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Amended

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3/18/2021




Regional Revolving Loan Fund Management Plan for Lake, Porter and LaPorte Counties


CARES Act Recovery Assistance Revolving Loan Fund Management Plan (Date of Board Approval: 9/17/20)

Table of Contents

PART I: REVOLVING LOAN FUND STRATEGY 5

Introduction 5

Revolving Loan Fund (RLF) Program Established 5

Comprehensive Economic Development Strategy (CEDS) 6

  1. ECONOMIC ADJUSTMENT OVERVIEW 6

    CEDS and the Region 6

    Regional Economic Adjustment Problems and Economic Distress 7

    Plan to Deal with the Regional Economic Adjustment Problems and Economic Distress8 CARES Act Recovery Assistance 8

    RLF: Supporting Economic Adjustment Activities/Strategies 9

  2. BUSINESS DEVELOPMENT STRATEGY 9

    Objectives 9

    Targeted Businesses 9

    Business Needs 10

    Other Programs and Activities 10

  3. FINANCING STRATEGY 12

    Financing Needs 12

    Local Capital Market 13

    RLF Financing Niche 13

  4. FINANCING POLICIES 13

    Eligible Lending Area 13

    Allowable Borrowers 14

    Allowable Lending Activities 14

    Prohibited Lending Activities 15

    Loan Size 15

    Interest Rates UPDATE 16

    Terms 16

    Fees 16

    Equity and Collateral 17

    Moratoria 17

    Start-ups 17

    Working Capital 17

    Prudent Lending Standards and Operating Procedures 18

    Credit Not Otherwise Available 18

  5. PORTFOLIO STANDARDS AND TARGETS 19

    Target Percentages 19

    Private Sector Leverage 19

    Job Cost Ratio 19

  6. RLF LOAN SELECTION CRITERIA 19

  7. PERFORMANCE ASSESSMENT PROCESS 20

Loan Portfolio Review 20

Updates to the Management Plan 20

Part II: REVOLVING LOAN FUND OPERATIONAL PROCEDURES 20

  1. ORGANIZATIONAL STRUCTURE 20

    NIRPC 20

    Regional RLF Board - NIRPC Finance and Personnel Committee 21

    Individual County Loan Committees 21

    Conflicts of Interest 22

  2. LOAN PROCESSING PROCEDURES 23

    Application Process 23

    Eligibility Establishment 23

    Submittal Requirements from Each Applicant 24

    Application Review and Credit/Financial Analysis 24

    Recommendations to the Regional RLF Managing Board UPDATE 25

    Loan Closing Schedule, Fund and Close of Loan 25

    Confidentiality 25

    Other Compliance Requirements 25

  3. LOAN CLOSING AND DISBURSEMENT PROCEDURES 26

    Loan Closing Documents 26

    Loan Agreement Provisions 27

    Loan Disbursement 27

  4. LOAN SERVICING PROCEDURES 27

    Loan Servicing 27

    Repayment 28

    Monitoring 28

    Job Creation 29

    Delinquency Management 29

    Loan Files 30

  5. ADMINISTRATIVE PROCEDURES 31

    New RLF’s UPDATE 31

    Accounting and Audits 31

    Administrative Costs 31

    Capital Utilization and Sequestration 31

    Economic Development Administration Reporting 32

  6. CARES ACT RECOVERY ASSISTANCE ADDENDUM 32

PART I: REVOLVING LOAN FUND STRATEGY

Introduction


The Northwestern Indiana Regional Planning Commission (NIRPC) is a multi-purpose, sub- state, area-wide planning agency. NIRPC was originally established as the Lake Porter County Regional Transportation and Planning Commission in 1965, pursuant to State- enabling legislation. An amendment to this legislation in 1973 provided the

Commission with its current name and allowed for the addition of new member counties. Under this provision, LaPorte County joined NIRPC in 1979. In 1996, the legislation was again amended to provide a seat on the Commission for all mayors in the three-county region. The legislation was again amended in 2003 to provide for representation of all 41 cities and towns in the Tri-County area, and to specify that representatives must be elected officials, making NIRPC the metropolitan planning organization and council of government for the three-county region. The most current legislative change was in 2007 adding trustees of a township with a population over 8,000. This amendment added two more voting Board members, bringing the total number of Commissioners to fifty-three. The statutory purpose of NIRPC is to provide a coordinated management process for Lake, Porter, and LaPorte Counties and to institute and maintain a comprehensive planning and programming process for: Transportation, Economic Development, and Environmental Policy.


