Section 108

Loan Guarantee Program

Section 108 is the loan guarantee provision of the Community Development Block Grant (CDBG) program. In Alabama, Section 108 provides nonentitlement communities with an efficient source of financing for large-scale economic development projects.

Use of Funds

  • Acquisition of real property.
  • Rehabilitation of publicly owned real property.
  • Economic development activities eligible under the CDBG program.
  • Payment of interest on the guaranteed loan and issuance costs of public offerings.
  • Debt service reserves.

Source of Funds

  • Financed through underwritten public offerings.
  • Financing between public offerings is provided through an interim lending facility established by HUD.

Limits

  • $10 million not to exceed $35,000 per job.

Eligibility

  • Eligible applicants include non-entitlement communities that are assisted in
    the submission of applications by states that administer the CDBG program.
  • Proposed activities, generally, must be associated with an economic development
    project creating and/or retaining permanent jobs.
  • The project must generally fall in SIC Code 20 through 39, or consist of major
    warehousing or distribution centers, or other projects deemed to have significant
    economic development impact.
  • The applicant must have a commitment from the business to create or retain jobs
    and make private investment.
  • If a business has not yet been identified, then the applicant must commit to create
    a certain number of jobs within a specified amount of time acceptable to the state.
  • Beneficiaries of Section 108 Loan Guarantee projects must be at least 51 percent
    low and moderate income persons.

Ineligible uses

  • Intrastate relocation of a business, except when the relocation is caused by
    inadequacies in the existing location and the move will result in a greater
    number of jobs.

General

  • Security: pledge by the applicant of current and future CDBG funds; HUD may
    require additional security, and will always do so if the repayment period
    exceeds 10 years.
  • Repayment period: maximum is 20 years.
  • In addition to evaluation criteria in accordance with the Section 108 Final, the
    following will also be considered:

    • Section 108 dollars per permanent job.
    • Actual number of jobs to be created or retained.
    • Potential for spin-off benefits.