Rural Development
Investment Fund
The Rural Development Investment
Fund (RDIF) is a financing tool used to promote economic development
in rural communities in Washington and Oregon. It is targeted
primarily toward industries that Cascadia believes can demonstrate
a competitive advantage in the rural areas of this region, specifically:
- secondary wood products
- value-added fish and agricultural
products
- manufacturing from recycled
materials.
However, the RDIF will consider
any business that can demonstrate a sustainable market niche
and the potential to create good jobs in the local area.
How does the RDIF
work?
The investment is made through
the use of a Participation Agreement (PA). This is a low interest,
deeply subordinated loan with an on-going revenue based fee.
The fee is calculated in advance of closing using financial projections
negotiated between Cascadia and the company. Once a five-year
revenue projection is agreed upon, we calculate a percentage
of monthly or quarterly revenues targeted to earn Cascadia a
risk-adjusted rate of return.
How is the RDIF
funded?
The RDIF is funded by investments
from individuals and other financial institutions as well as
foundation grants.
What are the benefits
to the borrower of an RDIF loan?
- Traditional lenders view the
PA debt as equity, allowing our "investment" to leverage
additional debt.
- The simplicity of structuring
and closing the deal minimizes attorney fees for both parties.
- The PA allows for an exit over
time. The owner is not forced to sell the company to pay off
true venture capital investors.
- Similar to true equity, the
entrepreneur pays a higher rate of return only if the business
is growing and successful - if not, the cost of funds is lower.
- Though not as patient as true
equity, the entrepreneur can choose to accrue the Participation
Payments and delay the impact on cash flow.
For more information on the Rural
Development Investment Fund contact Dave Kleiber at 206-447-9226
x101 or by e-mail at dkleiber@cascadiafund.org
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1901 NW Market
Street, Seattle, Washington 98107
Phone (206) 447-9226 w Facsimile (206) 682-4804