Lehigh Valley Lending Network
The Lehigh Valley Lending Network (LVLN) is an outgrowth of the Peer Review Program (PRP) developed by Lehigh Valley Economic Development Corporation (LVEDC) and the Community Action Committee of the Lehigh Valley (CACLV) in 2010. It was renamed the Lehigh Valley Lending Network in 2011. The initial intent of the program was to provide a forum where members, primarily made up of commercial lending institutions, could bring rejected, but marginal, financing prospects before the group to see if one or more of their peers could offer a solution to the borrower’s needs. This “peer review” program was a reaction to the economic recession and was aimed at trying to improve access to credit for small businesses in the Lehigh Valley.
In 2012, it became increasingly clear that the peer review aspect of the program was no longer necessary. Banks were flush with capital and proactively looking for opportunities to deploy such capital to credit worthy borrowers.
In late 2012, the LVEDC Finance Department began to consider new ways to utilize the LVLN. This process led to repurposing the program to focus on creating efficiencies in accessing credit within the private commercial lending community and to maximize the use of incentive resources, made available through the economic development community. The thought being, that by allowing creditworthy borrowers easy access to all of the financing options available in the community, be they public, private, for-profit or not-for-profit, we could help them obtain the best possible financing for their project in the shortest amount of time.
Lehigh Valley Lending Network Overview
LVEDC has developed a comprehensive network to allow business financing requests to be broadcast to a multitude of commercial lending institutions and economic development resource providers, simultaneously; thus, allowing for expedited loan review and approval, resulting in the best possible financing structure for any given business need. The membership of the LVLN is comprised of private commercial lending institutions and economic development resource providers serving the Lehigh Valley. A secure web-based document management system distributes financing requests to the membership.
The LVLN is more than a resource at LVEDC. It is the centerpiece of the Finance Department and will be continually emphasized in marketing efforts related to LVEDC’s financing endeavors. It is believed, this is the most important financing resource – a single point of access to the majority of Lehigh Valley business lenders with opportunities to benefit from the best terms and the lowest financing rates available. LVEDC not only manages the LVLN and the distribution of related information, LVEDC is a member. The financing programs that LVEDC administers are under the umbrella of the LVLN, as sources of funding that might be marshaled to assist in a given project.
Members of the LVLN will benefit from additional loan volume derived from participation in the program and will be highlighted individually on an ongoing basis in the marketing of the program, as well as, promoted as civic-minded organizations with a deep interest in strengthening the region.
In addition to providing an efficient network to match borrowers and lenders, LVEDC will be providing basic financial review of the prospects for the LVLN to offer the members access to pre-qualified leads.
Benefits to the Borrower
First and foremost, the LVLN is about assisting clients by quickly identifying the best sources of financing available to support their project. However, the complete benefits of the network to the clients are numerous:
- At its most basic level, the LVLN will allow clients to canvass a number of potential relationships simultaneously and to expeditiously determine which, if any, are willing to seriously consider their project.
- LVLN will allow clients the opportunity to compare lending institutions and their products while also allowing them to become aware of what the economic development community can offer to assist. The Lehigh Valley has more than a dozen different economic development organizations engaged in low-interest loan and grant programs to businesses, to promote growth in the region.
- Having the banks compete for business and utilizing the economic development incentive financing programs when possible will provide the lowest possible cost of borrowing for clients.
- The Network will allow for participated loans in projects where one lending institution is not comfortable in extending the necessary credit, but a number are willing to “spread the risk”.
- It will also allow for ease of structuring, in instances where both economic development and commercial lenders are involved in a single project.
It is important to acknowledge that it is expressly understood that the intent of the LVLN is NOT to disturb relationships between LVLN clients and their existing financial institutions. If an existing satisfactory banking relationship is in place, the LVLN may still be used to gauge interest from community and economic development lenders in supporting the proposed project.
Accessing the Network
Borrowers will be provided access to the LVLN in one of the ways outlined below. The borrower will determine, at their sole discretion, which way would be best suited to meet their needs:
- Borrowers working with LVEDC to access one of LVEDC’s incentive financing programs would be given the opportunity, where an existing bank relationship does not exist in the Lehigh Valley or where that relationship is not providing the desired results, to use the LVLN to find complementary financing from a bank (or other economic development organization) in the network to support a structure proposed by LVEDC.
- Borrowers not requiring LVEDC’s assistance or those that cannot be assisted via LVEDC’s programming will be offered the ability to utilize the LVLN to route their financing request to other LVLN members for their assessment. Again, to the extent possible, the LVLN will be marketed as a resource to companies that do not have existing banking relationships in the Lehigh Valley, are unable to obtain the desired results from their existing relationship(s) or could be eligible for other economic development incentives administered outside of LVEDC.
- Borrowers unwilling to have their business information broadcast to numerous lending institutions, but are still seeking a referral to a local lending institution, we will provide access to members of the LVLN directly via the LVLN Internet Website. LVLN will have a dedicated page providing contact information for lenders who are members of the LVLN. This service will be offered not only to LVEDC clients, but will also be available to general visitors to the website.
