Financing Programs

VACC, a subsidiary of Vermont Economic Development Authority (VEDA), is a nonprofit corporation which provides credit to farmers and agricultural facilities who are not having their financing needs fully met by conventional agricultural credit sources. Loans are available from VACC to strengthen existing farm operations, encourage diversification, support beginning farmers and to encourage marketing and processing of Vermont agricultural products.

For further information or an application, please review the VACC program through the VEDA website at www.veda.org

Vermont Agricultural Credit Corporation

Community Capital offers financing and other assistance to businesses in Vermont that do not yet meet all the requirements of traditional bank financing.

Financing to Start or Grow your Business: We provide flexible and affordable financing for eligible and qualified new and growing businesses. Loans are available up to $50,000 to businesses located in Washington, Lamoille or Orange counties. For all other counties in the state, our maximum loan size is $25,000.

Post-Loan Technical Assistance Grants: Successful applicants receive a business advancement grant of $500 plus at least 10 hours of free, one-on-one assistance from specialized consultants in marketing, financial management, inventory management, and human resources as well as in their specific industry.

Community Capital is a community-based 501c3 nonprofit serving the entire state of Vermont.

For more information, contact us at 802-479-0167.
Or visit our website at: www.cvcapital.org
Mailing Address: PO Box 342, Barre, VT 05641
Physical Address: 107 North Main Street, Suite 7, Barre, VT 05641

The Vermont Financial Access Program (FAP) is a program which utilizes a "pooled reserve" concept to enhance opportunities for small businesses to access commercial credit. Premiums which are based on a percentage of the loan amount are paid to VEDA by a participating bank and are deposited into a reserve account on behalf of that bank. Bank and borrower contribute equally in the payment of the premium, however, the bank may pass its portion of the premium onto the borrower. VEDA matches this premium with insurance. This reserve account is dedicated to cover losses which may be incurred by the bank on loans which are enrolled in FAP, thus giving the bank an incentive to make loans they may not otherwise be willing to consider.

Terms of loans are determined by the lending institution; VEDA does not participate in the credit decision. To be eligible, a borrower must be duly authorized to conduct business in the State of Vermont and have gross sales less than $5 million. Loans must be in an amount less than $200,000 and proceeds must be used for industrial, commercial or agricultural enterprises within the State of Vermont.

Vermont Economic Development Authority

The Vermont 504 Corporation, with SBA's approval, makes SBA 504 loans to eligible and qualified borrowers. To fund these loans, the SBA guarantees debentures which are sold to private investors. The proceeds of the debenture are subsequently loaned to the borrower. SBA 504 loans are made in conjunction with a “third party lender” (i.e. a Bank) that normally provides financing for 50% of the Project. Vermont 504 Corporation’s SBA 504 loan lends up to 40% of the Project amount in a lien position that is junior to the third party lender, leaving as little as a 10% equity requirement from the Borrower. For further information please review the program through the VEDA website at www.veda.org

Central VT Economic Development

Through local banks

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.

Under the guaranty concept, commercial lenders make and administer the loans.

The business applies to a lender for their financing. The lender decides if they will make the loan internally or if the application has some weaknesses which, in their opinion, will require an SBA guaranty if the loan is to be made. The guaranty which SBA provides is only available to the lender. It assures the lender that in the event the borrower does not repay their obligation and a payment default occurs, the Government will reimburse the lender for its loss, up to the percentage of SBA's guaranty. Under this program, the borrower remains obligated for the full amount due.

All 7(a) loans which SBA guaranty must meet 7(a) criteria. The business gets a loan from its lender with a 7(a) structure and the lender gets an SBA guaranty on a portion or percentage of this loan. Hence the primary business loan assistance program available to small business from the SBA is called the 7(a) guaranty loan program.

A key concept of the 7(a) guaranty loan program is that the loan actually comes from a commercial lender, not the Government. If the lender is not willing to provide the loan, even if they may be able to get an SBA guaranty, the Agency can not force the lender to change their mind. Neither can SBA make the loan by itself because the Agency does not have any money to lend. Therefore it is paramount that all applicants positively approach the lender for a loan, and that they know the lenders criteria and requirements as well as those of the SBA. In order to obtain positive consideration for an SBA supported loan, the applicant must be both eligible and creditworthy.