Revolving Loan Fund Program Established


The NWI Regional Revolving Loan Fund is a program established for preventing, preparing for, and responding to the coronavirus and/or to economic injury as a result of the coronavirus for Lake, Porter and LaPorte Counties. The new program is designed to assist businesses in alleviating sudden and severe economic dislocation or financial hardship caused by the pandemic. NIRPC is committed to helping the NWI region respond to this unprecedented challenge by providing flexible gap financing to recover and respond to the impacts on businesses. This program is initiated under NIRPC’s statutory Economic Development responsibilities.


The Revolving Loan Fund program is one of several tools of the U.S. Department of Commerce, Economic Development Administration (EDA), available to assist areas of high unemployment. A Revolving Loan Fund (RLF) is a pool of money used by an eligible recipient for the purpose of making loans to achieve certain economic benefits. As the loans are repaid by borrowers, the money is returned to the Fund to make other loans. In that manner, the Fund becomes an ongoing or “revolving” financial tool.


The goal of the RLF is private-sector job retention and/or creation, capital formation and business recovery. RLF’s are not substitutes for conventional lending sources. Given the small size of the RLF program and the limited resources of each project, Revolving Loan Funds are not intended to match or replace the capacity of lending organizations. RLF’s are

designed to fill gaps in existing local financial markets and provide or attract capital which otherwise would not be available for economic development.


Comprehensive Economic Development Strategy (CEDS)


In 2019, NIRPC was designated by the U.S. Economic Development Administration (EDA) as the Economic Development District (EDD) for Lake, Porter and LaPorte Counties. One primary function of an EDD is preparation of a Comprehensive Economic Development Strategy (CEDS) every five years. NIRPC’s current CEDS was approved and signed in 2019 and will be updated by April 2024. NIRPC maintains and implements the CEDS plan for the Lake, Porter, and LaPorte County areas. The CEDS represents the confluence of local public and private interests and is intended to be a roadmap to a bright future in Northwest Indiana. The deliberation and forethought incorporated in the CEDS is designed to help create jobs, foster a more stable and diversified economy, and improve quality of life. It provides a mechanism to coordinate the efforts of individuals, organizations, local governments, and private industry concerned with economic development.


The overall goal of the CEDS is to create a pro-growth business climate that fosters economic development in harmony with the environment. In order to achieve this goal, the CEDS calls for Northwest Indiana work toward these goals:

The RLF financing for the three-county region area will be used to assist regional businesses to address impacts from COVID-19 while working towards advancement of the goals identified within the CEDS. The Regional Revolving Loan Fund Management Plan includes the current EDA Regulations.


  1. ECONOMIC ADJUSTMENT OVERVIEW CEDS and the Region

    The current CEDS reflects the priorities of the Region defined as Lake, Porter, and LaPorte Counties. The CEDS acts as a guide in improving the overall economic condition. The implementation of economic development resides with the public and private entities within Northwest Indiana. With the local CEDS and RLF’s in mind the local governments are encouraged to consider all regional efforts and funding mechanisms available when working

    with private partnerships in business recruitment, retention, and expansion efforts within the region.


    The CEDS identifies trade clusters for each of the three counties:


    Lake County as Construction, Downstream Chemicals, Environmental Services, Hospitality, Leather Products, Medical Devices, Oil & Gas, Transportation, Upstream Chemical, Upstream Metals, and Vulcanized Materials.


    Porter County as Downstream Chemicals, Education, Leather Products, Lighting, Metalworking, Music, Plastics, Production Technology, Upstream Metals, and Water Transport.


    LaPorte County as Automotive, Downstream Chemicals, Downstream Metals, Hospitality, Medical Devices, Metalworking, Paper and Packaging, Plastics, Production Technology, Upstream Chemicals, Upstream Metals, and Vulcanized Materials.


