PUBLIC SECTOR DUPLICATION OF SMALL
BUSINESS ADMINISTRATION LOAN AND
INVESTMENT PROGRAMS:
AN ANALYSIS OF OVERLAP BETWEEN
FEDERAL, STATE, AND LOCAL PROGRAMS
PROVIDING FINANCIAL ASSISTANCE TO
SMALL BUSINESSES
Final Report
January 2008
Prepared for:
U.S. Small Business Administration
Prepared by: Rachel Brash
The Urban Institute
2100 M Street, NW ● Washington, DC 20037
Public Sector Duplication of Small Business Administration
Loan and Investment Programs:
An Analysis of Overlap between Federal, State, and Local
Programs Providing Financial Assistance to Small
Businesses
Final Report
January 2008
Prepared By:
Rachel Brash
The Urban Institute
Metropolitan Housing and Communities
Policy Center
2100 M Street, NW
Washington, DC 20037
Submitted To:
U.S. Small Business Administration
409 Third Street, SW
Washington, DC 20416
Contract No. GS23F8198H
UI No. 07112-020-00
The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that
examines the social, economic, and governance problems facing the nation. The views
expressed are those of the authors and should not be attributed to the Urban Institute, its
trustees, or its funders.
Public Sector Duplication of SBA Loan and Investment Programs
i
CONTENTS
INTRODUCTION ..........................................................................................................................1
BACKGROUND............................................................................................................................2
Definition of Duplication ...........................................................................................................2
Program Overviews .................................................................................................................3
2.2.1 Section 7(a) Loan Guarantee Program ....................................................................4
Certified Development Company (504) Loan Program .....................................................5
MicroLoan Program...........................................................................................................5
Debenture Small Business Investment Company (SBIC) Program ..................................6
METHODOLOGY .........................................................................................................................7
FINDINGS...................................................................................................................................11
Duplication Overview .............................................................................................................11
State and Local Programs Benefiting Businesses of All Sizes .......................................17
Duplication Analysis by Program and Sector .........................................................................18
Section 7(a) Loan Guarantee Program ...........................................................................18
504/CDC Loan Program..................................................................................................39
MicroLoan Program.........................................................................................................43
SBIC Program .................................................................................................................45
CONCLUSION............................................................................................................................47
REFERENCES ...........................................................................................................................49
Public Sector Duplication of SBA Loan and Investment Programs
ii
INDEX OF TABLES
Table 1: SBA Program Overview ..................................................................................................4
Table 2: Study States....................................................................................................................8
Table 3: Study Cities.....................................................................................................................9
Table 4: Public Sector Financial Assistance Programs for Small Businesses ............................11
Table 5: Federal Financial Assistance Available to Small Businesses .......................................13
Table 6: State and Local Financial Assistance Programs for Small Businesses ........................16
Table 7: Size Standards for 504 and 7(a) Loans ........................................................................20
Table 8: Comparison of 7(a) and 504 Loan Program Attributes .................................................21
Table 9: Use of Proceeds by Firms Receiving 7(a) Loans Only, 1997–2005 .............................24
Table 10: Average Loan Amount for Firms Receiving 504 and/or 7(a) Loans, 1997–2005 ........24
Table 11: Average Maturity Term (in months) and Interest Rate, 1997–2005 ............................25
Table 12: Comparison of Ownership and Firm Characteristics for Recipients of 7(a)
and/or 504 Loans, 1997–2005....................................................................................27
Table 13: Comparison of Industry for Recipients of 7(a) and/or 504 Loans, 1997–2005 ...........28
Table 14: Comparison of Business Location for Recipients of 7(a) and/or 504 Loans,
FY 1997–2005 ............................................................................................................29
Table 15: Nonprofit Microenterprise Programs ...........................................................................45
Public Sector Duplication of SBA Loan and Investment Programs
1
INTRODUCTION
This study investigates government programs that provide assistance similar to the assistance
provided through SBA’s 7(a) Loan Guarantee, 504 Loan, MicroLoan, and Debenture Small
Business Investment Company Programs: that is, programs that potentially “duplicate” or
“overlap” with SBA’s programs. The study was conducted using SBA administrative data, online research, and conversations with SBA district staff and Small Business Development
Center officials. The research found that at the federal level some potential duplication exists
between SBA’s 504 and 7(a) programs: between 1997 and 2005, almost half of the loan volume
to firms receiving only 7(a) loans—which can be used for working capital, equipment, and real
estate—went toward real estate, despite the fact that the 504 program provides loans
exclusively for fixed assets, typically to finance real estate purchases. The research also found
that although several federal agencies have financial assistance programs for small business,
the SBA is the most significant federal source of financing for small businesses not in rural
areas. The U.S. Department of Agriculture (USDA) appears to be the primary provider of loans
and loan guarantees for small businesses in rural areas.
A greater amount of potential duplication exists at the state and, to a lesser extent, local
level. This duplication exists for the most part among federal, state, and local general-purpose
loan and loan guarantee programs that resemble the SBA’s 7(a) program. There are fewer state
and local loan and loan guarantee programs that resemble the 504 program, which provides
loans exclusively for fixed assets, typically to finance real estate purchases. Few states or
localities run microloan programs, though a handful of nonprofit microenterprise organizations
receiving a majority of their funding from government sources (i.e., “public” nonprofits) have loan
programs. It appears that many states rely on local and national “public” and private nonprofit
organizations—in addition to the SBA—to provide businesses with small loans. All of the study
states have state-run or state-funded venture capital programs, but these state programs focus
much more heavily on technology, science, and healthcare than the debenture SBIC program
does.
The extent of similarities among federal, state, and local loan and loan guarantee
programs varies by state and program. In general, SBA programs have higher maximum loan
and loan guarantee amounts and longer terms than state and local programs. Size standards
are similar for SBA, state, and local programs, although a few study states and localities have
size standards considerably smaller than SBA standards. Standards for industry sector,
geographic market, and growth stage are similar for SBA programs and state and local
programs. Whether a business chooses a state or local program instead of an SBA program—
or whether a bank decides an applicant should apply for a particular program—may be
Public Sector Duplication of SBA Loan and Investment Programs
2
influenced by factors such as credit history, differences in fees, interest rates, amount of
paperwork required, job creation requirements, or prevailing wage standards.
The next section discusses the issue of duplication and provides a description of the four
SBA programs of interest. Section III presents the study methodology, which explains how
chose the state and city samples were selected, and what program characteristics were used to
assess whether overlap exists. The findings section is divided into two subsections: one that
provides an overview of the array of loan and loan guarantee programs within states and
localities, and one that provides an analysis of the duplication between the SBA’s 504 and 7(a)
programs and of each of the four programs at the federal, state, and local levels. Because the
greatest amount of duplication exists among state and local general-purpose loan and loan
guarantee programs, the sections on state and local duplication of the 7(a) program are further
divided into subsections addressing program characteristics, including eligible businesses,
eligible uses, industry sector, geographic market, growth stage, loan or investment amount, and
loan term.
Appendix A presents the number of federal, state, and local programs potentially
duplicating SBA’s programs. Appendix B presents the program characteristics for each of the
four SBA programs of interest. The complete inventory of federal, state, and local programs
identified in this study can be found in Appendices C-F. Appendix G presents average interest
rates and maturity terms from 1997 to 2005 for firms receiving 504, 7(a), and both types of loans
as part of the comparison of those two SBA programs.
BACKGROUND
This study investigates government programs that provide assistance similar to the assistance
provided through SBA’s 7(a), 504, MicroLoan, and debenture SBIC programs: that is, programs
that potentially “duplicate” or “overlap” with SBA’s programs.
Definition of Duplication
For the purposes of this paper, programs are considered as duplicative if there is overlap in type
of aid, eligible businesses, eligible uses, industry, geographic market, growth stage, loan or loan
guarantee amount, and maturity term. The analysis of duplication between the SBA’s 7(a) and
504 program examines whether funds from the 7(a) program, the general-purpose loan
program, were being used for real estate purposes. The comparison of the 7(a) and 504
programs also includes an analysis of the business characteristics of firms receiving only 7(a)
loans, those receiving only 504 loans, and those receiving both loan types. Even if the program
proceeds were being used for the same purpose the programs might not be duplicative if they
Public Sector Duplication of SBA Loan and Investment Programs
3
were serving different types of businesses. However, duplication might exist if the programs
were serving similar populations and being used for the same purpose (i.e., fixed assets).
A more general definition might define duplication as programs that overlap in
stage of financing, industry and region served and where there is not enough demand
for the supply of assistance offered by the coinciding programs. For the purpose of this
study, such a definition is inappropriate because of the difficulty of establishing market
demand for small business financing.
That multiple programs provide similar services does not necessarily mean that
resources are being wasted. If duplication does exist among loan and loan guarantee programs,
it may result in higher overall administrative costs or a more complex application process than
would exist with fewer programs. Fewer programs might simplify the process for applicant
businesses and for lenders helping businesses determine which programs they are eligible for.
However, some duplication is inevitable, and having multiple access points might mean that a
broader range of small businesses is able to access capital. Additionally, the existence of
parallel programs may mean that the demand for such assistance exceeds the supply.
Program Overviews
All four SBA programs studied here have the effect of making capital available to small
businesses that might otherwise have difficulty accessing funds. The programs differ in
their scope, vehicle, and purpose. The SBA’s largest programs, the 7(a) and 504
programs, are similar because they provide large amounts of money to businesses that
have been denied credit by private funding sources. As is discussed in more detail
below, the financing mechanisms for the programs differ: Under the 7(a) program, SBA
guarantees a loan issued by a bank or other private lender, whereas under the 504
program, the SBA guarantees a debenture issued by a nonprofit “certified development
company.” As shown in Table 1, the two programs also differ in that 7(a) loans can be
used to finance most business purposes, including both working capital and fixed assets,
while 504 loans can only be used to finance fixed assets. The MicroLoan program differs
from the 7(a) and 504 programs in that it provides much smaller loan amounts and the
SBA originates the loans. Rather than providing or guaranteeing loans for small
businesses, the debenture SBIC program guarantees debentures issued by venture
capital firms that invest in small businesses.
4
Public Sector Duplication of SBA Loan and Investment Programs
Table 1: SBA Program Overview
Program
Program
Type
Use of Proceeds
Maximum SBA
Exposure
Does program
have a “credit
elsewhere”
requirement?
Loan Volume,
1997-2005
Section 7(a)
Loan
Guarantee
Loan
guarantee
Working capital,
fixed assets, and
other general
business purposes
$1.5 million
Yes
$86.8 billion
CDC/504
Debenture
guarantee
Fixed assets only
$4 million
Yes
$18.0 billion
MicroLoan
Loan
General business
purposes
$35,000
Yes
$235 million
Small
Business
Investment
Company
(SBIC)
Debenture
guarantee
Investment in small
businesses
300 percent of
equity raised by
small business
investment
company
No
$6.6 billion
2.2.1 Section 7(a) Loan Guarantee Program
The Section 7(a) Loan Guarantee Program provides loan financing to small businesses
deemed unable to obtain financial assistance on reasonable terms in the private credit
markets. The Office of Management and Budget (OMB) PART Assessment for the 7(a)
program states: “the loans guaranteed by SBA are of a lower quality from what the
private sector is willing to make…” (Office of Management and Budget, 2005). Most of
the small businesses aided in the 7(a) program are minority-, women-, or veteranowned, or located either in rural areas or in special zones determined by federal
legislation to be in special need of economic development aid. About one-third of
businesses are start-ups.
The Section 7(a) program is delivered by private lenders that make, service, and
liquidate loans. Under the program, the SBA guarantees up to 85 percent of principal and
interest of any loan. Lenders set loan terms and conditions according to the purpose of the loan
and form of collateral (e.g., real estate or equipment), loan size, and perceived risk, consistent
with maximum rates and terms set by SBA. SBA charges a loan guarantee fee, which is usually
paid by the borrower. These loans are intended to supply the kinds of credit that may not be
easily available to the class of borrowers the program targets. This credit includes loans of
longer maturity to borrowers of higher credit risk, who can offer only single-purpose collateral
and have limited equity (Office of Management and Budget, 2005).
Public Sector Duplication of SBA Loan and Investment Programs
5
As detailed in Appendix B, the maximum amount that the SBA guarantees under the
program is $1.5 million. Interest rates are negotiated between the borrower and the lender, but
are subject to SBA maximums, which are pegged to the prime rate. Businesses can use 7(a)
loans to finance working capital and fixed assets, and for limited refinancing of existing debt.
Refinancing is permitted in limited cases; a borrower cannot use 7(a) loan proceeds to pay a
creditor in a position to sustain a certain loss that would be shifted to the SBA. Between 1997
and 2005, the SBA guaranteed $86.8 billion in loans under the 7(a) program.
Certified Development Company (504) Loan Program
Like the 7(a) program, the 504 program provides loan financing to small businesses deemed
unable to obtain financial assistance on reasonable terms in the private credit market. It differs
from the 7(a) program in two significant ways: (1) loans obtained through the program can only
be used for fixed assets (i.e., land and buildings) and (2) the 504 loans have fixed interest rates
(under the 7(a) program, rates are fixed or variable). Under the 504 program, businesses obtain
loans through a certified development company (CDC), local nonprofit organizations that work
with the SBA, and a private-sector lender. There are about 270 CDC’s nationwide. The typical
504 project includes a loan secured with a senior lien from a private-sector lender, covering up
to 50 percent of the project cost; a loan secured with a junior lien from a CDC, covering 40
percent of the project cost (backed by a 100 percent SBA-guaranteed debenture); and a
contribution of at least 10 percent equity from the small business.
Maximum amounts allowed under the program vary based on the goal of the loan. Under
the 504 program, the maximum debenture for businesses other than small manufacturers is
$1.5 million. For small manufacturers, the maximum debenture is set considerably higher, at $4
million. Refinancing is permitted under the 504 program in very limited circumstances. Interest
rates are pegged to an increment above the current market rate for five- and ten-year U.S.
Treasury issues. Program fees are approximately three percent and can be financed with the
loan (U.S. Small Business Administration, 2006a). From 1997 to 2005, the SBA guaranteed
$18.0 billion in loans under the program (SBA administrative data).
MicroLoan Program
The MicroLoan program provides very small loans to start-up and early-stage businesses. The
SBA provides funds to community-based “intermediaries” that accept applications from potential
borrowers, evaluate ability to repay, provide technical assistance to prospective and current
Public Sector Duplication of SBA Loan and Investment Programs
6
borrowers, and originate and service loans.1 The maximum loan amount is $35,000, although
the average loan size is about $10,500. Loan terms are for a maximum of six years, although
actual terms vary, and interest rates are set by the intermediaries, in part based on their own
cost of funds.
All intermediaries are required to supply technical assistance to firms seeking loans,
supported by SBA grant funds of up to 25 percent of the total balance owed to SBA on loans the
intermediaries originate. For any loan exceeding $20,000, intermediaries are obliged to certify
that the borrowers are not otherwise able to obtain credit. Industry sources claim that the
overwhelming majority of microloan borrowers have no established credit record. Between 1997
and 2005, the SBA provided $235 million in microloans.
Debenture Small Business Investment Company (SBIC) Program
The debenture SBIC program makes capital available to small business investment companies
that are privately owned, for-profit companies licensed by the SBA to provide venture capital to
start-up and expanding small businesses. Rather than provide assistance directly to small
businesses, under the debenture SBIC program, the SBA allows privately operated venture
capital funds to leverage their capital through SBA-guaranteed. Debenture SBICs may issue
securities that provide for a maximum of 300 percent leverage of equity raised by the SBIC
(U.S. Small Business Administration, 2004). Debentures issued by SBICs pay market interest
rates to investors through semi-annual interest payments for ten-year terms. Debenture SBICs
may prepay their securities at any time; prepayments after five years carry no penalty (U.S.
Small Business Administration, 2004). Debenture SBICs are obligated to make all payments to
investors, and so companies in which debenture SBICs invest must have sufficient cash flow to
allow the SBIC to service its debt by the time the first semi-annual interest payment is due.
Debenture SBICs provide equity capital, long-term loans, near-equity investments, and
management assistance to qualifying small businesses, using their own funds and funds
borrowed or otherwise obtained at favorable rates with SBA guarantees. In general, assistance
provided by debenture SBICs is some form of mezzanine financing: subordinate debt2 that also
includes warrants or options that can be exercised by the SBIC to take an equity position in the
company. From 1997 to 2005, the SBA provided $6.6 billion in guarantees to debenture SBICs.
1
2
As of spring, 2005, there were 170 active intermediaries.
The debt instrument originated by the debenture SBIC is often subordinate to other debt–which could be
conventional or with an SBA guarantee–that the firm already has on its balance sheet.
Public Sector Duplication of SBA Loan and Investment Programs
7
METHODOLOGY
The research question answered by this report is, Do SBA programs duplicate or overlap with
other public programs? Of interest are federal, state, and local programs providing services
similar to those offered through four of SBA’s major financial assistance programs—the Section
7(a) Loan Guarantee Program, 504 Loan Program, MicroLoan Program, and SBIC Debenture
Program. Also of interest is overlap between SBA’s two largest programs, the 7(a) and 504
programs. Time and resources permitted a comprehensive review of most federal programs, but
not most state or local programs. The examination of state and local programs uses a sample of
12 states and 12 cities. To create an inventory of public programs, a search of on-line
information was conducted; this included reviewing Web sites run by federal, state, and local
government agencies, as well as on-line reports, directories, and journal articles. To confirm and
augment the information found on-line, discussions were conducted with ten SBA district
officials and with ten state directors of Small Business Development Centers, one-stop shops
for small business assistance that are partially funded by the SBA.
The review of federal programs examines programs that target small businesses in
addition to ones that provide financial aid to both small businesses and a wider range of
businesses.3 A significant amount of assistance may go to small businesses by way of these
broader programs. The inventory of federal programs appears in Appendix C. The standards for
inclusion for the state and local programs were more restrictive; only those programs specifically
targeted at small businesses are included in the list of state and local programs (Appendix D).
Including finance programs for businesses of all sizes would have increased the number of
programs to a degree not within the scope of this study. Major state and local programs
providing financial aid to all businesses are not included in the inventory, but are discussed in
the text of this section. Also discussed in the text, but not included in the inventory, are
3
To develop the inventory of federal financial assistance programs, the authors consulted a GAO study,
Multiple Federal Programs Fund Similar Economic Development Activities (September 2000). All the programs
mentioned in the GAO study were reviewed. Many of the programs provided technical assistance or funds for
planning, strategic development, or research (but not loans, loan guarantees, or other investment) to businesses or
financial assistance to nonprofit or public bodies for the purpose of economic development not specifically related to
small business development. Programs that provide loans, loan guarantees, and grants to small businesses (i.e.,
programs providing assistance similar to the four SBA programs of interest) were included in this duplication study.
Programs that provide grants to entities that may re-lend to small businesses were not included in the inventory
because they are not explicitly designed to provide assistance similar to SBA assistance. However, these programs
are discussed in the text and detailed in Appendix C.
Public Sector Duplication of SBA Loan and Investment Programs
8
programs targeted at businesses run by certain groups, such as women or minorities. These
programs are of interest because many of their recipients are likely to be small businesses.
