Sto:lo Community Futures

BCSS

Business Loans

Community Economic Development

Investment Fund Policy

Overall Objectives of the Investment Fund Policy

SCF acts as a fiduciary, empowered to properly manage and administer the various SCF General Investment Funds, under the terms and conditions of their existing Agreements with Western Economic Diversification (WED), SCF has established operating procedures for these Funds. Being a Core Service of a Community Futures organization, the objectives for the SCF General Investment Funds are as follows:

To fully comply with the proper administration and management of the various SCF General Investment Funds, as established by our existing Agreements and operating procedures with WED
For the Board of SCF to establish a Board Investment Committee, that will be mandated with the overall management and operation of the SCF General Investment Funds
That the Investment Committee shall prepare detailed Investment Procedures that would govern the Operation of SCF General Investment Funds, once such procedures and operating polices are approved by the Board, they shall govern the operation of SCF General Investment Funds
That SCF Staff develop the Staff capacity and resources to provide daily ongoing management and administration of the SCF General Investment Funds, in accordance with all Fund Criteria and Procedures as established by the Board Investment Committee and approved by the SCF Board.

Statement of the SCF Investment Fund Policies

The SCF Board of Directors has established a Statement of Investment Fund Policies as a statement of its basic guidelines of all Investment Funds administered by Sto:lo Community Futures. These are as follows:

Administration of WED Repayable Investment Funds

The SCF currently has a Loan Fund from WED that requires administration and management.

General Investment Fund (subsequently includes Youth Investment Fund and Disabled Entrepreneur’s Fund)

This Fund has specific rules and procedures established under the Terms and Conditions of the original advance of these Funds between SCF and WED. The Board Investment Committee shall be responsible for the proper administration of the Funds in accordance with all criteria established under its agreements with Western Economic Diversification.

SCF Board Administration and Investment Committee

The Board of Directors of SCF is responsible for the management and administration of the SCF Investment Funds. In the Board’s operation of the SCF Investment Funds, the Board has established an Investment Committee of the Board, which shall have the overall management and administrative authority with respect to the SCF Investment Funds. This Committee will be chaired by a SCF Board Member, but shall be able to access resources beyond the SCF Board, that can contribute direct experience for the efficient and proper management of the SCF Investment Funds. The Committee will report to the Board on a regular basis. The General Manager shall provide Staff resources to assist the SCF Investment Committee in its operation of the SCF Investment Funds.

The Investment Committee must approve all loan applications up to $100,000. For all loans over $100,000, these loans require the consideration and approval of the Board of Directors of SCF. The current maximum loan that SCF can approve is $150,000.

On loan applications in excess of $10,000 the applicant may be requested to appear before the Investment Committee.

The applicant, in the event of any rejection of their loan application, can appeal the same directly to the Board of SCF, through the Board Chairman

The Investment Committee, working with SCF’s Solicitor, has developed standard Loan Agreement and Security Documentation that shall be used in all SCF Investment Fund approved loans. As part of an ongoing process, SCF shall continue to evolve and progress Application Forms and Due Diligence procedures as it gains experience and new lending procedures are established.

Fund Policies

The fundamental basis for all approved SCF Investment Funds Loans is to provide assistance and support for approved, new and existing Aboriginal business, in order to encourage business growth within the Sto:lo Territories. Therefore, SCF Investment Fund policies need to reflect that principle.

The Investment Fund Committee is obligated to ensure that all SCF Investments Funds, which are made to applicants who meet the Fund’s criteria, satisfy the due-diligence process established for all Fund Applicants. The operation of the SCF Investment Funds should be governed by the following policies and principles:

The operation of the SCF Investment Funds shall not be viewed as being in competition with other Funds. SCF Investment Funds shall work with all other Funding sources, following the approach that presents the best financing options for the Client.
The General Manager and the Investment Committee shall work in cooperation with other funding organizations for Aboriginal businesses, such as Aboriginal Business Canada (ABC), Tale’awtxw Aboriginal Capital Corporation (TACC), Indian and Northern Affairs Canada (INAC), Industry Canada, and others.
The General Manager and the Investment Committee shall also work with the private institutions, for the benefit of SCF’s clients, in creating access to conventional lending sources provided by the private sector and commercial lending institutions, which could assist SCF’s clients.
The overall objective of the SCF Investment Funds, once an applicant has met all of the due-diligence criteria, is to actively encourage the growth, expansion and development of existing and new Aboriginal businesses within the Sto:lo Territory.
SCF’s Investment Fund function is to provide business financing to new and existing Aboriginal businesses and ventures within the Sto:lo Territory and implicit in these lending activities, is the fact that SCF will tolerate more risk than those acceptable to conventional lending institutions.
When assessing any loan application, the Investment Committee shall clearly give due consideration to specific Aboriginal benefits that would arise with any proposed SCF Investment Loan, such as local Aboriginal employment, Aboriginal skill-sets development, relationship with other Aboriginal suppliers, and potential to provide direct benefits to the Aboriginal communities in the Sto:lo Territory.

