Application process for a loan from Mercy Corps Northwest:
The loan application process begins with filling out a loan inquiry form on our website. The inquiry should only take a few minutes to fill out and submit. It asks some basic questions about you, your business and the loan you’re requesting. To fill out the loan inquiry form, just fill out the “See If You Qualify ForA Loan” section on the Page 1 of the Small Business Loan section of the website. Once you submit this, it will be reviewed by a staff member, and if your financing needs fit our program parameters, we will ask you to complete a loan application.
The loan application requests that you submit more detailed information about you, your business and the use of the loan proceeds. You can take as much time as you need to fill out the application and you’ll be able to save and update your application as needed. Typical information that we require to complete the loan application includes:
- Personal and Business Tax Returns for the most recent two years (if available)
- A business plan that describes your business and what you plan for the future of the business, including how you’ll use the loan funds. (There are sample business plan formats on our website)
- A personal resume or description of your work and educational background.
- A list of assets and debts for you and your business
- A projection of income and expenses for your business
- What you plan to use for collateral for the loan you’re requesting (this may include the assets being purchased with the loan funds).
When the application is complete, and all of our questions and clarifications have been answered, we can proceed with underwriting the loan to present to our loan committee.
Your loan officer will create a summary of your business plan, application and financials and present these to our loan committee. The committee meets the last Thursday of each month. To present an application, we need to have all information submitted and all questions answered by the middle of the month to allow sufficient time for underwriting.
Businesses MCNW cannot fund:
Due to the organization’s policies and procedures and requirements of its funders, MCNW is not able to fund the following types of businesses:
- Adult Entertainment
- Liquor Stores
- Tobacco Store
- Passive Real Estate Investments
- Pyramid business structures
Time until loan approval:
We analyze and underwrite loan applications in the order they are received. Historically, the more time owners have invested in preparing their business plan, financial projections and loan application, the more favorable the outcome has been for them. Loan committee meetings happen only once a month. The average amount of time past clients spent preparing everything before submission to the committee was 3 months. In general, if all information has been provided to us, and all our questions have been answered, we will be able to underwrite the loan and submit it to our committee for a decision within 60 days. Once a loan has been approved, closing can happen within a few days, and funds are immediately available. (See also Application Process)
Disbursal process of an approved loan:
MCNW, as a non-profit organization, does not write a check or transfer funds directly to you once a loan is approved. Instead, we utilize the budget approved by the loan committee that details specific uses of funds and we disburse to third party vendors. This means: 1) you obtain a price quote, invoice, purchase order or other documentation of a purchase that identifies the item or items being purchased, the price, and the seller’s contact information, 2) a check for the purchase price is written and sent directly to the seller. If you are making multiple small denomination purchases, we can reimburse you for those purchases based on the receipt from the transaction.
Increasing a loan request after committee approval:
You can increase your request prior to loan committee, as long as: 1) there is enough time for the staff to analyze and underwrite the loan for a revised amount and 2) there is sufficient cash flow and collateral to cover the increase. Once the loan committee approves a loan request, the loan amount cannot be increased without formally re-presenting the additional request to the committee.
If I don’t use all the funds I’m approved for, what happens:
Loan closing fees are based on the loan amount you request and are non-refundable; to save yourself money, you should make every possible effort to ensure that your loan budget is reasonable and realistic. If an approved loan request is larger than what is needed for the business, a few things can happen (at the discretion of Mercy Corps Northwest staff in consideration with the business owner). In most situations, our loan tracking and billing software will recognize you have not drawn down the full amount of the loan, and you will simply pay off the principal balance earlier than originally scheduled. You will continue to pay the agreed upon monthly payment.
If the amount used is significantly smaller than the loan amount, the loan may be re-amortized over the same or a shorter period of time, reducing the loan amount (and the interest the client pays). No matter what, you only pay interest on the money you actually borrow—you will not be charged extra interest simply because you did not use your entire loan amount.
Range of loan amounts considered:
MCNW will consider funding loans between $500 and $50,000. The amount of the loan will affect the cash flow needed to repay the loan, and the amount of security or collateral needed. A larger loan will require more collateral. The repayment terms of the loan will also be affected. (See also average loan size)
Average loan amount:
With close to 200 loans in the portfolio, the average loan amount at MCNW is $10,200, and the average amortization period for the loan is 3 years (36 months). We have underwritten loans that were repaid in as little as 2 months and loans that were amortized up to 5 years (60 months).
For loan requests above $50,000, can MCNW co-lend or participate with another lender?
As long as it is not for the purchase of real estate, MCNW can co-lend or participate with another lender to fund a small business loan. Organizations that MCNW has worked with in the past include:
- Washington CASH
- Portland Development Commission
- Albina Opportunities Corporation
- Hispanic Metropolitan Chamber
Allowable and non-allowable uses of loan funds:
The list of allowable uses of loan funds is long and each loan and business plan is considered on a case by case basis. It is easier to define what the loan funds cannot be used for. Non-allowable uses include:
- Real estate acquisition
- Incorporation or organization expenses of a start-up
- Refinancing debt
- Payment of delinquent taxes
- Manufacturing, distribution, or sale of illicit materials or activities which violate clearly expressed laws of the State of Oregon.
- Related party transactions such as sale of a business from one family member to another.
- Operating Deficits
- Personal Income
- Route or Territory Fees
- Pre-venture Research