Washington Recovery Loan Fund — Community and Economic Development Committee Briefing (Wednesday March 10, 2021)
- Issuer
- Congressional materials
- Date
- 2021-03-10
Summary
A slide presentation on the Washington Recovery Loan Fund prepared for a Community and Economic Development Committee briefing on Wednesday, March 10, 2021, with contacts from the Washington Department of Commerce. The slides describe the fund as a working title for a low-barrier loan product for small businesses and nonprofits that leverages CARES funding and works through community lenders and CDFIs. They state that a fund capitalized at $100 million can assist between 700 – 1,400 small businesses and non-profits. A capital structure slide shows senior debt of 35%, subordinate capital of 35% and state equity of 30% in a special purpose vehicle. The proposed loan terms include interest rates of 2.75% for nonprofits and 3.75% for small businesses, no fees, and a loan amount capped at the lesser of $150,000 or 100% of average monthly revenues.
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Cite this document
“Washington Recovery Loan Fund — Community and Economic Development Committee Briefing (Wednesday March 10, 2021).”
Original at app.leg.wa.gov, dated 2021-03-10. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2021-03-10-2021-03-10-a28725-d230953-department-of-commerce-washington-recovery-loan-fund/
, SHA-256 90587375ccf77b217661a3149af253602bbca4138f9021d46525bfc752a086fd.Full text
Washington Recovery Loan Fund
Partnering to support Community Lenders, Businesses and Nonprofits with Recovery Assistance
COMMUNITY and ECONOMIC DEVELOPMENT COMMITTEE BRIEFING
WEDNESDAY MARCH 10, 2021
For this proposal, the term business is meant to include non-profit organizations and for-profit businesses.
Washington Recovery Loan Fund is a working title.
1
Opportunity Zones
Washington Recovery Loan Fund
Need: Small Business Access to Capital
• Governor’s Economic Recovery Taskforce
Lessons Learned: Addressing an Equitable Recovery
• Grants are not sufficient
• Insufficient lender relationships
• Technical assistance needs for underbanked communities
Action: Creation of a Washington Recovery Loan Fund
• Provides a tool for businesses to pivot toward recovery
• Supports Washington’s small business recovery ecosystem
• Leverages CARES funding to provide a low-barrier loan product to struggling small
businesses and nonprofits
2
Early indicators show devastating effects of COVID-19 on the small business
Opportunity Zones
community, with outsized negative impact on communities of color and immigrants
Reduction in Self-Employed Business Owners
Percentage drop in number of businesses
February - April 2020 National Statistics
45%
41%
40%
36%
35% 32%
30%
26% 25%
25%
20% 17%
15%
10%
5%
0%
Black Immigrant LatinX Asian Women White
Business ownership
Source: Fairlie, Robert W. (2020), The Impact of COVID-19 on Small Business Owners: Evidence of Early Stage Losses From the April 2020 Current Population Survey, SIEPR Stanford Institute for Economic Policy
Research 3
The Fund combines existing infrastructure, networks, and relationships to simplify
execution and speed to market
Loans, investments & …centralized and …distributed through …to the organizations that
grants… tailored… local partners… need it most
Government
Washington State
Recovery Loan Fund
Banks
Local small
Capital Comms & businesses and
Foundations Advisory nonprofits affected by
Community based
lenders / CDFIs
COVID-19
Individuals & Technology
Families platforms
4
Dynamic technical assistance utilizing existing small business assistance
infrastructure and networks to connect to borrowers and assist applications
…potential technical assistance / …assist businesses and non- …centralized and tailored to
application assistance organizations: profits with online application loan requirements…
requirements…
Commerce Resiliency Partners Washington Recovery
Loan Fund
Washington Economic Development
Association (WEDA)
Technology
platforms Capital
SBA SBDCs
Local Government Agencies
Business Impact NW Comms &
Advisory
501Commons
Ventures
Sister Sky (Native Business Consultants)
This network of application assisting partners is the key to scaling applications from borrowers. Many of these relationships have 5
already been formed through previous recovery programs.