To determine the sample sizes for the state and local program inventory, data on lending
frequency and volume for the 7(a) and 504 programs from fiscal years 2003 to 2005 were
examined. Recent data were used to determine the current state of potential duplication; this
research analyzed data for only these two programs because it seemed likely that high lending
activity for these programs would correspond with high volume and frequency for the MicroLoan
and SBIC programs.4 The sample size was initially set at ten states because a natural break in
the lending frequency occurred after the tenth state. Because the ten high-activity states did not
include states that are mostly rural, the SBA requested that two such states, Maine and North
Dakota, be added to the sample. These ten high-activity and two rural states are listed in Table
2 with their 7(a) and 504 loan activity.
Table 2: Study States
State
Loan Activity
1
California
33,297
2
Texas
16,357
3
New York
12,825
4
Florida
12,671
5
Pennsylvania
12,530
6
Massachusetts
7,822
7
Ohio
7,310
8
New Jersey
6,544
9
Illinois
6,229
10
Michigan
5,536
11
Maine
1,185
12
North Dakota
870
Note: Loan activity equals the number of firms receiving 7(a) and 504 loans in fiscal years 2003 to 2005.
4
Analysis of SBA administrative data indicates that the study states are among the states with the highest
levels of SBIC and MicroLoan activity, as measured by lending volume and frequency, for fiscal years 2003 to 2005.
Public Sector Duplication of SBA Loan and Investment Programs
9
To create a local sample, ten cities with the highest frequency of 7(a) and 504 loans
from fiscal years 2003 to 2005 in each of the ten high-activity study states were selected. Two
study states, California and Texas, each had two cities with high frequency of loans relative to
other cities nationally. Both cities in those states were included in order to highlight variation in
borrowing opportunities across a state. The ten cities of interest are listed in Table 3 with their
7(a) and 504 loan activity.
Had the city sample been drawn to include the 10 cities with the highest frequency
nationally, regardless of whether they fell within the ten study states, the list would have
included Phoenix and Las Vegas, and not Cleveland, Boston, Jersey City, or Detroit. However,
this study examines only cities that fall within study states because the research suggests that
the greatest amount of overlap exists between federal and state programs—and not at the local
level. Therefore, looking at a city without examining the state programs did not seem to add
value to the research. UI’s approach examines the range of programs available, from federal to
local, in each of the study states.
Table 3: Study Cities
City
Loan Activity
1
Los Angeles
3,821
2
Houston
2,489
3
New York City
2,363
4
Miami
1,976
5
Dallas
1,213
6
Chicago
1,183
7
Philadelphia
1,129
8
San Diego
1,116
9
Boston
548
10
Cleveland
431
11
Detroit
288
12
Jersey City
117
Note: Loan activity equals the number of 7(a) and 504 loans in fiscal years 2003 to 2005.
The analysis of duplication between the SBA’s 504 and 7(a) programs used
administrative data collected by the SBA. Two types of analysis to measure possible duplication
were conducted. The first analysis looked at whether 7(a) funds were used for real estate
Public Sector Duplication of SBA Loan and Investment Programs
10
purposes. The SBA does not systematically collect information on use of proceeds, but the
agency treats maturity term length as a substitute measure for use. Loans with terms of less
than 7 years are considered working capital loans, those with terms of 7 to 15 years are
considered heavy equipment loans, and those with terms of greater than 15 years are
considered real estate loans. Because 7(a) loans with a term of more than 15 years are
considered to be for real estate purposes, they are potentially duplicative of the 504 program.
The 504-7(a) comparison also includes an analysis of the business characteristics of firms
receiving only 7(a) loans, those receiving only 504 loans, and those receiving both loan types.
Even if the program proceeds were being used for the same purpose, the programs might not
be duplicative if they were serving different types of businesses. However, duplication might
exist if the programs serve similar populations and are used for the same purpose (i.e., fixed
assets).
The analysis proceeded in the following sequence:
•
Assembled an inventory of all federal, state, and local programs available to small
businesses through internet searches and conversations with program officials in
selected federal agencies, states, and localities, including regional and district SBA
officials.
•
Constructed a matrix of program policies and activities, to be filled in with information
on target businesses, terms and conditions of assistance, types of assistance
available, program resources, and other aspects of programs.
•
Conducted data analysis for comparison of SBA’s 504 and 7(a) programs using SBA
administrative data.
•
Obtained descriptive information on SBA programs, other federal programs, and
state and local programs from government agency and nonprofit lender websites and
from discussions with SBA district staff and Small Business Development Center
state directors.
The program comparisons consider eight program characteristics. They examine type of aid
(e.g., does the program take the form of a loan, loan guarantee, microloan, grant, or other form
of assistance), eligible businesses, eligible uses, industry sector, geographic market, growth
state, amount, and term. The comparisons do not systematically address interest rates because
they vary considerably within programs, and making generalizations about them proved difficult.
Programs were considered as duplicative if there was overlap in type of aid, eligible businesses,
eligible uses, industry, geographic market, growth stage, loan or loan guarantee amount, and
maturity term.
11
Public Sector Duplication of SBA Loan and Investment Programs
FINDINGS
This research found that there is some overlap between the SBA’s 7(a) and 504 programs. It
also found that of the four SBA’s programs studied here, the 7(a) program has the greatest
amount of potential duplication at federal, state, and local levels. At all levels of government,
there is less duplication of the SBIC program and even less of the MicroLoan and 504
programs. These findings are discussed in detail below. The “Duplication Overview,” we
identifies the range of programs, from federal to local, available in certain states or cities. This
analysis is useful in understanding the variety of options available to businesses in a given
location. The “Duplication Analysis by Program and Sector” examines the four SBA programs
and presents evidence of potential duplication at the three levels of government. This section
also includes the comparison of the SBA’s 7(a) and 504 programs.
Duplication Overview
This research suggests a small degree of potential duplication exists between SBA
programs and similar programs run by other federal agencies, with most of the potential
duplication occurring within SBA’s 7(a) and 504 programs. Some overlap also exists with
the programs offered through the USDA. Several federal agencies have grant programs
that provide funds to states, local government, nonprofit organizations, and other groups
that may use the assistance to offer loans or loan guarantees to small businesses.
Because these programs are not explicitly designed to aid small businesses and
because the grantees may not in fact use the funds to provide loans to small
businesses, they are not included in the numbers in Table 4, but are detailed in
Appendix C. A greater degree of potential duplication exists at the state and local level.
Table 4: Public Sector Financial Assistance Programs for Small Businesses
General-Purpose
Loans/Loan
Guarantees
Loans/Loan
Guarantees for
Fixed Assets Only
MicroLoans
Venture
Capital
Total
7
1
1
3
12
State government
27
4
1
30
62
Local government
12
2
3
0
17
Total
46
7
5
33
91
Source
Federal government
Note: These numbers include programs from all federal agencies (including the SBA), the 12 study states, and 12 study cities. The
number for federal programs does not include 12 programs that provide grants to state or local governments or nonprofits that may
use the funds to provide loans small businesses. The microloan program count does not include 20 programs run by nonprofit
organizations that can be considered “public,” organizations with 50 percent or more of their total revenues from government grants
Public Sector Duplication of SBA Loan and Investment Programs
12
or contracts, as reported on the most recent (2004 or 2005) 990 IRS form available on guidestar.org. These programs are discussed
in the section on state and local duplication of the MicroLoan Program.
Most of the 12 study states and 12 study cities offer programs that have characteristics similar
to SBA’s 7(a) and SBIC programs; fewer states and cities have programs similar to 504 and
MicroLoan programs. As shown in Table 4, these states and localities had a total of 79
programs potentially duplicating SBA’s 7(a), 504, MicroLoan, and SBIC programs. See
Appendix A for an analysis of the numbers in Table 4 by federal agency, state, and city.
The SBA is the most significant source of federal financing for small businesses,
although some financing is also available through other federal agencies, particularly for
businesses in rural areas. Table 5 lists the federal assistance available to small businesses. It
also includes programs providing assistance to businesses of all sizes because small
businesses may benefit from a portion of these funds. These programs provide assistance in
the form of loans, loan guarantees, microloans, and venture capital. The table distinguishes
between general-purpose loans and loan guarantees (i.e., programs similar to the 7(a) program)
and loans or loan guarantees that can be used only for real estate purposes (i.e., programs
similar to the 504 program). The list below does not include programs that provide technical and
planning assistance, but no financial assistance, such as the USDA’s Rural Business
Opportunity Grants. It also does not include the U.S. Department of Housing and Urban
Development’s (HUD) Community Development Block Grant or the U.S. Department of Health
and Human Services’ (HHS) Community Services Block Grant. Some of these funds may go
toward small business assistance, but because the decision is left to the recipients, these
programs are discussed under state duplication. Table 4 also does not include federal grant
programs--including programs through the Appalachian Regional Commission, Environmental
Protection Agency, and U.S. Departments of Commerce, Transportation, and HHS--that provide
funds to public bodies or nonprofits that may choose to lend the funds to small businesses.
These programs are not included in the inventory because re-lending may be one of a dozen or
more potential uses for the funds and therefore not a reliable source of federal funding for small
business loans or investment. Furthermore, most of these grant programs are targeted at
specific industries for specific purposes, setting them apart from SBA’s programs.
Our research found that states and localities provide a wide range of financial aid
programs for small businesses. Some of the programs have conditions similar to SBA
programs, and therefore could be considered duplicative, while others differ considerably in their
terms and conditions. The greatest amount of potential duplication exists for the 7(a) program.
In fact, many of the state programs were modeled on SBA’s 7(a) program. As shown in Table 4,
13
Public Sector Duplication of SBA Loan and Investment Programs
the study states and cities are host to a total of 45 general-purpose loan or loan guarantee
programs, compared to 5 real-estate specific loan or loan guarantee programs, 4 microloan
programs, and 30 publicly funded venture capital programs. As shown in Table 6, all the study
states and cities, except Florida, Houston, and Detroit, have some type of general-purpose loan
or loan guarantee program.
Table 5: Federal Financial Assistance Available to Small Businesses
Federal Agency/
Program
General-Purpose
Loans/Loan
Guarantees to Firms
Unable to Access
Private Credit
General-Purpose
Loans/Loan
Guarantees to Firms
Able to Access
Private Credit
Loans/Loan
Guarantees
for Fixed
Assets
Only
Microloans
Publicly
Funded
Venture
Capital
Grants to
Firms/ Lenders/ Public
bodies/
Nonprofits
Small Business
Administration
7(a) Loan Guarantee
Program
X
504 Program
X
SBIC Program
X
MicroLoan Program
X
Agriculture Department
Business and Industry
Loans
X
Empowerment Zones
X
Farm Loan Program
X
Intermediary Re-lending
Program
X
Rural Business Enterprise
Grants
X
Rural Business
Investment Program
Rural Economic
Development Loans and
Grants
X
X
Appalachian Regional
Commission
Area Development
Program
Commerce Department
X
14
Public Sector Duplication of SBA Loan and Investment Programs
Economic Adjustment
Assistance
X
Environmental
Protection Agency
Capitalization Grants for
Clean Water State
Revolving Funds
Federal Agency/
Program
X
General-Purpose
Loans/Loan
Guarantees to Firms
Unable to Access
Private Credit
General-Purpose
Loans/Loan
Guarantees to Firms
Able to Access
Private Credit
Loans/Loan
Guarantees
for Fixed
Assets
Only
Microloans
Publicly
Funded
Venture
Capital
Capitalization Grants for
Drinking Water State
Revolving Funds
Grants to
Firms/
Lenders/
Governments
/ Nonprofits
X
Health and Human
Services Department
Community Services
Block Grant
X
Native American
Programs
X
Indian Loans, Economic
Development
X
Transportation
Department
Airport Improvement
Program
Disadvantaged Business
Enterprises—Short Term
Lending Program
X
X
Federal Transit / Capital
Investment Grants
X
Formula Grants for Other
Than Urbanized Areas
X
Treasury Department
Bank Enterprise Award
Program
Community Development
Financial Institutions
Programs
X
X
Public Sector Duplication of SBA Loan and Investment Programs
15
Public sector microloan programs are less prevalent than loans and loan guarantees.
States and localities may be more risk averse because they face strict fiscal restraints. These
programs can also be costly to administer. Furthermore, the government programs face
competition from microloan programs run by nonprofit organizations. One state, Florida, and
three cities—Miami, Boston, and Chicago—offer microloan programs. All but three study states
have nonprofit microlending organizations that receive a majority of their funding from
government sources and could be considered “public.” As for programs similar to the SBIC
program, all of the 12 study states have public venture capital funds, as shown in Table 6. As is
discussed below, and detailed in Appendix E, some of these programs are publicly funded and
publicly managed, while some are publicly funded and privately managed, the latter being more
akin to SBICs.
As Table 6 and Appendix D show, the availability of state and local financial aid to small
businesses varies greatly across states and cities. No state has all types of assistance available
directly to small businesses. Ohio is typical of the states with a wider array of programs. It has
state-run general-purpose loan guarantee programs for both bankable and near bankable small
businesses, in addition to a state program providing loan guarantees to very small businesses.
Cleveland businesses also have access to a local microloan program, although only businesses
able to meet conventional lending standards are eligible. The terms of Ohio’s programs are
comparable to SBA’s. Ohio’s Capital Access Program resembles the 7(a) program by targeting
businesses unable to obtain private credit and prohibiting use for real estate investment. Size
standards vary somewhat between SBA programs and the Capital Access program. The
greatest difference between the two programs is the maximum amount allowable: Ohio’s
program guarantees loans up to $250,000 for working capital and up to $500,000 for fixed
assets, compared to a $1.5 million maximum guaranteed by the 7(a) program. Small businesses
with good credit seeking large, reduced-rate loans also have access to the Ohio State Treasury
Department’s Linked Deposit Program. Very small Ohio businesses—with fewer than 25
employees—that are unable to obtain private credit are eligible for the Ohio Mini-Loan
Guarantee Program, which provides loan guarantees up to $45,000.
Of the study states, Florida has the least amount of general aid available through staterun programs. It has no state-run loan or loan guarantee programs, and its economic
development agency directs small businesses to SBA programs (Enterprise Florida 2006).
However, it is one of the few states with a microloan program for small businesses: As shown in
Appendix D, Florida’s Front Porch Microcredit Loan Program provides loans up to $15,000 to
start-up businesses unable to obtain private loans. The state also has a publicly funded and
managed venture capital fund for technology businesses and a publicly funded, privately
16
Public Sector Duplication of SBA Loan and Investment Programs
managed venture capital fund. Presumably, a significant amount of the investment by these
funds reaches small Florida businesses. Small businesses in Miami—both those able and those
unable to obtain private credit—have access to city-run revolving loan programs. Rather than
targeting small businesses per se, Florida’s major state-run business finance programs target
minority-run businesses, many of which may be small businesses. For example, the state runs
the Florida Minority Business Mobilization Program, which provides payments to be used as
collateral to businesses awarded state contracts. Minority-run businesses also have access to
loans and venture capital through the quasi-public Florida Black Business Investment Board.
Table 6: State and Local Financial Assistance Programs for Small Businesses
State/City
General-Purpose
Loans/Loan Guarantees
to Firms Unable to
Access Private Loans
California
X
General-Purpose
Loans/Loan Guarantees
to Firms Able to Access
Private Loans
Microloans
Publicly
Funded
Venture
Capital
X
Los Angeles
X
X
San Diego
X
X
X
X
Texas
Loans/Loan
Guarantees for
Fixed Assets
Only
X
Houston
Dallas
X
X
New York
New York City
X
X
X
Florida
Miami
Pennsylvania
X
X
Philadelphia
Ohio
Boston
New Jersey
Jersey City
X
X
*
X
X
X
*
Cleveland
Massachusetts
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
17
Public Sector Duplication of SBA Loan and Investment Programs
Illinois
X
X
Chicago
X
Michigan
X
X
X
X
X
Detroit
Maine
North Dakota
X
X
X
X
X
X
Note: States are ordered by loan activity. *The city of Philadelphia offers loan assistance through two private corporations. The
loans are funded by federal, state, and local government sources and are usually leveraged with private debt and equity. The
Massachusetts loan fund for businesses unable to access private credit, the Economic Stabilization Trust, is quasi-public.
Houston is another interesting case, where little overlap with SBA programs appears to
exist. The city runs no loan, loan guarantee, or microloan programs. This research found only
four state or local program dedicated to fixed asset financing, and two of them are located in
Maine.
State and Local Programs Benefiting Businesses of All Sizes
Most of the study states have public financial assistance programs that do not explicitly target,
but that almost certainly have a substantial proportion of, small businesses among their
beneficiaries. These include programs that target women and minorities, and those that are
available to businesses of all sizes.
Given that a large proportion of small businesses are women- or minority-owned, it is
safe to assume that many of the loan and loan guarantee programs targeted at women and
minorities are serving small businesses. Among the study states and cities, Florida, Ohio,
Pennsylvania, and Philadelphia have bonding and loan discount programs for minorities. As
discussed above, numerous state and local programs target distressed areas. Some state and
local programs target special zones—empowerment, empire, and enterprise zones—or other
distressed areas. Some programs are limited to small businesses, whereas others do not have
such restrictions.
Most states have public financing programs available to businesses of all sizes. Some
small businesses may benefit from these, although small businesses that are unable to access
private credit may face difficulty qualifying for these programs. Some states (e.g., New York,
Florida, and Ohio) have bond programs that are generally used to fund large industrial projects.
New Jersey and Illinois have several loan and loan guarantee programs that are open to all
businesses. Other states—including California and Pennsylvania—have loan programs for
specific uses, such as the replacement or improvement of underground storage tanks. Los
Public Sector Duplication of SBA Loan and Investment Programs
18
Angeles has two programs open to all businesses to finance machinery and equipment. Ohio
uses some of its Community Development Block Grant money to issue Section 108 loans to
businesses to fund machinery and equipment or real estate, but it does not specifically target
small businesses. Pennsylvania and California also have loan programs for equipment or
machinery and working capital. Chicago has several programs (including a microloan program
with very broad eligibility standards) that do not explicitly target small businesses, but appear as
if they would serve them.
Because states and cities may be more risk averse than the Federal government, the
financial assistance programs open to all businesses are more likely to serve larger businesses
or ones with strong credit histories, i.e., those businesses that are able to access private credit.
For example, Detroit has a revolving loan program that is open to all businesses. Among other
things, proposed borrowers are evaluated on their impact on the local economy. Small
businesses would be at a disadvantage because by their nature they are likely to have a smaller
impact on the economy than large businesses.
Lastly, quasi-public agencies are another potential source of financial assistance to
small businesses. Programs run by these agencies (e.g., the Massachusetts’s Citizens’ Job
Bank, the Florida Black Business Investment Board, and the Philadelphia Commercial
Development Corporation) are open to businesses of all sizes. Again, the assistance offered
through these programs may be difficult to obtain for start-ups or other businesses that do not
have strong credit histories.
Duplication Analysis by Program and Sector
Of the four SBA programs of interest, the 7(a) program has the greatest amount of potential
duplication; there are a total of 6 programs at the federal level, 27 at the state level, and 12 at
the local level that provide general-purpose loans or loan guarantees. Programs providing realestate-specific loans or loan guarantees (i.e., programs resembling the 504 program) or
microloans are less prevalent. All of the study states have publicly funded venture capital
programs resembling the SBIC program, as does the USDA.
