Capital Access Program
The ADFA Capital Access Program's purpose is to make funds available to borrowers who for various reasons might otherwise have difficulty in obtaining conventional bank loans.
It is specifically designed to be a Non-Bureaucratic process. A one-page enrollment form and a check for the enrollment fee, is all that is needed to enroll a loan in the program.Participating lending institutions build an earmarked off-balance sheet loan loss reserve account each time they enroll a loan in the program. A contribution is required to enroll the loan into the program. This contribution is paid by the Borrower (contribution can be financed as part of the loan) and shall not be less than 3% of the loan amount, nor greater than 7% of the loan amount. This contribution is then matched by ADFA for a total of 7.5% of the loan amount (150% of enrollment contribution for the first $1million in loans, after which, ADFA matches Borrower contribution at 100%) as the contribution to a lender's earmarked loan loss reserve account. At a maximum, 7% of the loan amount is paid up-front and matched by ADFA for a total of 17.5% contribution to the loan loss reserve. ADFA owns and controls the reserve, but it is designated for use by the bank and usually held on deposit at that bank.
The loss loan reserve fund is available on a pooled basis to be applied to any of the lenders Capital Access Program loans. The fund is maintained on deposit with the lender, in ADFA's name and invested at ADFA's direction.
The ADFA, as administrator, is not a party to loan transactions and plays no role in underwriting, approving or servicing the loans. This program is structured to be highly non-bureaucratic, while at the same time assuring risk-taking by lenders.
Fees paid into a loan loss reserve account are not considered interest for the purpose of Arkansas' usury laws. Legally, the fees paid into the loan loss reserve accounts represent a cost to the borrower for providing security for a loan, not compensation to the lender for the use of its funds. As structured, the lender never receives more than the principal, plus interest at its normal loan rate.
The average processing time for a loan is 3 to 5 days.
As of January 31, 2010, ADFA has enrolled 406 loans into the Capital Access Loan Program, totaling $17.473,040.
Also, as of January 31, 2010, only 28 claims have been filed against the reserves of the program. In all 28 claims, the balance in the reserve account covered 100% of the net loss recorded by the bank.
This loan program has been a lending incentive for working capital loans for several types of industry within the state, i.e. Agriculture, Manufacturing, Wholesale/Retail, Construction, Service, etc.
If you are interested in finding out more about this program, contact:
Cami Davis, Development Finance Division: 501-682-5900