COVID-19 PACE Recovery (CPR) Program

This program assists local financial institutions in providing low interest loans to support North Dakota businesses in their economic recovery due to negative impacts from the COVID-19 pandemic.

Applications will be accepted through November 30, 2020.

ALL APPLICATIONS MUST BE SUBMITTED BY A LENDER AT YOUR LOCAL FINANCIAL INSTITUTION. APPLICATIONS SUBMITTED BY A BUSINESS OWNER WILL NOT BE ACCEPTED.

Eligibility

Can a business receive more than one CPR Program Loan?

If a business was approved for a CPR loan in an amount that was less than what they were eligible for, the originating lender may submit another application to BND.  The combined original total loan amounts between both CPR loans may not exceed the maximum amount the borrower was eligible for.  The combined interest buydown between the two CPR loans, and any other CPR loans with common ownership, may not exceed $500,000.

How much buydown is available if an individual has ownership in more than one entity?

Example of common ownership:  Company A is owned by two individuals, one with 51% ownership and  the other with 49% ownership.

The Company A owner with 51% ownership also has 75% ownership in Company B. Both companies are eligible to apply for the CPR Program, but because one individual owns 51% or more in both companies, Company A and Company B are considered to have common ownership. The combined buydown for Companies A and B cannot exceed $500,000.

The Company A owner with 49% ownership also has 75% ownership in Company C.  Both companies are eligible to apply for CPR Program. There is no common ownership;  the buydown for Company A and C can be up to $500,000 each.

What criteria can bankers use to certify need?

Consider issues related to negative impacts caused by the COVID-19 pandemic including negative impact due to executive orders to close business, a decreased customer base, decreased revenue, inability to meet term debt payments and supply chain issues. This is not an all-inclusive list and similar items will be considered. BND is relying on lead lenders to make the best decisions keeping in mind the intentions of the loan program.

Are nonprofit organizations eligible?

Yes.

Would a North Dakota-based company that does projects in Minnesota be eligible?

The company may only apply for funds related to projects being completed in North Dakota. Any out-of-state projects must be excluded.

If a borrower has an existing loan with buydown, are they eligible for the CPR buydown?

If you have a borrower with an existing PACE loan, please contact your BND business banker to discuss options.

A customer asked if this program will be available for lost rents for a real estate holding company. Please advise.

Real estate holding companies are eligible if they can demonstrate their impacts.

Are Schedule C (sole proprietors) with only one employee (themselves) treated differently?

No.

Would Schedule E rental income qualify for the CPR or SELF program if they are experiencing decreased rents?

The person or entity negatively impacted by the pandemic is eligible to apply.

Use of proceeds

Will there be documentation requirements to ensure proceeds are being used appropriately?

No. We are relying on lead banks to verify the intended use of proceeds are eligible.

If a borrower has a line of credit (LOC) with a balance previous to March 13, 2020 and they enroll in the CPR LOC for business expenses, which is paid first?

Advances made after March 13, 2020 are eligible to be termed out using the CPR program.

Are CPR loans subject to open records requests?

North Dakota Century Code allows for the release of the borrower’s name and the amount of the loan. No application or financial records beyond those two items are ever released.

Loan amounts

Is cost of goods sold an eligible operating expense to be included when calculating the maximum loan amount?

The intent of the CPR program is to replenish working capital.  The most consistent way to accomplish this across all industries is by using this formula:

  • (Operating expenses plus Interest expense) less Depreciation. Divide this amount by 2 to determine the six months of operating expenses to be used for the maximum loan amount. This is a loan amount calculation, not a use of proceeds limitation.
  • No direct labor or direct materials expenses are allowed in the calculation, however, in the event a business can substantiate allocation of indirect labor and/or indirect material costs to cost of goods sold, those indirect labor and indirect material costs would be eligible to include, along with the operating costs, in determining the maximum loan amount.

Collateral

Is there an expectation to have adequate collateral coverage as typically required for traditional financing?

We anticipate some loans will be under-secured dependent on the nature of the business. In most cases, we will allow the lead lender to determine if this is adequate.

Participation requirements

Do we need to complete an environmental assessment?

No environmental assessment is required on any CPR loans, unless the collateral securing the loan is on the below “Top 20 List” of environmentally sensitive industries. An automatic Phase I Environmental Assessment is required for the following environmentally high-risk industries:

  • Gasoline stations
  • Fuel dealers
  • Registered or unregistered storage tanks – above or below ground
  • Automotive repair and maintenance
  • Laundry and dry cleaning services
  • Waste management and remediation services
  • Commercial printing facility
  • Photo developing labs
  • Cattle feedlots
  • Junkyard or landfill
  • Industrial or commercial hydraulic equipment with polychlorinated biphenyls (PCBs)
  • Pipeline transportation
  • Saltwater disposal wells
  • Oil and gas extraction
  • Mining, except oil and gas
  • Petroleum and coal products manufacturing
  • Chemical manufacturing or storage
  • Recyclable material merchant wholesaler
  • Chemical and allied products merchant wholesaler
  • Petroleum and petroleum product merchant wholesaler
Loan terms

Is it required for lenders to service for 10 years on both programs?

Yes, serviced for the term of the loan.

Does the guaranty need to be unlimited?

The guaranty may be limited or unlimited; traditional underwriting standards would apply. (Note: This changed since April 29, 2020 on the CPR program only.)

The borrower can be any person or entity whose business is located in North Dakota. Loan funds may only be used to support operations in the state of North Dakota.

