City of La Crosse Small Business Development Loan Program Program Overview Underwriting, Eligibility Projects & what we learned from them Show of hands, how many entitlement grantees here have an economic development program?

City of La Crosse : Population 52,306 Metro Area: 100,000 + Confluence of the Mississippi, Black and La Crosse Rivers, Economic Growth 2017 CDBG EN: $783,207 HOME : $228,067 Annual Loan Payments: $200,000

54 small businesses expand or start up. National HUD Recognition Created over 515 new jobs. Flexible, Tailored Small Business Loan Beneficiary (Dublin Square) Of these, 13 which we didn’t get paid back, one which paid us back but didn’t create the jobs.

Creating Economic Growth in our Downtown….

Our Process Borrower sets the rate and payment schedule, maximum term is 20 years City underwrites and keeps the loan, we collect an application fee of $250 Min. 10% equity, Up to 60% of project costs Collateral secured at a $1 to $1 loan ratio We prefer to fund equipment & acquisition Collateral (UCC filing or second mortgage file), personal loan guarantee, CDBG Agreement, Loan Note Maximum $200,000 loan Davis Bacon does apply to projects involving construction

To apply Detailed project plan Business Plan List of principal players and relationship to the business Articles of Incorporation Balance sheet (current) Operating/loss statements 5-year projected cash flow Previous year’s Federal Income Tax Returns Copies of correspondence with two lending institutions regarding availability of funds List of current employees and their job titles List of Titles and Description of Projected Jobs Cover letter with requests specific loan terms and conditions Improvements to application- try an online application, people rarely get all of the information to us.

Underwriting Score Sheet Developer equity/cash (10%) Loan is no more than 60% total project cost Extent to which project will provide LMI jobs Satisfactory credit on history of all owners Owners will to provide personal loan guarantee Project costs are reasonable All other sources of financing committed Documentation of need and CDBG funds are not substituted for non-financial financing or support Return of owner’s equity investment not unreasonably high Debt to Coverage Ratio at least 1.25 Developed in house

People’s Food Coop Need: Downtown grocery store Year: 2003 CDBG Funds: $250,00 SBDL Loan Downtown relocation, expansion Project Total: $4.5 Million Other Sources: WHEDA, Wells Fargo, Co-Op Member Loan Impact: 125 jobs, triple sales volume, expansion to Rochester, community-wide Loan rate was 3.5%

1981-1993 Rochester Go to 8:33 1993-2003 1978 Today

Nationally-Recognized Automotive Software Company Need: Office expansion, downtown location Year: 2007 and 2009 CDBG Funds: $125,00 SBDL Loan Paid for: New data management software and equipment Project Total: $375,000 Other Sources: La Crosse County Loan, Owner Impact: 15 jobs to 100+ jobs Doerflinger Store family-owned department store, eventually closed in 1984, City even owned it. They paid off their loan early. 0% interest months 1-18, 2% months 19-42, 4% months 43-120

Lesson Learned…. It’s never too late to celebrate the success of a CDBG project 40th anniversary celebration led to a Obama speech mention of Authenticom’s CDBG loan

“Recession Slump” 2012 Jade Café: $40,000 loan, one year later went bankrupt City ended up with cars and yogurt machines So we tried more promotion, annual roundtables, talking up our program, celebrating the old programs

La Crosse Wellness Need: One-stop center for health and wellness, coffee shop, spa, day care, chiropractic, sports training, turf (30,000 sq ft) Year: 2015 CDBG Funds: $200,000 SBDL Loan Paid for: Equipment, acquisition Project Total: $3.1 million Other Sources: City TIF Financing, SBA Loan, Merchants Bank, Owner Challenges: Environmental Assessment, 4% Equity, More time, slow to provide job creation reports They are at year one 0% interest, years 2011 2% interest. Annual interest rate.

That Foreign Place Need: Downtown Expansion of existing gift shop to restaurant Year: 2017 CDBG Funds: $40,000 SBDL Loan Paid for: Equipment Project Total: $70,000 Other Sources: Owner, County Loan (denied bank loan) Challenges: “Risky Applicant”, Follow-Up, Cut checks directly for costs They are at year one 0% interest, years 2011 2% interest. Annual interest rate.

Up next- Brewery Expansion Manufacturing steam boilers

Key Takeaways Micro-Entrepreneurship & TA Emphasize Job Creation Application & Underwriting Keeping it “in-house” Risk versus Reward Environmental Reviews Tell their story