Low-Interest Loan Pool

Financing Programs Available in Harrison County

Business and industry locating or expanding in Harrison County may choose from a variety of financing alternatives which supplement conventional source of funding. The Harrison County Development Commission can provide assistance in coordinating the local, state and federal programs available.

1. MISSISSIPPI FINANCING PROGRAMS

   The Mississippi Business Finance Corporation (MBFC), an entity of the Mississippi Development Authority (MDA), administers a variety of finance programs designed to assist businesses in locating or expanding in the State. MBFC provides companies an opportunity to review all financial information through one source. MBFC works with other public entities and the private sector to coordinate efforts to stimulate other commercial and industrial development. The following information is provided as an overview of the finance programs available through MBFC and MDA.

   1. Loan Guaranty Program

      This program provides guarantees to private lenders on loans made to small businesses. Loan proceeds may be used for all project costs including fixed assets, working capital, start-up costs, rental payments, interest expense during construction, and professional fees. The maximum guarantee is 75% of the total loan or $375,000, whichever is less, the loan is restricted to a maximum term of twenty years with an interest rate limited to the current legal rate. The borrower must have equity in the business, no matter how small, and pay a guaranty fee of 2% of the guaranteed portion of the loan The lender will require the necessary collateral to secure the loan. Loans cannot exceed 90% of the fair market value of this collateral.

   2. 504 Loan Program

      The 504 Loan Program allows MDPC, as a certified development company through the Small Business Administration (SBA), to coordinate funding through private lenders and SBA to finance projects for eligible small businesses as defined by SIBA. As much as 90% of a total project may be financed under this program, requiring owner equity of as little as 10%. The maximum loan amount is usually $l,850,000, with the SBA portion not exceeding $750,000 or 40%, whichever is less. The structure of financial package, while somewhat flexible is typically as follows:

      1. Participating bank's loan of 50% on the bank's terms and interest rate, with the bank taking a first mortgage position.
      2. SBA guaranteed debenture of 40%, with interest rates comparable to long-term U. S. Treasuries fixed for ten or twenty years.
      3. Small business concern equity of 10%.

      Proceeds may be used for fixed assets, renovations, machinery, equipment, leasehold improvements, and professional fees.

   3. Minority Business Enterprise Loan Program

      This program is designed for the purpose of making grants or loans to qualified entities to establish revolving loan funds to assist in financing minority economic development. Currently, the following entities have met MBFC criteria for participation in the program: Mississippi Planning and Development Districts (PDDs), Small Business Investment Corporations, bank-based community development corporations, the Recruitment and Training Program, Inc., the City of Jackson Business Development Loan Fund, the East Mississippi Development Corporation, and the West Jackson Community Development Corporation. Loans or grants to any qualified entity shall be matched in an equal amount by the qualified entity, except PDDs, which are required to match only the amount in excess of $100,000. A minority business means a socially and economically disadvantaged small business organized for profit, performing a commercially useful function which is owned and controlled by one or more minorities, or a minority business which is certified by MBFC. Socially and economically disadvantaged has the same meaning as described in the Small Business Act (15 U.S.C.S. Section 637[a]) and shall include women. If the minority business is a proprietorship, the borrower must be a resident of the State. If the business is a corporation or partnership, at least 50% of the owners must be residents. In either case, ownership must be 60%. The maximum MBFC loan amount to any one borrower is $250,000 or 25% of the total project cost, whichever is less. Maximum terms are seven years for working capital, ten years for machinery and equipment, and fifteen years for land and buildings. The maximum interest rate which may be charged on the MBFC portion of the loan is 2% above the Federal Reserve Discount Rate, and the minimum is 2% below.

   4. Industrial Development Revenue Bond Program

      The Industrial Development Revenue Bond Program reduces the interest costs of financing projects for companies through the issuance of both taxable and tax-exempt bonds. Additionally, ad valorem and sales tax exemptions arc granted in conjunction with this type of public financing. The bonds must be secured by an irrevocable, direct-pay letter of credit or other credit enhancement acceptable to MBFC. The proceeds of a bond issue may be used for the acquisition and construction of real property, machinery and equipment, capitalized interest, reserve funds, an a limited amount of the cost of issuance in accordance with provisions of the Internal Revenue Code. Although there is no restriction on the amount of taxable debt which may be incurred, there is a $10 million cap on tax-exempt financing. The maximum term of a bond issue will be equal to 120% of the average life of the financed assets or thirty years, whichever is less. The effective rate of a loan to a company will be determined by using a combination of the interest rate on the bonds, the cost of issuance, and any applicable fees.