Section 7(a) Loan Guarantee Program
Potential duplication exists at all levels of government for the 7(a) program, a general-purpose
loan guarantee program. At the federal level, overlap exists between the SBA’s 7(a) and 504
loan programs. Regulatory overlap is found within programs administered by the USDA,
although SBA administrative data indicate that a small number and proportion of loans go
toward the agriculture sector. At the state and local levels, the 51 general-purpose loan and loan
Public Sector Duplication of SBA Loan and Investment Programs
19
guarantee programs vary in their program characteristics, although they all serve the purpose of
a making capital available to small businesses.
Federal Duplication: Overlap Between SBA’s 7(a) and 504 Programs
The 7(a) and 504 programs were established to serve similar clientele, businesses unable to
obtain private financing on reasonable terms, but with different purposes. The 504 program is
intended to provide long-term financing for fixed assets only, particularly real estate, while the
7(a) program is intended to be used for purposes other than real estate, such as working
capital, although fixed assets are an eligible use of proceeds under the 7(a) program. The two
programs have similar eligibility requirements and size standards. The programs differ
significantly in their interest rate and fee structure, maturity term, loan structure, maximum
allowable amount, and type of lender. According to SBA district officials and state directors of
Small Business Development Centers, the 504 program represents “the best deal” for long-term
real estate loans because, as is discussed below, the interest rates are lower, the term is
longer, and the equity requirement is lower than for 7(a) loans. As is also shown below,
however, businesses use 7(a) loans for real estate purposes. The SBA and SBDC officials
suggest that businesses are directed toward the 7(a) program not because it necessarily fits the
businesses’ needs, but because the lender may have a greater level of comfort with one
program or the other. Personal preference, relationships, and geographic location appear to
play a large role in which loan program a bank or loan officer might recommend for a particular
business.
As shown in Table 8, the 7(a) program was originally authorized under Section 7(a) of
the Small Business Act of 1958, 15 U.S.C., Chapter 14A, Section 636(a). This section was
repealed August 13, 1981, and amended that year by Title XIX of Public Law 97-35. The 504
program was authorized by Title V of Small Business Investment Act of 1958, 15 U.S.C.,
Chapter 14B, Sections 695 to 697. Both programs have a “credit elsewhere” criteria, which is
defined under the SBA’s Standard Operating Procedure (SOP) 50-10(4)(E) Subpart A.120 (U.S.
Small Business Administration 2006b). This section reads:
“SBA provides assistance only to applicants for whom the desired credit is not
otherwise available on reasonable terms from non-Federal sources. SBA
requires the Lender or CDC to certify or otherwise show that the desired credit is
unavailable to the applicant on reasonable terms and conditions from nonFederal sources without SBA assistance, taking into consideration the prevailing
rates and terms in the community in or near where the applicant conducts
business, for similar purposes and periods of time.”
Public Sector Duplication of SBA Loan and Investment Programs
20
Both programs are available to the same business sectors and have very similar size and sales
restrictions. In general, the criteria in Table 7 are used by SBA to determine if a concern
qualifies as a small business and is eligible for SBA loan assistance. As shown below, these
size standards vary depending on the industry sector of the business. The 504 program has a
set of further size restrictions. To be eligible, a small business may not, together with its
affiliates, have a tangible net worth in excess of $7.5 million or an average net income in excess
of $2.5 million after taxes for the preceding two years.
The two programs overlap in their restrictions on eligible use of proceeds. Proceeds from
504 and 7(a) loans can be used for the following:
ƒ
Acquire land (by purchase or lease);
ƒ
Improve a site (e.g., grading, streets, parking lots, landscaping), including up to five
percent for community improvements such as curbs and sidewalks;
ƒ
Purchase one or more existing buildings;
ƒ
Convert, expand, or renovate one or more existing buildings;
ƒ
Construct one or more new buildings;
ƒ
Acquire (by purchase or lease) and install fixed assets (for a 504 loan, these assets
must have a useful life of at least 10 years and be at a fixed location, although shortterm financing for equipment, furniture, and furnishings may be permitted where
essential to and a minor portion of the 504 project).
Table 7: Size Standards for 504 and 7(a) Loans
Industry Group
Size Standard
Manufacturing
500 employees
Wholesale trade
100 employees
Agriculture
$750,000 in average annual receipts
Retail trade
$6.5 million in average annual receipts
General and heavy construction (except dredging)
$31 million in average annual receipts
Dredging
$18.5 million in average annual receipts
Special trade contractors
$13 million in average annual receipts
Travel agencies
$3.5 million in commissions and other income
Business and personal services
$6.5 million in average annual receipts
Public Sector Duplication of SBA Loan and Investment Programs
Except architectural, engineering, surveying, and
21
$4.5 million in average annual receipts
mapping services
Dry cleaning and carpet cleaning services
$4.5 million in average annual receipts
Source: U.S. Small Business Administration (2006a)
In addition, 7(a) proceeds can be used for inventory, supplies, raw materials, working
capital, and refinancing certain outstanding debts. Allowable refinancing includes private or
institutional debt, including credit card debt related to the business. However, a borrower may
not use 7(a) loan proceeds to pay a creditor in a position to sustain a certain loss that would be
shifted to the SBA. Under the 504 program, proceeds cannot be used for general refinancing,
but can be used to term out debt obtained in anticipation of the 504 project that would have
been eligible for initial 504 financing (U.S. Small Business Administration 2006b).
The programs differ in the size: from 1997 to 2005, the SBA guaranteed $86.8 billion
under the 7(a) program, compared to $18.0 billion in loans under the 504 program (SBA
administrative data). As shown in Table 8, the two programs differ by the percent of guarantee
offered, target processing time, interest rates, maturity terms, fees, and penalties.
Table 8: Comparison of 7(a) and 504 Loan Program Attributes
Standard 7(a) Loan
Standard 504 Loan
Geographic
area
Nationwide
Certified Development Companies (CDCs) are SBA-regulated entities
that process, close, and service 504 loans. Each CDC has a specific
geographic area – the minimum area is the state in which the CDC is
located. The program is available nationwide. CDCs may expand into
contiguous states as a Multi-State Expansion (for the entire state) or as
a Local Economic Area (LEA) expansion (limited to contiguous counties
in the contiguous state).
Program
description
Loan guarantee of private loan for
working capital, heavy equipment, and
fixed assets.
Long-term, fixed-asset financing. The typical 504 project includes a loan
secured with a senior lien from a private-sector lender, covering up to
50 percent of the project cost; a loan secured with a junior lien from a
CDC, covering 40 percent of the project cost (backed by a 100 percent
SBA-guaranteed debenture); and a contribution of at least 10 percent
equity from the small business.
Size
Standard
See Table 7
For-profit businesses that do not exceed $7M in tangible net worth and
do not have an average net income over $2.5M for the past 2 years.
May also use the 7(a) size standard as an alternative.
Percent of
guarantee
85 percent for loans of $150,000 or less.
75 percent for loans of more than
$150,000.
100 percent of CDC lien. Zero percent of private lender lien.
Public Sector Duplication of SBA Loan and Investment Programs
22
Standard 7(a) Loan
Standard 504 Loan
Statutes
and
regulations
Originally authorized by Section 7(a) of
the Small Business Act, 15 U.S.C.
Chapter 14A, Section 636(a). This
section was repealed Aug. 13, 1981, and
amended by Title XIX of Public Law 9735.
Small Business Investment Act and 13 CFR, part 120 governs the
program.
Target
processing
time
13 business days
6 days
Maximum
loan amount
General rule is gross loan limited to $2.0
M per loan. SBA guarantee amount
limited to $1.5 M to one borrower and its
affiliates.
If job creation, maximum debenture is $1.5 M. If project meets a public
policy goal, maximum debenture is $2.0 M. If project is for a small
manufacturer, maximum debenture is $4.0M. Therefore, the maximum
project size for small manufacturer is $10.0M (Borrower =$1.0M;
Lender = $5.0M; & CDC = $4.0M).
Maturity
Depends on use of proceeds. Maximum
25 years reserved for fixed assets
including real estate.
10 or 20 years. Depends on use of proceeds. Machinery and equipment
is generally 10 years. Real estate is 20 years.
Public Sector Duplication of SBA Loan and Investment Programs
23
Standard 7(a) Loan
Standard 504 Loan
Interest
rates
Prime plus 2.25 percent for maturities
under 7 years. Prime plus 2.75 percent
for maturities of 7 years or more. Rates
can be higher by 2 percent for loans of
$25,000 or less, and 1 percent for loans
between $25,000 and $50,000.
The 504 debenture that funds the 504 loan is sold to the private sector
as part of a pool. There are monthly sales. The debenture’s interest rate
is determined at the time of the sale and is fixed. The 504 loan’s
interest rate is the debenture rate plus monthly fees.
Collateral
policy
Available collateral (liquidation value) up
to loan amount.
Project assets.
Fees paid to
SBA
Upfront fees (percentage of guaranteed,
not gross, amount). For maturities of 12
months or less = 0.25 percent. For
maturities over 12 months: gross loan
$150,000 or less = 2 percent, gross loan
$150,001 to $700,000 = 3 percent, over
$700,000 = 3.5 percent. For guaranteed
amounts over $1 M = 3.75 percent.
Annual fee is 0.545 percent.
Upfront fees: First mortgage/third party lender pays 0.5 percent on first
mortgage amount. Borrower pays 0.5 percent on 504 net debenture
amount. Annual fees: CDC pays 0.125 percent of the principal amount
and borrower pays 0.018 percent.
For 20 year debentures: Declining amount over 10 years. 100 percent
of the interest rate x the principal balance the first year down to 10
th
percent of the interest rate x the principal balance in the 10 year. For
10 year debentures: Declining amount over 5 years. 100 percent of the
interest rate x the principal balance the first year down to 20 percent of
th
the interest rate x the principal balance in the 5 year. This penalty is
paid to the investor, not to SBA.
Source: U.S. Small Business Administration (2006c and 2006d)
Prepayment
penalty
If term of loan is for 15 years or more
and loan is prepaid in first three.
An analysis of SBA administrative data suggests that there is some duplication between
the 7(a) and 504 programs. As shown in Table 9, 17 percent of firms receiving only 7(a) loans
from 1997 to 2005 used those loans for real estate purposes. The volume of those loans
amounted to nearly half, or 44 percent, of the total volume borrowed by firms receiving only 7(a)
loans.5 The 7(a) loans used for real estate purposes had an interest rate, 8.88 percent,
considerably higher than the rates paid by firms receiving only 504 loans. As shown in Table 8,
firms receiving only 504 loans had a median interest rate of 5.95 percent. The real estate loans
borrowed through the 7(a) program had a longer median term than 504 loans, 277 months for
7(a) loans compared to 240 months for 504 loans. Conversations with SBA district directors and
with state directors of Small Business Development Centers suggest that although the 504
program usually represents a “better deal” for real estate loans, lenders often direct small
5
The SBA does not systematically collect use of proceeds data for its loans. However, the agency uses
maturity term length as an indicator of use of proceeds; loans with a term of less than 7 years are generally used for
working capital, from 7 to 15 years for heavy equipment, and greater than 15 years for real estate.
24
Public Sector Duplication of SBA Loan and Investment Programs
businesses needing real estate loans to the 7(a) program based on personal preference or lack
of information.
Table 9: Use of Proceeds by Firms Receiving 7(a) Loans Only, 1997-2005
Use of Proceeds
N
Working Capital
Heavy Equipment
Real Estate
119,060
220,449
69,151
Volume (in $)
Share of
Share of
Investments Volume
(%)
(%)
12,757,641,561
29
15
34,875,185,413
54
41
37,373,170,323
17
44
Median
Median
Interest
Maturity
Rate
Term
8.88
48 mos.
8.88
84 mos.
9 277 mos.
Source: SBA administrative data
Note: Median interest rates were computed using an average of the portion of the loans with variable and fixed
interest rates. For working capital, the fixed rate was 9 percent and variable rate 8.75 percent; for heavy equipment,
the fixed rate was 8.75 percent and variable rate 9 percent; and for real estate, both rates were 9 percent.
An analysis of the types of firms receiving only 504 loans, only 7(a) loans, and both
types of loans was conducted to examine whether the types of firms receiving one type of loan,
or both, differed by business characteristics, geographic region, or industry sector. If variation
exists across loan types then duplication would be unlikely even if firms were using 7(a) loans
for real estate purpose; that is, if the firms receiving 7(a) loans are fundamentally different than
the firms receiving 504 loans, then the loan programs are not duplicative. However, if similar
firms are receiving each loan type, then it is possible that 504 loans and 7(a) real estate loans
are duplicative. The research suggests that there are minor differences across the firms
receiving only 7(a) loans, those receiving only 504 loans, and those receiving both.
Of the 455,859 firms receiving a total of $105 billion from 1997 to 2005 in 504 or 7(a)
loans, 81 percent of the total loan volume went to firms receiving only 7(a) loans, 15 percent
went to firms receiving only 504 loans, and 3 percent went to firms receiving both types of loans,
as shown in Table 10. The median loan amount for 504-only firms was $330,000 compared to
$100,000 for firms receiving only 7(a) loans and $293,000 for firms receiving both.
Table 10: Average Loan Amount for Firms Receiving 504 and/or 7(a) Loans, 1997-2005
Loan Type
Both 504 & 7(a)
Only 7(a)
Only 504
Total
N
Volume ($)
9,255
3,639,828,677
408,660
37,944
455,859
85,005,997,297
16,105,972,000
104,751,797,974
Source: SBA administrative data
Share of
Firms (%)
Share of
Volume (%)
2
3
90
8
100
81
15
100
Median ($)
293,000
100,000
330,000
N/A
Public Sector Duplication of SBA Loan and Investment Programs
25
As shown in Table 11, 7(a)-only firms paid higher interest rates than 504-only firms and
had shorter terms than 504-only firms. The median interest rate for 504-only firms was 5.95; for
7(a) only firms, the median rate for the fixed-rate portion of the loan was 8.75 percent and for
the variable-rate portion was 9 percent. Firms receiving only 504 loans had considerably longer
terms for their loans, with a median of 240 months. This compares to 92 months for the fixedrate portion and 118 months for the variable-rate portion of loans that went to 7(a)-only firms.
Appendix G presents interest rates and term by year and shows that interest rates dropped for
both types of loans after 2001. For 7(a) loans between 1997 and 2001, the median interest rate
ranged from 10 percent to 10.25; between 2002 and 2005, it ranged from 6.75 percent to 7.25
percent. Not surprisingly, the number of 7(a) loans increased dramatically with the rate
decrease, rising steadily from 29,442 loans in 2001 to 66,696 in 2005. From 1997 to 2001, the
median interest rate for the 504 program ranged from 6.3 percent to 7.46 percent; from 2002 to
2005, it ranged from 4.76 to 5.78 percent. The number of 504 loans rose with the decrease,
from 3,413 in 2001 to 7,043 in 2004, dropping to 4,860 in 2005. These numbers indicate that
even with fluctuation, 7(a) interest rates remained consistently higher than 504 interest rates.
An analysis of the business characteristics indicates that there are minor differences
among the firms that received only 7(a) loan guarantees, those that received only 504 loans,
and those that received both. As shown in Table 12, 7(a)-only firms were slightly more likely to
be start-ups than 504-only firms, tended to be smaller than 504-only firms, and were more likely
to be minority- or female-owned than 504-only firms. Among 7(a)-only firms, 29 percent were
start-ups, compared to 18 percent for 504-only firms and 21 percent for firms receiving both loan
types. Among 7(a)-only firms, 93 percent had fewer than 25 employees, compared to 74
percent of 504-only firms and of firms receiving both types of loans. As for minority ownership,
27 percent of firms receiving only 7(a) loans were at least 50 percent minority-owned, compared
to 19 percent of 504-only firms, and 22 percent of firms receiving both loan types. Among 7(a)only firms, 36 percent of firms were at least 50 percent female-owned, compared to 31 percent
of 504-only firms and 33 percent of firms receiving both loan types. As for veteran-ownership,
11 percent of 7(a)-only firms owned by veterans, compared to 8 percent for 504-only firms, and
10 percent for firms receiving both types of loans.
Table 11: Average Maturity Term (in months) and Interest Rate, 1997-2005
Term/Rate
Term, Fixed Rate Portion
Term, Variable Rate Portion
Interest Rate, Fixed Portion
Loan Type
Both 504 and 7(a)
Only 7(a)
Only 504
N
Mean Median
N
Mean Median
N
Mean Median
5,498 219
240 52,180
92
84 37,944 236
240
5,085 115
84 360,591
118
84
N/A N/A
N/A
5,498 5.06
5.11 52,180
8.49
8.75 37,944 5.87
5.95
26
Public Sector Duplication of SBA Loan and Investment Programs
Interest Rate, Variable Portion
5,085
8.45
8.75 360,591
8.77
9
N/A
N/A
N/A
Source: SBA administrative data
The three types of firms showed even smaller differences across industry categories. As
shown in Table13, the share of investments and of volume differed by three or fewer percentage
points for the three types of firms across all industry types except for: 1) manufacturing; 2) the
NAICS category covering information, finance real estate, professional, scientific, management,
and administrative; and 3) “other services,” which includes businesses engaged in activities
equipment and machinery repairing, promoting or administering religious activities, grantmaking, advocacy, and providing dry-cleaning and laundry services, personal care services,
death care services, pet care services, photofinishing services, temporary parking services, and
dating services. Firms receiving only 7(a)-loans were slightly more likely to be in information,
finance or a related industry, with 18 percent of 7(a)-only firms falling in the category, compared
to 15 percent of 504-only firms and 12 percent of firms receiving both. More firms receiving both
loan types were in manufacturing than firms receiving only 504 or 7(a) loans, with 21 percent of
firms receiving both loans in manufacturing, compared to 15 percent of 504-only firms and 10
percent of 7(a)-only firms. As for “other services,” 7 percent of the investment volume among
firms receiving both loan types was borrowed by firms falling within this category, compared to
11 percent for firms receiving only 7(a) loans and 7 percent for firms receiving only 504 loans.
Geographic differences among the firms receiving only 7(a) or 504 loans or both were
also small. In the Northeast, a greater proportion of firms received only 7(a) loans compared to
those firms that received only 504 loans or both loan types. As shown in Table 14, 23 percent of
7(a) only firms were located in the Northeast, compared to 12 percent of 504-only firms and 14
percent of firms receiving both. A greater proportion of firms in the West was found among the
firms receiving both loan types and among 504-only firms than among 7(a)-only firms: 39
percent of firms receiving both loan types are located in the West, 41 percent of firms receiving
only 504 loans are in the West, whereas just 28 percent of firms receiving only 7(a) loans are in
the West. Other than these minor differences, the geographic composition of the three types of
firms does not vary significantly. Other than these minor differences, the geographic
composition of the three types of firms did not vary significantly.
