EDA makes Economic Adjustment Assistance (EAA) grant awards to establish Revolving Loan Funds (RLFs) that make loans to businesses that cannot otherwise obtain traditional bank financing. These loans provide access to capital as gap financing that enables small businesses to grow and lead to new employment opportunities with competitive wages and benefits.
The economic development priorities of each RLF are defined in a specific RLF Plan that guides the lending strategy within its defined lending area. Most RLFs make general business loans focused on creating and retaining jobs while leveraging other sources of capital. Some RLFs focus lending to certain sectors or industries.
Krampade LLC, a borrower of RLF recipient Grand Forks Growth Fund, is a North Dakota-based sports drink company that was founded in 2015. Krampade is a powder that mixes into water for use in mitigating acute and chronic cramping. Many of the company’s major users are elite athletes, and several of its products also target the average consumer for treating issues ranging from dehydration-related headaches to heartburn.
Krampade was seeking financing for the purchase of equipment needed to get its production facility up and running in Grand Forks, North Dakota, but was unable to get the funds necessary through traditional financing. Grand Forks Growth Fund’s loan of $160,000 was critical in moving the project forward and enabled the company to grow.
Since the Growth Fund had the EDA RLF resources to buy into the project, it was also able to leverage $120,000 from the North Dakota Development Fund and also a combined loan from Gate City Bank and the Bank of North Dakota to effectively share in filling the funding gap. This leveraging power is perhaps the EDA RLF’s greatest benefit for this project, as it made it possible to spread the risk and expand buy-in to the company’s success.
Krampade’s project represents a total public investment of $370,000 and founders’ investment of $120,000. The project required collaboration among numerous entities at all levels and truly represents the success that these types of collaboration can drive.
“I think it is absolutely critical for any early-stage company to explore public financing options that exist in their community,” says Eric J. Murphy, CEO. “It is easy to look beyond public financing, but without our public partners, our ability to leverage our $120,000 investment would not have happened. The flexibility offered by this financing strategy made our dream a reality.”
For information on how to apply for an RLF, see the FY 2020 Public Works and Economic Adjustment Assistance Programs Notice of Funding Opportunity (PWEAA NOFO). EDA’s CARES Act Recovery Assistance is also funding RLF across the country. Please visit eda.gov for more information. To discuss any project proposals in further detail, contact your EDA Regional Office.