My CWCB loan contract contains a provision that prohibits additional debt or bonds that are superior to the CWCB loan. How do I comply with this requirement, also known as a "parity" requirement, if I desire to incur more debt?
If your contract contains a provision that prohibits you from obtaining new loans that are superior to the CWCB loan, you will need the consent of the CWCB before you can incur such debt. ("Superior" debt means that in the event of your default, the superior debt would have first access to your assets, and the CWCB would only get what was left, if anything, and that may be far less than what is owed.)
To request the consent of the CWCB, you will need to certify that the new debt meets the parity requirements contained in the loan contract and/or CWCB Financial Policy No. 6. Each request will be reviewed and evaluated by the CWCB staff on a case-by-case basis and will be approved or denied at the discretion of the CWCB Director.
Do I have to advertise for bids?
The CWCB does require that a project be advertised for bids. However, if your project is located in an area with limited number of qualified contractors, you may be allowed to solicit bids from just those contractors in your area. Coordinate with your CWCB Design & Construction Manager.
Am I required to attend the Board Meeting to present the loan?
Attendance is not mandatory, however in many instances it is recommended that the Borrower be present when the CWCB staff presents the loan to respond to questions of the CWCB Board. The CWCB staff will let you know if you have to attend.
The CWCB requires collateral to secure repayment of a loan. What type of collateral will the CWCB require?
State law requires the CWCB to obtain sufficient collateral from the borrower to assure repayment of the loan. The specific collateral the CWCB requires to secure a loan varies by project. Types of collateral include, but are not limited to, the following: (1) a pledge of assessment revenues backed by a rate covenant that guarantees that your organization’s assessment rates will be adequate to cover all of your debt obligations; (2) a pledge of your facilities, water rights, or other real property; and (3) other assets held by your organization. Finally, collateral requirements will be related to your creditworthiness and repayment capacity. The Board will determine the adequacy of collateral for each individual funding request. Please see CWCB Financial Policy No. 5
for more information regarding collateral.
What do I do when I complete the project?
When you complete your project, you will need to inform the CWCB that the project has been completed. The CWCB will prepare a "substantial completion letter" and determine the amount of construction interest due (Interest During Construction - IDC), and the amount and date of the first annual payment. IDC is due 10 days after the date of substantial completion.The first annual payment is due one year after the date of substantial completion. Attached to the substantial completion letter will be a copy of the IDC calculation, amortization schedule, and a copy of the promissory note.
Does the CWCB provide construction inspection?
No. The CWCB's Design & Construction Manager will make frequent site visits during construction. The primary intent of the site visit is to verify that construction related to loan disbursements has occurred, and that such construction and related expenses are within the scope of work. The CWCB is available to assist with issues regarding design, bidding and construction issues but does not perform official inspection of the project.
Does the CWCB have to approve the design plans and construction documents?
No. The CWCB does not formally approve the design plans for construction. The design engineer (registered professional engineer in Colorado) retained by the owner will approve the plans and construction documents. However, prior to the bid process, the CWCB will request a set of plans and specifications for review to ensure compliance with the loan program. If the project involves a jurisdictional dam, the State Engineer's Office must review and approve the design plans.
How do I request money from our approved loan?
Money is requested by means of a payment request. A payment request consists of a cover letter, signed by the company president or other approved representative, with all supporting expense information attached (i.e. invoices, contractor monthly pay statement, etc.). Allow 7-10 business days for your request to be processed and the money to reach your account.
Can the Borrower utilize in-kind services for phases of the Project?
Yes. All in-kind services must be documented and submitted to the CWCB, along with standard invoices. Contact the Design & Construction Manager for specific details.
Do I need to maintain insurance coverage during my loan repayment?
Yes. The contract establishes the rates that coverage is needed and a proof of insurance
will be sent to the CWCB each year upon renewal. This continues for the full term of the loan.
If I get a loan from the CWCB, what types of insurance will I be required to carry?
The State of Colorado requires all borrowers to have two types of insurance:
- Liability Insurance (Duration of Loan) The borrower must maintain commercial general liability insurance, with a company that is satisfactory to the CWCB, with minimum limits of $1,000,000 combined single limit for each occurrence and $2,000,000 general aggregate, including products/completed operations and personal injury.
[Note: Governmental entities must comply with the minimum insurance requirements of the Colorado Governmental Immunity Act, 24-10-101 C.R.S., et seq., as amended, and provide proof of such insurance.]
