Community Development Block Grant (CDBG) Loan to Industry Program FAQ

Who is involved in a CDBG loan?

CDBG loans involve Housing & Urban Development (HUD), AEDC as the grantor, a city or county as the grantee, an independent grant administrator, and the company as the borrower and employment provider.

Is a CDBG loan available throughout the State?

AEDC is responsible for administering the small communities allocation of the Community Development Block Grant Program of HUD. These funds are only available in rural cities and counties. Larger cities, including Little Rock, Conway, Fayetteville, Fort Smith, Hot Springs, Jacksonville, Jonesboro, North Little Rock, Pine Bluff, Rogers, Springdale, Texarkana, and West Memphis, receive their own CDBG allocation.

How does the State determine how much financing it can provide with a CDBG loan?

Projects that are considered for CDBG loans must commit to creating jobs with at least 51 percent made available to Low-to-Moderate Income (LMI) Persons. Please see that attached link to determine how LMI is computed. Normal underwriting criteria is used to help determine the creditworthiness of the ultimate borrower.

Can a CDBG loan be used to refinance existing debt?

AEDC does not refinance existing debt with a CDBG loan.

Can I finance used equipment?

Used equipment is eligible to be financed with a CDBG loan. Appraisals and physical depreciation of the equipment may impact the loan amount and the approved amortization of the loan.

How is the Low-to-Moderate-Income reporting requirement handled?

The borrower works with the outside grants administrator to ensure timely job creation reports and compliance with the LMI standard is met.

What is the standard amortization with a CDBG loan?

The loan amortization is largely determined by the value, re-marketability, and type of asset that is being financed. Typically, real property may receive an amortization that can be as long as 15 years; while personal property, such as equipment, generally receives a much shorter amortization, usually between 5-10 years.