Loan Participation Program
Please note that we are in the process of launching a new iteration of this program which is described below. We anticipate it launching on August 29, 2022.
The Loan Participation Program is a small-business credit enhancement program that works with local lenders across North Carolina to help expand access to capital. The original “1.0” Loan Participation Program (LPP) was launched in 2011 and has been operating for more than a decade (more information can be found here).
We are launching a new “2.0” version of LPP which is described below. The program and process are largely the same, but do include some new features.
If you are a bank, credit union, or certified CDFI and are interested in taking advantage of this program, click here to contact us.
If you are a small business owner and are interested in taking advantage of this program, please contact a bank, credit union, or Community Development Financial Institution. If your business is seeking loan capital, your lender may be able to utilize this program to strengthen your request. However, you must work with a lender, as this program does not provide either loan or grant capital directly to small businesses.
Small Businesses Face Barriers When Seeking Financing
Many small and medium sized businesses lack the cash equity required to meet Institutional Lenders’ loan-to-value minimum desires or requirements, creating a risk gap which prevents the loan from being injected into the local economy.
The LPP Solution
Utilize our Loan Participation Program to obtain a 20% ‘injection’ of subordinated debt, de-risking the loan in an incremental manner so as to make the transactional risk acceptable for the Institutional Lender.
What Lenders Need to Know
- LPP is available through partner lenders (banks, credit unions, and CDFIs) in all of North Carolina’s 100 counties. The Center does not directly administer loans to small-business owners. Instead, borrowers apply directly through our partner lenders.
- To participate, lenders must submit an initial application on behalf of their organization and sign a Master Loan Participation Agreement with the Rural Center.
- We will purchase up to 20 percent of an eligible term loan made to a small business through a partner lender, defined as a business with 500 or fewer employees.
- Our minimum participation is $30,000. Our maximum participation is $400,000. Our terms match those set by the originating lender.
- We have a new program feature focused on addressing the social and economic barriers faced by many small business owners. For businesses at least 51% owned by individuals who identify with a group that has faced racial or ethnic prejudice, or cultural bias, including but not limited to people of color, women, veterans, and rural residents:
- The Rural Center will purchase up to 30 percent of an eligible term loan made to a small business through a partner lender
- The Rural Center’s maximum loan participation is $450,000.
- Partner lenders maintain responsibility for managing and servicing all loans.
For more information, please review and download the following materials. To contact us for more information in the interim, please click here.