The Washington Recovery Loan Fund can create positive impact for the entire small
business ecosystem – from capital providers to customers and communities
Depending on capital raised for
Fund capitalized at $100 million can assist between the Fund – repayments could:
700 – 1,400 small businesses and non-profits
• Revolve for continued
Trusted local TA providers ensure that very small economic development lending
businesses, minority-owned businesses, and
businesses located in low-income and rural areas are • Expand lending capacity for
assisted CDFI partners
IMPACTS
Loan information will provide data on business type, • Establish relationships with
employees and demographic detail on minority and national financial partners and
women-owned businesses and geographic location foundations
• Establish a more resilient
The partnership network built by the Fund can be
network of community leaders
accessed for future economic development efforts
6
Washington Recovery Loan Fund
CAPITAL STRUCTURE
7
The State is providing a portion of equity capital, nominal loss reserves, and
administratrative funding to support the creation of a Special Purpose Vehicle (SPV) that
purchases CDFI-originated recovery loans
Washington
Recovery Loan
Banks Fund Originating CDFI
Originating CDFI
Senior Debt
35%
Originating CDFI
Originating CDFI
Recovery loans to
Subordinate
Foundations small businesses &
Capital
nonprofits
35%
RISK
WA State REQUITY
30%
8
Potential loan product is tailored to meet the immediate and longer-term credit
needs of small businesses and nonprofits; during and post COVID-19 recovery
Interest rate Interest rate set to 2.75% for nonprofits, 3.75% for small businesses
Interest-only for months 1-12
Interest and principal for months 13 through the end of the term (~60 months)
Payment schedule 0-12 months: Interest-only payments plus $10 principal payment (to establish account)
13-60 months: interest and principal payments with straight line amortization
Use of proceeds Working capital including payroll, utilities, rent, supplies, etc. Any typical expense
category. Must disclose any current loans. Could refinance existing debt under limited
circumstances
Recourse No collateral required. Personal guarantees required
for private business owners required
Fees No fees charged to borrower
Loan amount Lesser of (a) $150,000 or (b) 100% of average monthly
revenues for a 3-6 month period prior to the COVID-19
outbreak
Average SBA EIDL for Washington State =$60,046
Average SBA PPP Loan for Washington State = $96,834
* SBA Reports – 2/2021
9
The lead partners have a combined 95 years of experience in community development
Community Reinvestment Fund, USA is a Supporting National Development Council is a national 501c3 Calvert Impact Capital exists to use private capital in
Organization – their purpose and mission is to serve working to increase the flow of capital for innovative and collaborative ways to create an
other community and economic development investment in low-income communities. equitable and sustainable world.
organizations and expand impact through collaboration.
Working in partnership with nonprofits, funders, Lending to CDFIs and other impact intermediaries
Founded 30 years ago with an unprecedented and government for 50 years for 25 years
national network of small business development Current partner with Commerce on Opportunity Raised more than $2 billion to build, grow, and
organizations, including CDFIs, banks, and Zone and EDA-funded recovery efforts. sustain more than 520 impact intermediaries
business support organizations. Lent more than $251 million in business capital across the US and around the world; strong
Seasoned business lending team who has Through its SBA 7(a) lending programs. relationships with hundreds of institutions,
deployed more than $250 million over the last six advisors, and individuals interested in investing for
Manages multiple business recovery / loan
years directly to small businesses through our impact
programs in Washington, California, Utah and
SBA 7(a) and Patient Capital lending programs. Invested $610 million into 322 intermediaries
Nevada.
Technological know-how, financial sophistication, active in U.S. community development across
and process infrastructure to quickly build and Have trained over 75,000 professionals in sectors including microfinance and small
manage complex programs and innovative business and housing finance. business, affordable housing, and other critical
solutions community services
10
Thank you!
Keith A. Swenson
DEPUTY ASSISTANT DIRECTOR
Keith.Swenson@Commerce.wa.gov
206.256.6102 www.commerce.wa.gov
Jasmine Vasavada
LEGISLATIVE & POLICY DIRECTOR
jasmine.vasavada@commerce.wa.gov
360.725.4010
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