    Regional Economic Adjustment Problems and Economic Distress


    The coronavirus pandemic and accompanying shelter-in-place responses took a toll on local businesses. In many cases business owners are struggling to recover due to temporary closures, supply chain challenges, and increased expenses for employee and customer protection equipment and practices. As of June 2020, unemployment rates were as follows (Source: Indiana Department of Workforce Development):


    County

    June-2020

    May-2020

    June-2019

    Lake

    15.8%

    16.1%

    4.6%

    Porter

    13.4%

    13.6%

    3.6%

    LaPorte

    15.6%

    15.0%

    4.1%


    Within the region some of the older, urban areas experienced decay, vacant lots, empty stores, and closed businesses. As expected, this neighborhood blight results in depressed property values, low per-capita income, high unemployment, and poor infrastructure. There is no uniform inventory of underutilized properties within the County. Thus far there has not been a centralized group responsible for the redevelopment. Governmental units may compete for new business and to attract relocating existing employers.


    As a result, lenders are reluctant to participate in long-term fixed-asset financing for commercial and industrial purposes. This is especially true in the case of small and start-up businesses with little or no historical track record showing profits or potential of sustainability. The Regional RLF will provide another source of funds, which will occupy second position, in order to leverage more commercial banks to provide loans. This will enable current businesses suffering from the impacts of COVID, start-up businesses or job creating development and expansion projects to receive loans with reasonable interest rates

    and terms. Loans will act as an incentive for the banks to participate in various projects, and attract private lenders that would otherwise not participate.


    Plan to Deal with the Regional Economic Adjustment Problems and Economic Distress


    The intended purpose of the Regional RLF is job retention and creation, particularly in the low- and moderate-income sector. The goal is to achieve this through loans for existing businesses, business expansion, possible new startups, or to circumvent business closure. The Regional RLF funding is most desired to assist in leveraging private investment back into the Counties. The Regional RLF is a tool used to help support the overall goals of the CEDS within Northwest Indiana.


    CARES Act Recovery Assistance


    EDA’s CARES Act Recovery Assistance is designed to provide a wide-range of financial assistance to communities and regions in order to respond to and recover from the impacts of the coronavirus pandemic. The funds will support the long-term recovery of communities and businesses that have been impacted by the coronavirus pandemic. The EDA CARES Act finds that the coronavirus pandemic constitutes a situation of unusual and compelling urgency, therefore EDA is providing certain flexibilities to recipients of EDA-funded Revolving Loan Fund (RLF) awards in light of the impact of the pandemic on small businesses, the increasing demand for RLF loans, and the need for RLFs to provide credit quickly and efficiently to communities. The coronavirus pandemic and accompanying shelter-in-place responses took a toll on local businesses. In many cases business owners are struggling to recover due to temporary closures, supply chain challenges, and increased expenses for employee and customer protection equipment and practices. The RLF and administrative activity will help the three-county lending area to prevent, prepare for, and respond to coronavirus and respond to economic injury as a result of coronavirus by the following:



    RLF: Supporting Economic Adjustment Activities/Strategies


    In order to assure that the Regional RLF will be used to support specific economic adjustment activities identified in the CEDS, NIRPC staff and any support service rendered will ensure that as applicant reviews are underway the lending is in line with the regional efforts and strategies identified in the CEDS.


  2. BUSINESS DEVELOPMENT STRATEGY Objectives

    The purpose of the business development strategy is to increase the capacity of the local economy by providing local businesses and private entities a financing source to respond and recover from the coronavirus, grow, maintain and/or sustain their operations locally that will add value to the overall region.


    Specific objectives include:

  3. FINANCING STRATEGY

    The Regional RLF financing strategy is based on the sources of financing, both public and private, available to support the business development objectives discussed earlier in this plan and the differing needs of the types of business targeted for investment.


    Financing Needs


    The type of financing needs and opportunities for target businesses identified in the business development strategy include:

  4. FINANCING POLICIES


    This section discusses the specific policies designed to guide RLF financing, taking into consideration the need to manage and protect the RLF capital while accomplishing the objectives of the Business Development Strategy. The standard lending terms and any special financing techniques that the RLF may utilize are discussed below in detail. The financing policies below are consistent with EDA policies and requirements.


    Eligible Lending Area

    The eligible applicants proposed location of business must be within the three-county area of Lake, Porter, and LaPorte. The major goals of the program are to help prevent, prepare for, and respond to the coronavirus and respond to economic injury as a result of coronavirus and to provide support for small businesses negatively impacted by the COVID- 19 pandemic.


