Business Financing Options

The following are business financing options that are available through Pioneer Country Development, Inc.  They are not the only options available, but represent some of the more popular SBA programs.

SBA 504 Loans are for financing fixed assets, including real estate, buildings, machinery and equipment with a life of 10 years or more.  The typical loan structure is for the bank to lend 50% of the project cost, Small Business Administration (SBA) Debentures financing 35 to 40% and the Small Business Concern investing 10 to 15%.  The advantage to the small business is they get a low fixed rate of interest spread over a 10 or 20 year period on the portion SBA finances with the debentures.  The advantage for a bank is they only finance 50% of the project and get a first mortgage and first lien position on all collateral, thus greatly reducing their financial risk.  The 504 loan is designed for total project cost of $100,000 or more.

Example:  Total real estate and building cost of $500,000.

Bank loan                                          $250,000 (first mortgage in that amount)
SBA Debenture                                 $200,000 (second mortgage behind the bank)
Small Business Concern                     $  50,000

SBA 7a Loans are used for wide variety of projects including business furniture & fixtures, equipment, inventory and working capital.  They may also be used in combination with the 504 loans.  The 7a loans are made by the bank and partially guaranteed by the Small Business Administration.  The guarantee to the bank usually range from 70 to 80%.  This percentage applies to the current loan balance until it is paid off, using a given amortization schedule.

Example:  Total business loan needed for inventory and equipment of $200,000.

Bank loan for $200,000 (SBA guarantees $160,000 and the banks risk is $40,000.  If collateral is liquidated, proceeds are split on a percentage basis).

LOWDOC Loan is very similar to the 7a loan program, except it is only for loans of $150,000 or smaller.  The real advantage to this program is the application is only one page front and back.  The application is actually faxed to Fresno, Calif. and an answer can be expected in as little as three days.

Other SBA programs include Disaster Loan & Economic Injury Loan, Women’s Prequalification Loan, and an Export Loan.

Other business financing sources include:

  • Northwest Kansas Revolving Loan Fund.  This is a fairly flexible loan program and is mainly used to help leverage other loan funds.  (Filling a financing gap)

  • The Midwest Energy Revolving Loan Fund is available to assist new and existing businesses.  Please contact:
    Midwest Energy
    1330 Canterbury
    Hays, Ks 676601
  • The Prairie Land Electric Revolving Loan Fund can assist in an existing and new business.  The Revolving Loan Fund Application can be obtained by contacting the Norton Prairie Land Electric Office.
    Prairie Land Electric
    c/o Kirk Girard
    1101 W Hwy 36
    Norton , KS 67654
  • Community Development Block Grants.  These are actually low interest loans to businesses with the possibility of interest-only payments for the first 18 months.  One job must be created for every $35,000 and matching funds are required.

  • Business and Industry Loans through Rural Development.  This program is much the same as the SBA 7a loan program except the loan limit is much higher at $10 million.

  • Industrial Revenue Bonds.  Geared toward the larger manufacturers with interest rates varying according to the financial strength of the business.  Certain tax credits are possible with IRB financing.

Rooks County Economic Development also has available an E-Community Loan Fund for small business startups.  This loan can be used for a variety of expenses needed to start your own small business (1-5 employees).  The amount of money available in this pool is subject to the number of loans already made and may not be available for certain periods of time.  For more information, contact the Rooks County Economic Development Office at 785-425-6881.