Types of Investments:
LOAN CAPITAL FOR THE REVOLVING LOAN FUND
Loans requested in amounts from $25,000 to $1,000,000
Includes equity equivalent investments (EQ2's) and program related investments (PRI's)
Loans requested to bear interest between 0% and 5% with quarterly interest payments
Loans are repayable at a maturity of 5 to 15 years
Loans will be the primary source of capitalization for the loan fund. These funds will be loaned by MHDF to borrowers at a rate only slightly higher than the cost of funds to the loan fund. Providing low interest rate loans is essential to the loan fund's mission and strategic plan.
EQUITY CAPITAL FOR THE REVOLVING LOAN FUND
Equity requested in amounts exceeding $5,000
Due to the increased risk associated with the types of loan products this loan fund offers to borrowers, the loan fund is striving to have at least over a 5% net asset ratio and is reserving loss reserves and liquidity reserves. This equity capital will be loaned to create affordable housing, should be repaid and then re-loaned for another project. However, unlike the loan capital, equity capital has the flexibility needed to properly capitalize the loan fund.
Grants requested to provide operating funds for the company
Program earnings for the loan fund are low as the fees and interest charged for the loan products are minimal. While expenses for the loan fund will be kept to a minimum, some operating support is requested in the form of operating grants.
Equity Equivalent Investments - EQ2's article