Loan Programs
Listed below are samples of
the business financing programs offered by Madison
County and the State of Illinois.
Community
Service Block Grant (CSBG) Loan Program
The CSBG Loan Program is administered jointly by the
Illinois Department of Commerce and Economic Opportunity
(DCEO), statewide Community Action Agencies (CAAs)
and Illinois Ventures for Community Action (IVCA).
The program provides long-term, fixed-rate financing
to new or expanding small businesses in exchange for
job creation and employment for low-income individuals.
CSBG funds usually make up between 20-49% of the entire
loan project and have a low interest rate of 5% to
7.5%.
Authorization
The Community Services Block Grant (CSBG) program
was created by the federal Omnibus Budget Reconciliation
Act of 1981. The Illinois Department of Commerce and
Economic Opportunity (DCEO) administers the CSBG program
in accordance with federal law and the Illinois
Economic Opportunity Act.
How the Program Works
The Department of Commerce and Economic Opportunity
places a high CSBG priority on job-creating economic
development programs which result in the employment
and self-sufficiency of low-income persons. Each Community
Action Agency (CAA) designs and operates an individualized
economic development program. Ten percent of each
CAA's annual CSBG funding is allocated for economic
development/job creation activities. Most CAAs operate
a loan program through which below market rate loans
are made for business expansion and start-up which
results in the hiring of low-income persons. For more
information on CSBG programs and eligibility requirements
click here.
Illinois
Capital Access Program (CAP)
The Illinois Capital Access Program (CAP) is designed
to encourage financial institutions to make loans
to small and new businesses that do not qualify under
conventional lending policies. CAP is a form of loan
portfolio insurance, which provides additional reserve
coverage to the lender on loan defaults. By participating
in CAP, lenders have available to them a proven financing
mechanism to meet the needs of financial institutions
and Illinois small businesses.
Authorization
The grants shall be made from appropriations from
the Build Illinois Bond Fund or Illinois Capital Revolving
Loan Fund for the purpose of technical assistance.
See
Chapter 127 of the Illinois Compiled Statutes.
How the Program Works
The Capital Access Program is designed to encourage
lending institutions to make loans to businesses that
do not qualify for conventional financing. CAP is
based on a portfolio insurance concept where the borrower
and DCEO each contribute a percentage of the loan
amount into a reserve fund located at the lender's
bank. This reserve fund enables the financial institution
to make loans beyond its conventional risk threshold
and is available to draw upon to recover losses on
loans made under the program.
A CAP loan is a private market transaction between
the lender and the borrower with all terms, fees,
conditions, rates, collateral, etc., being determined
by the lending bank. The borrower's non-refundable
contribution to the reserve fund must be between 3
and 7 percent of the total loan amount. DCEO will
provide a matching contribution. A 133 percent match
to the borrower's contribution will be provided on
the first $2,000,000 in CAP loans enrolled at the
lender bank. A higher match will be provided to minority/woman/disabled
owned businesses (150 percent) and businesses located
in a federally designated Empowerment Zone or Enterprise
Community (200 percent). Loan proceeds cannot be used
for debt refinancing or for financing passive real
estate ownership.
The business must be for-profit, located in Illinois
and employ 500 employees or less. The borrower cannot
be in the business of manufacturing or selling firearms
at wholesale or retail; or in the business of manufacturing
or selling tobacco products, liquor or sexually explicit
materials at wholesale.
Illinois
State Treasurer’s Office
The Illinois State Treasurer’s Office offers
a number of programs that are designed to assist the
Illinois business community by providing access to
capital and financing at affordable rates in order
to promote economic development activities that create
and retain jobs within the state. To view the Treasurer’s
programs please click on the link above. The STEP
program and the ER program detailed below are part
of the Treasury loan offerings.
Authorization
The Illinois State Treasurers Office programs are
authorized by legislation in 20
ILCS 715/5.
How
the Programs Work
State
Treasurer’s Economic Program (STEP) - Administered
through the Illinois State Treasurer’s Office,
the STEP program is designed to provide Illinois companies
with access to affordable capital to expand their
operations and retain or create jobs in the state.
For each permanent full-time job that is created or
retained, the Treasurer can deposit up to $25,000
per job at below-market rates into a qualified borrower's
financial lending institution. The lender may then
loan that money to the qualified borrower. Loans may
not exceed five years. For further information, click
in the program title above.
State
Treasurer’s Economic Recovery Loan Program (ER)
- Administered through the Illinois State Treasurer's
Office, the ER program is designed to stimulate Illinois'
economy by providing access to capital at below-market
rates to out-of-state companies that create jobs in
Illinois. This program is primarily geared (but not
limited) to job creation in the manufacturing sector.
