THE APPALACHIAN DEVELOPMENT CORPORATION
LOAN FUND

THE APPALACHIAN DEVELOPMENT CORPORATION
LOAN FUND WITH COMMUNITY REINVESTMENT FUNDS

SBA 504 LOAN PROGRAM

THE APPALACHIAN DEVELOPMENT CORPORATION
LOAN FUND

What is the Appalachian Loan Fund?

The Appalachian Loan Fund (ALF) is a locally controlled source of low cost, long term; fixed rate financing for businesses whose projects will result in the creation of permanent full time jobs, and leverage private sector investment. As the ALF borrowers repay their loans, the payments increase the fund for relending to other businesses for additional job creation and investment. The Appalachian ALF is a loan pool capitalized by grants from the Appalachian Regional Commission, the State of South Carolina, and from borrowings from the US Department of Agriculture. Loans are available for small to medium size businesses in Anderson, Cherokee, Greenville, Oconee, Pickens, and Spartanburg Counties. The ALF is administered by the Appalachian Development Corporation, a private non-profit corporation equal opportunity lender.

Does the ALF compete with Financial Institutions?

No. The Appalachian ALF will complement lending activities of commercial banks. The ALF is designed to provide "gap financing." The ALF can fill the gap between what a financial institution can lend on a project and what the business can provide in equity. ALF loans will generally assume a subordinate position to the private lender.

What types of loans can be made?

ALF funds can be used to finance fixed assets such as land, building, machinery, equipment, real property improvements, etc. Working capital loans are also available. Refinancing of existing debt is not eligible.

What businesses are eligible?

The ALF program can assist manufacturing, industrial, service, and some retail firms. Restaurants and similar retail food-related firms are not eligible. Projects financed with ALF dollars must create at least one job per $25,000 in ALF funds loaned. At least 50 percent of the project cost must come from private sources. The business must contribute at least 10 percent of the project cost in equity.

The Advantages for you the Borrower

For you as a business owner/borrower, the ALF can finance a portion of your project at a below market interest rate and reduce you initial equity contribution. It improves the borrower's relationship with his financial institution as it reduces the borrowers risk with the financial institution. With the flexible terms of the ALF working with the financial institution an attractive financing package can be offered the borrower.

• Business start-up or expansion must result in the creation or retention of permanent jobs.
  
• The ALF loan must leverage private sector investment, either loans or equity.
  
• The business/borrower must contribute at least 10 percent of the project cost in equity.
  
• Generally, ALF loans will not exceed $200,000, nor be for less than $20,000.
  
• The maximum loan term for fixed assets is 15 years, - 5 years for working capital.
  
• Interest rates are normally fixed but can be variable if both borrower and lender agree.
  
• Interest rates will normally be less than market or prime rate with comparable repayment terms.
  
• There is a loan origination fee payable at closing, and borrower is responsible for all closing costs.
  
• The borrower must show that their business will generate sufficient cash flow to repay the debt being requested.
  
• Each loan must be adequately collateralized with business or personal assets.
  
• Personal guaranties will be required of all principals owning 20% or more of the business.
  
• The business and principals must be credit worthy and meet the under writing guidelines of the ALF.
  
• ALF loans may not be used for the relocation of a business from one state to another.
  
• Compliance with Federal Non-Relocation, Civil Rights and other Federal regulations is required.
  
• Businesses must complete an ALF application to be considered.
  

THE APPALACHIAN DEVELOPMENT CORPORATION
LOAN FUND WITH COMMUNITY REINVESTMENT FUNDS

What is this Program?

The Appalachian Loan Fund (ALF) is a locally controlled source of long term, fixed rate financing for existing businesses whose projects will result in the creation of permanent full time jobs, and leverage private sector investment. This program is partially capitalized by grants from the Appalachian Regional Commission, the State of South Carolina, and loans from US Department of Agriculture, and supplemented with funds from the Community Reinvestment Fund. These loans are available for small to medium size businesses in Anderson, Cherokee, Greenville, Oconee, Pickens, and Spartanburg Counties. This program is administered by the Appalachian Development Corporation, a private, non-profit corporation that complies as an equal opportunity lender.

