VIRGINIA SMALL BUSINESS FINANCING AUTHORITY

Transcription

1 VIRGINIA SMALL BUSINESS FINANCING AUTHORITY PRESENTATION TO THE HOUSE APPROPRIATIONS COMMITTEE Virginia House of Delegates January 24, 2011

2 Department of Business Assistance Department of Business Assistance Virginia Jobs Investment Program Virginia Small Business Financing Authority Business Information Services

3 ROLE OF THE VIRGINIA SMALL BUSINESS FINANCING AUTHORITY Per , the VSBFA works in partnership with private sector lenders to provide financial assistance to small and other eligible businesses in support of the Commonwealth s economic development efforts. We fulfill this role by providing loan participation, loan guaranty, loan loss insurance, and conduit bond financing programs, as well as technical assistance, to businesses and localities. We currently offer 9 financing programs, some of these are for other state agencies. We address a fundamental need for business growth: Access to Capital.

4 ECONOMIC DEVELOPMENT LOAN PARTICIPATION PROGRAM Low interest gap financing direct loans to businesses and/or localities to fund economic development projects. Typically loans are subordinate to financial institution s loan. VSBFA staff underwrites the loan request, disburses loan proceeds if approved, & collects monthly payments. We fill the gap financing need not filled by commercial bank loans and equity. We also lend to localities in support of economic development projects. Avg. loan size: $547K No annual state appropriation. This is a revolving loan fund. Program funded through federal grants (1977, 1989, 1995). Some federal restrictions on usage apply. Cannot be used statewide. Default rate: 5.2% Avg. Leveraging (Private $ to Public $) per Project: $10:$1 Leveraging of Public $ on Portfolio basis: $52:$1

5 LOAN GUARANTY PROGRAM VSBFA provides a deficiency guaranty to a financial institution on a loan by loan basis to support business loans that don t qualify conventionally. VSBFA staff underwrites the credit request, commits the guaranty to the financial institution if approved, & monitors the credit through the financial institution. Loans can be used for fixed asset purchases or working capital. Avg. loan size: $203K Evergreen program with periodic state capital infusions. ($900K in 1985 & $1 million in FY 11) & VSBFA bond fees. This is a statewide program. Default rate: 1.7% Leveraging of Public $ (Private $ to Public $) : $21:$1

6 VIRGINIA CAPITAL ACCESS PROGRAM Financial institution makes the business loan and enrolls it in VCAP. Financial institution charges a loan enrollment fee to the borrower which is matched by the VSBFA. Enrollment fee & VSBFA match build a loan loss reserve pool for the financial institution. Can be used for fixed asset purchase or working capital. Avg. loan size: $60K Program funded through periodic state capital infusions ($350K , $250K 1999, $250K 2001, $300K 2005, $500K ) & VSBFA bond fees. This is a statewide program. Default rate: 6.9% Leveraging of Public $ (Private $ to Public $) : $41:$1

7 PRIVATE ACTIVITY BOND PROGRAM VSBFA is a conduit issuer of tax- exempt or taxable private activity bonds. Bonds can be used to assist small manufacturers or 501c(3) non-profit entities. Bond funds can be used for the acquisition, construction or expansion of facilities and for equipment purchases. Tax-exempt status provides for sub-prime pricing, long-term financing, and potential for 100% financing. No financial obligation of the Commonwealth or the VSBFA.

8 PROGRAMS FOR OTHER STATE AGENCIES Other State Agencies Leverage VSBFA Expertise: Dept. of Social Services Child Care Financing Program (Direct Loan Program) Dept. of Environmental Quality Environmental Compliance Fund (Direct Loan Program) Dept. of Minority Business Enterprise PACE Program (Capital Access Program and Loan Guaranty) Tobacco Commission TCAP (Capital Access Program) Virginia Tourism Tourism Micro-Loan Program (proposed) (Loan Participation & Loan Guaranty Program)

9 RESULTS Since inception, we have made over 2,000 loans, which enabled over $800 million in private financing, & helped businesses create and retain over 24,000 jobs Currently we have: Over $1 billion in bonds outstanding Over $16 million in loans outstanding Over $2 million in guaranties outstanding Over 500 current loans & bonds on the books Responded to 923 requests for technical assistance for the fiscal year and made over 400 referrals to financial institutions and equity providers.

10 Existing 2011 programs The Innovation Continuum Eminent scholars ( $1.7M) CRCF - research - facilities loans - SBIR match ($0M) Proposed 2012 programs Research Tax credit ($5M) CIT GAP Fund ($1M) Angel Investor Tax credit ($5M) Capital Gains tax Exemption CIT GAP Fund ($0M) ideation RESEARCH PROOF OF CONCEPT OR INVENTION EARLY STAGE DEVELOPMENT PRODUCT DEVELOPMENT PRODUCTION CIT GAP Fund ($3M) CIT GAP Fund ($2M) CRCF ( $4M) emerging technology scholars CRCF ($4M) research match CRCF ( $12M) commercialization VRTIP program

