LaPorte County Revolving Loan Fund Program
The Revolving Loan Fund program is one of several tools of the U.S. Department of Commerce, Economic Development Administration (EDA), available to assist areas of high unemployment. A Revolving Loan Fund (RLF) is a pool of money used by an eligible recipient for the purpose of making loans to achieve certain economic benefits. As the loans are repaid by borrowers, the money is returned to the Fund to make other loans. In that manner, the Fund becomes an ongoing or “revolving” financial tool.
The goal of the RLF is private-sector job creation and capital formation. RLF’s are not substitutes for conventional lending sources. Given the small size of the RLF program and the limited resources of each project, Revolving Loan Funds are not intended to match or replace the capacity of lending organizations. RLF’s are designed to fill gaps in existing local financial markets and provide or attract capital which otherwise would not be available for economic development.
High unemployment rates in the region in the mid 1980’s initiated LaPorte County to search for a way to spark economic development. The revolving loan grant was pursued from the Economic Development Administration and the Northwestern Indiana Regional Planning Commission was chosen to administer the revolving loan fund given its neutrality in the Region and its capacity to run the program. In 1987, the Commission established the LaPorte Revolving Loan Fund to account for financial resources used for the revolving loan fund program in LaPorte County. The principal participants in the LaPorte County Revolving Loan Fund are the City of La Porte, the City of Michigan City, and the Economic Development Administration.
An eligible applicants proposed location of business must be within LaPorte County but is preferred to be within the city limits of Michigan City or La Porte. The major goals of stabilizing the economy, diversifying the economy, and reducing unemployment will be taking place primarily in the two cities. The business can be either a private for-profit or non-profit firm, industry, corporation, partnership or sole proprietorship.
Loans will not ordinarily be made in amounts less than $10,000 or more than $200,000 to any one company or organization, with an average loan expected to be between $50,000 and $150,000. In addition, the fund shall not usually have more than $200,000 in credit outstanding to any individual borrower at one time. Active loan(s) to a single borrower will not exceed 25% of the LaPorte County RLF lendable capital. The minimum interest rate the LaPorte County RLF can charge is 4 percentage points below the current money market center prime rate quoted in the Wall Street Journal for loans of similar size, maturity, and purpose; or the maximum interest rate allowed under State law, whichever is lower, but in no event shall the interest rate be less than 4%. However, should the prime interest rate exceed 14%, the minimum LaPorte County RLF interest rate is not required to be raised above 10% if doing so would compromise the ability of the loan recipient to implement its financing strategy.
A non-refundable loan application fee of two hundred dollars ($200) will be charged to all loan applicants. If the loan is approved, the fee will be applied to the loan processing fee.
The standard loan documents must include, at minimum, the following:
- Loan Application;
- Loan agreement;
- Board of directors’ meeting minutes approving the RLF loan;
- Promissory note;
- Security agreement(s);
- Deed of trust or mortgage (as applicable);
- Agreement of prior lien holder (as applicable); and
- Signed bank turndown letter demonstrating that credit is not otherwise available on terms and conditions that permit the completion or successful operation of the activity to be financed. EDA will permit NIRPC to accept alternate documentation only if such documentation is equivalent to the bank turndown letter.
The following is the targeted percentage breakdown of borrowers for the LaPorte County RLF program. It is anticipated that the breakdown of borrowers by percentage of dollar amount is as follows:
- Public/Private (Ownership): 0/100
- Fixed Asset/Working Capital: 70/30
- Start-Up/Expansion/Retention: 40/50/10
- Locally owned/Outside owned: 70/30
- Industrial/Commercial/Service: 60/15/25
The LaPorte County RLF’s target job/cost ratio is one job created or retained per every $25,000 of proceeds used. Applicants with a lower investment per job will be given priority over larger investments per job.
For more detailed information regarding the LaPorte Revolving Loan Fund please reference the LaPorte County Revolving Loan Fund Management Plan.
REVOLVING LOAN FUND DOCUMENTS: