Second Mortgage Program

Capital Access Program

Second Mortgage Program

Businesses located in the City of Milwaukee can take advantage of fixed rates of interest as low as current U.S. Treasury rates. MEDC will finance 25% to 40% or up to $500,000 of the total project. Eligible uses include building construction, renovation, improvements, real estate purchases, equipment purchases and in limited cases, working capital. Projects totaling $80,000 to $1.25 million are best suited to this program. MEDC's mortgage/lien may take a subordinated position behind the bank's loan for the project. 

Eligible Projects & Financing for Second Mortgage Program

• Business must be for-profit and located in the City of Milwaukee.
• Business must create or retain jobs, or increase the tax base.
• Land and building purchases.
• Building construction and additions.
• Soft costs associated with construction.
• Equipment purchases.
• Limited amounts of working capital may be financed only if fixed assets are part of the total project.
• Speculative or commercial rental real estate projects may be eligible if the project will create a significant
• Increase in the tax base or the tenant business will create a substantial number of new jobs.

The Capital Access Program (CAP) can provide access to financing for companies in the Milwaukee metropolitan area, especially start-ups and small businesses, which may not be able to obtain conventional financing. CAP is a flexible loan loss reserve program that provides lenders with a way to fund projects considered too risky for conventional lending. This is accomplished through the creation of a lender specific loan loss reserve.

CAP is structured as a public-private loan loass reserve program. Each bank participating in CAP has its own reserve to protect against losses on loans approved by the bank and enrolled under the program. The lender, along with the borrower, set aside funds as a reserve. This combined total of reserve funds is matched by MEDC. If a borrower defaults, this reserve can be used to reduce the bank's loss. If the funds are not needed, they become part of a permanent reserve for future loans made by the lender through CAP.

MEDC is currently working with the Wisconsin Business Development Corporation to expand the Capital Access Program to operate throughout the entire state (see www.wbd.org for more information).

Taverns, liquor stores, gun shops and passive real estate projects are not eligible.

Loan Terms for Capital Access Program

• The bank must have a signed Participation Agreement on file with MEDC.
• The bank sets its own criteria for determining whether to make the loan.
• The bank determines the loan term, interest rate, fees, collateral requirements and other loan conditions.
• The bank determines reserve percent for each loan.
• The bank submits to MEDC a one-page form about the loan with notification that the fees are deposited in the loan loss reserve account.
• MEDC remits matching amount to the bank for deposit into the loan loss reserve account.
• Reserve = 3% to 7% of the loan.
• Minimum contribution is 1.5% each, from bank and borrower.
• MEDC matches combined contributions up to 7%. If the bank and borrower each contribute 1.5% of the loan amount, MEDC contributes 3%.
• Fees plus earned interest accumulate in a bank controlled account.
• Bank taps CAP account for shortfall on collection. Recoveries must be re-deposited into the CAP account.

Benefits

• There is no processing delay and virtually no paperwork.
• Fast turnaround.
• Few eligibility rules.
• Bank makes credit decision.

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