For each permanent full-time job that is created or
retained, the Treasurer can deposit up to $50,000
per job at below market rates into a qualified borrower’s
financial institution. Retail projects are ineligible
for this program. For further information click in
the program title above.
The
Illinois Finance Authority (IFA)
The Illinois Finance Authority (IFA) is a self-financed,
state authority principally engaged in issuing taxable
and tax-exempt bonds, making loans, and investing
capital for businesses, non-profit corporations, agriculture
and local government units statewide. IFA finances
about $3 billion each year, helping generate economic
growth and job creation.
Authorization
The Illinois Finance Authority is authorized
by Illinois Statutes 20
ILCS 3501/845-75.
How the Program Works
IFA Industrial Revenue Bonds (IRBs) - Administered
through the Illinois Finance Authority, the industrial
revenue bond program provides the authority with the
ability to issue tax exempt IRBs on behalf of Illinois
manufacturers looking for long term financing on the
purchase or renovation of fixed assets such as land,
building, and equipment. IRBs may finance up to 100
percent of the total costs for qualifying projects
of at least $1.5 million. Terms of the bonds may not
exceed 10 years. A $1,500 non- refundable fee is required
upon submission of application. If approved certain
other fees will apply. For further information click
in the program title above.
IFA Participation Loan Program (IFA PLP) - Administered
through the Illinois Finance Authority, the IFA PLP
program is designed to provide Illinois industrial
and manufacturing businesses that create or retain
jobs, access to affordable financing. Participation
loans can provide financing for the purchase of land
or buildings, construction or renovation of buildings,
and the purchase of machinery and equipment. The authority
can participate with conventional lending institutions
and provide the lesser of $300,000 or 50 percent of
the loan with terms not to exceed 10 years. For further
information click in the program title above.
IFA Rural Development Loan Program - Administered
through the Illinois Finance Authority and in participation
with the Farmers Home Administrations Intermediary
Re-lending program, the Rural Development Loan program
is designed to assist industrial businesses located
in rural communities with a population of less than
25,000. Eligible projects must demonstrate the creation
or retention of Illinois jobs, and must demonstrate
that conventional financing was not available. The
authority may lend up to 75 percent of project cost
up to $150,000 at a set fixed rate of 6 percent. A
$100 application fee is required as well as a $225
commitment fee and a $225 loan-servicing fee. For
further information click in the program title above.
IFA State Guarantee Program for Agri-Industries -
Administered through the Illinois Finance Authority,
this program is designed to aide farmers and agribusinesses
that wish to diversify into new enterprises or to
further process existing crops or livestock. Loans
can be made to farmers or agribusinesses to purchase
new or used property, equipment, or other capital
items that will be used to enhance or add value to
the agriculture product or process. Loans are made
through a local lender who receives an 85% guarantee
on the principal and interest of the loan. The interest
rate can be variable or fixed and must be less than
the market rate of interest generally available to
the borrower. For further information click in the
program title above.
Manufacturing
Modernization Loan Program The
Manufacturing Modernization Loan Program is designed
to provide manufacturers with access to adequate and
affordable financing for upgrading and modernizing
their manufacturing equipment and operations.
Authorization
The Manufacturing Modernization Loan Program is authorized
by state statute 30
ILCS 750.
How the Program Works
To remain competitive in the global economy, manufacturers
must continually update their equipment. Investing
in new technologies allows manufactures to increase
production capacity and efficiency. The goal of this
program is to make adequate and affordable capital
available to Illinois manufacturers for retooling,
equipment upgrades, and facility expansion.
DCEO will participate with local lending institutions
in loan amounts of a minimum of $10,000 and a maximum
of $750,000, or 25% of the total project, which ever
is less. The participation amount will be at sub-prime
rates. The term of the loan is a maximum of 10 years,
and a fee of 1-2% of loan amount may be required.
Existing Illinois manufacturing companies that employ
less than 500 full-time workers, and are retooling,
upgrading their equipment, or expanding their business
are eligible for this program. Examples of eligible
projects include: acquisition and development of land,
building costs, fixtures, machinery, new and used
equipment.
Minority,
Women, and Disabled Participation Loan Program (MWD/PLP)
The MWD/PLP program is a variation of the conventional
PLP, in that DCEO subordinates the loans through participating
lending institutions, but the MWD/PLP program can provide
Illinois small businesses that are 51 percent owned
and managed by persons who are minorities, women, or
disabled, with loans up to $50,000 or 50 % of the total
project.
Authorization
The MWD/PLP Loan Program is authorized by state statute
30
ILCS 750.
