eCommunity Loan Fund

The eCommunity Leadership Teams works closely with their Regional Entrepreneurship Advisor to establish a loan structure and process to effectively deploy loan dollars in their community.

Loan Eligibility, Financial Review Board and Deal Flow

1. 1. The funds must be utilized to provide matching loans to for-profit, small businesses in the defined eCommunity.
   2. Loan Minimums and Matching Criteria
      1. Maximum loan size should be limited to $50,000 or less per business. (Note: If a business receives a $50,000 loan and pays it down to $30,000, they are eligible to apply for an additional $20,000, assuming the second loan has its own unique match).
      2. eCommunity funds require a match from a public source of capital (CDFI, community foundation, USDA loan, microloan fund, etc) and/or a private source (bank or credit union.)  eCommunity loans can match up to 150% of the public/private contribution.
   3. Acceptable usage of funds
      1. Purchase of land, purchase of real estate, purchase of business inventory, purchase of business equipment, blue sky (typically associated with purchasing of an existing business), and working capital
   4. Unacceptable usage of funds
      1. Paying off or refinancing debt, salary or owners draw, payroll taxes, and building renovations not tied to a specific business
   5. Rate of Return
      1. Loan funds should expect a competitive rate of return and are designed to provide sustainability to the eCommunity initiative.
      2. Loans of 1-5 years have an interest rate of 4%
      3. Loans of 6-10 years have an interest rate of 6%
      4. No loans should be awarded for longer than a 10 year payback time
   6. eCommunity Financial Review Board
      1. This board is typically a subset of the leadership team and can meet on a regularly scheduled basis or as needed. Members of the Financial Review Board should be knowledgeable of a variety of business projects, including start-ups and expansions, assisting them with resources and information needed to be successful, especially during their beginning stages.
   7. Deal Flow
      1. This is a gap financing fund; dollars are “last-in” and must accompany a loan from a public and/or private source.
      2. Private and public lending institutions (banks, economic development organizations, other lending institutions and resource partners) drive deal flow to the eCommunity loan fund.  It is important that entrepreneurs recognize that the first stop should always be a bank.  If the bank wants to, and can, provide all the capital the entrepreneur needs, they should.  However, in a well-functioning eCommunity, the banks know that this eCommunity fund exists and why it exists – not to compete with the bank, but to allow the bank to augment their risk.

Sample Loan Fund Opportunity

Below is a basic example of how eCommunity Loan Funds can be utilized.

Total Funding Needed:  $60,000
Funding Source	Amount
Applicant’s Own Capital	$10,000
eCommunity Loan Funding	Up to $30,000 (60% of $50,000)
Financial Institution/Public Source of Funding	At least $20,000 (40% of $50,000)
Total Funding	$60,000