Loan Program FAQ
Loan Program FAQ
Below are some of the common questions regarding our Loan Program.
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Additional Debt Superior to the CWCB Water Project Loan
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.
Bidding Process for a Water Project Loan
The CWCB does require that a project be advertised for bids. However, if your project is located in an area with a 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.
Board Meeting Attendance for Board Approval of Water Project Loan
Generally attendance is not mandatory but is highly recommended and encouraged in order to be able to respond to questions of the CWCB Board. However, the CWCB staff may require attendance.
Collateral Requirement for a Water Project Loan
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.
Completion of a Water Project Loan
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.
Construction Inspection for Projects Funded by the Water Project Loan Program
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 but does not perform official inspection of the project.
CWCB Approval of Design and Construction Documents for Water Project
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.
Disbursement of Funds for Approved Water Project
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 10 business days for your request to be processed and the money to reach your account.
Insurance Requirement During Loan Repayment for a Water Project Loan
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.
Insurance Requirements for a Water Project Loan
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.
- 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. If the Company owns no vehicles and therefore does not carry automobile liability insurance, a signed letter to that effect will need to be submitted to CWCB.
- 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.
Loan Payment Change - Not all of the Money is Needed for the Water Project Loan
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.
Please also note that the 1% service fee is only applied to the amount actually disbursed.
Loan Repayment Process for a Water Project Loan
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.
Minimum Loan Amount for a Water Project Loan
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 $100,000 is recommended. Please contact the CWCB staff to assist you in making sure the Loan Program funding is right for your project.
Options for Submitting Payment for a Water Project Loan
Payment is accepted also accepted by EFT (Electronic Funds Transfer) and online via a credit card or "electronic check". Instructions for EFT payments will be included on your annual loan reminder letter and specific information can be obtained by emailing cst_treasurycashier@state.co.
Additional Requirements for A Water Project Loan
1) If you are a governmental type entity:
Once your Water Project Loan is in repayment, a copy of your audited financial statements must be submitted annually.
2) If you are a non-governmental entity:
Once your Water Project Loan is in repayment, a confirmation that you meet the annual reserve requirements must be submitted annually.
Parity Requirement for Water Project Loan
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.
Pre-payment Penalty for Paying of a Water Project Loan
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.
Professional Engineer Requirement for a Water Project Loan
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.
Water Project Loan Program Application Process
A typical loan of less than $10 million can be processed in five to six months from submittal of the application and the loan feasibility study to the day funds are available.
Water Project Loan Program Funding in Shorter Time than Application Timeline
We recommend that the Borrower obtain a bridge loan from a local bank. Reimbursements based on project invoices can be paid 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.