Presentation on theme: "Women & Money Business Finance Opportunities and Options New Hampshire District Office (603) 225-1400."— Presentation transcript:
Women & Money Business Finance Opportunities and Options New Hampshire District Office (603)
Women & Money Globally: Women’s self employment up 33% over last 25 years Nationally: Women Owned Businesses increased from 10% to 30% over 25 years New Hampshire: WOB 27% WOBs tend to be smaller, start with less capital, are less likely to get started with loans or venture capital.
AGENDA Find the “Right Match” of capital for your business Dispel The Myths & Mystery Options for Sources of Money Debt vs. Equity Financing Banks, Economic Development Entities & other alternatives Question & Answer
Myths- Free Money Grants – Non-profits – For-profits: NH Job Training Fund – Small Business Innovative Research (SBIR) 11 Federal agencies reserve 10% R&D funds
Where does the money for start ups really come from?
Inc.’s 500 Fastest Growing Biz Early stage: Half started with less than $20,000 88% of CEO’s used their own $ to seed biz 1/3 took on partners with deep pockets Later stage: On average raised over $1mil Majority still own 50% of their stock 25% still own 100% of their stock
Where does startup $ come from? Savings and personal credit sources57% (includes credit cards 6%) Family and friends38% Bank loans 3-4% Angels and Venture Capital 1%
Start-Ups Estimated 565,000 businesses launch every month in the U.S. More than that close Average funds raised for a startup $78,000 – Personal savings & credit sources $48,000 – Family & friends $23,000 – Other: outside equity, crowd funding $7,000
Let’s Review Where To Get Money to Start Your Business Personal Savings Family & Friends Partners who can bankroll you Seller Note Collaborative venture Home equity line of credit Credit Cards
Where Else to Get Money Alternative Lenders-microloans, Community Loan Fund, Regional Economic Development Companies Retirement Funds: (not recommended) o Loan against your 401K (non taxable event) o Profit Sharing Funds from former employer SBIR funds for technologies the government needs Conserve cash by leasing equipment, barter, outsourcing, contract workers Consider trade credit, factoring, cash advances Crowdfunding—coming soon
Where Do Established Firms Get $? Financing Dollars in early years come from: 35% Owner Equity, Personal loans, personal credit cards (4%) 35% Business loans & Lines of Credit 7% Business credit cards 6% Outsider equity (Angels, VC) 17% other (crowd funding, vendors, trade credit, factoring, etc.)
Grow with Outside Sources of Financing o Bank o Non Bank Lender o Credit Union o Certified Development Company o Government Backed Loan (SBA, USDA) o NH Community Loan Fund o Economic Development Program in City or Town o Regional Economic Development Corporations o Angel Investor o Venture Capital o Factoring and Merchant Cash Advance Lender
Debt vs. Equity Debt: Legal Obligation to pay back Specific due date Stated rate of interest (fixed or variable) Set payment schedule Collateral Best for real estate, equipment, fixed asset acquisition, franchises, lines of credit Advantage: Lower cost, retain ownership
Debt Bank or credit union loans, SBA loans, USDA loans, EDC loans, credit cards, lines of credit, commercial real estate mortgages, accounts payable, leases, home equity line, etc. Advantages: Less expensive than equity Term loans carry interest rate in range of 6-10%, Line of credit might be 4 or 5%, and you only pay for what you use Disadvantages: Repayment terms inflexible Collateral pledged Lenders not risk takers, follow bank credit policy
Equity Money raised from owners, partners, private investors, customers, suppliers, angels, VCs, investment bankers Angel & Venture Capital Advantages: – Flexible and patient repayment terms – Access to large amounts of working capital Disadvantage: – Expensive, investor wants ROI 20-40% – Must give up ownership & control
Angels & Venture Capital Best for established businesses that have rapid growth potential. Good for large amounts of working capital for a new product launch, new marketing campaign, major growth & expansion phases. These are investors, they want to make money and get out in 3-5 years. You’ll need an exit strategy.
