A revolving loan fund (RLF), sometimes referred to as a microloan program, is a pool of money where loans are made and the repayments are returned and lent out again, which then allows for other similar investments.
For our purposes, we are looking at a revolving loan fund focused on small businesses. There are thousands of low-interest, small business loan programs available to small businesses that are available through states, counties, cities, local economic development agencies, and not-for-profits. Funding for these programs comes from a variety of programs such as the Small Business Administration (SBA), Economic Development Administration (EDA), United States Department of Agriculture (USDA), etc. These funds are used locally to finance small business start-up and expansion projects that will create permanent jobs.
Local revolving loan programs are available as an economic development tool to help communities prosper by providing financing for entrepreneurs who are not able to secure sufficient capital from banks. This allows for the hiring of jobs, which ultimately helps the community. These programs focus more on job creation than credit score, improving access to small business funding and growing communities. Additionally, an RLF is often provided at a lower interest rate and may not require as much collateral or equity as a bank.
Occasionally an RLF can fund an entire project, but more often they are used in combination with bank financing.
Click on your state below to learn more about revolving loan funds in your area.