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How Can Revolving Loan Funds Make Our Coasts More Resilient?

by Maia Crook

Jan 21, 2021

A revolving loan fund (RLF) is a self-replenishing financing mechanism that can be used to fund a variety of programs, ranging from small business development to clean water infrastructure. For example, U.S. Environmental Protection Agency (EPA) revolving loans have for years helped states fund clean-water and drinking-water infrastructure projects. Though RLFs can vary greatly depending on their mission and scope, they all share the same basic structure. RLFs start with a base level of capital, often consisting of private investment or grants from the federal government or state. This capital is then loaned out to several borrowers. Over time, as these borrowers make repayments and pay interest on their loans, the capital is replenished. When enough repayments are made, the fund uses its reaccumulated capital to issue new loans.

RLFs are often employed by states, municipalities, and nonprofits as a means for property owners to overcome financial barriers to undertaking environmental improvements. The self-sustaining nature of RLFs allows them to operate for decades with little to no additional investment if designed correctly. By providing low-interest loans with long repayment periods, RLFs can help those who may not have funds available to pay for improvements up front. In this way, RLFs can be used as a tool for building community resilience to environmental hazards.