What is the purpose of the Business Equity Loan Program?
The Business Equity Loan program strives to stimulate small business investment, create and retain jobs, and provide access to capital to small businesses.
I read that the program works in participation with a loan from a bank. What does this mean?
The program is considered to be a “gap financing” tool. If a bank, while evaluating your loan request, identifies that although they are able to approve your loan, they are unable to approve it for the total dollar amount that you are requesting, they may ask the City to participate in the project to help fill the identified “gap.” Businesses that qualify for loans under this program receive a portion of their loan directly from the City, while the remaining portion of their loan comes from a bank of their choice.
Are there specific banks that the program works with?
The City can work with any private-sector bank of your choice.
Who makes the decision on whether a loan is approved or not?
There are two decision makers involved in the program.
The first is a bank. Every bank has its own underwriting criteria and evaluates loan requests at their sole discretion. If a bank, while evaluating your loan request, identifies that although they are able to approve your loan they are unable to approve it for the total dollar amount that you are requesting, they may ask the City to participate in the project to help fill the identified “gap.” A lender's decision to provide Bank loan funds is made at the sole discretion of the Bank.
The second decision maker is the City. Once a Bank has requested that the City participate in a project, the City will undertake and complete its own review of your loan request. The City, in its sole discretion, makes the decision on whether a loan is approved for participation in the program or not.
Is the program a “loan guaranty” program?
No, the program is not a “loan guaranty” program. Businesses that qualify for loans under this program receive a portion of their loan directly from the City, with the remaining portion of their loan comes from a bank of their choice. As such, businesses participating in the program typically end up with two loans: One from a bank and a second loan from the City. There are occasions where businesses may actually end up with three loans. When a business is proposing to purchase owner-occupied real estate from which to operate their business, they should consider the SBA’s 504 loan program. When the City participates in a 504 transaction, the business ends up with three separate loans: One from a bank, a second loan from the SBA, and a third and smaller loan from the City.
How good does a business’s credit have to be?
Businesses and their owner’s do not have to have “perfect credit” to qualify for a loan. Credit history is just one of the factors analyzed in making a loan decision. If weak credit history exists, it can be made up for with other possible strengths, such as additional collateral or a strong co-maker or personal guarantor. However, all bills should be up-to-date and personal and business taxes should be current. Participation in the program will not be available to entities that are currently in bankruptcy or that have a substantial number of collection accounts or judgments. In addition, and as with any loan program, industry experience, a viable business plan, personal or business equity, good payment histories and adequate collateral and/or co-makers are desirable
Does a business need collateral to obtain a loan?
Yes. Loans will generally need to be secured by adequate business and/or personal assets. The collateral required depends on the size of the loan and strength of other factors. Collateral could include, among other things, a house, real estate, cash, business equipment, accounts, and inventory.
How does the City fund this program? Are federal dollars used?
This program represents your local tax payer dollars at work. No state or federal funds are used in this program.
I’m thinking of starting a business, can I apply for a business loan even though I haven’t been in business before?
Yes, start-up businesses are eligible to apply for financing. Keep in mind, however, that most traditional lenders require businesses to be operating a minimum of 24 consecutive months before they can consider a loan request. For this reason, it is important that you are well-positioned and prepared to seek financing. Visit CharlotteBusinessResources.com
to learn more about helpful hints for startup financing.
What can a business use the loan proceeds for?
Businesses that qualify for financing can use City loan proceeds for virtually any viable business purpose, including working capital. There are, however, certain types of activities that we cannot participate in, such as purchasing speculative or investment real estate. Refer to the program guidelines for additional details on eligible business activities.
If my application is not approved, what can I do to receive additional consideration?
Whether you’re talking to the City about a loan, or you’re talking to a traditional bank, or both, you should always understand exactly why your business loan application was denied. This will help you to identify what changes you need to make to better position you and your business for subsequent approval. Ask specific questions, including what you can do to change the “no” to a “yes” for future consideration, and then consult with a professional to learn how to take appropriate steps to improve your position. Fortunately, Charlotte has a number of excellent resources that can help you assess your readiness for financing. Visit the Preparing for Financing
page at CharlotteBusinessResources.com to learn more.
My business is located outside of Charlotte. Can I apply for a loan?
No. The program is available to businesses headquartered and operating within targeted areas and industries in Charlotte. To learn about other funding opportunities for your business, visit CharlotteBusinessResources.com
How can a small business know if they’re ready to apply for a business loan?
Before an entrepreneur or business owner approaches a lender for financing they should make sure that they are ready to do so. Whether you’re looking for start-up capital or funds to keep your business operating, it's important to understand what lenders are looking for. In addition, business owners should have a good grasp of their financial condition at all times and be able to clearly articulate the details of their business including their financial condition, realistic projections, and financing needs. Businesses are therefore strongly encouraged to seek professional assistance
to help them assess their readiness to seek financing before filling out an application or making any decision.
What are the benefits of seeking professional advice before applying for a loan?
Seeking professional advice not only helps a business assess its financial condition and readiness to seek financing, but can also help the business develop plans, goals and strategies to help it be better positioned for long-term success. Businesses that are not currently prepared to seek financing can also learn how to take steps to help them progress towards future credit readiness. The benefits of this type of assistance generally enhances the likelihood of long-term success of a business and, as such, the cost of technical assistance should be considered part of the normal cost of doing business. Fortunately, there are a number of excellent non-profit resources available
in our community that provide services at little-or no-cost.