Section 560.10  Purpose of Program

 

The purpose of the Illinois Small Business Incubator Program (Program) is to encourage entrepreneurship and economic development through the creation and support of small business incubators, facilities where start-up and young businesses can operate and prosper.  Under this program, the Department of Commerce and Community Affairs (Department) may designate and help fund the development and operation of unoccupied and nearly unoccupied properties for use as small business incubators.

 

Section 560.15  Eligible Applicants

 

Local governmental units (counties and cities), not-for-profit economic developmental organizations, educational agencies (public and private), or a combination thereof may apply to the Department for financial assistance under the Program.  Where applicable, eligible applicants may subcontract the actual operation of the incubator to a public organization or private firm.

 

Section 560.20  Pre-application Process and Analysis

 

A potential small business incubator must first complete a Community Advisory Board Analysis to determine if the community is capable of supporting an incubator.  This analysis will serve as a pre-application for funds and will address the issues identified in Section 11-5(a) of P.A. 84-109, effective July 25, 1985.

 

a)         Pre-application Cycle – Pre-applications under this Program will be accepted on an annual basis.  The Department will supply interested applicants with a pre-application package upon request.  Notification of intent to participate (pursuant to Section 11-5(b) of P.A. 84-109) must be submitted to the Department for the initial program year by October 15, 1985.

 

b)         The pre-application will provide the following information:

 

1)         Incubator Support and Services – a description of the commitments of community organizations, educational institutions, businesses, labor, etc. to the proposed small business incubator and a description of the business and management assistance (i.e., direct counseling services for incubator business tenants in such areas as strategic planning, marketing, financing, management, and operations provided by either the incubator management or other qualified sources) and facility services (i.e., general "front office" services for the small business tenants such as typing, reception services, cleaning, building security, conference rooms, central shipping and receiving, duplicating equipment, etc.) to be provided to incubator tenants.

 

2)         Community Advisory Board – a description of the Community Advisory Board and its membership.  The Community Advisory Board should have no more than 15 members and be representative of the Community.  At least 51 percent of the members should represent private for-profit businesses or business organizations.

 

3)         Incubator Site – an identification of the property under consideration for designation as a small business incubator (i.e., an improved building and site suitable for immediate occupancy by light manufacturing, research and development, commercial, or professional services firms), including the general building conditions, existing amenities, past history of structure, zoning classification, etc.

 

4)         Community Economy – a description of the economy of the geographic area the proposed incubator would serve, including the characteristics of existing firms and the supply and demand for commercial and industrial space; a description of how the proposed incubator would complement the area's existing economy.

 

5)         Potential Tenants – a description of the types of small

 

c)         Analysis Process – The Department shall review all pre-applications to determine that all requirements of the pre-application package have been addressed.  This review process will be completed within 30 days.  As a result of the review, the Department will provide written comments identifying strengths and weaknesses of the pre-application to the applicant.

 

Section 560.30  Formal Application Process

 

a)         Invitation to Apply – Those applications that best demonstrate the potential for meeting the requirements of the Act (Article II of P.A. 84-109, effective July 25, 1985), in accordance with the evaluation criteria specified in Section 560.40, will be approved.  Formal funding applications must be submitted to the Department within 180 days of the notification of intent to participate.  All applications will be competitively reviewed and ranked on a state wide basis.

 

b)         Staff Review – A staff review by the Department will be conducted to determine whether all the required information is contained therein.

 

c)         Length of review – Provided that all the required contents of the application are complete and adequate, the Department will notify the applicant within 30 days of the receipt of the complete application of its funding decision.

 

d)         Awards – The Department will award loans up to the limit of its annual appropriation.  Once that limit is reached, the Department will consider further applications but will not make awards until additional funds are available.

 

Section 560.35  Content of Application

 

The following identified information to be included in the application:  

 

a)         Need and Impact of the Project

 

1)         Feasibility Study/Needs Analysis – a summary of the results of the Community Advisory Board Analysis and information which demonstrates adequate local interest to generate tenants.

 

2)         Potential Tenants – identification of the number and type of firms expected to become tenants within the incubator (light manufacturing, professional services, research and development, etc.) and listing of at least five firms which have been interviewed and are potentially prepared to become tenants.

