Micro Business Lending and Alternative Financing

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Margery Maxwell
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1 Micro Business Lending and Alternative Financing North Carolina Main Street Conference New Bern, NC Thursday January 30, :30 am 11:45 am Scott Daugherty Asst. Vice Chancellor and Executive Director North Carolina SBTDC

30, 2014 10:30 am 11:45 am Scott Daugherty Asst.

2 Some Background on the Recent Small Business Financing Environment Impact of the Recession Deep, prolonged and with particularly significant impact on small businesses Small business failure rates up significantly, and overall employment down Key Reality Factors Significantly increased regulatory oversight of lenders Heavier scrutiny of loan documentation and loan portfolios Significant concerns about decline in real estate values North Carolina

overall employment down Key Reality Factors Significantly increased regulatory oversight of lenders Heavier

3 Dramatic impact on small business borrowing Sharp decrease in collateral value of assets (real estate and receivables) to support loans Limited start up activity Significant belt tightening Recovery is now clearly underway New business starts are on the increase Small business borrowing is now at pre-recession levels but job creation is slow by small businesses 4 th quarter 2013 borrowing this year up very significantly a leading indicator for jobs to come Stimulate efforts by Federal Government to increase capital availability for small businesses

business borrowing is now at pre-recession levels but job creation is slow by small businesses 4 th quarter 2013 borrowing this year up

4 Some Resources and Financing Programs The best available small business financing guidebook Capital Opportunities Report Updated regularly and available online free downloads Sample Business Plans prepared by the SBTDC for the North Carolina Department of Commerce %20-%20Business%20Plans.pdf

5 Capital Opportunities Report

6 North Carolina s Department of Commerce Sample Business Plan

7 State Small Business Credit Initiative Program Authorized and funded under the Small Business Jobs Act (2010) Administered thru the US Treasury Department Managed on behalf of North Carolina by the Rural Center Engages and leverages capital from private sector lenders and investors Supports two lending programs and a Fund of Funds

Managed on behalf of North Carolina by the Rural Center Engages and leverages

8 Capital Access Program (CAP) A loan loss reserve program (up to 4% per loan originated) Small loan amounts and easy to understand and administer Rural Center

9 Loan Participation Program (LPP) Rural Center directly purchases up to 20% of eligible loans made by participating lenders Larger loan amounts to small and mid-sized companies quite popular Rural Center

participating lenders Larger loan amounts to small and

10 SBA Micro Loan Program SBA generated loans made through intermediary lenders (e.g. Self-Help Credit Union, Mountain Biz Works) Loans of up to $50,000, average loan is about $13,000 Used for operating expenses, not facilities - SBA Micro Loan Program

Self-Help Credit Union, Mountain Biz Works) Loans of up to $50,000,

11 Crowd Funding An Emerging and Exciting New Source of Equity Why is this an important tool Crowd funding has been around for some time some legal and some not Food Lion example Non Profit example Non-financial return example (Kickstarter and Indiegogo) Key concerns with the potential for fraud and abuse

some not Food Lion example Non Profit example Non-financial return example

12 Federal Recognition of Crowd Funding US 2012 Jobs Act authorization of crowd funding regulation SEC has been very cautious Has allowed investments by accredited investors via secure websites Has proposed rules to allow investments by non-accredited investors (generating more questions than answers)

investments by accredited investors via secure websites Has proposed rules

13 States Beginning to Push Ahead on Intrastate Crowd Funding Exemption Several states have already acted (Michigan, Wisconsin, Georgia, Kansas) North Carolina is poised to act North Carolina Jobs Act (2013/14) Passed the House (103 to 1) Alive in the Senate for 2014 short session likely to pass

North Carolina is poised to act North Carolina Jobs Act (2013/14) Passed

14 Questions? Contact Scott Daugherty at (919)

15 Scott Daugherty Asst. Vice Chancellor and Executive Director North Carolina SBTDC

SSBCI PROGRAM PROFILE: CAPITAL ACCESS PROGRAM. May 17, 2011 State Small Business Credit Initiative (SSBCI) U.S. Department of the Treasury

SSBCI PROGRAM PROFILE: CAPITAL ACCESS PROGRAM May 17, 2011 (SSBCI) U.S. Department of the Treasury What is a Capital Access Program (CAP)? A CAP is a loan portfolio insurance program that enables small