Overview:
Federal CDBG regulations allow entitlement communities such as Cincinnati to lend a portion of their allocated but unspent funds to other CDBG-eligible projects, especially economic development projects.  This is called a Float Loan.

A Floan Loan is a short-term loan of Community Development Block Grant (CDBG) funds that must be repaid in less than 30 months.  Float Loans are typically used for construction financing and in those cases would require take out financing.  Like Section 108 loans, the Float Loan should be used only for high-priority community development projects for which there are no other sources of funding available but which will result in exceptional community benefits.

Eligibility:
Like all other CDBG-funded activies, projects receiving Float Loan funds must meet activity eligibility criteria and either assist low- to moderate-income individuals or prevent/eliminate slum or blight conditions.  An economic development project is required to create or retain at least 1 job per $35,000 of CDBG assistance. At least 51% of those jobs must be held by low- to moderate-income individuals.  

Underwriting Criteria:
The City requires the developer/owner to provide evidence that sufficient net operating income will be generated to cover the debt service on the loan.  Collateral is required in the form of personal guarantees, mortgages, etc., from the project owners and/or developers.  Underwriting standards also require some equity participation from the owner and/or project developer, except in very unusual circumstances.  Private lender participation and other sources of funding must be pursued to minimize public participation and to obtain a professional assessment of project feasibility.

Benefits to Developer:
At times when there is no conventional construction financing available, Float Loans can sometimes be used as a last resort.  Float Loans generally include lower interest rates than conventional financing.

Contact:
Katrina Gragston, Senior Community Development Analyst
805 Central Avenue, Suite 700
Cincinnati, Ohio 45202
Phone:   (513) 352-6250
Fax:   (513) 352-6257
Katrina.gragston@cincinnati-oh.gov