 

3)         Projected Employment – given the program's purpose of creating permanent jobs for the Illinois economy, an estimate of the number and types of jobs to be created by the incubator in 12 months, in 24 months and the hourly wage.

 

b)         Proposed Site and Building

 

1)         Location and Building information – a discussion of the general building conditions, existing amenities, zoning classifications, leases/purchase arrangements, past history of the structure, etc.

 

2)         Description of Equipment and Furnishings (If Applicable) – an identification of major classes of equipment and furnishings to be acquired with proceeds of the Department's loan or grant.  For each equipment item, whether it is new (N) or used (U); the useful life of the equipment, and the lower of actual cost of fair market value must be indicated.

 

3)         Documentation – copies of appraisals, deeds, leases, floor plans, photographs, and a site map, as exhibits.  The site map should illustrate the location of any floodplain areas.  For all purchases of equipment and furnishings, the contractor, engineer, or architect's cost estimates must be provided.

 

c)         Incubator Management Information

 

1)         Implementation Schedule – a listing of the primary project activities and an outline of the implementation schedule of the project.

 

2)         Organizational History – a short organizational history of the incubator sponsor which demonstrates the capability to successfully manage the facility.

 

3)         Incubator Management – a detailed resume for the individual responsible for day-to-day management of the incubator facility which includes past employment, educational background, and general accomplishments.

 

4)         Marketing Plan – information on the marketing plan for the incubator and the methods to be used to recruit businesses.

 

5)         Information Exchange – description of the process to facilitate the exchange of information/resources among tenants.

 

6)         Tenant Entry/Exit Procedures – a description of procedures that will be followed when considering tenant selection.  As a supplement, the actual tenant application form and tenant selection procedures must be submitted.

 

7)         Reporting Requirements – a description of applicants understanding of periodic progress reports required to be submitted to the Department.

 

8)         Business Management and Professional Services – a listing, as appropriate, of the types of assistance to be provided to the small business tenants, the amount of the fee collected, and the organization providing services.

 

9)         Facility Services – an identification of all facility services to be offered to incubator tenants (e.g., duplicating services, conference rooms, clerical services, etc.).

 

d)         Budget

 

1)         Source and Use of Funds – an identification of financing resources available and how they will be used, and a brief description of the type of collateral and guarantee to be offered for the Department's loan.  The Department will pay up to 50% of the cost of a local incubator project. The remaining cost must be met by local revenues.

 

A)        Acquisition costs include land/site costs and building acquisition costs.  Renovation costs include plumbing, heating/cooling, plastering/painting, electrical, water/septic, fire protection, architectural engineering, insulation/weatherization, legal, appraisal, and construction interest costs.

 

B)        Equipment and furnishings include those items of equipment required to provide facility services such as typing, reception, shipping and receiving, etc., for incubator tenants.

 

C)        Operational costs include utilities, telephone, repair and maintenance, taxes, if any, insurance, equipment and rental and accounting, legal and advertising expenses.

 

D)        Incubator management costs include salaries, fringe benefits, payroll taxes, supplies and travel costs.

 

E)        Business management assistance costs include costs of counseling and training necessary to provide business and management assistance and professional services to incubator tenants.

 

2)         Collateral and Guarantees

 

3)         Requests for Loan Deferral or Waiver

 

4)         Incubator Facility Expenses and Earnings for Three Years – statement which includes total income (rental income, other income, grants (list)) less total expenses (acct/legal/adv., utilities, telephone, repair/maintenance, taxes, insurance, equipment rental, salaries, fringes, payroll taxes, office supplies, travel, other (specify)) which equals net profit.

 

5)         Tenant Financing Pool – a description of arrangements made to provide a source of financing for the incubator tenants and, where possible, a listing of sources and dollar amounts.

 

6)         Letters of Commitment – as an exhibit, any firm letters of commitment, grant award notices, etc. for financial commitment to the incubator project.

 

7)         Cash Needs Plan – a list of estimated dates and fund amounts needed to meet the cash needs of proposed project; State funds used to fund this incubator program will be distributed by the Department in monthly allotments.

