The Tenacity Works 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.
Occasionally the Tenacity Works 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.