The business must have capacity or history of showing it can service debt before March 13, 2020. The local lender determines if the applicant’s business has incurred economic injury as a result of the COVID-19 pandemic. Consider issues related to negative impacts caused by the pandemic including negative impact due to executive orders to close business, a decreased customer base, decreased revenue, inability to meet term debt payments and supply chain issues. This is not an all-inclusive list and similar items will be considered. BND is relying on lead lenders to make the best decisions keeping in mind the intentions of the loan program.

Receipt of Payroll Protection Program funds does not affect eligibility.

Proceeds may be used to:

  • Support working capital needs of a business in the state of North Dakota
  • Term out COVID-19-related bridge loans or pay credit card debt originated on or after March 13, 2020. This amount may not exceed 20% of the maximum loan amount.

Loan funds may not be used:

  • For capital purchases or business expansion
  • To refinance any existing debt
  • For the relocation of the business
  • For operating expenses outside of the state of North Dakota
  • For businesses of 500 or fewer employees: Maximum loan amount is the lesser of $5,000,000 or six months of operating expenses plus interest
  • For businesses of 501 employees or more: Maximum loan amount is the lesser of $10,000,000 or six months of operating expenses plus interest

The intent of the CPR program is to replenish working capital.  The most consistent way to accomplish this across all industries is by using this formula:

  • (Operating expenses + Interest expense) – Depreciation. Divide this amount by 2 to determine the maximum loan amount. This is a loan amount calculation, not a use of proceeds limitation.
  • No direct labor or direct materials expenses are allowed in the calculation
  • Indirect labor and/or indirect material costs that are necessary to support the cost of goods are eligible and may be included in the loan request.

Interest rate will be fixed at 3.75% for up to five years . BND to net 3.50%. The lead lender to retain a 0.25% service fee. Borrower will receive a 1% interest rate for the term of the buydown or until buydown funding is exhausted.

The buydown of the interest rate to 1% will only occur on permanent financing.

Origination fees should not be charged, however, hard costs associated with documentation can be charged.

BND must share in collateral with the lead lender, and on a pro-rata basis at time of liquidation.

BND may take not less than 50% or more than 80% of the total loan amount as its participation percentage.

No environmental assessment is required on any CPR loans, unless the collateral securing the loan is on the below “Top 20 List” of environmentally sensitive industries. An automatic Phase I Environmental Assessment is required for the following environmentally high-risk industries:

  • Gasoline stations
  • Fuel dealers
  • Registered or unregistered storage tanks – above or below ground
  • Automotive repair and maintenance
  • Laundry and dry cleaning services
  • Waste management and remediation services
  • Commercial printing facility
  • Photo developing labs
  • Cattle feedlots
  • Junkyard or landfill
  • Industrial or commercial hydraulic equipment with polychlorinated biphenyls (PCBs)
  • Pipeline transportation
  • Saltwater disposal wells
  • Oil and gas extraction
  • Mining, except oil and gas
  • Petroleum and coal products manufacturing
  • Chemical manufacturing or storage
  • Recyclable material merchant wholesaler
  • Chemical and allied products merchant wholesaler
  • Petroleum and petroleum product merchant wholesaler

Maximum buydown amount from BND is $500,000 per borrower. Borrower is defined as an individual, corporation, limited liability company, partnership, association or any combination of these if there is common ownership.

Upon conversion to term, loan will receive interest rate buydown to 1% for a maximum of five years or until such time the buydown dollars are fully expended. A community match, jobs or investment funds are not required.

When separate borrowers with common ownership of 51% or more apply for multiple loans, these borrowers must be labeled as and considered to have common ownership. The maximum buydown on all loans for entities designated as common ownership if $500,000.

Example of common ownership:  Company A is owned by two individuals, one with 51% ownership and  the other with 49% ownership.

The Company A owner with 51% ownership also has 75% ownership in Company B. Both companies are eligible to apply for the CPR Program, but because one individual owns 51% or more in both companies, Company A and Company B are considered to have common ownership. The combined buydown for Companies A and B cannot exceed $500,000.

The Company A owner with 49% ownership also has 75% ownership in Company C.  Both companies are eligible to apply for CPR Program. There is no common ownership;  the buydown for Company A and C can be up to $500,000 each.

  • Monthly principal and interest payments based on UP TO a 10-year amortization with a 5-year balloon.
  • At the discretion of the originating lender, payments may be interest only or fully deferred for six months.
  • Principal and interest payments to begin after six months or August 1, 2021, whichever comes first, based on 10-year amortization with a 5-year balloon.
  • Loan proceeds must be advanced no later than Dec. 31, 2020.

Lead lender should utilize normal underwriting procedures with consideration given to the current pandemic.

COVID-19 PACE Recovery Program (CPRP) Application (PDF)
COVID-19 PACE Recovery Program (CPRP) Non-fillable Application (PDF)

ALL APPLICATIONS MUST BE SUBMITTED BY A LENDER AT YOUR LOCAL FINANCIAL INSTITUTION. APPLICATIONS SUBMITTED BY A BUSINESS OWNER WILL NOT BE ACCEPTED.

It is recommended you use Internet Explorer 11 or above to download these forms. If you are not able to access a PDF, please contact us for assistance.

ALL APPLICATIONS MUST BE SUBMITTED BY A LOCAL LENDER. APPLICATIONS SUBMITTED BY A BUSINESS OWNER WILL NOT BE ACCEPTED. Please contact your local lender to initiate the loan application with Bank of North Dakota.