A NetWork Kansas E-Community has made a commitment to cultivating an entrepreneurial environment by identifying and developing resources to help local entrepreneurs start or grow businesses. Selected communities partner with NetWork Kansas to establish a locally-administered loan fund to assist entrepreneurs with capital, to increase connectivity to resources available to assist entrepreneurs and small businesses, to initiate activities to generate entrepreneurial development, and to participate in a statewide partnership with other E-Communities.
The E-Community Partnership has grown from six communities in 2007 to fifty-nine through 2016. More than $9.1 million has been loaned to over 335 businesses leveraging an additional $43.4 million of additional capital (bank loans, owner down payment, resource partner loans, etc.).
Goals of the E-Community Partnership
- Grow a flourishing, sustainable entrepreneurial environment supportive of business startups and expansions
- Engage and/or develop entrepreneurial resources to meet identified community and business needs
- Create a revolving loan fund to provide matching loans to entrepreneurs and small businesses with local control of decisions and terms
E-Community Partnership Benefits
- Creation of a locally-administered revolving loan fund through the allocation of tax credits
- Priority access to NetWork Kansas board certified programs (Ice House, Growing Rural Businesses, Youth Entrepreneurship Challenge, Destination Boot Camp and Economic Gardening)
- Opportunity to attend conferences to participate in peer-to-peer discussion with other E-Communities focused on developing strong entrepreneurial environments
- Materials and support for fostering the E-Community, including marketing materials, training opportunities, leadership team guidance, and more
- Opportunity to engage with entrepreneurship experts for consulting including Advancing Rural Prosperity representatives and the national economic gardening team
FAQs about the E-Community Program
Question: Are there restrictions to the funds, and/or what projects/businesses qualify for an E-Community loan?
Answer: The funds must be utilized to provide matching loans to for-profit businesses in the defined community (city, multiple cities, county), as per the E-Community Award Agreement. Maximum loan size is limited to $45,000 E-Community funds per business*.
The E-Community can decide the specific uses of funds that are allowed, but typically the following are approved uses: purchase of land, purchase of real estate, purchase of business inventory, purchase of business equipment, blue sky (in the instance of the purchase of an existing business) and working capital.
The E-Community can decide additional specific uses of funds that are not allowed, however, the following are NOT approved uses: paying off or refinancing existing debt, salary or owners draw, payroll taxes, housing, tearing down or renovating a building to create apartments (if the result will be a direct business with an apartment above/attached, contact NetWork Kansas to discuss before approval is given) and building renovation that is not tied to a specific business (i.e. renovating a storefront in hopes it will be easier to rent/lease/sell. However, if a business agrees to rent/lease/purchase a storefront if certain renovations are made, that qualifies).
Question: What is meant by matching loans?
Answer: The following scenario depicts a matching loan. Assume the applicant needs a total of $60,000. Also, assume the applicant is providing $10,000 of their own capital. Of the remaining $50,000 needed, the E-Community can provide no greater than 60% of that gap* (In this case, the E-Community funds could be no more than $30,000 of the $50,000 needed.) The other 40% minimum (in this case, $20,000 minimum) must come from a financial institution and/or a a local/regional public source of capital. In this way, the E-Community funds “match” other loans.
*E-Community funds awarded to an individual business/project cannot total more than $45,000 in any scenario.
Question: If selected as an E-Community, where do the funds go?
Answer: NetWork Kansas establishes a separate bank account for each E-Community. The funds remain in the account until the E-Community has approved a loan and requests a portion of the funds from NetWork Kansas by submitting a formal Check Request and all necessary documentation.
Question: When an E-Community has approved a deal, how do they request funds?
Answer: "Go to networkkansas.com/ecommunities, click E-Communities and select Resources for E-Communities from the menu that appears. Follow the procedures underneath the heading: Steps for Requesting E-Community Funds. Another way to access this information is by selecting this direct link: www.networkkansas.com/ecommunities/e/resources-for-e-communities.
Question: If a business defaults on their loan, is the E-Community responsible for reimbursing the bank account?
Answer: No. The E-Community has the discretion to pursue collection or legal action, at their expense, and if funds are recovered, they are to be returned to the E-Community bank account. If the E-Community has made good-faith efforts to pursue past due payments, and the Leadership Team votes to allow it, NetWork Kansas will assist by sending a letter to the business requesting payment. If that letter isn't acknowledged by the business, and the Leadership Team votes to allow this next step, NetWork Kansas attorneys will send a registered letter to the business demanding payment and/or outlining the steps NetWork Kansas will take if payment isn't received. If the E-Community chooses not to pursue collection or legal action, the E-Community account balance will be negatively affected by the default but the
E-Community will not be liable for the balance of the defaulted loan. However, unrecovered funds will affect the E-Community Portfolio Score (see FAQ#10). Legal fees can be reimbursed to Administrative Support Organization or Attorney(s) before recovered funds are deposited back into the E-Community account.
Question: How quickly must the E-Community raise funds through tax credit donations?
Answer: Communities selected will be notified by mid October, but typically it is a few weeks earlier, after the face-to-face interviews have concluded. At that time, they will learn how many tax credits they have been allocated. The E-Community Leadership Team is responsible for collecting donations, keeping NetWork Kansas updated as to the progress, and forwarding donations to NetWork Kansas by mid December.
Question: How quickly must our E-Community loan funds be disbursed?
Answer: There is no timeframe specified for disbursement to businesses in your community. Our philosophy is that funding decisions should be made based upon each business's prospects for success and its ability to enhance the community in terms of economic and/or community benefits. Therefore, the disbursal rate for an E-Community’s loan fund varies based upon individual conditions. However, if an E-Community becomes dormant (i.e. there is no capital deployed for an extended period, such as 2 years) then it is possible that the E-Community’s funds would be reallocated.
Question: What happens to the E-Community funds when a business repays their loan?
Answer: When the business begins to repay the loan, they must make their repayment check payable to the Administrative Support Organization, and the payment must include principal and interest amounts. The Administrative Support Organization will deposit the check into their account and then issue a check payable to NetWork Kansas to be deposited back into the E-Community bank account. In this way, the loan funds are replenished and available to be loaned out to another business. The E-Community bank account is owned and managed by NetWork Kansas.
Question: If the E-Community Administrative Support Organization is a local bank, how does the check process (both to the customer and repayment back to NetWork Kansas) work?
Answer: The bank must set up a separate account that will be used as a pass-through account (i.e. "'Name' E-Community"). The check to be written by NetWork Kansas for approved E-Community loans will be made payable to the account name on the pass-through account. The bank would deposit the NetWork Kansas check into the account and then issue a check to the business. When repayment by the business begins, the business must make the check payable to the account name on the pass-through account. The bank would deposit the business's repayment check into the account and then issue a check to NetWork Kansas for the amount due on the loan. NetWork Kansas is not allowed to write a check directly to the business or receive a check directly from the business.
Question: What is the E-Community Portfolio Score?
Answer: The E-Community Portfolio Score is calculated by multiplying three metrics: Velocity, Retention Rate and Disbursement Ratio. The product of these metrics equals the overall Portfolio score for each community. Velocity: Loan per year since inception. (We mark the inception year as the one immediately following the year the E-Community raised the tax credit). Retention Rate: The percentage of dollars that has been repaid or might still be repaid. (The inverse would be the percentage of dollars that have been charged off). Disbursement Ratio: Dollars that have been loaned compared to the dollars that were allocated to the E-Community by NetWork Kansas.