The goal of the CDC small business finance is to promote the growth and to diversify small business enterprises through their lending services.
The CDC Small Business finance helps its borrowers in the following ways:
Helping to assemble loan packages, pre-qualify, perform credit assessment
Presenting and locating the lenders who are interested in making the loan for the small business administration (SBA).
To facilitate small business finance different loan programs are available which are discussed under the following heads:
SBA 504 Loan
If an entrepreneur is interested in obtaining loans for purchasing industrial or commercial building at rates of interest that are below the market rate coupled by a minimum down payment of 10% or equity injection, then he must opt for the SBA 504 Loan scheme.
Loan Limit
The entrepreneur opting for the CDC Small Business Finance can get a maximum loan of 90% of the total project cost.
50-40-10-Loan Structure
In this scheme the bank portion of the loan is amortized over 25 years whose minimum term is 10 years or a maximum of 25 years. The rate of interest and the fees can be easily negotiated between the lenders and the borrowers. For the part of the loan that is offered by CDC, two term options are available with 10 or 20 years fully amortized. The interest rate for the 504 loan scheme is settled at a level which exceeds the current market rate for five year and ten year U.S. Treasury Issues.
There are certain criteria that the businessman has to fulfill to qualify for this loan and they are:
1. Net worth should not exceed $7.5 million
2. The business Net Profit after taxes should not exceed $2.5 million for 2 consecutive years.
3. 51% of owner occupancy for the existing building purchase
4. 60% owner occupancy for new construction
5. 10 years economic life for new equipment.
SBA 7A Loan
The SBA 7A Loan is obtained on a guarantee basis although full guarantee is not obtained on this loan program. This is basically risk sharing by the SBA and the Lender assuming that the borrower would not be able to repay the full volume of the loan. Hence the guarantee is nothing but security against loan default. The maturity of the loan rests on the ability to repay, the purpose, which the loan serves, and the useful life of the assets financed. This CDC small business finance scheme can be used for a variety of purposes, viz, buying an existing business, as working or short term capital, to refinance existing debt, to purchase new or used equipment, to purchase real assets for business purposes. The loan is also used to finance accounts receivable.
Community Express SBA Loan Program
Small Business finance is not affordable to the lower rungs of the society since they do not qualify for the conventional loan programs. For them the community loan programs are tailored. These loan programs supports the emerging businesses, help them to grow and provides them technical assistance in their business.
California State Guarantee Loan Program
This scheme provides Guarantee to the lender. This encourages the lender to approve the credit request, which he would not have considered otherwise.
SBA Micro Loan Program: This loan program as offered by the CDC Small Business Finance started in 2001. Maximum loan limit stretches to $35,000. Technical assistance on pre and post loan is also provided. Ever since its beginning CDC has financed 22 businesses with an average loan size of $26,800.
San Diego Bankers' Small Business CDC: This is a multi bank micro loan system. The maximum loan limit through this scheme is $50,000. CDC has provided loans to 114 small business entrepreneurs with the help of this scheme. This loan also provides financial assistance for medical and child care purposes.
SoCal CDC: This CDC Small Business Finance scheme gives loans upto a maximum limit of $150,000 to Orange County and Inland Empire small businessmen. Pre and post bank technical assistance is provided.
Direct Capital: This loan scheme caters to customers who want to reap the benefits offered by the 504 loan but at the same time do not meet its qualifying criteria. This loan scheme facilitates the purchase of industrial or commercial building at interest rates lying below the market rates.
For more details on the CDC Small Business Finance sites like cdcloans.com, brajeshwar.com, sandiegometro.com etc may be viewed.