Description/Purpose:
The Northland Foundation Asset Building Loan Fund provides
below market interest rate financing to eligible businesses
that are both credit worthy and meet certain social criteria
that go beyond basic employment outcomes. The social criteria
will be designed to meet the uniqueness of each financing
project and will include areas such as: Employment benefits;
family-sustaining wage levels; individual development accounts;
employment of moderate and low-income persons; other means
of building assets among employees.
We anticipate most financing provided through the program
will be structured along with other financial participation,
although it is not required.
A loan origination fee of up to 1.5% of the loan may be
charged to the borrower. Legal costs associated with documenting
and closing the loan are the responsibility of the borrower.
Loan Amounts:
The loan maximum is $500,000.
Eligible Applicants:
For profit business owner operated businesses engaged in
manufacturing, wood products, agriprocessing, information
industries, and tourism etc. Funds may not be used for retail
development projects and most service businesses.
Other Funding Required:
Applicants must demonstrate that they will leverage a minimum
ratio of one dollar in private debt to one Business Loan
Program dollar (1:1). Private debt must be cash commitments
not yet expended.
Other Special Requirements:
All projects must create employment opportunities and/or
save existing jobs in a manner acceptable to the Northland
Foundation. The overall goal of the program is one job created
or saved per $10,000 in Northland financing assistance.
The actual employment target is negotiated with each loan
recipient on a case-by-case basis.
A mutually agreed upon portion of all jobs created or retained
must be targeted for persons from households at or below
80% of median family income. Actual percentage is negotiated
with each loan recipient and may vary among individual borrowers.
The overall goal of the program has been set at 60%.
Total compensation, including the value of benefits not
mandated by law, must, on average, equal or exceed 110%
of poverty level for a family of four for all jobs created
or retained.
All employees, new and retained, must receive health insurance
benefits within two years of hiring.
Loans must be adequately secured and personally guaranteed.
Minimum collateral standard will be applied as follows:
loan secured by real estate may generally not exceed 90%
of market value; loans secured by equipment may generally
not exceed 80% of market value.
Loans primarily secured by current assets (inventory and
other accounts receivable) will generally be done only in
participation with other financial institutions. Collateral
coverage will generally not exceed 80% of eligible accounts
receivable and 40-60% of eligible inventory.
Allowable Use of Proceeds:
Direct Loans: Northland originates the loan and is the holder
of the note.
Participation Loans: Northland purchases a portion of another
loan and receives a participation certificate.
With respect to security, Northland will consider the following:
first mortgage loans, first position on assets financed;
subordinated loans, loans with prior security; credit enhanced
loans, enhanced with a government guarantee or first mortgage
loan ahead of subordinated debt (i.e. SBA 504 loan) or other
enhancement.
Financing assistance may include, but is not limited to:
fixed assets, including land and building purchases, building
construction, leasehold improvements and renovations. Acquisition,
renovation or moving machinery and equipment. Working capital
(term loans only).
Limited refinancing (when associated with an expansion
or when it contributes to the continued viability and success
of the business).
Term of Loan:
The loan term is based on the assets financed, the collateral
securing the loan and the needs of the business. Some examples
of typical financing terms are: construction or real estate
loans, up to 20 years; equipment loans, up to ten years;
working capital loans, up to five years; refinancing (subject
to the useful life of the collateral securing the loan).
Interest Rate:
The interest rate on loans is a fixed, below-market rate
and is negotiated according to the following: impact of
the project on job creation for moderate and low-income
people, the quality of the jobs created and associated benefits.
Incentive interest rates may be provided in accordance with
the degree of project impact; the perceived level of risk
incurred. Lower-risk projects will generally receive a lower
rate, all other factors being equal.
Application Process:
All inquiries to the Northland Foundation Asset Building
Loan Fund should be directed to:
Name: Northland Foundation
Address: 610 Sellwood Building
202 W Superior Street
Duluth, MN 55802
Phone: (218) 723-4040
Fax: (218) 723-4048
Email: info@northlandfdn.org
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