 

e)         Application Certifications

 

1)         Farmland Preservation – certification that the incubator project is compatible with established state policy regarding farmland preservation pursuant to the Farmland Preservation Act (Ill. Rev. Stat. 1983, ch. 5, pars. 1301 et seq.).

 

2)         Floodplain – certification that the project will comply with the Flood Disaster Protection Act of 1973 (42 U.SC. 4001 et seq. (1984)) and Executive Order 79-4, effective June 1, 1979 which requires special environmental procedures if any activities will be carried out in a flood hazard area.

 

3)         Prevailing Wage – certification that the provisions of the wages of Employees on Public Works (Ill. Rev. Stat. 1979, ch. 48, Sec. 39s-1 et seq.) and the Preference to Citizens in Public Works Project (Ill. Rev. Stat. 1979, Ch. 48, Sec. 269 et seq.) will apply to the proposed project and that construction cost estimates have taken into account the effect of those Acts.

 

4)         Non-Discrimination – certification that the applicant shall not discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin.

 

Section 560.40  Formal Application Review Criteria

 

The Department will accept and review formal applications based on the following criteria:

 

a)         Economic Impact

 

1)         The actual need for the type of incubator given the community's economy and services offered by the facility.

 

2)         The number of businesses that could be housed in the proposed facility, and the expected number of new business starts.

 

3)         The job creation potential of the incubator and the job creation in relation to Department funds requested.

 

4)         The extent to which the incubator services an economically depressed area.

 

5)         The location of the incubator, in order to encourage geographic distribution.

 

b)         Incubator Management

 

1)         The past experience or previous performance of the applicant (e.g. success in previous projects and the level of compliance with previous grant agreements) and demonstrations of management capability to deliver the incubator benefits pursuant to Section 11-3 of P.A. 84-109.

 

2)         Evidence of experience of the individual selected to manage day-to-day incubator operations.

 

3)         The scope of coordination with local areawide economic development programs.

 

4)         Demonstration by letters of support that the incubator project is supported by local representative of business, labor and education.

 

c)         Proposed Activities

 

1)         The type and condition of the building being proposed for use as an incubator.

 

2)         A reasonable time schedule for the initiation and completion of the project.

 

3)         The quality and depth of management assistance mechanisms and services offered to incubator clients.

 

4)         The ability of the local sponsor to obtain funding commitments to assist the financing of start-up firms.

 

5)         The incubator's marketing effort.

 

6)         The thoroughness of the incubator's proposed entry and exit procedures and documentation.

 

7)         The costs and types of faculty services to be provided.

 

d)         Financial

 

1)         The identification of sources and use of funds.

 

2)         The degree to which the local sponsor contributes monetarily or in-kind.

 

3)         Whether the local sponsor has a financial commitment of at least fifty percent of the projected costs of establishing and administering the incubator facility.

 

4)         The degree to which the local sponsor has a financial commitment for the projected reimbursed costs of maintenance of the incubator.

 

5)         The projected income and expenses of the incubator and cash flow in relation to debt services.

 

6)         Justification for any waivers or deferrals of loan repayment.

 

7)         Firm written cost estimates from contractors, suppliers, etc. to indicate cost feasibility.

 

Section 560.50  Application Ranking

 

a)         Applications will receive a maximum, moderate, or minimum rating. (the Likert Scale) for criteria provided in Section 560.40.

 

b)         Department staff will conduct site visits of highly rated projects (i.e., maximum and moderate ratings per subsection (a)) and analyze project characteristics, (e.g., a verification of application information).

 

c)         The Department will fund those applications which received the highest comparative rankings (see subsection (a)) and result in a satisfactory site visit (see subsection (b)).

 

d)         The Department will provide written notification to the applicant indicating either approval for funding or denial of funding requests and reasons for such denial.

 

Section 560.60  Administrative Requirements

 

a)         Loan Terms – Monthly installments shall be due and payable to the Department at a time specified in the loan agreement.  All payments shall be applied first to interest and then to principal.

 

b)         Reporting – The Recipient (applicant receiving grant/loan) will provide, at least annually, information and reports required by the Department (e.g. reports on job creation/retention; client status report, and expenditure summary).

