AboutState Loan Guarantee Program

What is Valley Small Business Development Corporation?

Valley Small Business Development Corporation (VALLEY) was incorporated in 1981 as a nonprofit, public benefit, small business development corporation under section 14000 of the California Corporations Code. As such, it is authorized to make direct loans to farmers and small businesses, as well as to guarantee small businesses and family farms with increased access to capital through both such financing mechanisms. To further insure the successful completion of this mission, Valley collaborates with a wide variety of public and private financing institutions. Valley focuses all of the activities on the overall Service Area, which currently includes the following twelve Counties in the Central San Joaquin Valley: Fresno, Kern, Kings, Madera, Mariposa, Merced, Stanislaus, Tulare, Tuolumne, Inyo, Mono, and Sacramento. However, with the state loan guarantee program, Valley’s footprint is statewide.
Valley’s office conducts a variety of financing related activities over the past forty four years that focus on providing significant community and economic development benefits to the residents, family farmers, small businesses, Enterprise/Empowerment Zones, HUB Zones, and “Champion Communities” within the San Joaquin Valley.

What is the difference between the state loan guarantee program and your direct financing programs?

The State Small Business Loan Guarantee Program provides up to an 80% loan guarantee to a participating commercial lending institution, Certified Development Corporation, and/or a credit union. The loan guarantee has a maximum of $2,500,000 to guarantee either a line of credit or term loan facility to promote small business and small farm enterprises. A special emphasis is placed on assistance to those small businesses that will create significant new job opportunities.
Other Direct Loan Programs are listed separately on this website. In most cases, Valley acts as an intermediary for other financial institutions, government agencies, or private lenders to lend funds to promote small business and small farm enterprises.

A Valley loan officer will review your application and determine which program best suits your needs.

What is a Financial Development Corporation?

The Financial Development Corporations (“FDC’s”) were created to act as an intermediary between the state of California and the small business borrowers to provide access to capital. Most FDC’s are incorporated as a nonprofit, public benefit, small business development corporations under section 14000 of the California Corporations Code. As such, they are authorized to make direct loans to farmers and small businesses in their individual service areas.

What are the geographical regions served by the state loan guarantee program?

The FDC’s have specific geographical areas that serve all of California. However, a small business borrower is not tied to a specific FDC. Each FDC can offer loan guarantees to any commercial lender, CDFI, or credit union in the state, regardless of geographical location.

What is the maximum loan to value that a lender will loan on real estate loans?

Primarily, real estate loans are based on cash flow and the applicant’s ability to repay the loan. The actual lending policies for this program are conditioned upon the individual participating lender.

Isn’t it hard to get a loan guarantee?

No, relative to the required paperwork, it is not any different than obtaining a loan from any other institutions. Typically, the small business borrower has the relationship with the participating lender; the participating lender has the relationship with the FDC. Each FDC will request copies of the information prepared for the bank’s credit approval, which can be transmitted electronically. Generally, both the lender and the FDC have the same requirements.

What are the interest rates for the loan guarantee program?

The interest rates are determined by the lender. The actual interest rates are set by the individual lender. The FDC’s do not set the interest rates.

Can I get a State Loan Guarantee if i have no down payment and no collateral to offer in support of the loan?

Generally, the answer would be no. The FDC’s have a contractual commitment to the state of California to be a good steward of the state’s trust funds. Therefore, it is incumbent that the small business borrower has some “skin in the game” in order to successfully obtain a loan guarantee.

Who holds the collateral for the loan guarantee – the lender or the FDC?

The lender will hold all collateral for the loan from the borrower. The FDC has a loan guarantee with the lender which promises to pay up to 80% of any loss that might be sustained by the bank in the event of a default.

What is the difference between SBA and the State Loan Guarantee Program?

The Small Business Administration (“SBA”) offers a variety of loan programs including a loan guarantee component similar to the state loan guarantee program. However, it is administered by the Federal government. The state loan guarantee program has similar feature to the SBA loan guarantees but in many cases, there is expedited loan processing times with the state loan guarantee. Also, the major difference for the lenders is that the SBA loan guarantees can be sold on the secondary market; there is no secondary re-sale market for the state loan guarantees at this time.

What if my lender will not participate in the state loan guarantee program?

As a small business borrower, you have the option to look for a lender that will participate in the SSBCI state loan guarantee program. The FDC’s can work with any commercial lender, CDFI or credit union. You can contact the individual FDC’s in your area to see what local banks are participating in the program.