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By Bill Amt |
Staff capacity is one of the key factors that affect loan fund performance. RLFs that use best practices in marketing, underwriting, servicing and other aspects of fund management tend to make more and sounder loans and have fewer defaults.
Evans notes that EPA will increasingly consider applicants’ RLF management experience. A recent study of the EPA RLF program by the U.S. GAO supports this, having found that expertise is “key to making [RLF] loans.” There are several places to which organizations can turn for this expertise.
RLF management is complex and time-consuming, but is often performed by staff who wear other professional hats and who do not have a lending background. For organizations that have made a commitment to use their own staff to administer a loan fund, RLF staff should at least be trained in the principles of RLF management, credit analysis and structuring deals that use EPA RLF dollars to leverage other public and private funds. Such courses provide the firm foundation necessary for administering funds effectively and making loans that will be repaid.
Hundreds of public entities across the country manage economic development RLFs that provide capital to small businesses that cannot obtain bank financing on their own. Having a history as a lender means that these organizations that become EPA RLFs can hit the ground running.
South Florida Regional Planning Council has administered an EDA RLF since 1994. According to Terry Manning, South Florida’s senior planner, they were able to adapt their EDA RLF lending procedures and capital-leveraging experience to the EPA program and thus be the first and only RLF in EPA Region 4 to close a loan.
Manning also reports that having an economic development loan fund in-house allows them to serve a more comprehensive range of borrowers’ capital needs. For their second deal, they expect to use the EPA RLF for the cleanup portion of the project and its EDA RLF for gap financing of construction and land acquisition activities.
Partnerships
The GAO report also found that EPA has taken back about $12 million from inactive
RLFs. Limited experience and time to devote to the fund can result in little
or no activity. If training staff to build capacity is not an option but a grantee
wants to realize its goal of funding site cleanup, it should consider partnering
with organizations that have RLF experience. Partnerships are common in the
economic development RLF arena. Consulting organizations assist their clients
in a variety of ways.
EPA RLF partnerships are already gaining momentum. For example, the GAO report notes that Hennepin County, referred to by Evans, “Contracted with a nonprofit organization that specializes in servicing loans to manage its fund.” Building and supplementing grantees’ staff capacity will strengthen the EPA RLF program and result in an increase in loan volume and site cleanups. BFN
William Amt is senior program manager for NADO in Washington, D.C.
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