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| FINANCING SOURCES AND FINANCIAL ASSISTANCE
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Southwest Arkansas Planning & Development District The goals of SWAPDD are to create or save jobs and to expand or develop business and industry in the 12 counties it serves. The District receives funds for loans from two sources: the USDA Rural Development Program and the Department of Commerce's Economic Development Administration. From these two sources come the District's lending plans:
Contact: (870) 234-4030, www.swapdd.dina.orgArkansas Department of Economic Development Industrial revenue bonds, commonly known as "Act 9 Bonds" in Arkansas, provide manufacturers with competitive financing. Interest on tax-exempt issues is normally 80 percent the of prime, but this may vary depending on terms of the issue. The primary goal of this financing is to enable manufacturers to purchase land, buildings and equipment to expand their operations.
In addition to tax-exempt industrial revenue bonds, taxable industrial revenue bonds may be used for distribution facilities and business headquarters at long-term fixed rates and for manufacturing projects that exceed $10 million in capital costs or do not meet other federal guidelines relative to tax-exempt bond financing. Tourism attractions and facilities may also qualify. Businesses that use either tax-exempt or taxable industrial revenue bond financing can negotiate with the local community for a payment in lieu of property taxes.
To qualify for a tax-exempt bond program, a borrower must meet the following eligibility criteria:
Contact: Arkansas Department of Economic Development, 1-800-ARKANSAS or (501) 682-1121, www.1800arkansas.com/incentives/index.cfm?page=industrial_revenue_bondsFor businesses that have a financial history but are unable to sell industrial revenue bonds to the public, the Arkansas Department of Economic Development can assure bondholders of repayment by guaranteeing up to $5 million of the bond issue. The state's guaranty allows the bonds to be sold at a higher credit rating, therefore lowering the effective interest rate for the business. The Department charges a 5 percent fee for guaranteeing issues of this type.
The Arkansas Development Finance Authority (ADFA) also provides a bond guaranty program that enables a company to obtain competitive, fixed interest rates. The total amount ADFA can guarantee is up to $6 million per borrower; therefore, a business could obtain up to $11 million per project, combining the programs of ADFA and the Department of Economic Development. ADFA has the capacity to issue bonds for a single project or for several projects on a pooled basis. The pooled or composite issue allows small businesses needing financing for fixed assets to take advantage of low interest financing and to share the costs for issuing bonds, an option which gives more financing opportunities which otherwise would not be available. ADFA can also provide short-term financing to a company before bond proceeds are available. Contact:Arkansas Department of Economic Development, 1-800-ARKANSAS, (501)682-1121, www.1800arkansas.com/incentives/index.cfm?page=bond_guarantee
The Small Business Loan Program was created to stimulate small businesses by providing up to one-half of the amount of participation loans offered by approved community lenders. A small business is one with fewer than 50 full-time employees and less than $1 million in annual gross sales, excluding agricultural production. The project must provide reasonable expectations for job creation. The Department's share cannot exceed 50 percent of the total loan amount and cannot be less than $2,500 or more than $40,000. Contact: Arkansas Department of Economic Development, 1-800-ARKANSAS, (501) 682-1121, www.1800arkansas.com/incentives/index.cfm?page=small_business_loan
Arkansas Capital Corporation (ACC) is a privately owned, non-profit organization established in 1957 to serve as an alternative source of financing for businesses in Arkansas. Its main goal is to improve the economic climate in the state by providing long-term, fixed-rate loans to Arkansas businesses. Loans generally range from a minimum of $100,000 to a maximum of $1.25 million. As a preferred lender for the Small Business Administration, ACC makes loans to existing operations and business start-ups for everything from new construction and equipment to working capital. ACC loans may be used in combination with bank loans, municipal bond issues, or other sources of financing.
