Loan Documentation & Administration
If a predevelopment loan is approved, the following will constitute the loan documentation. Following approval, approximately two weeks is needed for loan processing.
Loan Commitment Letter
This letter includes the amount authorized by CDFA that may be drawn for the project, specific loan terms, and any special conditions pertaining to the loan commitment.
Borrowers must enter into a loan agreement with CDFA using a standard master loan agreement form, which is designed to be easily amended to cover any anticipated subsequent CDFA loan commitments to the borrower for the same project. The loan agreement includes a ‘maximum loan amount’ that CDFA might provide to the project. In some cases, this amount will exceed the initial loan amount authorized by CDFA thus anticipating the possibility of future allocations.
The note is the evidence of indebtedness. This document also specifies the ‘maximum loan amount’ for which the borrower may qualify for a particular project.
The board of directors of the borrowing organization must authorize borrowing up to the ‘maximum loan amount,’ the granting of guarantees or assignments (if required), and designation of an individual to sign the documents with CDFA on the borrowing organization’s behalf. A written resolution documenting the board’s approval is required.
In cases where the borrower and the developer are separate, legal entities, both the borrower and developer are required to execute the loan documents. In addition, the developer, as the recipient of the construction/final loan proceeds that will retire CDFA’s loan, may be required to guarantee repayment. In some cases, the CDFA loan will be closed prior to the creation of the entity that will serve as the developer. In such cases, the loan agreement may stipulate that the borrower will have a separate developer agreement and guarantee executed when the development entity is formed.
If a predevelopment loan is approved, the following will constitute loan administration.
After a loan is executed, the borrower submits claims for reimbursement through CDFA’s Grants Management System (GMS) and attaches invoices approved for payment, as well as work products, and other documentation. If all or part of the disbursement will cover the cost of an application or commitment fee, instead of an invoice, borrower attaches a copy of the document indicating the amount to be paid, the date when payment is required and the name and address of the payee. Detailed instructions for submitting claims in GMS are provided with signed loan documents.
If project costs and activities justify, the borrower may request an increase in the loan amount above the approved ‘maximum loan amount’ in the loan agreement. The request must be submitted in writing, along with detailed justification and a revised project budget. If CDFA approves an increase above the previously approved loan amount, CDFA will execute a Loan Increase Commitment Letter. The letter revises the schedule of approved costs and disbursements contained in Exhibit A of the loan agreement, and serves functionally as a loan amendment.
The full amount of principal and accrued interest is due and payable on or before the closing date for the final project financing package. There is no penalty for prepayment. CDFA may forgive repayment of this loan if, in the sole opinion of CDFA, the project becomes infeasible due to financial, regulatory, or other circumstances beyond the control of the borrower. Borrower must submit a written request to forgive repayment with a detailed explanation why the project will not move forward and why the borrower is unable to repay the balance owed.
Borrower must provide a brief progress report on the overall project with each claim request. If the borrower does not have a claim to submit in a calendar quarter, borrower must provide a brief written update on project progress by the end of each calendar quarter (March 31, June 30, September 30, December 31).
Prospective applicants are required to consult with CDFA staff before submitting a formal application to the Predevelopment Loan Program. For more information, please contact Kevin Peterson, Director of Economic Development, at 603-226-2170 or email email@example.com.