27
Public Sector Duplication of SBA Loan and Investment Programs
Table 12: Comparison of Ownership and Firm Characteristics for Recipients of 7(a) and/or 504 Loans, 1997-2005
Ownership and
Firm
Characteristics
Female Ownership
Firms Receiving Both 504 and 7a
Firms Receiving Only 7a Loan Guarantees
Loans
N
Volume ($) Share of Share of
N
Volume ($) Share of Share of
Firms Volume
Firms Volume
(%)
(%)
(%)
(%)
Firms Receiving Only 504 Loans
N
Volume ($)
Share of Share of
Firms
Volume
(%)
(%)
Less than 50%
6,214 2,505,087,579
female-owned
At least 50%
3,041 1,134,741,098
female-owned
Minority Ownership
33,704,195
67
69 261,035 57,174,273,940
64
67 26,352 11,631,112,000
69
72
33
31 147,625 27,831,723,357
36
33 11,592
4,474,860,000
31
28
Less than 50%
7,106 2,657,045,421
minority-owned
At least 50%
2,067 949,079,061
minority-owned
Veteran Ownership
77
73 296,020 59,904,932,048
72
70 30,625 12,437,498,000
81
77
22
26 109,504 24,610,565,442
27
29
3,568,635,000
19
22
90
91 364,545 75,553,318,849
89
89 34,953 14,844,742,000
92
92
9,451,055,448
11
11
1,261,230,000
8
8
Not veteranowned
Veteran-owned
8,365 3,305,916,330
886
9 44,107
7,114
333,343,347
10
2,991
Existing business
7,332 2,882,872,196
79
79 290,269 63,560,477,165
71
75 31,112 12,963,283,000
82
80
Start-up
1,923
756,956,481
21
21 117,962 21,303,198,964
29
25
3,075,293,000
18
19
Fewer than 25
6,886 2,403,865,087
employees
25 to 75
2,048 1,039,377,587
Employees
More than 75
321 196,586,003
employees
Source: SBA administrative data
74
66 26,331 12,225,413,812
93
83 27,921 10,074,202,000
74
63
22
29
3,826
2,308,144,126
6
14
8,143
4,775,524,000
21
30
3
5
429
142,321,168
1
3
1,880
1,256,246,000
5
8
Firm Tenure
6,683
Firm Size
28
Public Sector Duplication of SBA Loan and Investment Programs
Table 13: Comparison of Industry for Recipients of 7(a) and/or 504 Loans, 1997-2005
Industry
Firms Receiving Both 504 and 7(a)
Loans
N
Volume ($) Share of Share of
Firms Volume
(%)
(%)
47
20,133,306
1
1
Agriculture,
forestry, fishing
Mining, utilities, and 521
construction
Manufacturing
1,907
373
Share of Share of
Firms
Volume
(%)
(%)
199,214,000
1
1
742,880,000
6
5
39,856 10,978,330,629
10
13 5,701
2,692,980,000
15
28
28 116,415 23,655,577,071
28
28 9,494
4,153,983,000
25
17
26
12
10
18
13 5,732
2,135,711,000
15
13
8
8
7,393,779,800
8
9 4,033
1,486,457,000
11
9
16
19
64,864 17,083,996,550
16
20 6,607
3,508,331,000
17
22
8
7
48,561
8,935,799,798
12
11 3,761
1,172,780,000
10
0
0
212
27,807,633
0
3,715,000
0
7
0
815,129,596
21
22
Wholesale trade,
2,557 1,025,715,979
retail trade,
transportation, and
warehousing
Information,
1,095 358,757,225
finance, real estate,
professional,
scientific,
management,
administrative
Educational, health
834 288,474,220
care, and social
assistance
Arts, entertainment, 1,478 686,030,889
recreation,
accommodations,
and food services
Other services
813 255,802,846
Source: SBA administrative data.
Volume ($)
6 2,200
5
562,00
N
7
6
1
Firms Receiving Only 504 Loans
4,816,421,415
188,542,616
Public
administration
Firms Receiving Only 7(a) Loan
Guarantees
N
Volume ($) Share of Share of
Firms Volume
(%)
(%)
3,892 1,221,712,422
1
1
28,785
71,894 10,832,910,852
33,905
0
17
29
Public Sector Duplication of SBA Loan and Investment Programs
Table 14: Comparison of Business Location for Recipients of 7(a) and/or 504 Loans, FY 1997-2005
Firms Receiving Both 504 and 7(a) Loans
Geographic
Region
N
Volume ($)
Firms Receiving Only 7(a) Loan Guarantees
Northeast
1,333
Share of Share of
Firms Volume
(%)
(%)
424,372,766
14
12
Midwest
2,132
794,998,119
23
22
78,068
14,744,286,989
19
17
9,239 3,666,499,000
24
23
South
2,096
820,056,921
23
23
115,128
26,075,695,076
28
31
8,507 3,587,768,000
22
22
West
3,610 1,575,093,496
39
43
115,545
28,501,498,089
28
34 15,561 7,049,102,000
41
44
Source: SBA administrative data
N
93,255
Volume ($)
Firms Receiving Only 504 Loans
Share of Share of
Firms
Volume
(%)
(%)
14,824,799,928
23
17
N
Volume ($)
Share of Share of
Firms
Volume
%)
(%)
4,386 1,705,460,000
12
11
Public Sector Duplication of SBA Loan and Investment Programs
30
Federal Duplication: Overlap with Other Federal Programs
The greatest degree of regulatory overlap between SBA programs and other federal financial
assistance programs exists with the USDA, particularly its Farm Service Loan program. The
USDA has several other programs providing financing to small businesses and to businesses of
all sizes, although SBA administrative data indicate that a small fraction of 7(a) and 504 loans
go toward rural businesses.6 Nevertheless, rural businesses can avail themselves of both SBA’s
loan programs and several offered by the USDA. The U.S. Department of Interior also has a
loan guarantee program, and several other federal agencies run grant programs that permit
recipients to re-lend funds to small businesses.
As shown in Appendix C, the Farm Service Agency (FSA) makes direct and guaranteed
loans to family-size farmers and ranchers who cannot obtain commercial credit from private
lenders. Although financial aid to farmers is usually made through USDA, and not the SBA, SBA
rules allow for assistance to farms or farm-related businesses. 7 FSA loans and loan guarantees
come in the form of ownership loans and operating loans. Direct ownership and operating loans
have a $200,000 maximum and can be used for purchasing land, livestock, or equipment;
financing construction or other physical improvements; and refinancing debt under limited
conditions. Guaranteed ownership and operating loans have a maximum amount of $850,000
and can be used for the same purposes as direct loans, in addition to less restricted debt
refinancing.
The 7(a) program differs somewhat from the FSA loan programs. The SBA program has
considerably higher maximum amounts and more limited restrictions on using proceeds for debt
refinancing. Under the 7(a) program, the SBA guarantees a portion of a loan up to $1.5 million,
and businesses cannot use proceeds to refinance existing debt if the lender is in a position to
sustain a loss and the SBA would take over that loss as a result of the refinancing (U.S. Small
Business Administration, 2006). Despite these differences, some duplication may exist for small
farmers seeking amounts less than $850,000 for purposes other than debt refinancing.
6
SBA administrative data indicate that 14 percent of businesses receiving 7(a) or 504 loans are in rural
areas. Because data on this indicator are missing for 26 percent of all cases, this proportion could be higher.
7
SBA SOP 50-104(E), Subpart “A”, Section 5.120.103 (page 24), found on the SBA’s website, is titled
“Eligibility of Farm Enterprises.” It indicates that SBA aid is available for “farm-related businesses” and in some cases
for “agricultural enterprises.” The section states that aid to agricultural businesses “is generally made by the [USDA],
but may be made by SBA under the terms of a Memorandum of Understanding between SBA and USDA. Farmrelated businesses which are not agricultural enterprises are eligible businesses under SBA’s business loan
program.” This suggests that there is some overlap for aid in agricultural enterprises. It also suggests that there may
be overlap for farm-related businesses.
Public Sector Duplication of SBA Loan and Investment Programs
31
A borrower or lender might choose one program over the other based on more favorable
interest rates or fees. It is difficult to make generalizations about how the programs’ rates
compare because of the variation of rates even within programs. Under the FSA programs,
interest rates vary because they are negotiated between the borrower and lender. Rates for
direct operating loans are set by the Secretary of Agriculture. Under the 7(a) program, interest
rates are negotiated between the borrower and the lender, but are subject to SBA maximums,
which are pegged to the prime rate. According to SBA district officials and SBDC state directors,
businesses may end up using SBA programs instead of USDA programs, or vice versa, based
on the established relationships loan officers have with the different agencies.
The USDA has five other financial assistance programs that do not explicitly target small
businesses, but likely benefit them. The Intermediary Relending Program lends money to
nonprofits, state or local governments, and Indian tribes in order for them to re-lend the funds to
private businesses, nonprofit organizations, or individuals for business development or
community development in rural areas. Both the intermediaries and the ultimate recipients must
have been unable to obtain a loan at reasonable rates from a bank or other government
program, and the ultimate recipients have to be located in a city with a population smaller than
25,000. As shown in Appendix C, the loans can range from $150,000 to $1 million. Because
emerging or small enterprises may have difficulty obtaining private credit—and because the
enterprises located in rural areas are likely to be small, this program may overlap with the 7(a)
program to a small extent. The Business and Industry Loans program is a loan guarantee
program that is also available to rural businesses of all sizes, although it gives no preference to
small businesses or to businesses with difficulty obtaining private credit. It provides large loans,
up to $25 million, that can be used for working capital, equipment and machinery, acquisition or
development of land, and working capital.
The Rural Business Enterprise Grants program provides grants of $2,000 to $500,000 to
public entities and nonprofits organizations serving rural areas with the goal of improving
development of small and emerging businesses and industries. The program defines eligible
businesses as those with 50 or fewer employees and less than $1 million in project gross
revenue. One of the several uses permitted under the program is the establishment of revolving
loan funds. Although a different vehicle than the loan guarantee of the 7(a) program, this
program could potentially duplicate the SBA’s program by providing publicly funded financial
assistance to small businesses. Likewise, the Rural Economic Development Loans and Grants
program provides loans and grants to rural electric and telephone utilities, both public and
private, that use the funds to establish revolving loan funds for projects that promote rural
economic development and job creation. Recipients can include small rural businesses, and
projects can include start-up costs, construction, and other physical improvements. In fiscal year
2007, the grants were capped at $300,000 (U.S. Department of Agriculture, 2007a). Lastly, the
Public Sector Duplication of SBA Loan and Investment Programs
32
Empowerment Zone and Enterprise Community Program provides ten-year grants to highpoverty rural communities that may be used to provide assistance to small businesses. The first
round of grants was phased out in 2005, so assistance is only available to businesses in the 27
areas that received grants in the last two rounds (U.S. Department of Agriculture, 2007b, and
Catalog of Federal Domestic Assistance, 2007).
Another federal source of loan guarantees for individuals and entities based on or near
Indian Reservations is the Department of Interior’s Indian Loans-Economic Development
Program, under which the agency guarantees loans from $2,500 to $500,000 for commercial,
industrial, agricultural, and other businesses.
For small businesses involved in construction or other transportation-related industries
the U.S. Department of Transportation’s Disadvantaged Business Enterprises—Short Term
Lending Program represents an opportunity for financial assistance. This program provides
loans up to $750,000 to certified disadvantaged business enterprises, which are defined as
small businesses owned and controlled by socially and economically disadvantaged individuals,
and to minority- and women-owned businesses for transportation-related contracts. The
program is meant to provide these businesses with working capital at lower interest rates than
they might otherwise be able to obtain.
Several federal agencies fund grant programs that go to states, counties, other public
entities, and nonprofits. One of the many uses of these programs is the establishment of
revolving loan programs that may benefit small businesses. These programs include the
Appalachian Regional Commission’s Area Development Program, the Department of
Commerce’s Economic Adjustment Assistance program, the Environmental Protection Agency’s
Capitalization for Clean Water State Revolving Funds and Capitalization for Drinking Water
State Revolving Funds programs, the HHS’s Native American Programs, and the Department of
Transportation’s Airport Improvement Program, Federal Transit/Capital Investments Grants, and
Formula Grants for Other Than Urbanized Areas Program. As their names suggest, most of
these grants programs are targeted at specific industries. If funds reach small businesses in the
form of revolving loans, the number and type of businesses are very limited compared to the
businesses served by SBA’s 7(a) program. An exception is Commerce’s Economic Adjustment
Assistance program, which provides grants to states, cities, and counties, among other entities,
that may establish loan funds that benefit small businesses in distressed communities
experiencing negative economic changes.
State Duplication
A considerable amount of potential duplication exists between the SBA’s 7(a) program and
state-run loan and loan guarantee programs. State programs are not exact replicas of their SBA
Public Sector Duplication of SBA Loan and Investment Programs
33
counterparts, and similarities between federal and state programs differ by state and program.
In general, SBA programs have higher loan and loan guarantee amounts and longer terms than
local programs. Eligibility requirements also vary: some programs are only available to
businesses unable to access private capital; some are available to all small businesses; and
some are available to businesses in certain market segments (e.g., minority-owned businesses,
businesses in distressed areas, or those serving underserved populations). Size standards are
similar for SBA and state programs, although a few states have size standards considerably
smaller than SBA standards. Standards for industry sector, geographic market, and growth
stage are similar for SBA programs and state programs. Some SBA and SBDC officials believe
that state and local-run programs create unnecessary duplication—that is, they increase
administrative costs and make the application process more burdensome on businesses than if
there were fewer programs. Other officials believe that state and local programs can be more
user-friendly and are valuable because they can provide capital more quickly than SBA
programs. Other SBA and SBDC officials argue that any duplication of loan programs is of
benefit to businesses because more programs results in more capital available.
In some states, lending and investment programs differ significantly from SBA programs
in their job creation requirements. Many states have stringent requirements. For example,
Ohio’s Section 166 program limits its loans to $35,000 per job created, and the Massachusetts
Trust limits its loans to $10,000 per job created. On the other hand, the 7(a) program does not
have a job creation requirement, and the 504 program has a less rigorous one. Under the 504
program, businesses other than small manufacturers must create or retain one job per $50,000
borrowed. Small manufacturers have a $100,000 job creation requirement except when they
“improve the economy of the locality or achieve one or more public policy goals,” in which case
the job creation requirement is waived (U.S. Small Business Administration, 2006). Another
significant difference between SBA and local programs is that the latter often have a prevailing
wage requirement, whereas SBA loan programs do not. Both of these requirements would serve
to make SBA programs more attractive to businesses than local programs in some cases.
Loan Amount and Term
The 7(a) program on the whole provides larger amounts of debt and longer repayment terms
than state programs. Under the 7(a) program, the SBA guarantees a portion of a loan up to $1.5
million. As shown in Appendix D, only one state, California, guarantees loans for an amount
anywhere approaching this size. The California Capital Access Program guarantees loans up to
$2.5 million. Several other state and local loan programs have maximum amounts similar to the
7(a) program. The New York Linked Deposit Program has a cap of $1 million. However, most of
the state programs have maximum amounts lower than SBA limits—with the maximum
allowable amount falling between $200,000 and $750,000.
Public Sector Duplication of SBA Loan and Investment Programs
34
Loan terms vary greatly among state programs, and these terms tend to be shorter than
the maturities offered under SBA programs. Given that the SBA loan guarantees are often
larger than state loans or loan guarantees, this is not surprising. The 7(a) program has a
maximum term of up to 20 years. In many cases, state loans and loan guarantee programs do
not specify a term; rather they let the lender set the terms. Among states that do set limits,
rather than relying on lenders to do so, terms often vary depending on their use. For example,
under the Pennsylvania’s Small Business First program, working capital loans have a term up to
3 years, machinery and equipment loans up to 10 years, and real estate loans up to 15 years.
More often than not, however, terms set by states do not exceed ten years.
As is the case with the 7(a) program, some state programs do not cover the full cost of a
given project or loan. The 7(a) program offers a guarantee of 50 to 85 percent of a loan. Under
the 504 program, a private lender provides a senior lien covering up to 50 percent of the loan,
while the SBA guarantees another 40 percent of the loan. The small business must make a ten
percent equity contribution. State programs have variants on these requirements. The
Pennsylvania Small Business First program covers up to 40 percent of a project’s costs
(although businesses can apply for more than one loan under the program at any one time). In
Illinois, loans cannot exceed 25 to 50 percent of the project costs, depending on the type of
business applying. Many of the state programs do not require an equity contribution; this may
be because the amounts borrowed through programs are lower than under SBA programs.
Eligible Businesses and Uses
Some state programs are open only to small businesses that are unable to access private
credit, while others are open to all small businesses. As shown in Table 6, eight states have
loan or loan guarantee programs for small businesses that are able to meet the requirements of
private lenders, and eight states have programs targeting businesses unable to obtain private
credit. One study state—California—has a loan guarantee programs for small businesses
unable to access private credit but no similar programs for businesses that meet conventional
lender standards. Seven states— Illinois, Maine, Massachusetts, North Dakota, Ohio,
Pennsylvania, and Texas—have loan or loan guarantee programs for both small businesses
able to meet private lending requirements and those that cannot. Three states—New York, New
Jersey, and Michigan—offer loan or loan guarantees only to small businesses that meet the
requirements of conventional lenders. That states are somewhat less likely to offer programs for
less creditworthy businesses may be explained by the financial restraints they face; they may
have limited budgets or be under legislative mandate to balance their budgets.
Public Sector Duplication of SBA Loan and Investment Programs
35
Some state programs use SBA size standards to define what can be considered a small
business.8 Other states and localities have stricter size standards. To be eligible for many of
Pennsylvania’s loan programs—such as the Small Business First and the Community Economic
Development Loan Program—a business must have 100 or fewer employees. In Ohio, only
businesses with annual sales of $10 million of less (and which are unable to qualify for private
loans) are eligible for the Capital Access Programs. Ohio’s Mini-Loan Guarantee Program is
available only to businesses with fewer than 25 employees.
Most state programs have eligibility requirements for the use of proceeds similar to the
7(a) program, under which proceeds can be used for most legitimate business activities
involved in establishing new businesses and assisting in the operation, acquisition, or expansion
of existing businesses. Like the 7(a) program, state programs generally prohibit the use of funds
for real estate investment. One difference between the 7(a) program and similar state programs
is that a few state programs allow businesses to use proceeds for debt refinancing. Under 7(a),
refinancing is only permitted in limited cases: Businesses cannot use proceeds to refinance
existing debt if the lender is in a position to sustain a loss and the SBA would take over that loss
as a result of the refinancing (U.S. Small Business Administration, 2006). As shown in Appendix
D, the Ohio Capital Access program allows refinancing, and the California Capital Access
Program allows limited refinancing.
Industry Sector, Growth Stage, and Geographic Market
The 7(a) program is open to most types of businesses, as is the case with state programs. The
SBA program prohibits real estate investment firms and other speculative businesses; it also
explicitly excludes dealers of rare coins, lending agencies, pyramid sales plans, and businesses
involved in gambling or illegal activities. A few state programs have tighter industry restrictions.
Some programs are targeted at technology while others exclude certain types of businesses. In
New York, the Linked Deposit program excludes personal and professional services and
includes only those retail businesses located in distressed areas. Some mercantile, commercial,
and retail businesses are ineligible for Pennsylvania’s Small Business First program. Likewise,
in Massachusetts, the Economic Stabilization Trust excludes real estate firms, as well as
retailers, service firms, and restaurants. Texas’s Linked Deposit Program is open only to
historically underutilized businesses, childcare providers, nonprofits, and businesses in state
enterprise zones. Some states have restrictions on businesses engaged in activities considered
8
Under SBA standards, manufacturers must have 500 or fewer employees; wholesale trade businesses
fewer than 100 employees; agricultural enterprises less than $750,000 in annual receipts; retail trade less than $6.5
million; constructions firms less than $31 million; travel agencies less than $3.5 million; and business and personal
services less than $6.5 million, and, in some cases, $4.5 million.
