Rockford Local Development Corporation gave a briefing to the Winnebago County Board on Thursday on the county's revolving loan fund, explaining how the program supports small-business lending and a county-seeded housing rehabilitation initiative.

The presentation described the RLF as gap financing that usually sits behind a bank loan and is intended to help businesses buy buildings, expand or finance equipment. John Phelps, a presenter for Rockford Local Development Corporation, told the board the fund had a balance of about $1.4 million and that the county portfolio includes roughly 20 outstanding loans totaling about $1.1 million, with an average loan size of about $56,000.

That financial profile matters because the fund originated from U.S. Department of Housing and Urban Development money that passed to the county through state channels and is now managed to be self-sustaining, county staff said. Chris Dornbusch, representing Winnebago County, told the board the program does not create county liability beyond reducing the fund balance if a loan defaults.

Phelps said the RLF typically takes subordinate positions to banks, offers flexible terms, and targets small manufacturers and disadvantaged borrowers in distressed areas. He described underwriting standards, including analysis of management, market conditions and debt-service capacity, and said default rates have historically been low: "Our default rates are generally under 2% a year." He also said management fees average about 1.5% and loan-loss reserves have been set near 2%.

The presenters reviewed a housing rehabilitation program they said was seeded with county participation roughly eight years ago. Under that program, qualifying borrowers could receive loans up to $100,000 for one year to buy a vacant, distressed property, fix it up and either sell or refinance the property to return capital to the fund. Phelps said the Rockford-area program later organized as a Community Development Financial Institution to access federal CDFI support.

Board members asked operational questions. When a board member asked whether the program provides coaching after loans are made, Phelps replied, "We do. And that's part of our requirement. . . . We priority when we make a loan is we want to get repaid. So we gotta do everything we can to make sure they're successful." When asked about typical loan terms, he said terms vary by purpose: "We generally try not to go beyond 5 or 7 years. But if it's real estate, we may amortize it a lot longer to keep the payments." The housing rehab loans were described as one-year loans tied to resale or refinancing.

Dornbusch told the board the original federal HUD funds passed through what was the Illinois Department of Commerce and Community Affairs (DCCA) and later the Illinois Department of Commerce and Economic Opportunity (DCEO). He said county funds are not commingled with the RLF and that DCEO has relaxed some prior stacking restrictions, which has allowed RLDC to combine the loans with other programs.

No formal action was taken; the presentation concluded with the board thanking the presenters and asking staff to provide the written financials that the presenters referenced.

The county's revolving loan fund remains under county-board oversight, with Rockford Local Development Corporation administering loans and returning repayments to the fund for future lending.