_______________________________ Georgia Department of Community Affairs Metro Atlanta Chamber of Commerce August 2, 2012

Page 2 History & Background of State Small Business Credit Initiative (SSBCI) Component of Small Business Jobs Act, bi-partisan legislation signed into law on Sep. 27, 2010 $1.5 billion set aside for SSBCI, managed by U.S. Treasury, to strengthen state-run lending programs to support small business Georgia’s allocation is $47,808,507 Requirement for the state to generate overall 10:1 leverage

Page 3 Advantages and Opportunities for Georgia Lenders Credit enhancements to strengthen bank loans for small businesses Delegated lending - Lenders manage underwriting process SSBCI program - quick turnaround and streamlined format (days) Opportunity for CRA credit

Page 4 Advantages and Opportunities for Georgia Lenders Opportunity to improve Safety and Soundness reviews ▪A distinguished panel of state and federal regulators participating in the roll-out of the SSBCI on 5/23/12 indicated a general consensus that lenders participation in the SSBCI Program is viewed positively by Safety & Soundness and Consumer Compliance Examiners. This resource panel continues to provide advice and assistance as program implementation progresses. Georgia Department of Banking and Finance; Federal Reserve; Federal Deposit Insurance Corporation; and Office of Comptroller of Currency.

Page 5 What Does Georgia SSBCI Offer? Three new initiatives available to private lenders to expand small business lending  GCAP (Georgia Capital Access Program) - $10 million ( Risk reserve pool funded with borrower/lender fees matched with SSBCI funds)  SBCG (Small Business Credit Guarantee) - $17.8 million (50% loan guarantee with a conversion option into a risk reserve pool offering up to 80% reimbursement)  Georgia Funding for CDFIs - $20 million (Loan participation program specifically designed for underserved SBs)

Page 6 SSBCI – General Eligibility Criteria Loan proceeds can be used for eligible “business purposes” including:  Start-up costs  Working capital  Business procurement, franchise fees  Equipment & inventory  Purchase, construction, renovation, or tenant improvements of eligible place of business

Page 7 SSBCI – General Eligibility Criteria Refinancing is not eligible; however, renewals are eligible under certain conditions … as one example… performing lines of credit that balloon and become due … new balance must increase by at least 10% Passive real estate investment generally is not eligible. However, exception should at least 51% of existing commercial RE be occupied by owner).

Page 8 SSBCI – Eligibility Criteria (cont.) Eligible small businesses include corporations, partnerships, joint ventures, cooperatives, sole proprietorships, state- designated charitable & other non-profit institutions. SBs generally defined as 500 or fewer employees SSBCI participation generally limited to $500,000 or less, with exceptions and target amounts tailored for each program Participating lenders and borrowers will be required to provide certain assurances and certifications as required by US Treasury SSBCI guidelines.

Page 9 GCAP (Georgia Capital Access Program) Provides risk reserve pool for lender by matching a required fee (2% to 7%) paid by the borrower, lender or combination, into a loan loss reserve fund for enrolled loans SB loans of $500,000 or less (exceptions possible) In case of default on enrolled loans, claims may be made against the loan loss reserve account for loss of principal and up to 90 days of accrued, but unpaid, interest Borrower/bank fee may be financed through resulting loan. Up to 100% of covered loan balance losses can be claimed.

Page 10 Total Project Cost$1,500,000 - Private Bank Financing$1,350,000 - Borrower Equity$ 150,000 - GCAP enrolled loan amt$ 500,000 (amts > $500k require exception) Lender/Borrower Fee$ 20,000 (assuming 4% fee) GCAP Match$ 20,000 Total $ Placed in Reserve$ 40,000 GCAP CASE SAMPLE – Bldg Expansion & Inventory for Small Business

Page 11 SBCG (Small Business Credit Guarantee) The (“SBCG”) Program provides a 50% loan guarantee with a option to convert to risk reserve pool. Enrolled loans are covered with a 50% loan guarantee; loans converted to risk reserve pool can be covered up to 80%. SSBCI funds are leveraged with private capital from eligible lenders (banks, credit unions, qualified private lenders, and CDFIs). Max terms for SBCG guarantee:  Lines of credit - 24 months  Amortizing loans – 48 months Deficiency guarantee – Lender must diligently pursue collection from borrower prior to filing claim.

Page 12 SBCG Case Sample – Accounts Receivable for Software Small Business 50% Guarantee Pool Risk Reserve Pool Total Project Cost$250,000 - Conventional Bank $200,000 - Borrower Equity$ 50,000 - SBCG Guaranteed Amt $100,000 Initial Fee – 2%$2,000NA Annual Fee ½ of 1% of guarantee balance $0 Contribution to RRP assuming loan balance of $180,000 at the end of Yr 1 $20,000 (10% of loan balance plus initial fee)

Page 13 GA Funding for Community Development Financial Institutions (CDFIs) GA Funding for CDFIs is a loan participation program specifically designed to increase access to capital for Georgia’s underserved small businesses (minority- and women-owned small businesses, and small businesses located in low- and moderate-income, minority, and other underserved communities). CDFIs are private financial institutions certified by the U.S. Treasury to provide credit and financial services to underserved markets and populations.

