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Loan Finance Criteria

How can SFF make a difference by looking at Loans differently to traditional mainstream financial institutions?

Generally projects fall into three broad categories: (1) Low / Medium Risk (2) High Risk and (3) Extremely High Risk. SFF would expect the normal financial institutions to support category (1) projects and they would be directed accordingly. Category (3) are projects that are so High Risk it is questionable if the promoters should undertake the project at all and discussions usually take place between the SLO and the promoters as to how this project can be re-structured so that it makes sense for it to proceed.

Category (2) is typical SFF supported projects where the risk is too high for normal financial institutions such as:

• Where there is little or no track record on the part of the promoters such as greenfield developments for the community
• Where there is a high dependency on state support through grants either for building work or ongoing payments to employees
• Where there is a fundraising aspect which has yet to be established
• Where there is significant building and overrun risk to be managed in the community by volunteers
• Where there is significant funding available to a project but there is a small (in percentage terms) shortfall to allow the project to proceed and none of the other parties will increase their allocations
• Where bridging is required to get the project moving while awaiting other funders to release their allocations.

In the case of micro enterprise, these projects are all largely about start up businesses to get people back to work and off the unemployment register. These projects are unbankable due to the high credit risk associated with them.