While the LVLN offers clients access to all of the lenders in the network, should they so desire, we will also offer the ability for the borrower to select individual lending institutions they would like to solicit. In this context, we will be asking all of the LVLN lenders to provide detailed information about their institutions, their service-territories and their products and services, so the borrower can make an informed decision as to the institutions that are best suited to meet their needs.
LVEDC may provide counseling on which external economic development resources might be of interest to the client, but will not offer recommendations of private lending institutions – other than to tout the members of the LVLN and their investment and dedication to business growth in the region.
It is important to note, that LVEDC will only refer clients (that are requesting referrals to banks/lending institutions) to members of the LVLN.
The Credit Inquiry Process
LVEDC will distribute a uniform package for each Borrower, using the aforementioned document management system. This information package will provide the requisite information necessary for each lender in the LVLN to assess a level of interest in financing the project. This web-based system will allow for interaction between LVLN members and LVEDC Finance Department representatives, should the base information provided not be sufficient, we can provide for additional material to allow the assessment process to be completed. The data will be housed in a secured Microsoft cloud-based server and will be accessible to members of the network according to the choices the Borrower makes in routing the information. Below is an outline of the process that will be used in working with clients of the LVLN.
- Initial conversation – Borrowers will be interviewed by LVEDC to understand the financing need (use of the network will be limited to commercial loan products and mainly be focused on fixed-asset and working capital financing), the background on the company and a general level of credit worthiness. If the Borrower is determined to meet certain criteria and is interested in utilizing the LVLN, LVEDC will begin working with the client to develop the information required by the LVLN.
- Lehigh Valley Lending Network Access Request – LVEDC will distribute the client’s information to the LVLN to gauge a level of interest in the project. The documentation will include an overview of the financing need, business background, business financial statements, personal financial statements, etc. Also, the client will complete a profile form, identifying their preferences related to lending institutions (if any) and other banking services they require. Finally a statement will be signed identifying that, among other things:
a) The client is giving permission to distribute their information to the LVLN;
b) Application is not an application for credit;
c) The client will determine which lending institutions it will ultimately approach with the project and each lending institution will need to complete their review prior to expressing interest.
*See the attached request forms.
- Request Upload – Once the required materials are packaged, they will be uploaded to a web-based document management site that will be accessible to the lenders (selected in the lender preferences form completed by the client) and by LVEDC staff.
- Request Review – Upon uploading, there will be an amount of time given to the lenders to respond with a level of interest in the project (timing will be dictated by the client). During this period, the lending institutions will be able to request additional information and ask questions regarding the loan inquiry. These inquiries will be fielded by LVEDC and the requested information will be posted for all of the members to use in their review. The intent of this information is to give each of the lending institutions enough information to render an expression of interest in the form of a term sheet and also be able to work through the full loan application process quickly following the LVLN’s review. While the LVLN will play no role in reviewing formal loan applications we do want this process to help expedite the loan approval process, where possible.
- Level of Interest – At any time during the review process, a lending institution can state their level of interest in the project. There will be a designated area in the document management system for this to be done. All expressions of interest will be made available only to LVEDC staff and the client. If a lender is interested in pursuing a LVLN client, LVEDC would ask that they post a standard term sheet outlining what they would propose for the transaction. This would at minimum provide a range for an interest rate and the likely term (with amortizations, if longer). It is the intent that this process will offer sufficient information that members will be able to offer a confined range for pricing of the loan (even if it is a spread from an index) and term/ amortization. The economic development organizations will be able to provide this level of detail.
- Client’s Decision – Finally, the client will select among the interested lenders and further their conversations, as they see fit. At this point, the LVLN is no longer involved. The client will finalize discussions with their selected lender(s) and follow through the commitment and closing process. For the purposes of reporting, LVEDC staff will continue to monitor the situation and will keep track of those LVLN lenders offering commitments. Staff will also follow-up to determine which, if any, of the LVLN lenders were successful in financing the request.
As stated above, membership to the LVLN will include community and economic development lenders, as well as, commercial lending and banking institutions. The community and economic development lenders are considered to be “de facto” members of the LVLN, as they are non-profit community-based organizations focused on community and economic development and we actively refer prospects to these organizations when the project merits their involvement. Banks and commercial lending institutions will need to pay an annual membership fee to be a member of the LVLN.
Benefits of Membership
Private lending institutions who are members of LVLN will receive a number of benefits from their involvement in the program:
- Membership will increase deal flow and may result in access to financing opportunities that would have otherwise not been available.
- The LVLN will be marketed as a single point of access to address any financing need related to the expansion of an eligible business. It is the intent to market the low interest rates available through LVLN economic development partners (state financing programs available through LVEDC currently offer rates as low as 2%). All members will benefit from the additional activity that these interest rates can promote.
- LVLN Membership will also provide access to companies/individuals seeking general bank relationships outside of a specific project (i.e. general business banking, home mortgages, personal banking, wealth management, etc.). LVEDC will only refer requests for recommended banks to LVLN members.
- Marketing of the LVLN will include participating member banks and community and economic development organizations. Members will be promoted as being civic-minded organizations dedicated to growing businesses in the Lehigh Valley.
- Members will have a competitive advantage in marshalling economic development resources to service their clients as they will be aware of the latest developments in programming and have a demonstrated relationship with those organizations that manage these resources.
For more information, please contact: