Revolving Loan Funds (RLF) serve as sources of critical financing when credit access remains limited, supporting the development and expansion of small businesses, property owners, micro-enterprises and other special initiatives. RLFs are self-replenishing pools of money that utilize interest and principal payments on past loans to issue new ones, providing access to flexible sources of capital that can be used in combination with more conventional sources. Often, a RLF will act as a bridge between the amount the borrower can obtain on the private market and the amount needed to start or sustain a business or project, issuing loans at market or otherwise competitive and attractive rates while maintaining the ability to lower overall risk for institutional lenders (if any).
Virginia Main Street has created the Revolving Loan Funds: A Basic Overview document for communities and organizations, highlighting typical loan uses, loan characteristics and how to capitalize RLFs. The overview also details steps and tips for starting an RLF, as well as how to effectively administer and report the outcomes and impacts of funds.
Here are two great examples of how RLF programs have aided downtown revitalization and small businesses:
Fredericksburg VA Main Street (FVMS) was awarded a $25,000 Downtown Investment Grant (DIG) to establish an RLF for new and existing businesses. The fund has stimulated further revitalization and enhanced the physical appearance of the district by making improvements to historic commercial properties and businesses. Brianna Lopez (pictured below), owner of X-Quizit Coffee Roasters, used funds to purchase K-Cups and heat press printing equipment to add new product lines for retail and eCommerce sales!
Downtown Blackstone, Inc. (DBI) was awarded a $25,000 Downtown Investment Grant (DIG) to establish an RLF for new and existing business owners. The fund has been a valuable resource for downtown merchants, seeking to improve their storefronts, signage, and make other property related investments. Christy Aviles (pictured below), owner of Body Beautiful Fitness Studio, utilized funds to commission an artist to create an intricate mural, featuring a mandala and other designs that serve as an extension of her business’s mission to help clients achieve internal harmony and external radiance.