Page 14 GA Funding for CDFIs – Two Options State will enter into contractual relationship with CDFIs. Participating CDFIs will earn fees for underwriting, closing, and servicing SSBCI loans through participating in one of two capacities:  Loan originator/servicer – State forwards SSBCI funds directly to borrower. Receivables are returned to the State  Generally for-profit CDFI’s attached to commercial banks  Contracting entity – State forwards SSBCI funds to CDFI; CDFI loans SSBCI funds to borrower. CDFI may retain SSBCI loan payments and revolve these funds into future SSBCI projects.  Generally non-profit CDFI’s operating independently

Page 15 GA Funding for CDFIs Case Sample – Bldg renovation & equipment for restaurant Total Project Cost$600,000 - Private Bank Financing$440,000 - Borrower Equity$ 60,000 - CDFI (with SSBCI funds)$100,000 TermsPrivate bank – 1 st lien on bldg & equip; CDFI: second lien Bank interest rate: 6%; CDFI interest rate: 5% Contracting entity CDFIs retain and revolve interest and principal payments into new SSBCI projects. Originator/servicer CDFIs receive principal & interest payments and remit them to state CDFI fund. Both contracting entity & originator/servicer CDFIs earn fees for loan underwriting, closing (customary) and servicing (1% of balance payable monthly)

Page 16 Getting Started – What You Need to Know… Applications, Program Participation Agreements, Loan Enrollment Procedures, Transaction Documents, and Reporting Requirements & Compliance … No nonsense Delegated Lending means days until lender can begin to enroll SB loans …

Page 17 For more info, contact: Holly Hunt, SSBCI Program Manager (404) ; Brian Williamson, Assistant Commissioner (404) ; Fax: (404)

Page 18 Opportunity Zones State Job Tax Credit

Page 19

Page 20 Opportunity Zones O.C.G.A (c)(4) General Strategy ▪Encourage local governments to use existing redevelopment statutes in an innovative fashion to revitalize blighted commercial, industrial and adjoining residential areas ▪Reward local governments and businesses that undertake such revitalization with access to maximum State Job Tax Credits ▪Operate state-wide, wherever eligible revitalization and redevelopment needs occur (rural, urban and suburban). ▪Support bottom up, locally driven initiatives through local collaborative partnerships

Page 21 Promising Uses for Opportunity Zones Declining commercial corridors Pockets of older commercial and industrial areas with outdated facilities and buildings in otherwise affluent counties Deteriorating in-town neighborhoods adjoining older industrial areas (state EZ allows tax abatement on rehabilitated housing)

Page 22 Opportunity Zone Requirements Allows DCA to designate as an “Opportunity Zone”, an area within or adjacent to one or more contiguous census block groups with a 15% or greater poverty rate, where the area is part of an Enterprise Zone OR Redevelopment Plan adopted by the local government and the area displays underdevelopment, general distress and blight.

Page 23 Tax Incentives State designation of an Opportunity Zone allows: ▪ANY businesses (including retail) within the area to qualify for the State’s maximum job tax credit ▪Lower job creation threshold to 2 jobs to qualify for the state’s maximum job tax credit of $17,500 per job over 5 years (3,500 per year) ▪Allow credit against 100% of income tax liability, with excess credit available to claim against payroll withholding

Page 24 Example of OZ Credit Usage Jobs Created Credit Tax Liability Withholding Year 12$ 0 Year 23$7,000 $1,200 $5,800 Year 33$10,500 $1,000 $9,500 Year 44$10,500 $1,500 $9,000 Year 54$14,000 $1,700 $12,300 Year 65$14,000 $2,100 $11,900 Year 75$10,500 $2,050 $8,450 Year 86$7,000 $1,800 $5,200 Year 96$7,000 $1,750 $5,250 Year 106$3,500 $1,450 $2,050 Year 117$3,500 $1,600 $1,900 Year 127$ 0 $ 0 TOTALS$87,500 $16,150 $71,350 In the above example, a Job Tax Credit of $87,500 is generated, with the business able to utilize all of the credit

Page 25

Page 26 Application, regulation, maps and more available at: For questions on Metro Atlanta OZ please contact: Dr. Eloisa Klementich, CEcD (404) For general questions on OZ application process: Joanie Perry (404) For questions about how to take the tax credit: Dawn Sturbaum (404)