Public Sector Duplication of SBA Loan and Investment Programs
36
socially undesirable. For example, the Pennsylvania Capital Access Program is not available to
some businesses involved in alcohol sales or pregnancy termination or to private clubs,
racetracks, or massage parlors. The Illinois Capital Access Program excludes manufacturers,
retailers, and wholesalers of firearms, tobacco products, liquor, or sexually explicit materials.
Like the 7(a) program, most state loan and loan guarantee programs are available to
businesses at all growth stages. A handful of state programs bar start-up businesses from
applying. These include New York’s Linked Deposit Programs, Pennsylvania’s Export Finance
Programs, Ohio’s Capital Access and Mini-Loan Guarantee Programs, Massachusetts’
Economic Stabilization Trust, and Illinois’ Capital Access Program.
For the most part, the state loan and loan guarantee programs are open to businesses
throughout the state. There are a few exceptions, where the programs are targeted at
businesses in distressed areas or designated areas, such as enterprise or empowerment zones.
For example, New York’s Linked Deposit program targets businesses in empire zones and other
distressed areas. Texas’s Linked Deposit Program is available to businesses in state enterprise
zones (as well as to childcare providers and historically underutilized businesses).
Pennsylvania’s Community Economic Development Loan Programs are designated for
underserved or un-served areas.
Two other potential sources of state funding for small businesses are Community
Services Block Grant (CSBS) funds from HHS and Community Development Block Grant
(CDBG) funds from HUD. Under HHS’s CSBS program, states distribute funds through a
network of community action agencies and other neighborhood organizations (Catalog of
Federal Domestic Assistance, 2007); it is likely some of these funds reach small businesses in
the form of business loans, grants, or other investments. According to recent HUD data (U.S.
Department of Housing and Urban Development 2006), some states allocate large portions of
CDBG funds to direct economic aid to businesses, while other states allot a considerably
smaller portion.9 In fact, in a study of the use of HUD funds during the second half of the 1990s,
Walker et al. (2003) found that state and local governments spent approximately $2.2 billion on
economic development loans, a substantial proportion of which went to small businesses.
Among the ten study states, Pennsylvania and New Jersey spent the least of their
CDBG funds on assistance to businesses of any size for the program year starting July 1, 2004,
9
The HUD data does not indicate how much of this assistance reaches small businesses, but it is safe to
assume that a large proportion does, given that the goal of the assistance is community development. Aid to
businesses with five or fewer employees is categorized as micro-enterprises assistance. Aid to all other businesses is
categorized as direct financial assistance to for-profit businesses. Both types of assistance can take the form of
loans, loan guarantees, or grants.
Public Sector Duplication of SBA Loan and Investment Programs
37
and ending June 30, 2005 (U.S. Department of Housing and Urban Development 2006).
Pennsylvania spent none of its CDBG funds on direct financial assistance for businesses and
practically none on microenterprise assistance. Allotting less than 0.1 percent of its CDBG
funds, or $6,800 on direct financial aid to businesses, New Jersey spent the second smallest
proportion of its CDBG funds on that purpose. It apportioned none of its funds to
microenterprise assistance. This contrasts to New York, which spent 15 percent of its funds, or
$6.4 million, on direct financial assistance to businesses and seven percent on microenterprise
assistance. California spent 12 percent of its fund, or $7.7 million, on aid to businesses and four
percent on aid to microenterprises. The remaining six study states spent between three and five
percent of their funds on direct assistance to businesses. Of these, four allotted none of their
funds specifically to microenterprises.
Local Duplication
As with state programs, some potential duplication exists between the SBA’s 7(a) program and
local loan and loan guarantee programs. Not surprisingly, SBA programs have higher loan and
loan guarantee amounts and longer terms than local programs. Eligibility requirements also
vary. Some programs are only available to businesses unable to access private capital, some
are available to all small businesses, and some are available to businesses in certain market
segments (e.g., minority-owned businesses, businesses in distressed areas, or those serving
underserved populations). Size standards are similar for SBA and state programs, although a
few cities have size standards considerably smaller than SBA standards. Standards for industry
sector, geographic market, and growth stage are similar for SBA programs and local programs.
Loan Amount and Term
The 7(a) program on the whole provides larger amounts of debt and longer repayment terms
than local programs. Under the 7(a) program, the SBA guarantees a portion of a loan up to $1.5
million. Three local loan programs have maximum amounts similar to that maximum: the Grow
Miami Fund has a $2 million limit, and both the New York City Capital Access Program and the
Los Angeles County Business Loan Program have caps of $1 million. The remaining local
programs have limits lower than SBA’s, with the maximum allowable amounts ranging from
$100,000 to $750,000.
Loan terms vary greatly among local programs, and these terms tend to be shorter than
the maturities offered under SBA programs. Given that the SBA loan guarantees are often
larger than local loans or loan guarantees, this is not surprising. The 7(a) program has a
maximum term of up to 20 years. In many cases, local loan and loan guarantee programs do
not specify a term; rather they let the lender set the terms. A few local programs have terms of
Public Sector Duplication of SBA Loan and Investment Programs
38
length comparable to SBA terms. For example, Cleveland’s Small Business Revolving Loan
Program has a term up to 20 years for loans financing the renovation of existing facilities or new
construction. More often than not, however, terms set by localities do not exceed ten years.
Eligible Businesses and Uses
Some city programs are open only to small businesses that are unable to access private credit,
while others are open to all small businesses. As shown in Table 6, seven cities have loan or
loan guarantee programs for small businesses that are able to meet the requirements of private
lenders, and four cities have programs targeting businesses unable to obtain private credit. Two
study cities, New York and Miami, have loan or loan guarantee programs only for small
businesses unable to access private credit, but have no similar programs for businesses that
meet conventional lender standards. Two cities—Los Angeles and San Diego—have loan or
loan guarantee programs for both small businesses able to meet private lending requirements
and those that cannot. Four cities—Philadelphia, Cleveland, Boston, and Chicago—offer loan or
loan guarantees only to small businesses that meet the requirements of conventional lenders.
That cities are somewhat less likely to offer programs for less creditworthy businesses may be
explained by the financial restraints they face; they may have limited budgets or be under
legislative mandate to balance their budgets.
Most local programs use SBA size standards to define what can be considered a small
business. Some state and local programs have other eligibility criteria. For example, in
Philadelphia, the Public Housing Authority MicroLoan Fund provides loans only to small
businesses run by public housing residents.
Most local programs have eligibility requirements for the use of proceeds similar to the
7(a) program, under which proceeds can be used for most legitimate business activities
involved in establishing new businesses and assisting in the operation, acquisition, or expansion
of an existing business. Like the 7(a), local programs generally prohibit the use of funds for real
estate investment. As discussed above, the 7(a) program only allows for limited refinancing.
Most local programs also have such restrictions, if they allow refinancing at all. One exception is
the Southern Dallas Development Fund, which permit proceeds to be used for refinancing.
Industry Sector, Growth Stage, and Geographic Market
The 7(a) program is open to most types of businesses, as is the case with local programs. The
SBA programs prohibit real estate investment firms and other speculative businesses. The 7(a)
program also explicitly excludes dealers of rare coins, lending agencies, pyramid sales plans,
and businesses involved in gambling or illegal activities. Only one local program, the Los
Public Sector Duplication of SBA Loan and Investment Programs
39
Angeles Technology Loan Fund (which targets technology firms), has restrictions on the types
of businesses eligible.
Like the 7(a) program, most local loan and loan guarantee programs are available to
businesses at all growth stages. A few local programs specifically target start-ups or early stage
businesses. As shown in Appendix D, these include two San Diego programs, the Metro
Revolving Loan Fund and the San Diego Technology Fund. Some local programs bar start-up
businesses from applying. These include Cleveland’s Small Business Revolving Loan Program,
Boston’s Back Streets Backup Loan Program, and two Dallas programs, the Community
Development Business Loan program and the Southern Dallas Development Fund.
For the most part, the local programs are available to all small businesses in a city.
There are a few exceptions, where the programs are targeted at businesses in distressed areas
or designated areas, such as enterprise or empowerment zones. For example, San Diego’s
Revolving Loan Program is available only for businesses in certain census tracts. Two Dallas
programs restrict eligible businesses to Southern Dallas and city enterprise zones, and two
Miami programs exclude all businesses except those in community redevelopment districts or
empowerment zones.
504/CDC Loan Program
As discussed above, some overlap exists between the SBA’s 7(a) and 504 programs. Beyond
this, relatively little explicit duplication exists for the 504 program. Only five programs at the
federal, state, and local levels provide loans or loan guarantees for real estate purposes were
identified. These include three state program, one in Ohio and two in Maine, and two local
programs, in Cleveland and Chicago. As discussed above, most of the general-purpose loan
and loan guarantees programs include real estate as a legitimate use. Therefore, some overlap
exists among the 504 program and federal, state, and local programs that provide real estate
loans and loan guarantees in addition to aid for other purposes.
Federal Duplication: Duplication between SBA’s 7(a) and 504 Programs
As is discussed extensively above in the section on federal duplication of the 7(a) program, SBA
administrative data suggests that there is some overlap between the 7(a) and 504 programs. As
shown in Table 7, 17 percent of firms receiving only 7(a) loans from 1997 to 2005 used those
loans for real estate purposes. The volume of those loans amounted to nearly half, or 44
percent, of the total volume borrowed by firms receiving only 7(a) loans. In addition, an analysis
of the business characteristics of firms receiving only 504 loans, only 7(a) loans, and both
indicates that there are not great differences among the firms receiving the different loan types.
Public Sector Duplication of SBA Loan and Investment Programs
40
Federal Duplication: Duplication with Other Federal Programs
As with the 7(a) program, the federal agency with the greatest amount of overlap with the SBA’s
four major programs is the USDA. As mentioned above in the section on 7(a) federal
duplication, a relatively small proportion of 504 and 7(a) loans appear to go to rural businesses,
so overlap may be limited. Nevertheless, rural businesses can avail themselves of both SBA’s
loan programs and several offered by the USDA. Its FSA loans and loan guarantees are
available for real estate purposes (in addition to other purposes). Loan maximums are lower
under the FSA program. Loan guarantees for land and equipment are capped at $850,000
under the FSA program, compared to $1.5 million for businesses other than small
manufacturers and $4 million for small manufacturers under the 504 program. Direct loans
under the FSA program for land and equipment are capped at $200,000. Interest rates for FSA
loans are variable; whereas under the 504 program, rates are fixed. They are pegged to an
increment above the current market rate for five- and ten-year U.S. Treasury issues. Program
fees are approximately three percent, and can be financed with the loan (U.S. Small Business
Administration 2006).
The USDA has several other financial assistance programs that do not explicitly target
small businesses, but likely benefit them significantly. As discussed above, these programs may
potentially duplicate the 7(a) program, and because one of the uses of these programs is real
estate purposes, they may also duplicate the 504 program. The Intermediary Relending
Program lends money to nonprofits, state or local governments, and Indian tribes in order for
them to relend the funds to private businesses, nonprofit organizations, or individuals for
business development or community development in rural areas. Both the intermediaries and
the ultimate recipients must have been unable to obtain a loan at reasonable rates from a bank
or other government program, and the ultimate recipients have to be located in a city with a
population smaller than 25,000. As shown in Appendix C, the loans can range from $150,000 to
$1 million. Because emerging or small enterprises may have difficulty obtaining private credit—
and because the enterprises located in rural areas are likely to be small, this program may
duplicate the 504 program to some extent.
The Business and Industry Loans program is a loan guarantee program that is also
available to rural businesses of all sizes, although it gives no preference to small businesses or
to businesses with difficulty obtaining private credit. It provides large loans, up to $25 million,
that can be used, among other purposes, for fixed assets including equipment and machinery
and for the acquisition or development of land. The Rural Business Enterprise Grants program
provides grants of $2,000 to $500,000 to public entities and nonprofits organizations serving
rural areas with the goal of improving development of small and emerging businesses and
industries. The program defines eligible businesses as those with 50 or fewer employees and
Public Sector Duplication of SBA Loan and Investment Programs
41
less than $1 million in project gross revenue. One of the several uses permitted under the
program is the establishment of revolving loan funds. Although a different vehicle than the loan
guarantee of the 504 program, this program could potentially duplicate SBA’s program by
providing aid that is used for real estate.
The Rural Economic Development Loans and Grants program provides loans and grants
to rural electric and telephone utilities, both public and private, that use the funds to establish
revolving loan funds for projects that promote rural economic development and job creation.
Recipients can include small rural businesses, and projects can include fixed asset projects
such as construction and other physical improvements. In fiscal year 2007, the grants were
capped at $300,000 (U.S. Department of Agriculture 2007a). Lastly, the Empowerment Zone
and Enterprise Community Program provides ten-year grants to high-poverty rural communities
that may be used to fund fixed asset projects for small businesses. The first round of grants was
phased out in 2005, so assistance is only available to businesses in the 27 areas that received
grants in the last two rounds (U.S. Department of Agriculture 2007b; Catalog of Federal
Domestic Assistance 2007).
Several federal agencies fund grant programs that go to states, counties, other public
entities, and nonprofits. One of the many uses of these programs is the establishment of
revolving loan programs that may benefit small businesses—and that may be used for fixed
asset projects. These programs include the Appalachian Regional Commission’s Area
Development Program, the Department of Commerce’s Economic Adjustment Assistance
program, the Environmental Protection Agency’s Capitalization for Clean Water State Revolving
Funds and Capitalization for Drinking Water State Revolving Funds programs, and HHS’s
Native American Programs. These programs also include three programs run by the
Department of Transportation: the Airport Improvement Program, which specifies as one of its
purposes the construction and rehabilitation of public-use airports; the Federal Transit/Capital
Investments Grants program, which finances the construction and improvement of public
transportation facilities and equipment; and the Formula Grants for Other Than Urbanized Areas
Program. As the program names suggest, most of these federal grants programs are targeted at
specific industries. If funds reach small businesses in the form of revolving loans, the number
and type of businesses are very limited compared to the businesses served by SBA’s 504
program. An exception is the Department of Commerce’s Economic Adjustment Assistance
program, which provides grants to states, cities, and counties, among other entities, that may
establish loan funds that benefit small businesses in distressed communities experiencing
negative economic changes.
Public Sector Duplication of SBA Loan and Investment Programs
42
State Duplication
Little potential duplication of the 504 program appears to exist at the state level. Three states
have programs that only allow for investment in fixed assets: Ohio’s MiniLoan Guarantee
Program, Pennsylvania’s Pollution Prevention Assistance Account, and two Maine programs.
Ohio’s program provides much smaller amounts of real estate capital than the 504 program, and
is only available to businesses with fewer than 25 employees that have been unable to obtain
private loans. Under Ohio’s program, businesses can use proceeds for fixed asset expansion
costing less than $100,000. Loan amounts do not exceed $45,000, and loan terms are up to 10
years. Pennsylvania’s program is even more restrictive than the 504 program, providing loans to
businesses with fewer than 100 employees to help fund the installation of pollution-control or
energy-efficient equipment. In Maine, one fixed-asset loan program provides funding for site
improvements for licensed day care centers of up to $100,000, while the other provides up to
$250,000 to farmers, food processors, and aquaculture operations.
However, most of the state programs resembling the 7(a) program, discussed in the
preceding section, include as legitimate uses the financing of fixed assets, real estate, and real
estate improvements. There are a few exceptions: California’s CalCAP loan guarantee program
has some restrictions on real estate loans, Pennsylvania’s Export Finance Program can only be
used for working capital or accounts receivable, and Massachusetts’ Economic Stabilization
Fund is only for working capital. All other general-purpose loan or loan guarantee programs can
be used for fixed asset financing. Therefore, although these general-purpose loan and loan
guarantee programs do not exactly duplicate the 504 program—and more closely resemble the
7(a) program—they do overlap with the 504 program.
Local Duplication
Two cities, Cleveland and Chicago, have programs that exclusively finance fixed assets.
Cleveland’s Small Business Revolving Loan Fund provides loans of up to $500,000 to small
businesses for the acquisition of fixed assets, new construction, or the renovation of existing
buildings. The terms of the loans are 7 to 10 years for machinery or equipment and 20 years for
real estate. Though the terms are similar to those under the 504 program, the maximum amount
allowable is considerably smaller. Chicago’s MicroLoan Program also provides smaller amounts
for fixed assets to small businesses, specifically those with projects supporting community or
neighborhood development or providing job opportunities.
As is the case with the state programs resembling the 7(a) program, most of the city-run,
general-purpose loan and loan guarantee programs discussed in the preceding section overlap
with the 504 program. Almost all of these city programs include as legitimate uses the financing
of fixed assets, real estate, and real estate improvements. There are a few exceptions: San
Public Sector Duplication of SBA Loan and Investment Programs
43
Diego Technology Fund can only be used for working capital, and Miami’s Empowerment Zone
Revolving Loan Program can be used for most general business purposes except real estate.
All other general-purpose loan or loan guarantee programs can be used for fixed asset
financing. Therefore, although these general-purpose loan and loan guarantee programs do not
exactly duplicate the 504 program—and more closely resemble the 7(a) program—they may
overlap with the 504 program.
MicroLoan Program
There appear to be few federal, state, or local government agencies that directly run microloan
programs. Only a few of the study states and cities have government programs that provide
small businesses with small loans. However, almost all of the 12 states have microloan
programs run by nonprofit organizations that receive a majority of their funding from government
contributions.
It appears that many states rely on local and national nonprofit organizations—in
addition to the SBA—to provide businesses with small loans. New York City’s Economic
Development Fund directs women-owned businesses to the Women’s Venture Fund, a
nonprofit group that provides microloans to women who do not qualify for credit with
conventional lenders. Like most nonprofit lenders, this organization receives some funding from
government sources, but this funding does not constitute a majority of its revenue. ACCION
USA, an arm of the international microlending organization ACCION International, also may be
meeting the need for small loans in certain markets. It is active in New England, Texas, New
Mexico, New York City, Chicago, Miami, Atlanta, and San Diego. The apparent dearth of public
microloan programs may also be explained in part by the fact that businesses seeking smaller
loans can apply to the state and local loan and loan guarantee programs described above.
Federal Duplication
The Rural Business Enterprise Grants program provides grants of $2,000 to $500,000 to public
entities and nonprofits organizations serving rural areas with the goal of improving development
of small and emerging businesses and industries. The program defines eligible businesses as
those with 50 or fewer employees and less than $1 million in project gross revenue. One of the
several uses permitted under the program is the establishment of revolving loan funds. The
funds may provide large loans or microloans, making this the one federal program that
potentially duplicates the SBA’s MicroLoan Program.
Public Sector Duplication of SBA Loan and Investment Programs
44
State and Local Duplication
There is less duplication at the state and local levels of the SBA’s microloan programs than of
its 7(a) or 504 programs. This research found only four state or local government program in the
12 study states and 12 study cities. The research also analyzed microloan programs offered
through nonprofit organizations receiving 50 percent or more of their annual revenue from
government sources—i.e., programs that might be considered “public”—but found only 16 such
programs in the 12 study states. The absence of state microloan programs may also be
explained in part by the fact that businesses seeking smaller loans can apply to the state loan
and loan guarantee programs.
