IVCDO Micro Business Revolving Loan Program Policies and Procedures
Revised and Adopted December 2013 Mission Statement:
To increase options for self-sufficiency through capitalization of micro ventures.
Make small low interest loans to local entrepreneurs and workers, especially those who are unable to get capital through conventional sources, help those that do qualify to get loans or additional sources of funding, and/or help with selected business training or technical assistance.
We expect to achieve our mission statement, and specifically, if the program creates the equivalent of one full time job for every ten thousand dollars invested, we will be operating within our basic expectations for a successful project. At the same time, we would like to really have a revolving loan fund, which implies a very limited attrition. Therefore, success will reflect both the ability of applicants to enhance self-sufficiency through the utilization of the loans, and their performance in repaying these loans.
The IVCDO Loan Board, hereafter known as the Loan Board, comprises volunteer members nominated by the current Loan Board, and appointed by the IVCDO Board of Directors. The Board members are recruited for their expertise and potential to make a positive contribution to the Loan Board. The Loan board will comprise a minimum of four (4) members and a maximum of eight (8) members. Two of the Loan Board members must also be directors on the board of the IVCDO. The Loan Board appoints its own Chair. In addition, the Loan Board Chair may appoint up to three (3) ad hoc members for any particular meeting if, in the Chair’s opinion, the ad hoc members contribute an area of expertise that will be helpful for that meeting. The Chair may choose whether to endow these members with full voting privileges. The Loan Board reviews all loans, and it alone has the authority to approve them and pledge assets. The Loan Board is responsible for the design, maintenance, and usage of the loan funds. Loan Board members, IVCDO staff, or other volunteers, screen applications for basic eligibility and help ensure they are complete prior to the appointment with the Loan Board, and follow up with clients and provide status reports to the Loan Board.
Reporting from the Loan Board
The Loan Board reports to the IVCDO Board of Directors on the performance of the loans in the portfolio on at least a semi-annual basis. This report may include the number of delinquencies, extensions, and loans that are current, anticipated employment impact and the types of businesses that are pursuing loans. Normally, information about individual clients remains confidential.
Size of Loans/Interest
The maximum loan amount is for twenty-five thousand dollars ($25,000), not including closing fees. The Loan Board encourages application for much smaller loans too, down to $200. The annual interest rate is fixed at the time of loan approval and may be adjusted by the Loan Board from time to time to help cover operating costs, from a minimum of 5% up to a maximum of 9.5%. Residents of the Illinois Valley (census tracts 3615 and 3616) doing business in the Illinois Valley will generally be eligible for lower interest rates than applicants outside of the IV.
Approval of Loans
A minimum of four Loan Board Members must be present to review a loan application. A minimum of three Loan Board members, or a simple majority, whichever is more, is necessary to approve any loan. Applicants will be informed of approval or denial within one week of the final interview.
Appeal of Decision
The Loan Board has the authority to review applications and approve loans. There is no appeal of the decisions.
Potential for a loan to contribute toward local job creation, enhancement, or retention, including self-employment, will be weighed against the apparent risks for the loan’s repayment.
• Loans may be used for business expansion or start up, and applied toward equipment, materials, marketing, certification, repairs, technical assistance, training, etc.
• Loans may be used for a combination of above items and in conjunction with other financing.
• Consideration will be given to avoid undermining businesses already in the loan portfolio.
• Loans for training or certification to help an applicant in a conventional job may be considered.
• Loans will not be made to multi-level marketing businesses.
• Loans will not be made for refinancing of existing debt or for passive investing.
• Loans will not be made for business distress situations.
• Applicants must have a personal credit history acceptable by the Loan Board.
• The focus of the Loan Fund is for applicants who live in or do business in Josephine County, Oregon.
• Some loans funds are available for applicants who live in or do business in Jackson County, Oregon.
• Loans will not be made to Loan board members or their immediate families (spouses, parents or step-parents, siblings or step-siblings, or children or step-children), IVCDO Board of Directors or their immediate families.
Loans will not be made to IVCDO paid staff (not including staff of Oregon Caves Outfitters) or their immediate families, where there is a perception of a conflict of interest.
