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ECONOMIC DEVELOPMENT ADMINISTRATION (EDA) 5/89 BUSINESS LOAN GUARANTEE PROGRAM PROGRAM GOALS Loan guarantees are used to provide financial assistance to firms that create or retain permanent jobs through the expansion, estab- lishment, or retention of plants in distressed areas. TYPE OF ASSISTANCE EDA may guarantee up to 80 percent of the unpaid balance of business loans made by private lenders to private sector borrowers for the acquisition of fixed assets or for working capital. Inves- tors must provide 15 to 25 percent of project funding, and lenders must be at risk for the non-guaranteed balance of the loan. ELIGIBILITY REQUIREMENTS To qualify, businesses must be located in an EDA-designated redevel- opment area eRA) or economic development center. Businesses located in other areas of an EDA-designated economic development district also are eligible if the project will benefit residents of an RA within the district. Assistance is limited to cases where financial aid is not available from other sources on terms and conditions that will permit accomplishment of the project's economic development objectives. Projects must be approved by the State and local jurisdictions in which they are to be located and must be consistent with an approved overall economic development program. Borrowers must meet statutory requirements and be creditworthy. FUNDING LEVELS (000) FY 87: $150,000,000 Range of loans guaranteed: $500,000 to $10,000,000+ FY 88: $150,000,000 Interest rates: 1.5 to 2.5 percent above lender's prime rate. FY 89: $150,000,000 Maturity: Working capital loans: 5-7 years Fixed asset loans: average life of the asset(s) financed. APPLICATION PROCESS Eligible borrowers should identify a willing lender. The lender (EDA's applicant for a guarantee) should contact the Economic Development Representative for the area and/or the assigned EDA Regional Office. A preliminary review of the project proposal will be conducted and, if the project warrants, an application for a loan guarantee will be issued to the lender. Average time from submis- sion of an application to a final funding decision is four to six months, depending on the complexity of the project and the availá- bility of credit data. Complete program information appears annually i n t h.e Fed era 1 R e g i s t e r .