Loans -- Not Equity

The normal lending practice for the SCF Investment Fund will be through approved Applications by the Investment Committee that are fully secured loans.

In all instances, SCF’s position shall be fully secured, to the greatest extent possible, over the assets of the business operations and shall include appropriate personal security of the individual borrowers or shareholders, in the case of corporate borrowers. This will include Applicants to have a minimum 15% equity requirement in the business with at least 50% to be in cash, or near cash equivalents. Any shareholder’s loan that forms part of this owner’s equity requirement will be subject to a Postponement Agreement.

Advances from the SCF Investment Funds shall be secured loans, shall not be equity investments, shall only be loans to third parties at arms-length from SCF, and shall be for existing or new Aboriginal businesses, throughout the Sto:lo Territories.

The Investment Committee may also consider, under certain circumstances, issuing loan guarantees to assist approved Applicants in obtaining funding once further policies have been developed, for this consideration, by the Investment Committee.

In very rare circumstances, the Investment Committee could consider equity investments in approved Applicants, but only when the Investment Committee establishes such policies for equity investments and such policies are acceptable to WED.

Equipment Leasing

Under certain circumstances, the Investment Committee will consider leasing arrangements, as opposed to direct loan arrangements, where financially appropriate.

SCF Staff shall establish complete policies and procedures that would govern future equipment leasing and to consult with other CF’s for guidance.

Applicant Procedures

SCF Funds shall be available to new and existing Aboriginal owned businesses within the Sto:lo Territory. Applications are required to complete an Application Form that incorporates approved Application Guidelines, in applying for an SCF Investment Loan. The Applicant is required to fully disclose all aspects of their proposed borrowing and shall consent to be subject to credit investigations by SCF. Sample Application Forms are available on the SCF website.

The Applicant is also obligated to establish to the satisfaction of the Investment Committee, that there is a minimum of at least 15% owner’s equity, or other owner investment, in the proposed or existing business. At least 50% of that investment should be in cash, or near-cash investments. Any existing Shareholder’s Loans to the proposed borrower shall rank behind all security of SCF. Such Shareholders Loans shall be acceptable for the purposes of establishing this minimum 15% requirement.

Business Plan and Due Diligence Process

All SCF Investment Fund Applicants are required to prepare a comprehensive and detailed business plan, which details all aspects of the proposed Loan borrowing. SCF, through its Staff, under the direction of the General Manager, shall offer as a service, to work with clients of SCF, to assist them in the preparation of their business plans and borrowing requirements, however, the requirement to complete the business plan is solely the responsibility of the Applicant.

New businesses applying will be required to provide a business plan as the principle evaluation document. For current businesses, the last three years of financial statements plus a current business strategy will be required to support their Application. Staff, shall complete a full due-diligence assessment for all Applications. Upon completion of the assessment, Staff shall prepare a comprehensive analysis and report to the Investment Committee, together with Staff positive or negative recommendations, with respect to the Application.

All Applicants shall be entitled to a full disclosure of the status of their Application, including recommendations from the Staff, including areas where the Application needs further clarification in order to satisfy the due-diligence process.

Staff working with the Investment Committee, shall establish the procedures for all aspects of the due-diligence process to be used in all loan evaluations.

Staff Administration

Staff administrations of SCF Investment Funds will be under the overall direction of the General Manager, with day-to-day administration by the Business Development Officer in accordance with the established Fund Policies. The Business Development Officer is the primary Staff member for all interactions with SCF’s clients, seeking funding from the SCF Investment Fund.

Security and Security Documents

All loans approved by the Investment Committee shall only be dispersed once the Applicant has complied with all Security and Security Documentation, required as a condition of advancing the Loan.

Interest Rate

The current interest rate has been set at 10% for all SCF loans.

Application and Administration Fees

As the fundamental principle of the SCF Investment Fund is to support approved Applicants, the following policies will be implemented and administered;

A 2% administration charge will be applied to all approved loans exceeding $2000, excluding any Micro-Loans at the time of the loan advance.
$20 Late Payment fees shall be applied to the balance of all loans
$20 Service charge fees will be applied to all loans for NSF payments

Legal Fees

Legal costs will be added to the loan amount at the time of the loan advance. The scale for legal costs is as follows:

Loans between $0 - $2,000 No Legal Fees
Loans between $2,000 - $10,000 $250 Legal Fees
Loans between $10,000 - $20,000 $500 Legal Fees
Loans exceeding $20,000 $1,000 Legal Fees
Loans exceeding $100,000 Legal Fees to be reviewed

Insurance

Loan Applicants will not be required to obtain Life Insurance. Where deemed appropriate, business insurance coverage with SCF as named insured, may be required. SCF Staff will work with the Funds Solicitors in establishing policies covering insurance.

Repayment Terms and Conditions

The Business Development Officer, or Investment Committee shall negotiate the terms of repayment conditions on an individual basis with each particular Loan Applicant, reflective of that Applicants particular business needs and requirements.

Repayments terms shall not exceed five-years from the date of the Loan advance. The preferable repayment term is three-years, where such would not adversely impact the viability of the business operations of the Applicant borrower.