Among the 12 study states, only Florida runs a microloan program. As shown in
Appendix D, Florida’s program lends small businesses unable to access private loans up to
$15,000. This compares to the $35,000 limit under SBA’s MicroLoan Program. Three of the
study cities—Philadelphia, Boston, and Chicago—have microloan programs. Philadelphia’s
program, offered through the Public Housing Authority, is only available to businesses run by
public housing residents. These businesses can borrow between $5,000 and $25,000.
Chicago’s program is open to small businesses with projects supporting community or
neighborhood development or providing job opportunities. Boston businesses can obtain
microloans through the Back Streets programs, although they can also receive larger loans, up
to $250,000. The loan term under the SBA loan program is up to six years, although loan terms
vary according to the size of the loan, planned use of the funds, requirements of the
intermediary lender, and needs of the business. The state and local programs also have
variable loan terms and, like the SBA, variable interest rates.
Another source of “public” microloans is microenterprise programs run by nonprofit
organizations that receive most of their funding from government contributions. According to the
Aspen Institute’s 2005 Online Directory of Microenterprise Programs, there were over 500
microenterprise programs in the U.S. in 2005. Some of these provide loans and technical
assistance, while others provide only technical assistance. A review of the 252 microenterprise
programs in the12 study states found that 20 offer loans and can be considered “public.” These
20 microloan programs received 50 percent or more of their total revenue from government
grants or contracts, as reported in the most recent 990 IRS tax form published on GuideStar, an
on-line service that gathers data on nonprofit organizations with income of greater than $25,000.
Illinois, North Dakota, and Texas had no nonprofit microenterprise programs that fall under this
description. As shown in Appendix F, all but one of the programs—Maine’s Coastal
Enterprises—are not available to small businesses statewide but rather are targeted to
businesses in certain cities or counties.
Public Sector Duplication of SBA Loan and Investment Programs
45
Table 15: Nonprofit Microenterprise Programs
State
Total Number of Nonprofit
Microenterprise Programs
California
Florida
Illinois
Maine
Massachusetts
Michigan
New Jersey
New York
North Dakota
Ohio
Pennsylvania
59
12
13
16
25
16
14
48
2
14
19
Texas
Total
15
252
Number of “Public”
Programs Providing
Loans
3
2
0
2
1
2
2
4
0
1
3
0
20
Source: Aspen Institute (2006) and Philanthropic Research, Inc. (2006)
Note: Programs are considered “public” if 50 percent or more of their total revenues
came from government grants or contracts, as reported on the most recent (2004 or 2005) 990
IRS form available on guidestar.org. Organizations that serve as SBA MicroLoan intermediaries
were not included.
SBIC Program
SBICs and community development venture funds recognize that small and disadvantaged
businesses in low- and moderate-income areas are often underserved by private venture
capital. States also have recognized the need for investment in such businesses and have
established public programs to improve the availability of venture capital to businesses in
underserved geographic areas or industries. These public efforts vary in their degree of state
involvement; they range from publicly funded and publicly run venture capital funds to statesponsored venture capital fairs meant to facilitate interaction between investors and local
entrepreneurs or businesses (Barkely et al. 1999).
There appears to be more duplication of the SBIC program than of the 504 and
MicroLoan programs and somewhat less than of the 7(a) programs. Only one federal program
provides funding to small business investment firms, while 29 programs in all 12 of the study
states have such programs. Like private market venture capital loan funds, state venture capital
programs focus heavily on technology, science, and healthcare, overlooking traditional “low-
Public Sector Duplication of SBA Loan and Investment Programs
46
tech” firms. By contrast, SBIC investments are more diverse. None of the study cities appears to
have city-run or city-funded programs similar to the SBIC program.
Federal Duplication
The SBIC program appears to have little duplication among federal programs. One source of
potential overlap is the Treasury Department’s Community Development Financial Institutions
(CDFI) Program. The program is designed to build the capacity of CDFIs, nonprofit
organizations or for profit entities that serve low-income people and communities lacking
adequate access to affordable financial products and services. Under the program, the Treasury
Department provides financial assistance to the CDFIs in the form of equity investments, loans,
deposits, or grants for the purpose of economic revitalization and community development (U.S.
Treasury Department, 2006). CDFIs can use this financial assistance for job creation, business
development, commercial real estate development, affordable housing, and community
development financial services (provision of basic banking services to underserved communities
and financial literacy training). The program requires a dollar-for-dollar match by the CDFI with
funds of the same kind from a non-federal source.
Another source of federal venture capital is the USDA’s Rural Business Investment
Program, a program that has been developed with SBA’s aid. The USDA licenses Rural
Business Investment Companies (RBICs) and provides them with debenture guarantees to
make equity capital investments in business enterprises. At least half of the investments—
measured both in volume and dollars—must be in “smaller enterprises,” those with a maximum
net worth of $6 million and net income of $2 million in the two years preceding the RBIC
investment (U.S. Department of Agriculture 2007c). At least 75 percent of an RBIC’s
investments must be in enterprises whose principal office is located in a rural area. Potential
overlap exists with the SBIC program in cases where the RBIC program funds small businesses
in either rural or urban areas.
State and Local Duplication
States have also recognized the need for investment in such businesses and have established
public programs to improve the availability of venture capital to businesses in underserved
geographic areas or industries. These public efforts vary in their degree of state involvement;
they range from publicly funded and publicly run venture capital funds to state-sponsored
venture capital fairs meant to facilitate interaction between investors and local entrepreneurs or
businesses (Barkely et al. 1999).
All 12 study states had venture capital funds funded with public dollars in 2005 (National
Association of Seed and Venture Funds 2006). Among the 30 programs in these 12 states, 15
Public Sector Duplication of SBA Loan and Investment Programs
47
were publicly managed and 15 were privately managed. Both types of funds potentially
duplicate SBIC investment, although the structure of the latter type is more similar to the SBIC
program. The greatest difference between the state venture capital funds and SBIC funds
appears to be that state funds are directed largely to the technology sector. Of the 29 state
programs detailed in the NASVF survey (one of the 30 programs was not listed in the survey),
21 programs, or 72 percent, exclusively targeted the technology, science, or healthcare sectors.
The remaining 9 programs targeted technology in addition to other sections. Compared to
programs targeting the tech and healthcare sector, the state venture capital programs with
diverse investments had a relatively low investment volume. A total of approximately $254
million was under management for the firms with diverse investments, compared to roughly $1.7
billion for funds targeting the hi-tech and healthcare sectors.
In contrast, the debenture SBIC program’s investments are more diverse. Among SBIC
investments between 1997 and 2005, approximately 26 percent of total investment volume and
17 percent of investment numbers went toward information, science, and other high-tech areas
and 5 percent of investment volume and 3 percent of investment numbers went toward the
educational, health care, and social assistance sector (see Competitive and Special Competitive
Opportunity Gap Analysis of the Debenture Small Business Investment Company Program,
Final Report).
CONCLUSION
Our research suggests that some overlap exists between SBA’s 504 and 7(a) programs and
that a small degree of duplication exists between SBA programs and similar programs run by
other federal agencies. The USDA’s Farm Loan Program appears to be the greatest potential
source of overlap, although SBA administrative data suggests that a relatively small portion of
SBA loans go to agricultural businesses and other rural businesses. Other USDA programs
provide services similar to SBA loan programs, as do the Treasury, Interior, and Transportation
Departments. These programs do not exactly replicate the SBA programs, but they provide
similar types of assistance to small businesses (although they may also provide these services
to larger businesses as well). Several federal economic development grant programs are
available to states and cities, which may choose to use the funds to establish revolving loan
funds for small businesses. The USDA’s Rural Business Investment Program potentially
overlaps to some extent with SBA’s SBIC program for small businesses both in rural and urban
areas. A greater degree of potential duplication exists at the state and local levels. This
duplication exists for the most part among federal, state, and local general-purpose loan and
loan guarantee programs that resemble the SBA’s 7(a) program. There are fewer state and
local loan and loan guarantee programs that resemble the 504 program, which provides loans
exclusively for fixed assets. Few states and localities run microloan programs. Most of the
Public Sector Duplication of SBA Loan and Investment Programs
48
states in this study have publicly funded venture capital funds, although these programs may
differ from SBA’s program by the types of businesses they target or the amounts of money they
offer.
The extent of similarities among federal, state, and local loan programs varies by state
and program. SBA programs have higher maximum loan and loan guarantee amounts and
longer terms than local programs. This means that there is less duplication among businesses
seeking bigger loans. For example, the Pennsylvania Capital Access Program provides loan
guarantees up to $500,000 to small businesses unable to obtain private loans. The state
program appears to duplicate the SBA’s 7(a) program for businesses seeking a guarantee up to
$500,000. Beyond that, SBA is providing a service that the state program is not.
Size standards are similar for SBA and state and local programs, although a few states
and localities have size standards considerably smaller than SBA standards. In these states,
duplication exists for very small businesses more than for larger small businesses. Standards
for industry sector are also on the whole similar across the board—most programs are open to
most types of industry. There are a few exceptions: some states exclude retail or mercantile
businesses from their major loan or loan guarantee programs, such as Capital Access or Linked
Deposit programs, while others exclude certain industries engaged in activities considered
socially undesirable. Geographic market and growth stage are similar for SBA programs and
state and local programs. Again, there are a few exceptions. Some state and city programs
target distressed areas or designated areas like empowerment zones, and many prohibit startup businesses from participating.
There are few microloan programs provided by federal agencies other than the SBA or
by the study states or cities. The growing private microenterprise industry, including established
organizations like ACCION USA, may complement SBA’s MicroLoan program.
The duplication that does exist among loan and loan guarantee programs may reduce
efficiency. Less duplication might simplify the process for applicant businesses and for lenders
helping businesses determine which programs they are eligible for. The overall cost of
administration might be reduced if similar programs were offered through fewer levels of
government. However, some duplication is inevitable, and multiple access points might reach a
broader range of businesses. Finally, for political reasons, states and localities may want their
own financial assistance programs so that they are seen as supporting small business.
Public Sector Duplication of SBA Loan and Investment Programs
49
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www.state.il.us/treas/Programs/step_SB.htm on May 1, 2006.
Jersey City Economic Development Corporation. 2006. “Business Loan Programs.” Accessed
on-line at www.jcedc.org/new/businessloanprograms.html on May 15, 2006.
Key, Peter. 2004. “VC Fund Closes on $86M,” Philadelphia Business Journal, November 8.
Los Angeles County. 2006. “Economic Development: Business Loan Programs.” Accessed online at www.lacdc.org/economic/business/index.shtm on May 19, 2006.
Michigan Economic Development Agency. 2006. The Capital Access Program. Accessed online at http://www.michigan.org/medc/cm/attach/0003005A-7A12-42C3-BE1C044EF1E000EA/CAP.pdf on June 8, 2006.
Michigan 21st Century Investment 2006. “About the 21st Century Fund.” Accessed on-line at
Fundhttp://www.michigan21stcenturyinvestmentfund.com/faq.htm on January 3, 2007.
National Association of Seed and Venture Funds 2006. State Venture Capital Program
Directory. Accessed on-line at http://www.nasvf.org/web/nasvfinf.nsf/pages/svcp.html
New Jersey Economic Development Agency. 2006. “Entrepreneurial Services.” Accessed online at www.njeda.com/entrepreneurialservices.asp on May 1, 2006.
New Jersey Economic Development Agency. 2004. Annual Report 2004. Trenton: New Jersey
Economic Development Agency.
New York City Economic Development Corporation. 2006. “New York City Capital Access.”
Accessed on-line at www.newyorkbiz.com/Business_Incentives/Financing/ index.html on
April 18, 2006.
Public Sector Duplication of SBA Loan and Investment Programs
51
Office of Management and Budget. 2005. Small Business Administration PART Assessments.
Washington, D.C. Executive Office of the President, Office of Management and Budget.
Ohio Department of Development. 2006a. “Ohio Capital Access Program.” Accessed on-line at
www.odod.state.oh.us/cap/ on April 20, 2006.
Ohio Department of Development. 2006b. “Ohio Mini Loan Guarantee Program.” Accessed online at www.odod.state.oh.us/DMBA/MiniLoan.htm on April 20, 2006.
Ohio State Treasurer’s Office. 2006. “Small Business Linked Deposit.” Accessed on-line at
www.treasurer.state.oh.us/the_ohio_treasury/treasury_program
s/linked_deposit_programs/small_business/index.htm on May 22, 2006.
Pennsylvania Department of Community and Economic Development. 2005. Business
Financing Programs. Accessed on-line at www.newpa.com/default.aspx?id=24 on April
17, 2006.
Philadelphia Commercial Development Corporation. 2006. “Small Business Lending Programs.”
Accessed on-line at www.philadelphiacommercial.org//pcdc/home.htm on May 16, 2006.
Rural Policy Research Institute. 2000. State-Assisted Venture Capital Programs, 2000.
Accessed on-line at www.rupri.org/publications on April 3, 2006.
State of California. 2006. “Financial Assistance: Small Business.” Accessed on-line at
www.commerce.ca.gov/state/ttca/ttca_navigation.jsp?path=Financial+Assistance on
April 17, 2006.
State of New York. 1999. Empire State Development: New York State Science and Technology
Foundation Program Oversight and Governance. Accessed on-line at
www.nysosc3.osc.state.ny.us/audits/allaudits/093000/99s3.pdf on May 9, 2006.
State of Texas. 2006. “Economic Development Bank.” Accessed on-line at
http://www.governor.state.tx.us/divisions/ecodev/ed_bank/ on April 18, 2006.
U.S. Department of Agriculture. 2007a. “Rural Economic Development Loans and Grants.”
Accessed on-line at http://www.rurdev.usda.gov/rbs/busp/redlg.htm on May 10, 2007.
U.S. Department of Agriculture. 2007b. “Information About Rural EZ/EC Communties.”
Accessed on-line at http://www.ezec.gov/communit/index.html on May 10, 2007.
U.S. Department of Agriculture. 2007c. “Fact Sheet: Rural Business Investment Program.”
Accessed on-line at http://www.rurdev.usda.gov/rd/farmbill/2002/RBIPFactSheet.pdf on
April 27, 2007.
U.S. Department of Agriculture. 2006. “Farm Loan Programs.” Accessed on-line at
www.fsa.usda.gov/dafl/default.htm on April 3, 2006.
Public Sector Duplication of SBA Loan and Investment Programs
52
U.S. Department of Housing and Urban Development. 2006. “Grantee Use of CDBG Funds by
Matrix Code.” Accessed on-line at http://www.hud.gov/offices/cpd/
communitydevelopment/budget/disbursementreports/ on May 11, 2006.
U.S. Environmental Protection Agency. 2007. “The Drinking Water State Revolving Fund:
Protecting the Public Through Drinking Water Infrastructure Improvements. Accessed
on-line on at www.epa.gov/safewater/dwsrf/index.html on April 23, 2007.
U.S. Small Business Administration. 2006a. “Financing: the Basics.” Accessed on-line at
www.sba.gov/financing/index.html on March 23, 2006.
U.S. Small Business Administration. 2006b. U.S. Small Business Administration Standard
Operating Procedure. Accessed on-line in June 2006.
U.S. Small Business Administration. 2006c. “7(a) Loans: Standard, PLP, Community Express
and Low Doc.” Washington, D.C.: U.S. Small Business Administration.
U.S. Small Business Administration. 2006d. “7(a) Loans: Standard, PLP, Community Express
and Low Doc.” Washington, D.C.: U.S. Small Business Administration.
U.S. Small Business Administration. 2004. FY2005 Congressional Budget Request. Accessed
on-line at www.wipp.org/Press/20040307_budget.doc.
U.S. Treasury Department. 2006. “Community Development Financial Institutions Funds.”
Accessed on-line at www.cdfifund.gov/what_we_do/programs_id.asp?programID=7 on
April 4, 2006.
Walker, Christopher, Martin Abravanel, Patrick Boxall, Roger Kormendi, Kenneth Temkin, and
Marsha Tonkovich. 2003. Public Sector Loans to Private-Sector Businesses: An
Assessment of HUD-Supported Local Economic Development Lending Activities.
Washington, DC: US Department of Housing and Urban Development.
APPENDIX A:
NUMBER OF PROGRAMS POTENTIALLY
DUPLICATING SBA's 7(a), 504,
MICROLOAN, OR DEBENTURE SBIC
PROGRAMS
Appendix A
Number of Programs Potentially Duplicating SBA's 7(a), 504, MicroLoan, or SBIC Programs
Federal Agency
State or City
Agriculture Department
Interior Department
Small Business
Administration
Transportation Department
Treasury Department
California
Los Angeles
San Diego
Texas
Houston
Dallas
New York
New York City
Florida
Miami
Pennsylvania
Philadelphia
Ohio
Cleveland
Massachusetts
Boston
New Jersey
Jersey City
Illinois
Chicago
Michigan
Detroit
Maine
North Dakota
Total
Loan/Loan
Guarantee
4
1
2
1
0
2
2
3
2
0
2
1
1
0
2
5
1
3
1
1
1
2
0
7
1
1
0
6
1
53
MicroLoan
0
0
1
0
0
0
0
0
0
0
0
0
0
1
0
0
1
0
0
0
1
0
0
0
1
0
0
0
0
5
Venture
Capital
0
0
1
0
1
1
1
2
3
6
3
1
2
4
2
3
2
32
Total
4
1
4
1
1
3
2
3
3
0
2
3
1
4
2
11
2
6
1
2
2
4
0
11
2
3
0
9
3
90
APPENDIX B:
SBA PROGRAMS
Appendix B
SBA Programs
Program
Type of
Aid
Eligible
Businesses
Eligible Uses
Industry Sector
Geographic
Market
Growth
Stage
Amount
Section 7(a) Loan
Loan
guarantee
Guarantee
Program
Small
businesses
unable to
obtain funding
elsewhere
Establishing new
businesses.
Assisting in the
operation,
acquisition, or
expansition of an
existing
business.
Most. Not eligible: real All
estate investment
firms, other
speculative
businesses, dealers
of rare coins and
stamps, lending
agencies, pyramid
sales plans, illegal
activities, gambling
activities.
504 Loan
Program
Loan
Small
businesses
Improving major Most
fixed assets (e.g.
land and
buildings). Not
for working
capital or
inventory,
consolidating,
repaying or
refinancing debt
MicroLoan
Micro-loan Small
businesses
Establishing new Most
businesses.
Assisting in the
operation,
acquisition, or
expansition of an
existing
business.
