The Fund generally provides term loans over a 5-year term with a
fixed rate of interest. The rate is 2 percentage points above the prime
lending rate with a minimum rate of 8%. The loans are usually placed as
subordinate debt, which only has priority over the members’ own
investments. By receiving the loan as subordinate debt the co-op has an
increased chance of securing additional conventional financing from
credit unions of other financial institutions as the conventional
lenders can have first claim on the assets of the co-op.
Occassionally the Fund also provides a loan with interest only payments for an
additional term of 1- 2 years to assist the co-op with its cash flow
during early period of the loan. The interest rate for the interest only
period is slightly higher than the regular rate which is charged during
the interest and principal payment period.