IDOT hopes loan plan increases interest of disadvantaged bidders

    SPRINGFIELD – Minority businessmen who feel shut out of state highway projects are being encouraged to apply for a new program aimed at getting them a place in the bidding process.
    The Illinois Department of Transportation is inviting applications for its new Disadvantaged Business Revolving Loan Program. The low-interest loan program, signed into law by Gov. Pat Quinn in July, provides capital necessary for properly certified Disadvantaged Business Enterprises to finance IDOT project-specific work.
    Under House Bill 3267, sponsored by state Rep. William Davis, D-Homewood, and state Sen. Mattie Hunter, D-Chicago, the program allows IDOT to make low-interest loans to minority- and female-owned businesses that are certified in the Illinois Unified Certification Program and are participating in construction contracts with the agency.
    Many of these firms are small and lack the ability to obtain the lines of credit necessary to secure the bonding and capital equipment financing needed for state construction projects.
    Frank McNeil, director of IDOT’s Office of Business and Workforce Diversity, which administers the program, helped draft the rules. He said restrictions are intended to be “very detailed and very strenuous,” in part to make sure only those who are truly eligible receive loans.
    “We feel very strongly here in Illinois that we have one of the better programs to ferret out fraud. We get a lot of questions from people unhappy because they are turned down for (disadvantaged business) certification.”
     They have the legal right of appeal to the U.S. Department of Transportation, Office of Civil Rights.
    “There have been a number of appeals, but we have been sustained on each one,” McNeil said.
    A DBE is outlined in the legislation, but is generally considered to be an individual, socially or economically disadvantaged, primarily African American, Hispanic, Asian or American Indian.
    White female business owners are also considered a minority in terms of the law.
    Among other things, the department scrutinizes individuals to make sure they’re not fronting for a spouse or a spouse’s company that would otherwise not be eligible.
    At the time the governor signed the legislation he said that as the loans are paid back into the working capital revolving loan fund, the funds will help other firms who are in the same situation, which creates more jobs.
    The  law calls for hiring of a banker to serve as an escrow agent in charge of the funds and of a funds control agent who can monitor and release funds through a line of credit.
    The maximum amount extended is based on the award amount of the contract that the company, generally a subcontractor, wins.
    The company can get up to 55 percent of its contract, with the maximum extended for any one contract set at $249,000. The interest rate for loans awarded will be calculated as the Prime Rate plus  0.5 percent. Once calculated the interest rate will be fixed for the duration of the loan term.
    There are no points or escrow or application fees.
    For years, state officials have fielded concerns from contractors about the uneven playing field they experienced in state bid letting. Few of them had substantial capital sitting around to get them through the early phases of a project.
     After the recession IDOT began looking for ways to help DBEs compete, which led to this legislation, on which McNeil’s office had substantial input.
    Under the program eligible expenses include labor costs, materials, utility fee, taxes, equipment rental, insurance and bonding.
    Among ineligible expenses are back taxes and purchases of vehicles.
    “What we found going into the program was the biggest hurdle was the first month or so’s payroll,” McNeil said.
    Because subcontractors typically submit their payroll expenses to a job’s general contractor, there is a delay in processing, and cash flow is a major issue. The availability of the loan gives them cushion.
    “This keeps them more fluid, the workforce stays on the job, and they can go out and get the job done,” he said.
    Failure to complete a project may cause the DBE to be ineligible for future loans and would cause the balance of the loan to immediately become due.
    “The advantage (of the loan program) to the taxpayers is that local companies of this nature hire local people. If we’re talking about improving employability of people in the community, minority contractors will employ minority people. This is good jobs creation, jobs sustainability legislation,” McNeil said.
    State Sen. James Clayborne, D-East St. Louis, was a co-sponsor of the bill.
    The program is really just now getting started. Applications for the revolving loan fund must be received 30 days prior to a bid letting, when IDOT seeks out contractors on various construction projects.
    Three applications were received for loans from the November bid letting. One was determined pre-eligible and could receive a loan if the applicant indeed lands the state contract on which the loans are sought.
    The next such letting is January. There are seven such lettings throughout the year, with the most interest coming in the April and June lettings.
    An initial state investment of $3 million will start the revolving loan program, which is subject to annual appropriation by the Illinois General Assembly.
    To apply and obtain more information, visit www.dot.il.gov/doingbusiness/dbe/revolvingloan.html.
    For assistance in filling out the loan application, an applicant should call the Department’s Office of Business and Workforce Diversity at (217) 782-5490.
    Among criteria:
    – The businesses must be IDOT-certified for participation on department-procured construction contracts. Firms must be “ready, willing, and able” to participate on contracts. Applicants must be DBE certified by the Unified Certification Program.
    – Applicants must have at least two years of experience in construction-related projects
    – Applicants must have been denied a loan for operating expenses from two or more conventional lenders.
    – Applicants must not have had a bankruptcy or foreclosure in the past five years.
    – Applicants must not be encumbered by liens or restitution orders that could require payment from the loan funds granted by the state program.
    – The applicant must not be delinquent in payment of any state debt
    The loan committee will only consider the disadvantaged person having a minimum of 51 percent ownership and with daily operational control of the DBE that will receive the loan.