Do the funds compete with Financial Institutions?

No. The funds will complement lending activities of commercial banks. These funds are designed to provide "gap financing" by filling the gap between what a financial institution will lend on a project and what the business can provide in equity. These funds will generally assume a subordinate position to the private lender.

What types of loans can be made?

These funds can be used to finance fixed assets such as land, building, machinery, equipment, real property improvements, etc. Working capital loans are also available. Refinancing of existing debt is not eligible.

What businesses are eligible?

The program funds can assist manufacturing, industrial, service, and some retail firms. Projects financed with fund dollars must create at least one job per $25,000 in funds loaned. At least 50 percent of the project cost must come from private lenders or sources. The business should contribute at least 10 percent of the project cost in equity.

The Advantages for the Primary Lender.

This program uses its own money to make and service loans. Other than a letter from the lender acknowledging the program participation, no other paperwork is required of the primary lender. Involvement by the Appalachian Development Corporation limits the risk of the primary lender. Use of the funds can lead to a lower blended interest rate for the borrower. The extended terms offered by the funds can improve the borrowers' cash flow improving the credit risk. Public funds involvement obtains Community Reinvestment Act credit.

Program Guidelines

• The loan must leverage private sector investment, either loans or equity.
  
• The business/borrower must contribute at least 10 percent of the project cost in equity.
  
• Generally, loans will not exceed $1,000,000, nor be for less than $200,000.
  
• The maximum loan term for fixed assets is 15 years, - 5 years for working capital.
  
• Interest rates are normally fixed but can be variable if both borrower and lender agree.
  
• Interest rates will normally be less than market or prime rate with comparable repayment terms.
  
• There is a loan origination fee payable at closing, and borrower pays all closing costs.
  
• The borrower must show that their business will generate sufficient cash flow to repay the debt requested.
  
• Each loan must be adequately secured with business or personal assets.
  
• Personal guaranties will be required of all principals owning 20% or more of the business.
  
• The business and principals must be credit worthy and meet under writing guidelines.
  
• Loans may not be used for the relocation of a business from one state to another.
  
• Compliance with Federal Non-Relocation, Civil Rights and other Federal regulations is required.

SBA 504 LOAN PROGRAM

The Appalachian Development Corporation (ADC) is certified by the Small Business Administration as a Certified Development Corporation with a primary area of coverage being the six counties of the upstate, and a secondary area of anywhere in the State of South Carolina. The ADC operates the 504 program in conjunction with the local financial community who provides primary financing on projects.

The SBA 504 Loan Program provides long-term, fixed rate, subordinate financing for acquisition and/or renovation of capital assets including land, buildings and equipment. Virtually all types of for-profit businesses are eligible for this program.

SBA 504 Loan Program Highlights

• The typical financing structure for existing businesses consists of a 50% first mortgage by a financial institution, 40% through the SBA 504 program with a second lien position, and the applicant has to contribute 10%. For Startup businesses the maximum amount of 504 funding is 35% of the project.
• The SBA portion through the ADC can be up to 40% with a normal maximum of $2,000,000. Manufacturing companies have a maximum of up to $4,000,000.
• The term for the SBA portion is either 10 or 20 years with monthly payments.
• The interest rate is a fixed rate for the duration of the loan and is normally at or below market rates.
• Application processing through ADC is at no cost. Loan fees for the SBA portion normally cost between 2 and 3.5% and are financed in the transaction.
• The financial institution sets its own interest rate, terms, and fees on its portion of the project.
• All project costs can be financed including acquisition costs and soft costs, such as life insurance, legal costs, appraisals, environmental reports, and bridge loan costs.
• Collateral typically consists of the assets being financed leaving other company assets available as collateral for other borrowings.