Loan Products

Monday December 29th, 2003

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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:

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.	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:

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 required.
Community Express Pilot Program sba.gov	Up to $250,000 (Requires hands-on technical training and support to the firm).	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 and personal guaranty. SBA Guaranty: - 88% up to$150,000. - 75% over $150,000.
SBA Express sba.gov	Up to $2 million	Working capital, fixed assets or real estate financing.	Maturity: - 7 years for working capital; -10 years for fixed assets: -25 years for real estate. - Up to 25 years for real estate.	Secured by business assets and personal guaranty. -50% SBA Guaranty
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 or supports line of credit. Maximum maturity: 1 & 1/2 year.	Secured by accounts receivable and other business assets; -90% SBA Guaranty
7 (a) SBA sba.gov	Up to $2 million.	Working capital; consolidation; equipment; acquisition or construction of commercial business property.	Maturity date determined by loan proceeds: - 5 to 7 years working capital. - 10 years fixed assets. - 25 years for commercial business property.	Secured by business assets and 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; $1,000,000 or 40% of project. Under specific conditions may go up to $1,300,000.	Finance major fixed assets project (land, building, equipment and improvements.) (Refinancing is not permitted.)	10 to 20 years maturity.	Secured by project assets being financed and personal guaranty. -Senior lien from private sector lender. -Junior lien by CDC (100% SBA Guaranty). (10% equity required from owner)

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:

Funding Source	Eligibility Limitations	Purpose	Activities	Website
Federal Community Development Block Grant Program (CDBG) (HUD) Program	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)	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	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