   5. Small Enterprise Development Program

      The issuance of State General Obligation Bonds provides funds for manufacturing and processing companies to finance fixed assets, including land, buildings, new machinery, and new equipment at below market interest rates for terms of up to fifteen years. Although a company may qualify for more than one loan under this program, the aggregate amount loaned to any company cannot exceed $2 million. Interest rates on these loans are equal to the net interest rate on the bonds issued by the State plus 1/8 of 1%. A proposed project must create a minimum of ten jobs, and loans cannot exceed 90% of the market value of the financed assets. Companies participating in the program will be required to obtain a letter of credit guaranteeing the loan.

   6. Rural Economic Development Assistance Program

      Companies financing projects through the Small Enterprise Development or Industrial Revenue Bond Programs which are administered by MBFC are eligible to participate in the Rural Economic Development Assistance Program. The program allows these companies to receive credits on Mississippi corporate income taxes and assess new employees job development fees to offset annual debt service on the bonds. Mississippi corporate income tax credits will be granted at the end of a company's fiscal year and will be based on the Mississippi tax liability at that time. The amount a company will be required to pay in Mississippi income tax will be reduced by the amount of debt service paid during the tax year. Employees whose gross wages are $5.00 or more per hour may be assessed a certain percentage of gross wages per hour up to a maximum of 6%. These employees will receive credits on their Mississippi personal income taxes in an amount equal to the assessment. The total amount of tax credits and assessments may not exceed the annual debt service on the bond issue. Only employees whose jobs are created as a direct result of the project may be assessed.

   7. Beginning Farmer Loan Program

      This program is designed to assist individuals who have farming experience in the acquisition of farms. Farm is defined as an enterprise engaged in the cultivation of land for the production of agricultural crops; the raising of poultry; the production of eggs, milk, fruit or other horticultural crops; the production of livestock; aquaculture; hydroponics; or other activities designated by MBFC. The maximum aggregate loan amount to any beginning farmer is $250,000. Based on provisions in the Internal Revenue Code, the interest paid to a lender on a Beginning Farmer Loan is tax-exempt, thereby lowering the financing cost of the purchase. Persons participating in the program must not have previously owned farmland in excess of 15% of the median size farm in the county, and the fair market value of any farm previously owned must not have exceeded $125,000. Certain other restrictions pertaining to inter-familial transactions apply.

   8. Mississippi Business Investment Act Program

      Through the issuance of State General Obligation Bonds, low interest loans are provided to counties or incorporated cities or towns to finance improvements which complement investments by private companies. To be eligible for financing under this program, a private company must invest at least $3.00 for every $1.00 it receives in state assistance and must create and maintain new jobs as required by statute and MDA. The project to be financed must be necessary for the operation of the company, and it must be determined that other financing options are unavailable. The minimum loan amount for a project is generally limited to $500,000 for a term of ten years or the estimated useful life of the project to be financed, whichever is greater. Rates of interest are set by MDA on a scale based on the number and quality of jobs created. Loan proceeds may be used for the acquisition, expansion, or improvement of land, buildings, and infrastructure.

   9. Airport Revitalization Revolving Loan Program

      Funds from the issuance of state bonds provide loans to airport authorities for the construction and/or improvement of airport facilities which will be used in the promotion of Latin American trade markets. Latin American trade markets are considered to be markets established with Mexico, Central America, and South America. Airport Loan funds may be used for 100% project financing. The maximum loan amount for any one project is $500,000, with a term of up to ten years and an interest rate of 4% per annum.

   10. Mississippi Port Revitalization Revolving Loan Program

       The Mississippi Port Revitalization Revolving Loan Program is designed for making loans to state, county or municipal port authorities for the improvement of port facilities. Funding for loans is derived from the issuance of state bonds. The maximum amount which may be loaned to finance any one project is $500,000, with a term of up to ten years and an interest rate of 4% per annum. Port Loan funds may be used for 100% financing.

   11. Development Infrastructure Loan Program

       Through the issuance of state bonds, counties or municipalities may receive loans under the Development Infrastructure Loan Program to finance small infrastructure projects. Counties and municipalities are encouraged to use these loans in connection with other state and federal programs. Eligible projects must be directly related to the construction, renovation, or expansion of manufacturing, processing, or distribution facilities. A private match of at least $3.00 for every $1.00 of Development Infrastructure assistance is required. The maximum amount which may be loaned for any one project is $250,000. The loan shall be payable in a maximum of ten annual installments of principal and interest. The rate of interest on the loan shall be set by MDA on the date the application is approved and will be based on the Federal Reserve Discount Rate for that date.

