The Connecticut Development Authority ("CDA") Is Your Friend!!!

The CDA is chalk full of good loan programs for Connecticut Companies. The CDA plays a very important role in the Connecticut banking landscape. Not only does it promote job growth or job retention in the State, it also provides a buffer with the wide swings in credit availability supplied by the Banks.

Now, you might think that with any quasi-government program comes with a mountain of red-tape - not with the CDA. The CDA has provided a streamlined, well publicised application process that reduces the time and frustrations felt by borrowers in the State. The application can be downloaded from its web site: CDA Application. But wait, there are very helpful CDA loan professionals ready to assist you with your situation. The CDA suggests calling the CDA loan offices prior to filling out the application (CDA Contact Info).

Before we go into some of the specific loan programs, here are some do's and don'ts with the CDA.

1. Which came first the chicken or the egg, or in this case the CDA or the Bank. Well, its a bit confusing with the CDA as well. The CDA's customers are the participating banks and lenders in the State, and not necessarily or directly the borrower. If you've been turned down by a bank or your astute enough to know that your loan request might cause your lender stress, then study the CDA programs and speak with a CDA loan officer. Get a green light (not a commitment, but an indication from the CDA that your request is in the realm of possibilities) from the CDA loan officer. Then start speaking with your existing lender or any prospective lenders about your loan request and the CDA. Having this knowledge would also so your bank that you mean business.
2. Have an understanding of the timing of the CDA and your lender. The CDA's Board of Directors meet once a month, usually on the 15th if that falls on a weekday. Applications usually have to be approved by the CDA management the last week of the prior month (at the latest). So if you have a tight time frame associated with your loan, then missing a key date might mean waiting another month before your get the funds.
3. Be confident on your projections in particular your employment projections. Remember, the CDA bases its support on your current and projected employment - among other things such as cash flow and collateral. Historically, the CDA has lent or guaranteed $10,000 to $20,000 per employee. The CDA will conduct annual audits on your employment levels, and any shortfalls that aren't easily explainable or extraordinary may result in penalties.
4. Provide the CDA the same information package that you provided your lender and remember your Lender has to fill out an application and provide certain information to the CDA as well. The lender has to fill out an application supporting its request for the CDA support and also has to provide the CDA its loan approval memo prior to the CDA going to its Board for final approval. So keeping tabs on your lender is important. Ask your loan officer if the CDA has the Bank's loan approval document. If he or she doesn't then you might be waiting another month.

The CDA is a great organization and its loan officers are experienced former bank lenders. So communication is important, and they are a good source of information and help. I'd like to now highlight one of the many lending programs offered by the CDA: The Participating Loan Program.

The Participating Loan Program essentially allows the CDA to participate with your lender in the loan structure provided to you - usually on the term or mortgage structure of your loan request. You continue to work with the lender and make your payments. The lender then distributes the CDA's piece of the payments to them. You are still working with one entity - your lender. There are no outside fees required as the CDA will participate with the lender's fees which you signed up for when you signed the commitment letter.

So its a marriage made in heaven - hopefully. The lender receives support to provide the needed loan to the customer (you), while not compromising its loan standards. The customer gets the money required to complete his or her business plan. The CDA provides support to the lender and thereby supports employment growth by the borrower. How does the CDA participation help the lender? The CDA participation is junior to the lender, which means that the CDA essentially has a second lien and the lender a first lien on the assets of the company.

If you find yourself looking for help to get the required money to grow your business and employee base, then the CDA is a great option to consider. If your banker doesn't mention it, then mention it to your banker. For more CDA programs, click here. Good Luck!!

I can't understand Bankers!!!! Here are 10 Ways to Creat A Smooth Loan Process.

Does this look like you during your last loan negotiation? Well it doesn't have to be. It is true that bankers have their own language - a language that sounds greek to most of us. What is an LTV? What is LIBOR and what happend to the Prime Rate? What are negative and affirmative covenants? AGHHH! Wow, I just wanted to borrow money for five years to add a key new machine that will allow me to grow my business over 5% over the next few years. Is all of this worth it?

