Having adequate and readily available capital is paramount for the continued success of any business. This does not just mean the money that you have accumulated as assets but that which can be obtained from outside sources when you need to use it. When you are considering making major site and building improvements, the need for available capital becomes especially critical. In addition to having sufficient money to run current operations, you must also have adequate money to pay for the design and construction of the proposed facility and still have enough for legal and other administrative support services as well as to fund the expanded future (after construction) operations.
There are numerous articles and books written regarding the manner in which a business owner must present his/her request for financing. We will not be addressing this here. However, we will focus on what outside sources of financing could be employed to meet your expansion needs.
Typically, a developer or private company that desires to build needed improvements cannot afford to pay cash to plan, construct, and operate the project. To cover the cost of acquiring land, designing and constructing the site improvements and buildings, development phase financing is needed. Such loans include the land acquisition loan and the construction loan. Lenders find this phase to be quite risky; therefore, there are a limited number of such loans made. Permanent financing is less of a concern to the lender since a first mortgage loan is made with the intention that it will be in place for some period of time.
The main sources of development phase financing include Savings and Loan institutions, commercial banks, insurance companies, the US Small Business Administration (SBA), housing authorities, state finance authorities, other government agencies, and pension funds. Sources of permanent financing in addition to those providing development loans include Mortgage Limited Partnerships, individual investors, credit companies, and the secondary mortgage market.
There are a variety of federal and state government administered programs aimed at improving regional economic development and job retention and expansion opportunities. Below is a partial listing of financing sources to assist you in your efforts to obtain funds to construct your project.
There are several grant and loan programs that are used in the State of New Hampshire which are used to provide expansion capital to businesses. These include:
NH Business Finance Authority
4 Park Street, Suite 302
Concord, New Hampshire 03301-6313
NH Industrial Development Revenue Bond Authority or "IRB" - Manufacturing (as described under the US Internal Revenue Code) firms are eligible for tax-exempt financing. Funds obtained through this program are for land acquisition, the purchase of buildings, expansion/improvements, equipment, and machinery. Such money can also be used for development and financing costs and the fees charged by a bond counsel. The maximum dollar limit is $10 million for any one project. The level of participation can be up to 100%. To apply, one needs to make a reservation of the bond amount. A preliminary approval is required before an expenditure commitment is made.
Loan Guarantee Program (SBA/BFA) - To utilize this program the applicant must meet certain requirements established by the US Small Business Administration (SBA). This loan guarantee cannot be greater than 90% of the original principal amount minus the "7a" SBA program eligible amount. Funds obtained through this program are for real estate, expansions, equipment, and working capital. Interest terms are negotiable with the participating bank. The loan guarantee cannot exceed $1.5 million. An application prepared by the business and the bank needs to be first submitted to the SBA. A Certification of Approval is issued by the SBA to the BFA. Your bank then submits a copy of the application to the BFA. You then must obtain approval from the BFA, with final authorization to be obtained from the Governor and the state's Executive Council.
NH Community Development Finance Authority (CDFA)
14 Dixon Avenue, Suite 102
Concord, New Hampshire 03301
NH Business Development Corporation
1001 Elm Street
Manchester, New Hampshire 03101
SBA "7a" - This is a program that has the same eligibility requirements as the Loan Guarantee Program described above. Funds obtained through this program are for real estate, building and plant expansions, equipment, and working capital. Interest rates are Prime plus a surcharge. This program has a dollar limit range of $50,000 to $750,000 with a level of participation up to 90%. The approval is based upon your ability to service the loan.
US Small Business Administration
Stuart Nelson Plaza
143 N. Main Street
P.O. Box 1257
Concord, New Hampshire 03301
Small Business Administration 504 Loan Program - The purpose of this
program is to provide long-term financing of fixed assets and to stimulate
local economic development activity in the form of an increased number of
jobs. Eligible uses of such funds include the purchase, construction, or
the improvement of fixed assets with a useful life of at least 10 years
including real estate (land and buildings), machinery, and equipment. It
also can cover professional fees (legal, engineering/architectural, accounting),
appraisals, environmental site assessments, interest on interim financing,
and contingencies. The participation limit is up to 40% of the project
cost. (Note: The 504 loan amount can increase to $1 million if the project or business
qualifies in one of the following ways: minority-owned business; located in a rural area
as defined by the SBA; manufacturing facility or advancement of technology; company
must make changes due to regulatory environmental compliance; financing will assist
in expansion of exports; business district revitalization; changes necessitated by federal
Basic criteria for eligibility:
A Certified Development Company that serves your community can work directly with you to create a financing package that meets the program's guidelines. If you register with us, we can provide you with a list of Certified Development Companies.
