REVOLVING LOAN FUND GUIDELINES
A major focus for the Cumberland Valley Area Development District has and continues to be the issue of improved job opportunities within the eight county service area. The CVADD wants to help business grow and provide jobs for area residents. This focus has lead to the establishment of a revolving Loan Fund through grants from Economic Development Administration and Appalachian Regional Commission.
The Cumberland Valley Area Development District’s primary objective through the establishment of a revolving loan fund has been to assist business start-up and expansion in the industrial, commercial, agricultural and tourism sectors. The RLF serves to bridge financing gaps often encountered as businesses seek financing for projects from traditional financial institutions.
Only businesses with projects located within the eight-county service area of the Cumberland Valley Area Development District (Bell, Clay, Harlan, Jackson, Knox, Laurel, Rockcastle, and Whitley) are eligible for loans from the CVADD-RLF. Please contact Lesli Gill at 606-864-7391 or by email for more information.
Loans will not ordinarily be made in an amount less than $10,000 or greater than $200,000 to any one entity or company. Generally, the RLF investment will be 33% of the total project cost.
The RLF will require a minimum of 10% equity injection to be provided by the borrower. The equity requirement for a working capital loans can be met if the borrower has existing net working capital of at least 10% of its working capital needs.
MAXIMUM LOAN TERMS
The terms of the loans are matched to the use of funds, with long-term financing structured to the productive life of fixed assets. The terms of maturity of loans will vary depending on the needs of the applicant, but the following maximum repayment terms are generally considered appropriate:
· Buildings and Real Estate…………………….12 years
· Machinery and Equipment…………………….10 years
· Working Capital………………………………….5 years
The interest rate on RLF loans will generally be at a fixed-rate within the range of five (5) to seven (7) percent. Interest rate floor will be the lesser of 4% or 75% prime. Interest on loans will be compounded monthly.
When an applicant participates with a private lending institution the lending institution will generally hold the first lien with the CVADD taking a second or junior position. CVADD employs standard collateral requirements; sufficient and appropriate collateral is required for all loans. Personal guarantees will be required of any person having ownership interest of 20% or more in the business.
CREATION OF JOBS
CVADD will require that for every $20,000 in RLF dollars loaned to a borrower, one full-time job will be created or retained. The one job per $20,000 invested is required for the RLF portfolio as a whole, and not necessarily for each loan project.
Because the Cumberland Valley Area Development District’s Revolving Loan Fund is designed not to compete with private financial institutions, potential applicants are encouraged to contact their bank prior to contacting the CVADD.
Potential borrowers are encouraged to contact the CVADD office, to speak with the RLF Manager to discuss their project. If the applicant is potentially eligible for RLF funds, a preapplication will be taken for review which can be submitted by email, fax, or mail.
CLICK HERE FOR THE CVADD-RLF PRE-APPLICATION
The RLF Manager will begin screening the project for both its conformance with RLF guidelines and standards and its soundness as a business venture. If a project is found to have merit and a possibility for success as a business, the prospective borrower will be asked to submit a full loan application along with a $150 non-refundable application fee to the CVADD Loan Review Committee. The RLF Manager will provide assistance in completing the loan application if necessary.
All applications recieved will be reviewed by the CVADD Local Review Committee, which will make a recommendation for funding. All applications must receive the approval from both the CVADD Economic Development Committee and the CVADD Board of Directors before the loan can be approved.
Loan applications need to be submitted a minimum of 30 days prior to Cumberland Valley Area Development District Board of Director’s bi-monthly meeting, which is the third Wednesday.
Click here for the CVADD-RLF Loan Application
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For more information please contact Will Napier at 606-864-7391.