Virginia small business financing
Small business undertakings play an important role in the business sectors all over the world, thus contributing to the general economic growth. This fact holds good for Virginia as well, together with the other U.S states. To promote and to help aspirants who wish to start their own business or to sustain and make their business grow, there are various programs that are run by the government and private financial institutions, from which they can get the money they want to fulfill their business needs.
Virginia Small Business Financing Authority
Also known as VSBFA, the Virginia Small Business Financing Authority, is a political subdivision of the Commonwealth of Virginia. It is amongst the leading institution in providing financial assistance to small businesses in Virginia. It primarily provides help to small business enterprises and non profit organizations aspiring to grow in Virginia. VSBFA also provides assistance to the local economic development authorities for passing various financial products to the small business enterprises. VSBFA also lends its support t those financial institutions and banks which provide financial help to the small businesses. VSBFA works on the mission to encourage and help businesses by providing easy and affordable finance through public and private financial institutions. By doing so it aims towards the overall economic development of the region thereby increasing the GDP and per capita income across the commonwealth.
Financial loan programs of VSBFA: VSBFA assists the small business in three ways.
1) through direct lending,
2)Indirect lending, where it provides loan guarantees to the commercial banks to facilitate access to capital for businesses and 3) Conduit financing.
The following are some of the important financial programs undertaken by VSBFA.
1) Industrial Development Bond Program (IDB): IDB is a tax free municipal bond issued by a state or local government authority to finance the acquisition, construction or equipping of a facility. IDB tax exempt financing for building projects is restored under the federal revenue reconciliation act of 1993.
The benefits of IDBs include
Sub-prime pricing: IDBs provide lower interest rates than conventional financing.
IDBs help companies finance effectively for all the costs of a project, including site preparation, capitalized interest during construction and most issuance cost up to $20 million.
Long term financing; IDBs can have an average maturity of up to 120% of the economic life of the financed assets.
2) Loan Guaranty Program:
VSBFA, through the loan guaranty program, will guarantee a portion of loan or line of credit provided to an eligible Virginia business by a commercial bank. With this guaranty, the risks facing the bank while financing a business get reduced, at the same time the business also gets benefited by getting access to the finance which would have been hard to get otherwise.
3) Economic Development Loan Fund (EDLF)
EDLF, which is funded by the federal Economic Development Administration (EDA), is designed to fill the gap between the private debt financing and private equity. Finance is provided to the economic development authorities and eligible new and developing businesses which create new jobs in the lesser developed areas of Virginia as defined by the EDA. Funds are also made available to businesses in Virginia which find 15% or more of their revenues from defense related activities.
4) Small Business Environmental Assistance Fund: Through this program, which is a revolving loan program developed by the Virginia department of environmental quality (DEQ), along with Virginia department of business assistance (DBA), low interest loans are provided for businesses to purchase and install the replacement equipment needed to comply with the Clean Air Act ; or to execute voluntary pollution prevention measures.
5) Virginia normal capital access program (VCAP): VCAP is intended to persuade banks in Virginia to provide loans which they would have reservations against due to the risks involved in doing so to particular borrowers. VCAP establishes a loan loss reserve at the respective bank which is funded by the enrollment premiums paid by the borrower / bank and VSBFA. This is a flexible and a non bureaucratic program to assist banks in providing finance to businesses in Virginia.
6) Virginia Community Reinvestment Program: This program is designed to help existing businesses fund the purchase of owner occupied real estate and/or capital equipment. VSBFA serves as a channel through which the Community Reinvestment Fund makes loan in economically backward areas, to disadvantaged business owners, or in situations that provide economic benefit or cause positive public response as determined by the VSBFA and CRF.
7) New Markets Tax Credits Program: This program intends to help existing businesses by providing finance for the purchase of real estate occupied by their companies and/or capital equipment used in their operation.
8) Providing Access to Capital for Entrepreneurs (P.A.C.E): PACE program is designed specially to help gain access to capital for disadvantaged businesses in Virginia by encouraging the banks to furnish loans which they otherwise may be reluctant due to the risks involved in lending the borrower, given his profile. This program is administered by VSBFA for DMBE (Department of Minority business Enterprise). PACE provides two funding mechanisms namely, the Capital Access Fund and the Loan Guaranty Fund for disadvantaged businesses. The eligible borrowers include any corporation, partnership, limited liability partnership, joint venture, sole proprietorship which is authorized to conduct business in Virginia.
To get a loan: Before applying for a loan, you should make a study about the needs of your business and the lending policy of the various banks and other lending institutions. Though most banks provide loans for existing as well as for start-up businesses, they may vary among themselves in the mode of lending. Generally, the lender will want basic information about your business idea (which should be detailed in the business plan you submit) and its probability of success in the location where you plan to do it, collateral down payment, your credit history and your current financial position, your management ability and your ability to repay the debt.
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