10/31/08 — “We’re very pleasantly surprised at the size of the loan we got,” said William Bragg, president of the Economic Progress Alliance of Crawford County.
Very pleasantly surprised, indeed. The $500,000 rural development loan, ceremonially delivered Thursday afternoon on behalf of the U.S. Department of Agriculture by Rural Development State Director Gary Groves, increased the alliance’s $1 million Intermediary Relending Loan Fund by a full 50 percent. The local fund, which now totals $1.5 million, is used to promote economic development by making low-interest loans and guarantees available to area businesses.
In explaining the workings of the fund, Mark Turner, the alliance’s executive director, describes the USDA as playing the role of a federal bank and the alliance playing the role of a local bank. “We borrow it at 1-percent fixed interest,” he explained. “We mark it up and lend it out, still at below-conventional rates, to local businesses — and we make a margin on that.”
Although it’s officially a loan, all the federal government really expects to be paid is the interest, Groves explained. “We’re investing in rural Pennsylvania,” he said. “A majority of it is going to be paid back to the government — and it becomes a revenue stream for the treasury.”
As a result, as time goes by, the money lent out is repaid, the alliance collects a little more interest than it owes to the federal government, and the program revolves. “It’s somewhat altruistic,” Turner said. “We’re an economic development organization, but our real motive is to get our money back so we can lend it to the next person.”
“There’s never been a default,” said Republican state Sen. Bob Robbins, who represented Republican U.S. Rep. Phil English at Thurs-day’s presentation. “People are vetted properly at the local level.”
Turner agreed. “Every-body’s current,” he added. “It’s part of the Crawford County ethic, I think. When people borrow money, they intend to pay it back. And they do pay it back.”
Currently, the alliance has $850,000 loaned out, is waiting for approval on approximately another $100,000, and has funds set aside for the required 5-percent reserve, Bragg said.
According to Turner, none of the funds received are used for administrative or operating costs. “It’s all used to save or create jobs,” he said.
As for the additional funds received Thursday, “at the time of our application, which probably goes back 60 days or maybe longer, we had five local manufacturers standing in line, looking primarily for equipment lending,” Turner said. “That number is growing; it’s probably closer to eight or nine by now.”
While the alliance has a backlog of potential borrowers waiting for capital, Turner doesn’t see the lineup as being a response to the nationwide financial crisis. “Most of it is related to the growth that’s occurring in manufacturing in the region,” he said.
Groves was pleased to report that the program doesn’t include any of the now-infamous congressional earmarks. “It’s put into the agricultural appropriations in the Farm Bill,” Groves said. Although this particular funding was provided under the 2002 federal Farm Bill, he added, the program will be continued in the most recent version, which became law in June and sets priorities for the next five years.
Local News
County gains $500K loan for development
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