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Outline for Lending
Oregon Bankers Association
Basis: A good pre-development process – especially one including a feasibility statement- is an
essential part of every major project. Banks currently require these studies to be done before making certain development loans. In other words, if a loan is necessary to do the needed pre-development work, school districts should be requesting them and banks are willing to finance them.
To determine if a loan and/or type of loan is needed:
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Is the loan only needed to front the funds prior to tax collection?
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Are their restrictions about using their general funds for pre-development projects?
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Is there a restriction or timing issue.
In seeking a loan to fund the pre-development work, a school district needs to be able to answer the following:
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What is the need? Why are you seeking the loan?
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How is the district going to pay the bank back? What is the source of repayment and what is the secondary source of repayment if the primary source goes away?
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Who is authorized to encumber the district?
Paperwork a school district needs to provide includes:
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Annual reports (3 years worth if available);
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Audited financial statements;
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Current budget.
Summary Points:
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There is little concern that a school district would have trouble getting a loan from a bank. Today, many do for cash flow purposes (funding prior to tax collection).
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One of the best things a school district can do is to have a banker serve on a committee dealing with feasibility studies, etc. The banker will have a good perspective as to why this is critical to the success of a project.
- Once a school district embraces spending their resources on pre-development costs, and determines that a loan is preferable to paying for it with their existing dollars, the district should visit with their local banker about financing options and the lending process for which there will be a number of options.
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