Minority  |  The Collateral Enhancement Program (CEP)


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Natalie Burley 
Financial Programs Manager 
Minority Business Development Division 
(614) 644-7249

The Collateral Enhancement Program (CEP)

The Ohio Development Services Agency's Collateral Enhancement Program (CEP) was created to facilitate increased lending by banks to small businesses and minority-owned businesses that need access to capital for growth or expansion. The CEP is designed to enable financing that might otherwise be unavailable because of a collateral shortfall. The program supplies pledged cash collateral deposit accounts (or allocations for credit unions and Community Development Financial Institutions) to lending institutions to enhance collateral coverage of individual small business loans. The program is designed to target certain situations in which there is insufficient collateral shortfall value to make the loan.

2021 Programmatic Changes to Assist Businesses as a Result of the COVID-19 Pandemic
Beginning January 1, 2021, the CEP will increase the maximum deposit size to 50% of the proposed loan amount not to exceed the demonstrated shortfall amount. The CEP will increase the maximum deposit size to 80% for minority businesses and women-owned businesses certified with the State of Ohio or certified with the Ohio Minority Supplier Development Council or the U.S Small Business Administration. The CEP fee of 2% of the deposit amount is also waived. These changes are effective until December 31, 2021.

CEP Frequently Asked Questions

  • Corporations, partnerships, LLCs, and sole proprietorships (subject to restrictions as set forth below)
  • Small businesses with fewer than 250 employees
  • Small businesses that are creating or retaining jobs ($50,000 CEP deposit per one full-time equivalent job)
  • Small businesses with revenues equal to or less than $20 million
  • Ohio businesses (principal place of business and activity in Ohio)
  • New or existing businesses (if owners of food services have a minimum of two years of recent food service management experience and franchise owners must have operated a franchise during the most recent two years)
  • Firms involved in real estate investment, speculative activities, lending or leasing activities, pyramid sales, illegal activities, gambling activities, charitable institutions, religious institutions, consumer and marketing cooperatives, and other nonprofits
  • Small businesses whose principal of the business has been convicted of a sex offense against a minor
  • The maximum Cash Collateral Deposit amount for fixed asset Loans is $500,000
  • The maximum Cash Collateral Deposit amount for working capital loans is $500,000
  • The $500,000 maximum deposit limit is the total for a business, its owners active in the business, its guarantors, and the aforementioned party’s related entities: "related entities" means that 1) have significant common purposes and substantial common direction or control; 2) exhibit an ownership structure where either entity owns a (directly or through one or more entities) a fifty per cent or greater interest in the capital or profits of the other; or 3) other determinations made by the Ohio Development Services Agency
  • There are no minimum deposit amounts

Up to 50% of the loan amount for real estate, equipment, and working capital loans up to the maximum cash collateral deposit limits, unless the business is a food service business or franchise. In which case, the limit is up to 15% of the loan amount.

Yes, the deposit percentage is up to 80% of the loan amount if the loan is to a minority-owned business or woman-owned business certified with the State of Ohio Equal Opportunity Division or certified with the Ohio Minority Supplier Development Council or the U.S. Small Business Administration.

