Reducing Borrowing Costs & Owner Equity Requirements

The City of Mandan has partnered with the Lewis and Clark Development Group to establish lending programs to assist with business start-ups, expansions and retention.

  • Loan options complement financing from traditional lenders by reducing owner equity requirements to a minimum of 10%.
  • Interest rates typically range from 4% to market rate. Other loan terms are based on the loan purpose and the asset being financed, credit risk, economic impact and borrower's ability to cash flow.

 

INTERMEDIARY RELENDING PROGRAM

Two separate $1 million revolving loan pools were created in 2007 and 2009 to assist with business start-ups, expansions and retention in Mandan and the surrounding 10-mile radius within Morton County. The City of Mandan twice provided $250,000 in sales tax revenue as a match for two $750,000 loans from USDA Rural Development to establish the revolving loan pools.

The Lewis and Clark Development Group manages the loan programs. Goals of USDA’s Intermediary Relending Program (IRP), the source for the majority of the loan funds, include job creation and retention. Among criteria:

  • Business projects must be in Mandan or the surrounding 10-mile radius in Morton County.
  • The IRP loan can be no more than 50% of total financing needs with a maximum of $250,000 per project. Most loans are approved for 10 to 25% of the financing package.
  • There is a 1% origination fee on all loans.

 

N.D. OPPORTUNITY FUND

A Mandan-led consortium of 38 municipalities has received a $9.7 million allocation from the U.S. Department of Treasury’s State Small Business Credit Initiative (SSBCI) for a loan participation program for small businesses. The LCDC administers the loan program in which a lender originates a senior loan and the SSBCI funds provide for a second, subordinate loan to the same borrower.

  • The fund targets borrowers that employ 500 or fewer full-time employees.
  • Loan share cannot exceed $1 million or 50% of proposed project costs.
  • Must have at least 20% private capital at risk.

Loan program overview. The program must ultimately leverage the federal dollars to generate at least $10 in new small business investment for every $1 of SSBCI support. It targets loans with an average principal of $5 million or less and cannot extend loans that exceed a principal of $20 million. The consortium’s application stipulates a maximum direct loan size of $1 million supporting loans up to $10 million. The loan participation program can fund up to 50 percent of an eligible business project, but will generally be at level of 20%.

Eligible use of loan proceeds include business start-up costs, working capital, business procurement, franchise fees, equipment, inventory, and the purchase, construction, renovation or improvements of an eligible place of business. It is not limited to manufacturing, processing or other businesses that generate new wealth. Lending is allowed to retail and service businesses, too. Loans are allowed on real estate if primarily owner-occupied, but not if generally for sale, lease or investment.

The loan participation program will offer rates ranging from 4% to market rate. Projects perceived as having a high development impact or providing assistance to minority or under-served persons, or businesses impacted by natural disasters, are eligible for the most attractive rates. The length of a loan varies by asset type:

  • 10 to 20 years for real estate 
  • 3 to 10 years for machinery and equipment
  • 1 to 5 years for inventory and working capital, and
  • about 18 to 24 months for construction loans

The program will allow for loans of up to 100% of the value of collateral. The origination fee is up to 2% with payment required for all hard costs including mortgage filing fees, lien fees, title searches and credit reporting fees.

As dollars are loaned to businesses, repayments from recipients are replenishing the program fund, allowing it to revolve and continue to provide assistance for years to come.

Consortium members. The other municipalities participating in the State Small Business Credit Initiative as part of the Mandan consortium are the cities of Almont, Beach, Beulah, Bismarck, Bowman, Carson, Casselton, Crosby, Dickinson, Dodge, Dunn Center, Fargo, Garrison, Glen Ullin, Halliday, Hazelton, Hazen, Hebron, Hettinger, Killdeer, Lincoln, Linton, McClusky, Minot, Mott, New England, New Salem, Regent, Sentinel Butte, Steele, Turtle Lake, Underwood, Watford City, West Fargo, Williston and Wilton. The Standing Rock Sioux Tribe is also a participant.