 

c)         Termination of Grants/Loans – Grants/loans shall be terminated for the following reasons:   

 

1)         Termination Due to Loss of Funding – In the absence of state funding for a grant year, all grants/loans for that year will be terminated in full.  In the event of a partial loss of state funding, the Department will make proportionate cuts to all Recipients.  In the event the Department suffers such a loss of funding in full or part, the Department will give the Recipient written notice setting forth the effective date of full or partial termination, or if a change in funding is required setting forth the change in funding and changes in the approved budget.

 

2)         Termination for Cause

 

A)        If the Department determines that the Recipient has failed to comply with the terms and conditions of the grant/loan, the Department shall terminate the grant/loan in whole, or in part, at any time before the date of completion.  Circumstances which will result in the termination of a grant/loan include, but are not necessarily limited to the following:  consistent failure to submit required reports; failure to maintain required records; failure to protect inventory; misuse of equipment purchased with grant/loan funds; evidence of fraud and abuse; consistent failure to meet performance standards and failure to resolve points of the agreement (i.e., narrative, number to be served).  These circumstances are explained in the grant/loan agreement.

 

B)        The Department shall promptly notify the Recipient in writing of the determination to terminate, the reasons for such termination, and the effective date of the termination.  Payments made to the Recipient or recoveries by the Department shall be made in accordance with legal rights and liabilities explained in the grant/loan agreement. 

 

3)         Termination by Agreement – The Department and the Recipient shall terminate the grant/loan in whole, or in part, when the Department and the Recipient agree that the continuation of the program objectives would not produce beneficial results commensurate with the future expenditures of funds.  The Department and the Recipient shall agree upon termination conditions, including the effective date and, in the case of partial termination, the portion to be terminated.  Recipient shall not incur new obligations for the terminated portion after the effective date, and shall cancel as many outstanding obligations as possible.  The Department shall allow full credit to the Recipient for the Department's share of the noncancellable obligations, properly incurred by the Recipient prior to termination.

 

d)         Events of Default – The entire unpaid principal of the loan, and the interest then accrued thereon, shall become and be immediately due and payable upon the written demand of the Department, without any other notice or demand of any kind or any presentment of protest, if any one of the following events (hereafter an "event of default") shall occur and be continuing at the time of such demand, whether voluntarily or involuntarily, or without limitation, occurring or brought about by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rules or regulations of any administrative or governmental body, provided, however that such sum shall not be then payable if Recipient's payments have been deferred.  The Department will make deferrals based upon case by case review of the Recipient's financial statements and projections (see Section 560.35(d) to determine if the Recipient will be able to make payments at a future date.

 

1)         Non-Payment of Loan – If the Recipient shall fail to make payment when due of any installment of principal on the loan, or interest accrued thereon and if the failure to make payment shall remain unremedied for fifteen (15) days.

 

2)         Incorrect Representation or Warranty – If any representation or warranty contained in, or made in connection with the execution and delivery of, the loan agreement, or in any certificate furnished pursuant hereto, shall prove to have been incorrect.

 

3)         Default in Covenants – If the Recipient shall default in the performance of any other term, covenant or agreement contained in the loan agreement, and such default shall continue unremedied for thirty (30) days after either:  

 

A)        it becomes known to an executive officer of the Recipient; or

 

B)        written notice thereof shall have been given to the Recipient by the Department.

 

4)         Voluntary Insolvency – If the Recipient shall cease to pay its debts as they mature or shall voluntarily file a petition seeking reorganization of, or the appointment of a receiver, trustee, or liquidation of its assets or to effect a repayment plan with creditors, or shall be adjudicated bankrupt, or shall make a voluntary assignment for the benefit of creditors.

 

5)         Involuntary Insolvency – If an involuntary petition shall be filed against the Recipient under any bankruptcy or insolvency law or seeking the reorganization of or the appointment of any receiver, trustee or liquidator for the Recipient, or the property of the Recipient, or a writ or warrant of attachment shall be issued against the property of the Recipient and such petition shall not be dismissed, or such writ or warrant of attachment shall not be released or bonded within thirty (30) days after filing or levy.

