Economic Development Lending

Community and Economic Development:

Economic Development loans are flexible financing tools that are issued by local governments and are designated for activities to promote economic and neighborhood development for specific jurisdictions. This type of loan supports activities that revitalize neighborhoods, stimulate job creation, and increase tax revenue for the City. These funds are often used to supplement senior loans from other public and private lending institutions. Economic Development Loans can also be used to leverage Federal and State investment within local communities. Often, these types of financing packages are used to incentivize private investment to improve the appearance of commercial and industrial areas. In many instances, these loans are tied to job creation goals which help satisfy the over-arching goals for economic development within the community. Reinvestment leads to the improvement in the development of talent, skills, and living conditions for the inhabitants, business owners, and the customer base within the surrounding community. 

7A Loans

SBA 7(a) loans, have a maximum loan amount of $5 million, and repayment terms of up to 25 years. Loans guaranteed by the SBA are assessed a guarantee fee. This fee is based on the loan’s maturity and the dollar amount guaranteed, not the total loan amount. The lender initially pays the guaranty fee and they have the option to pass that expense on to the borrower at closing. The funds to reimburse the lender can be included in the overall loan proceeds. On loans under $150,000 made after October 1, 2013, the fees will be set at zero percent. On any loan greater than $150,000 with a maturity of one year or shorter, the fee is 0.25 percent of the guaranteed portion of the loan. On loans with maturities of more than one year, the normal fee is 3 percent of the SBA-guaranteed portion on loans of $150,000 to $700,000, and 3.5 percent on loans of more than $700,000. There is also an additional fee of 0.25 percent on any guaranteed portion of more than $1 million. 

504 Loans
The US Small Business Administration 504 Loan or Certified Development Company program is designed to provide financing for the purchase of fixed assets, which usually means real estate, buildings and machinery, at below market rates.^[1] As part of its mission to promote the development of businesses, the SBA offers a number of different loan programs tailored to specific capital needs of growing businesses. The 504 program works by distributing the loan among three parties. The business owner puts a minimum of 10%, a conventional lender (typically a bank) puts up 50%, and a so-called Certified Development Company (CDC) puts up the remaining 40%. Certified Development Companies^[2] are established under the 504 code as non-profit corporations set up to support economic growth in their local areas. There are a few hundred such CDCs nationwide.^{[3][needs update]} The maximum amount of the loan is $5 million ($5 million for meeting SBA-defined policy goals,^[4] and $5.5 million for manufacturers and some energy-related policy goals), and if the borrower defaults, the private sector lender is paid off first, reducing the risk to the lender and encouraging loans.^{[needs update]}

Below are links to some local resource organizations that provide economic development funding:

Still have questions? 
Of course, if you have questions on financing options and would like to visit with someone, call us at 410-984-3337.  We can answer your questions and connect you to the resources you need.