NADO ATC Small Business Lending

SC Case Study

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Catawba Regional COG/Catawba Regional Development Corporation

◦$53 million of loans originated◦$123 million of private capital leveraged◦2,100+ SC jobs created or preserved ◦$25MM of loan assets

under management

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Products and Coverage

SBA 504 – statewide lender

EDA RLF – 18 Counties – expanded in 2012/2013◦Assumption of Economic Development Administration (EDA)

Revolving Loan Funds (RLF) from: Lowcountry, Lower Savannah, and Santee-Lynches COG regions

USDA IRP – 9 counties◦5 new counties with Santee

Lynches IRP debt assumption

Brownfields RLF Fund Manager ◦Statewide lender, capitalized

by US Environmental Protection Agency (EPA)

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EDA RLF Consolidation – SC Lessons Learned

◦ POLICY MAKERS:

Strategy and buy-in with COG Boards (old and new fund managers)

New fund manager commits to market in old territory, although loans can be made based upon market demand

Resolutions of support from both COG Boards

Preparation and approval of amended RLF Plan

EDA provides grant assumption documentation for both organizations

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EDA RLF Consolidation – SC Lessons Learned

◦LOAN ADMINISTRATION/FINANCE

New fund manager does initial file, legal, and documentation reviews ◦ Preferably with existing fund manager staff◦ Include finance staff - balance sheet impact for both

organizations

Legal Review◦ All existing loans:

Documents – including note, loan agreement, security agreement, mortgages/deeds of trust, UCC filings

Validity, priority and outstanding amount of existing liens and/or mortgages

Loan and security documents to determine if loans are assumable

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EDA RLF Consolidation – SC Lessons Learned

◦ LOAN ADMINISTRATION/FINANCE

Credit/Underwriting◦ Current and Past Financial Information:

Review borrowers’ financial statements (if available) for cash flow coverage

Determine collateral adequacy (appraisals in file, current tax value, other)

Payment performance, and guarantor support ◦ Personal Financial Statements, guarantor tax returns (if available)

Communicate with third party entities (i.e. insurers) to ensure coverage remains in place for hazard, life, etc.

Based upon Legal and Credit/Underwriting reviews:◦ Loan write-downs are done by mutual agreement at portfolio

assumption (by either old or new fund manager/lender)

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EDA RLF Consolidation – SC Lessons Learned

◦ EXISTING CUSTOMERS AND PROSPECTS:

Communications with customers◦ Written and verbal from existing fund manager and new fund manager◦ Personal introductions (when feasible) to customers by new fund

manager/servicing staff◦ New servicing staff aggressively, but nicely, introduces reporting

requirements and payment processes ◦ If mistakes occur, remedy quickly and firmly

Marketing in new areas:◦ Leverage existing banking and board relationships◦ Economic development partners◦ Referrals (establish point person) from old fund manager to pass quickly

to new fund manager

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Summary

◦Economies of scale exist◦Request time to deploy new capital

Developing new territories and relationships requires patience and time

◦Things will happen which you don’t expect (good and bad)

◦Common Solution: Better to have a larger capital pool to serve the state than for funds to be sequestered

◦Questions?