Revolving Loan Fund

REVOLVING LOAN FUND

In 1988, the Commission obtained money from local sources to provide the match for a $500,000 grant from EDA to create the first regional revolving loan fund (RLF) in Alabama. The Commission subsequently received a $250,000 grant from ARC for region-wide RLF activities. The Commission also received two awards of $978,000 each through ADECA under a legislatively authorized bond issue to fund regional revolving loan funds. These revolving loan funds provide gap financing loans to expanding and start-up small business and industry.

PURPOSE OF THE RLF

The RLF Program administered by the East Alabama Regional Planning and Development Commission (EARPDC) provides gap financing for business and industry to stimulate economic development. The Program’s primary goal is to reduce unemployment and create new jobs.

The RLF Program provides gap financing for businesses that are financially healthy and growing, but cannot obtain adequate financing to carry out and expansion or start-up project. The RLF Program can also provide a source of incentive financing to businesses locating facilities within East Alabama. The RLF Program works in cooperation with private lenders in approving loans that a bank might not ordinarily make on their own. However, the RLF Program is not intended to provide venture capital to support high risk enterprises. The program makes good projects better by filling in a missing piece of the project financing.

ELIGIBILITY

Eligible businesses include:
  • Small and medium size businesses.
  • New entrepreneurial ventures.
  • Manufacturing businesses that diversify the local economy.
  • Any legitimate business proposal resulting in a significant creation of new employment opportunities for local residents.
Eligible businesses must be located within the EARPDC region (Calhoun, Chambers, Cherokee, Clay, Cleburne, Coosa, Etowah, Randolph, Talladega, and Tallapoosa Counties).

FUNDS CAN BE USED FOR
  • Purchasing and development of land and facilities.
  • Financing and development of now businesses, including construction of new facilities.
  • Renovation and/or expansion of existing facilities.
  • The purchase of necessary machinery and equipment.
  • Working capital needs.
INTEREST RATES

The RLF Program may provide fixed, variable, or adjustable rate interest loans, which will be generally available at below market rates. The borrower must justify the need for the below market rate. The private lenders will set the interest rates for their loans.

LOAN LIMITS

The EARPDC RLF Program can provide up to $250,000 or 33% of a project, whichever is less. Certain job creation requirements and equity injection requirements must be met.

CRITERIA

The purpose of the RLF Program is to create or retain jobs and to leverage private sector capital investment. The following criteria will be used in evaluating loan applications:
  • Funding with satisfactory terms and conditions must be unavailable from conventional lenders.
  • Job creation requirements must be met.
  • The RLF Program should leverage private sector investment.
  • Equity injection will be required for most loans.
  • The RLF can provide up to 1/3 of a project’s total cost, (not to exceed certain Maximums), with other funding sources providing the balance of the required financing.
  •  A private lender must be willing to participate in funding the project in cooperation with the RLF Program.
  •  Adequate collateral.
LOAN TERMS

The terms of the RLF Program loans should be matched to the uses of funds, with long-term financing structure to the productive life of fixed assets. The maturity terms on loans will vary. Repayment terms will also vary, but the following repayment terms are generally considered appropriate:
  • Building and real estate loans: 10 to 20 years.
  • Machinery and equipment loans: 5 to 10 years.
  • Working capital loans: 1 to 5 years (certain limits apply).
FEES

One time processing fee of 1 ½ % on the amount of the loan due at the time of closing.
Annual servicing fees of ½% on the declining loan balance.
The borrower will pay all closing costs including attorneys’ fees, probate recording fees, and UCC filing fees.

DOCUMENTATION

Like any private lender, the RLF Program will require the following:
  • Financial statements
  • Evidence of sufficient cash flow to service the debt.
  • Personal guarantees of principles, partners, spouses, and owners.
  • Monthly or quarterly financial statements.
  • Personal financial statements.
PROCESS

The potential borrower should contact a private lending institution to discuss conventional financing. If gap financing is required, the borrower and the lending institution should contact the East Alabama Regional Planning and Development Commission. Once an application with all required documentation is submitted, a Loan Administration Board will review the loan request. If approved, the private lending institution and RLF documents are executed simultaneously.

For more information regarding EARPDC's Revolving Loan Fund contact:
Donna Fathke
Principal Planner
(256) 237-6741
Fax: (256) 237-6763
Email: donna.fathke@earpdc.org
RLF Application Package
RLF Application Form 
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