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ATTACHMENT 3 <br /> 19 <br /> LAW OFFICES <br /> COLEMAN, GLEDHILL & HARGRAVE <br /> A PROFESSIONAL CORPORATION <br /> 129 E.TRYON STREET <br /> P.O.DRAWER 1529 <br /> HILLSBOROUGH.NORTH CAROLINA 27278 <br /> 919.732.21% FROM THE DESK OF <br /> FAX 919.732.7997 GEOFFREY E. GLEDHILL <br /> April 25, 1997 <br /> Mr. Ted Abernathy <br /> Director <br /> Orange County Economic Development <br /> Post Office Box 8181 <br /> Hillsborough, North Carolina 27278 <br /> RE: orange County Small Business Loan Program <br /> Dear Ted: <br /> Thank you for the copy of the final draft of the Orange <br /> County Small Business Loan Program Operating Policies and <br /> Procedures . This letter confirms our recent discussions and the <br /> discussions we 've had with the representatives of the banks that <br /> have agreed to participate in the Orange County Small Business <br /> Loan Program. For the Loan Program to work from the point of <br /> view of the banks, it is necessary for the banks to "book" a loan <br /> equal to the amount that they make available to the program for <br /> loans to small businesses . The financial documents that have <br /> previously been reviewed and that were from the Raleigh Success <br /> Fund Program contemplated that this loan would be to the County. <br /> That is, the County would be indebted to the banks for the amount <br /> of the banks ' contribution to the small loan program. <br /> It is my opinion that the County cannot become indebted to <br /> the banks in this manner and for this purpose. The model for <br /> this program that works under North Carolina law is for a non <br /> profit corporation to be formed and for that corporation to <br /> "receive" the bank funds, incur the debt for those funds and lend <br /> the money to the qualifying businesses . From the bank ' s point of <br /> view, the money advanced for the loan program will be "booked" as <br /> a loan to the non profit corporation . The non profit corporation <br /> could perform other functions of the loan program but legally its <br /> most important function would be that of debtor in the <br /> transactions with the banks . <br /> The County ' s obligation to fund a loan loss reserve equal to <br /> 30% of the combined commitment of the banks can be handled by <br /> contract which contract can be funded by appropriations . <br />