Be patient, here are a few helpful hints to smooth the process and get to that loan closing and the new machine you wanted.

1. Be fully prepared when you approach your bank for a loan. Here are things you should bring with you to give to your banker: A Cash Sources and Uses table (in other words what will the money be used for), A cash flow projection showing how the loan will be paid back, A copy of your financial statements and/or tax returns on your business for the past three years, and have three business references for your lender to call (this is not required if you already have a relationship with a Bank).
2. Be specific as to your timing expectations, but also be realistic. Banks - by design - typically do not act quickly. Don't walk into a bank and tell the banker that you need the money in two days - its just won't happen. To frame your timing expectations, communicate to the banker that you intend to present this opportunity to several banks, and that among other items meeting your timing is an important factor in your selection process.
3. Hire a lawyer that has completed several commercial finance transactions. I can't stress this enough. The protections provided to consumer borrowers doesn't flow to the commercial borrower - as the regulatory bodies assume that the borrower is sophisticated enough and has hired the appropriate counsel to enter into the transaction. Why a commercial finance attorney? Well they understand the ins and outs of a loan agreement that could literally be over 100 pages. If you aren't careful, you could easily be facing a not so nice consequences as a result of not having another set of eyes looking at your loan aggreement.
4. Know that everything is negotiable. It's not just price and term of the loan, but pretty much everthing in the loan agreement can be and must be negotiated up front. The bank is entitled to get its money back, however, setting and understanding the behavior in certain situations of both the borrower and the bank upfront is key. Nothing ever goes as planned. So default rates, grace periods, use of insurance proceeds, events of default are all things that should be hammered out prior to signing the loan agreement.
5. Control the transaction fees. It is completely appropriate to get caps on the bank's fee for legal counsel, and other miscellanous fees. Also, use the competitve nature of commercial lending to your benefit by entertaining multiple loan proposals.
6. Understand and control the "Conditions Precedent to Funding" language in your loan proposal. Bank issue proposal and commitment letters subject to certain conditions being met. This can range from obtaining a real estate appraisal to enviromental due diligence. These items could take weeks to a month to complete, and once completed each bank has internal specialist to review these reports which adds to the time. Use the proposal letter stage to eliminate any contingencies, that way you move quickly from a commitment letter to loan documents.
7. If things go sideways get the Bank's decision maker in the same room with you. Generally, loan officers report to superiors who have increasing loan authority to make changes or get the loan back on track. So if things go sideways and your tired of the daily "I'll have to get that approved by my boss", call the loan officer's boss and settle this quickly. The loan officer's boss want's the loan volume, and doesn't have a lot of time to deal with these situations prompting quick, decisive decisions to be made. The loan officer isn't intemidated because you helped him or her move the loan through the bank's beauracracy.
8. I know you have to run a business, but always put the ball back in the Bank's court. Set aside daily time to answer any questions the banker might have, and quickly get any additional reports, financial statements or other information back to the banker. Email is a great time saver here. There comes a point, however, whereby you get overwhelmed about the amount of additional pieces of information being requested. This is a sign that the bank isn't to sure it can get the loan done, and doesn't understand your business. If you get to this point then go to Point #7 for guidance.
9. Check out the Bank's reputation, by talking with other business owners. You might gain insight into a bank's behavior and quirks. Also, you make the final choice on the lender, but consult with your lawyer about the reputation of the bank you are selecting. There are banks out there that will submit a proposal letter to seal the business without regard to understanding the business. They think that they will figure it out during the loan process. Accepting a proposal letter from a bank like this guarantees a lengthy frustrating, costly loan process.
10. It's never to late to switch horses! The numbers are still in your favor, there are more banks chasing a low amount of loan requests. The worst thing you can do is to give into process by entering into a long term agreement (read partner) with a bank just because they have beaten you down. Despite time and costs involved in switching, the cost of entering a potentially bad relationship is more costly. Another bank can be brought in at any time, and would even make concessions on upfront costs to get your business.