Grow King County Fund Cheryl Markham Program Manager King County Housing & Community Development Program

Setting the Stage Meeting with King County Staff (HCD and Economic Development Program), HUD Regional Economic Development Specialist and National Development Council for Grow America Fund

Working with a Community Development Financial Institution (CDFI) Entitlement jurisdiction grant of CDBG funds to a CDFI for-profit lender to make economic development loans Key Issues:  CDFI Lender entity must be a for- profit  CDBG funds must be a grant to the for-profit

Working with a Community Development Financial Institution (CDFI) Initial economic development loans from CDFI to businesses must meet all CDBG requirements including standards for public benefit Repayment of economic development loans to the CDFI are not program income

Working with a Community Development Financial Institution (CDFI) Repayments revolve back into loan pool and subsequent loans are not subject to CDBG requirements Other discretionary requirements may be negotiated

Grow King County Fund Exhibit Goal Capitalize and establish the Grow King County Fund (GKCF) to provide capital to creditworthy small businesses that have difficulty obtaining conventional loans from banks, especially in the aftermath of the financial/banking crisis of 2008 and the resulting new, extremely stringent lending criteria. The intent is to use the SBA loan guarantee program to leverage a minimum of 3 times the amount of the CDBG investment to ultimately capitalize a self-sustaining small business revolving fund of at least $1,300,000.

Grow King County Fund Exhibit GAF will make loans solely to small businesses eligible for US Small Business Administration (SBA) guaranteed loans and located within King County cities that participate in the King County CDBG Consortium (CDBG Consortium). Currently, the cities of Auburn, Bellevue, Kent, and Seattle do not participate in the CDBG Consortium.

Grow King County Fund Exhibit Objectives To the extent feasible through marketing and outreach, a loan portfolio that is balanced in providing loans to small businesses that are located in jurisdictions across the King County CDBG Consortium, and that serve the diverse populations that reside in the King County CDBG Consortium.

Grow King County Fund Exhibit Procedures GAF will provide up to four one-half day training sessions at the startup of the GKCF, and will repeat sessions periodically, as needed and agreed upon between GAF and King County, for economic development professionals at cities within the CDBG Consortium, small business development centers, and other organizations regarding the kinds of loans that are available under this program and the general underwriting criteria GAF will use to evaluate small businesses loan applications. GAF will develop a marketing and outreach plan, for review and approval by King County HCD, to work with economic development professionals at cities within the CDBG Consortium, banks, and other community-based organizations to generate business loan referrals from across the CDBG Consortium cities and populations.

Grow King County Fund Exhibit GAF will review and analyze loan applications for: Creditworthiness – determination of current financial health, repayment ability, reasonableness of projections, collateral, and management experience; and CDBG eligibility – determination that 1) the loan activity meets a CDBG national objective for job creation/retention, or area benefit; and 2) the loan activity meets the CDBG criteria for public benefit.

Grow King County Fund Exhibit GAF will submit a loan summary to the Housing and Community Development Program (HCD) of the King County Department of Community and Human Services for environmental review, national objective and public benefit compliance review. If the national objective for a loan is job creation/retention, GAF must provide to HCD the identification of the type and number of jobs that will be created or retained by the loan activity. HCD will provide review results to GAF within two weeks for loans that do not trigger full environmental review due to building renovation and/or construction.

Grow King County Fund Exhibit While most loans will be for working capital and equipment, if a loan activity involves equipment installation and/or building renovation and/or construction that triggers federal labor standards monitoring, GAF loan officers will confer with HCD about the appropriate means of monitoring federal labor standards. GAF will not charge a loan fee for its services in originating loans with CDBG funds. GAF shall be compensated solely from the interest revenue generated from GKCF loans, which will range from prime to prime plus 1.5 percentage points. 10)GAF will work with each recipient of a CDBG loan to ensure that all required documentation is submitted to King County HCD in a timely manner, including required self-certification forms provided by King County HCD for job creation/retention, narrative reports required for the Comprehensive Annual Performance and Evaluation Report (CAPER) that HCD submits annually to HUD.

Grow King County Fund Exhibit GAF will exercise due diligence in monitoring recipients of CDBG loans to ensure, to the extent possible, that CDBG job creation/retention requirements are met and the required number of jobs are actually filled by low to moderate- income persons. In the event that GAF does not exercise due diligence for monitoring tasks that are within their control, and the job requirements for a CDBG loan are not met, GAF will take appropriate action to pay back the King County CDBG Consortium funds to HCD.

Grow King County Fund Exhibit After the total amount of CDBG funds in this contract have been drawn and loaned out for eligible loan activities, the proceeds from loan guarantee sales and repaid funds will be made available only to eligible businesses located in cities participating in the King County CDBG Consortium, without the requirement for compliance with the CDBG requirements contained in this exhibit.

Grow King County Fund Exhibit All loans made from the initial CDBG grant will: Meet a CDBG national objective for job creation/retention, or area benefit… Meet the CDBG public benefit standard per 24 CFR (b)… Complete CDBG environmental review; Meet GAF underwriting criteria; Post jobs to be created from the loan with the DCHS Work Training Program. Subsequent loans made from loan guarantee sales and loan repayments, that are no longer subject to CDBG requirements, will be required to meet GAF underwriting criteria and to post jobs to be created with the DCHS Work Training Program, as appropriate.

Grow King County Fund Exhibit Reporting Requirements GAF will provide quarterly reports to King County HCD, in a format that is approved by HCD, on the status of all loans and repayment activity, including all loans from the initial CDBG funds and all subsequent loans. These reports will include the progress of loans made with the initial CDBG funds toward meeting the national objective and public benefit requirements. Once the national objective and public benefit for an activity has been met and properly documented, no further national objective and public benefit reporting will be required. If the provision of area benefit of goods and services is used to determine CDBG eligibility, GAF will also report the number of jobs created by the project to HCD.

Grow King County Fund Exhibit GAF will t. have three years from the date this contract is signed to lend $350,000 of CDBG granted under the contract, and to leverage the total Grow King County Fund to four times the original grant amount At the completion of the three years, DCHS and the King County CDBG Consortium will review the performance of GAF and determine which of the following conditions to apply: 1)If GAF has not loaned all of the CDBG funds, DCHS may either reduce the grant by this amount or grant a time extension. If DCHS reduces the grant by the amount of the unloaned funds, GAF will keep the loaned portion of the grant and continue to relend this money to new projects as principal is returned. The re-loaned money will not be subject to CDBG regulations; or

Grow King County Fund Exhibit 2)If GAF has not leveraged the GKCF to at least four times the original grant amount, DCHS may require one of the following: a) GAF will return 50% of grant funds loaned, repaying the 50% monthly from loan principal repayments until it is repaid. GAF will keep the remaining 50% of grant funds and relend the funds to new projects as principal is returned, only after it has repaid DCHS/HCD the full 50%; or b) DCHS will accept the leverage achieved; or c) DCHS will grant a time extension. 3)If GAF has loaned all of the CDBG grant funds and leveraged the GKCF to at least four times the original grant amount, GAF will be entitled to keep the entire grant amount for the purpose of relending principal repayments to new projects per Section III.C.13. in this exhibit.