Plaza South, Suite 100100 East Reynolds Street
New Castle, PA 16101
724-658-1488 Phone
724-658-0313 Fax
info@lawrencecounty.com
How We Help
Federal Business Financing Loan Programs
SBA Micro-Loan Program
Purpose
Provides low-interest financing to Micro Enterprises defined as a business with ten (10) or less employees.
Eligible Applicants
Any legitimate small business operation.
Eligible Uses of Funds
Loan proceeds may be used for equipment or working capital. Refinancing and real estate projects are ineligible.
Limitations
Loans are between $500 and $20,000 and may require matching funds.
Conditions
Applicant's business must be located within the eight-county region of northwest Pennsylvania: Clarion, Crawford, Erie, Forest, Lawrence, Mercer, Venango and Warren.
Rates and Terms
Terms up to 60 months. The interest rate will be based on the prime rate plus one percent with a minimum rate of 9 percent.
Fees
Applicant will submit a non-refundable $100 application deposit.
Collateral
Must collateralize assets financed. Will subordinate lien position to bank. Personal and corporate guarantees may be required.
Application Process
- An application must be completed with all applicable exhibits and other closing documents.
- Applicant will be required to execute a promissory note for repayment of the debt.
- All applications will be reviewed by the Northwest Commission Micro Loan Committee.
- All applicants must complete SBA Form 1624.
- All applicants must complete a business plan through a Small Business Development Center.
For more information and an online application, please refer to www.nwcommission.org
SBA 504 Loan Program
The SBA 504 loan program provides viable small and medium size businesses with long-term fixed rate financing for the acquisition or construction of fixed assets. Projects are typically financed 50% private lender, 40% SBA and 10% by the small business. Because the SBA takes a secondary collateral position on project assets the private lender can reduce the amount of equity normally required of the borrower.
Sample Financing Combinations
| Bank | SBA | Business | |
|---|---|---|---|
| Sample 1 | 50% | 40% | 10% |
| Sample 2 | 40% | 40% | 20% |
Special Purpose Building
| Bank | SBA | Business |
|---|---|---|
| 50% | 35% | 15% |
The SBA 504 program is a "take out" financing program. The SBA offers an up front commitment to finance its portion of the project. The participating private lender provides interim financing, advancing project funds during the construction or acquisition period. After the project is completed, the SBA reimburses or "takes out" the private lender by the amount of the SBA's loan commitment. SBA loans are funded by the sale of federally guaranteed debentures on the open market. The SBA 504 program is an unsubsidized Federal loan program.
Project Size
Projects range between $150,000 and $3,000,000+. The maximum dollar amount the SBA can contribute to a single company is $1,000,000 ($1,300,000 if certain SBA objectives are met). The SBA cannot exceed 40% of the total project costs. The debenture cannot be less than $50,000, and no more than 50% of a project can be financed through federal sources.
Eligible Businesses
For-profit businesses engaged in manufacturing, retail/wholesale, service and construction that meet the following small business size standards (including affiliates):
- Tangible net worth less than $6 million, and
- Average annual net profit after tax for the previous two years of less than $2 million.
Ineligible Businesses
The SBA has identified certain ineligible businesses including, but not limited to: non-profits, gambling facilities, lending institutions, life insurance companies, private clubs and religious institutions.
Eligible Passive Company
The SBA 504 funds can be lent to a passive company formed for the purpose of holding real estate or equipment for lease to an operating entity which is an eligible small business. Both the passive company and the operating company must meet small business size standards. The operating company must be a co-borrower or guarantor of the SBA loan.
Eligible Project Costs
- Land and building improvements.
- Building construction, acquisition, expansion or renovation.
- Equipment acquisition (new and used). Must have an economic life of at least 10 years.
- Professional fees: survey, engineering, legal, architect, accounting.
- Interest, fees and points on the interim bank loan.
- Note: On the acquisition of an existing building the small business must occupy at least 51% of the space. The funds can be used to acquire the building, renovate the exterior, repair or install electricity, plumbing, heating and cooling for the entire building and renovate any space to be occupied by the small business.
On the construction of a building, the small business must initially occupy 60% of the space, and then 80% within 10 years. The remaining 20% of space may be long-term leased to a third party. The SBA will take an assignment on all leases.
In either lease situation, the small business must show the ability to pay the project debt (both the bank and SBA loans) without the third party lease income.
Ineligible Project Costs
- Working capital
- Bank fees for end loan
- Refinancing debt
- Moving costs
- Autos, trucks or airplanes
- Counseling, finders or franchise fees
SBA Loan Terms
- 10 years for equipment
- 10 or 20 years for real estate and equipment combined
- SBA Loan Interest Rate
- Fixed for the full term of the loan
- Determined at bond sale after the project is complete
- Bond sales are on the Wednesday of the second full week of each month
The quoted effective rate includes the note rate paid to the bond holder and a combined on-going servicing and borrower guarantee fee of 1.2%.
Prepayment
- Declining prepayment penalty for the first half of the term of the loan.
- Allowed to prepay with 45 days written notice.
- Debentures are assumable.
Collateral
SBA 504 loans are secured by a lien on the fixed assets acquired with the loan proceeds. SBA's lien is subordinate to the private lender's position. SBA requires personal guarantee(s) of any person owning 20% or more of the applicant passive and operating companies. Other personal guarantees may be required of key personnel, officers and/or directors. SBA may require additional collateral based on the type of business, debt coverage and type of assets being financed. Life insurance as collateral may be required on principal(s).
Jobs Test
- One job must be created or retained for every $35,000 the SBA lends
- Or, the business must meet community or area development tests
- Or, the business must meet the National Objectives Test
- For manufacturers this requirement is waived
Credit Criteria
The 504 loan program is designed to assist healthy, expanding businesses that have been in operation for two years or more. The following credit criteria apply to such businesses:
- Existing or projected cash flow from business operations is greater than debt service needed to pay both existing debt and debt resulting from the proposed loan
- Sufficient collateral to secure the loan
- Sufficient working capital to sustain the projected growth of the company
- Private Lender
Amount: The private lender's end mortgage or loan must be as much, or more than, the SBA's amount. Projects involving special purpose buildings or startups require a minimum of 50% bank financing. The private lender also provides interim lending.
Maturity
At least 7 years on equipment; at least 10 years for real estate or a combination of real estate and equipment.
Prepayment
Not regulated.
Interest Rate
Must be reasonable.
Small Business Injection
The small business must inject at least 10% of the project cost in the form of cash, land equity, or land and building equity (must be part of project). Personal liquid assets (in excess of the total project cost) held by the owners may be required to reduce the SBA portion of the project. Projects involving special purpose facilities and/or start-up operations require a 15%-20% equity injection. Quick Links Keystone Opportunity Zone Business Retention Financial Assistance Grants Entrepreneurship