Chesterfield Business Assistance

Financing Options: Grants, Financing and Business Incentives

Grants

By and large, governmental entities and private foundations do not make grants to for-profit enterprises. There are only a limited number of financial grants for specific business purposes offered through federal, state or local governments. The available grants are for such funding uses as research, industrial road access or grants to non-profit organizations to provide assistance to small businesses. Foundations typically fund nonprofit organizations that qualify for public charity status under section 501(c)(3) of the Internal Revenue Code. These are organizations whose purposes are charitable, educational, scientific, religious, literary, or cultural.

There are an overwhelming number of web sites that claim to provide information on grant opportunities. Be very cautious of web sites that require costly, annual subscriptions and promise to guarantee grant money to their subscribers. Some of the more reputable website that can help you search for the limited grant opportunities that may be available are listed below.

The Catalog of Federal Domestic Assistance  provides access to a database of all federal programs available to state and local governments (including the District of Columbia); federally-recognized Indian tribal governments; Territories (and possessions) of the United States; domestic public, quasi-public, and private profit and nonprofit organizations and institutions; specialized groups; and individuals.

The Foundation Center provides information on private corporate foundations that offer funding opportunities. Major corporations such as Ford, Pespi and Target provide grants to private profit and nonprofit organizations and institutions; specialized groups; and individuals for a wide variety of community oriented projects.

The Small Business Administration website provides a list of links to individual government agencies that may provide grant opportunities.

If you are trying to start a for-profit business, as opposed to a not-for-profit entity, you may find practical advice about financing sources for new businesses at OPEN: The Small Business Network, sponsored by the American Express Company.

The Kaufman Center for Entrepreneurial Leadership also hosts EntreWorld, a Web site providing resources covering many topics of interest to entrepreneurs including starting a business and financing.

In summary, it is very unlikely that you will be able to start or fund your business with grant money. There are, however, financing programs and business incentives that you may be eligible for that can provide some financial assistance for your business endeavor.

Financing Programs

Access to capital continues to be a serious issue for most businesses. Growth and expansion require additional capital that a business may not have and, therefore, must seek from outside sources, typically debt financing through a commercial bank. Small businesses and start up companies face a variety of obstacles in trying to access these funds through commercial banks. Starts up companies by their very nature represent a perceived risk beyond a commercial bank’s lending criteria. Many existing companies are in the very early stages of their lifecycle or may not have operating experience sufficient to meet the bank’s criteria. Many government agencies and support organizations have recognized these obstacles and have created a number of credit enhancement programs to help these businesses access the critical funding they need.

Below are some of the financing programs available to Chesterfield County businesses.

Financing Programs of the Small Business Administration (SBA)

Microloans are loans made directly to a business by a non-bank lender such as a Certified Development Corporation (CDC). The loans are typically under $50,000 and can be used to purchase machinery and equipment and for working capital needs. The interest rates on these loans are generally comparable to market rates for similar loans at a commercial bank. They are not intended to be “cheap money”. The CDCs are designed to be more flexible in their underwriting criteria and since they are a non-profit lender, by nature they can assumer more risk than most banks. Companies that cannot be approved for a loan by a bank may still meet the qualifications for a microloan through a CDC.  There are two microloan programs available to Chesterfield County businesses: The Crater Development Corporation Microloan Program and the Virginia Community Development Loan Fund Microloan Program.

Loan Guaranty Programs of the SBA guarantee up to 80% of a loan made by the commercial bank to a high-risk business. The SBA promises to repay the bank up to 80% of the outstanding balance of a loan approved through the program if the borrower should default. This helps reduce the banks risk and enables the bank to make the loan. Again, this is not a “low-cost” financing. The rates can be negotiated between the bank and the borrower and will be at or slightly higher than market rates. There are also additional upfront and annual fees associated with the SBA guaranty, which will be paid by the borrower. This program is designed to address the business’s ability to get the loan, not how much the financing will cost. There are several loan and loan guaranty products offered by the SBA: the Community Express Loan, the 504 Loan, and the 7(a) Loan Program. The application processes for any of these programs start by the borrower applying to a commercial lender for the loan. Many of the major banks in the Richmond area such as Wachovia, BB & T and Bank of America are SBA lenders.

Financing Programs of the Virginia Small Business Financing Authority (VSBFA)

The Child Day Care Financing Program provides low-interest installment loans to "regulated" Providers in the Commonwealth of Virginia. Loan proceeds can be used to meet or maintain childcare standards, including health, safety or fire codes or to make quality enhancements to their childcare program. Loans may also be used for certain start-up costs.

Through the Small Business Environmental Compliance Assistance Fund low-interest rate loans are available to small businesses for the purchase and installation of replacement equipment needed to comply with the Clean Air Act; or to implement voluntary pollution prevention measures; or for the implementation of selected voluntary agricultural best management (BMPs) practices as listed in the Virginia Agricultural BMP Manual.

The Virginia Capital Access Program (VCAP) provides access to capital for Virginia businesses by encouraging banks in Virginia to make loans that they would otherwise not make due to a borrower’s riskier profile. Unlike government guaranty programs, which provide a guaranty of a specific loan, VCAP utilizes an insurance concept on a portfolio of loans.

The VSBFA DIRECT  is a loan program designed to provide access to capital to new and existing small businesses and economic development authorities. Funds are provided through direct loans from the Virginia Small Business Financing Authority to facilitate the financing of projects that create economic benefit to Virginia's communities through increased revenues and the creation of new jobs.

The Virginia Economic Development Loan Fund (EDLF) is designed to fill the financing gap between private debt financing and private equity. Funds are provided for fixed asset financing to new and expanding industries that are creating new jobs or saving "at risk" jobs in Virginia.  Funds can be used for the acquisition of land and buildings, construction or improvements to facilities and the purchase of machinery and equipment. Manufacturing companies and other industries that derive 50% or more of their sales outside of Virginia are eligible to apply.

The Loan Guaranty Program will guarantee a portion of a loan or line of credit extended by a commercial bank to a qualified Virginia business. The maximum guaranty under the program is 75% of the loan or line of credit up to a maximum guaranty of $300,000. The program can be used to provide a guaranty for a short-term line of credit or a term loan of up to three years in duration. More information on these programs can be found at the Virginia Department of Business Assistance.

Business Incentives

For companies locating or expanding in one of the counties two Enterprise Zones, the Jefferson Davis Enterprise Zone or the Walthall Enterprise Zone, there are local and state benefits that may impact the company’s cost of doing business. Tax credits, rebates or exemptions, development fee waivers and jobs grants may be available to eligible businesses.

Information on other business incentives offered by the Commonwealth of Virginia can be found in the Commonwealth’s Guide to Business Incentives.

Chesterfield County’s Project Manager for Small and Minority Business can help you access the financing program that is the best match for you business needs. To discuss financing options or to set up a counseling session contact Karen A. Aylward at (804) 318-8550 or karen@chesterfieldbusiness.com.

 
The grass is greener.