Women & MoneyBusiness Finance Opportunities and Options New Hampshire District Office (603) 225-1400
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 www.grants.gov • For-profits: NH Job Training Fund • Small Business Innovative Research (SBIR) • 11 Federal agencies reserve 10% R&D funds • www.sbir.gov
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 sources 57% (includes credit cards 6%) • Family and friends 38% • 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) • Loan against your 401K (non taxable event) • 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 • Bank • Non Bank Lender • Credit Union • Certified Development Company • Government Backed Loan (SBA, USDA) • NH Community Loan Fund • Economic Development Program in City or Town • Regional Economic Development Corporations • Angel Investor • Venture Capital • 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.
Competitionfor Investors • Receive 1,000 proposals each year Consider 100 of them Invest in 10 of them Your Business Plan should focus on: • Executive Summary • 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: • Nationally: 54,100 loans for $23 Billion • 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 • Northway Bank 62 • St. Mary’s Bank 49 • TD Bank 40 • The Provident Bank 23 • Connecticut River Bank 21 • Centrix Bank 20 • Meredith Village SB 18 • Peoples United Bank 14 • Merrimack county SB 13 • Claremont SB 13 • First Colebrook Bank 12 Top 6 “504” Third Party Lenders: • Centrix Bank 12 • Enterprise Bank & Trust 9 • Peoples United 7 • The Provident Bank 6 • Northway Bank 5 • 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: • Rely on savings and gifts from family • Take out a home equity line of credit • Apply for a bank loan • Ask for an SBA guaranteed loan • 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. • Apply for a bank loan • Look for an equity investor • 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 • Consider a franchise • Get a partner or successful restaurateur to invest in you • Form a board of experienced advisors • Expand your management team • All of above • None of above
What would you do? Challenge #4: Your manufacturing company is ready to expand and you need more space and equipment • Talk to your lender about a 504 loan to finance the facility and equipment • Ask your local REDC if they can partner with you • If you export, look into SBA’s International Trade Loan to refinance your existing mortgage, and provide the expansion funds • 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 • www.appbackr.com funding for new apps • www.dedicatingdollars.com NH based fundraising for cause & business entrep • www.Fundable.com traditional biz • www.GoFundMe.com fund raising benefits & personal event funding • www.IndieGoGo.com humanitarian efforts, start charities, creative proj. • www.Kickstarter.com startup funds for creative projects like • video/film/music recording • www.PeoplesVC.com NH based-Crowdfunding for Biz; online education & certification for investors • www.PlumAlley.com fundraising for women owned businesses • www.RocketHub.com launch pad for creative projects, media artists • www.RockThePost.com entrepreneurs get $ and swap resources • Angel Investors & Venture Capital: • 128 Innovation Capital Group, Waltham Ma, www.128icg.com • ACE-NET for regional angel clubs (http://acenet.csusb.edu) • AngelList.com- online network of startups and investors • Borealis Ventures, Portsmouth (www.borealisventures.com) (Borealis Granite Fund for NH biz) • Cate Street Capital, Portsmouth (www.catecapital.com) focus on green technologies • 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) • 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 sciences • Mass Venture—for Boston based biz (www.massventure.com) • National Venture Capital Association (www.nvca.org) • North East Angels, Nashua (http://gust.com/angel-group/northeast-angels) • SecondMarket—broker/dealer for accredited investors • Sequoia—VC firm for seed rounds www.sequoiacap.com/us • Small Business Investment Companies—(SBA licensed) www.sba.gov/sbic • 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: • www.accionusa.org microloans for startups, $5.0 to $50.0 • www.boefly.com online 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, www.businessownersideacafe.com • 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 www.VersantFunding.com • 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 www.capital-connection.com • Credit Bureau Reports--free copy www.annualcreditreport.com • FICO Score: small fee; gives advice on how to improve www.myfico.com • Grant opportunities: www.Grants.gov • Small Business Administration: www.sba.gov loan programs, business advice, business plan templates, tools • SBA Size-Up Tool: http://www.sba.gov/community/blogs/free-sources-market-data-plus-tips-using-data-business-planning • Small Business Innovative Research/ Small Business Technology Transfer www.sbir.gov • USDA Business & Industry loans: www.rurdev.usda.gov
Thank You • Marilyn Bogue, Lead Economic Development Specialist, U.S. Small Business Administration • Marilyn.firstname.lastname@example.org (603) 225-1600 • Donna Ehrler, Senior Vice President and Market Manager, Northway Bank • email@example.com (603) 326-1025 • Jennifer Boulanger, Loan Officer, Capital Regional Development Council • firstname.lastname@example.org (603) 369-6147
Commercial Lending Presented by: Donna M. Ehrler Senior Vice President
1. Character • 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?
2. Capacity • 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
3. Collateral • 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.
4. Capital • 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?
5. Conditions • 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.
What Will A Lender Need to Know? • 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 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) • Personalfinancial statements & tax returns (3 yrs) • Resumes
Types of Commercial Loans • Working Capital Line of Credit • Short-Term Business Loan • Equipment Loan • Equipment Line of Credit • Commercial Real Estate Loan • Construction Loan • SBA Financing
Why Need an SBA Guaranteed Loan? • Collateral inadequate • Longer maturity needed • Lender’s legal or policy limit • Start-up or certain types of businesses • Leverage high (thin on equity)
Presenter: Jennifer D. Boulanger Loan Officer Capital Regional Development Council
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 • $20,000 per job created • Loan to business-flexible terms • Merrimack, Hillsborough and Sullivan Counties • CDIP Tax Credits • Merrimack, Hillsborough and Sullivan Counties • 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 603/369-6000 email@example.com • Liz Sweeney, Senior Loan Officer 603/369-6146 firstname.lastname@example.org • Jennifer Boulanger, Loan Officer 603/369-6147 email@example.com • Kimberly Imbriglio, Portfolio Administrator 603-/369-6073 firstname.lastname@example.org