OZ application process:
Joanie Perry (404) 679-3173
For questions about how to take the tax credit:
Dawn Sturbaum (404) 679-1585