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 repaid payments recapitalize the fund to promulgate relending to other businesses that will generate additional job creation and investment. The ALF is comprised of funds capitalized by grants from the Appalachian Regional Commission, the State of South Carolina, and loans from US Department of Agriculture. ALF loans are available to for-profit small to medium sized businesses in Abbeville, Anderson, Cherokee, Fairfield, Greenville, Greenwood, Laurens, McCormick, Newberry, Oconee, Pickens, Spartanburg, and Union Counties.

The ALF will complement lending activities of commercial banks. The ALF can provide funding that will fill the gap between what a financial institution will lend on a project and what the business can provide in equity. ALF loans will generally assume a subordinate position to the lender.

ALF funds are used to finance fixed assets such as land, building, machinery, equipment, and real property improvements and can also be used for working capital. Refinancing of existing debt is not an eligible use of ALF funds.

The ALF uses public funds to make loans. A commitment letter from the lender acknowledging the participation of the ALF is required for participation in the ALF loan program. Involvement by the Appalachian Development Corporation through the ALF limits the risk of the primary lender. Use of the ALF can lead to the borrower obtaining a long term fixed rate to improve the maturity risk associated with a standard commercial loan structure. The extended terms offered by the ALF can improve the borrowers’ cash flow. ALF involvement provides Community Reinvestment Act credit for the bank by having the ADC participate as a subordinate lender. Through the participation of the ALF, the borrower can have a reduced equity requirement . With the flexible terms of the ALF working with the financial institution, an attractive financing package can be offered to the borrower.

ALF Guidelines

  • 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.
  • 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 underwriting guidelines.
  • 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. The ALF loan must leverage private sector investment, either loans or equity.

This institution is an equal opportunity provider and employer.

pdf Download the ADC Application