1 1 (June 09, 2020)

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               Researh Sevice

COVID-19: EDA Revolving Loan Funds for


June 9, 2020

Economic development revolving loan funds (RLFs) use funding from federal grants and other sources to
make loans to local businesses and in limited circumstances to communities for infrastructure and
development projects. The Economic Adjustment Assistance (EAA) program-administered by the
Department of Commerce, Economic Development Administration (EDA)-is a source of RLF funding.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act (RL. 116-136) provided $1.5 billion
in supplemental funding for the EAA program, which can be used for RLF grants, among other activities.
RLFs can make loans to targeted types of businesses or areas, such as economically-distressed
communities; specific industries, like healthcare or manufacturing; underserved markets; Opportunity
Zones; or areas impacted by natural disasters. This Insight describes EDA's RLF program, how it could
potentially be used to address COVID-19 pandemic-related business credit needs, and the temporary RLF
program changes made in response to urgent circumstances.

An Overview of EDA's EAA Program for RLFs

Businesses cannot directly access EDA grants and many other federal economic development grants.
Instead, eligible businesses may receive a loan from one of the approximately 400 organizations
administering EDA-funded RLFs. These organizations include Regional Development Organizations,
local governments, states, non-profit organizations, educational institutions, and Indian Tribes.
(Businesses may also receive direct technical assistance through projects funded by EDA grants.)
Federal programs and other funding sources provide grants or loans to RLFs to capitalize the fund and
cover administrative expenses (see CRS In Focus IF 11449, Economic Development Revolving Loan
Funds (ED-RLFs) for more detail). RLF borrowers include businesses, units of local government, and
non-profit organizations in a targeted lending area or industry. RLFs are revolved-meaning future
loans can be made when previous borrowers repay principal and interest.
Interest rates may vary by program because the EDA regulations allow RLF administrators to set an
interest rate that is appropriate, as long as it is above one of the two minimum interest rate standards.

                                                               Congressional Research Service

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