In recent years more and more state and local governments have created programs to help finance growing businesses. You would think they'd want you to know about them, but don't count on it: often the information is hard to come by and even bankers are in the dark.

So how do you sniff out the sources that one expert calls "secret scholarships for business"? The best advice we have is to set aside some time and plan to do lots of legwork. Below is an annotated list of some of the types of financing that may be available in your area, and some tips on how to find them:

Loans. Depending on where you are and what you need money for, you may be eligible for a loan from a revolving loan fund. More than 30 states have such funds to support the working-capital and fixed-asset requirements of businesses that are expanding in targeted communities or hiring low-skill workers. Other revolving funds are sometimes sponsored by nonprofit groups. Loans from revolving loan funds are usually granted at favorable rates and terms, and those loans may make it easier for a bank to come in with more money as a senior lender.

Even if there are no locally sponsored sources, there may still be loan funds that are capitalized by grants from the Economic Development Administration (EDA), an arm of the U.S. Department of Commerce, or from the Department of Housing and Urban Development (HUD). Typically, such funds are managed by local government, nonprofit development corporations, or rural-planning districts. To get the ball rolling, call your city or state economic development office.

Loan guarantees. The advantage of a loan guarantee is that it can prod a bank to lend more money and to provide it for a longer period, often at a lower interest rate. Beyond the well-known guarantee program of the Small Business Administration, it's worthwhile to investigate other sources. HUD, for example, has a loan-guarantee program that operates through cities and towns (using Community Development Block Grant funds). Several states, among them California, Maine, and Mississippi, have guarantee programs of their own. For information about loan guarantees, call your SBA regional office and ask for names of certified and preferred lenders. To check out other possibilities, call the local HUD office, your state economic development agency, or (if your state has one) the state financing authority.

Interest subsidies. If you had a choice between a loan at 11% and an otherwise identical one at 9.5%, which would you choose? Depending on where youare, below-market-rate money may not be a pipe dream. Several states, including Ohio, Iowa, and Oklahoma, have interest-rate subsidy or "linked-deposit" programs, which permit qualifying small businesses to get favorable loans from local banks.

In Oklahoma, for instance, participating banks can qualify for low-cost funds from the state, provided they agree to pass along the savings to customers; to qualify, companies must have revenues of less than $4 million and employ fewer than 200 people. To find out about such programs in your area, contact the state economic development agency. You might also get in touch with local business groups such as the chamber of commerce, or nonprofit development corporations in your community. -- Bruce G. Posner

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