Overview:
Section 108 is the loan guarantee provision of the Federal Community Development Block Grant (CDBG) program.  Section 108 provides a source of permanent financing for economic development, housing rehabilitation, public facilities, and large-scale physical development projects.  Local governments borrowing funds guaranteed by Section 108 pledge their current and future CDBG allocations to cover the loan amount as security for the loan.  Section 108 is designed to 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 Section 108 funds must meet activity eligibility criteria and either assist low- to moderate-income individuals or prevent/eliminate slum or blight conditions.  In the case of Section 108 loans used for economic development purposes, the 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.  

Activities typically funded under the Section 108 program would include real property acquisition, demolition and other site improvements, housing rehabilitation, commercial construction or rehab, and public infrastructure improvements.

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.

Rates/Terms:  
Interest rates will vary.  Loan term must be consistent with the nature of the asset being financed (up to 20 years).  HUD has the ability to structure the principal amortization to match the needs of the project and borrower.  


Contact:
Katrina Gragston, Senior Community Development Analyst
Phone: (513) 352-6250
Fax: (513) 352-6257
katrina.gragston@cincinnati-oh.gov