PENNSYLVANIA CREDIT ENHANCEMENT/FINANCING PROGRAMS SMALL BUSINESS AND ECONOMIC DEVELOPMENT RATES AND TERMS

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1 CREDIT ENHANCEMENT/FINANCING S SMALL BUSINESS AND LENDING LIMITS ROLE FOR BANKS CONTACT Community and Economic Development Loan Export Finance (EFP) Provides low-interest loans to existing and start-up businesses (100 employees or less) located in socially and economically distressed areas. Funds may be used for land and building acquisition and construction, machinery and equipment purchases, working capital, and acquisition of assets from other small businesses. Loan proceeds may be used to acquire inventory, to pay for direct or indirect costs used for the manufacture or purchase of goods or for the provision of services, to support standby letters of credit used as bid bonds, performance bonds, or payment guarantees, and to finance accounts receivable up to 180 days from the date of arrival at the port of importation. Maximum loan amount is $200,000 or 50% of the total eligible project cost, whichever is less. The interest rate is 2%. Loan terms are negotiable. $350,000 or 50% of eligible project costs, whichever is less. The interest rate is 5%. Private-sector match is required. Richard D. Boyer Director, Small Business Financing Division (717) (717) (fax) ra-dcedsbfo@state.pa.us Industrial Resource Center Provides operational and management assistance to manufacturing companies. Uses consultants who provide services in areas of productivity, quality, information technology, human resources, strategic and business planning, environmental, manufacturing techniques, workforce development, international business, and e-business through mfggate.com. Loans to manufacturers varies by local center. Banks can refer manufacturing businesses that need pre-loan assessments or assistance to increase profitability or expand operations. Tom Palisin Technology Investment Specialist (717) (717) (fax) tpalisin@state.pa.us

2 CREDIT ENHANCEMENT/FINANCING S SMALL BUSINESS AND Industrial Sites Reuse Infrastructure Development (IDP) Provides grants and lowinterest loans for environmental assessment and remediation. Designed to foster cleanup of environmental contamination at former industrial sites, thereby bringing blighted land into productive reuse. Financing incentive to complement eligible capital improvements by private companies and developers; may be used for public (grants) and private (loans) infrastructure, site preparation, demolition, and rehabilitation activities. Eligible applicants include municipalities, industrial development authorities and corporations, redevelopment and municipal authorities, and local development districts. Maximum amount to be awarded for any assessment project will not exceed 75% of total cost, or $200,000 per phase, in single fiscal year, whichever is less. Maximum amount to be awarded for any remediation project will not exceed 75% of total cost, or $1 million, in a single fiscal year, whichever is less. Interest rate on all industrial site reuse loans will be 2%. Maximum term is 5 years for assessment and 15 years for remediation. Interest rate is currently 3%; term is set by the department depending on the asset financed; maximum loan amount is $1.25 million. A private match of $2 for every $1 in IDP funding must be committed by the company (to be spent within 18 months at the project site) or developer (to be spent within 5 years). Project must create a minimum of one new full-time equivalent job for every $25,000 in IDP assistance. Banks can provide loans for balance of project costs. They can also provide letters of credit as one of the types of acceptable security for loans. State loan is usually subordinated to private-sector financing. Barbara A. Musko Director, Grants Division (717) bmusko@state.pa.us Machinery and Equipment Loan Fund (MELF) Purchase or upgrade machinery and equipment directly related to manufacturing, industrial processing, agricultural processing, and direct mining operations. Interest rate is between 3.75% and 6.75%; terms to 7 years; loans to $500,000 or 50% of eligible project cost, whichever is less; 50% private-sector match, including minimum 10% equity required. Scott Dunkelberger (717) scdunkelbe@state.pa.us

3 CREDIT ENHANCEMENT/FINANCING S SMALL BUSINESS AND Neighborhood Assistance Enterprise Zone Tax Credit Pennsylvania Community Development Bank (PCD Bank) Qualifying capital investments include costs for improvements to or construction of additions to buildings. PCD Bank is not chartered as a financial institution by the PA Department of Banking or by any federal regulatory agency. It is a program administered by the PA Financing Authority. The program provides loans through community development financial institutions (CDFIs) for enterprise creation. Also provides capacity-building grants for communitydevelopment lending. Businesses located in enterprise zones receive state tax credits equal to 20% of eligible costs. A business is limited to $250,000 in state tax credits per fiscal year. Only CDFIs are eligible for the loan fund. Loans to CDFIs will be offered at belowmarket rates, and the maximum term is seven years. The minimum principal amount will be $250,000 over five years; maximum loan is $5 million. Both CDFIs and community organizations seeking certification as CDFIs are eligible for capacity-building grants. The maximum grants are $225,000 for CDFI startup, $250,000 for CDFI expansions, and $100,000 for development services. The endusers of the funds will be businesses and nonprofit organizations benefiting low- and moderate-income people and/or economically disadvantaged areas. Loans are for small-scale business expansions, new business starts, community facilities (e.g., day-care centers), other community development projects, and microenterprises. A bank making a qualified capital improvement to its property within a Pennsylvania designated enterprise zone requests credits against the state s shares tax. Banks can be participating lenders with PCD Bank or can make other investments to support the PCD Bank. Banks can also make loans and grants directly to local CDFIs. E. Darlene Ferrier Chief, State Division Community Services Office (717) (717) (fax) eferrier@state.pa.us For information on loans and investments: Carlton L. Ketchen Manager Pennsylvania Community Development Bank Center for Private Financing Harrisburg, PA (717) (717) (fax) cketchen@state.pa.us For information on grants: Brenda Bubb Analyst Office of Community Development (717) (717) (fax) bbubb@state.pa.us

