1. Economic Development Loan Program – City of Miami
48th ANNUAL NCDA CONFERENCE, MIAMI
JUNE 14 – 17, 2017
George Mensah
Director

2. NCDA Winter Conference
Program Overview
Purpose, Eligible & Ineligible Use
Purpose: to provide businesses with financial assistance to support the retention and creation of jobs for low to moderate income City residents.
Eligible Use:
• Purchase and Installation of machinery, equipment, furniture, fixtures
• Leasehold improvements or expansions
• Technology infrastructure
• Renovation, improvement and expansion
• Inventory
Ineligible Use:
Paying off a creditor or creditors
Providing funds for distribution or payment to the owner, partners, or shareholder of the applicant.
Refunding a debt owed to a small business investment company.
Paying of any tax lien or liability
Refinance loans made by other lenders
Projects which are not consistent with the City’s economic development loan program
February , 2017
NCDA Winter Conference

3. NCDA Winter Conference
Program Overview
Eligibility
Demonstrate that financing is not otherwise available on terms or conditions that would permit completion and/or successful operation or accomplishment of the project activities to be financed
Business is not relocating jobs, except where the loan applicant is forced to relocate due to circumstances beyond their control (i.e. government intervention, building demolition, etc.)
Project impacts an adequate number of jobs, as defined by 24 CFR 209 (b)(1)(i), to be created and/or retained for low to moderate income people
The business’ ability to repay the loan.
February , 2017
NCDA Winter Conference

4. NCDA Winter Conference
Program Overview
Loan Criteria
Job Creation/Retention
Jobs must be created within six (6) months of the loan closing if loan is not used for rehabilitation or leasehold improvements or the total project does not include rehabilitation or leasehold improvements.
Jobs must be created within eighteen (18) months of the loan closing if loan is used for rehabilitation or leasehold improvements or six (6) month after the completion of the rehabilitation/improvements, whichever is less.
On job retention, the applicant must give details on why the borrowed funds are required to retain the jobs and demonstrate that without the assistance, the jobs would be lost.
Loan Amount
Minimum: $20, Maximum: $80,000.00
Higher loan amounts may be approved on a case by case basis by the City of Miami Commission.
February , 2017
NCDA Winter Conference

5. NCDA Winter Conference
Program Overview
Loan Criteria II
Loan Terms
Repayment term shall be as follows:
Equipment: Up to the economic life of the assets involved, not to exceed the IRS depreciation limits (See IRS Instructions for Form 4562) and not longer than seven (7) years.
Others: Fully amortized between three (3) to seven (7) years
Special Circumstances: Longer repayments may be considered on a case by case basis
Interest Rates
The interest rates of the City of Miami’s EDLP loans shall be 0% - 3% per annum, based on the cash flow of the business.
Match Requirements
All loans must be matched by the applicant’s funds. Matching participation requirements will be:
Capital: Applicant must match a minimum of 20% of capital needed for project
Equity: Applicant must have at least 20% equity in the business.
February , 2017
NCDA Winter Conference

6. NCDA Winter Conference
Program Overview
Other Requirements
Applicants shall sign Unlimited Guaranties.
Commercial Insurance Policies naming the City of Miami as loss payee in an amount acceptable to the City of Miami Risk Department
All loans will require a collateral position of any and all real property or equipment pledge as security for the loan.
 Loans for equipment will require UCC-1 filings.
Recipient may not pledge, transfer, hypothecate, encumbrance or dispose of any asset purchased, in whole or in part, with funds from the City of Miami, without the written approval from the City of Miami
The City of Miami may impose late fees if the business does not pay on a timely manner.
 If a business does not meet its minimum employment requirements, then the City shall call the loan payable within 30 days.
February , 2017
NCDA Winter Conference

7. NCDA Winter Conference
Program Overview
Approval/Appeal Process
All loans made strictly under the policies of the EDLP will be recommended for approval by the Housing and Commercial Loan Committee.
If the Housing and Commercial Loan Committee denies a loan application, the applicant will be advised in writing with an explanation as to why the loan was denied. All loans not meeting the EDLP guidelines will require an additional approval by the City Commission.
Applicant’s will have 10 business days from the receipt of the letter not recommending the loan to appeal the decision. The applicant can provide additional documents at that time for consideration of the underwriting committee. If the loan is not recommended a second time, there will be no further appeal entertained from the applicant.
February , 2017
NCDA Winter Conference

8. NCDA Winter Conference
Loan Example
Wynwood Brewery
Borrower: A father and son team, father is a retired senior Pharmaceutical executive with considerable sales experience and son with knowledge in brewing technology from FIU
Loan Amount: $420,000 subordinate loan.
Bank Loan: $586,700
Total Project: $1,260,600
Use of Funds: Purchase of Manufacturing equipment
# of Jobs: 12 within 24 months of complete disbursement
Interest: 0%
Term: 5 years
Security: UCC-1 filling on all equipment and furnishings of the business irrespective of who purchased it.
Guarantees: Unlimited guarantees from all officers and directors of the company
February , 2017
NCDA Winter Conference

9. NCDA Winter Conference
Loan Example
Wynwood Brewery II
Documents Reviewed and Analyzed:
Application
Business Plan
Projected financials
Management Capacity/Resumes etc
Industry Information/Materials
February , 2017
NCDA Winter Conference

10. NCDA Winter Conference
Loan Example
Wynwood Brewery-Underwriting
Market demand:
Tremendous growth in the micro-brewery industry
No other micro-brewery exist in Miami
Location in Wynwood, an up and coming artist enclave and tourist attraction in Miami
An area frequented by Millennials
Financial:
Compared assumptions with industry average and determined that they were reasonable
Analysis showed a higher cost of the materials at 16% compared to industry average of 10%, which shows room for a better performance
Breakeven analysis shows profitability in year 2
All other financial ratios showed a solid business potentially
Loan Closing
Loan date: August 5, 2013
Opening Date: April 5, 2014
February , 2017
NCDA Winter Conference

11. NCDA Winter Conference
Loan Example
Wynwood Brewery-Beers
February , 2017
NCDA Winter Conference

12. NCDA Winter Conference
Loan Example
Wynwood Brewery Today
Wynwood Brewery has been very successful beyond anyone’s imagination
Financial Success
2015 Projected
2015 Actual
Difference
Total Income
$900,960.00
$1,514,015.85
$613,055.85
Cost of Goods
$201,329.00
$266,227.18
$64,898.18
Gross Margin
$834,732.00
$1,247,788.67
$413,056.67
Total Expenses
$622,955.00
$933,329.77
$310,374.77
Operating income
$211,777.00
$314,458.90
$102,681.90
February , 2017
NCDA Winter Conference

13. NCDA Winter Conference
Loan Example
Wynwood Brewery Today
Other Success
Pops Porter won a gold medal at Denver’s Great American Beer Festival in 2014
Has a contract to supply Norwegian Cruise Line and currently negotiating with other cruise lines
Sold 24.5% minority share to Craft Brew Alliance (CBA) so it can get the necessary financing to expand and produce more beer
Their main 2 beers now to be produced in NH where CBA has a large scale production facility
News article
February , 2017
NCDA Winter Conference