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Phil Christopherson Executive Director IDEA Inc..

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Presentation on theme: "Phil Christopherson Executive Director IDEA Inc.."— Presentation transcript:

1 Phil Christopherson Executive Director IDEA Inc.

2 Mission and objectives of IDEA Inc. Promote economic diversification by helping businesses grow and expand so Rivertons and Fremont Countys economic future is more secure Provide a continuous, financially viable economic development entity independent of state and local funding which ensures a consistent drive toward diversification and a strong economic future. A self funded organization that does not rely on continuously obtaining grants, memberships, donations, tax revenue or the local government

3 How IDEA is accomplishing their objectives Own land and buildings that are leased to local businesses for their operations Utilize Wyoming Business Council BRC funding and debt secured by the business and repaid by the business to pay for the land and buildings IDEA is obligated to recapture the grant funds provided by the state Have investigated to varying degrees a total of 22 different projects Have completed four projects: Brunton BTI Smart Start Child Care Alco Building

4 How is this working for IDEA Inc. Monthly Gross revenue from projects Brunton$19,722.47 BTI$3,000.00 Smart Start$5,192.70 Alco Building$11,362.00 Total:$39,277.17 ($471,326 per year) Each of these projects used a 1.5 million dollar BRC grant and debt financed by the business total of 6 million dollars in BRC grant funds to recapture

5 How is this working for IDEA Inc. Monthly expenses from projects (primarily loan payments) Brunton$16,554.22 BTI$2,211.36 Smart Start$4,492.70 Alco Building$4,605.27 Total:$27,863.55 ($334,362. per year)

6 How is this working for IDEA Inc. Net operating revenue from projects: Monthly – $11,413.62 Yearly – $136,963.44 Approximately 29% of Gross revenue from BRC projects is being used for operational expenses The Net operating revenue is being used for the following: Operating costs – staff, training, office expenses, etc Approximately 38% of the 29% Building improvement and maintenance Creating a savings fund for future projects Investigating a business innovation center Developing entrepreneurship program in conjunction with Central Wyoming College and other local schools

7 Additional benefits from the IDEA Inc. Recapture Model Net equity gain from the projects IDEA Inc. owns the land and the buildings Each month as the loans are paid off by the tenants the equity that IDEA Inc. has in the property grows For last year IDEAs equity in all of the project combined grew by $211,000.00

8 What does this mean? IDEA Inc. is recapturing the BRC funds granted by the state $136,963 per year in project revenue – steady income $211,000 per year in equity gain – increases each year IDEA Inc. is building a solid financial future that is not dependant upon donations, memberships, grants, tax money or local government

9 Why would a business participate Project Financing Example using a BRC Grant 1. BRC Grant1,500,000.00 2. Required Match (10%)166,666.00 3. Extra Financing Required200,000.00 Total Project Cost:1,866,666.00 Sources of funds Item 1: IDEA Inc. and WBC Items 2 & 3: Business (financing or cash) Recurring Cost to the business** Lease - 4% of total grant per year: 60,000.00* Monthly cost:5,000.00* Cost of financing $366,666/ year:42,048.60 ( 8% for 15 years) Monthly cost:3,504.05 Total Costs (Lease & Financing) Per year$102,048.60 Per month$8,504.05 * This is the initial lease rate – the lease rate will be adjusted at defined renewal periods for inflation ** Leases will be triple net – the lessee pays for taxes, insurance and maintenance

10 Why would a business participate Project Financing Example using private financing only and not a BRC Grant (for comparison) Total Project Cost:$1,866,666.00 Source of funds - Business financing Recurring Cost to the business Cost of financing $1,86,666.00 (8% for 15 years)Monthly cost:$17,838.83 Total Costs for private financing Per year$214,065.96 Per month$17,838.83 Compare BRC funding vs. Business funding BRC Funded project (from the previous example): Total Costs (Lease and Financing) Per year$102,048.60 Per month$8,504.05 Savings for the business by using a BRC grant over Private financing Per year$112,017.36 Per month$9,334.78

11 Key elements to make this work The business must be committed – financially, managerially, operationally Get at least 1% up front They are responsible for the match The match can be cash either from the company or from a loan from a bank of their choosing – the debt payments will be included in the monthly lease payments The business will guarantee the loan The bank should be very willing and eager to participate – A large part (if not most) of the equity will be grant funds – this means limited risk to the bank They are responsible for any amount over the grant and the match They do not own the land or building – at some point they can make an offer to purchase

12 Key elements to make this work The project must cash flow!!!! The monthly financial gain must be greater than the monthly expenses IDEA uses 4% of the grant amount (as a rule of thumb) plus loan payments on the match (and extra money from the bank loan) to set the lease rate No promise to sell or selling price listed in the lease Provision in the lease for the business to pay the tax consequences to IDEA for an early loan payoff or project buy out. The business must get a good deal – better than they would have gotten by going to the bank or other lending institution – we are trying to help good businesses grow faster

13 Key elements to make this work Do not take business away from local contractors or developers – If we bring the deal we get the deal, we do not go out and steal other peoples deals. Keep the project moving – short delays in making decisions quickly add up to long project delays that cost a lot of money to fix on the back end of the project. Establish a project schedule with key decisions scheduled Do not let project design take all of the project time leaving no time for construction Be upfront and honest with what you can and cannot do Explain the project timeline – it is not fast Explain project priority at the WBC – there is none Explain the finances clearly

14 Key elements to make this work Make sure the business is up to the task of completing the project and staying in business Get solid financials from the business – If they are coming to you because a bank will not work with them are you willing to take on the risk the bank was not willing too? They must have the business acumen and managerial ability to run the business and the project They must have someone assigned to the project for the life of the grant project (writing the grant, designing the project and building the project) who can make the decisions needed and make commitments for the business that will be required

15 Final Comments IDEA Inc. is in the infancy of our long term strategic plan. Phase 1: 15 – 20 years building a financial foundation for future success Start programs to help local business grow and succeed Develop a well organized and run organization with board members who are committed to the success of the community over their own personal success and recognition No pay, no recognition, no financial benefit, no membership Entrepreneurship Innovation Center Business recruiting as opportunity presents Phase 2: 10 years and beyond Develop our own projects without using BRC or other grant funding Have a fully functioning Innovation center Provide loans and grants to local businesses and non-profits Fully operating entrepreneur programs at Central Wyoming College and the local High Schools

16 Questions? Thank You

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