What SBA Seeks In A Loan Application:

In order to get a 7(a) loan, the applicant must first be eligible. Repayment ability from the cash flow of the business is a primary consideration in the SBA loan decision process but good character, management capability, collateral, and owner's equity contribution are also important considerations. All owners of 20 percent or more are required to personally guarantee SBA loans.

Eligibility Criteria:

All applicants must be eligible to be considered for a 7(a) loan. The eligibility requirements are designed to be as broad as possible in order that this lending program can accommodate the most diverse variety of small business financing needs. All businesses that are considered for financing under SBA’s 7(a) loan program must: meet SBA size standards, be for-profit, not already have the internal resources (business or personal) to provide the financing, and be able to demonstrate repayment. Certain variations of SBA’s 7(a) loan program may also require additional eligibility criteria. Special purpose programs will identify those additional criteria.

Eligibility factors for all 7(a) loans include: size, type of business, use of proceeds, and the availability of funds from other sources. The following links will provide more detailed information on these eligibility issues.

Specific types of businesses not eligible include:

REAL ESTATE INVESTMENT firms exist when the real property will be held for investment purposes - as opposed to loans to otherwise eligible small business concerns for the purpose of occupying the real estate being acquired.

OTHER SPECULATIVE ACTIVITIES are those firms developing profits from fluctuations in price rather than through the normal course of trade, such as wildcatting for oil and dealing in commodities futures, when not part of the regular activities of the business. Dealers of rare coins and stamps are not eligible.

LENDING ACTIVITIES include banks, finance companies, factors, leasing companies, insurance companies (not agents), and any other firm whose stock in trade is money.

PYRAMID SALES PLANS are characterized by endless chains of distributors and sub-distributors where a participant's primary incentive is based on the sales made by an ever- increasing number of participants. Such products as cosmetics, household goods, and other soft goods lend themselves to this type of business.

ILLEGAL ACTIVITIES are by definition those activities which are against the law in the jurisdiction where the business is located. Included in these activities are the production, servicing, or distribution of otherwise legal products that are to be used in connection with an illegal activity, such as selling drug paraphernalia or operating a motel that permits illegal prostitution.

GAMBLING ACTIVITIES include any business whose principal activity is gambling. While this precludes loans to race tracks, casinos, and similar enterprises, the rule does not restrict loans to otherwise eligible businesses, which obtain less than one-third of their annual gross income from either: 1) the sale of official state lottery tickets under a state license, or 2) legal gambling activities licensed and supervised by a state authority.

CHARITABLE, RELIGIOUS, OR OTHER NON-PROFIT or eleemosynary institutions, government-owned corporations, consumer and marketing cooperatives, and churches and organizations promoting religious objectives are not eligible.

For more information visit the SBA website http://www.sba.gov/index.html

Once a small business borrower meets the lender's requirements for credit, the lender may request a guarantee from the SBA through SBALowDoc procedures. It's a quick, two-step process:

• The borrower completes the front of the SBA's one-page application, and the lender completes the back.
• The lender submits a complete application to the SBA and receives an answer within 36 hours.

Interest Rates

• Interest rates can be negotiated between the borrower and lender, may be fixed or variable, are tied to the prime rate (as published in the Wall Street Journal), and may not exceed the following SBA maximums:
• Follows 7(a) Interest Rate structure

Collateral

• To secure the loan, the borrower must pledge available business and personally owned assets. Loans are not declined when inadequate collateral is the only unfavorable factor.
• Personal guaranties of the principals are required.

Maturity

Length of time for repayment depends on -

• Ability to repay, and
• The use of the loan proceeds.
  Maturity is usually 5 to 10 years. For fixed-asset loans it can be up to 25 years.

Eligibility

A business is usually eligible for the SBALowDoc if -

• The purpose of the loan is to start or grow a business;
• The existing business employs no more than 100 people, has average annual sales for the preceding three years not exceeding $5 million, and the business including affiliates; the business and its owners have good credit; and the business owners are of good character.

Vermont Job Start was created in 1978 to help develop self-employment opportunities for low- and moderate-income Vermonters.  Loans may be made in any amount up to $20,000, with a lifetime cap of $20,000 to any one borrower, and may be used to start, strengthen or expand small businesses.

Further information and applications are available by contacting the Job Start office or through the VEDA website at www.veda.org

Vermont Job Start

Vermont Small Business Loan Program

Vermont Economic Development Authority