Small Business Loan Guarantee
California Small Business Loan Guarantee Program: Allows a business to not only
acquire a loan it could not otherwise obtain, but to establish a favorable credit history with a
lender so that the business may obtain future financing on its own.
Eligible Applicants: Any small business as defined by the U. S. Small Business Administration (typically businesses that employ one hundred people or less).
Eligible Uses: Proceeds must be used primarily in California and for any standard business
purpose beneficial to the applicant's business, such as expansion into new facilities or purchase of new equipment.
Guarantee Amount: Guarantees can cover up to 90% of the loan amount, with the guaranteed
portion of the loan not exceeding $500,000. The guaranteed percentage varies and subject to negotiation between the FDC and the lender.
The term of the loan guarantee may extend up to
• Interest rates are negotiated between the borrower and the lender. The FDC may charge a guarantee fee of up to 2% for guarantee amounts up to $150,000, and 3% for guarantee amounts over $150,000, plus a documentation fee of $250.
• Processing time takes three to five weeks, depending on how quickly the applicant provides the necessary information and documentation, and on the lender's responsiveness.
• Collateral is generally required, but each transaction is tailored to meet the borrower's financial situation. Collateral is generally required, but each transaction is tailored to meet the borrower's financial situation.
Market Development and Expansion Grant Program:
The Department of Conservation provides up to $20 million annually to increase beverage container recycling in California and to improve processing and manufacturing with recycled aluminum, glass and plastic. It encourages projects that advance environmentally and economically sustainable containers, packaging and other products. The program supports research and development of new technologies and helps reduce greenhouse gas emissions by strengthening green industries in the state.
Specific objectives include:
• Creating market opportunities for new sustainable products or packaging.
• Expanding market-related activities for existing recycled-content products.
• Improving the quality and supply of beverage container material feedstock for use in manufacturing sustainable products or packaging.
• Creating market opportunities for sustainable beverage packaging.
For more information, visit www.conservation.ca.gov/dor/grants/Pages/rmdeg.aspx
Beverage Container Recycling Grant Program:
The Department of Conservation provides funding annually in the form of grants for beverage container recycling and litter reduction programs. The Department typically seeks projects that provide convenient beverage container recycling opportunities in California. However, the focus may change with each new solicitation. Grant proposals are evaluated on criteria set forth in each year's Grant Solicitation. There are no restrictions on who can apply for the grants. For more information, visit the Department of Conservation's website or call 1-800-RECYCLE.
Beverage Container Recycling Infrastructure Loan Guarantee Program:
The Department of Conservation provides continuous funding in the form of loan guarantees for up to $10 million for capital expenditures for new infrastructure that would add recycling capacity, re-use and/or remanufacture beverage container materials into new products. Uses: equipment costs, building and facilities, rent and utilities, travel, contractual services, salaries and benefits, other operating and non-operating costs. Private companies, non-governmental organizations, governmental agencies, manufacturers and trade associations are eligible to apply. For more information, visit the Department of Conservation's website at:
Recycling Market Development Zone Revolving Loan Program:
The Recycling Market Development Zone (RMDZ) Revolving Loan Program makes capital available for California manufacturers located in RMDZ's. The program provides direct loans to eligible businesses that manufacture recycled raw materials, produce new recycled products, or that reduce waste from the manufacture of a product. These loans promote market development for post consumer and secondary waste materials and divert waste from non-hazardous California landfills. Funds may be used to acquire equipment, make leasehold improvements, purchase recycled raw materials and inventory, or acquire real property. Applicants may borrow a maximum of 75 percent of the cost of a project, or $2 million. Terms are generally 10 years, and low interest rates are fixed.
SBA 504 Loans:
SBA (Small Business Administration) 504 loans are marketed, processed, closed and serviced by Certified Development Corporations (CDC). Through the SBA 504 Program, CDC's provide up to 90% of fixed-asset financing costs. The second mortgage, long-term, fixed-rate financing nature of the program allows banks to participate in business expansion by reducing risk exposure. The benefit to the borrower is a lower down payment requirement (10%) and a longer-term, fixed-rate loan, which translates into reduced monthly payments.
The maximum SBA debenture is $1,500,000 when meeting the job creation criteria or a community development goal. Generally, a business must create or retain one job for every $50,000 provided by the SBA except for "Small Manufacturers" which have a $100,000 job creation or retention goal.
Individual job goals can be somewhat flexible if the CDC's overall portfolio meets the requirements. At that point, community impact and public policy goals can be mitigating factors. Eligible 504 loan uses include the purchase of land, existing buildings, new construction, and the acquisition of machinery and equipment with a 10-year useful life. The private sector participant finances 50 percent of the project cost and takes a first lien on assets pledged as collateral.
The SBA takes a second lien on assets and finances up to 40 percent of the project cost, up to $1 million in some cases. Borrowers inject 10 percent in the form of cash or equity in real estate. For more information on SBA 504 loans, call the California Statewide Certified Development Corporation toll free at (800) 348-6258.
USDA Rural Development:
The U.S. Department of Agriculture sponsors "Business & Industry" guaranteed loans in rural communities. USDA guarantees up to 80 percent on loans from $750,000 to $5 million, and up to 70% on loans up to $10 million. Rates are fixed or variable and negotiated between lender and business. Terms are typically seven years for working capital, 15 years on equipment and 30 years on real estate. Lenders negotiate their own fees and the USDA charges 2% of the guaranteed amount as a one-time fee. Most types of businesses qualify, but the project must be in a rural area beyond the urbanized periphery surrounding a city of 50,000 or more. Communities that have grown beyond 50,000 since the 2000 census may still be eligible.
Local Revolving Loan Funds:
Enterprising communities throughout California have recognized that Revolving Loan Funds (RLF) are important economic development tools. The United States Economic Development Administration, Department of Agriculture, and Housing and Urban Development's Community Development Block Grant Program typically capitalize RLF's. Their proceeds often provide critical capital to deserving small businesses, which in turn provide needed jobs in urban and rural areas throughout California.
Certain businesses may be targeted for assistance and most often the loan will be provided as part of an overall package in the form of gap financing.
RLF's are guided by policies that outline loan or loan guarantee sizes, uses, rates, terms, special conditions and participation levels.
The goals, objectives and priorities of the program are weighed against the portfolio's requirements, and loans are approved or denied by a Loan Administration Board. Conventional lending is required, with the RLF taking a second or third mortgage position. Personal and/or corporate guarantees are required. Contact your local city or county for more information.
Various forms of financial assistance are available through local redevelopment agencies in California. Business may benefit through direct financial assistance, land assemblage, bond issuance and/or construction of public improvements. Redevelopment is funded through incremental property tax revenue increases that are a direct result of private investment and increased property values. Assistance may be in the form of fee reductions, infrastructure improvements, land cost reductions, mortgage interest reductions, rehabilitation/demolition/clearance of existing structures and utility tax rebates. Legislation enables the redevelopment agency to provide financing for manufacturing projects under certain conditions. Capital financing or long-term operating leases may also be permitted.