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Case #3 <br /> <br /> COMPARISON BETWEEN SBA 504 AND TCCCF <br />Scan M. Sullivan, Economic Development / TIF Specialist <br /> <br />~l h. crc arc ~mmy similarities between the SBA 504 Loan Program and the Twin Cities <br />Community Capital Fund. In fact, the structure of the TCCCF was modeled after the SBA 504 <br /> <br />I;oth p~'ograms work off a formula of 50% bank financing, 40% SBA 504 or TCCCF financing <br />and 10% t~wner equity to complete the overall financing structure for any project. Fees to the <br />b,)rroxwr are also very similar in nature. The fee structure for both programs is outlined in the <br />attached chart which shows the comparison between the two programs. The difference between <br />Ihe ~i~'cs ~o thc borrower lbr the two programs is negligible. <br /> <br />are differences in the following key areas however: <br /> <br />'l'he interest rate charged to the borrower is a full percentage point or more under the <br />q'CCCF program. The associated interest expense can be a significant number over the <br />li~kz the loan. Current rates for the SBA 504 Loan Program are below market. This <br />month's rate is 6.1% effective to the borrower after all fees are included in the loan <br />amount. The rate for the TCCCF loan is approximately 7.25% according to fund <br />representatives excluding fees. <br /> <br />Thc TCCCI: Loan Program requires a substantial reserve fee from the borrower while the <br />SBA 504 Loan Program does not. The reserve fee is refundable after 12 consecutive on <br />time monthly payments are made. <br /> <br />~l'he SBA 504 Program does not require any investment to be made by the City of <br />Ramsey. The TCCCF Program requires.a minimum $50,000 investment in order to <br />participate in the program. <br /> <br />The SBA 504 I~oan amount can now go up to $4,000,000 for manufacturing projects. <br />Thc TCCCF Program is limited to a $21'000,000 cap contingent on the community <br />investing $200.,000 in the fund. <br /> <br />The SBA 504 Loan Program cannot make loans to non profit entities. Non profits are <br />eligible for the TCCCF Program. <br /> <br />l~oan decisions for Ramsey projects funded through the SBA 504 Loan Program are <br />made locally through Central Minnesota Development Company. Ramsey currently has <br />2 people on thc Board of Directors for CMDC who represent the City of Ramsey. Loan <br />decisions for the TCCCF will be made by an as yet to be formed Board of Directors <br />derived fi'om the membership. All credits reviewed through the TCCCF must also pass <br />thc credit review of representatives of the Community Reinvestment Fund based in <br />Minneapolis. The CRF is the conduit for the program's access to the secondary market <br />which provides the funding for the program. <br /> <br />12 <br /> <br /> <br />