4 CREDIT ENHANCEMENT/FINANCING S SMALL BUSINESS AND Pollution Prevention Assistance Small Business First Fund Underground Storage Tank Upgrade Loan (USTULP) A for-profit business enterprise that has no more than 100 total employees and operates from a stationary source: emits any form of pollution from a fixed point on its property. Eligible uses include the adoption or installation of pollutionprevention equipment or processes. Land and building acquisition; construction and renovation; machinery and equipment acquisition and installation and working capital. Loan proceeds may be used to finance all or a portion of the following costs: tank removal or closures and/or replacing tanks; cost of new tanks; upgrade of existing tanks; piping; leak detection devices; dispensers; engineering, design, and permitting costs associated with upgrading, and all construction and installation costs directly associated with upgrading. Maximum loan amount is $50,000 or 75% of the total project cost, whichever is less. Borrower would finance the remaining 25% of the total eligible project cost with proceeds from a private lender or equity from the owners or investors. Matching lending sources must have equivalent or longer terms. The PDCED portion has an annual fixed interest rate of 2.0%. The term of the loan can be up to seven years or the life of the asset, whichever is less. Loans up to $200,000 or 50% of total eligible project costs, whichever is less; interest rate is 5%; term up to 10 years for land and buildings, up to seven years for machinery and equipment, and up to three years for working capital; up to $25,000 is lent for every job created or retained. The interest rate for the PDCED portion is fixed for the term of the loan and shall equal the interest rate for a 5-year United States Treasury note as determined by PDCED. The term of the loan is up to 10 years. Maximum loan amount is $500,000 or 75% of the total eligible project cost, whichever is less. 10% of the total eligible project cost must be cash equity. The remaining 15% may be bank or vendor financed. Private-sector match is required. Richard D. Boyer Director, Small Business Financing Division (717) (717) (fax) ra-dcedsbfo@state.pa.us

5 CREDIT ENHANCEMENT/FINANCING S SMALL BUSINESS AND S FINANCING AUTHORITY (PEDFA) Pennsylvania Capital Access (PennCAP) Taxable Bond Targeted to all businesses with capital needs; loan guarantee use is for land and buildings, equipment, and working capital; no minimum; maximum to $500,000; loans can be term or line of credit. PEDFA bond program provides guarantee for bank loans. This bond program is for all types of businesses needing access to low-cost capital; funds are used for land and building acquisition, building renovation and new construction, machinery and equipment acquisition and installation, refinancing, and working capital. Loan minimum is $400,000, up to 100% of total project costs. Rate and terms are set by participating bank. This loan guarantee program is administered in conjunction with participating commonwealth banks. The interest varies according to weekly interest rates for bonds backed by letters of credit. The taxable program rate, including all fees, tends to be approximately 90% of prime. Borrower generally must secure a letter of credit from a bank. Kimberly Kaufman Pennsylvania Financing Authority (717) (717) (fax) kkaufman@state.pa.us Tax-Exempt Bond This program can be used by manufacturing firms, 501(c)(3) organizations, and exempt facilities projects. Funds are used for land and building acquisition; renovation and new construction; machinery and equipment acquisition and installation; and taxexempt bond refinancing. The interest rate varies according to weekly interest rates for bonds backed by letters of credit. The tax-exempt program rate, including all fees, tend to be approximately 75% of prime. Borrower must secure a letter of credit from a bank. INDUSTRIAL AUTHORITY (PIDA) Loans to businesses for land and building acquisition, building construction and renovation, industrial park development and multi-tenant spec building construction, acquisition, and renovation. Job creation and retention loans are for manufacturing, industrial research and development, agricultural processors, or firms establishing a national or regional headquarters. Job retention loans must meet certain county wage thresholds. Interest rate is from 3.75% to 6.75% depending on local unemployment; term to 15 years; $25,000 cost per job to be created/retained. Loans up to 50% of PIDA-eligible costs or $1.25 million loan ceiling, whichever is less. Targeted areas such as enterprise zones may be eligible for up to $1.75 million at 3.75% interest. Banks often provide additional financing for projects; a conventional lender generally assumes first position while PIDA assumes second position. Scott Dunkelberger Economic Development (717) scdunkelbe@state.pa.us