Agenda - 01-05-1987 - Laserfiche WebLink

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ORANGE COUNTY • BOARD OF COMMISSIONERS ACTION AGENDA ACTION AGENDA ITEM ABSTRACT ITEM HO.r g MEETING DATE January 5, 1987 14? SUBJECT: Availability of SBA 504 Loans in Orange County DEPARTMENT: Economic Development C PUBLIC HEARING: YES x NO ATTACHMENT(S) : INFORMATION CONTACT: Sylvia Price EDC Minutes, Dec. J1, 1986 A CEDCO rep. will be present on Jan_ (includes EDC Resolution) PHONE NUMBERS: HILLSBOROUGH - 732-8181 HILLSBOROUGH - 732-9361 CHAPEL HILL - 967-9251 MEBANE - 227-2031 DURHAM - 688-7331 PURPOSE: To consider a Resolution which will start the process of making available to Orange County firms the Small Business Administration (SBA) 504 loan program. 1. The SBA 504 program - benefits existing firms. The SBA 504 program, though narrow in its focus, can benefit existing Orange County firms which qualify. The program benefits the firm because the SBA loan helps to fill the gap between what a bank will loan and what the company has to put in. On a typical loan package, the bank takes a first deed of trust, the SBA takes a second deed of trust, and the borrower puts in the balance (at least 10%) . The loan can be used for the purchase of land, buildings, equipment, long term assets. 2. Availability in Orange County. Federal legislation requires that all 504 loans must be submitted by a "CDC", a local certified development corporation which is certified by the SBA for this particular program. The role of the CDC is to screen the applicants, process the paperwork, liaise with banks, and submit the completed application. To make the loans available in Orange County it is necessary either to establish a CDC, staff it and get it certified by the SBA; or to ask an existing CDC to include Orange County in its service area. Because of the overhead costs and the small number of loans likely to be processed, the establishment of an Orange County CDC is not recommended. The procedure required by federal regulations is that: 1) the BOCC may by formal Resolution invite an existing CDC to service Orange County for these loans; and 2) that the arrangement must then be approved by the SBA. The SBA favors such arrangements and are expected to give approval, though the approval process may take several months. 3. CEDCO Proposal. Capital Economic Development Corporation (CEDCO), established in Raleigh by Wake County in 1981, has offered to extend its service area for the SBA 504 loan program to include Orange County. Durham County was added to the service last year. CEDCO staff member Janneke Hermans and CEDCO consultant Lee Butzin work with applicant firms and banks to prepare the loan documents. Ms. Hermans is also available to offer advice to companies on other SBA programs which might be suitable, if the 504 program is not appropriate.