Second Stage Loan Program

Overview

Loan Guarantees for working capital for 2-7 yr old manufacturing, biotech and technology-oriented companies

Uses

Preference will be given to guarantees for working capital. Land, building, machinery and equipment are also eligible.

Funding

For first two years, 50 percent of outstanding principal up to $1 million. After first two years, 25 percent of outstanding principal amount.

Eligibility

Banks that do business within Pennsylvania

Terms

Program Guidelines to be approved and issued by Commonwealth Finance Authority (CFA). Visit dced.pa.gov to confirm issuance and see details.

How to Apply

Banks will be required to enroll in the program through DCED.

Purpose of Funding

  • Land & Building
  • Machinery & Equipment – Business
  • Working Capital

FAQs

What is the Second Stage Loan Program?

The Program is a loan guarantee to be administered by the Commonwealth Financing Authority (CFA). It will guarantee loans made by commercial lending institutions to life science, advanced technology or manufacturing businesses.

Why is this program being established?

Many early to mid-stage businesses in these industry sectors have significant working capital needs during their early operational years. Because of a lack of business history, banks are often reluctant to extend lines of credit or other working capital financing to early-stage businesses. The program’s purpose is to provide banks with an extra measure of security to encourage them to provide early-stage companies with working capital financing.

What does a bank have to do to participate in this program?

If a bank wants to take advantage of the loan guarantee program, it must apply to the CFA for enrollment in the program. The bank will provide information to the Authority about its lending operations, and how participation in the loan guarantee program will help it to better serve the business community within its service area. This will help it to better serve the business community within its service area. If the information provided to the Authority is acceptable, the bank will be enrolled in the program and the Authority will execute a master loan guarantee agreement in favor of the bank.

What happens after the bank enrolls in the program?

As the bank approves loans for eligible businesses, it will submit information about each business and the borrower to the CFA. If the loan meets the requirements set by the Authority, a loan guarantee certificate will be issued to the bank indicating that a portion of the bank’s loan will be guaranteed by the Authority.

Are all businesses eligible to participate in the loan guarantee program?

The guarantee program is only available to life science, advanced technology and manufacturing businesses that are at least two years old but less than eight years old.

What kind of loans can receive a guarantee?

Preference will be given to working capital financing provided to eligible businesses. However, financing for land, building, machinery and equipment will also be eligible to receive a guarantee under the program.

Will the Commonwealth Financing Authority guarantee the full amount of the loan to the business?

The program will guarantee up to half of the outstanding principal amount of the bank loan, not to exceed $1 million, for the first two years of the loan. Thereafter, the program will guarantee up to 25 percent of the outstanding principal amount of the loan for the remainder of the loan term or until the end of the seventh year of the loan term. No guarantee will be provided for a period longer than seven years. The guarantee will only cover loan principal; it will not cover any unpaid interest or fees.

What happens if the bank wants to collect on the guarantee?

The bank will be required to pursue all avenues of collection against the borrower and any other guarantors, including foreclosure on collateral and liquidation of assets. Only after the bank has exhausted all of its collection efforts may it seek a payment from the Authority under the guarantee.

How many guarantees can be awarded by the Commonwealth Financing Authority?

The program will provide guarantees in an aggregate amount not to exceed $50 million.

How can a business obtain a loan guarantee under the program?

The business must first check with its bank to see if the bank has enrolled in the program. If the bank is enrolled, and the business is a life science, advanced technology or manufacturing business that is at least two years old but less than eight years old and in need of working capital or other financing, the business should meet with loan officers at the bank to see if a loan backed by the Second Stage Loan Program is right for that business. If the bank approves a loan to the business, the bank will take the next steps to insure that it receives a loan guarantee certificate from the Authority to cover that loan.

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