Term
All
Up to $1 million Up to 20
years
U.S. Small
Business
Administration
(2006a)
All
Existing
Up to $1.5
10 or 20
million when
years
goal is job
creation or
community
development, up
to $2 million for
public policy
goals, up to $4
million for small
manufacturers
U.S. Small
Business
Administration
(2006a)
All
All
Up to $35,000
U.S. Small
Business
Administration
(2006a)
Up to 6
years
Source
Program
Small
Business
Investment
Company
(SBIC)
Debenture
Program
Type of
Aid
Venture
capital
Eligible
Eligible Uses
Industry Sector
Businesses
Small business Investing in small Not new markets
investment
businesses
companies
providing later
stage capital to
cash-flow
positive or
nearly cashflow positive
companies
Geographic
Market
All
Growth
Stage
SBICs
investing in
later stage
small businesses
Amount
Term
Source
Up to three
times equity
raised by SBIC
N/A
U.S. Small
Business
Administration
(2006a)
APPENDIX C:
FEDERAL FINANCIAL
AID PROGRAMS
Appendix C
Federal Financial Aid Programs
Agency
Program
Type of Aid Eligible Businesses
Agriculture
Farm Loan
Loan
Program: Farm
Ownership and
Farm Operating
Loans
Family-size farmers
and ranchers
Purchasing land,
livestock, and
equipment;
construction and
other physical
improvements;
limited refinancing
Farm Loan
Loan
Program: Farm guarantee
Ownership and
Farm Operating
Loans
Family-size farmers
and ranchers
Purchasing land,
livestock, and
equipment;
construction and
other physical
improvements; debt
refinancing
Intermediary
Relending
Program
Intermediaries
relending proceeds to
businesses or
community
development entities.
Intermediaries and
ultimate recipients must
be unable to obtain
loans at reasonable
rates through
commercial credit or
other government
programs.
Intermediary
Rural
relending. No
businesses
restrictions stated for
ultimate recipients.
Loan
Eligible Uses
Industry
Sector
Farming,
ranching
Geographic
Market
Rural
Growth
Stage
All
Farming,
ranching
Rural
All
Ultimate
No
recipients
restrictions
outside of city stated
with population
of 25,000 or
more
Amount
Term
Source
Up to
$200,000
Up to 40 years
for ownership
loans, 1 to 7
years for
operating loans
U.S.
Department of
Agriculture
(2006a)
Up to
$852,000
Up to 40 years
for ownership
loans, 1 to 7
years for
operating loans
Catalog of
Federal
Domestic
Assistance
(2006)
Up to $2
Up to 30 years
million to
intermediaries, up to
$250,000 to
ultimate
recipients
Catalog of
Federal
Domestic
Assistance
(2006)
Agency
Program
Type of Aid Eligible Businesses
Eligible Uses
Industry
Sector
Geographic
Market
Growth
Stage
Amount
Term
Source
Agriculture,
cont.'d
Business and
Industry Loans
Loan
guarantee
Rural businesses
Modernization,
development costs,
purchasing and
developing land,
purchasing
equipment and
machinery, and
agricultural
production
Rural
businesses
Rural
All
Up to $25
million
Up to 30 years
for land and
buildings, up to
15 years for
equipment and
machinery, up
to 7 years for
working capital
Catalog of
Federal
Domestic
Assistance
(2006)
Rural Business Grant
Enterprise
Grants
Public bodies and
nonprofit corporations
serving rural areas.
Grants are meant to
facilitate development
of small and emerging
business, industry.
One of many uses is Rural
establishment of
businesses
revolving loan fund
Rural area
All
defined as
city, town, or
unincorparated
area with
population of
50,000 or less
$2,000 to
$500,000
N/A
Catalog of
Federal
Domestic
Assistance
(2006)
Community
Development
Financial
Institutions
Fund
CDFIs able to
demonstrate they have
capacity to provide
financial products that
positively impact their
communities, use and
leverage CDFI funds
effectively
Provision of loans or No restrictions
development
stated
investment in private
businesses and
nonprofit
organizations
No restrictions No
stated
restrictions
stated
$50,000 to
$2 million
N/A
Catalog of
Federal
Domestic
Assistance
(2006)
Treasury
Grant
Agency
Program
Type of Aid Eligible Businesses
Eligible Uses
Industry
Sector
Treasury,
cont.'d
Bank Enterprise Grant
Award
Depository institutions No restrictions stated Banking
that invest in CDFIs or
over an observation
period increase lending
and investment
activities in distressed
communities or
increase provision of
services and technical
assistance
Interior
Indian Loans-Economic
Development
Loan
guarantee
Indian tribal
governments, Native
American
organizations,
individual American
Indians
Overseas
Investment
Corporation
Foreign
Investment
Financing
Loan, loan
guarantee
Loans to small
businesses, loan
guarantees to
businesses of all sizes
Geographic
Market
Growth
Stage
Amount
Term
Source
No restrictions N/A
stated
$1,100 to
$1.5 million
N/A
Catalog of
Federal
Domestic
Assistance
(2006)
Commercial,
No restrictions
industrial,
stated
agricultural, or
business activities.
Loan guarantees to
private lenders only
permitted if funds
would otherwise be
unavailable to
borrower. Speculation
ineligible.
Indian
reservations
No
restrictions
stated
For
Varies
individuals
and tribal
enterprises,
$2,500 to
$500,000.
Catalog of
Federal
Domestic
Assistance
(2006)
Projects in
No restrictions
developing country
stated
that contribute to the
economic and social
development of host
countries and that
have positive impact
on U.S. economy
No restrictions No
stated
restrictions
stated
$100,000 to Varies
$29.5 million
for small
business
loans.
Catalog of
Federal
Domestic
Assistance
(2006)
Agency
Program
Type of Aid Eligible Businesses
Transportation
Disadvantaged Loan
Business
Enterprises-Short Term
Lending
Program
Minority- or womenowned business,
disadvantaged
business enteprise
Eligible Uses
Industry
Sector
Geographic
Market
Growth
Stage
Transportationrelated contract:
maintenance,
rehabiliation,
restructuring, or
revitalization of any
mode of
transportation with
public or commercial
transportation
provider or any
federal, state, or local
transportation agency
Construction
and other
transpor-tation
related
industries
No restrictions No
stated
restrictions
stated
Amount
Term
Source
Up to
$750,000.
No
minimum.
Up to five years Catalog of
Federal
Domestic
Assistance
(2006)
APPENDIX D:
STATE AND LOCAL SMALL
BUSINESS LOAN,
LOAN GUARANTEE,
AND MICRO-LOAN PROGRAMS
Appendix D
State and Local Small Business Loan, Loan Guarantee, and Microloan Programs
State/City
Program
Type of Aid Eligible
Businesses
Eligible Uses
California
Loan
Small
Business Loan guarantee
Guarantee
Program
California
Loan
California
Capital Access guarantee
Program
(CalCAP)
Small
businesses as
defined by SBA
unable to obtain
private loans
California
Matching
California
Technology in grant
Partnership
(CalTIP)
Commercialization
Small and
of technology-based
medium-sized
businesses with innovations
federal research
and
development
grants
Industry
Sector
Geographic
Market
Growth
Stage
Amount
All
Any purpose
Small
beneficial to
businesses as
defined by SBA applicant's business
unable to obtain
private loans
California
All
Guaranteed Up to 7 years State of
California
portion cannot
(2006)
exceed
$500,000
All
Most (including
working capital).
Limitations on real
estate loans and
loan refinancing. No
luxury uses, or
facilities selling
alcohol consumed
off site
California
All
$2.5 million. Set by lender
Max. premium
CAPCFA
pays is
$100,000
Existing
Up to
$250,000 in
matching
funds
Life science, California
homeland
defense,
telecommunic
ations,
information
processing
Page 1 of 16
Term
Source
California State
Treasurer's
Office (2006)
and State of
California
(2006)
Not specified State of
California
(2006)
State/City
Program
Type of Aid Eligible
Businesses
Eligible Uses
Industry
Sector
Geographic
Market
Growth
Stage
Amount
Los Angeles
Loan
Los Angeles
County
Business Loan
Program
Los Angeles
Small- and midsized businesses
unable to access
private credit
with good credit
and
demonstration of
repayment ability
Working capital,
fixed assets, real
estate, real estate
improvements
No stated
restrictions
Los Angeles
County
Existing
Los Angeles
$25,000 to $1 Working
million
capital 5 to 7 County (2006)
years;
equipment/m
achinery 7 to
10 years; real
estate 15 to
20 years
Loan
Los Angeles
County
Technology
Loan Program
Small technology
firms in business
incubators part
of Los Angeles
County Incubator
Network
Technology
Working capital,
purchase of
equipment or
machinery. No debt
refinancing
Los Angeles
County
Start-up and
early-stage
$10,000 to
$100,000
Los Angeles
Working
capital 5 to 7 County (2006)
years;
equipment/m
achinery 7 to
10 years
San Diego
Loan
San Diego
Revolving
Loan Program
Small- and midsized businesses
located in
distressed areas
Working capital,
fixed assets, real
estate, real estate
improvement, and
other uses
No stated
restrictions
Eligible census
tracts in San
Diego, National
City, Imperial
Beach, and
Chula Vista
All
$150,000 to
$750,000
City of San
Working
Diego (2006)
capital 7
years;
equipment/m
achinery 10
years; real
estate 15
years
San Diego
Metro
Revolving
Loan Fund
Loan
Small
businesses in
distressed areas,
small businesses
unable to access
private loans
Working capital,
fixed assets, real
estate, real estate
improvement, and
other uses
No stated
restrictions
San Diego
Early stage
$25,000$150,000
City of San
Working
capital 3 to 5 Diego (2006)
years;
equipment/m
achinery 5
years; real
estate 5 years
Page 2 of 16
Term
State/City
Program
Type of Aid Eligible
Businesses
Eligible Uses
San Diego
San Diego
Technology
Fund
Working capital
Participating Small
businesses in
debt
distressed areas,
financing
small businesses
unable to access
private loans
Texas
Capital Access Loan
Program
guarantee
Businesses with
<499 employees,
nonprofits,
businesses with
51 percent of
more of its
employees living
in Texas.
Businesses
facing difficulty
accessing capital
or obtaining
private loans
Texas
Linked Deposit Loan
Program
guarantee
Small and
Working capital;
medium-sized
purchase,
businesses in
construction, or
state enterprise leasing of capital
zones,
assets.
historically
underutilized
businesses, childcare providers,
nonprofits.
Industry
Sector
Geographic
Market
Growth
Stage
Amount
Term
No stated
restrictions
San Diego
Early stage
$50,000$250,000
Up to 5 years City of San
Diego (2006)
Texas
No stated
restric-tions
Set by lender Set by lender State of Texas
(2006)
No stated
Working capital;
restrictions
purchase,
construction, or
leasing of buildings
and equipment.
Proceeds cannot be
used for
construction or
purchase of
residential housing
or simple real estate
investments.
No stated
restrictions
Page 3 of 16
Enterprise zones All
$10,000 to
$250,000
Source
Set by lender State of Texas
(2006)
State/City
Program
Type of Aid Eligible
Businesses
Dallas
Community
Loan
Development
Business Loan
Dallas
Southern
Dallas
Development
Fund
Loan, loan
guarantee
Eligible Uses
Industry
Sector
Geographic
Market
Small and
minority-owned
businesses in
southern Dallas
or state
enterprise zones
Working capital,
equipment, real
estate acquisition
and rehabilitation
No stated
restrictions
Small and
minority-owned
businesses in
southern Dallas
or state
enterprise zones
Loans: working
capital and
equipment. Loan
guarantee: real
estate and debt
refinancing
No stated
restrictions
Page 4 of 16
Growth
Stage
Amount
Term
Source
Southern Dallas, At least 18
enterprise zones months of
success-ful
operation
Not stated
Not specified City of Dallas
(2006)
Southern Dallas, At least 18
enterprise zones months of
success-ful
operation
Not stated
Not specified City of Dallas
(2006)
State/City
Program
Type of Aid Eligible
Businesses
New York
Linked Deposit Loan
Program
discount
New York
Small
Business
Technology
Investment
Fund
Publicly
funded,
publicly
managed
venture
capital
No restrictions
Small
businesses with stated
well-protected
intellectual
property
New York
New York
State
Foundation for
Science,
Technology
and Innovation
Publicly
funded,
privately
managed
venture
capital
Small- and mid- Entrepreneurship, Science and
technology
sized businesses technology
commercialization,
product
development,
business incubator
facility
management,
technology transfer
services
New York City
New York City Term loan,
Capital Access line of credit
(NYCCA)
Manufacturers
with >500
employees,
service
businesses with
>100 employees
Small- and
medium-sized
businesses
unable to access
private loans
Eligible Uses
Industry
Sector
Working capital,
machinery/equipme
nt, new product
development,
buyouts of
companies by
employees
Geographic
Market
Amount
Term
No start-ups
No personal or Empire Zones,
distressed areas
professional
services. Only
retail
businesses in
Empire Zone
or in highly
distressed
area
Up to $1
million
Up to 4 years Empire State
Development
(2006)
New York
High-tech,
areas underserved by
private venture
capitalists
Start-up
Typical
investments
$50,000$500,00
N/A
Empire State
Development
(2006)
Start-up and
existing
Unknown
N/A
State of New
York (1999)
No stated
restric-tions
$1,500 to $1
million
Varies
New York City
Economic
Development
Corporation
(2006)
New York
No restrictions New York City
Working capital,
stated
real estate
acquisition,
machinery,
equipment, physical
improvements to
real estate
Page 5 of 16
Growth
Stage
State/City
Florida
Program
Type of Aid Eligible
Eligible Uses
Businesses
Loan
Start-ups unable No restrictions
Front Porch
to access private stated
Micocredit
loans
Loan Program
Miami
Grow Miami
Fund
Revolving
loan
Miami
Revolving
Empowerloan
ment Zone
Revolving
Loan Program
Geographic
Market
Florida
Growth
Stage
Start-up
All
All legitimate
business purposes.
Cannot be used for
research and
development.
Community
redevelop-ment
districts
Start-up and
expanding
City of Miami
$50,000 to $2 Working
million
capital 3 to 10 (2006a)
years;
equipment 5
to 10 years;
real estate,
construction
up to 25
years
All
General business
Small- and
minority-owned purposes, excluding
real estate
businesses in
Empowerment
Zones unable to
obtain private
loans
Empower-ment
Zones
All
$10,000 to
$250,000
Small
businesses in
community
redevelopment
districts
Industry
Sector
Cottage
industries
Page 6 of 16
Amount
Term
Source
Up to $15,000 Not specified Enterprise
Florida, Inc.
(2006)
Not specified City of Miami
(2006b)
State/City
Program
Type of Aid Eligible
Businesses
Pennsylvania
Small
Loans
Business First
Pennsylvania
Small firms
Pennsylvania Loan
unable to obtain
Capital Access guarantee
Program
(term loan or private loans
line of credit)
Pennsylvania
Community
Economic
Development
Loan
Programs
(CED)
Loan
Local businesses
with <100
employees
worldwide
unable to fully
finance project
with private or
public sources
Eligible Uses
Industry
Sector
Geographic
Market
Growth
Stage
Amount
Term
Source
Land, buildings,
machinery,
equipment, working
capital
All but some
mercantile,
commercial,
retail
Pennsylvania
Some restrictions on
hospitality
projects,
restaurant or
food service
operators
Working
capital up to
$100,000;
land,
machinery/
equipment up
to $200,000
Working
capital up to 3
years; real
estate up to
15 years;
machinery/
equipment up
to 10 years
Pennsylvania
Department of
Community
and Economic
Development
(2005)
Land, buildings,
machinery,
equipment, working
capital
Pennsylvania
All but some
businesses
involved
alcohol sales,
pregnancy
termination
services,
private clubs,
racetracks,
massage
parlors.
Businesses with Most legitimate
<100 employees business costs
providing
products and
services to
unserved or
underserved
areas
Retail,
mercantile,
commercial
Page 7 of 16
Underserved,
unserved areas
All stages,
Max.
including start- $500,000
ups
Set by lender Pennsylvania
Department of
Community
and Economic
Development
(2005)
All
Flexible
Up to
$100,000
Pennsylvania
Department of
Community
and Economic
Development
(2005)
State/City
Program
Type of Aid Eligible
Businesses
Pennsylvania
Export Finance Loan
Program
Pennsylvania
Pollution
Prevention
Assistance
Account
(PPAA)
Philadelphia
Public Housing Micro loan
Authority
(PHA) Micro
Loan Fund
Philadelphia
Small
Business
Revolving
Loan Fund
Loan
Loan
Eligible Uses
Industry
Sector
Geographic
Market
Growth
Stage
Amount
Term
Source
Operating at
least 12
months
Up to
$350,000
1 year,
renewable
annually for 2
additional
years
Pennsylvania
Department of
Community
and Economic
Development
(2005)
Pennsylvania
All except
mercantile and
service
Existing
Up to
$100,000
Up to 10
years
Pennsylvania
Department of
Community
and Economic
Development
(2005)
Businesses with Working capital or Manu-facturing Pennsylvania
<250 employees accounts receivable
with difficulty
accessing
private credit
Businesses with Purchase and
<100 employees installation of
pollution control or
energy efficient
equipment
Small
businesses
owned by
residents
sponsored by
PHA
Working capital,
equipment,
leasehold
improvements,
startup costs
No restrictions Philadelphia
stated
Start-up,
existing
$5,000 to
$25,000
Up to 5 years Philadelphia
Commercial
Development
Corporation
(2006)
Small
businesses
Projects benefitting No restrictions Philadelphia
stated
low-to-moderate
income persons
through job creation
or service provision
Start-up,
existing
$25,000 to
$200,000
Not specified Philadelphia
Commercial
Development
Corporation
(2006)
Page 8 of 16
State/City
Program
Type of Aid Eligible
Businesses
Loan
Businesses with
guarantee
annual sales
<$10 million
unable to qualify
for private loans
Ohio
Ohio Capital
Access
Ohio
Ohio MiniLoan
Guarantee
Program
Ohio
Loan
Small
discount
Business
Linked Deposit
Program
Cleveland
Small
Business
Revolving
Loan Fund
Loan
guarantee
Loan
Eligible Uses
Industry
Geographic
Sector
Market
No restrictions Ohio
stated
Growth
Stage
Existing
Businesses with Fixed asset
< 25 employees expansion of less
unable to obtain than $100,000
private loan
No restrictions Ohio
stated
Existing
Up to $45,000 Up to 10
years
Businesses with No restrictions
< 150 employees stated
No restrictions Ohio
stated
Existing
Not stated
Not specified Ohio State
Treasurer's
Office (2006)
Small
businesses
No restrictions Cleveland
stated
Existing
Up to
$500,000
7 to 10 years City of
for machinery Cleveland
or equipment, (2006)
20 years for
real estate
Working capital,
purchase or
construction of fixed
assets, refinancing.