How the Program Works
Funds available for this program can be used for a number
of business activities, such as purchase and installation
of machinery and equipment, working capital, purchase
of land, construction or renovation of buildings. Funds
cannot be used for debt refinancing or contingency funding.
The Department’s interest rate will be established
at the time of its loan commitment. DCEO’s interest
rate on this program variation may be lower than on
a regular participation.
Any for-profit small business operating in Illinois
which has, including its affiliates, fewer than 500
full-time employees and meets the criteria of a minority,
women or disabled owned business is eligible for participation
in the program. A minority, women or disabled owned
business is a business which is at least 51 percent
owned by one or more minority, women or disabled persons
and the management and daily operations of the business
are controlled by one or more of the minority, women
or disabled persons who own it. A minority shall mean
a person who is a citizen of the United States, and
who is African American , Hispanic, Asian-American,
American Indian, or Alaskan Native. Disabled shall mean
a person with a physical or mental impairment that substantially
limits one or more of the major life activities of an
individual.
Participation
Loan Program (PLP) The PLP program
is designed to work through banks and other conventional
lending institutions, to provide subordinated financial
assistance to Illinois small businesses that employ
Illinois workers. A business with 500 or fewer employees
may apply for a PLP loan of not less than $10,000
nor more than $750,000. Loans shall not exceed 25%
of the total project and may not be used for debt
refinancing or contingency funding.
Authorization
The PLP Loan Program is authorized by state
statute 30
ILCS 750.
How the Program Works
Funds available through the PLP program can be used
for a number of business activities, such as purchase
and installation of machinery and equipment, working
capital, purchase of land, construction or renovation
of buildings. Funds cannot be used for debt refinancing
or contingency funding. Participating lending institution
shall be responsible for reviewing applications for
eligibility and setting terms.
Any for-profit small business operating in Illinois
which has, including its affiliates, fewer than 500
full-time employees is eligible. A Minority, Women
or Disabled owned business is a business which is
at least 51 percent owned by one or more minority,
women or disabled persons and the management and daily
operations of the business are controlled by one or
more of the minority, women or disabled persons who
own it.
Revolving
Line of Credit Program (RLOC)
The RLOC program can provide qualifying businesses
with a subordinated line of credit through banks and
other convention lending institutions at affordable
interest rates.
Authorization
The Revolving Line of Credit Program is authorized
by state statute 30
ILCS 750.
How the Program Works
The Revolving Line of credit program is appropriate
for businesses with 500 or fewer employees having
seasonal or variable working capital demands. A revolving
line of credit allows a business to borrow the amount
of money needed to meet the demand for its product/service
sales and to repay the loan from the sales revenues.
A RLOC loan permits a company to borrow, repay and
re-borrow in accordance with business needs, without
applying for a new loan. Generally, the program may
provide subordinated lines of credit to small business
at attractive interest rates for up to 25% of the
total amount , but not less than $10,000 or more than
$750,000. The lender is responsible for the review
and verification of the information in the application,
the initial approval and setting the loan terms. Typically,
the Department will not participate for more than
three years. Before submitting an application, the
lender must have a signed RLOC agreement with DCEO.
Southwestern
Illinois Development Authority (SWIDA)
SWIDA was created by action of the Illinois General
Assembly and the Governor in 1987. Tax-Exempt revenue
bonds are available through SWIDA but are limited
by federal law to selected purposes including not-for-profit
organization objectives, pollution control, solid
waste facilities, transportation and small issue manufacturing
companies. Interest on tax-exempt bonds is exempt
from federal income tax, and therefore attracts a
much lower rate than conventional financing.
SWIDA can also issue taxable
revenue bonds for commercial, industrial, and recreational
projects that are not eligible for tax-exempt financing.
Taxable bond rates generally run two to two and one-half
points higher than tax-exempts. Proceeds can be used
to purchase land, buildings and equipment, and to
construct new or renovate existing facilities. Taxable
bonds provide the ability to borrow money for a longer
term and at a lower rate of interest than alternative
forms of taxable financing.
Revenue bonds issuance through
SWIDA provides the following benefits: (1) The advantage
of longer and more flexible debt repayment periods
and lower interest rates than conventional financing;
(2) A moral obligation commitment of the State of
Illinois (optional); (3) The availability of unlimited
dollar amounts for project activities with no fixed
minimum job creation or capital investment requirements;
and (4) All SWIDA bonds are exempt from state taxation.
SWIDA finances development through
the sale of both taxable and tax-exempt bonds including:
(1) projects ranging from $800,000 to $40 million;
(2) interest rates as low as 5 percent; (3) periods
as long as 40 years; (4) a quick and easy double tax-exempt
program for government.
Lease-purchase financing for everything from fire
trucks to a new city hall.
