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Loan Products
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Posted On: Monday December 29th, 2003 at 12:00am EST
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CAPSULE
Learn about available debt financing vehicles.
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Learn about available debt financing vehicles.
Debt financing is the most common means of obtaining capital. Financial institutions (banks and other funding sources) provide a variety of loan products. Each funding source has its own credit parameters and requirements.
This matrixprovides general guidelines based on several factors: loan amount, use of funds, repayment terms and collateral requirements. The matrix also reflects both conventional (standard commercial) and alternative (i.e. Federal and State Loan Guarantee) loan programs. Standard commercial programs do not require credit enhancement tools such as loan guarantees. Alternative loan programs (such as SBA products) require working with preferred or certified lenders and local intermediaries.
Conventional Loan Products:
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| Loan Product |
Loan Amount |
Purpose |
Repayment Terms |
Collateral Requirements |
| Micro Loan |
Up to $50,000 |
Working Capital |
One Year. Terms may be longer if loan purpose is long-term. |
None required unless basic credit parameters are not met. |
| Business Line of Credit |
Up to $100,000 |
Working capital |
Revolving; No fixed terms. |
None required unless credit parameters are not met. |
| Equipment Loans |
$100,000 to $1,000,000 |
Equipment or Technology Purchases |
Three to seven Years:
Terms matched to loan purpose:
Used: 3-4 years
New: Up to 5 years.
Other: Up to 7 years.
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Secured by item(s) purchased or refinanced. Advance rates:
New (100%)
Used (75%) |
| Asset Based |
$250,000 to $1,000,000 |
Receivable and Inventory Financing |
One to Two Years. (Advance rates of eligible receivables (75% to 85%). Eligible inventory may be included up to 50% or higher |
Secured by all business assets including receivables and inventory. |
| Commercial Real Estate (Owner Occupied) |
$500,000 and Up |
Purchase or refinance commercial building |
-15 to 20 Years (Fully Amortizing)
-25 Year Amortization/Due 15 Years) |
Secured by commercial real estate (Up to 75% based on appraised value) |
Federal Programs - SBA Products:
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| Loan Product |
Loan Amount |
Purpose |
Repayment Terms |
Collateral Require-
ments |
| Micro Loan sba.gov |
Up to $35,000 |
Working capital for start-up or small businesses. |
Maximum of 6 years; terms vary based on size of loan and purpose. |
Handled through intermediaries. Collateral generally required. |
Community Express Program
sba.gov |
Up to $250,000
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For start-up, working capital, expansion, equipment purchases or real estate acquisitions. |
Maturity:
-Revolving loans up to 7 years for working capital. |
Secured by business assets; personal guaranty.
SBA Guaranty:
- 85% guaranty for loans up to $150,000.
- 75% guaranty for loans over $150,000. |
SBA Express
sba.gov |
$350,000 |
Working capital; Consolidation; Equipment; Business Acquisition. |
Revolving loan or term loan up to 7 years. |
Collateral not required for loans up to $25,000; thereafter, secured by business assets; Personal Guaranty.
Other outside collateral may be required.
-50% SBA Guaranty
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| Export Working Capital Program (EWCP) sba.gov |
Up to $1.5 million.
SBA Guaranty. |
Supports exporting financing; to finance working capital. |
Maturity matches single transaction cycle with maximum maturity of 12 months. |
Secured by accounts receivable and other business assets;
-90% SBA Guaranty |
| 7 (a) SBA sba.gov |
Up to $2 million. |
Working capital; consolidation; equipment; business acquisition or purchase of commercial real estate.
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Maturity date determined by loan proceeds:
- 7 to 10 years for working capital.
- 10 years fixed assets.
- 25 years for real estate acquisition. |
Secured by business assets; Personal Guaranty.
(85% guaranty for loans up to $150,000.)
(75% guaranty for loans up to $150,000). |
(504) SBA Loan
(Handled by Certified Development Company "CDC") nadco.org |
Limit on SBA portion is 40% project; generally up to $1.5 million.
-Up to $2 million when meeting a public policy goal;
-Up to $4 million for small manufacturers
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Finance purchase of major fixed assets:
(Land, building, equipment and improvements.)
(Refinancing is not permitted.) |
10 to 20 years maturity. |
Secured major fixed assets; personal guaranty.
-Senior lien from private sector lender.
-Junior lien by CDC (100% SBA Guaranty).
(Minimum of 10% equity required from owner)
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| Loan Product |
Loan Amount |
Purpose |
Repayment Terms |
Collateral Requirements |
| State Guarantee Program |
Various from state to state.
(i.e. State of California Loan Guarantee Program) |
Short-term and long term purposes including working capital and refinancing existing debt. |
Dates vary. (i.e. State of California. Short-term loans have one year maturity. Long-term have maximum of seven years.) |
Secured by all business assets and include personal guaranty. Guaranty percentage varies with a maximum of 90%. |
Micro-enterprise Programs:
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| Funding Source |
Eligibility Limitations |
Purpose |
Activities |
Website |
Federal Community Development
Block Grant
Program (CDBG)
(HUD) Program
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Federal aid (70% of CDBG provided to "entitlement communities").
(Metropolitan cities with minimum population of 50,000 or urban counties with minimum population of 200,000.) |
No less than 70% of funds must be used for activities to benefit low and moderate income persons. |
Land and building acquisition, construction; rehabilitating residential and nonresidential properties and water and sewer improvements. |
hud.gov 202-708-1577 |
State Community Development
Block Grant
Program (CDBG)
(HUD Program)
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Federal aid (30% of CDBG given to States. Each state provides allocations to local governments for "nonentitlement areas").
"Nonentitlement areas" qualifying are cities with population of less than 50,000 or 200,000 for a county. |
No less than 70% of funds must be used for activities to benefit low and moderate income persons. |
Land and building acquisition, construction; rehabilitating residential and nonresidential properties and water and sewer improvements. |
hud.gov
202-708-1322 |
Community Development Block Grants (CDBG)
(Section 108 Loan Guarantee is a HUD Program) |
Section 108 is the loan guarantee provision of the CDBG program. |
For both "entitlement and nonentitlement" areas that receive CDBG Grants. |
Real property acquisition, rehabilitation of publicly owned real property and related relocation, site improvements. Interest payments on guaranteed loan and issuance costs of public offerings. |
hud.gov |
Economic Development Adm.
(EDA)
(Grants)
Depart. of Commerce
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States, cities or political subdivisions of a city; Indian tribes; institutions of higher learning; public and private nonprofit organizations. |
To provide capital to local businesses and achieve economic development through job creation and retention. |
Working capital, equipment and real estate loans. |
doc.gov/eda (Select "About EDA"; Go to "Economic Dev. Directory). Listed by State. |
Community Development Financial Institution Fund
(CDFI)
U. S.Dept. of Treasury) |
Non-governmental financing entity with community development as main mission and serving eligible target markets.
Entities certified include (banks, business and housing loan funds, credit unions, multi-banks CDCs and venture capital funds). |
To provide capital and financial services in distressed urban and rural communities. |
Commercial loans and investments to start or expand businesses or financial services needed by local businesses. Rehabilitate rental housing or mortgage financing for first-time home buyers. |
cdfifund.gov
(202-622-8662)
(Select: Certification Supplemental Resources - Listing of Certified of CDFIs |
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