Competition for Investors Competition for Investors Receive 1,000 proposals each year Consider 100 of them Invest in 10 of them Your Business Plan should focus on: 1)Executive Summary 2)Management Team 3) Your Numbers (projections) 4) Exit Strategy
The Role of the SBA Mission: Help Biz get started and grow 3 C’s: Capital, Counseling, Contracting Guaranty is a Credit Enhancement for Lenders In 2013 SBA guaranteed: o Nationally: 54,100 loans for $23 Billion o NH: 481 loans to support $100 Million in lending to small businesses
New Hampshire SBA Top 10 SBA 7(a) Lenders in FY 2013: # Loans 1.Northway Bank62 2.St. Mary’s Bank49 3.TD Bank40 4.The Provident Bank23 5.Connecticut River Bank21 6.Centrix Bank20 7.Meredith Village SB18 8.Peoples United Bank14 9.Merrimack county SB13 10.Claremont SB13 11.First Colebrook Bank12 Top 6 “504” Third Party Lenders: 1.Centrix Bank12 2.Enterprise Bank & Trust 9 3.Peoples United 7 4.The Provident Bank 6 5.Northway Bank 5 6.Optima Bank 5
Access to Capital How SBA Helps 7(a) Loan Program: Guaranty 50 to 90% of loans up to $5 million 504 Loan Program: Loans up to $5.5 million to finance 40% of fixed asset project cost thru CDC at fixed rates for 10 or 20 years; lender provides other 50%; you put in 10%
SBA 2014 Incentives Loans up to $150,000 – zero% guaranty fee – no ongoing fee charged to lender Veteran Owned Biz Loans up to $350,000 – 0% guaranty fee Streamlining the application process and rules to make them user friendly
Best Advice Have a great Business Plan Explain who you are, what you make, how you make it, how you sell it, project revenues & expenses, analyze your cash flow Be passionate Be persistent Be creative & adaptable
What would you do? Challenge #1: Need $ to start your business You would: 1.Rely on savings and gifts from family 2.Take out a home equity line of credit 3.Apply for a bank loan 4.Ask for an SBA guaranteed loan 5.All of the above
What would you do? Challenge #2: You’re established and looking to expand. Need operating capital to fund a new product or marketing campaign. 1.Apply for a bank loan 2.Look for an equity investor 3.Both
What would you do? Challenge #3: Your dream is to start a restaurant. You’ve worked in the industry but don’t have a lot of management experience 1.Consider a franchise 2.Get a partner or successful restaurateur to invest in you 3.Form a board of experienced advisors 4.Expand your management team 5.All of above 6.None of above
What would you do? Challenge #4: Your manufacturing company is ready to expand and you need more space and equipment 1)Talk to your lender about a 504 loan to finance the facility and equipment 2)Ask your local REDC if they can partner with you 3)If you export, look into SBA’s International Trade Loan to refinance your existing mortgage, and provide the expansion funds 4)Look into venture capital with an eye to growing rapidly, then selling or going public
Jumpstart Our Business Startups (JOBS) Act Crowd funding-raise small amounts of equity capital at earliest stages IPO “On Ramp” reduces regulatory burdens Helps entrepreneurs go public and access equity capital up to $1 million/year so they can grow Makes it easier to raise capital from customers and local community Allows more investors in small business* Investments up to $50 million exempt from SEC filings (was $5 mil) Creates new category of IPO stock called Emerging Growth Companies (< $1 Billion gross revenue prior year) Raises threshold for mandatory registration w/ SEC to 2000 shareholders (was 500).
Alternative Lending Resources Crowdfunding: Way to raise small amounts of capital from large numbers of investors New SEC rules will allow biz to raise up to $1 mm per year Where people network, and pool resources and money via the internet for new apps based fundraising for cause & business entrep traditional biz fund raising benefits & personal event funding efforts, start charities, creative proj. startup funds for creative projects like video/film/music recording based-Crowdfunding for Biz; online education & certification for investors for women owned businesses launch pad for creative projects, media artists get $ and swap resources Angel Investors & Venture Capital: 128 Innovation Capital Group, Waltham Ma, ACE-NET for regional angel clubs (http://acenet.csusb.edu)http://acenet.csusb.edu AngelList.com- online network of startups and investors Borealis Ventures, Portsmouth (www.borealisventures.com) (Borealis Granite Fund for NH biz)www.borealisventures.com Cate Street Capital, Portsmouth (www.catecapital.com) focus on green technologieswww.catecapital.com CharlesRiverVentures—VC for technology & media—Cambridge, MA Commercial Finance Associates-Litchfield NH-Alternative lending sources, ABL, purchase order financing, factoring, leasing (www.cfa.com) CrowdFunder.com—US businesses sell equity and attract investors, angels & VC eCoast Angels, Portsmouth (www.ecoastangels.com)www.ecoastangels.com FundersClub-- accredited investors fund inventory of vetted early-stage startups that are then bundled (online equity investing) Launch Pad Venture Group (www.launchpadventuregroup.com), Boston area venture group focus on high tech and life scienceswww.launchpadventuregroup.com Mass Venture—for Boston based biz (www.massventure.com)www.massventure.com National Venture Capital Association (www.nvca.org)www.nvca.org North East Angels, Nashua (http://gust.com/angel-group/northeast-angels)http://gust.com/angel-group/northeast-angels SecondMarket—broker/dealer for accredited investors Sequoia—VC firm for seed rounds Small Business Investment Companies—(SBA licensed) Venture Finance—leading site for companies seeking capital and high net worth individuals and institutions to meet (http://www.vfinance.com)
