VSBFA Funding

The Virginia Small Business Financing Authority was created in 1984 to assist small businesses in overcoming obstacles in obtaining financing. VSBFA promotes the growth of Virginia small businesses by providing programs to assist in obtaining financing they would otherwise be unable to acquire. This is accomplished in three different ways, depending on which of the seven different programs is used. VSBFA issues industrial development bonds, encourages banks to make loans, and, in some cases, makes direct loans to small businesses. Here are the seven primary programs administered by this organization:

1. Industrial Development Bonds (IDBs) and the Umbrella IDB Program
   VSBFA has the authority to issues tax-exempt and taxable revenue bonds statewide to provide creditworthy businesses with access to long-term, fixed asset financing at favorable interest rates. These funds may NOT be used for providing a small business with working capital funds. Tax-exempt IDBs may be used to finance new or expand existing manufacturing facilities and exempt projects, such as solid waste disposal facilities. The Umbrella IDB Program provides a cost-efficient means for businesses to sell their bonds in the public bond market.
2. Virginia Economic Development Revolving Loan Fund
   Financing from this fund is available to manufacturing and other industries which derive 50 percent or more of their sales outside Virginia. The program is designed to fill the financing gap between private debt financing and private equity. Funds are provided for fixed asset financing to new and expanding industries that are creating new jobs or retaining “at risk” jobs in Virginia. Funds may NOT be used to refinance existing debt or for working capital. The maximum loan available for each project is $700,000. The maximum amount of financing available is 50 percent of the total project.
3. Virginia Defense Conversion Revolving Loan Fund
   Financing from this fund is available to companies adversely affected by defense reductions. To be eligible, a company must have at least 15 percent of their operations in defense-related activities. The fund offers loans to companies to assist in creating new jobs or retaining “at risk” jobs in the Commonwealth. It provides fixed asset and working capital financing for defense dependent industries making the transition to commercial products and services. Loans may NOT be used to refinance existing debt. The fund can be used where financing from private sector lenders is unavailable or not affordable. The maximum loan available is $700,000. The maximum amount of financing available is 50 percent of the total project.
4. Loan Guaranty Program
   This program is designed to reduce the risk to banks in making loans, thereby, increasing the availability of short-term capital to small businesses. The guarantee is up to $250,000 or 50 percent of the loan, whichever is less. Loans eligible for the guarantee are: (1) one-year credit lines to finance accounts receivable and/or inventory; (2) short-term (three years maximum) loans to finance working capital or fixed asset purchases. Loans may NOT be used to refinance existing debt. There is a non-refundable application fee and an annual guarantee fee.
5. Virginia Capital Access Program
   VCAP provides a form of loan portfolio insurance for participating banks through special loan loss reserve accounts which are funded by enrollment premiums paid by the bank/borrower and matched by VSBFA. This allows the banks to exceed their normal risk thresholds for commercial loans of all types and, thereby, accommodate a broader array of loan requests. Funds are available for working capital, expansion, equipment, and most other business needs. The maximum size of outstanding loan amount(s) under the program is $250,000. The term of the loan is determined by the bank. The enrollment premium is typically between three percent and seven percent of the loan amount and is non-refundable.
6. Export Financing Assistance Program
   This program assists qualified businesses with obtaining loan guarantees for short-term export financing. Working in partnership with the Export-Import Bank (EXIMBANK) and the SBA, VSBFA assists businesses with accessing federal export loan guarantees by packaging and submitting applications according to federal guidelines. Once an approval is obtained, VSBFA can assist the business in locating a bank to fund the transaction. If federal guarantees are not available, state support of the export transaction may be available for credit worthy exporters through the Virginia Export Loan Guarantee Fund. This fund provides a guarantee of up to $750,000 or 90 percent (whichever is less) of a bank loan for export working capital. In addition, VSBFA administers an Eximbank Export Credit Insurance Umbrella Policy to assist businesses in obtaining insurance on their foreign receivable. The policy offers 95 percent commercial coverage and 100 percent political coverage with no deductible.
7. Child Day Care Financing Program
   Direct loans of $1,500 to $25,000 can be made to child day care providers for quality enhancement projects or to meet or maintain child care standards under this program. Eligible loan uses include infant care equipment or equipment needed to care for children with special needs, playground improvements and installation of resilient surfaces, transportation vehicles, and upgrades or minor renovations to kitchens, bathrooms, and plumbing and electrical systems. These installment loans have interest rates fixed at three percent BELOW prime and have terms of up to 10 years. Loans under this program may NOT be used for building construction, to refinance existing debt, or for working capital. Family Home Providers are limited to a loan amount of up to $1,500, terms of up to three years, and funds may NOT be used for transportation vehicles.