What is it?
A loan guarantee program providing a source of capital to Arkansas Small Business Enterprises and administered by the Arkansas Development Finance Authority (ADFA).
- Addresses the working capital needs of small businesses that perform governmental and/or private contract work, including service contracts.
- ADFA provides a loan guarantee to lenders up to 80% of the first $200,000 loan amount with maximum loan guarantee of $160,000, who in turn lend to small businesses that have government or private contracts but lack the necessary cash flow to adequately finance their working capital needs.
- Loans are at a market rate for a term of 180 days with an optional renewal for an additional 180 days.
- Can be used in conjunction with other ADFA programs such as Capital Access.
- Cost of the guarantee is 1% per 180 day maturity with another 1% due if optional renewal is exercised for a maximum of 2%.
What does it do you you?
- Helps Small Business obtain financing for labor and materials necessary to complete specific governmental and/or private contracts including service contracts.
- Helps Small Businesses build Lender relationships.
Sequence of Events:
- Prior to applying for a Loan Guarantee, the Small Business with an opportunity to bid on a contact will contact a Lender for a Line of Credit Loan and determine the amount of Working Capital necessary to complete the contract.
- Once a contract is awarded, complete the required documentation for formal approval from the bank. After the bank approves the loan, the application is forwarded to ADFA for its approval and issuance of the Loan Guarantee Agreement. Initial ADFA approvals are done by a Loan Committee appointed by the ADFA Board Chairman with ratification by the full Board at the subsequent meeting.
- Usual components of the loan application:
- Details of the project, contract history and work experience of contractor;
- Applicant financial statements, credit information, loan repayment ability in the event of default;
- Collateral availability and borrower’s personal guarantee;
- Contractor’s ability or inability to secure conventional financing and
- Values of contract in comparison to loan request.
If you are interested in finding out more about this program, contact:
Chuck Cathey, ADFA Loan Officer - Phone: 501-682-5901