| Frequently Asked Questions |
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WMEF provides direct loans to businesses and nonprofit organizations that cannot obtain sufficient financing from banks or other lending sources. Loans typically have a term structure with monthly payments of principal and interest which repays the entire loan in 5 years or less. We can provide different payment structures which are appropriate to the specific financing need, and can include interest only periods, and draw down periods for longer term projects, but we do not provide long term financing (10 years or more) and we typically do not provide a monthly payment amount which results in a balance at the loan’s maturity. We also provide financing through different programs tailored to specific business niches, locations, or organizational needs.
Loans are offered at fixed and floating interest rates. The actual interest rate depends on factors including our funding source for that loan, the size of the loan, and the loan structure.
WMEF does not provide long term real estate financing, and does not provide guarantees for existing loans. WMEF loans are for business use and are not for consumer financing. WMEF does not make grants but may act as an administrator for specific grant programs.
WMEF will make loans to sole proprietors, businesses or non-profit organization which cannot obtain financing from other sources (banks or other lending agencies), meet WMEF’s mission requirements concerning economic development, and have a viable business plan or project. WMEF will make loans for start-up businesses which have a complete and well thought out business plan and a high probability of success.
WMEF does not provide pre-venture funds to create a business plan or determine project viability and does not provide venture capital funds at this time. WMEF does not make loans for unpaid income or other taxes, or for strict debt consolidation. WMEF does not make consumer loans.
WMEF can make direct loans of up to $300,000 and can partner with other lending institutions or agencies to be part of larger financing arrangements. There is no minimum loan size, although loans are generally $5,000 or more.
WMEF charges an application fee, which varies depending on the size of the loan request but is typically either $100 or $150. The fee is non-refundable and is due when the application is submitted to WMEF. We suggest that applicants complete the pre-application form on the website to provide WMEF with information to determine the appropriate application process and fee.
WMEF makes higher risk loans than conventional lenders, and charges higher interest rates to support that risk. Loans which fall into the micro-enterprise category (generally $35,000 or less) are usually at a fixed interest rate for the entire loan term. Larger loans are usually at a variable interest rate which adjusts on a quarterly basis. The actual interest rate on a loan is determined on a case by case basis and depends on a variety of factors including business history and financial condition, management experience, loan size, collateral, and repayment terms. WMEF utilizes personal credit scores in assessing a loan request but does not price its loans based on those scores.
Loans which fall into the micro-enterprise category (generally $35,000 or less) do not have any closing fees. Larger loans typically have a closing fee of between 2% and 4%. Certain specialized financing requests may have additional fees on a periodic basis, such as a quarterly administrative fee or royalty fee. All fees are clearly defined in the commitment letter issued to the applicant, which details the financing terms proposed by WMEF.
All borrowers are required to pay for any legal costs associated with the preparation of loan documents, and for any recording fees relating to WMEF’s security interest in the collateral (such as mortgage recording fees, UCC filing fees, and the like). WMEF makes every effort to keep legal fees to a minimum, and utilizes its in-house loan documents as much as possible. WMEF does not start any process which creates expenses for the applicant without the applicant’s prior knowledge.
Collateral is generally required, and can consist of business and/or personal assets. The amount of collateral depends on the nature and terms of the financing requested, and the nature of the business. While collateral is not the only basis for our loan decision, we do expect our borrowers to be fully committed to the business and to be willing to provide all available collateral to support the loan, as well as personal guarantees of the business owners.
WMEF obtains personal credit reports on all individual applicants and guarantors. Personal credit is an important consideration but is not the primary or only factor in making a lending decision. WMEF may ask for a written explanation of derogatory items on an applicant’s credit report in order to understand any particular event or problem affecting the credit score. We suggest that applicants request a free copy of their credit reports before requesting a loan so any credit concerns can be addressed and resolved ahead of time.
We do not offer grants, although we may be a grant administrator under certain specific programs from time to time. We do offer flexible financing structures which are intended to support business viability and growth and completion of projects which create a stronger local economy.
WMEF makes direct business loans and provides access to other financing services in order to help local businesses grow and prosper and to support the development of projects and organizations that create a stronger regional economy.
WMEF makes direct loans of up to $300,000 and works with its business partners and area banks in larger financing transactions. WMEF works with organizations having tax credit financing programs to provide access to those programs for qualified projects or borrowers. WMEF also works with a wide array of local, regional, state and National organizations to remain on the forefront of financing options and to represent our region in identifying unmet financing tools or needs. We view lending as a crucial resource for local businesses and organizations, but we also provide access to larger scale resources and knowledge.
WMEF makes loans to applicants who meet our mission requirements of creating or fostering economic development and for a business or project which is clearly viable. WMEF makes loans to borrowers who cannot obtain sufficient financing from conventional or other lending sources, and where the funds will grow a business, improve a business, create or sustain jobs, provide a needed local service, or otherwise strengthen the economic fabric of our region. We do not compete with banks and we recommend to every borrower that they explore conventional financing options.
WMEF makes higher risk loans and is more expensive than conventional lending sources, but WMEF also provides a significant amount of support to its borrowers to help them succeed. We believe that loans are one of several necessary tools for creating a strong economy, and that our local, regional and national resources allow WMEF to provide both financing options and relevant knowledge to our borrowers.
