The Lake Cumberland Area Development District’s (LCADD) Revolving Loan Fund (RLF) program, established through a grant from the Economic Development Administration, U.S. Department of Commerce, was established to provide debt financing for businesses unable to obtain adequate market financing for projects of economic benefit to an area. The term "Revolving" relates to the fact that RLF capital is replenished as loans are repaid and recycled into new loans. These are one-time, direct loans, not revolving lines of credit.
Purpose - The Lake Cumberland Area Development District’s Revolving Loan Fund Program is designed to work in conjunction with private lending sources to provide financing for economic growth and job creation/retention. The prospective borrowers for the RLF are new or expanding companies that need funding to fill the “gap” between their equity and the amount lenders are willing to extend for a project.
Eligible Uses - Only businesses with projects located within the ten-county service area of the Lake Cumberland Area Development District (Adair, Casey, Clinton, Cumberland, Green, McCreary, Pulaski, Russell, Taylor & Wayne) are eligible for loans from the LCADD-RLF. These loans must be for the establishment of new businesses, expansion of existing businesses, creation of employment opportunities, or retention of existing jobs. Such loans may include, but are not limited to:
· Purchase of equipment, machinery, and/or fixtures including related costs
· Business and industrial acquisitions when the loan will keep the business from closing, prevent the loss of employment opportunities, or provide expanded job opportunities.
· Business construction, conversion, enlargement, repair, modernization, or development.
· Leasehold improvements
· Working Capital
Ineligible Activities - Loans from the LCADD-RLF will not be used for the following purposes:
Speculative activities (i.e., land banking and the construciton of speculative buildings).
- Debt consolidation or repayment
- Relocation of jobs from one labor area to another.
- Investment activities (i.e., loans for the purpose of investing in high interest accounts, certificates of deposits or other investments not related to job creation/projects).
- Conflict-of-interest loans to officers or employees of the LCADD, or any current or former members of the RLF committee or anyone who reviews, approves, or otherwise participates in decisions on RLF loans. Loan activities which directly benefit these individuals or persons related to them by blood, marriage or law will be prohibited.
- When fixed assets are leased, lease costs cannot be included as an eligible item for a direct fixed asset loan.
- Revolving or open-end working capital loans.
- Purchase or finance equity in private business.
- Subsidy of interest payments on existing loans.
Loan Size - Loans will not ordinarily be made in an amount less than $10,000 or greater than $200,000 to any one entity or company. The RLF investment cannot exceed 33% of the total project.
Equity Requirements - The RLF will require a minimum of 10% equity injection to be provided by the borrower. The equity requirement for 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…………………….15 years
· Machinery and Equipment…………………….7-10 years
· Working Capital………………………………….5 years
Interest Rates - The interest rate on RLF loans will be indexed to the prime rate as published in the Wall Street Journal and will be at a fixed-rate within the range of two to four points below prime, however the interest rate minimum is four (4) percent. Interest on loans will be compounded monthly.
Collateral Requirements - When an applicant participates with a private lending institution the lending institution will generally hold the first lien with the LCADD taking a second or junior position. LCADD employs standard collateral requirements; sufficient and appropriate collateral is required for all loans. Corporate guarantees or personal guarantees will be required of any entity having ownership interest of 20% or more in the business.
Creation of Jobs - LCADD will require that for every $20,000 in RLF dollars loaned to a borrower, one full-time job will be created or retained.
Loan Process - Because the Lake Cumberland 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 LCADD.
Potential borrowers are encouraged to contact the LCADD office, to speak with the RLF Manager prior to submitting the application form. Once the application has been completed and submitted by email, fax, or mail, applicants are encouraged to come to the LCADD office for a preliminary review of the company’s application, business plan, and the financial statements.
Following the meeting the RLF Manager will begin screening the project for both its conformance with EDA 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 full required documentation along with a non-refundable application fee to the LCADD Loan Review Committee. The RLF Manager will provide assistance in completing the loan application if necessary.
All applications must receive the approval from both the LCADD Loan Review Committee and the LCADD Executive Committee before the loan can be approved.
Loan applications need to be submitted a minimum of 30 days prior to Lake Cumberland Area Development District Executive Committee's monthly meeting, which is the second Wednesday of each month.
Please note that, due to the nature of the program in which all principal and a portion of the interest from existing loans is used to replenish the loan fund, money is not always available to be lent. Please contact the loan fund staff to determine if sufficient funds are available prior to submitting an application.
Click here for the LCADD - RLF Application
(LCADD-RLF Application is under construction at this time)
For Additional Information Plaease Contact:
Waylon Wright, RLF Manager
Lake Cumberland Area Development District
2384 Lakeway Drive
P.O. Box 1570
Russell Springs, Kentucky 42642
Phone: (270) 866-4200
Fax: (270) 866-2044
Director, Community & Economic Development Department