Community

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SBA Loan Motion

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IHC Motion Regarding approval for a “SBA Loan Assessment” to move forward with the final paperwork for the SBA loan. The total terms and conditions of the loan are HERE.

Background: The officers of the Island Home Club, Inc. have made presentations to the Members of the IHC with respect to the borrowing in the principal amount of $757,200 pursuant to a Disaster Business Loan (the “Loan”) being made by the U.S. Small Business Administration (“SBA”) (Please reference document titled: SBA Disaster Lean Terms Summary previously distributed by the IHC President). As a condition of the SBA’s agreement to extend the Loan for the benefit of the IHC, the SBA requires that a majority of the IHC Members pass a “SBA Loan Assessment” in an amount sufficient to fully amortize the Loan.

  • Definition of the “SBA Loan Assessment”: a portion (amount yet to be determined based on what is ultimately borrowed but not to exceed a monthly payment of $3,357.00) of the IHC monthly assessment to be allocated to a separate account noted as the SBA Loan Assessment Account. The purpose of this account will be to pay the principal and interest of the Loan on a monthly basis as indicated by the Payment Terms in the agreement.  This is NOT a special assessment to escrow the full value of the loan, rather an ongoing assessment to cover monthly debt service cost.

In Summary: This approval would give the IHC legal and contractual access to the funds and to officially engage with the SBA as the lender. However, actual use of those funds (e.g. to use for building a bridge or the pierhead) will be discussed in subsequent meetings and voted on separately on a per project basis in order to determine appropriate use of borrowed money. The borrowed money will sit in an interest bearing account until it is used, and if all or a portion is not used by 2/14/26 at the latest, will be returned to the SBA without meaningful cost to the IHC.

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Motion:  

Allow the IHC Treasurer/Finance committee to create the SBA Loan Assessment account, and an SBA Loan Assessment which:

  1. Is in an amount sufficient to fully amortize the Loan in accordance with the “Payment Terms” set forth in the Loan Agreement.

  2. Refers to and adopts all the terms and conditions of the Loan Agreement and provides that the proceeds of the SBA Loan Assessment will be used solely to amortize the Loan;

  3. Shall be irrevocable until the SBA is paid in full pursuant to the Loan Agreement; and

  4. Shall provide that the SBA Loan Assessment account will be assigned by the IHC to the SBA as collateral for the Loan.

And:

To allow the IHC Treasurer/Finance Committee to proceed with finalizing the SBA loan agreement on behalf of the IHC. The paperwork would be finalized by 11/18/24 which would give the IHC until 2/14/25 to receive funds which would not require any payments nor will it accrue interest on any amount until 11/18/25 at the earliest. This agreement would further pledge all IHC common property as collateral while the loan is outstanding under the Mortgage Agreement included in the loan documents.

SBA Disaster Loan Terms Summary

Basics

Total Proceeds:               $757,200
 Sub-Total for Real Estate Repair/Replacement: $644,800
    Sub-Total for Contents:          $112,400

Rate: 3.25%

First 12 Months: No interest accrual or payments due

Debt Service payment: Monthly payment of $3,357.00 (assuming full amount of loan used)

  • Note: if you exclude Contents, monthly payment is $2,850.00 per month

Pre-Payment Penalty: None

Final Payment (if not pre-paid): 8/14/2054

Tenor & Key Dates

Collateral

1) Security Interest: 

  • Budgeted "Special" Assessments: Money allocated to paying debt service monthly

  • Loan assessments will need to be collected in a separate account and "pledged" to SBA

  • NOT a special assessment to escrow the full value of the loan

  • NO WORD YET ON ANY RESTRICTIONS ON INTEREST BEARING ACCOUNTS. 

2) Mortgage Interest: 

  • Collateral here is all IHC property, including Malden, Hen and Mink islands. 

  • Includes all common infrastructure: buildings, floats, piers, sewer building, etc. 

  • NOTE: Would need SBA approval to sell or transfer IHC property until loan complete

Operating Requirements/Compliance

  • Must submit construction plans for any project over $50,000

  • Post the Equal Opportunity disclaimer somewhere on your place of business if you hire employees 

  • Retain all receipts from spent proceeds

  • Cannot use proceeds to pay wages or compensation to a member for repairs, etc.

  • To the extent feasible, purchase only American made equipment and products w/ proceeds

  • Submit Agreement of Compliance before any disbursement of funds for Real Estate

  • Cannot use lead based paint

  • All proper construction permits must be secured

  • Cannot store excess amounts of hazardous substances

Insurance

  • Real Estate projects must have hazard insurance up to 80% of insurable value 

  • Real Estate must purchase flood insurance for any insurable property 

Penalties

  • Wrongful misuse of proceeds can result in repayment of 1.5x the principle amount