Member cooperatives leverage Revolving Loan Funds to support local businesses « Back to Search Results

 Pictured, from left, is Jeff Borling, economic development lead, Great River Energy;  Mike Rhodes, president and co-owner, MNSTAR Technologies, Inc.; John  Damjanovich, MNSTAR's CFO; and Jeff Sheldon, business development manager,  Lake Country Power. 


Over the past year, several of Great River Energy’s member cooperatives supported economic growth in their service areas by providing Revolving Loan Fund (RLF) financing for small businesses.

Backed by the U.S. Department of Agriculture (USDA), rural electric cooperative RLF programs offer an invaluable economic development tool designed to work in participation with traditional bank financing, encouraging business growth and investment in rural communities where city-run RLFs are not always available. 

One such place is on the Gunflint Trail north of Grand Marais, where Arrowhead Electric Cooperative recently approved a low-interest loan to support the reopening of the Skyport Lodge on Devil Track Lake. When the Christensen family approached Arrowhead with a business plan to reopen the once-popular lodge and restaurant, the cooperative joined the rest of the community in rallying around the project.

“We were thrilled with the support we received from the entire community, including Arrowhead Electric Cooperative,” said Rachelle Christensen, one of the new owners.  “Our budget had sufficient equity and bank financing to cover the real estate and some start-up costs, but it would have been a real challenge to finance the reopening of the lodge without a loan from Arrowhead’s revolving loan fund for inventory and working capital.”

Often referred to as “gap financing,” RLFs can be used to round out the budget when owner equity and bank financing do not cover all project costs. With lower interest rates and a broader appetite for risk than traditional financing, a subordinated RLF loan can often tip the scales in favor of viable business expansion projects moving forward.

“Over the past year, we have used our revolving loan fund to support the new Serenity Living Solutions senior living facility in Remer, MNSTAR’s manufacturing operation in Coleraine and the Natural Harvest Food Co-op in Virginia, to name a few,” said Jeff Sheldon, business development manager for Lake Country Power. “The program is a great tool for supporting projects important to our members.”

At present, nearly half of Great River Energy’s 28 member cooperatives maintain RLFs, but all are eligible to establish funds under the USDA guidelines.

RLFs are typically established in conjunction with a nonprofit or publicly-owned project, whereby the cooperative applies for a $300,000 grant from the USDA with a $60,000 match. The cooperative then lends the funds to the project developer and, as the loan is repaid with modest interest, the cooperative retains the funds to relend out to other projects in the future. 

When it comes to administering the RLFs, the role of Great River Energy’s economic development services team varies from co-op to co-op. Great River Energy plays an integral role in preparing the grant applications to establish an RLF, but the funds are designed to be managed internally by the cooperative, with autonomy in how the funds are used.

As long as the cooperatives adhere to the rural development plan approved by their board of directors and the USDA, the program offers unmatched flexibility in how the RLFs are leveraged to support their mission and the communities they serve.

“There was a time when Lake Country Power depended more on Great River Energy to manage the revolving loan fund process, but over the years we have grown quite comfortable reviewing loans and working directly with the USDA when needed,” Sheldon said. “We look to Great River Energy to play more of a supporting role, providing technical review of RLF loan applications.”

Great River Energy’s economic development services team is always ready to roll up its sleeves and pitch in on any aspect of economic development financing or project management when its members request assistance, or to support viable projects in the communities they serve.

If you have questions about the availability of rural electric cooperative RLFs in your area, please contact Tom Lambrecht, economic development manager at tlambrecht@grenergy.com.



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40 percent of Minnesotans hold an associate degree or higher.