October 23, 2019 – Jim Tank, Bi-State Revolving Loan Fund (RLF) Board Member and RLF Program Representative to Bi-State Regional Commission, and Donna Moritz, Revolving Loan Fund Program Administrator, presented information about the Revolving Loan Fund Programs in the Bi-State Region.
Bi-State Revolving Loan Fund Program. The Bi-State Revolving Loan Fund in Rock Island and Scott Counties is celebrating 34 years of providing gap financing to businesses. Since the inception of the program in 1985, over $10.7 million has been loaned to 114 businesses in Rock Island and Scott Counties. These loans have helped generate nearly $441 million in total investments, accessing city and state public financing programs, financial institutions, and company equity. In addition, over 3,900 jobs have been created/retained in the two county area. Currently, there is approximately $800,000 available to loan.
Mercer-Muscatine Revolving Loan Fund Program. There have been $598,000 loaned to businesses in Mercer and Muscatine Counties. These loans have helped generate over $43 million in total investments. Currently, there is $400,000 available to loan for Mercer & Muscatine businesses.
Henry County Revolving Loan Fund Program. Henry County’s RLF program is administered by Jim Kelley and has approximately $628,000 available to loan to Henry County businesses with very similar requirements. Information for this program is on Henry County’s website at www.henrycty.com.
Program Guidelines and Processes. Companies in need of gap financing can find an application and program guidelines at www.bistateonline.org by clicking the RLF Programs link on the left hand side of the home page. They should submit this application to the community’s economic development staff where the business is located or to Bi-State Regional Commission. They need to prove their need for gap financing by providing a letter from their primary project lender/financial institution stating the gap and reason for not fully providing total lending. RLF funds cannot be used when conventional financing is available.
The loan amount is based on number of jobs the business will create or retain in two years. Other criteria reviewed included an owner of 20% or more must provide a personal guarantee, 10% of the total project cost should be funded by owner equity, adherence to federal laws and regulations is required, and the loan will be collateralize with a security agreement, mortgage, and/or UCC filings. Total public funds into a project maximum are 1/3. Once the application satisfies community and RLF staff reviews, the RLF Board determines if the project and loan request is approved.
Loans terms are typically 3 years for working capital, 5 to 7 years for equipment, and 7 to 10 years for real estate/fixed assets. The interest rate is below market with a floor of 75% of prime. Priority is given to manufacturing/industrial projects, then service, and lastly to retail businesses.
Risk Rating System for EDA RLF programs. There are six categories: capital, assets, management, earning, liquidity, and strategic results for a total of 15 measurements. A score is given that affects reporting frequency and could result in a corrective action plan. The Bi-State and Mercer-Muscatine RLF programs scored an A and B respectively, doing well in all categories and measurements except liquidity. There is too much cash available to lend compared to other programs in this EDA region. There are two years to improve this measurement until a corrective action plan, sequestration, or possible return of grant funds to EDA would be required.
Bi-State Regional Commission followed up on marketing suggestions from last year and has contacted bankers, credit unions, business brokers, Chamber and Small Business Development Centers, and SCORE and presented the program to other organizations, creating working relationships with many of these organizations. There was an increase in inquiries, and Bi-State is hopeful these contacts will continue to provide potential applicants.