Frequently Asked Questions

1. How does Louisiana assist in financing small businesses?
2. How do I apply for these financing programs?
3. Are there programs for workforce development and infrastructure projects?
4. What type of information must I include in my business plan?
5. How do I get a small business grant?
6. What types of businesses are eligible for the LEDC Small Business Financing Programs?
7. Do I need collateral?
8. What about equity? And what is it?
9. How can the Small Business Loan Guaranty funds be used?
   

1. How does Louisiana assist in financing small businesses?

Louisiana Economic Development Corporation (LEDC) administers several programs for small Louisiana businesses, ranging from loan guarantees, participations and grants to venture capital investment.

Louisiana Economic Development Corporation was established in July 1988 by an Act of the Legislature. LEDC serves as the reviewer and administrator of Louisiana Economic Development's financial assistance programs.

Approval of requests for financial assistance occurs at different levels, depending on the dollar level of LEDC's involvement in the project. LEDC is governed by a 12-member board of directors appointed by the governor. For a list of board members, click here . Board meetings are held on the first Friday of each month. The board's loan committee meets prior to the full board meeting to review and make recommendations on project requests. The full board has final authority on all projects, but generally only projects requiring LEDC's involvement at more than $1 million are presented directly to the committee and board.

An internal loan committee augmented by two board members has the delegated authority to approve LEDC's involvement over $250,000 to $1 million. Up to $250,000 may be approved by a committee of only LEDC staff. These delegated approval authorities have allowed staff to process requests for assistance at a reasonable business pace, with a decision rendered within days as opposed to months.

Click here to visit the Small Business Loan Assistance Programs


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2. How do I apply for these financing programs?

To apply for funding through the Louisiana Economic Development Corporation, the following procedure must be followed:

1. A detailed business plan must be submitted first. The enclosed Outline for a Business Plan is to be used as a guideline. Contact the Small Business Development Center (need link to list of SBDCs) nearest you for assistance in developing your business plan.
   
   
2. Submit the completed business plan to your local bank, and establish a relationship with a lending officer.
   
   
3. Submit a copy of the completed business plan to the Louisiana Economic Development Corporation, along with your bank's name and contact person.

3. Are there programs for workforce development and infrastructure projects?

The Economic Development Award Program (EDAP)

Description

• The economic development award program (EDAP), administered by the Department of Economic Development, provides grants for publicly-owned infrastructure to assist industrial or business development projects that promote economic development and that require state assistance.

Funding

• About $5 million in an annual state appropriation.
• 54 companies have been assisted and over 5,425 jobs created since 1997.

Who is Eligible

• An eligible applicant for the grant award must be a public or quasi-public state entity or a political subdivision of the state and a private company who will be the primary beneficiary of the award. Preference will be given to projects for industries identified by the state as target industries and to projects located in areas of the state with high unemployment levels.
  
• The minimum award request is $25,000.
  
• Projects must create or retain at least ten (10) permanent jobs in Louisiana.
  
• Eligible project costs may include, but are not limited to, the following: engineering and architectural expenses, site acquisition, site preparation, construction expenses, building materials, and capital equipment.

The Process

1. Application filed by public/quasi-public entity and private company.
2. Application is reviewed for completeness and content by the Economic Development Program Specialist and an Economic Impact Analysis is prepared by the Department's Statistician.
3. Application is then presented to the Louisiana Economic Development Corporation (LEDC) for approval.
4. Contract is prepared in accordance with the state's approval process.

4. What type of information must I include in my business plan?

5. How do I get a small business grant?

Louisiana does not have a grant program for the start-up or expansion of a small business.

6. What types of businesses are eligible for the LEDC Small Business Financing Programs?

1. Small business concerns domiciled in Louisiana whose owner(s) or principal stockholder(s) shall be a resident of Louisiana .
2. Certified economically disadvantaged businesses.
3. Disabled person's business enterprises domiciled in Louisiana whose owner(s) or principal stockholder(s) shall be a resident of Louisiana .
4. Funding requests for all but the following may be considered:
   1. restaurants, except for regional or national franchises;
   2. bars;
   3. any project established for the principal purpose of dispensing alcoholic beverages;
   4. any establishment that has gaming or gambling as its principal business;
   5. any establishment that has consumer or commercial financing as its business;
   6. funding for the acquisition, renovation or alteration of a building or property for the principal purpose of real estate speculation;
   7. funding for the principal purpose of refinancing existing debt;
   8. funding for the purpose of buying out any stockholder or equity holder by another stockholder or equity holder in a business;
   9. funding for the purpose of establishing a park, theme park, amusement park or camping facility;
   10. funding for the purpose of buying out any family member or reimbursing any family member.

7. Do I need collateral?

Collateral

1. Collateral-to-loan ratio will be no less than one-to-one.
2. Collateral position may be negotiated, but will be no less than a sole second position.
3. Collateral value determination.
   1. the appraiser must be certified by recognized organization in area of collateral;
   2. the appraisal cannot be over 90 days old.
4. Acceptable collateral may include, but not be limited to, the following:
   1. fixed assets - business real estate, buildings, fixtures;
   2. equipment, machinery, inventory;
   3. personal guarantees may be used only as additional collateral and does not count towards the 1:1 coverage; if used, there must be signed and dated personal financial statements;
5. Accounts receivable with supporting aging schedule. Not to exceed 90 percent of receivable value (used with guarantee only).
   1. Unacceptable collateral may include, but not be limited to the following:
   2. stock in applicant company and/or related companies;
   3. personal items or personal real estate;
   4. intangibles.

8. What about equity? And what is it?

Equity

1. Will be 20 percent of the loan amount for a start-up operation or acquisition and no less than 15 percent for an expansion. However, if 20 percent is not available for a guarantee, the following chart may be applied which provides for an annual guarantee fee attached to a lesser equity position:
   Equity is defined to be:
   1. cash;
   2. paid-in capital;
   3. paid-in surplus and retained earnings;
   4. partnership capital and retained earnings.
2. No research, development expense or intangibles of any kind will be considered equity.
   

9. How can the Small Business Loan Guaranty funds be used?

Use of Funds

1. Purchase of fixed assets, including buildings that will be occupied by the applicant to the extent of at least 51 percent.
2. Purchase of equipment, machinery or inventory.
3. Line of credit for accounts receivable or inventory.
4. Debt restructure may be considered by LEDC, but will not be considered when the debt:
   1. exceeds 25 percent of total loan with the following exception:
      (a) a maximum of 35 percent may be considered on a guaranteed loan but the guarantee percent will be decreased by 5 percent; and/or
   2. pays off a creditor or creditors who are inadequately secured; and/or
   3. provides funds to pay off debt to principals of the business; and/or
   4. provides funds to pay off family members.
5. Funds may not be used to buy out stockholders or equity holders of any kind, by any other stockholder or equity holder.
6. Funds may not be used to purchase any speculative investment or real estate development.