Running Efficient Loan Programs

Kentucky Assistive Technology Loan Corporation(KATLC)

One Program’s Experience

KATLC

Loan Guarantee Model• Loan servicing costs absorbed by

lending partner (Fifth Third Bank of Kentucky)

• Limits program income (currently receive 2.0% on money deposited with lending partner)

KATLC• Unique for a ‘community-based organization’• Created by state statute as a ‘independent de

jure municipal corporation and political subdivision of the Commonwealth of Kentucky’

• Resides in state government but controlled by a consumer-dominated Board of Directors

• Some costs have been absorbed by state agency• Currently receives $100,000 annual allotment in

state funds which are used for operating costs

Cost of Operating a Loan Program

• Staffing costs• Ongoing operational costs (rent, utilities,

telephone, travel, etc.)• Marketing costs (printing, advertising, mailing,

etc.)• Board support costs (meeting costs)• Miscellaneous costs (liability insurance)• Loan-related costs (fees, buy-downs, defaults)• Loan servicing costs (absorbed by lending

partner)

Staffing Costs

• Currently have two full-time staff costing about $75,000 per year including fringe benefits and contractual overhead

• OVR donates financial management, some marketing staff time, and some other miscellaneous services

• Staff duties include processing applications, communicating with lending partner, marketing program, developing referral sources, following along with borrowers, data management, supporting Board of Directors

Staffing Costs

• Board is struggling with how much staff time is needed to process current level of applications

• Exploring sharing staff with another agency program or having other staff absorb KATLC duties

Ongoing Operational Costs

• Rent, utilities, most office supplies, and telephone to date have been absorbed by OVR (always subject to change)

• Travel paid from state allotment

Board support costs

• Principally related to meeting expenses• KATLC Board of Directors meets four

time per year and usually at a state park to keep costs down

• KATLC Board uses an e-group to review applications in order to reduce the need for meetings

• Unexpected cost: had to purchase a computer for a Board member to facilitate their participation in e-group

Miscellaneous costs

• Board pays over $7,000 annually for liability insurance

Loan-related Costs

• Loan fees are charged to program, not to applicants - but lending partner has always waived charges at end of year

• Interest buy-downs - this year buying all loans down from 6% to 4.5%

• Defaults

Loan Servicing Costs

• Absorbed by Fifth Third Bank of Kentucky

I am What I am

Income in FY 2004

Income• State Allotment* $41,429• Interest Income $32,046• Total Income $73,475

* Budget crisis forced the state to take back $58,571 of the $100,000.

Expenditures in FY 2004

Expenditures• Staffing costs $72,374• Ongoing operational costs $3,414• Marketing costs $2,213• Board support costs $6,700• Miscellaneous costs $7,410• Loan-related costs $7,671

Budget in FY 2004

Income $73,475Expenses $99,782

Net Loss $26,307

Current Loan Portfolio

• As of September 30, 2004, KATLC had 123 outstanding loans worth $726,267.83. Seventy percent of that amount was guaranteed by KATLC with the balance of the risk assumed by the lending partner.

• As of September 30, 2004, KATLC had $1,767,053 on deposit with Fifth Third Bank of Kentucky available for guarantees.

Issues in the Future

• What are our true staffing needs?• What do we do if we lose our state

allotment?• What do we do if we have to pay

rent and utilities?

That’s All, Folks!