WMEF provides financing to start-up and existing businesses and to nonprofit organizations. Loan terms are flexible and are designed to meet the needs of the business or project, but are targeted at helping the borrower grow or improve their business or to finance a project which provides a broader social or environmental benefit. Typical loans are for working capital, marketing, equipment purchases, leasehold improvements, start-up costs, and operating overhead.
Click here to view Frequently Asked Questions about the WMEF loan program.
WMEF has a microenterprise lending program tailored to the needs of these borrowers. A microenterprise can be a sole proprietor or can have a small number of employees (typically five or fewer) and usually has one location. The business owner is the core of the business, performing most if not all of the business activities. WMEF’s microenterprise loans are generally $35,000 or less, have a fixed interest rate, and are for 5 years or less. WMEF has been lending to microenterprises since 1989 and we have a complete understanding of how they operate and of their unique business needs. Our goal is to help the business owner grow the business and improve his or her economic strength so he or she can easily transition to conventional lending sources. WMEF can act as a guide to those services and can introduce the business owner to local lending partners.
WMEF’s business loans can be as large as $300,000 but the actual loan amount and structure are based on multiple factors including the nature of the financing request, the associated business plan, projected cash flows to comfortably support the debt service, available collateral, management capacity and other considerations. Business loans may have a structure tailored to the specific project or activity, and may have interest only periods, draw down periods, adjusted amortization schedules to reflect business growth, balloon payments at maturity and the like, as appropriate. However, WMEF recognizes that the financing process is a complex one, and we make every effort to keep loan terms as simple and functional as possible.
Small business owners, like microenterprise owners, often have multiple responsibilities in running their business, and may benefit from outside support and guidance. WMEF provides active support to its borrowers to lend direction, act as a sounding board, and to assist the business owner in transitioning to conventional lending sources which provide capacity for additional business growth.
WMEF can provide financing to non-profit organizations to support a specific project or program which has demonstrated financial capacity to support the debt. WMEF does not provide funds for operational uses which depend on unverifiable funding sources such as future grants or donations.
WMEF has provided financing for specific projects which provide a broader social, community, or economic benefit. In these situations, WMEF would assess the viability of the project itself, including the need for the project or resulting service, and would focus heavily on the source of repayment for the loan. The repayment could be from the completed project’s own operating cash flow (as in the case of a medical clinic or theater), from sale of assets or from permanent mortgage or other financing (as in the case of a large scale construction project). In most cases involving project financing, WMEF would establish that other organizations or agencies were also involved to support the project and that both need for the project and the probability of timely repayment was very high.
For established businesses with larger financing needs or for larger scale projects WMEF may partner with another lender or group of lending agencies to meet the full financing need. WMEF can identify those lending sources or work with the borrower’s existing lender. These can include SBA504 lending, tax credits, bonds, or other more sophisticated lending resources.
In some cases, the borrower can obtain partial financing from a bank or other lending source, but additional funds are needed to meet the total project cost or business requirement. WMEF works with banks and other lenders and can provide subordinate financing, as long as the financing request meets WMEF’s standards including mission and viability. In Gap financing cases, WMEF would work closely with the bank or other lenders as well as the borrower throughout the loan term to act as a resource and ensure success.
New Markets Tax Credits: WMEF partners with agencies and organizations which have available New Market Tax Credits (NMTC). This specialized lending vehicle provides Federal income tax credits to investors in qualified projects in low income areas (as defined by census tract). The program has very specific requirements and restrictions, but provides a lower payment schedule to qualified borrower in order to make a project viable. Borrowers can be non profit, and other financing enhancements can be combined with the Credits, such as bonds, grants, loans from other agencies or organizations, and the like. For more information on NMTC fill out the pre-application and you will be contacted by WMEF staff.
SBA7(a)/SBA504: WMEF does not issue SBA 7(a) or 504 loans directly but works with multiple lending organizations that do provide such financing. WMEF can help determine whether a borrower or project is appropriate for SBA financing programs and can direct the applicant to appropriate lending organizations.
Near Equity: WMEF provides near equity financing to highly qualified borrowers. This is a complex financing structure and requires that the borrower has a very high likelihood of achieving the required revenue growth, and that WMEF can obtain an appropriate return for its time and risk. Near equity financing typically involves an interest only period at a market interest rate coupled with a royalty fee based on sales. It may also involve fees at inception and upon exit. WMEF’s target applicants would be established businesses which have a comprehensive business plan supporting strong growth, but which will remain locally owned and operated.
Venture Capital: WMEF does not provide venture capital funds or pre-development funds in general but does have business partners in the VC and angel investor fields.
Agriculture Financing: WMEF provides financing to the agricultural sector in an effort to create sufficient scale for small farmers to increase their viability, to support the development of infrastructure and processing needs to improve access to necessary resources and lower farmer’s processing costs, and to work with a broad array of organizations which also support this sector to bring critical resources to the agricultural community. WMEF believes in the importance of the agricultural sector as a linchpin to a strong and self-sustaining economy, and has developed several partnerships to provide direct financing resources in conjunction with business planning and support services.