   12. Agribusiness Enterprise Loan Program

       Designed to encourage the extension of conventional financing by lending institutions, the Agribusiness Enterprise loan Program provides interest-free loans to agribusinesses. An eligible agribusiness is any aquaculture; horticulture; or agriculture-related industrial, manufacturing, research and development, or processing enterprise. The maximum Agribusiness Loan is 20% of the total project cost or $200,000, whichever is less. Proceeds may be used to finance buildings and equipment and for costs associated with the purchase of land (appraisals, title searches, etc.). However, proceeds cannot be used to purchase land. All loans must be guaranteed by either the Farmers Home Administration, the Small Business Administration, or a direct lender.

   13. Emerging Crop Program

       This program was created for the purpose of making loans to qualified borrowers to pay interest on loans made by lenders to finance non-land capital costs of establishing production of emerging crops. An emerging crop is any new non- traditional plant or animal crop for which consumers have a growing demand and which has a development time of no more than five years. The maximum amount of an interest loan for the benefit of any one borrower shall be $50,000. During the period that MDA pays interest on a loan, the maximum rate charged by a lender shall be 4% per annum above the New York Prime Rate.

   14. Mississippi Small Business Assistance Program

       The Mississippi Small Business Assistance Program was established for the purpose of making grants to qualified entities to establish revolving loan funds to assist in financing small businesses. Qualified entities must be approved MBFC and are defined as Mississippi Planning and Development Districts (PDDs), Small Business Investment Corporations, Community Development Corporations, and other appropriate entities. Initial grant funding for this program is $12 million. Each PDD may apply for up to $1 million and other qualified entities may apply for up to $500,000 of these initial funds. At least 60% of the loans made by a qualified entity from initial grant funds must be used in connection with the expansion of existing businesses. A small business is defined as any for-profit commercial enterprise with fewer than 100 full time employees; less than $2 million in net worth; or less than $350,000 in net annual profit, after taxes, during two of the last three years. A company meeting any of the above criteria is eligible to seek assistance under this program. No small business shall receive funding under this program in excess of $100,000 or more than 50% of the total project cost. Maximum terms of the loans shall be fifteen years for land and buildings, ten years for equipment, five years for working capital, and three years for inventory. Interest rates cannot be less than 5% per annum or more than 2% above the rate of any bonds issued to provide Small Business Assistance funds plus servicing fees. Entities must apply to MBFC for admission into the program, and small businesses should contact a qualified entity in their area for application forms and loan information.

   15. Mississippi Major Economic Impact Authority

       Unique in the nation, this program allows the State, through the issuance of general obligation bonds, to assist local communities in meeting the development requirements inherent in large capital projects, thereby generating an investment in the quality of life in such communities. Funds may be used to improve transportation, education, recreation, and medical facilities within sixty-five miles of a project site. Certain other infrastructure needs are also eligible for financing. Major Impact Authority projects can be new projects of expansions of existing facilities which have a minimum initial investment of $300 million by the private sector or the U. S. government. Eligible projects include industrial commercial projects, research and development, warehousing, distribution, transportation, processing, mining establishments, U.S. government projects, and tourism facilities.

   16. Economic Development Highway Program

       The Economic Development Highway Program assists political subdivisions with the construction or improvement of highway projects which encourage high economic benefit projects to locate in a specific area. A high economic benefit project is any new private investment of $50 million or more by a company in land, buildings, or depreciable fixed assets, or an investment of at least $20 million by a company which has state wide capital investments of at least $1 billion in the aggregate. A private company engaged in agriculture, aquaculture, mariculture, processing, distribution, warehousing, manufacturing, research and development, or any air transportation and maintenance facility, regional shopping mall, large hotel, resort, movie industry studio, or the federal government with a project meeting the high economic benefit criteria is eligible for assistance. The highway must be necessary to ensure adequate and appropriate access to the proposed project.

   17. Mississippi Access Road Program

       Under this program, MDA and the Mississippi Department of Transportation assist local entities in the construction of links of highways or roads necessary to connect new and existing industrial sites to adequate road facilities.

   18. Energy Investment Program

       Through the Energy Investment Program, MDA provides financial assistance to individuals, partnerships, or corporations, making energy conserving capital improvements or designing and developing energy conservation processes. This program offers low interest loans of up to $200,000, with maximum terms of seven years. Each loan may be secured by a lien on the measures installed, other business assets, personal guarantees of the owners or officers, performance bonds, or a combination of these.

