Program Summary
The Cash Collateral Support program helps small and medium-sized businesses in Colorado access loans that they would otherwise not get because they do not have enough collateral. This credit enhancement uses small amounts of public resources to encourage private lenders to loan money to businesses. The program provides a cash deposit as collateral for a business loan or credit facility when the business cannot meet the lender’s collateral requirements. One of the goals of this program is to support employee ownership business transitions and financing for employee-owned businesses. For additional resources visit the Office of Employee Ownership.
Lenders can apply for up to 25% of the loan amount or $500,000 (for employee ownership, up to 40% or $800,000), whichever is less, in collateral to support business loan applications. There may be further flexibility for certain transaction types, including those that support employee ownership. The maximum loan size for this program is $10 million. Collateral caps may be increased for certain transaction types, including those that support employee ownership.
Benefits to lenders include:
- low-cost credit enhancement option
- deposits are held by the partner lender
We along with the Colorado Economic Development Commission (EDC) have provided $15.2 million in funding for this program through federal Small Business Jobs Act of 2010 funds.
The Colorado Housing and Finance Authority (CHFA) manages this program and is the main point of contact.
Overview
Type: Credit enhancement
For: Businesses and lenders
Amount: Up to 25% of the loan amount or $500,000, (for employee ownership, up to 40% or $800,000), whichever is less. The maximum loan size eligible for this program is $10 million.
Application deadline: Rolling
OEDIT division: Business Funding and Incentives
The business borrower needs to have fewer than 750 employees at the time of the financing. For-profit, nonprofit, and manufacturing organizations are eligible.
Lenders need to demonstrate a:
- collateral shortfall
- reasonable expectation that the business borrower will repay the loan as agreed
Lenders may use Colorado Housing and Finance Authority deposits on most types of business loans. Cash deposits are pledged as additional collateral to the lender for an initial term of three years. Deposit term lengths may be increased for certain transactions, including those that support employee ownership. After the initial term ends, the lender may request an annual extension of up to 10 years for longer-term loans.
Because this program is not a direct lending program, you will need to apply for support through the lender that is underwriting your loan request. Lenders will need to email or mail the completed Cash Collateral Support borrower and lender applications, along with the supporting documents listed on the lender application, to the Colorado Housing and Finance Authority (CHFA) for review. If your lender is not familiar with Cash Collateral Support program, you can connect them with CHFA.
A Borrower Fee is collected by the lender at closing and may be deducted by the lender from the loan proceeds or paid for by the borrower. The standard Borrower Fee is 4% and covers the entire Initial Term. This standard fee may be reduced by 1 percentage point for loans made to businesses that are Very Small Businesses (VSB), owned by individuals who qualify as Socially or Economically Disadvantaged Individuals (SEDI).
Program Manager
Colorado Finance and Housing Authority
Community Development Lending Team