• Being an IVCDO General Member does not disqualify a loan applicant.
• Loans will not be made to support criminal activity.
• Loans will not be made to applicants less than 18 years of age. Potential applicants under the age of 18 are encouraged to speak with the Loan Fund advisor for possible alternatives.
Ninety Day Commitment
Loan decisions are valid for 90 days from the date of the Loan Board meeting in which the commitment was made. If a business is delayed in implementing its plan, or for any reason, the loan is not disbursed, the Loan Board may revisit the loan decision to renew or decline the commitment.
Use of repayment incl. Interest
All principal payments received by the Loan Board will only be reused for new loans. Interest, fees, and other income may be used for new loans, operating and administrative expenses, training, or advertising.
Point of Default: IVCDO would assess collateral when either of the following events occurs:
1. Loan is past due 60 days from due date
2. Loan is past due 30 days or more from due date for three consecutive months.
3. When a payment is past due and the Loan Board feels that the loan is at risk.
Definition of Default: Failure of Borrower to comply with or to perform when due any term, obligation, or documentation shall constitute an Event of Default. If an Event of Default shall occur, all commitments and obligations (including any obligation to make loan advances, or disbursements) will terminate. The loans will immediately become due, all without notice of any kind to the Borrower.
Delinquency Policy: The following schedule for responding to delinquent loan payments will be followed:
1. Any loan payment over 15 days in arrears will immediately be charged a late fee of 5% of the past due amount, or $25, whichever is greater.
2. At 45 days past due, a Loan Board representative will contact the Borrower. A written plan to remedy the delinquency will be prepared by the representative and the Borrower, and placed in the Borrowers file. If the client does not respond and the loan continues to be delinquent, the loan may be declared in default and a demand for full payment of the loan will be sent by registered mail.
3. Loans will be placed in default if payments are more than 60 days late. Loans may be placed in default sooner, based upon the relationship with the borrower and the perceived willingness to repay the loan.
4. After 90 days past due, or 10 days after notice of default is sent (whichever is earlier), legal action will be taken including filing a judgment against the borrower, confiscation of collateral, and/or turning the account over to a collection agency.
The Loan Board may approve formal extensions or changes of amortization schedule if necessary, based on a detailed written request from the borrower.
As part of the package for the Loan Board consideration, the loan applicant must agree to a credit inquiry. The Loan Board may waive a formal credit check as it sees fit in loans under $1000. Each loan applicant’s credit history is considered individually. Previous credit problems do not automatically exclude clients from the loan program. The applicant’s pattern of managing their debt is very important.
Special circumstances such as medical crisis and divorce may lesson the impact of poor credit history during a particular time period. It is important that the individual has stabilized and in most cases has not had credit problems in the past two years.
Bankruptcy: An explanation must be given for the bankruptcy. The client must have had two years without credit problems since the bankruptcy.
Current Loan Defaults: The client must have communicated with the lending institution, have made arrangements to pay the debt, and be current with their repayment arrangements.
Bad checks: Must be resolved with creditor prior to receiving a loan.
Tax liens and federal debt: Loans will not be made to individuals with outstanding tax liens or delinquent federal debt, including delinquent child support payments.
In general, the applicant must exhibit no credit problems for at least the past year, with two or more years being highly preferred.
Conflict of Interest
If a member of the Loan Board has a personal financial interest in a loan applicant, or in the success or failure of the applicant’s business, the Loan Board member is expected to disqualify themselves from decision-making regarding the applicant’s loan. Staff members, contractors, and Loan Board members are expected to communicate possible conflicts of interest, and to bring up questions regarding perceived conflicts of interest involving other staff members, contractors, applicants, and Loan Board members. Conflict or perceived conflict of interest may involve positive or negative effects on those involved.
Changes to Policies and Procedures
Changes in Loan Program policies and procedures may be recommended by the Loan Board to be approved by the IVCDO Board of Directors at any regularly scheduled meeting.
Illinois Valley Community Development Organization / 201 Caves Highway, Cave Junction, Oregon / 541-592-4440 / fax 541-592-4075