Nonconventional financing: AIDEA: working with lenders to support business endeavors.

• Author: Barbour, Tracy
• Position: FINANCIAL SERVICES

As a state-owned corporation, the Alaska Industrial Development and Export Authority (AIDEA) is in a unique position to finance business endeavors throughout the state.

AIDEA's purpose is to promote, develop, and advance the general prosperity and economic welfare of the people of Alaska. The Authority accomplishes this, in part, through commercial finance programs that give businesses access to long-term capital for financing new-construction and expansion projects. Its most broad-based and popular option with businesses is the Loan Participation Program. Other less well-known and less utilized AIDEA finance programs include the Conduit Revenue Bonds, Rural Development Initiative Fund, Small Business Economic Development, and Business and Export Assistance Loan Guarantee programs.

Although AIDEA is in the business of financing commercial projects, it strives to work collaboratively with other lending institutions. Or as External Affairs Officer Karsten Rodvik sums it up: "We do not compete with the private sector; we work in partnership with Alaska's lending community."

As of fiscal year end, June 30, 2013, AIDEA had $352,494 million in unrestricted cash and investments in a Revolving Fund. AIDEA was originally capitalized by the state of Alaska with approximately $333 million in cash and loans. AIDEA pays an annual dividend to the state. Since the program's inception, AIDEA has provided Alaska and its citizens with more than $345 million in dividends to support much-needed programs, services, and projects at the state level, Rodvik says. AIDEA gets money to lend through investment returns on its liquidity, income from projects, and interest and fees from the Loan Participation Program. However, generally speaking, income is generated from the business operations of AIDEA.

Loan Participation Program Guidelines

AIDEA's Loan Participation Program provides permanent financing, both taxable and tax-exempt, to borrowers through a qualified originator for the purpose of developing, acquiring, or enhancing Alaska business enterprises or for a qualified energy development project. AIDEA doesn't originate or create loans. Instead, it can purchase up to 90 percent of a commercial loan to a maximum of $20 million. The loan request must be originated by a financial institution--which must provide the remaining 10 percent--that is eligible to participate in AIDEA's credit programs. And the project being financed must be in Alaska.

The Loan Participation Program is primarily used to finance commercial (income-producing) real estate and equipment. AIDEA provides participation loans for a wide range of projects, from car washes, warehouses, and aircraft to lodges, restaurants, and retail establishments.

Unlike typical commercial financing that goes five to ten years for a fixed interest rate, the Loan Participation...