- Liability Insurance (During Construction) During construction of the project, the borrower must require the construction firm(s) and any subcontractors to maintain the following insurance coverage during the term of their contracts for the construction of the project. No payments can be made to the borrower unless all insurance certificates are current.
- Builder's risk insurance for construction in progress for all perils of loss including fire, wind, hail, and vandalism in an amount equal to the completed value of the project. Worker's compensation and employer's liability insurance in the required statutory amounts.
- Automobile liability insurance that includes coverage for all owned, non-owned and hired vehicles with minimum limits of $1,000,000 combined single limit for bodily injury and property damage.
- Commercial general liability insurance with minimum limits of $1,000,000 combined single limit for each occurrence and $2,000,000 general aggregate. This insurance coverage shall include products/completed operations and bodily injury/property damage.
I did not need all of the loan money. Will my payments change?
You have the following two options:
- You may keep the annual payment the same and reduce the number of payments to pay off the adjusted loan balance; or
- You can request that the loan be re-amortized and the amount of the payment reduced leaving the term of the loan the same. An amendment to the contract is required for a change in the annual payment amount.
How will I know when to make my payments and what my loan balance is?
When the project is completed and the annual payment date established, the promissory note to the contract will be filled in with the date of your first payment and a copy sent to you. In the month prior to the payment due date, a reminder will be sent notifying you of the amount and date due. Upon receipt of your payment, a letter containing the principal and interest distribution along with the loan balance will be sent to you. Should you not receive a reminder, it is still your responsibility to make your annual payment in a timely manner.
What is the minimum loan amount?
A typical loan will require a borrower to spend money for services to obtain loan approval. These costs include engineering assistance for the preparation of a Loan Feasibility Study, as well as attorney fees associated with the review of the loan contract and a 1% loan origination fee. In addition a borrower must provide $1 million of liability insurance during the life of the loan. When considering these costs, a minimum loan amount of no less than $75,000 is recommended. Please contact the CWCB staff to assist you in making sure the Loan Program funding is right for your project.
My payment amount is too large to rely on mail service. What can I do?
Wire transfers directly from your bank can be made to safeguard your funds. Prior to the date that your payment is due, you will receive a reminder and instructions to make an Automated Clearing House (ACH) transfer, also known as an electronic fund transfer
(EFT). Simply notify your bank with the CWCB account information, the amount of the payment, and the date of transfer. The CWCB will be notified upon receipt of the funds and you will be notified with the loan distribution including your balance to date. It is a good idea to call or email the CWCB with your anticipated wire in order to track the transfer.
The CWCB may require a "parity certificate" before it will sign the loan contract. What is "parity" and how do I comply with this requirement?
If your organization has existing debt when the Board approves your loan, we will require you to submit a "parity certificate" prior to executing a loan contract. In financing situations, "parity" between two loans means that in the event of the borrower's default, the two lenders would divide the available assets on a pro-rata basis. In other words, neither lender would have a "first position" to attach the available assets of the default party without regard to the other lender. Accordingly, to secure a pro-rata share of a defaulting borrower's assets, the CWCB requires that you meet the parity requirements of your existing debt so that the CWCB will be on par with your existing loans. If we require a "parity certificate" from you, you must certify, through an independent certified public accountant, that you meet the parity tests contained in your existing loan agreements. Please see CWCB Financial Policy No. 6
for more information.
Is there a financial penalty for paying off the loan early?
No. The borrower can make additional payments without penalty, which may reduce the term of the loan; however, the annual loan payment will remain the same and be due by the date established. If the Borrower desires to reduce the annual payment amount after a principal prepayment, a contract amendment will be required. The cost of a contract amendment is $1,000 as established in CWCB Financial Policy No. 16
Do I need a Professional Engineer on-site during project construction?
Each project will be evaluated to determine if the complexity of the project will require a professional engineer’s presence on site. In addition, the type of construction and the level of difficulty will also determine the amount of time that an engineer should be present. Contact the CWCB for additional assistance.
How long does the process take?
A typical loan of less than $10 million can be processed in four months from submittal of the application and the loan feasibility study to the day funds are available.
What if I need funds sooner?
We recommend that the Borrower obtain a bridge loan from a local bank. The bridge loan can be paid in full (including fees and interest) with CWCB loan funds when they become available. The Borrower accepts the risks associated with the possibility that the CWCB may not approve project funding.