U.S. Rural Development - Formerly Farmers Home Administration (FmHA)
501 South Street
Bow, New Hampshire 03304
(603) 226-9338 -- fax
Water and Waste Water Disposal Loan Program - This program provides funding to communities for water and sewer projects. Priority for the funding in Rural Development's programs is given to those projects with median household incomes below the statewide median household income. A list of community median incomes can be obtained by contacting the Rural Development offices directly. The Northeast Rural Water Association provides additional information at their web site: http://www.usda.gov/rus/water/water.html.
Eligibility for grants is based on both median income levels and the resulting user rates after the system is approved. If rates will be excessive, grant funds may be available to reduce the loan and the resulting user rates.
Applications for funding are typically filed when the preliminary engineering is completed and project costs are defined. Rural Development has published a proposed "streamlining" of its regulations which it expects to be final in early 1997. Some key changes in the program include a reduction in the maximum grant from 55% to 45% for communities with median incomes between 80-100% of the statewide median household income. Maximum grants for poverty-level communities remain at 75% (subject to availability of funds). The pre-application has been eliminated, and preliminary engineering reports must be submitted as part of the application. Changes were also made to comply with the 1996 Farm Bill. These include requiring a qualifications-based request for proposals process for the selection of engineers. The authorized SDWA amendments will provide states with funds to establish state revolving funds (SRFs) for drinking water.
Rural Housing Site Loans - This program is available to public or private local nonprofit organizations with legal authority to buy, develop, and sell homesites to eligible applicants. These loans are for financing building sites which may be developed into desirable residential communities. The sites must be in rural areas and must be sold on a nonprofit basis. Rural areas include open country or a population of 10,000 or less that are rural in character. Loans may be made in towns with populations between 10,000 and 20,000 that are outside of standard metropolitan statistical areas. The Secretary of Agriculture and the Secretary of Housing and Urban Development can determine if there is a serious lack of mortgage credit.
Section 523 sites are for housing to be built by the self-help method. Section 524 sites have no limitation on the method of home construction.
Business and Industrial Loan Guarantees - This program is available to any legal entities including individuals, public and private organizations, and federally-recognized Indian tribal groups. FmHA is aimed at upgrading the economic environment and in doing so will make a material contribution to better living. This program of loan guarantees furthers business and industrial development. Business and industrial guaranteed loans can be made in any area outside the boundary of a city with 50,000 or more or its immediate adjacent urbanized areas with population density of no more than 100 persons per square mile. Priority is given to applications for projects in open country, rural communities, and towns of 25,000 and smaller.
This is provided in the form of a loan guarantee as to whereby the agency contracts to reimburse the lender of losses up to a maximum of 90% of principal and interest for guaranteed loans of $2 million or less, 80% for loans over $2 million but not over $5 million, and 70% for loans over $5 million.
Priority is given to projects in areas of high unemployment, to projects which show a low amount of investment per job created or saved, and to projects that will employ members of displaced farm families.
Insurance companies fund commercial real estate transactions either directly with regional or local offices or a correspondent system using commercial mortgage bankers or local brokers. Most maintain offices in major metropolitan areas throughout the country and/or have field staffs which will visit the areas frequently. These firms are tailored to deal directly with the borrower. Currently, the bulk of the transactions are handled through a correspondent network of local mortgage banking companies that will represent their lending interest in a particular area. Finally, there is the local broker who is familiar with both the current real estate conditions as well as the lending climate, and can efficiently package and process the borrower loan needs.
When pursuing an insurance company end loan through any of the above sources, the borrower must be cognizant that the process may be lengthy and involve support costs. An average commercial loan can take 60 days from application to commitment, and another possible 60 days to close. Typical fees range from 1.0% - 2.0% (points) of the loan amount plus closing and incidental costs which can run between .25% - .50%. Although initially such costs may seem significant, over the life of the loan they are relatively small.
When preparing any commercial real estate package, regardless of funding source, a number of items should be properly organized prior to discussing the matter directly with the source:
Upon assembly of these basic materials, the funding source will review the information and inspect the project to gauge initial investment risk in the transaction. This process typically requires several weeks. If dealing with an insurance company directly, the borrower will be provided a quote based on the interest of the particular institution. If dealing with a mortgage banker or broker, contacts to several insurance companies may be made to acquire quotes (rate, term, and dollar amounts). The borrower may then choose between the several options before signing a specific application for funding.
Many local and regional revolving loan funds exist throughout New Hampshire. These funds have been capitalized from a variety of services, many with federal monies. The administration of these funds is generally a nonprofit corporation, while the local funds most often are overseen by governing bodies with the help of a loan committee. The loans may be used in conjunction with other sources to leverage additional monies or independently finance the project.
