Lending

The Mountain Association supports small business owners, nonprofit leaders and local governments with loans, as well as a variety of other services, including business support and energy services. We serve the 54 Appalachian counties of Kentucky, and we have offices in Berea, Prestonsburg, and Hazard.

Because we are a Community Development Financial Institution and a nonprofit – not a bank – we can lend to those who would not be able to get a business loan with a traditional lender. Unlike most lenders, we offer flexible payment schedules, and we can pay for all or a portion of a project to help your business or organization succeed – from website development to professional photography, and more. Our energy team can also help facilitate energy efficiency upgrades and renewable energy installations in order for you to save money on utility bills.

We do not offer grants or personal loans. We only provide loans for businesses or organizations.

A business loan is a legal agreement between a borrower and a lender, like the Mountain Association, to provide financial support for your business. The agreement states the amount of money you borrow, interest rate (or cost you’ll pay for borrowing the money), the term (or length of time you’ll have to pay the loan back) and the amount you’ll pay on a monthly basis.

Interest rates vary, and are based on a risk and impact assessment of each loan as it’s considered. Our loans range from $1,000 to $1,000,000 and up. Interest rates typically range from 5 to 7.75% with flexible terms, depending on the loan purpose, amount and type of business. Please note: for loans specifically for solar installations, we offer 4% fixed interest with up to a 20 year term. For loans for energy efficiency upgrades, like a new HVAC for example, we can offer 5% fixed interest.

Terms range from one to 20 years, depending on loan purpose and collateral type.

Loans typically require collateral, which is what you will pledge in the event you are unable to repay the loan. For example, this could include a building you own, a car you have, a piece of property, or a large piece of equipment. We need collateral to give us the assurance we can get the loan money back in the unfortunate event you are unable to repay the loan.

Loans also typically require personal guarantors. A guarantor is a person or entity that assumes the financial obligation of another party in the event that the original party is unable to repay a loan.

There are administrative closing fees based on the loan size. For example, loans $50,000 or less are 2% of the loan amount, while loans over $50,000 are typically 1.5% of the loan amount. Depending on what your collateral is, you may have additional fees, such as Uniform Commercial Code (UCC) filings, mortgage filing, appraisal fee, equipment evaluations, title liens, etc. The majority of the fees are rolled into the loan amount.

We consider the community impact of your idea, capacity to repay the loan, experience of the entrepreneur, credit history of the owners (please don’t let a low credit score deter you from applying- see below for more details!), and purpose of the loan. If the business is just getting started, we consider the business idea. If the business is an existing business, we consider the business history.

The documentation you need to provide will depend on whether you have an existing business or are starting a new business, and the total amount requested. Typically, the below lists are what we will need.

Please don’t worry if you do not have these things ready. We can go ahead and get started on your request while you work on the other items.

Existing business loan request under $50,000:

• Business Tax Returns – for each of the last 3 years, if any
• Business Income/Expense Statement & Balance Sheet – for the current year-to-date, if any
• Personal Tax Returns – for the last 2 years from each business owner listed
• Other Information – our staff may ask for additional information depending on your application

New business loan request under $50,000:

• Business Plan – if no tax returns for the last 2 years
• Business Financial Projections – if no tax returns for the last 2 years
• Personal Tax Returns – for the last 2 years from each business owner listed
• Other Information – our staff may ask for additional information depending on your application

Existing business loan request greater than $50,000:

• Business Tax Returns – for each of the last 3 years, if any
• Business Income/Expense Statement & Balance Sheet – for the current year-to-date, if any
• Personal Tax Returns – for the last 2 years from each business owner listed
• Personal Financial Statement – current within the past 3 months from each business owner listed
• Business Debt Schedule – current within the past 3 months
• Other Information – our staff may ask for additional information depending on your application

New business loan request greater than $50,000:

• Business Plan – if no tax returns for the last 2 years
• Business Financial Projections – if no tax returns for the last 2 years
• Personal Tax Returns – for the last 2 years from each business owner listed
• Personal Financial Statement – current within the past 3 months from each business owner listed
• Other Information – our staff may ask for additional information depending on your application

Many of our borrowers have credit scores that disqualify them from getting a traditional bank loan. We look at a variety of factors when deciding on a loan. Though we consider credit history, we also consider your experience as a business owner or entrepreneur, community impact, what you are investing in the business, the business’ financials (if an existing business) and projections, purpose of the loan, and risk.

Additionally, because our loans are to a business or organization, your personal credit will not be impacted (beyond one hard credit pull) by a loan the Mountain Association.

Learn more about improving your credit score here.

Note: We have a loan option for using your ability to crowdfund as the main criteria for approval. Through these “CrowdMatch Loans,” a credit check is not required.

Once your loan is approved and closed, disbursements can begin. The way we disburse funds for our loan clients also looks a little different than at a bank. For example, for most of our loan clients who need to make a large equipment purchase, we would typically issue payment directly to the vendor. Similarly, for purchase of real estate, we would typically issue payment directly to the seller.

For smaller purchases, the loan client sends us receipts and we reimburse. This is usually more beneficial to a borrower because they won’t be making payments on the full amount of a loan, but rather just the amount that they have used up to that point.

Though we do offer working capital loans, we typically structure our loans to include direct vendor payments in order to have greater accountability to our funders on where funds are used.  

The information we need varies depending on the size of the loan and the length of time the business has existed.

For businesses that are just getting started, we will need a business plan and basic financial projections. If you do not have a business plan, please find resources here to learn how to create one. If you do not have financial projections, please find a template here via Initiate, a free online platform Mountain Association provides access to.

For existing businesses, we often need financials and personal income tax statements for the last three years.

This short video provides more details on the above items and what else you will need to provide during the loan application process: https://www.youtube.com/watch?v=eVjvFrdMPeM

Please contact a staff member with any questions.

Once we have all the information we need, decisions for loans under $50,000 are typically made within 2-10 business days. Larger loans have a longer processing time as loans larger than $50,000 must be approved by our loan committee. For these larger loans, after we have received your application and all of the necessary information, a staff member will create the loan proposal and present it to the committee. The committee generally meets monthly. It can take up to as long as six weeks to get an answer on an approval or denial for these larger loans.

We charge an interest rate to help cover our costs, which can include individual coaching and consulting to clients, salaries, overhead, and the interest we must pay on the borrowed money that we re-lend.

This short video provides more details on start-up business loans and tips on what you should do before you apply: https://www.youtube.com/watch?v=eVjvFrdMPeM

You can also find more resources on our Business Support page for tips on starting your business.