ACC also has an affiliate SBIC venture capital fund, Diamond State Ventures, that provides patient capital to emerging growth businesses in Arkansas and the region. DSV's investment range is $250,000 to $2,800,000 and can syndicate capital raises of up to $20 million. DSV will consider businesses in basic manufacturing and services, as well as technology related ventures. Other ACC affiliates include the Arkansas Certified Development Corporation, which administers SBA 504 loans, and the Arkansas Capital Relending Corporation, which facilitates U. S. Department of Agriculture loans in communities with a population of 25,000 or less. Contact: Arkansas Department of Economic Development, 1-800-ARKANSAS, (501) 682- 1121, www.1800arkansas.com/incentives/index.cfm?page=Capital_Corporation
Arkansas Development Finance Authority (AFDA) Loan Programs
Venture Capital Investment Fund The Venture Capital Investment Act of 2001 authorizes the Arkansas Development Finance Authority (ADFA) to raise significant amounts of venture capital for investment within the state. The pool of capital, raised from traditional Arkansas lenders, will guarantee principal and interest payments to the lenders and will be managed by a professional investor group under contract to the state . Contact: Arkansas Development Finance Authority, (501) 682-5900, www.state.ar.us/adfa/Venture%20Capital%20Description.htm
The ADFA Capital Access Program's purpose is to make funds available to borrowers who for various reasons might otherwise have difficulty in obtaining conventional bank loans. Participating lending institutions build an earmarked off-balance sheet loan loss reserve account each time they enroll a loan in the program. A contribution is required to enroll the loan into the program. This contribution is paid by the Borrower (contribution can be financed as part of the loan) and shall not be less than 3% of the loan amount, nor greater than 7% of the loan amount. This contribution is then matched by ADFA for a total of 7.5% of the loan amount (150% of enrollment contribution for the first $1million in loans, after which, ADFA matches Borrower contribution at 100%) as the contribution to a lender's earmarked loan loss reserve account. At a maximum, 7% of the loan amount is paid up-front and matched by ADFA for a total of 17.5% contribution to the loan loss reserve. ADFA owns and controls the reserve, but it is designated for use by the bank and usually held on deposit at that bank.
The loss loan reserve fund is available on a pooled basis to be applied to any of the lenders Capital Access Program loans. The fund is maintained on deposit with the lender, in ADFA's name and invested at ADFA's direction. The ADFA, as administrator, is not a party to loan transactions and plays no role in underwriting, approving or servicing the loans. This program is structured to be highly non-bureaucratic, while at the same time assuring risk-taking by lenders.
Fees paid into a loan loss reserve account are not considered interest for the purpose of Arkansas' usury laws. Legally, the fees paid into the loan loss reserve accounts represent a cost to the borrower for providing security for a loan, not compensation to the lender for the use of its funds. As structured, the lender never receives more than the principal, plus interest at its normal loan rate. Contact: Arkansas Development Finance Authority, (501) 682-5900, www.state.ar.us/adfa/programs/cap.html
Disadvantaged Business Enterprise Program ADFA, in cooperation with Levi Strauss Foundation and the Winthrop Rockefeller Foundation as has created a program to provide working loan guarantees capital to minority contractors who cannot otherwise finance their working capital needs. The targeted businesses for the DBE program are those owned by African-Americans, Native Americans, Hispanic Americans, Asian Pacific Americans, subcontinent Asian Americans, handicapped persons, or women who are certified DBE contractors. by either the Arkansas State Highway and Transportation Department or 8(a) contractors by the Small Business Administration.
The goal of the program is to help disadvantaged businesses go from a status of program dependence in securing government contracts to one of independence by demonstrating -- over time -- to lenders and sureties (a company that secures against loss, damage or default) their ability to perform. The Small Business Administration partially supports the Small Business Development Center, which assists small business owners at no cost in preparing business plans and applying for financing. The University of Arkansas' Cooperative Extension Service houses the Arkansas Procurement Assistance Center which provides assistance in preparation of bids. Contact: Arkansas Development Finance Authority, (501) 682-5900, www.state.ar.us/adfa/programs/dbep.html
Tourism Development Loan Program ADFA has set aside $2,000,000 for tourism development direct loans for new business start up or expansion in the tourism industry. Additional funding of $1,000,000 will be sought through the USDA-Intermediary Relending Program (IRP). An additional $250,000 will be made available from the Arkansas Department of Heritage for projects which have cultural or historical significance.
Intermediary Relending Program (IRP) money, if received by ADFA, will be used in rural Arkansas and in federally designated Enterprise Communities whenever possible. If the business qualifies for USDA funding, the loan rate will be 3%. Otherwise, the loan rate will be ½ of the maximum finance rate allowed by the Arkansas Usury Law. Loans will be a 50/50 match with local financial institutions. The local financial institution will service all loans. There is no maximum or minimum project size. Maximum state loan amount is $250,000. Minimum state loan amount is $1,000.