 

6)         Judgments – If any final judgment for the payment of money that is not fully covered by liability insurance shall be rendered against the Recipient, and within thirty (30) days, shall not be discharged, or an appeal therefrom taken and execution thereon effectively stayed pending such appeal, and, if such judgment be affirmed on such appeal, the same shall not be discharged within thirty (30) days.

 

e)         Notice of Default – The Recipient agrees to give written notice to the Department of any event, within 15 days of the event, which constitutes an event of default as specified in Section 560.60(d).

 

f)         Monitoring and Evaluation – Recipients must permit any agent authorized by the Department, upon presentation of credentials to, in accordance with the constitutional limitation on administrative searches, have full access to and the right to examine any documents, papers, and records of the Recipient involving transactions related to a grant/loan from the Department.

 

g)         Audits

 

1)         The Recipient shall be responsible for having an audit of all grant/loan records and such audit must be performed by an independent public accountant, certified and licensed by authority of the State of Illinois.  The audit must be conducted in accordance with generally accepted government auditing standards adopted by the AICPA (1981).

 

2)         The Recipient may secure an independent audit of its grant/loan in the same manner as it secures its regular audits, provided it provides for maximum open and free competition.  The audit should be conducted as part of the Recipient's normal annual audit or, when the ending period of the audit covers the expenditure of all grant/loan funds, bi-annual audit.

 

3)         The Recipient shall work cooperatively with the audit firm selected; actively work with both the audit firm and the Department to resolve any and all audit findings; and work cooperatively with the Department's staff in preparing for, conducting, and resolving audits.

 

4)         Any Recipient receiving a grant will provide the Department with 6 copies of its annual audit which addresses Department grant(s).  In instances where the grant period or term does not coincide with the Recipient's fiscal year, two fiscal audit reports shall be forwarded to the Department.  Any Recipient receiving a loan will provide the Department with 3 copies of its audit which addresses funds expended under the Department's loan, within thirty days of its publication.

 

5)         The Department reserves the right to conduct special audits, including but not limited to an agency-wide audit, at any time during normal working hours of funds expended under Department grant/loans.

 

6)         Any independent public accounting firm that provides consultant services to a Recipient is prohibited from conducting an audit of that Recipient for the period during which services were rendered.

 

h)         Complaint Process – In the event of a Recipient complaint, the Department will follow the procedures outlined in the Administrative Review Law (Ill. Rev. Stat. 1985, ch. 110, pars. 3-101 et seq.).

 

i)          Interest on Grant Funds – In accordance with Section 10 of the Illinois Grant Funds Recovery Act (Ill. Rev. Stat. 1985, ch. 127, par. 2310), all interest earned on funds held by the Recipient under the grant shall become part of the grant when earned.  Any interest earned under the grant, and not expended as grant principal during the term of the grant, shall be returned to the Department.

 

j)          Nondiscrimination – The Recipient shall refrain from unlawful discrimination in employment and undertake affirmative action to assure equality of employment opportunity and eliminate the effects of past discrimination in accordance with the Illinois Human Rights Act (Ill. Rev. Stat. 1985, ch. 68, pars. 1-101 et seq.).

 

k)         Financial Management Standards – The Recipient's financial management system shall be structured under the Accounting Standards of the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (AICPA) (June, 1984) to maintain control and accountability over grant/loan funds.

 

l)          Maintenance and Insurance of Property

 

1)         The Recipient shall at all times maintain the property provided as security for the loan in such condition and repair that the Department's security will be adequately protected.

 

2)         The Recipient shall maintain, during the term of the loan, adequate (at least covering the amount of the loan) hazard (e.g., tornado, hail, acts of God) insurance policies, covering fire and extended coverage for all such other hazards and issued by an insurance company authorized to do business in the State of Illinois with loss payee clauses in favor of the Department.

 

3)         The Recipient shall, if at any time during the life of the loan the Recipient's property is declared to be within a flood hazard area, purchase federal flood insurance if available.  Such insurance shall be equal to the amount of the loan.

 

4)         The Recipient shall maintain liability and worker's compensation insurance.  The Recipient shall provide written notice to the Department of any public hearing or meeting before any administrative or other public agency which may, in any manner, affect the chattel, personal property or real estate securing the loan.

 

(Source:  Added at 10 Ill. Rev. 19733, effective November 5, 1986)