For 29 years, EDC Finance Corporation — a not-for-profit economic development lending institution in Lancaster County and across Central Pennsylvania — has provided important capital financing options for hundreds of expanding businesses and farms.
Their projects help to create and retain important jobs and drive an overall economic ripple effect in the community.
But do the financing options provide an incentive for a project to move ahead or a credit enhancement to save a project that otherwise would not happen?
The answer is “yes” to both.
EDC Finance has assembled an array of designations and certifications that allow it to provide loans through federal and state resources such as U.S. Small Business Administration 504, Pennsylvania Industrial Development Authority, and Building PA financing, to name a few.
Other economic development organizations in the community — such as Community First Fund and Assets — provide numerous other complementary lending resources to make sure businesses of all sizes and longevity have access to capital options.
It is the job of the economic development lending professionals to match the project being described by the borrower or bank with the correct resource, based on eligibility, financing benefits, and ease of access.
In some cases, a company cannot obtain standard bank financing and does not have the capital to complete the project on its own. Economic development financing is a needed enhancement to make the project happen.
In other situations, businesses may be evaluating an opportunity and can use economic development lending as an incentive option to make a project happen sooner, in a targeted geographic location, or with an enhanced return on investment.
Long-term fixed interest rates, below market interest rates, subordinated lien positions, reduced equity levels, and overall access to capital are all key components provided to business owners in economic development financing options.
While one borrower may be attracted to an SBA 504 loan for its 20-year fixed-rate incentive, another borrower may be most interested in a 504 loan because the equity injection will be kept at a low 10 percent, allowing working capital to remain in the company.
Business can benefit from economic development financing options in different ways.
In tallying the 150-plus economic development loans EDC Finance supported between 2012 and 2015, the actual amount EDC Finance has lent is even at about $56 million to “incentive”-type projects and about $55 million to “enhancement”-type projects.
This level distribution of financing is a great benchmark, demonstrating that economic development financing balances motivating solid projects and taking some risk to drive projects ahead that otherwise would not get off the ground.
Business owners in Lancaster County have access to a diverse pool of banking interests along with a strong range of additional economic development financing options.
The county is also well-served by economic development professionals who can offer guidance to navigate the requirements of these important financing resources.
Whether in incentive or enhancement situations, economic development financing options work to move important projects forward and strengthen our community.
This column was written for Lancaster Newspapers by Lyle Hosler, our Vice President and Director of Finance. You can see the column here.