Cannot be used for
passive real estate
acquisition or
development,
residential housing
development
Acquisition of fixed
assets, renovation
of existing facility,
new construction
Page 9 of 16
Amount
Term
Source
Up to
$250,000 for
working
capital; up to
$500,000 for
fixed assets
Set by lender Ohio
Department of
Development
(2006a)
Ohio
Department of
Development
(2006b)
State/City
Program
Massachusetts
Economic
Stabilization
Trust
Boston
Back Streets
Backup Loan
Program
Type of Aid Eligible
Eligible Uses
Businesses
Working capital
Term loans, Small- and
medium-sized
lines of
"value-added"
credit, loan
guarantees businesses
unable to access
private loans
Loan
No restrictions
Small- and
stated
medium-sized
businesses
within the City of
Boston
Industry
Geographic
Sector
Market
Massachu-setts
Retailers,
service firms,
restaurants,
and real estate
businesses not
eligible
Growth
Stage
Existing
No restrictions Boston
stated
Existing
Page 10 of 16
Amount
Term
Source
$100,000 to
$750,000 for
term loans;
$100,000 to
500,000 for
credit;
$100,000 to
500,000 for
loan
guarantee
Up to 5 years
for term loan;
up to 2 years
for guarantee;
12-month
credit line
may be
renewed for
an additional
12 months
Commonwealth
Corporation
(2006)
Up to
$250,000
Varies based City of Boston
on loan size (2006)
and strength
of company's
finances
State/City
Program
New Jersey
New Jersey
Development
Authority for
Small
Businesses,
Minorities' and
Women's
Enterprises
Small
Business
Loans
New Jersey
NJDA Child
Care Loans
Type of Aid Eligible
Businesses
Small
Loans and
businesses and
loan
minority- and
guarantee
women-owned
enterprises
Loan
Eligible Uses
Working capital,
real estate and
other fixed assets
Nonprofit and for- Start-up and
profit child care operational costs
providers
Industry
Geographic
Sector
Market
No restrictions New Jersey
stated
Growth
Stage
No restrictions stated
Amount
Term
Source
Up to
$200,000
Loans: up to
15 years for
real estate,
10 years for
other fixed
assets, 5
years for
working
capital.
Guarantees:
up to 10
years for fixed
assets and
working
capital.
New Jersey
Economic
Development
Authority
(2006)
Childcare
All
$15,000 to
$75,000
Varies
New Jersey
Economic
Development
Authority
(2006)
Page 11 of 16
New Jersey
State/City
Type of Aid Eligible
Businesses
Illinois Capital Loan portfolio Businesses with
insurance
<500 employees
Access
and unable to
Program
access private
loans
Eligible Uses
Industry
Geographic
Sector
Market
Cannot be used for Manufacturer/r Illinois
debt refinancing or etailers/wholes
passive real estate alers of
firearms,
ownership
tobacco
products,
liquor, or
sexually
explicit
materials
ineligible
Growth
Stage
Existing
Illinois
Low-interest Small
State
loan
businessess with
Treasurer's
annual gross
Economic
sales/revenue of
Program Small
< $2 million
Business
Program
No restrictions Illinois
Working capital,
machinery/equipme stated
nt, inventory, real
estate acquisition,
remodeling,
construction
All
2 years, with Illinois State
$2,500 to
possible three- Treasurer's
$750,000
(cannot
year renewal Office (2006)
exceed 25
percent of
project costs)
Illinois
Participation
SubordinLoan Program ated loan
Existing
Set by lender
$10,000 to
$750,000
(cannot
exceed 25
percent of
project costs)
Illinois
Program
No restrictions Illinois
Businesses with Working capital,
stated
<500 employees machinery/equipment, inventory,
real estate
acquisition,
remodeling,
construction. Debt
refinancing or
contingency funding
ineligible.
Page 12 of 16
Amount
Term
Source
Set by lender Set by lender Illinois
Department of
Commerce and
Economic
Opportunity
(2006)
Illinois
Department of
Commerce and
Economic
Opportunity
(2006)
State/City
Program
Type of Aid Eligible
Businesses
Illinois
SubordinEnterprise
ated loan
Zone
Participation
Loan Program
Businesses in
Enterprise Zones
with <500
employees
Illinois
SubordinMinority,
Women, and ated loan
Disabled
Participation
Loan Program
(MWD/PLP)
Businesses with
<500 employees
and that are
owned by
women,
minoritites, or
disabled
Eligible Uses
Industry
Sector
Amount
Term
Source
No restrictions Enterprise Zones Existing
Working capital,
stated
machinery/equipment, inventory,
real estate
acquisition,
remodeling,
construction. Debt
refinancing or
contingency funding
ineligible.
$10,000 to
$750,000
(cannot
exceed 25
percent of
project costs)
Set by lender,
lower than
Participation
Loan
Program
Illinois
Department of
Commerce and
Economic
Opportunity
(2006)
No stated
Working capital,
restrictions
machinery/equipment, inventory,
real estate
acquisition,
remodeling,
construction. Debt
refinancing or
contingency funding
ineligible.
Up to $50,000
(cannot
exceed 50
percent of
project costs)
Set by lender,
lower than
Participation
Loan
Program
Illinois
Department of
Commerce and
Economic
Opportunity
(2006)
Page 13 of 16
Geographic
Market
Illinois
Growth
Stage
All
State/City
Program
Type of Aid Eligible
Businesses
Eligible Uses
Industry
Sector
Geographic
Market
Growth
Stage
Amount
Term
Illinois
Revolving Line Subordinof Credit
ated line of
Program
credit
No stated
restrictions
Illinois
Existing
$10,000 to
$750,000
Up to 3 years Illinois
Department of
Commerce and
Economic
Opportunity
(2006)
Illinois
Rural MicroBusiness
Participation
Loan
Subordinated loan
Existing
Up to $25,000 Varies
(cannot
exceed 50
percent of
project costs)
Chicago
Linked
Deposits
Program
No restrictions
Loan, line of Emerging
stated
credit
businesses
unable to access
private loans,
small
businesses,
minority- or
women-owned
businesses
No restrictions Chicago
stated
Existing
Not stated
Set by lender Chicago-Cook
Business
Assistance
Center (2006)
Chicago
Micro Loan
Program
Micro loan
No restrictions Chicago
Purchase of
stated
machinery or
equipment,
rehabilitation of real
property
Existing
Not stated
1 to 5 years, Chicago-Cook
depending on Business
Assistance
project
Center (2006)
Businesses with Working capital
<500 employees
and with
seasonal or
variable working
capital demands
Rural
Rural businesses Debt refinancing or Agriculture,
contingency funding forest
with <5
products,
ineligible.
employees
cottage and
craft products,
tourism
Small
businesses with
projects
supporting
community or
neighborhood
development or
providing job
opportunities
Page 14 of 16
Source
Illinois
Department of
Commerce and
Economic
Opportunity
(2006)
State/City
Type of Aid Eligible
Businesses
Capital Access Loan
Small
guarantee
businesses
satisfying banks
credit
requirements
Loan
Maine
Finance
businesses
Authority of
Maine (FAME)
Intermediary
Relending
Program
Eligible Uses
Maine
Loan
FAME
Regional
Economic
Development
Revolving
Loan Program
for Day Care
Licensed day
care providers
Maine
Loan
FAME
Economic
Recovery
Loan Program
No restrictions
Businesses
unable to obtain stated
capital from
other sources
but
demonstrating
reasonable
ability to repay
Maine
Commercial
Loan
Insurance
Program
Loan
guarantee
Maine
businesses
Maine
Linked
Investment
Program for
Commercial
Enterprises
Loan
discount
Businesses with No restrictions
stated
up to 20
employees or
sales of less
than $2.5 million
Michigan
Maine
Program
Industry
Geographic
Sector
Market
No real estate Illinois
businesses
Growth
Stage
No restrictions stated
Amount
No restrictions No
stated
restrictions
Michigan
Economic
Development
Agency (2006)
Prudent business
activities
No agricultural, Maine
hospitality, or
tourism
businesses
No restrictions stated
Up to
$250,000
Up to 25
years for real
estate, up to
10 years for
machinery
and
equipment,
up to 7 years
for other
purposes
Finance
Authority of
Maine (FAME)
(2007)
Physical site
improvements
Day care
Maine
No restrictions stated
Up to
$100,000
Up to 20
years
FAME (2007)
No restrictions Maine
stated
No restrictions stated
Up to 5 years FAME (2007)
Up to
$200,00. Up
to $1 million
for projects
with
substantial
public benefit
All prudent business No restrictions Maine
activities
stated
No restrictions stated
No
relationship
can exceed
$4.25 million
exposure
Useful life of
assets
financed or
provided as
collateral
FAME (2007)
Manufacturing Maine
or other
sectors if 70
percent of
sales are out
of state
No restrictions stated
Maximum
exposure of
$200,000
2 years
FAME (2007)
No restrictions
stated
Page 15 of 16
Term
Source
State/City
Program
Type of Aid Eligible
Businesses
Eligible Uses
Industry
Sector
Geographic
Market
Growth
Stage
Amount
Term
Source
Maine
Agricultural
Marketing
Loan Fund
Loan
Farmers, food
processors, and
aquaculture
operations (the
last are not
considered
agricultural
enterprises)
Fixed asset
expansion,
construction,
purchase
Agriculture,
food
processing,
aquaculture
Maine
No restrictions stated
Up to
$250,000
Up to 25
years
FAME (2007)
North Dakota
North Dakota
Development
Fund
Loan
North Dakota
businesses
Working capital,
machinery and
equipment, real
estate
Manufac-turing North Dakota
and retail
No restrictions stated
$10,000 to
$150,000 for
retail, $15,000
to $500,000
for manufacturing
Up to 25 year
for fixed
assets, up to
10 years for
equipment,
up to 5 years
for inventroy,
up to 2 years
for working
capital
Entrepreneur
Centers of
North Dakota
(2006)
Page 16 of 16
APPENDIX E:
STATE-ASSISTED PUBLIC
VENTURE CAPITAL FUNDS
Appendix E
State-Assisted Public Venture Capital Funds
State
Fund
California
Public Interest Energy
Research
Florida Black Business
Investment Board, Inc.
X
Florida
Technology Research Fund
X
Florida
Cypress Capital Network
Illinois
Illinois Equity Fund
Illinois
Ilinois State Treasurer's Office-Technology Development
Fund
Illinois
Technology Venture
Invesment Fund
Illinois Development Finance
Authority--Technology
Development Bridge Seed
Stage Venture Fund
X
Maine
Maine Economic Development
Venture Capital Revolving
Investment Program
X
Maine
Maine Technology Institute
Maine
Small Enterprise Growth Fund
Massachusetts
X
Michigan
Massachusetts Technology
Development Corporation
Mighican 21st Century
Invesment Fund
VC Investments
New Jersey
Techniuum
X
New Jersey
Garden State Life Sciences
Venture Fund
New York
Small Business Technology
Investment Fund
New York State Foundation
for Science, Technology and
Innovation
Florida
Illinois
Michigan
New York
Publicly
funded and
publicly
managed
Publicly
Total capital
funded and under
privately
management
managed
$488 million
X
$4 million
Unknown
Source
California Energy
Commission (2006)
National Association of
Seed and Venture Funds
(NASVF) (2006)
Unknown
Rural Policy Research
Institute (RUPRI) (2000)
RUPRI (2000)
$3 million
NASVF (2006)
$50 million
NASVF (2006)
Unknown
$8 million
Chicago-Cook Business
Assistance Center (2006)
NASVF (2006)
$3 million
NASVF (2006)
X
$30 million
NASVF (2006)
X
$8 million
NASVF (2006)
$35 million
NASVF(2006)
X
$109 million
X
$150 million
Mighican 21st Century
Invesment Fund (2006)
NASVF(2006)
$233 million
NASVF (2006)
Unknown
New Jersey Economic
Development Authority
(2004)
$40 million
NASVF (2006)
X
X
X
X
X
X
X
NASVF (2006)
Appendix E (continued)
State-Assisted Public Venture Capital Funds
State
Fund
North Dakota
North Dakota Development
Fund
North Dakota
Seed Capital Tax Credit
Ohio
Fuel Cell Program
Ohio
Ohio
Pennsylvania
Publicly
funded and
publicly
managed
Publicly
Total capital
funded and under
privately
management
managed
X
Source
$18.5 million
(included debt
and equity
investments)
NASVF (2006)
$5.5 million
NASVF (2006)
X
$25.4 million
NASVF (2006)
Innovation Ohio Loan Fund
X
$14 million
NASVF (2006)
Third Frontier Pre-Seed and
Seed Fund Initiatives
Ben Franklin Technology
Partners
X
$160 million
NASVF (2006)
X
$27 million
NASVF (2006)
X
Pennsylvania
Innovation Works
X
$26 million
NASVF (2006)
Pennsylvania
X
$60 million
NASVF (2006)
X
$18 million
NASVF (2006)
Pennsylvania
New PA Venture Capital
Investment Program
Technology
Commercialization Initiatve
Tobacco Settlement Board
$200 million
NASVF (2006)
Pennsylvania
PA Early Stage Partners
Unknown
RUPRI (2000), Key (2004)
Texas
Texas Emerging Technology
Fund
$200 million
NASVF (2006)
Pennsylvania
X
X
X
APPENDIX F:
“PUBLIC” NONPROFIT MICROENTERPRISE
ORGANIZATIONS WITH MICRO-LOAN
PROGRAMS
Appendix F
"Public" Nonprofit Microenterprise Organizations With Micro-Loan Programs
State
Organization
Program Target Area
California
Oakland Business Development Corporation
City of Oakland and Bay Area
California
Sierra Economic Development District
California
Florida
Florida
CA's Nevada, Plascer, El Dorado, Sierra, Modock,
and Plymouth Counties
State Assistance Fund for Enterprise Business Microloan program is available to businesses in
and Industrial Development Corporation (SAFE- Northern California
Micro-Business, USA
Dade, Broward, and Pinellas Counties
Maine
Mount Olive Housing and Community
Development Corporation
Coastal Enterprises, Inc.
State of Maine
Maine
Eastern Maine Development Corporation
Eastern Maine
Massachusetts
Lower Cape Cod area of Barnstable, MA
Michigan
Lower Cape Cod Community Development
Corporation
Community Capital Development Corporation
Michigan
Detroit Entrepreneurship Institute
New Jersey
New York
Hudson County Economic Development
Corporation
Jersey City Economic Development
Corporation
Business Outreach Center Network Inc. and
BOC Capital Corporation
Chautauqua Opportunities for Development,
Inc.
Structured Employment Economic
Development Corporation
New York Association for New Americans, Inc.
Ohio
Kent Regional Business Alliance
Northeast Ohio
Pennsylvania
MetroAction, Inc.
Lackawanna, Luzerne, and Monroe Counties
Pennsylvania
North Central PA Regional Planning and
Development Commission
Rural Enterprises Development Corporation
Cameron, Clearfield, Elk, Jefferson, McKean, and
Potter Counties
Columbia, Luzerne, Lycoming, Montour,
Northumberland, Schuylkill, and Sullivan Counties
New Jersey
New York
New York
New York
Pennsylvania
Tallahassee and rest of Leon County
Not specified
City of Detriot and surrounding communities,
including Wayne, Oakland, Macomb, and
Washtenaw Counties
Hudson County
Jersey City
New York City
Chautauqua County, NY
Target areas in New York
New York City
APPENDIX G:
AVERAGE MATURITY TERM AND INTEREST
RATE BY LOAN TYPE AND YEAR,
1997-2005
Appendix G
Average Maturity Term and Interest Rate By Loan Type and Year, 1997-2005
1997
Term, Fixed Portion
Term, Variable Portion
Interest Rate, Fixed Portion
Interest Rate, Variable Portion
1998
Term, Fixed Portion
Term, Variable Portion
Interest Rate, Fixed Portion
Interest Rate, Variable Portion
1999
Term, Fixed Portion
Term, Variable Portion
Interest Rate, Fixed Portion
Interest Rate, Variable Portion
2000
Term, Fixed Portion
Term, Variable Portion
Interest Rate, Fixed Portion
Interest Rate, Variable Portion
2001
Term, Fixed Portion
Term, Variable Portion
Interest Rate, Fixed Portion
Interest Rate, Variable Portion
2002
Term, Fixed Portion
Term, Variable Portion
Interest Rate, Fixed Portion
Interest Rate, Variable Portion
2003
Term, Fixed Portion
Term, Variable Portion
Interest Rate, Fixed Portion
Interest Rate, Variable Portion
Both 504 and 7a
Only 7a
Only 504
N
Mean Median
N
Mean Median
N
Mean Median
375
213
240 5,079
92
84 4,332
233
240
558
131
89 32,916
129
88
0
N/A
N/A
375
5.93
6.95 5,079 10.29
10.5 4,332
7.05
7.1
558 10.24
10.25 32,916 10.48
10.5
0
N/A
N/A
Both 504 and 7a
Only 7a
Only 504
N
Mean Median
N
Mean Median
N
Mean Median
387
209
240 5,043
93
84 3,793
234
240
491
131
96 30,471
129
87
0
N/A
N/A
387
5.37
6.15 5,043 10.16
10.25 3,793
6.26
6.15
491 10.22
10.5 30,471 10.49
10.5
0
N/A
N/A
Both 504 and 7a
Only 7a
Only 504
N
Mean Median
N
Mean Median
N
Mean Median
446
208
240 6,449
100
84 3,846
235
240
481
129
84 30,226
132
95
0
N/A
N/A
446
5.13
5.95 6,449 9.61
9.75 3,846
6.36
6.3
481
9.63
9.75 30,226 9.94
10
0
N/A
N/A
Both 504 and 7a
Only 7a
Only 504
N
Mean Median
N
Mean Median
N
Mean Median
501
210
240 6,196
102
84 3,466
236
240
515
128
85 31,230
129
90
0
N/A
N/A
501
6.08
7.33 6,196 10.1
10 3,466
7.46
7.46
515 10.08
10.25 31,230 10.38
10.5
0
N/A
N/A
Both 504 and 7a
Only 7a
Only 504
N
Mean Median
N
Mean Median
N
Mean Median
533
208
240 5,701
91
84 3,418
236
240
462
114
84 29,442
124
84
0
N/A
N/A
533
5.54
6.34 5,701 9.85
10 3,418
6.52
6.35
462
9.73
10 29,442 10.01
10.25
0
N/A
N/A
Both 504 and 7a
Only 7a
Only 504
N
Mean Median
N
Mean Median
N
Mean Median
610
222
240 5,241
86
84 3,860
236
240
567
115
84 34,735
125
84
0
N/A
N/A
610
5.21
5.78 5,241
7.5
7.5 3,860
5.73
5.78
567
7.19
7 34,735
7.4
7.25
0
N/A
N/A
Both 504 and 7a
Only 7a
Only 504
N
Mean Median
N
Mean Median
N
Mean Median
673
224
240 6,568
86
84 4,255
236
240
614
106
84 46,608
113
84
0
N/A
N/A
673
4.34
4.75 6,568 6.55
6.75 4,255
4.74
4.76
614
6.69
6.5 46,608 7.29
7
0
N/A
N/A
Appendix G (continued)
Average Maturity Term and Interest Rate By Loan Type and Year, 1997-2005
2004
Term, Fixed Portion
Term, Variable Portion
Interest Rate, Fixed Portion
Interest Rate, Variable Portion
2005
Term, Fixed Portion
Term, Variable Portion
Interest Rate, Fixed Portion
Interest Rate, Variable Portion
Both 504 and 7a
Only 7a
Only 504
N
Mean Median
N
Mean Median
N
Mean Median
871
225
240 7,043
86
84 5,191
236
240
724
100
84 58,267
107
84
0
N/A
N/A
871
4.62
4.93 7,043 6.13
6.5 5,191
4.95
4.98
724
6.46
6.25 58,267 7.28
6.75
0
N/A
N/A
Both 504 and 7a
Only 7a
Only 504
N
Mean Median
N
Mean Median
N
Mean Median
1,102
230
240 4,860
89
84 5,783
237
240
673
94
84 66,696
101
84
0
N/A
N/A
1,102
4.62
4.86 4,860
6.9
7 5,783
4.84
4.86
673
7.5
7.25 66,696 8.37
8
0
N/A
N/A