How Does the Small Business Short Term Lending Program Work

The Short Term Lending Program (STLP) is an initiative of the Financial Assistance Division of the Office of Small and Disadvantaged Businesses Utilization (OSDBU) that is aimed at enabling small businesses access to capital needed to participate in transportation-related contracts. This program provides funds to business that are certified Disadvantaged Business Enterprises (DBE) at competitive interest rates for Department of Transportation (DOT) contracts, or other DOT funded contracts and subcontracts.

So how exactly does this program work? For starters, the line of credit is for account receivable financing to support work being performed on eligible transportation related contracts. The management of the lines of credit is the responsibility of the OSDBU, and this is done through cooperative agreements between DOT and Participating Lenders (PLs). The interest rate of the loans offered are variable, and tied to the Wall Street Journal Prime Interest Rate.

“A vibrant transportation system represented by the creativity and ingenuity of the small business owner is important to the success of interstate commerce,” according to Jonathan Davis, Sales and Marketing Executive Manager at 42^nd Street Photo in New York City.

Together with a duly completed application form, the applicant must also pay a $150 application fee to the Participating Lender. If a business owner should need any technical assistance in filling out the application form, help is available at the Small Business Transportation Resource Centers.

The borrower receives funds against each invoice of the contracts being financed, up to 85 percent of the invoice total. For each invoice, the payment is made directly to the Participating Lenders by the Project Owner with a two-party check addressed to the Lender and Borrower. The borrower is required to repay the principal and interest, while the bank releases the balance to the borrower.

There are certain uses of the funds obtained under the Short Term Lending Program that are prohibited. These include:

• Contract mobilization
• Purchase of equipment and other long term uses
• Refinancing of debt that is already in existence
• Payment of taxes
• Distribution to investors or stock holders

In order to qualify for a line of credit guaranteed by DOT, you must meet certain eligibility criteria. These include:

• The business must be certified as a Disadvantaged Business Enterprise by an agency applying DOT certification guidelines or by the SBA
• The business needs to have a DOT federally funded (wholly or partly) transportation-related contract
• The business must have an established track record. As such, the program does not offer funding for start-ups
• The business must be current on all Federal and state taxes

The maximum loan amount that an applicant can receive is $750,000. The term is one year with an allowance to renew for five years as long as the applicant remains eligible. The term is a line of credit used for short term accounts receivables generated by transport-related contracts and subcontracts.

If a business owner does not qualify for the Financial Assistance Division of the Office of Small and Disadvantaged Businesses Utilization Short Term Lending Program (STLP), other loans may be available.  For example, National Business Helpers offers Merchant Cash Advances, Small Business Financing Solutions, Bad Credit Funding and more.