Economic Development Finance

Maureen Collins-Williams

Director, Entrepreneurship Outreach

University of Northern Iowa

Maureen.Collins-Williams@uni.edu

#McWillie

Economic Development Finance

1 The Role of Finance in ED

2 Private and Public Sector

3 Kinds of Business Financing

4 Startup and Growth Finance

5 Finance Programs

Finance and the EDO

Core Competency

Multiple Partners

Multiple Rounds

Katy-Bees $15,000

Knowledge Base Needed by an EDo Finance Program Managemento Public Policy Behind the Programso Municipal Finance

Classic Kitchen and Bath

$450.000

Debt

Equity

Private Sector Lending

Urban Chickens…Omlet Chicken Coops $85,000

Commercial BanksCommunity Development Finance Institutions (CDFIs)Microfinance OrganizationsNon-Bank LendersTransactional Lenders

Private Sector Lending-Debt Financing

Dilutive Investmento Entrepreneur Loses Portion of Ownershipo Does Not Require Repaymento Business Capital is Used to Leverage Debt

Sourceso Friends and Familyo Angel Investors (Formal, Informal)o Venture Capital Organizations

Private Sector Lending-Equity Financing

The Role of the Public Sectoro Fill Gapso Public Good Exceeds Risko Dovetails Improves Access

Public Sector Financing

Disaster Recovery Technical Assistance Parkersburg, IA

EF5 Tornado 2008

Lowers the Cost of BorrowingReduces the RiskAddresses Special NeedsProvides PackagingDirect Lending/ Investment Technical Assistance

Public Sector Financing

NH Transfer and Storage$250,000

Factors Which Influence Finance Options

StageIndustryEconomic Conditions

Two Kinds of Need

oWorking Capital

oFixed Assets

Use of Funds

MainStreet Waterloo

Seasonal IndustriesContractorsBusiness w/Rapid GrowthNew to ExportingReplacement/Repair

Typical Needs

New Hampton MetalFab$650,000

Factors

o Debt:Equity

o Collateral

o Amount of Funding Needed

o Term

Choosing the Financial Tool

EntreFest 2013

EDO Direct Lending

Revolving Loan Funds

Microloan Funds

State Finance Programs

Federal Finance Programs

Crowdfunding!

Tools and Programs

Soybasics Candles$1.2 Million

EDO Direct Lending

Revolving Loan Funds

Tools and Programs

Peach Tree Tea Room $38,000

Microloan Funds

State Finance

Programs

Federal Finance

Programs

Tools and Programs

Buchanan County EDC

Microenterprise Programs

self-sufficiencyo increase economic self-sufficiency o 500 to $5,000 loans (peer lending)

self-employmento encourage start-up & expansion o $5,000-$15,000 loans

small-scale enterpriseo existing businesses poised for expansiono $15,000 to $25,000 loans

MaggieVandewalle,Nashville, TN

Direct Microlending

advantagesoControl of Funds oGroup solidarity o Borrowers Accountable

disadvantageso Timeo Identifying LRC

Please See Your SBEManual For ElementsOf Effective Micro-loan FundLending

Pages 162-166

Cost EffectivenessDelivering Microcredit is Costly o extensive technical assistance & training

Self Sufficiency Ratioo internally generated funds o total program costs

Income Sourceso application fees and closing costso interest earned from lending or uncommitted fundso fees for technical assistance & training

The One Hat Band

Federal Programs SBA

7(a)

504

Microloan Program

Disaster Assistance

Small Business Investment Company (SBIC)

MoGo Organics

Crowdfunding

Small Investments Made by Many

Tokens of Appreciation

Online

JOBS Act

o Waiting on Rules

Seed Money, Kickstarter

PlatformsKickstarter

Indiegogo

RocketHub

GoFundMe

Razoo

Crowdrise

Pledge Music

Sellaband

Appbackr

Crowdfunder

CrowdLever

Fundarole

iCrowd

Petridish

Ulule

Earlyshares

Startsomegood

Sportfunder

33needs

ChipIn

Buzzbnk

InventionBuy.com

Crowdtilt

Go4Funding

Cumplo

Dancefunder

CrowdBnk

FundAGeek

Inventory $ 30,000 Furniture and Fixtures $ 15,000Equipment $ 5,000Supplies $ 5,000Accounting and Legal $ 1,000Signage $ 2,000Pre-Opening Training Costs $Insurance $ 500Deposits on real estate $ 1,000Deposits on utilities $ 500Remodeling $ 20,000Operating Capital $ 20,000Total Financial Need $100,000

Bartlett’s Boutique

$100,000 total need

$ 15,000 owner equity

$ 85,000 outside investment needed

Her package should look something like this:

 

$100,000 total need

$ 18,000 more owner equity

$ 15,000 owner equity

$ 67,000 outside investment needed

Bartlett’s Boutique

Cost Collateral ValueInventory $ 30,000 $15,000 (50%)Furniture and Fixtures $ 15,000 $ 7,500 (50%) Equipment $ 5,000 $ 2,500 (50%)Supplies $ 5,000 $ 0Accounting and Legal $ 1,000 $ 0Signage $ 2,000 $ 0Pre-Opening Training Costs $ $ 0Insurance $ 500 $ 0Deposits on real estate $ 1,000 $ 0Deposits on utilities $ 500 $ 0Remodeling $ 20,000 $ 0Operating Capital $ 20,000 $ 0 Total Financial Need $100,000 $25,000  

Bartlett’s Boutique

Economic Development Finance

Maureen Collins-Williams

Director, Entrepreneurship Outreach

University of Northern Iowa

Maureen.Collins-Williams@uni.edu

#McWillie