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Philadelphia Commercial Development Corporation (PCDC)
1315 Walnut Street, Suite 500
Philadelphia, PA 19107-4706
215.790.1401PCDC offers a number of resources to small businesses in the SSWBA and along South Street West corridor, including Small Business Loan Programs. Various lending options are available through PCDC, including the MicroLoan fund and the Small Business Revolving Loan Fund.
PCDC MicroLoan Fund. (For additional information, contact Alvin Hill at 215-790-1401.) Mr. Hill oversees the Intermediary MicroLoan Fund that PCDC administers for the Small Business Administration to provide loans for start-ups and micro-enterprises. Eligibility includes any start-up or expanding business in the City of Philadelphia that was not successful in raising capital through conventional sources. Generally, some type of collateral is required on the part of the business owner; however, there is no set percentage of the loan that the business owner must inject.
Loans range in size from $5,000 to $35,000, targeted to borrowers who are for-profit businesses engaged in the retailing, manufacturing, and services sectors. The maximum term of the loans is 6 years, at a fixed interest rate, which varies according to the prevailing market rate. Hill mentioned that the maximum rate PCDC can charge is 12.5% under their current government contract. The average interest rate is 10%. The funds can be used for working capital, inventory, machinery, equipment, furniture, fixtures, and leasehold improvements. The funds cannot be used to purchase real estate or satisfy federal, state, or local tax obligations. If the applicant's paperwork is in order, Hill reports that a decision can be made as quickly as two weeks, with an additional one or two weeks until closing.
Small Business Revolving Loan Fund. Ms. Evelyn Montalvo reported to the group on this PCDC loan program, which she oversees as a Senior Loan Officer. Applicants are required to operate existing or start-up businesses in the Philadelphia area that hire employees. The loan amounts range from $35,000 to $200,000. Borrowers from start-up businesses are expected to provide at least 25% of the total loan as collateral; businesses in operation from two to three years can have that percentage reduced to 10 to 15 %, if their application is in good order. Ms. Montalvo also noted that participating businesses must draw up a business plan, for which PCDC will provide technical assistance. For this program, PCDC is considered to be a secondary lenderÑbusinesses are required to first go to another lending institution or to accept a referral from the organization. "We do gap financing, and cover your loan needs beyond what another lender is willing to grant you," said Montalvo. She reported that PCDC "looks for experience, good credit, and collateral," when reviewing applications. The advantage of using PCDC as an intermediary is that it minimizes the risk for a bank to lend money to a start-up or a business owner with less-than-glowing credit ratings. Their interest rate is also lower than the bank's rate.
For example, a business could need a total of a $100,000 loan. If the borrower injects 25% into the loan as collateral, he or she would then need to qualify for a $75,000 loan. A bank may only be comfortable with lending $50,000. PCDC then considers lending the remaining $25,000 that the business owner needs. In essence, the business owner will have two loans: one with the bank at their interest rate, and one with PCDC at a significantly lower rate (at the time of the meeting, this rate was 3-4%). The loans can be used to finance the purchase of a commercial building, for renovations, for working capital, and for equipment, among other items. The term of the loans can be from 3 to 15 years. The longest term usually applies for real estate purchases. Equipment loans usually are set for 5 to 7 year terms, while working capital loans tend to last from 3 to 5 years. For the PCDC portion of the loan, businesses must provide one full-time or two part-time jobs for every $20,000 of the loan. These larger loans may take up to 60 or 90 days to close. As with the MicroLoans, any violations on child support, student loan payments, or tax payments automatically cancels the application.