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Hud Section 108 Guaranteed Loans Project
Qualifications
Federal Department of Housing and Urban Development (HUD) Section
108 Loan Guarantees are available to businesses from the Washington
State Office of Trade and Economic Development (OTED) through cities
and counties which are eligible to receive Washington State Small
Cities Community Development Block Grant (CDBG) Program assistance.
An eligible city or county may apply to obtain a 108 Loan Guarantee
for a private business projects which meets the following conditions:
- The need for assistance is appropriate given the type of the
project.
- The project will create jobs, and if qualified lower-income
candidates are available, the majority of the jobs must
be made available to them. Retention of jobs can also
be considered as a qualifying factor.
- The proposed repayment is 20 years or less.
- Other reasonable financing alternatives have been exhausted.
- The request is not less than $250,000 and does
not exceed one‑third of the current CDBG annual allocation.
- The sponsoring jurisdiction has less than $7 million
in outstanding 108 Loan Guaranties.
Terms of the Guarantee
- Borrowers may be required to establish a reserve account of
up to 10percent of the loan amount.
- Borrowers will be charged an interest rate of the cost of borrowing
plus an incremental servicing fee of up to and additional 1 percent
or a one-time commitment fee of up to 1˝percent of the loan amount.
- Borrowers must pledge collateral equal to at least 125 percent
of the loan amount and may be required by HUD to provide additional
collateral.
Approval Process
- Borrowers must have an eligible local government
sponsor willing to support the project and fulfill
local government requirements.
- OTED must approve the project and pledge future
CDBG dollars to secure bond holder payments.
- HUD must approve and fund the project.
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