FINANCING YOUR BUSINESS

Loan Programs available in Orange County

ACCION

Launched in May 1994, ACCION San Diego, an associate of ACCION International, a leading international nonprofit organization, is dedicated to helping micro entrepreneurs grow their businesses by providing small loans and business training. ACCION has just recently moved to Orange County to provide the same services as in San Diego.
www.accionsandiego.org (San Diego office)
1-800-967-4429
www.accionusa.org (national program)
1-866-245-0783

As a community lender, they provide small loans ranging from $300-$25,000.

In 1991, ACCION brought its successful micro lending model home to the United States. Headquartered in Boston, Massachusetts, ACCION USA operates the largest micro lending network in the United States with offices in 30 cities and towns.

The average loan size is approximately $4,500. About 40% of ACCION San Diego's clients are women and over half are Hispanic or African-American.

Terms

ACCION San Diego's small business loans are available for financing your business needs. First loans are usually termed between 3 and 60 months. With ACCION's stepped-lending model you can apply for larger loans after 6 months of positive repayment.

Interest Rates

ACCION San Diego's interest rate starts at 10 percent.

Borrowers will qualify for a reduced interest rate based on the following criteria:

• All payments must be made within 5 days of the due date with one exception. One payment per 12-month period may be made later than 5 days after the due date.
  
• Monthly payments must be made on half of the term of the loan or for a minimum of 6 months whichever is longer.
  
• No payments may be later than 30 days.
  
• No bounced checks.

Conditions:

• Have owned and operated your business in Orange County for at least 6 months.
  
• Be at least 18 years of age and demonstrate good character.
  
• Show current capacity to maintain monthly loan payments.
  
• Use the proceeds of the loan for your business.
  
• Disclose all aspects of business activities.
  
• Have collateral of equal or greater value than the loan and/ or one or more cosigner(s).

The following table shows the monthly payments and the initial administrative fees for varied loan terms and loan amounts. For example, a $3,000 loan over a 12-month term has a monthly payment of approximately $286.

Amount of Monthly Loan Payment*

SoCal Reinvestment CDFI

SoCal Reinvestment CDFI administers loan programs for financing under $200,000 in Orange, Riverside, and San Bernardino counties. These loan pools are a consortia of small business lenders that pull together to make these loans available for businesses.

SoCal Reinvestment CDFI helps small business owners that do not meet criteria for conventional bank loans or SBA financing. The loan pool is made available by over 20 banks as an effort to "give back" to our local communities. Women, minority and businesses in low to moderate-income levels comprise 75% of SoCal Reinvestment CDFI borrowers. Millions of dollars have already been made available through these micro-loan programs.

Unlike regular bank loans, SoCal Reinvestment CDFI judges applicants on their character - not on their collateral. Businesses over one year old that can demonstrate professionalism, satisfactory credit and positive cash flows but may not have profit levels that are available for conventional banking meet the general qualifications.

3 – 5 year terms / Amortized over 5 – 7 years * Fixed interest rates for 3 years at Prime plus 4%

http://www.socalcdfi.com/

Small Business Administration’s 7 (a) Loan

7(a) loans are the most basic and most used type loan of SBA's business loan programs. Its name comes from section 7(a) of the Small Business Act, which authorizes the Agency to provide business loans to American small businesses.

SBA's 7(a) Loan Program has a maximum loan amount of $2 million dollars. SBA's maximum exposure is $1 million. Thus, if a business receives an SBA guaranteed loan for $2 million, the maximum guaranty to the lender will be $1 million or 50 percent. The 7(a) loan program project size is $50,00 to $1,000,000.

Terms are 25 years for Real Estate; 10 years for Equipment, Business Acquisition and 5-7 years for Working Capital. All loans are fully amortized.

Down payment requirements are 30% for start-up business acquisition and 10-20% for expansion. Rates are typically variable and usually don't exceed 2.75 percent over low New York Prime interest rate.

The Federal Government does not extend credit to businesses where the financial strength of the individual owners or the company itself is sufficient to provide all or part of the financing. Therefore, the utilization of both the business and personal financial resources is reviewed as part of the eligibility criteria. If business and personal resources are found to be excessive, the business will be required to be use those resources in lieu of part or all of the requested loan proceeds.

SBA Micro Loan Program

The Micro Loan Program provides very small loans to start-up, newly established, or growing small business concerns. Under this program, SBA makes funds available to nonprofit community based lenders (intermediaries), which, in turn, make loans to eligible borrowers in amounts up to a maximum of $35,000. The average loan size is about $10,500. Applications are submitted to the local intermediary and all credit decisions are made on the local level.

TERMS, INTEREST RATES AND FEES:

The maximum term allowed for a micro loan is six years. However, loan terms vary according to the size of the loan, the planned use of funds, the requirements of the intermediary lender, and the needs of the small business borrower. Interest rates vary, depending upon the intermediary lender and costs to the intermediary from the U.S. Treasury.

COLLATERAL

Each intermediary lender has its own lending and credit requirements. However, business owners contemplating application for a micro loan should be aware that intermediaries will generally require some type of collateral, and the personal guarantee of the business owner.

TECHNICAL ASSISTANCE

Each intermediary is required to provide business based training and technical assistance to its micro borrowers. Individuals and small businesses applying for micro loan financing may be required to fulfill training and/or planning requirements before a loan application is considered. The following is the Intermediary Lender for Orange County.

Valley Economic Development Corp.
5121 Van Nuys Blvd. 3rd Floor
Van Nuys, CA 91403
Phone: 818-907-9977 Fax: 818-907-9720

504 Loan Program

The CDC/504 loan program is a long-term financing tool for economic development within a community. The 504 Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. A Certified Development Company is a nonprofit corporation set up to contribute to the economic development of its community. CDCs work with the SBA and private sector lenders to provide financing to small businesses.

Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the CDC (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business being helped.

Proceeds from 504 loans must be used for fixed asset projects such as: purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping; construction of new facilities, or modernizing, renovating or converting existing facilities; or purchasing long-term machinery and equipment.

The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.

The interest rates for the 504 loan program are fixed and are fully amortized through the term of loan.

CDC Small Business Finance Corp
(714) 550 - 5444

Southland EDC
(714) 647 - 1143