All Loans shall be repayable monthly and shall include the appropriate amortization of principle and interest repayments, commencing thirty-days after the initial Loan advance.

Under certain circumstances, the Business Development Officer can consider, for up to a twelve-month period of the initial term of any loan, to require interest only repayments, where circumstances are such, that such repayment would assist the business operation of the Applicant borrower.

Furthermore, the Business Development Officer may establish alternative repayment terms and conditions, especially for seasonal businesses if such would significantly enhance the Borrower’s capacity to achieve their business goals and objectives, while still maintaining the Security and repayment obligations to the SCF Investment Fund.

Borrower’s Covenants

Each approved Loan Agreement shall have certain Borrower’s Covenants and Agreements, which the Applicant consents to as a condition of receiving the Loan advance from the SCF Investment Fund. The Borrower’s Covenants would include, but shall not be limited to, the following:

To make all payments as required under the Loan Agreement or any Security Agreements with SCF.
Payments are to be made by way of pre-authorized automatic bank debit payment from the Applicant, wherever possible.
To pay on demand to SCF, the outstanding balance of the Loan, together with interest accrued thereon, at the rate of interest equal to that set out in the Loan Agreement.
To provide upon demand, any information, financial or otherwise, that SCF may reasonably require from time to time, including, but not limited to semi-annual financial statements from the Borrower.
To observe all of the covenants, agreements, terms and conditions of the Loan Agreement and any Security Agreements to which the Borrower is a party.
To provide full disclosure to SCF, which is open, honest, fair, and complete to the best of the Borrower’s knowledge.
The Borrower agrees to provide SCF with the rights to inspect the project to insure the proper use of approved SCF Loan Funds and to carry out such other due-diligence as required by SCF from time-to-time.
To perform the terms and conditions of the Loan Agreement and to avoid default under the Security Agreement.
The Borrower shall procure appropriate forms of insurance, as determined by SCF, with SCF as a named insured, to protect the interest and liabilities against SCF.
That the Borrower shall absolutely indemnify and save harmless, SCF, its Board, Investment Committee, and Staff, from any and all actions arising as a result of the Loan Agreement.
Such other Borrower’s Covenants deemed necessary by SCF’s Solicitor in any particular lending situation.

Procedures in the Event of Default

The SCF General Investment Committee have established policies and procedures to follow in the event that a loan becomes in default or if collection efforts are required.

Micro-Loan Funds

Considering the recent success of administering the Micro-Loan Program to local Artisans, especially to those Artisans using the SCF Artisan Centre. SCF will continue to administer the Micro-Loan program to artisans as well as other entrepreneurs in various industries, with a maximum loan amount to $2,000, with appropriate collateral/security.

Lending Approval

The General Manager of Sto:lo Community Futures Development Corporation has the lending approval limit on loans up to a maximum of $5,000, and has the authority to negotiate existing disbursed loans, previously approved by the Investment Committee, where circumstances of Loan registration are required.

Marketing and Promotion of the Investment Funds

Given that the SCF Investment Fund’s overall objective is to encourage Aboriginal business growth and new businesses, within the Sto:lo Territory, the SCF Investment Committee shall therefore establish appropriate marketing and public relations procedures, to fully make known the benefits of the SCF Investment Funds to the Aboriginal business Community in the Sto:lo Territories. This shall include, an outline of all aspects of the SCF Investment Funds on its website, including the capacity for online applications, from prospective Aboriginal borrowers. In all such marketing, the fact that the SCF Investment Funds were supplied by WED, shall be included in all marketing and public relations efforts.

Maximizing Fund Growth while Maintaining Fund Security

The SCF Investment Committee shall be charged with the proper management of SCF Investment Funds. In the management and investment of any non-committed portions of the SCF Investment Funds, the Investment Committee shall recognize the overriding need for security of these Funds, while attempting to maximize Fund growth and return, as secondary considerations. In such management, it may be prudent under certain circumstances, for the Investment Committee, to have the management of these funds with third parties, or in pooled-accounts, such as the PAL Program administered by the British Columbia Community Futures Development Association.

Objective to Secure Additional Investment Funds **Priority

Recognizing the extensive financial needs of the Aboriginal business community within the Sto:lo Territories for program lending and access to financing, and considering the limited amount of funds currently available with the SCF Investment Funds, the Investment Committee shall attempt to identify and secure other sources of investment fund capital for SCF, as a priority.

In all instances, the Investment Committee shall be obligated to properly manage and administer any such additional new funds in accordance with all criteria established by the Funding Agency that provided such additional SCF Investment Funds.

Full Disclosure and Reporting

The SCF Investment Committee shall report, on a regular basis, to WED and all other Funding Agencies, to ensure full and complete compliance with such requirements established by WED, and any other Funding Agency.

The Auditor of SCF, shall on an annual basis, be responsible for full and complete disclosure, to the general community, to WED and other Funding Agencies; all aspects of the SCF Investment Funds operations, to report on the SCF Investment Funds being fully in compliance with all Fund Policies.

* some images supplied by Sqwelqwels Ye Sto:lo, C/O Sto:lo Nation

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