Welcome to NADBANK-Community Adjustment

and Investment Program

 Targeted Grant Program


Background

The Community Adjustment and Investment Program [CAIP] was created by Congress through passage of the 1993 NAFTA Implementation Act which also created the North American Development Bank [NADB], which provides the capital for the CAIP and is responsible for its administration. The subsequent Presidential Executive Order No. 12916 gave oversight for the program to a Finance Committee consisting of several Federal Agencies. The purpose of the CAIP is to help U.S. communities that suffer significant job losses as a result of the North American Free Trade Agreement [NAFTA].

In carrying out its responsibilities, the NADBank follows the Guidelines that have been adopted by the Finance Committee. The Guidelines have been modified from time to time as the Committee adopts changes intended to increase program effectiveness.

Purpose

The purpose of the CAIP is to assist in the creation and/or preservation of private sector jobs within CAIP eligible communities. The CAIP does this primarily by assisting with the provision of credit. This can be accomplished with direct assistance or through the CAIP's partnership with certain loan programs of the Small Business Administration and the U.S. Department of Agriculture's Business and Industry Loan Guarantee Program. Details on these programs can be found by following the links in the Table of Contents.

Eligibility for the CAIP

The CAIP operates in certain eligible areas that have been determined to meet the requirements of the Guidelines. The full details and requirements for eligibility are outlined in the Guidelines. In general, an area needs to be able to demonstrate that it has an unemployment rate that has averaged at least 1% or more over the National Unemployment Rate for the 12 months prior to the request for certification. Additionally, the area must show that it has suffered significant job losses due to Nafta; for a Rural area this means 300 or more Nafta related job losses and for an Urban area 500 or more Nafta related job losses. These job losses must have occurred in the 36 months prior to the request for certification. The CAIP uses Urban and Rural designations that are based upon the US Department of Agriculture's Rural-Urban Continuum Codes. Urban counties are those with a Beale code of 1 or 2, all others are considered rural. Click here for more information on these codes and to find the code for your county.  For information on historical job losses as reported by the Department of Labor (DOL) click here.

If approved for the CAIP, initial eligibility runs for three years and can be renewed for additional one-year periods if an area�s unemployment rate continues to meet the 1% threshold. Eligibility for approved areas is reviewed quarterly on or near the anniversary date of initial approval. New requests are considered at any time. Click here for a current list of eligible areas. Interested parties are encouraged to contact the CAIP office.

The CAIP/SBA 7(a) Program

The SBA 7(a) Loan Guarantee Program provides lenders with federal guarantees on loans and lines of credit to small businesses. Program elements can change from time to time but typical guarantees are for 75% of the amount of the loan or $750,000, whichever is smaller, however, loans under $100,000 can be guaranteed up to 80%. For loans that meet the requirement of SBA and the additional eligibility requirements of the CAIP, the NADBank may pay the costs of the SBA loan guarantee fee that is typically paid by the lending institution or the borrower. The amount of the guarantee fee is determined by the size of the loan guarantee requested and can range from 2 to 3 7/8% of the amount of the guarantee.

Eligibility under this program requires that the business is located in a CAIP eligible community and that, within two years of the loan, at least one job will be created for every $70,000 of the amount of the guarantee. For example, a loan of $280,000 with a 75% guarantee equals a guarantee of $210,000. Divided by $70,000 means that three jobs would need to be created. Additionally, the program is restricted to loans for the purpose of business expansion, refinance transactions, i.e., more than 50% of the loan used to pay existing long term debt, are not eligible.

If a borrower believes their loan may be eligible for CAIP assistance, they should direct their lender to contact the appropriate SBA District Office for information and instructions.

Details on the Programs of the Small Business Administration and the CAIP can be found on the SBA website.


The CAIP/SBA 504 Program

The SBA 504 Program is designed to assist businesses in the acquisition of long term fixed assets. The typical transaction will have a commercial lender providing 50% of the cost or purchase price of real estate or equipment, the borrower providing at least 10% of the amount and the SBA providing the balance through the involvement and assistance of a Certified Development Corporation (CDC). The SBA share is handled by the CDC and funded through the issuance of debentures. The up front costs for this portion of a typical transaction are borne by the borrower and can amount to several thousand dollars, depending on the size of the transaction. As with the 7 (a) Program, the CAIP may cover much of these costs for the borrower on eligible, SBA approved projects.

Eligibility under this program requires that the business is located in a CAIP eligible community and that, within two years of the loan, at least one job will be created for every $50,000 of the amount of the SBA debenture. Additionally, the program is restricted to loans for the purpose of business expansion, refinance transactions, i.e., (more than 50% of the loan used to pay existing long term debt, are not eligible.

If a borrower believes their loan may be eligible for CAIP assistance with a 504 loan, they should contact their local Certified Development Corporation [CDC]. Click here for a list of the SBA approved CDC's. 

The CAIP/USDA Business and Industry Program

Through the CAIP � B&I Program, borrowers seeking loans in CAIP eligible communities may apply for a B&I Guarantee and avoid the limitations on availability that exist in the regular program. In effect, CAIP funds assure that a guarantee can be provided for almost any loan that meets all the requirements of the B&I Program and the special additional requirements of the CAIP. This enhancement assures lenders and potential borrowers of timely processing and, subject to normal credit approval, less uncertainty as to the availability of the guarantee.

In addition to all of the normal requirements of the B&I Program, the CAIP requires that a majority of loan proceeds (over 50%) must be used for business expansion purpose, i.e., investment in new plant and equipment. The refinancing of long term debt or financing a change in ownership usually does not qualify. Additionally, the borrower must be able to demonstrate that within 24 months of loan funding at least one new job will be created or preserved for each $70,000 of the guaranteed amount of the loan. Example: For a $875,000 loan with an 80% guarantee at one job per $70,000 we have: $875,000 x 80% = $700,000/$70,000 = 10, or a minimum 10 full time equivalent jobs which must be created or preserved.

Click here for information on the USDA B&I Program.

CAIP Direct Credit Program

In certain cases, where conventional or Government Guaranteed financing is not available or is not appropriate for a transaction, the CAIP will consider direct participation. Sections III. B, 3 and V. B., of the Guidelines provide information on the requirements for consideration of direct assistance. In general, transactions must be in CAIP eligible areas, projects must be for business expansion, and the CAIP participation must be for less than half of the total transaction, i.e., no more than 49%. Additionally, at least one job must be created for each $50,000 of CAIP assistance.

Rates and terms will be determined on a case by case basis and the CAIP seeks to provide maximum flexibility consistent with making loans that are safe and sound. Interested parties should contact the CAIP Office for additional information or to discuss potential transactions.