Drinking Water State Revolving Loan Fund (SRF) - This program consists of grants and loans to further the health protection objectives of the Safe Drinking Water Act (SDWA). A total of $9.6 billion is authorized for FY95-2003. One percent of this amount will be issued to each state until 1998. After 1998, the allotment will be based on a needs survey. States must prepare an "intended use plan" for the funds and must contribute an amount equal to 20% of the federal contribution.
Like the Clean Water Act SRF, the Drinking Water SRF will have capitalization grants, and these may be used for nonconstruction projects, particularly as related to source water protection, state prevention programs, and water systems management. However, priority must go to projects that:
Industrial Development Department|
Dennis M. Cote, Director
City Hall Main Street
Berlin, NH 03570
Belknap County Economic Development Council|
Eliza Leadbeater, Executive Director
County Court House, 64 Court Street
Laconia, NH 03246
Sullivan County Economic Dev. Council|
Susan Elder, Executive Director
52 Tremont Square
Claremont, NH 03743
Center for Economic Development|
Walter Warren, Executive Director
188 Main Street, City Plaza
Nashua, NH 03060
Economic Development Department|
City of Concord
41 Green Street
Concord, NH 03301
Mt. Washington Valley Business Development Corp.|
Gerald I. Coogan
PO Box 1435
North Conway, NH 03860
Derry Development and Preservation Corp.|
Ronald C. Hilfiker, Executive Director
PO Box 794
Derry, NH 03038-0794
Monadnock Business Ventures|
Larry Ross, Director
PO Box 43
Peterborough, NH 03458
Dover Industrial Development Authority|
City of Dover
288 Central Ave.
Dover, NH 03820
Office of Community Development|
Rochester City Hall, 31 Wakefield Street
Rochester, NH 03867-1917
Keene Industrial Development Corporation|
Jack Dugan, Executive Director
PO Box 6220
Colony Mill Market Place
Keene, NH 03431
Planning & Economic Development|
City of Somersworth
157 Main Street
Somersworth, NH 03878
Connecticut River Development Corporation|
John Stahura, President
28 River Street
Addison County Economic Development Corporation|
William Kenerson, Executive Director
2 Court Street
Bellows Falls Area Development Corporation|
James Saudade, Executive Director
PO Box 652
Bellows Falls, Vermont
Bennington County Industrial Corporation|
Chris Hunsinger, Executive Director
Walter Street, PO Box 357
North Bennington, Vermont
Brattleboro Development Credit Corporation|
Francis Walsh, Executive Vice President
Cotton Mill Hill, PO Box 1177
Chester Economic Development Corporation|
William Dakin, Jr., Secretary
PO Box 499
C. Harry Behney, President
60 Main Street, PO Box 785
Economic Development Council of Northern VT, Inc.|
Connie Stanley-Little, Executive Director
155 Lake Street
St. Albans, Vermont
Fair Haven Development Corporation|
David Mallory, Director
Fair Haven, Vermont
Franklin County Industrial Development Corporation|
Timothy Soule, President
2 North Main Street, PO Box 1099
St. Albans, Vermont
Greater Burlington Industrial Corporation|
C. Harry Behney, President
60 Main Street, PO Box 766
Green Mtn. Economic Development Corporation|
Peter Markou, Executive Director
PO Box 246, Suite 311, Gates-Briggs Bldg.
White River Junction, Vermont
Jay Area Industrial Park|
Harold Haynes, Secretary/Treasurer
North Troy, Vermont
Lake Champlain Islands Chamber of Commerce
& Development Corporation|
Barbara Mooney, Executive Director
PO Box 213
North Hero, Vermont
Lamoille Economic Development Corporation|
Christopher D'Elia, Executive Director
PO Box 455
Ludlow Development Corporation|
Dean Brown, Jr., President
PO Box B
Manchester Development Corporation|
Walter Hersom, President
PO Box 365
Orleans County Development Corporation|
Chester Greenwood, President
522 Sias Avenue
Precision Valley Development Corporation|
Robert Mitchell, President
100 River Street
Randolph Community Development Corporation|
Jeff Staudinger, Executive Director
PO Box 409
Rutland Economic Development Corporation|
David O'Brien, Executive Director
256 North Main Street, PO Box 39
St. Johnsbury Development Corporation|
William Costa, Jr., President
PO Box 219
St. Johnsbury, Vermont
The Fund (Nonprofit Development Finance Agency)|
Gene Hallman, Executive Director
155 Lake Street
St. Albans, Vermont
Text-based Table of Contents
Preparing a Vision of Your Project
| Developing a Marketing Plan | Developing
Sources of Project Financing | Project Phases | Wetland Delineation and Summary Report
Environmental Site Assessments | Permit Acquisition Process
Project Delivery Systems | Data Checklist
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