Alternative Lending Resources Alternative Lending Sources: for startups, $5.0 to $ commercial loan market that lenders subscribe to Communities At Work Fund- microloans to low income/low wealth biz Guidant Financial: 401K borrowing advice Idea Cafe—small biz grants info for women, IOU Central -- loans up to $100,000 based on cashflow Kabbage.com –cash advances for inventory, payroll, biz needs (algorithm based) Kiva.com and KivaZip in US--microlending Lending Club—peer to peer lending up to $35,000 (CBR score 660) Lendio.com—matches borrowers with lenders MultiFunding.com—Ami Kassar’s credit consultant for biz seeking credit sources National Family Mortgage—structure real estate loans with relatives (spinoff of Circle Lending & Virgin Money US) On Deck Capital—alternative lender using technology driven data Prosper.com-- Peer to peer loans up to $25,000 (CBR 640) RapidAdvance.com Cash advances Verizon: “We Commerce” on Facebook: find simpatico businesses for barter/trade/team Versant Funding--Working capital lender, factoring Accounts Receivable $5.0 to $15 MM World Business Lenders, LLC—cash flow & ABL up to $700,000, collateralized Other Important Resources: Capital Connection-for entrep seeking finance, VC, angels, finance sources Credit Bureau Reports--free copy FICO Score: small fee; gives advice on how to improve Grant opportunities: Small Business Administration: loan programs, business advice, business plan templates, toolswww.sba.gov SBA Size-Up Tool: Small Business Innovative Research/ Small Business Technology Transfer USDA Business & Industry loans:
Thank You Marilyn Bogue, Lead Economic Development Specialist, U.S. Small Business Administration (603) Donna Ehrler, Senior Vice President and Market Manager, Northway Bank (603) Jennifer Boulanger, Loan Officer, Capital Regional Development Council (603)
Commercial Lending Presented by: Donna M. Ehrler Senior Vice President
The 5 C’s
Honesty, integrity, trustworthiness & managerial skills of key managers. Are they interested in the success of the company? Is the management able to run the business successfully? Does the company have the capacity to grow their business? 1. Character
Does the business have the ability to pay debt (“total debt”)? How much debt can they handle? What is their borrowing history and track record of repayment? Capacity can also be referred to as the “Primary Source of Repayment 2. Capacity
What would be the bank’s collateral position? Consider that economic conditions can affect the value of the collateral. Collateral can be real estate or equipment, but accounts receivable and inventory can also be pledged as collateral. Collateral is considered a secondary source of repayment. 3. Collateral
How well capitalized is the business? How much money has the owner invested in the business? Is the owner committed to the business? Does the business have the ability to sustain a downturn in the economy? 4. Capital
What are the current economic conditions, and how does your business fit in? Banks look at general economic conditions as well as local competition, industry trends to name a few. If your business is sensitive to economic turndowns, the bank wants to know that you are good at managing productivity and expenses. 5. Conditions
Basic Questions: Who are you and why should they lend to you? How much money do you need? What is the purpose of the loan? How will you repay the loan? What’s the fall back plan? What Will A Lender Need to Know?
What you need to show a lender Cover letter of introduction Summary of financial needs Business Financial Statements (3 years) Projected Cash Flow Statement (12 months) Collateral (business and personal) Personal financial statements & tax returns (3 yrs) Resumes
Working Capital Line of Credit Short-Term Business Loan Equipment Loan Equipment Line of Credit Commercial Real Estate Loan Construction Loan SBA Financing Types of Commercial Loans
Collateral inadequate Longer maturity needed Lender’s legal or policy limit Start-up or certain types of businesses Leverage high (thin on equity) Why Need an SBA Guaranteed Loan?
Presenter: Jennifer D. Boulanger Loan Officer Capital Regional Development Council
NH Alliance of Regional Development Corporations
Non-profit development corporation that provides a variety of economic development and lending services to businesses and local governments throughout New Hampshire in support of their mission: -Private sector job creation/retention -Local property tax base enhancement
Small Business Lending CRDC Direct Revolving Loan Fund Matching loan funds to partner with other finance options (no more than 50% of project costs) Up to $200,000 Purchase of assets, working capital, refinance Merrimack, Hillsborough and Sullivan Counties CRDC as a SBA 504 Certified Development Corporation Traditional Bank - 50% financing CRDC (SBA 504) – up to 40% financing Up to $5.0 million Purchase of fixed assets New Hampshire – statewide
Small Business Lending CRDC is a NH Community Development Finance Authority approved RDC -Community Development Block Grants available to municipalities to support job creation 1.$20,000 per job created 2.Loan to business-flexible terms 3.Merrimack, Hillsborough and Sullivan Counties -CDIP Tax Credits 1.Merrimack, Hillsborough and Sullivan Counties 2.Non-profit CRDC was awarded a total of $1.8 million grant from the US Environmental Protection Agency to capitalize a Brownfield RLF -Funds available to clean up identified non-petroleum based environmental contaminated sites -New Hampshire (statewide) -Site Assessment performed -Remediation costs identified -Flexible repayment terms designed to bring property to sustainability
Thank you ~ CONTACTS Stephen Heavener, Executive Director 603/ Liz Sweeney, Senior Loan Officer 603/ Jennifer Boulanger, Loan Officer 603/ Kimberly Imbriglio, Portfolio Administrator 603-/