11 GAP Overview House Appropriations January, 2011 Peter Jobse

12 CIT GAP Funds CIT GAP Funds RESEARCH PROOF OF CONCEPT OR INVENTION EARLY STAGE DEVELOPMENT PRODUCT DEVELOPMENT PRODUCTION GAP Tech Fund GAP BioLife Fund GAP Energy Fund GAP Cyber Security Fund

13 Investment portfolio - 40 investments made to date - electrical components and materials - drug discovery - medical devices and medical testing - cyber security - bio fuels - business application software - mobile applications - 35 companies active, 5 inactive - Fiscal year 2010 four investments - Fiscal year 2011 targeting 9 new investments - Commonwealth potential - 35 new companies per year

14 GAP Funds Lead Analysis Top of the Funnel Presented to the IAB FY05 FY06 FY07 FY08 FY09 FY10

15 GAP Funds University Spin-Outs GAP Portfolio George Mason University Invincea University of Virginia Global Cell Solutions Soft Tissue Regeneration Tau Therapeutics Virginia Tech Airak Miserware NBE Piedmont BioProducts 2011 Pipeline University of Virginia Diagnostic for infectious diseases Ultrasound technology for spinal taps George Mason University Virtualization-based security solution William and Mary Therapeutic for PTSD and anxiety disorders Virginia Tech Therapeutics for diabetes and inflammation Meniscus replacement technology

16 GAP Funds Investment to Date $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 CIT Value (Q4 - $4.71M; Q1 - $4.74M) CIT Investment (Q4 - $4.1M; Q1 - $4.1M)

17 GAP Funds Leverage Value $70,000,000 $60,000,000 $50,000,000 CIT Investment: Q4 - $4.1; Q1 - $4.1 3rd-Party Investment: Q4 - $59.1; Q1 - $59.9 $40,000,000 $30,000, x $20,000,000 $10,000,000 $0 Q3 FY05 Q1 FY06 Q3 FY06 Q1 FY07 Q3 FY07 Q1 FY08 Q3 FY08 Q1 FY09 Q3 FY09 Q1 FY10 Q3 FY10 Q1 FY11

18 Q3 FY10 Q1 FY11 Q1 FY10 GAP Funds Enterprise Value $140,000,000 $120,000,000 Enterprise Value: All Q4 - $117.0; Q1 - $117.9 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 Q3 FY05 Q1 FY06 Q3 FY06 Q1 FY07 Q3 FY07 Q1 FY08 Q3 FY08 Q1 FY09 Q3 FY09

19 GAP Funds VA GSP Contribution Revenue Forecast - 28 Active Portfolio Companies $1,400 $1,200 $1,000 $800 Revised Forecast 100% Success Rate 75% Success Rate 50% Success Rate 25% Success Rate (M) $600 $400 $200 $

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21 Catalyzing Innovation in the Commonwealth of Virginia Study undertaken on behalf of the Virginia Economic Development Partnership May 5, 2010

22 Benchmarking Virginia s Innovation Foundations Summary Results Weakness Average Strength Financial Resources Human Resources VC investment ($) Small business loans ($) Advanced S&E degrees STTR awards ($) SBIR awards ($) NAEP Science & Math Scores S&E degrees Labor force growth Innovation Resources Patents Academic R&D expenditures ($) Industrial R&D expenditures ($) Academic R&D productivity Federal R&D performance ($) Innovation Economy Outcomes Business Start-Ups Exports ($) Entrepreneurs R&D to GSP ($ ratio) Tech Fast 500 companies Real GSP growth

23 Summary Assessment Global and national economic realities challenge forwardlooking states to expand industries driven by technology and innovation. Many of Virginia s high-tech industries serve the Federal market. While important, this narrow focus limits the state s diversity and overall ability to provide high value jobs. Virginia possesses important assets and initiatives related to innovation, but the Commonwealth has not reached its potential. An initiative to stimulate innovation and catalyze collaboration among industries, universities, laboratories, etc., can transform Virginia into a model innovation economy.

24 Strategic Focuses for Virginia Enhancing Research Excellence at Universities Engaging Private Sector Collaboration Across Sectors And Disciplines Catalyzing Innovation Nurturing Entrepreneurship and Access to Capital Making Smart Technology Choices

25 Lessons from the Research Virginia needs a long term initiative to sustain innovation and catalyze collaboration among the private sector, universities, federal laboratories, etc., to transform Virginia into a Model Innovation Economy and provide high value jobs. Must have strategic elements include: Engaged and sustained private sector leadership and collaboration. Smart technology choices. Elevated research excellence at universities. Nurturing of entrepreneurship and enhanced access to capital. Create the Virginia Innovation Alliance. Public/Private Partnership with greater research investment (focused and accountable for results). Align existing state resources seamlessly. Must transcend any given Administration.

26 VRTIP Comprehensive Tool for Innovation Virginia ideation RESEARCH PROOF OF CONCEPT OR INVENTION EARLY STAGE DEVELOPMENT PRODUCT DEVELOPMENT PRODUCTION CIT GAP Fund ($3M) CIT GAP Fund ($2M) CRCF ( $4M) emerging technology scholars CRCF ($4M) research match CRCF ( $12M) commercialization