CARES Act Revolving Loan Fund
The City of Orem offers a rare opportunity for Orem businesses – zero interest to low interest business loans! The City of Orem’s CARES Act Revolving Loan Fund is open to all Orem businesses who have suffered economic injury as a result of the COVID-19 pandemic. But ACT NOW! Low interest rates are only available until June 1, 2022!
The CARES Act RLF was designed to make loans accessible and affordable, and its features include:
- Fixed interest rates from zero interest to low interest rates. Interest rate is based on the level of risk and determined by the Loan Approval Board.
- Loan amounts range from $5,000 – $125,000
- Acceptable uses – Fixed asset purchases & working capital
- The business must be located in Orem for the duration of the loan
- Up to 3-year amortizations.
- The RLF must take collateral position in assets financed or assets pledged
- Personal guarantees are required for all principals holding a 20% or higher interest in the company.
- Job creation – one job created or maintained for every $35,000 of RLF money. 51% or jobs created must be made available to persons of low to moderate income.
WHO IS ELIGIBLE FOR THE CARES ACT RLF?
The CARES Act Revolving Loan Fund is open to all Orem businesses who have been negatively financially affected by the COVID-19 pandemic.
Besides the above caveat, eligible businesses include, but are not limited to:
- Technology industries
Businesses can NOT use the loan proceeds to refinance existing debt and business relocation
WHO DECIDES ON THE LOANS?
Eligibility for a loan through the CARES Act RLF program is decided by the Loan Approval Board. The Loan Approval Board is comprised of qualified business, financial, and community leaders who are experts on Orem’s revolving loan fund. The Loan Approval Board approves or rejects loan applications based on the criteria outlined on this page, and then assigns an interest rate on the loan based on risk.
WHAT CAN PROCEEDS FROM THE CARES ACT RLF BE SPENT ON?
Projects funded by the RLF must meet the eligibility requirement under the Revolving Loan Fund. The following types of activities are eligible for use of RLF funding.
● Acquisition of fixed assets such as machinery and equipment
● Working capital
The following activities are NOT eligible uses of RLF funding
● Acquisition of an equity position in a private business
● Subsidizing interest payments on an existing RLF loan
● Providing a loan to a borrower for the purpose of meeting the requirements of equity contributions under another Federal agency’s loan program
● Providing a loan that would result in the relocation of jobs outside of the City of Orem, the eligible lending area.
● Enabling a borrower to acquire an interest in a business either through the purchase of stock or through the acquisition of assets, unless sufficient justification is provided in the loan documentation. Sufficient justification may include acquiring a business to save it from imminent closure or to acquire a business to facilitate a significant expansion or increase in investment with a significant increase in jobs. The potential economic benefits must be consistent with the strategic objectives of the RLF
● Providing funds to a borrower for the purpose of investing in interest-bearing accounts, certificates of deposit, or any investment unrelated to the RLF
● Refinancing existing debt, unless: (a) Recipient sufficiently demonstrates in the loan documentation a “sound economic justification” for the refinancing (e.g., the refinancing will support additional capital investment intended to increase business activities). For this purpose, reducing the risk of loss to an existing lender(s) or lowering the cost of financing to a borrower shall not, without other indicia, constitute a sound economic justification; or (b) RLF funds will finance the purchase of the rights of a prior lien holder during a foreclosure action which is necessary to preclude a significant loss on an RLF loan. RLF funds may be used for this purpose only if there is a high probability of receiving compensation from the sale of assets sufficient to cover an RLF’s costs plus a reasonable portion of the outstanding RLF loan within a reasonable time frame approved by EDA following the date of refinancing
● Serving as collateral to obtain credit or any other type of financing without EDA’s prior written approval (e.g., loan guarantees)
● Undertaking any activity that would violate EDA Property regulations found at 13 CFR part 314;
● Financing gambling activity, or any illegal activity, including the cultivation, distribution, or sale of marijuana that is illegal under federal law
● Providing a loan that would create a conflict-of-interest
WHEN IS THE DEADLINE TO APPLY FOR THE CARES ACT RLF?
We will always have a Revolving Loan Fund, but the opportunity for zero interest to low interest rates closes on June 30, 2022. We want as may businesses as possible to take advantage of these low or nonexistent interest rates while they still can.
WHAT ARE THE TERM LENGTHS?
Term lengths are sometimes negotiable, but generally range from 6 months to 3 years.