    Allowable Borrowers


    In order to be eligible, an applicant must meet the following eligibility requirements. The business can be either a small business, private for-profit or non-profit firm, industry, corporation, partnership or sole proprietorship who have been negatively impacted by the coronavirus pandemic. The Regional RLF does not limit the allowable sector that the business operates. The small businesses must be located in Lake, Porter and LaPorte counties, in operation prior to January 2020 and must demonstrate effects of COVID-19. All applicants will be required to certify that neither themselves, the business, nor any affiliated business have been suspended or debarred or voluntarily excluded from receiving funds of this program pursuant to 15 CFR 26.215, 26.220 and/or 26.625.


    Allowable Lending Activities


    Priority projects will be those that assist with preventing, preparing for, and responding to the coronavirus pandemic. Projects could include, but are not limited to:


    The allowable lending activities for the Regional RLF program include:

  5. PORTFOLIO STANDARDS AND TARGETS Target Percentages

    The following is the targeted percentage breakdown of borrowers for the Regional RLF program. It is anticipated that the breakdown of borrowers by percentage of dollar amount is as follows:

    Public/Private (Ownership):

    0/100

    Fixed Asset/Working Capital:

    50/50

    Start-Up/Expansion/Retention:

    10/40/50

    Locally owned/Outside owned:

    70/30

    Industrial/Commercial/Service:

    20/40/40


    Private Sector Leverage


    The Regional RLF will follow the EDA required minimum ratio of two dollars in private investment for every one dollar of RLF loans as identified in 13 CFR 307.15(d). Private investment may include (1) capital invested by the borrower or others; (2) financing from private entities; and (3) 90% of the guaranteed portions of SBA 7(a) and SBA 504 debenture loans. Projects that provide higher private investment will receive consideration over those providing lower investment, all other factors (such as job creation) being equal.


    Job Cost Ratio


    The Regional RLF’s target job/cost ratio is one job created or retained per every $25,000 of proceeds used. Applicants with a lower investment per job will be given priority over larger investments per job. The Regional RLF will concentrate on creating family-wage employment, primarily for low- and moderate-income families. Skilled and semi-skilled jobs in light manufacturing will be viewed as those most desirable for long-term employment.


  6. RLF LOAN SELECTION CRITERIA


    The Regional RLF loan selection will be based on the financing policies and portfolio standards discussed earlier in this document. However, proposed projects that can demonstrate the following criteria will take higher/priority when awarding loans:

  7. PERFORMANCE ASSESSMENT PROCESS Loan Portfolio Review

The Regional RLF will be evaluated on a semi-annual basis in conjunction with the reporting to the Economic Development District by the NIRPC staff. The only time changes in the plan will occur will be when a loan is made and or closes. A review of the loan portfolio will also be made available to the Loan Management Board at each meeting in which a loan is being discussed or issued.


Updates to the Management Plan


The Regional RLF management plan will be updated in accordance with 13 CFR 307.9. At a minimum the plan will be updated every five years. Notification will be given to the Economic Development Administration of any changes made to the plan as well as any changes that affect the RLF. NIRPC can choose to update the Regional RLF management plan sooner than every five years as they see fit.


Part II: REVOLVING LOAN FUND OPERATIONAL PROCEDURES


This section serves as the Regional RLF’s internal operating manual and will identify the administrative procedures for operating the RLF. All operating procedures will be consistent with the “Prudent Lending Practices,” as defined in 13 CFR 307.8. As NIRPC is the administrator of the RLF funds, NIRPC will be responsible for complying, and ensuring that potential borrowers comply, with applicable laws and regulations including but not limited to 13 CFR Part 307.


  1. ORGANIZATIONAL STRUCTURE NIRPC

    The Regional RLF Program will be administered through NIRPC, a multi-county planning commission established under state law. NIRPC does not employ loan processing staff so some services will be contracted.


    NIRPC is responsible for the following tasks either through staff or contracted services:

  2. LOAN PROCESSING PROCEDURES Application Process

    Anyone desiring to participate in the program will be referred to contact NIRPC, or the designated contractor, to request assistance. An initial interview will be scheduled and the program will be explained along with the eligibility standards. An application will be given to the potential borrower as well as a contact person to work with. Multiple meetings may be required with any potential applicant in addition to on-site visits or field research.


    Eligibility Establishment

    As soon as the potential project is considered ineligible, then: (1) the potential applicant will be informed of the decision (via email, phone call or letter) and the reasons why: and/or (2) the potential applicant will be provided with information and changes needed in order to qualify for the program. In either case, the applicant is invited to resubmit a proposal if the revised proposal appears to meet requirements.


