Economic Development Float Loan Program:
The State of Alabama Economic Development (ED) Float Loan
Program funds short-term loans which will be made out of appropriated, but
unexpended, Community Development Block Grant (CDBG) program funds (such funds
may be from any fiscal year) that may have been allocated to specific program
activities. The purpose of ED Float Loans is to allow the State to fund
activities necessary to take advantage of economic development opportunities,
which will principally benefit low and moderate income persons. Funds used for
short-term loans will come from all categories of grants. A reasonable amount of
program income or recaptured funds may be used to provide a grant to administer
a float loan. As loans are repaid, the repayment principal will be used to
restore all funds from which the moneys originally came while any interest paid
will generally be used to increase the State’s CDBG ED Fund. The amount of funds
available for the float loan program will be determined by careful monitoring of
the fund flow needs of the CDBG program. Because the State recognizes that the
float loan program entails some risk, each request will be analyzed on the basis
of the need of grants previously funded. Float loans will be made only after it
has been determined, to the maximum extent possible, that the amount and term of
any float loan will not commit the state’s letter of credit balance to the
degree that other previously funded grants are delayed or jeopardized. Float
loans may come from more than one year’s funds with the amount from one year
being less than the minimum. Eligible applicants for ED float loans are all
non-entitlement local governments that meet eligibility thresholds listed. The
Float Loan program will be governed by the following requirements:
A primary objective of the float loan program is to expand
economic opportunities, principally for persons of low and moderate income.
Normally, the program will be used only to aid in the creation of new jobs and
on projects where there is likely to be a substantial economic development
impact. In exceptional circumstances the float loan program may be used to help
retain jobs. Of the jobs to be created (or retained), at least 51% must be
occupied by or made available to low and moderate income persons. If float loans
are made in order to retain jobs, the applicant must clearly demonstrate that,
without CDBG assistance, the jobs would be lost.
The float loans can be used to finance any necessary
activity including acquisition, site preparation, new construction, renovation,
purchase of machinery and equipment, working capital, refinancing, and other
CDBG eligible activities approved by the State.
Loan Amounts and Terms:
The minimum float loan amount shall be $1 million and the
maximum amount shall be $10 million. The maximum and minimum float loan amounts
may be waived by the State when significant long-term economic benefits for low
and moderate income persons are involved. The loan term will normally be for one
year with an option to extend for one more year. Interest earned on float loans
will be treated as program income and will be used for CDBG eligible activities.
Applications for ED float loans will be considered on a
continuous basis. However, due to the unique nature of this program, the State
intends to fund only a limited number of projects. Prior to accepting any
application, the State will require a thorough review of the project with the
State. Float loan funding decisions will be based on the following factors:
- Conformance with the national objective.
- Loan security (Loan security shall be in the form of an
irrevocable letter of credit or such other security acceptable to the State).
- Number of jobs involved.
- Private investment.
- Unemployment/community distress.
- Job diversification.
- Indirect/Spin-off benefits.