Intermediary Relending Loan Program (IRP)

Loans to establish revolving loan funds for rural businesses and community development

The Intermediary Relending Loan Program (IRP) provides direct loans at 1 percent interest to intermediaries for establishing revolving loan funds for small businesses and community development projects in rural areas.

Intermediaries are nonprofit organizations or public agencies that relend money through loan pools to ultimate recipients, including businesses, individuals and others such as Indian groups or Cooperative Ultimate.

Final recipients of loans from IRP revolving loan funds involved in agricultural production are not eligible. However, businesses processing, packaging, and marketing agricultural products will be considered.

Project Examples

As part of the Pacific Northwest Economic Adjustment Initiative, an IRP loan of $1.5 million supplemented an existing revolving loan fund for relending to small businesses in rural Jackson and Josephine counties in Oregon. Businesses that create or retain permanent jobs involving skills related to manufacturing, industrial production, and wood products are given preference. Southern Oregon Regional Economic Development, Inc., the intermediary, estimates that by targeting a maximum of $20,000 per full-time equivalent job created or saved, the IRP loan will create or save at least 50 jobs in the fund's first round of loans in these communities.
The North Kennebec Regional Planning Commission in Maine made a $150,000 working capital loan to KD Wood Products out of its revolving loan fund, created with a $2 million IRP loan. KD Wood Products buys lumber from local sawmills and processes it into about 200 different products, including unfinished furniture and lawn and garden items, such as fences, edging, and planters. KD used the loan to expand its operations and create new jobs.
In Salem, OR, BC Hop Farms, Ltd. received a loan from the local revolving loan fund established with IRP funds. BC Hop Farms provides processing facilities for local farmers who grow hops and contract with breweries for sale of their processed hops. The loan was used for building construction and purchase of equipment to expand existing facilities, providing the capacity to process a larger volume of hops.
American Cedar, Inc., of Arkadelphia, AR, received loans of $225,000 from a local revolving loan fund, partially funded by IRP. American Cedar produces dimensioned lumber, finished lumber, finished panels, closet accessories, decorative moth repellents, and custom products for the domestic and international markets. Wood shavings from the manufacturing process are also sold to local horse stables.

Application and Financial Information
Intermediaries with experience and expertise in running revolving loan funds apply to the USDA state offices of Rural Development. Applications are considered in a quarterly national competition.

Loans to intermediaries average $812,000. Intermediaries receive a 30-year loan with a fixed annual interest rate of 1 percent. The funding available for fiscal year 2002 was $38 million.

Loans made by intermediaries from the revolving loan fund are limited to $250,000 per ultimate recipient. Intermediaries develop their own application procedures for ultimate recipients. Factors considered in judging applications from intermediaries include:

Financial condition
Assurance of repayment ability
Equity
Collateral
Experience and record of managing a loan
A programmer providing other assistance to rural businesses Ability to leverage with funds from other sources
The extent assistance would flow to low-income people

Eligibility, Uses, and Restrictions
Nonprofit corporations, public agencies, Native American tribes, and cooperatives are eligible to receive IRP funds as intermediaries. Intermediaries must have adequate legal authority and a proven record of successfully assisting rural businesses and industries.

The ultimate recipients of loans from IRP revolving loan funds can be for-profit organizations, individuals, and public and private nonprofit organizations. They must be located in unincorporated areas or cities with populations under 25,000.

Both intermediaries and ultimate recipients must be unable to obtain the loan at reasonable rates and terms through commercial credit or other federal, state, or local programs.

Final recipients of loans from IRP revolving loan funds involved in agricultural production are not eligible. However, businesses processing, packaging and marketing agricultural products will be considered.

Intermediaries may not use IRP funds to finance more than 75 percent of the cost of an ultimate recipient's project or for a loan of more than $250,000 to one ultimate recipient.

Contact
For a list of intermediaries and their service areas, more detailed information, or an application, contact your USDA state or district office of Rural Development (formerly the Farmers Home Administration).

Lori Washington
National Program Office
Rural Business-Cooperative Service
Specialty Lenders Division
1400 Independence Avenue, SW
Washington, DC 20250-3225
Phone: (202) 720-9815; Fax: (202) 720-2213
E-mail: lori.washington@usda.gov

Internet
www.rurdev.usda.gov/rbs/busp/irp.htm

Last Updated December 28, 2004