Agenda - 09-02-1997 - 9b - Laserfiche WebLink

Browse Search

lb Answer: Practically speaking, it means that Orange County must provide sufficient funds to cover 30% of any losses, after liquidation of collateral. The funds would be contractually obligated. Question: How were the eligibility criteria for uses of funds determined; and why were certain items- such as movie theaters- excluded? Answer: The original list of uses was borrowed from the Raleigh loan program and the Small Business Administration(SBA) loan standards. Some were also suggested by the banks. We have changed the list to allow those items questioned by the County Commissioners. Question: How were the specifics of the Operating Policies and Procedures developed? Answer: Specifics were developed based on suggestions by the bankers and small business providers and from rules borrowed from other programs - specifically, the Raleigh program. The Raleigh program was chosen because our local banks are largely supervised by regional executives that have already approved the Raleigh model. Almost any specific is negotiable; changes would need to be presented to the banks for their approval. Every program in the state is different, so any modeling from another program should reflect local desires. Question: Carrboro's loan pool requires three bank rejections before being eligible. Why is that not a proposed requirement of the Orange County loan pool? Answer: Carrboro wants to insure that they are only making loans where conventional lending is not possible, a"lender of last resorts." The proposed Orange County fund has a similar philosophy; but, rather than require the borrower to go through the bank process three times, any banker on the loan committee who believes the application to be bankable, will be encouraged to make the loan. If several banks want to make the loan, the borrower will benefit from the competition. Question: What is the total cost of the loan pool to Orange County? Answer • The biggest cost is $50,000 annually for three years to provide a 30% loan loss reserve. These funds would be used to cover 30% of any losses, after collateral has been liquidated, on any loan that defaults.. An example might be as follows: A loan is made to ABC Company for$10,000. The company cannot pay off the loan and, after liquidating the pledged collateral, there is a short-fall of$1000. The County would be responsible for$300 of the loss. After three years, if all parties agree to continue the program, the County would be responsible for maintaining 30% of the outstanding fund balance in the loan loss reserve.