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Are Revolving Loan Funds A Better Way To Finance Rural Development?

Author

Listed:
  • Mikesell, James J.
  • Wallace, George B.

Abstract

Revolving loan funds (RLF's) operate, in principle, by issuing new loans as old loans are repaid. Although best suited to increasing credit access for viable firms that lack alternative funding sources, many RLF's are assisting local businesses in need of capital but financially nonviable. Two major problems arise when RLF's are used to transfer this kind of public subsidy to failing businesses: (1) RLF's require periodic refunding to avoid continued erosion of their capital base and (2) in lending money to high-risk borrowers, RLF's experience high loss rates.

Suggested Citation

  • Mikesell, James J. & Wallace, George B., 1996. "Are Revolving Loan Funds A Better Way To Finance Rural Development?," Agricultural Information Bulletins 33713, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersab:33713
    DOI: 10.22004/ag.econ.33713
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    File URL: https://ageconsearch.umn.edu/record/33713/files/ai967245.pdf
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    Cited by:

    1. Benjamin, Lehn M., 1997. "Community Development Financial Institutions: Insights From Rural EZ/ECs," Staff Reports 278824, United States Department of Agriculture, Economic Research Service.

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