Gap Financing
The Southwestern Illinois Community Development Corporation
(SWICDC) provides gap financing to small businesses
when conventional lenders are unwilling to assume
100% of the risk of lending or who do not meet county
CDBG loan requirements for job creation. It concentrates
on small to medium-sized businesses which require
capital for modernization, physical rehabilitation
of their facilities, or cash flow to make them more
commercially viable.
The SWICDC is an Illinois for-profit corporation.
Its stockholders are comprised of commercial banks,
SWIDA, and public utilities doing business in Madison
and St. Clair Counties. Representatives of the two
counties, the Illinois Department of Commerce and
Economic Opportunity (DCEO), and the Small Business
Development Centers at East St. Louis and Southern
Illinois University at Edwardsville are ex-officio
members. SWICDC exists for the public purpose of promoting
economic development through the provision of financing
that will directly benefit small businesses and create
and retain jobs.
Micro Loan Program
The SWICDC also administers a Micro Loan program for
business start-ups and expansions. Applicants must
be referred by the SIUE Small Business Development
Centers at East St. Louis or Edwardsville. The loan
limits are $2,000-$25,000. The interest rate is typically
above the prime rate and the terms range from 3-7
years.
Madison
County's Economic Development - Job Creation
Loan Program provides direct financing to businesses
at a below-market interest rate in cooperation with
private sector lenders. The purpose of the program
is to provide "gap" financing to expanding
or new firms whose projects create permanent jobs
for existing qualified low or moderate-income individuals
within Madison County.
Under the Job Creation Loan
Program, loans are typically made in the amount of
$100,000 or between 10-25% of the business' total
project costs, whichever is less (in special cases
where there is substantial job creation, a larger
loan amount may be allowed contingent on County Board
approval). The loan funds are normally provided at
a rate of 3% interest for a term of five years. The
remaining 75-90% of the total project costs must be
provided by the business' participating lending institutions
and its equity investment.
The program's loan funds can
be used for:
(1) Acquisition of real estate (land or buildings);
(2) Construction, renovation and rehabilitation improvements;
(3) Purchase or installation of machinery and equipment;
and
(4) Working capital.
The Job Creation Program's highest
priority is to create jobs. Businesses that receive
a low interest loan are expected to create at least
one full-time equivalent job for an existing low or
moderate-income individual for every $10,000 of loan
funds provided to the company.
Large
Business Development Program The
Illinois Large Business Development Program provides
incentive financing to encourage large out-of-state
companies to locate facilities in Illinois and also
encourages existing Illinois companies to undertake
major job expansion or retention projects within the
state. Funds available through the program may be
used by large businesses (500 or more employees) for
typical business activities, including financing purchase
of land or buildings, construction or renovation.
LBDP funds are targeted to major economic development
opportunities that will result in substantial private
investment and the creation and/or retention of 300
or more jobs.
SBA
7(a) Loan Program
The United States’ Small
Business Administration 7(a) Loan Program is a
guaranty loan program for small businesses. Through
this program, the SBA guarantees a portion of a bank’s
loan to a small business. Loan proceeds can be used
for a variety of business purposes including: working
capital; inventory purchases; acquisition of machinery,
furniture, fixtures and equipment; construction or
remodeling of buildings; the acquisition of real estate;
and in certain instances the refinancing of existing
debt. Loan terms typically range from 7 to 25 years
at market rates.
SBA
504 Loan Program - Typically, small businesses
encounter difficulties when looking for long-term
financing at fixed interest rates. Recognizing this,
the SBA created the 504-loan
program, which offers small businesses a financing
alternative. In Illinois, the Small Business Growth
Corporation administers the 504 program. Generally,
any small business project that involves the purchase,
construction or improvement of fixed assets is eligible.
Each 504 loan package has the following 3 elements:
(1) The Small Business Growth Corporation lends up
to 40 percent of the total fixed asset financing need,
to a maximum of $750,000-$1,000,000; (2) a private
lender, usually a bank, lends up to 50 percent of
the project’s total cost; and (3) the business
provides a minimum of 10 percent of the necessary
funds. The interest rate on the Small Business Growth
Corporation’s loan is fixed and generally a
little above the rate of long-term Treasury Bonds.
The loan maturity is 10 or 20 years. The interest
rate on the companion bank is negotiated by the borrower
and typically is floating. This combination of fixed
and floating interest rate financing provides an effective
hedge against unfavorable interest rate fluctuation.
For every $35,000 that the Small Business Growth Corporation
lends, reasonable projections should indicate that
one full-time equivalent job would be created or retained
over the next two years. For collateral, the Small
Business Growth Corporation generally requires a second
lien subordinate to the participating bank on assets
acquired with loan proceeds and personal guaranties.
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