Revolving Loan Fund
NGCDC, INC. and the Revolving Loan Fund Program
In addition to operating Small Business Administration loan programs, NGCDC, Inc. manages an Economic Development Administration Revolving Loan Fund (RLF) for the Northwest Georgia Regional Commission. The RLF is operated as a small business gap financing loan participation program seeking to achieve economic adjustment goals by leveraging job creation and private investment in the eligible area.
The borrower contributes at least 10% of the project cost; the private lender develops a loan proposal for up to 90% of the project cost and makes a loan commitment for an amount less the proposed RLF participation; and the RLF purchases a participation in the loan up to the lessor of 50% of the loan or $200,000 generally in a shared first lien position with the bank, but the lien position may be determined based on the project parameters. Generally, the RLF participation is based on the participating lender's statement of need (ie., given lender policy on loan percentage or term, excessive risk, lower payment needs, etc. and but for the RLF participation, the primary loan cannot be made). The RLF, however, can be used as an incentive, through favorable loan terms, to attract or keep a business or expansion in the area.
Use of Proceeds
Proceeds from RLF loans may be used for:
- business and industrial acquisitions, construction, conversion, enlargement, repair, or modernization;
- purchase of land and improvements including existing buildings, facilities, materials, etc.;
- purchase of equipment, machinery, or supplies;
- start up costs and working capital.
RLF loans may include reasonable costs, including legal fees, incurred for services rendered by accountants, appraisers, architects, engineers, and other parties related to the loan or project.
RLF loans cannot be used for passive investment, for relocation which will result in job losses in the original area, to subsidize interest payments on an existing loan, to provide the equity contribution required under another Federal loan program, or generally, to refinance existing debt.
Terms, Interest Rates and Fees
Interest rate on the RLF loan amount is 4 percentage points below the current prime rate, but not less than 4%. The RLF loan maturity is generally the same as the participating private lender.
RLF loans have an application fee which is one-half of 1% of the RLF amount and payable by the borrower. Other fees are as determined by the participating private lender.
The participating private lender may charge the market rate (fixed or variable) for its portion of the loan and may set a conventional maturity.
Generally, the project assets being financed are used as collateral. Personal guarantees of the principal owners are also required..
An RLF project may involve an existing or start-up, for-profit or non-profit business. The business must be located in Bartow, Catoosa, Chattooga, Dade, Fannin, Floyd, Gilmer, Gordon, Haralson, Murray, Paulding, Pickens, Polk, Walker or Whitfield Counties for the term of the loan.
Public entities, quasi-public organizations, private developers or investment companies are not eligible to receive RLF financial assistance unless the activity financed is non-speculative, directly benefits an identifiable business concern, and results in increased business activity.
Job Creation/Private Investment Standards
The RLF program requires that one job be created/ retained for every $10,000 in RLF financing. The RLF program also requires that each RLF dollar leverage at least two dollars in private investment. The standards for job creation and private investment apply to the program portfolio as a whole and may vary on a project by project basis.
Information Needed for the RLF Loan
NGCDC, Inc. needs the same information as a lending institution: loan amount needed, use of proceeds, and ability to repay the loan. The list below includes most of the items needed to determine the eligibility and feasibility of the loan project:
- Description of the business and the project
- Business Plan
- Number of jobs created or retained
- Income projections for next two years
- Cost estimates on all construction, purchases, improvements, etc.
- Security to collateralize loan
- Source of principal's investment (equity)
- Resume of principal's work history
- Personal and work references
- Personal and business tax returns for the most recent 3 years
A complete detail of information needed is indicated in the loan application.
RLF Loan Application Procedure
The major steps in the RLF loan proposal and application from initiation to closing are described below:
- Small business principal contacts NGCDC, Inc. to determine project eligibility, obtain RLF loan application, and identify participating private lender.
- Small business principal submits both the RLF application, including the application fee, to the NGCDC, Inc. and the required loan application information to the participating lender for review and evaluation.
- Loan proposal is presented to the participating lender loan review board for approval.
- Participating lender provides letter of loan commitment and RLF participation statement of need to NGCDC, Inc.
- Loan proposal is presented to NGCDC, Inc. Board of Directors for approval.
- Project is completed (ie., construction) and loan is closed including RLF/private lender loan participation agreements.
RLF Express Loan Procedures
The purpose of the "Express Loan" is to provide credit enhancement to lending institutions (banks) to encourage lending to eligible businesses or potential businesses located in North Georgia that would not be funded otherwise, quickly with existing bank documentation.
NGCDC participation has been pre-approved by its Board of Directors for up to $50,000 (contingent on the due prudence and authorization of two of the NGCDC designated representatives) to prevent unnecessary delays, provide the bank and business with cash quickly, eliminate another approval layer, and reduce paperwork. The participation is in a second lien position with the bank, and NGCDC funds no more than one-half of the loan.
The participating private lender services the full loan including the RLF portion. The borrower makes a single payment, and the participating lender deposits the RLF portion of payments in an RLF account opened with the participating lender.
For Loan Application Assistance please contact our Loan Program Officer at (706) 226-1110 or 272-2300, or via email at email@example.com