Last Updated January 26, 2010
Intermediary Relending Loan Program (IRP)
Offering revolving loan funds for rural small business and community development projects
The Intermediary Relending 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.
- 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.
An intermediary may borrow up to $2 million under its first financing and up to $1 million at a time thereafter. Total aggregate debt is capped at $15 million. In recent years, loans to intermediaries have been capped at $750,000. Ultimate recipients may borrow up to $250,000.
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.
Intermediaries develop their own application procedures for ultimate recipients.
Factors considered in judging applications from intermediaries include:
- Financial condition
- Assurance of repayment ability
- 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
The following entities are generally eligible to apply for loans from intermediary lenders provided they owe no delinquent debt to the Federal Government:
- Individual citizens or individuals who have been legally admitted to the U.S.,
- Those located in a rural area defined as an area with a population of 25,000 or less,
- An entity that is able to incur debt, give security, and repay the loan,
- A corporation, partnership, LLC, individual, nonprofit corporation, public body.
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.
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.
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.: www.rurdev.usda.gov/recd_map.html