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South Central Ozark
Regional Development Company (SCORDC)
Revolving Loan Fund (RLF)
RLF Application
RLF Participation
Requirements
Cities and Counties who wish to avail
themselves of the economic benefits of the RLF must be actively participating
in the District Program. Resolutions of Support and membership dues must be
current prior to participation in the loan fund.
Minimum RLF Threshold
Criteria
- One full-time job created per
$10,000.00 of RLF proceeds;
- A minimum leverage ratio of
$2.50 of private funds to $1.00 RLF;
- A minimum of 10% equity
injection by private sector participate;
- An RLF funding limit of 28%
of total project cost;
- Maximum loan amount of
$100,000.00
- Must obtain, in writing, firm
commitment from other private lender(s) participating in project;
- Must obtain, in writing, firm
commitment from private sector participant;
- Payment of one-and-one half
(1 1/2) percent loan origination fee on the RLF portion of the loan when
application is submitted.
Program Overview
SCOCOG's
Revolving Loan Fund administered under the SCORDC is one of several Economic
Development Administration (EDA) public investment tools available to assist
distressed areas.
An RLF is a pool of money used by eligible recipients for the purpose of
making loans to achieve certain economic benefits. As loans are repaid by the
borrowers, the money is returned to the fund to make other loans. In that
matter, the fund becomes an ongoing or "revolving" financial tool.
SCOCOG's RLF is not a substitute for conventional lending sources; RLFs are
designed to fill gaps in existing local financial markets and provide or
attract capital which otherwise would not be available for economic
development.
The primary goal of the RLF is private sector job creation or retention.
SCORDC Will Consider Projects Which Serve To:
- Create jobs;
- Stimulate private sector
capital formation;
- Aid small business
development;
- Redevelop blighted or vacant
land and facilities in order to put them into productive use;
- Aid businesses owned and
operated by minorities, women, or by persons who are economically
disadvantaged;
- Provide capital for new
manufacturing and service companies using new technologies with an
emphasis on growth industries;
- Provide financing for
economic adjustment efforts when conventional lenders may hesitate due
to the nature of the disclosure.
Eligible Borrowers and
Types of Loans
Fixed asset loans
for the acquisition and improvement of land, buildings, plant and equipment,
including new construction or renovation of existing facilities, demolition
and site preparation;
Working capital loans for the start-up of new business or conduction of
current business. Working capital loans will normally be limited to 30% of
total RLF portfolio.
Eligible Loan Activities
RLF loans must be used for purposes which result in private sector job
creation or retention and contribute substantially to economic development or
stabilization of the eligible area.
RLF loans will normally finance industrial or commercial activities,
including assistance for light manufacturing and service industries, where
opportunities for private sector jobs are the greatest.
Loan activities will normally emphasize direct job creation/retention by
providing capital for startup, expansion, or retention of businesses.
Activities which result in indirect job creation may also be considered if
local conditions warrant this approach. For example, commercial area
revitalization may be eligible if combined with other public and private
redevelopment efforts to attract or retain major employers.
Activities which are consistent with the priorities of the U.S. Department of
Commerce.
Interest Rates
SCORDC can make loans to eligible borrowers at interest rates and under
conditions determined by SCOCOG to be the most appropriate in achieving the
goals of the RLF and in accordance with the following:
- The minimum interest rate is
four (4) percentage points below the current Money Center Bank Prime
Rate or the maximum interest rate allowed under State Law, whichever is
lower,
- RLF financing is flexible to
assist firms with special credit problems, and therefore may involve
greater risks and more lenient terms than conventional financing.
Collateral
Requirements
In the
determination of collateral requirements, SCORDC will consider the merits and
potential economic benefits of each request. When appropriate and practical,
RLF financing may be secured by an assignment of rights in assets of assisted
firms as follows:
- In order to encourage
financial participation in a direct fixed asset loan project by other
lenders and investors, the RLF loan lien position may be subordinated to
other loans in connection with the project.
- In projects involving direct
working capital loans, the RLF will normally obtain collateral such as
liens on inventories, receivables, fixed assets and/or other available
assets of borrowers. Such liens may be subordinate only to existing
liens of record and other loans involved in the project.
- In addition to the
abovementioned types of security, the RLF may also require security in
the form of assignments of patents and licenses, the acquisition of
hazard and other forms of insurance, and such additional security as
SCORDC determines is necessary to support the RLF's exposure.
- RLF loan requests submitted
by closely held corporations, partnerships, or proprietorships dependent
on the continuing success of certain individuals will ordinarily be
expected to provide life insurance on key person and assign to the RLF.
- Personal guarantees may also
be required from principal owners, as appropriate.
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