| Finance
Opportunities
The
City of Los Angeles offers direct financing for larger construction
and rehab projects that will benefit low income communities or provide
good jobs for local residents. Funding is usually below market interest
rates.
SECTION
108 LOAN PROGRAM *
The City of Los Angeles Section 108 Program was established to create
economic and physical revitalization in the City’s economically
disadvantaged communities. This objective is accomplished by offering
a minimum of $2 million in direct “gap” financial assistance
for larger commercial and industrial real estate projects. Funds
are used for “eligible activities” which include acquisition,
construction or renovation, costs of fixtures and equipment, soft
costs (such as legal and loan fees), land assembly for project redevelopment,
relocation of a business to the City, and development of an incubator
or industrial park.
The Program is available for projects anywhere within the City of Los Angeles, with special emphasis on low-moderate income communities.
Funding Limits
Loan amounts start at $2 million minimum or a maximum¹
and have no fixed ceiling. Most loans finance 20 to 30 percent of project costs, but can be higher. Section 108 “gap” financing usually requires a minimum 10% owner equity contribution and a commercial loan component.
Projects
must satisfy one of three National Objectives including:
1) aid in the prevention or elimination of slum and blight;
2) benefit to low- and moderate-income families; or
3) meet a particularly urgent community need.
They are also required to meet an “eligible
activity” as defined under the CDBG Program regulations
at 24 CFR 570.201.
Projects
must provide a public benefit by: 1) creating new permanent jobs,
2) retaining jobs otherwise lost given certain circumstances,
and/or 3) providing goods and services to economically-disadvantaged
communities (area benefit test). The
job creation goal is one permanent full-time job for every $35,000²
in loan proceeds. A minimum 51% of the jobs must be available
to low- and moderate-income persons.
Interest
Rate
Rates range from one percentage point (1.0%) to two and a half
percentage points (2.5%) over the City’s cost of funds,
which is based on long-term treasury rates.
Fees
A
1.50% loan fee is assessed on the amount advanced. The borrower
is also responsible for the appraisal, title and other out-of-pocket
expenses related to loan processing, approval and documentation.
Term
A
20-year maximum loan term³
is based on, but not limited to, return on investment, cash flow,
collateral, equity, and use of funds.
Collateral
Advances
must be secured primarily by deeds of trust on real estate. Equipment
liens are considered.
Guarantees
Loans
must be supported by personal or corporate guarantees. For additional
information, call (213) 744-7111, (TTY) 213-744-9395.
BOND FINANCING AVAILABLE
The
Los Angeles
Industrial Development Authority (IDA) offers below
market rate, tax exempt financing for manufacturing, commercial,
and non-profit construction, land acquisition and major equipment
purchases. Empowerment Zone bonds are available for many types of
projects within the Federal Empowerment Zone.
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* Section 108 Program Disclaimer
¹ Loans under the City’s Civil Unrest Program have a $500,000 minimum. (return)
² Loans under the City’s Civil Unrest Program require a $30,000:1 job creation ratio. (return)
³ Loans under the City’s Civil Unrest Program mature in 2015. (return)
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