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| Home > Businesses |
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| Small Business Loan Guaranties |
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The Microenterprise Loan Guaranty Fund is designed to increase local ownership or expansion of small businesses, especially among underserved populations who may find it difficult to access capital through traditional lending institutions. The fund protects banks and lenders against loan default by underwriting up to $50,000 through a simple guarantee contract.
For business start-up and expansion projects, Initiative Foundation business financing programs meet the “gap” between the financing a local lender is able to provide and the equity the owner is able to contribute. Financial participation by a local lender is required.
Investment Amount: up to $50,000 or 80% of the original loan balance, whichever is less.
Preferred Borrowers
- Nontraditional business owners including women, minorities, young adults and applicants with low net worth.
- Individuals outside these targeted categories are also encouraged to apply.
Eligible Investments
- Operating capital
- Fixed assets, land and buildings
- Construction or leasehold improvements
- Acquisition, renovation or installation of machinery and equipment
- Limited refinancing, when necessary to consolidate debt
Collateral and Credit Worthiness
- Owner commitment (equity), credit worthiness and capacity for repayment must be shown.
- Personal guaranties from principal owners are required.
Terms and Fees
- Repayment terms may not exceed five years (amortized up to 15 years) with interest rates determined by the borrower and lender.
- The Initiative Foundation charges a 1% loan guaranty fee, payable by the lending institution at loan closing. Lenders may elect to charge the borrower for loan guaranty fees.
Other Requirements
- A sound business plan with financial projections
- Creation/retention of living wage jobs with broad employee benefits (preferred)
- Lenders must provide annual financial data on loan guaranties by June 30.
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