  • Maximum Lender loan amount is $5 million
  • Minimum loan amount for working capital lines of credit is $35,000
  • Loans can be used for short-term or long-term owner occupied commercial real estate purchases, expansions or renovations
  • Equipment purchases (new or used)
  • Leasehold improvements, working capital, inventory purchases or rolling stock
  • Refinancing of another Lender's debt, start-up costs, franchise fees or other business purposes
  • A Lender's new extension of credit that repays the amount due on a matured loan or line of credit when all the following conditions are met: the new loan or line of credit includes the advancement of new funds to a small business borrower (excluding closing costs):
    • The new credit supported with CEP funding is based on a new underwriting of the small business's ability to repay and a new approval by the lender/investor;
    • Proceeds from the new credit may only be used to satisfy the outstanding balance of a loan or line of credit that has already matured or otherwise termed and the prior debt was used for an eligible business purpose, as defined by the SSBCI Policy Guidelines; and,
    • The new credit has not been extended for the sole purpose of refinancing existing debt owed to that same financial institution lender (there must be a benefit to the business).
  • Real estate holding companies when all of the following conditions are met:
    • Proof the operating company is a guarantor or co-borrower on the CEP-supported loan to the eligible real estate holding company;
    • The real estate holding company and the operating company are eligible small businesses that meet all CEP criteria; 100 percent of the rentable property acquired or refinanced using proceeds from the CEP must be leased to the operating company. An operating company may sublease no more than 49 percent of the total rentable space (in the case of an existing building) to one or more unaffiliated tenants (no more than 40 percent in the case of new construction);
    • Both the eligible real estate holding company and the operating company must complete the CEP Borrower Certification Form;
    • Proof each natural person holding an ownership interest constituting at least 20 percent of either the eligible real estate holding company or the operating company provided a personal guarantee for the CEP supported loan;
    • The eligible real estate holding company and the operating company have a written lease with a term at least equal to the term of the CEP supported loan, including options to renew exercisable solely by the operating company
  • Loans cannot be made in order to place under the protection of the CEP prior debt that is not protected under the CEP and is or was owed by the Borrower to the Lender or to an affiliate of the Lender
  • Loans cannot be used for refinancing a current Lender's existing debt
  • Loans that have a Lender risk exposure of less than
  • 20 percent
  • Goodwill and owners credit card debt
  • A change of business ownership; permitting the reimbursement of funds owed to any owner, including any equity injection or injection of capital for the business's continuance
  • Repaying delinquent state or federal withholding taxes or other funds that should be held in trust or escrow
  • Financing a non-business purpose
  • Guaranteeing the unguaranteed portion of an SBA or other federally guaranteed loan
  • Residential purchase, construction, or development
  • Passive real estate investment
  • Loans that cannot demonstrate a collateral value shortfall or loans that have no collateral (i.e. the CEP cannot be the only collateral with value for the loan)
  • The maximum length of the CEP deposit/allocation is five years
  • The maximum term for a real estate loan is 15 years (balloon amortization schedules are acceptable)
  • The maximum term for equipment loans is seven years (balloon amortization schedules are acceptable)
  • The maximum term for short-term working capital loan is one year and can be renewed for no more than two additional years
  • There are no minimums
  • Only one CEP deposit/allocation per business within a twelve-month period (a business may receive a CEP deposit/allocation for a line of credit and a term loan if the lender provides the two loans simultaneously

Loans may be made with such interest rate, fees, and other terms and conditions as Lender and Borrower agree

  • The Borrower pays a fee equal to 2% (this fee is waived until December 31, 2021) of the cash collateral deposit at closing. This fee can come from loan proceeds
  • The Borrower provides a minimum of 10% equity on real estate (purchases, renovations, and leasehold improvements) and equipment financing transaction
  • Borrower pays all other Lender application and closing costs
  • Yes, the Borrower must create or retain jobs as a result of the CEP loan. The CEP's job to deposit ratio target is $50,000:1
  • The Borrower's historical or projected debt coverage ratio should be at minimum 1.2:1

Interest rates, maturity, and other loan terms are negotiated between the Borrower and the Lender

  • Lenders are responsible for loan origination and reporting, as required by the Ohio Development Services Agency
  • Ohio Development Services Agency or its network partners may refer businesses to Lenders

Lenders have responsibility for loan underwriting

  • Lenders whose principal has not been convicted of a sex offense against a minor
  • Banks that are not operating under any supervisory enforcement action
  • The Lender submits a CEP application to the Ohio Development Services Agency for the Cash Collateral Deposit and attaches the proposed loan write up, risk rating justification, appraisals or other collateral valuations, CEP Borrowers Certification, purchase agreements, cost estimates and proof of minority business certification (if applicable)
  • Borrowers must complete a lending institution's standard loan application

1. The Collateral Enhancement Program was funded by the State Small Business Credit Initiative, a program of the U.S. Department of the Treasury and the Small Business Jobs Act of 2010.

2. "Principal" is defined as "If a sole proprietorship, the proprietor; if a partnership, each managing partner and each partner who is a natural person and holds a 20 percent or more ownership interest in the partnership; and if a corporation, limited liability company, association or development company, each director, each of the five most highly compensated executives or officers of the entity, and each natural person who is a direct or indirect holder of 20 percent or more of the ownership stock or stock equivalent of the entity."

  • Lenders must report the loan status (balance, delinquency, etc.) on an annual basis
  • The Ohio Development Services Agency will generate the annual report and send to Lender for completion
    Borrowers may report on employment activity
  • In the event of default, a Lender must exhaust all allocation efforts (foreclosure, liquidation, etc.) prior to filing a claim on the CEP deposit account or allocation amount
  • The Lender has 120 days after the last collection effort to file a claim
  • The maximum claim amount is the deposit/allocation percentage of the outstanding principal balance after liquidation proceeds are applied