    Submittal Requirements from Each Applicant


    If the potential project is considered eligible, then the following information must be submitted to create the loan application package:

  3. LOAN CLOSING AND DISBURSEMENT PROCEDURES


    Commitment Letter (Credit Agreement): The applicant is advised of the loan approval including the terms and conditions set forth. A commitment letter shall indicate all reporting requirements necessary on behalf of the loan recipient.


    Loan Closing Documents


    Below is a minimum list of documents that will be required for the types of loans made under the RLF and any special timing requirements. Per 13 CFR 307.15(b) (2), the required documents should at a minimum include:

  4. LOAN SERVICING PROCEDURES Loan Servicing

    NIRPC will closely monitor the performance of all loans within the loan portfolio in order to improve opportunities for both the repayment of loans and for the success of the borrower. Loan servicing will be performed by NIRPC or NIRPC’s hired contractor(s), with recommendations from the Regional Managing Board. All contracting and procurement completed by NIRPC is conducted pursuant to Federal procurement regulations. Staff will provide accounting and loan collection services and provide a financial report to the Board at meetings, including a statement of individual account status. A commercial bank will be selected as the depository of the loan funds. Included in the loan servicing and accounting are the following:

  5. ADMINISTRATIVE PROCEDURES New RLF’s

    NIRPC received the Regional RLF grant on July 27, 2020. Accounting and Audits

    Since the Regional RLF program is administered by NIRPC its existing policies and procedures apply to this program. The financial statements of NIRPC are prepared annually in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. Every year NIRPC receives a federal audit in compliance with the federal regulations annually by the Indiana State Board of Accounts. As the Regional RLF funds are part of NIRPC’s financials they are included in the audit and are reported in compliance with the RLF Standard Terms and Conditions Part I.F.


    The Regional RLF has its own separate fund, and bank account, within the NIRPC accounting system and all loans are tracked separately within that fund. If more than fifty percent (50%) of revolving loan funds income, or $100,000, is used to cover costs of administering the Regional RLF program, a Revenue and Expense Statement must be submitted to EDA. Program income is defined as interest earned on outstanding loan principal, interest earned on accounts holding RLF funds not needed for immediate lending, all loan fees and loan-related charges received from borrowers.


    Administrative Costs


    NIRPC intends to use the Regional RLF income to cover eligible administrative costs associated with the grant. The anticipated maximum percentage of income to be used for expenses will be in compliance with EDA’s allowed percentage. NIRPC will submit form ED- 209I for administrative costs that are either 50% or $100,000 of the Regional income in a six-month Reporting Period. NIRPC will apply, track, and report the administrative costs in compliance with 13 CFR 307.


    Capital Utilization and Sequestration


    The Regional RLF portfolio is constantly watched. On a semiannual basis, in conjunction with reporting, the capital utilization will be reviewed. NIRPC will strive to maintain, at a

    minimum, 75% of the capital to be in use. If at any point NIRPC is required to sequester funds then such funds will be deposited into an interest-bearing account and interest shall be remitted to EDA as instructed. NIRPC will maintain compliance of 13 CFR 307.16 with regards to capital utilization and sequestered funds.


    Economic Development Administration Reporting


    NIRPC will comply with all EDA reporting requirements. As part of this reporting NIRPC will certify to EDA that the Regional RLF is operating in accordance with the applicable Regional RLF Management Plan.


    Allowable Cash Percentage


    Effective Jan. 2, 2018, EDA replaced the Capital Utilization Rate of 25 percent with region- specific Allowable Cash Percentage (ACP) that is updated annually. The ACP is the average cash available for RLFs in the Chicago EDA region and is used for risk rating RLFs according to the Risk Analysis System.


    Lending activity will be managed so that the cash available for lending is less than the current ACP in effect for the Chicago Region. However, if the Cash Available for Lending is greater than 50% of the RLF Capital Base for 24 consecutive months, EDA may take action to disallow the persistent excess cash.


    Audits


    NIRPC is required to obtain an annual audit of its RLF program in accordance with 2 CFR Subpart F and the Compliance Supplement, which is appendix XI to 2 CFR part 200, as applicable.


  6. CARES ACT RECOVERY ASSISTANCE ADDENDUM


During the disbursement period, or until July 2022 (whichever comes first), EDA is issuing a variance to the three regulations governing RLF awards that:


At the discretion and approval of the RLF Board the following flexibilities may be implemented: