Financing Programs

Access to capital continues to be a serious issue for most businesses. Growth and expansion require additional capital that a business may not have and, therefore, must seek from outside sources, typically debt financing through a commercial bank. Small businesses and start up companies face a variety of obstacles in trying to access these funds through commercial banks. Start up companies by their very nature represent a perceived risk beyond a commercial bank’s lending criteria. Many existing companies are in the very early stages of their lifecycle or may not have operating experience sufficient to meet the bank’s criteria. Many government agencies and support organizations have recognized these obstacles and have created a number of credit enhancement programs to help these businesses access the critical funding they need.

Below are some of the financing programs available to Chesterfield County businesses.

Financing Programs of the Small Business Administration (SBA)

Microloans are loans made directly to a business by a non-bank lender such as a Certified Development Corporation (CDC). The loans are typically under $50,000 and can be used to purchase machinery and equipment and for working capital needs. The interest rates on these loans are generally comparable to market rates for similar loans at a commercial bank. They are not intended to be “cheap money”. The CDCs are designed to be more flexible in their underwriting criteria and since they are a non-profit lender, by nature they can assume more risk than most banks. Companies that cannot be approved for a loan by a bank may still meet the qualifications for a microloan through a CDC.

Loan Guaranty Programs of the SBA guarantee up to 80% of a loan made by the commercial bank to a high-risk business. The SBA promises to repay the bank up to 80% of the outstanding balance of a loan approved through the program if the borrower should default. This helps reduce the banks risk and enables the bank to make the loan. Again, this is not a “low-cost” financing. The rates can be negotiated between the bank and the borrower and will be at or slightly higher than market rates. There are also additional upfront and annual fees associated with the SBA guaranty, which will be paid by the borrower. This program is designed to address the business’s ability to get the loan, not how much the financing will cost. There are several loan and loan guaranty products offered by the SBA: the Community Express Loan, the 504 Loan, and the 7(a) Loan Program. The application processes for any of these programs start by the borrowing applying to a commercial lender for the loan. Many of the major banks in the Richmond area such as Wachovia, BB & T and Bank of America are SBA lenders. There are also non-bank lenders that serve Chesterfield County businesses including the Richmond Economic Development Corporation Community Capital Group and CSI Capital.

Financing Programs of the Virginia Small Business Financing Authority (VSBFA)

The Child Day Care Financing Program provides low-interest installment loans to “regulated” Providers in the Commonwealth of Virginia. Loan proceeds can be used to meet or maintain childcare standards, including health, safety or fire codes or to make quality enhancements to their childcare program. Loans may also be used for certain start-up costs.

Through the Small Business Environmental Compliance Assistance Fund low-interest rate loans are available to small businesses for the purchase and installation of replacement equipment needed to comply with the Clean Air Act; or to implement voluntary pollution prevention measures; or for the implementation of selected voluntary agricultural best management (BMPs) practices as listed in the Virginia Agricultural BMP Manual.

The Virginia Capital Access Program (VCAP) provides access to capital for Virginia businesses by encouraging banks in Virginia to make loans that they would otherwise not make due to a borrower’s riskier profile. Unlike government guaranty programs, which provide a guaranty of a specific loan, VCAP utilizes an insurance concept on a portfolio of loans.

The VSBFA DIRECT  is a loan program designed to provide access to capital to new and existing small businesses and economic development authorities. Funds are provided through direct loans from the Virginia Small Business Financing Authority to facilitate the financing of projects that create economic benefit to Virginia’s communities through increased revenues and the creation of new jobs.

The Virginia Economic Development Loan Fund (EDLF) is designed to fill the financing gap between private debt financing and private equity. Funds are provided for fixed asset financing to new and expanding industries that are creating new jobs or saving “at risk” jobs in Virginia.  Funds can be used for the acquisition of land and buildings, construction or improvements to facilities and the purchase of machinery and equipment. Manufacturing companies and other industries that derive 50% or more of their sales outside of Virginia are eligible to apply.

The Loan Guaranty Program will guarantee a portion of a loan or line of credit extended by a commercial bank to a qualified Virginia business. The maximum guaranty under the program is 75% of the loan or line of credit up to a maximum guaranty of $300,000. The program can be used to provide a guaranty for a short-term line of credit or a term loan of up to three years in duration. More information on these programs can be found at the Virginia Department of Business Assistance.