Financing Value-Added Ag Ventures

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• Financing Value-Added Ag Ventures
• Gail Gesell

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Sources of Small Business Financing

• Self-funding
• Expand current business
• Re-direct to new niche

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DogDayz Playhouse and Retreat
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Sources of Small Business Financing

• R D
• Grants
• Cooperative Agreements

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Small Business Innovative Research

• Department of Agriculture
• Department of Commerce
• Department of Defense
• Department of Education
• Department of Energy
• Department of Health and Human Services
• Department of Transportation
• Environmental Protection Agency
• National Aeronautics and Space Administration
• National Science Foundation

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SBIR

• Qualifications
• American-owned and independently operated
• For-profit
• Principal researcher employed by business
• Company size limited to 500 employees

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Three Phases

• Phase I - startup phase
• Up to 100,000
• 6 months
• explore technical merit or feasibility of
  idea/technology
• Phase II
• Up to 750,000
• 2 years
• Phase III
• Phase II innovation moves from the laboratory
  into the marketplace
• No SBIR funds support this phase. The small
  business must find funding in the private sector
  or other non-SBIR federal agency funding.

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Access to SBIR Money

• Pre-Solicitation Announcement (PSA) - single
  source for the topics and anticipated release and
  closing dates for each agency's solicitations
• US Small Business Administration Office of
  Technology 409 Third Street, SW Washington, DC
  20416 [phone]

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Sources of Small Business Financing

• Government contracts

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• FedBizOpps.gov is the single government
  point-of-entry (GPE) for Federal government
  procurement opportunities over 25,000
• Government buyers publicize their business
  opportunities by posting information directly to
  FedBizOpps via the Internet
• FedBizOpps (FBO) single portal for commercial
  vendors seeking Federal markets for their
  products and services search, monitor and
  retrieve opportunities solicited by the entire
  Federal contracting community
•  

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Sources of Small Business Financing

• Angel funds
• Venture capital

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Sources of Small Business Financing

• Receivables factoring
• Equipment financing

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Sources of Small Business Financing

• Loan from financial institution
• Line of credit
• Term loan

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SBA Guaranteed Loan Programs

• 504 Certified Development Company Loan Program
• 7(a) Loan Guarantee Program

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Benefits of an SBA Guaranteed Loan

• SBA guarantee encourages lenders to loan money
• Money available for start-up
• No pre-payment penalty for loans under 15 years
• Reduced Owner Investment Collateral
  Requirements
• No balloon payments
• Interest rate limits
• Longer amortization

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Eligibility for SBA Guaranteed Loans Must
qualify as Small based on NAICS

• Manufacturing 500-1,500 employees
• Wholesaling 100 employees for financial
  assistance programs(500 employees for
  contracting assistance programs)
• Services 6 million to 29 million in annual
  receipts, or
• 1,500 employees
• Retailing 6 million to 24.5 million in annual
  receipts
• General and heavy construction 17 million to
  28.5 million in annual receipts
• Special trade construction 12 million in annual
  receipts
• Agriculture From 750,000 to 6 million in
  annual receipts

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Eligibility for SBA Guaranteed Loans

• Operated for profit
• Open to the general public
• Owners must be U.S. citizens or have permanent
  residence status
• Owners must have financial stake in the business

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Copper Ridge Alpacas, LLC
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504 Certified Development Company (CDC) Loan
Program

• Proceeds from 504 may be used for
• Purchasing land
• Construction of new facilities
• Improvements to existing facilities
• Improvements to real estate
• Purchase major machinery and equipment
• Financing
• SBA Debenture (CDC) 40
• Bank 40-50
• Borrower 10-20

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504 Certified Development Company (CDC) Loan
Program

• Debenture
• Maximum typically 1,500,000
• 2 million for projects meeting public policy
  goals
• 4 million for small manufacturers
• Create or retain one job for every 50,000
• Fees approximately three (3) percent of the
  debenture
• Interest rate calculated from the current rate
  for 5-year and 10-year U.S. Treasury issues
• Maturities of 10 or 20 years
• Collateral - project assets being financed
• Personal guaranties required from principals

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504 Certified Development Company (CDC) Loan
Program

• Owners must be of good character   
• Size Standards
• Tangible net worth up to 7 million  
• Preceding 2 year average net income after taxes
  up to 2.5 million
• Business cannot be engaged in speculation or
  investment in rental real estate 
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7(a) Loan Guarantee Program

• Working Capital
• Purchase Equipment/ Furniture/ Fixtures
• Acquire Land/Building
• Construct New Facilities
• Debt Refinancing
• Purchase an Existing Business

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INELIGIBLE Uses

• Purchase partial ownership of a business
• Repay owners for their investment in the business
• Pay for delinquent taxes
• Refinance of delinquent loans
• Speculative, lending or investing purposes
• Real Estate held for investment, sale or rent
• Illegal or gambling activities nor for sexually
  oriented businesses
• Business Pyramids
• Political, lobbying or religious activities

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7(a) SBA Guarantee Program

• Loans up to 2.0 million
• SBA can guarantee up to 1,500,000
• Multiple loans permitted up to 2.0 million total
  guarantee
• Percent of Guarantee
• 85 guarantee for loan amounts of 150,000 or
  less
• 75 guarantee for loan amounts over 150,000
• SBA guarantee for lenders
• Borrowers responsible for 100 loan repayment

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7(a) Guarantee Loan Maturities

• Working Capital
• 1 to 10 years depending on cash flow needs
• Equipment
• up to its expected useful life
• Building/Land
• up to 25 years

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(No Transcript)
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Financial Information Required - Established
Business -

• Current balance sheet past 3 full years income
  (profit loss)
• Projection of revenues, expenses profits for
  the next 12 months
• Cash flow projection for the next 12 months
• Written business plan with narrative of major
  assumptions
• Current personal financial statement for each
  owner, partner, or stockholder
• List of collateral
• Statement of the amount and intended uses of the
  loan

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Financial Information Required - New Business -

• Prepare a detailed estimate of how much capital
  is needed to start
• 12 month projection of revenues, expenses and
  profits
• 12 month projection of cash flow
• Written business plan with narrative of major
  assumptions
• List of collateral

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SBA Resources

• District Office
• www.sba.gov/in
• Small Business Development Centers
• SCORE
• Womens Business Centers

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Financing Value-Added Ag Ventures