Government Lending Programs

Federal, state, and local governments administer numerous lending programs. Many of these programs are intended to enable private capital providers to participate in riskier lending, mainly to smaller companies. These programs typically involve government lending guarantees rather than direct loans. With assurances for most of the loan principal, banks and other lending sources are enticed to participate in the loan process.

Borrowers are motivated to seek government lending programs for three reasons.

1. Most important, they cannot access the required capital without using the particular lending program. This is almost always the case with the guarantee programs of the Small Business Administration (SBA).

2. A government loan program may represent the cheapest source of capital. Industrial revenue bonds, for example, are the least expensive type of institutional capital.

3. The program may better fit their needs than other programs. This is often the case with the Certified Development Company 504 program.

Only national government lending programs are described in this chapter. Readers can contact the appropriate state and local economic resource centers for help with these programs. These loan programs are reviewed here:

  • Industrial Revenue Bonds
  • Business and Industry Loans, from the U.S. Department of Agriculture
  • Small Business Administration Programs, such as the 7(a) loan guaranty program, the Certified Development Company 504 program, ...

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