In 2008, the County Commissioners developed a Revolving Loan Fund (RLF) for the Redwood County EDA, with a matching grant from the USDA Rural Development Division. The RLF fund has served a number of organizations across the County to provide gap financing to fulfill a project.
Typically, applicants secure a loan through a primary lender, however need a push of funds to complete the project. This is where the County RLF program can assist! Contact Briana, Economic Development Coordinator to discuss your project and funding needs.
Redwood County EDA Revolving Loan Fund Purpose Statement
The Redwood County Economic Development Authority (“EDA”) Revolving Loan Fund (“RLF”) exists to allow the Redwood County Board of Commissioners and the Redwood County Economic Development Authority to invest in the growth and development of business in Redwood County. The Fund is intended to serve as gap financing, as outlined in this document, to invest in projects that meet the criteria outlined and the Redwood County Business Subsidy Policy, a copy of which is attached as an exhibit.
GOALS AND OBJECTIVES
Goal #1: To assist entrepreneurs by providing the gap financing required to encourage capital investment, enhance tax base, create jobs, generate wealth among residents, and allow for the improvements of the quality of life in Redwood County.
- Objective 1.1
To provide gap financing to qualified applicants on an as needed basis.
- Objective 1.2
To leverage other financing to reduce the primary lenders’ security risk, enhance project viability and demonstrate a collaborative spirit.
- Objective 1.3
To take prudent risks in the area of economic development financing.
- Objective 1.1
Goal #2: To enhance the role of Redwood County in economic development activities within Redwood County in collaboration with other private and public entities
- Objective 2.1
To provide expertise and assistance in the area of economic development finance.
- Objective 2.2
To secure funding for the RLF from various public and private sources.
- Objective 2.3
To operate the RLF as a perpetual fund and to manage and operate the fund for future viability.
- Objective 2.1
REVOLVING LOAN FUND GUIDELINES
Preferred Eligible Borrowers
- Businesses located in Redwood County
- All industries and types of businesses are eligible to apply, including manufacturing, retail and service industry businesses
- Project / business to be assisted by the RLF program typically must be physically located within Redwood County. On a case by case basis, the Loan Review Committee may waive this requirement and provide loan funds to a business located outside the Redwood County Area if the Loan Review Committee determines doing so will have a positive economic impact on the community to be assisted with RLF funds. If the business relocates outside of the Redwood County Area, the Loan Review Committee may require immediate pay off of the loan.
- Acquisition and development of land, easements, and rights-of-way.
- Construction, conversion, enlargement, repairs or modernization of buildings (including façade repairs), plants, machinery, equipment, access streets and roads, parking areas, utilities, and pollution control and abatement facilities.
- Loans for startup operating cost and working capital.
- Technical assistance for private business enterprises.
- Machinery and Equipment fixed assets and Rolling (non-fixed) assets.
- The grantee has a goal of creating or retaining at least one full time job for each $10,000 loaned from the RLF.
- Loans must involve a local lender as a greater portion of the financing package unless otherwise specified by the EDA Board.
- The loan approval is subject to a primary lenders approval.
- All approved loans will be required to set up electronic debit of payment and interest.
RLF funds will not be used to produce agriculture products through growing, cultivation, and harvesting either directly or through horizontally integrated livestock operations except for commercial nurseries, timber operations, or limited agricultural production related to technical assistance projects.
- RLF funds will not be used to finance comprehensive area-wide type planning. This does not preclude the use of grant funds for planning for a given project.
- RLF funds will not be used to fund a part of a project which is dependent on other funding unless there is a firm commitment of the other funding to ensure completion of the project.
- RLF loan funds will not be used to pay off any previous debt. Refinancing construction financing is an exception to this rule.
- Loans will not be made unless there is a reasonable prospect that the applicant meets the definition of “small and emerging private business enterprises” defined as “any private business that will employ 50 or fewer new employees and has less than $1 million annually in projected gross revenues.” If the grantor changes its definition of small and emerging business as defined by the Rural Business Development Grant regulations, the grantee reserves the right to utilize the amended definition without further approval from the grantor.
- Applications by members of the Loan Review Committee and their immediate family members shall be ineligible for funding.
Loans made from the RLF typically will not be less than $5,000 and not greater than $75,000, or not exceed 50% of the available funds in the RLF account balance. The Loan Review Committee may recommend loans outside the above values on a case by case basis to the EDA Board.
The interest rate will be no more than two percent (2%) above the published Wall Street Journal “prime rate.” The Loan Review Committee will provide a recommended rate to the EDA Board rate based on the evaluation of the applicant’s ability to repay and the necessity of below market financing to advance the project. Interest earned on any RLF loan must stay in the fund for use in making additional RLF loans. All loans are made at a fixed interest rate and will be confirmed by the Board of Commissioners on the day of loan approval.
Costs associated with processing the application (e.g. credit report fees, UCC and lien search fees, filing security documents, filing legal documents fees, etc.) shall be the responsibility of the applicant, not to exceed $500 and due at the time of application submission. If the loan is denied, the application fee will be refunded. The Loan Review Committee may waive or amend this fee structure without further approval from the grantor. All loan fees will be addressed in the RLF Loan Agreement.
The Loan Review Committee will make a recommendation to the EDA Board concerning the term of the loan and payment frequency (monthly, quarterly, etc.) depending upon project need, the expected life of the security, and the applicant’s ability to repay. The term of the loan will not exceed the expected life of the asset being used as collateral.
Security shall consist of the best lien available on real estate, equipment, inventory, etc. The discounted value of the security (using typical lender discount rates) shall equal or exceed the value of the loan. The Loan Review Committee may require personal guarantees and/or co-signors.
Redwood County will work with the potential loan recipient to obtain security that is adequate for the term of the loan. The nature of the collateral pledged shall be determined by the Loan Review Committee on a project-by-project basis. If the same collateral is used in joint financing, the RLF will seek a parity position with other lenders. Types of security may include:
- Mortgage Lien on Real Property
- Machinery and equipment which have a developed market;
- Letter(s) of credit from acceptable financial institution(s);
- Securities issued by the Federal government or its agencies;
- Accounts receivable and inventory for short-term loans; and
The loan recipient will be required to maintain fire insurance, and flood insurance if necessary, on secured assets. In some cases, credit life or key man insurance will be required with the RLF as loss payee.
Interested in learning more?
Schedule an appointment with Briana Mumme to obtain an application and discuss your project via email or at (507) 637-1122.