State loan proceeds must be for fixed costs only such as acquisition of land and buildings, new construction, renovation, of an existing building, site improvements and purchase of new or used equipment (existing buildings and used equipment must be appraised). Business planning and business skills training from UALR Small Business Development Center (SBDC) or similar programs will be encouraged for new and existing owners/operators. A standard pre-application form has been developed to keep costs to a minimum. Any legal and closing costs associated with the loan will be paid by the borrower and can be financed. www.state.ar.us/adfa/tourism_development_loan_program.htm
Arkansas Science & Technology Authority Loan Program
Seed Capital Investment Program The Arkansas Science & Technology Authority's Seed Capital Investment Program (SCIP) can provide working capital to help support the initial capitalization or expansion of technology-based companies located in Arkansas. The program can provide working capital up to $500,000 of the company's total financing needs. Investments made by the SCIP fund can be repaid through a variety of instruments, including direct loans, participations and royalties. Eligible users include corporations whose (1) principal place of business is located in Arkansas, (2) project is technology or science related, (3) business evaluation indicates a good chance of financial success and, (4) proposed project development is fully completed. All applicants must complete an application form and submit a fully developed business plan. An interview and site visit may be conducted by the Authority's staff as part of the review. Upon qualification, the enterprise may then be invited to submit a detailed full application for further review. Contact: Arkansas Science & Technology Authority, (501) 683-4408, www.accessarkansasscience.org/seed.html
Technology Development Program The Arkansas Science & Technology Authority's Technology Development Program provides royalty financing for qualified projects possessing a well developed, comprehensive project plan, and which utilizes the benefits of science and technology to provide economic and employment growth potential in Arkansas. The maximum investment is $ 50,000 with terms negotiated on an individual basis. These terms are a maximum five percent of net sales for a maximum term of 10 years. Qualified energy-related Technology Development projects are funded separately. Qualified applicants are eligible for the Technology Development Program: (1) researchers at Arkansas colleges and universities, (2) researchers at federal laboratories in Arkansas, (3) Arkansas-based small businesses, and (4) inventors in Arkansas. All applicants must complete an application form, which includes a cover sheet and a project plan. An interview and on-site visit may be conducted by the Authority staff. Contact: Arkansas Science & Technology Authority, (501) 683-4408, www.accessarkansasscience.org/tdp.html
Technology Transfer Assistance Grant Program (TTAG) The Arkansas Science & Technology Authority provides limited financial support for the transfer and deployment of innovative technology. The Authority will fund up to $3,750 of costs associated with transferring new or existing technology from a qualified applicant -- such as a public or private enterprise, laboratory, college or university -- to an enterprise based in Arkansas. Up to $5,000 of total project costs will be considered, with the first $2,500 funded by the Authority; the remaining $2,500 is cost-shared equally (50:50) between the Authority and the enterprise. Each enterprise is eligible to receive assistance for two technology transfer projects per year. Projects are evaluated on a competitive basis. The Authority defines eligibility as broadly as possible to encourage submissions that reflect the greatest potential for project success. Qualified eligible applicants include one or more technology transfer resource providers who possess or have the capability to locate innovative technology to transfer to a specific Arkansas-based enterprise. All qualified applicants must complete an application form, including a cover sheet and a problem description. The application must address the transfer of innovative technology from a qualified applicant to an Arkansas based enterprise. Contact: Arkansas Science & Technology Authority, (501) 683-4408, www.accessarkansasscience.org/ttag.html
Small Business Administration (SBA)
SBA offers financial assistance in the form of partial loan guaranties on small business loans made by banks and other commercial lenders. When a loan request does not meet regular lender approval requirements, SBA guaranteed financing can enable the lender to provide financing the would not otherwise be available on reasonable terms.
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. All 7(a) loans are provided by lenders who are called participants because they participate with SBA in the 7(a) program. Not all lenders choose to participate, but most American banks do. There are also some non-bank lenders who participate with SBA in the 7(a) program which expands the availability of lenders making loans under SBA guidelines. 7(a) loans are only available on a guaranty basis. This means they are provided by lenders who choose to structure their own loans by SBA's requirements and who apply and receive a guaranty from SBA on a portion of this loan. The SBA does not fully guaranty 7(a) loans. The lender and SBA share the risk that a borrower will not be able to repay the loan in full. The guaranty is a guaranty against payment default. It does not cover imprudent decisions by the lender or misrepresentation by the borrower. Contact: local bank. http://sba.gov/financing/sbaloan/7a.html
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. Contact: Miller County: Ark-Tex Regional Development, (903) 832-8636, www.atcog.org/economic_development.htm ; Columbia, Lafayette, and Union Counties: Arkansas Certified Development Corporation, (501) 374-9247, http://acdc.arcapital.com/504_loan_program/
This 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. Contact: Arkansas Enterprise Group, (870) 246-9739.
Several loan guarantee programs are available for companies involved in exporting. For more information on the various SBA international trade loan programs, contact your local bank. www.sba.gov/financing/loanprog/ewcp.html
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