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Revolving Loan Fund

Financing Economic Development Projects

Today economic development projects are funded primarily through owner equity and private bank financing, with economic development fund available for “gap financing”. With economic development projects often time’s owner equity and conventional bank financing do not provide all of the funding that needed for a project. Typically because the bank has lending limits that they must adhere to, there is inadequate equity, there is insufficient collateral or the business cannot afford market interest rates and/or term requirements.

Economic development financing tools exist to help fill this funding “gap”.

Here is an example of a typical economic development deal:

Source Notes
Owner Equity Must be present in the package – should be at least 10% of the entire financial package. More may be required and more is better.
Bank Loan Another required element in any financial package.
“Gap” Financing Gap financing only comes into play when needed and only in the amount necessary to make the deal work. Gap funds could come from multiple sources.

We do not compete with banks and in no instance will economic development financing replace bank
financing. Public financing exists to supplement private financing in order to move worthwhile economic development projects forward.

The UMVRDC Revolving Loan Fund is designed to provide gap financing for business and industry starting up or expanding in the five-county region of Big Stone, Chippewa, Lac qui Parle, Swift and Yellow Medicine. The primary focus of the program is manufacturing and industrial-related businesses that will create or retain jobs.

Eligibility: Must be located in Big Stone, Chippewa, Lac qui Parle, Swift or Yellow Medicine Counties.

Requirements

  • Bank Participation
  • Business Plan
  • Past, Present and Future Financial Information

Financing Policies

Loan Size

  • $5,000 – $100,000

Type of Assets Financed

  • Fixed assets
  • Working capital
  • Real estate

Terms

  • Fixed assets financed up to 10 years
  • Real estate financed up to 20 years
  • Working capital up to 5 years
  • Average financing is 5 – 7 years
  • Scheduled balloon payments are sometimes utilized

Interest Rates

  • Not less than 4% below prime with a minimum of 4%
  • Most loans are made at 5 – 7%
  • Fixed rate

Equity

  • 10% borrower equity is encouraged

Collateral

  • All loans must be secured with available assets, inventory, real estate and personal guarantees

Repayment

  • Loan repayments must be made by electronic transfer (ACH) or a participation agreement with the lead lender

Other Requirements

  • Borrower must demonstrate a gap financing need

Download an informational RLF brochure

Download the UMVRDC RLF Application

View the current RLF Plan here

Following are links to assist you in starting or expanding your business:

 

Contact the Upper Minnesota Valley Regional Development Commission at 320-289-1981 or send an email to jacki.anderson@umvrdc.org for additional information.

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