There are numerous lucrative loan programs available either from a municipality, industrial development agency, state, or federal government.
IDA Loan Programs
Regional Industrial Development Agencies (IDAs) have programs to provide additional lending capital in conjunction with traditional bank financing. In most circumstances, the IDA (or its affiliated lending entity) will take a junior position with a fixed interest rate, lowering the borrower’s effective interest rate.
Job Development Authority (JDA) loans
Provides direct loans for the growth of businesses within New York State by assisting in financing a portion of the cost of acquiring and renovating existing manufacturing, distribution, warehousing and certain service buildings or constructing new buildings (“real estate” projects) or for purchasing machinery and equipment (“M&E” projects). A JDA real estate loan is normally a second mortgage loan, subordinate to a first-mortgage loan provided by a bank; M&E Loans are secured by a first lien, co-equal with the bank’s lien, on the M&E being financed. Typical financing structure: 50% bank loan, 40% JDA loan and 10% borrower equity.
Small Business Administration (SBA) 504 and 7a programs
The SBA 504 program is a fixed asset, economic development program designed to promote growth and job creation for small businesses. The spirit of the 504 program is to provide access to low down payment financing so that small businesses can preserve cash to operate their business. The SBA 7(a) Loan Program helps expand access to capital to small businesses operating for-profit. Under the 7(a) program, eligible small business loans made by approved SBA lenders are guaranteed up to 85% by the SBA. This loan guarantee helps entice lenders to make loans to small businesses who would not qualify for conventional financing. Typically a lender might apply for an SBA 7(a) loan guarantee to mitigate a shortfall in collateral. In New York State, these programs are managed and administered by New York Business Development Corporation (NYBDC).
New Market Tax Credits financing
Interest-only loans at below-market rates, a portion of which may be forgiven upon maturity, used for the purpose of subsidizing long-term capital investment in order to foster job creation and community development in designated low-income communities throughout New York State. Preference will be given to borrowers with: development costs between $5 million and $25 million and/or projects that are likely to create new jobs and/or retained jobs at risk of being lost, with preferences as follows.