2. LOCAL GOVERNMENT FINANCING PROGRAMS
   
   1. Local Industrial Development Revenue Bonds

      Local political entities in Mississippi, including counties, supervisors' districts, incorporated cities, and towns, have the authority to issue tax-exempt and taxable industrial development revenue bonds to finance new or expanding industrial enterprises. There is no election approval required unless 20% or more of the entity's electors object to the bond issuance in writing. Ownership of a bond-financed facility is retained by the issuing political entity, which leases it to a company for rent sufficient to pay the annual principal and interest on bonds. Industrial development revenue bonds can finance up to 100% of total project costs, including land, buildings, fixtures, new equipment, new machinery, and professional fees. Facilities financed by such bonds are allowed up to a ten-year property tax exemption, in addition to being exempt from most sales and use taxes on project related purchases during construction.

   2. General Obligation Bonds

      Local political entities have the authority to issue general obligation bonds for the purpose of acquiring sites and constructing facilities for lease to new or expanding industries with rentals sufficient to amortize the debt service on the bonds. General obligation bonds carry the full faith and credit of the issuing political entity. As title to the property remains with the political entity issuing the bonds, no taxes, except school taxes, are assessed on the improvements made with the proceeds of such bonds. An agreement is negotiated between the industry and the political entity covering the details of the issuance of the bonds and the lease.

3. FEDERAL FINANCING PROGRAMS
   
   1. Small Business Administration

      The Small Business Administration (SBA) administers the following programs for small businesses, in addition to the 504 Loan Program discussed in Section I.

      1. Loan Guarantees
         The SBA may guarantee up to 90% of a bank loan with the loan not to exceed $155,000, and may guarantee 85% of loans in excess of $155,000 not to exceed $750,000.
         
      2. Direct Loans
         If a business cannot obtain private financing, SBA is permitted to make direct loans to qualified businesses. However, SBA funds are very limited for direct loans, and loans are limited to $150,000 per applicant.
         
      3. Participation Loans
         The SBA will participate with banks on loans. SBA will finance up to 75% of the project to a maximum of $150,000, with the bank financing the remaining funds.
         
      4. Counseling
         The SBA provides counseling and training for new or prospective businesses.
         
      5. Small Business Investment Companies
         The SBA may provide seed money for the formation of Small Business Investment Companies (SBICs), which are for-profit venture investment groups that provide equity capital, long-term loans, and management assistance to qualified small businesses. A SBIC investment is generally subordinated to a bank or other institutional financing. Usually, the SBIC investment is a minority position in the business. However, there are no SBICs currently operating in Mississippi.
         
   2. Department of Housing and Urban Development

      The Department of Housing and Urban Development (HUD) sponsors the Community Development Block Grant (CDBG) Program. This program provides funds to communities which can be used for: 1) loans to private businesses, or 2) public improvements to support private developments. All cities and communities in Mississippi are eligible for CDBG funding. Jackson, Biloxi, Gulfport, Moss Point, and Pascagoula are entitlement cities and receive their funding directly from HUD; all other cities and communities in Mississippi may apply (to the MDA) for CDBG funds on behalf of local businesses. To qualify for CDBG funds, a project must create or retain jobs and must benefit low and moderate income individuals.

   3. Farmers Home Administration

      The Farmers Home Administration (FHA) provides assistance in the form of loan guarantees to businesses in rural areas or in cities with a population of 50,000 or less. The FHA may not make direct loans. The FHA may guarantee up to 90% of an eligible business loan.

   4. Economic Development Administration

      The Economic Development Administration's Business Development Assistance Program provides two types of assistance to qualified businesses or other organizations: 1) loan guarantees, and 2) grants. All of the counties in Mississippi are eligible for EDA assistance except for a portion of Rankin County. The EDA may guarantee up to 80% of a private loan. It may provide grants for up to 80% of a project's costs, provided that a community has received a commitment from an industry to locate and the community is providing from 20% to 50% matching funds. For both the loan guarantees and the grants, the amount guaranteed or granted is limited to a maximum of $10,000 per job created.

To stimulate additional growth in downtown areas, in early 1998, the cities of Biloxi and Gulfport both initiated tax incentive programs for the renovation and restoration of historic buildings in designated areas of their Central Business Districts (CBD). The Harrison County Board of Supervisors has also enacted a similar program.