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• Snapshot of 3rd Quarter Funding Opportunites in NEO

Snapshot of 3rd Quarter Funding Opportunites in NEO

written on June 17, 2009 by Marsha Powers

Even financially healthy companies will continue to feel the credit pinch throughout the remaining 2009.  It will take several quarters to see how President Obama's new Economic Stimulus Package will ultimately play out in getting liqiuidity flowing again on a national level.  My forecast as to when this will happen is during the second quarter of 2010.  In the meantime, here are existing funding sources to consider:

      Credit Unions-  Credit unions are now filling an important credit void -  providing loans and lines under $50,000 - as many banks concentrate on the larger, less risky loans.  Because credit unions are privately owned, and do not have the high overhead of a bank, they can sometimes offer loans with lower interest rates.  In most cases you do not need to be a member of the credit union to apply.

           Banks-  Banks are lending but using much stricter credit writing criteria, including more cash infusion, higher loan-to-value ratios, higher credit scores, increased scrutiny of the company's growth business plans, stricter terms and covenants to ensure any risk is mitigated out of the deal.  Don't be surprised if you are asked to move all your checking accounts to their bank.  The community banks appear to be more open to bringing on new business clients than are the large banks in this area right now.  But, once the larger banks who recieved TARP funding pay back the money to the feds, I believe you will once again see an aggressive battle of business marketshare for your business.

         Community Reinvestment Business Loans-  Growth Capital Corporation, a Community Development Corporation, that provides the Small Business Administration (SBA) 504 and Ohio Regional 166 loan programs, has recently partnered with the Community Reinvestment Fund, USA (CRF).  This will allow Growth Capital to offer more flexible funding to borrowers. The CRF brings together community development lenders and socially-motivated and market rate investors to increase the amount of capital invested into local communities. 

     The State of Ohio Department of Development offers programs covering a full range of programs to support business including grants and funding ranging from $2,500 for training to multi-million infrastructure programs:

            Ohio Bipartisan Job Stimulus Plan-  This newer program is still being crafted and sometimes is difficult to navigate through the review process.  The program targets specific industry sectors and provides financial support including: $150 million for Advanced Energy, $100 million for Ohio's Biomedical Industry, $50 million for Bioproducts, $250 million for Higher Education Workforce Initiative, $400 million for Public Works, $120 million for Historic Preservation Tax Credits and $400 million for Clean Ohio.   

The Ohio Treasury offers the following programs to support businesses creating and retaining jobs:

         Ohio Enterprise Bond Fund-The OEBF is available to eligible borrowers for the purpose of purchasing land, buildings and equipment that will create and retain jobs and further promote economic development throughout the State of Ohio.  Eligible borrowers include corporations, partnerships, sole proprietorships, limited liability companies or limited liability partnerships engaged in the creation or retention of jobs in industrial, manufacturing, commerce, research and development or distribution ventures.       

            GrowNOW- This program offers interest rate reduction on loans to small businesses that create or retain jobs.  The Treasury invests state funds with participating banks at below market rates and the bank passes the interest rate savings (up to 3%) along to the small business.         

             Agricultural Linked Deposit Program- Ag-Link offers interest rate reductions on loans to farmers.  To qualify for Ag-link, farms must be for-profit with headquarters and more than half of their operations in Ohio.  Documentation is required to demonstrate need for the reduced interest rate and may request the reduction on up to $100,000 of a loan. 

     At a federal level, the Small Business Association's (SBA) major programs were finally funded and now more able to help small business.  The Obama administration will more than likely look at beefing up the SBA to help get funding to small business.  A bank is required with an SBA credit, so work with banks who has a specialist in SBA funding:

             SBA 7-A Loan Guaranty- This program can be used for most business purposes, including startup, expansion, equipment purchases, working capital, inventory or business occupied real estate purchases.  The program lowers fees to borrowers and their participating banks, with a maximum loan of $2 million, of which the SBA will guarantee up to $1.5 million to the bank.

          SBA Patriot Express Loan Guaranty: This program offers financial packages of up to $500,000 and with enhanced guarantee and interest rates.  This is an excellent finance program to consider if capital is needed to start or sustain a business during and after you have served our country.  This expanded program is open to all who have served in any U.S. military branch, at any period of time in war or peace, the service-disabled, active duty in transition or National Reserve and National Guard members.

            SBA Express Loan Guaranty:  Maximum loan of $350,000 with a 50% guarantee by the SBA with a 36 hour turnaround.  Use of funding is the same as the SBA 7-A program.

          SBA ARC program:  This is a new stimulus designed program from the feds, but the banks have been relucant to embrace selling this product.  Many banks feel there are too many restrictions for the bank in program.

Other sources of funding:

         Venture Capital Funding:  V/C funding, in general, is currently very tight.  Fund groups are reviewing their portfolio companies, grading them A, B or C.  Generally, if a company is graded an A or B, the fund will provide the  company with follow on money.  If the company is graded a C, the company will be required to look elsewhere for new capital.  With only a handful of IPO's last year, and predictions are the same this year, the V/C's are being  required to continue to support their portfolio companies instead of selling them off to earn their exit strategy profits.  I forecast the VC market to open up again first half of 2010.

          Private Equity Funding:  Similar to VC money.  The kind of deals being done are with undervalued but high potential companies holding proven technology in emerging industries.  PE groups are again actively out raising money for their portfolio clients.

           Angel Investors:  Many angels investment portfolios, like like the general invested population, was hit hard during this financial meltdown.  As the market goes back up, you will again see angels palying in angle investing.

For more information , please call Marsha Powers @ 216-292-3399