Meet the Business Lenders. Oakland City Hall September 18, 2014

Transcription

1 Meet the Business Lenders Oakland City Hall September 18, 2014

2 Thanks to our Sponsors

3 Who is the SBDC?

4 Region Northern California SBDC Locations 1. Alameda 2. Central Coast 3. Contra Costa 4. Humboldt (lead) 5. Livermore 6. Napa 7. Marin 8. Mendocino 9. North Coast 10.San Francisco 11.San Mateo 12.Silicon Valley 13.Sonoma 14.Solano

5 Partnership SBDCs stimulate sustainable economic prosperity throughout coastal Northern California and the greater San Francisco Bay area. Through world class, transformative business counseling and training, we assist entrepreneurs with solutions for more profitable business management to thrive in today s global market The purpose of the Oakland Metropolitan Chamber of Commerce is to promote commerce and industry, to advance economic growth

6 Our Services Free One-on-One Consulting Free & Low cost Seminars

7 Seminar Examples Access to Capital Starting a Business Social Media Marketing Retailing Starting a Restaurant Starting a Food Business Finding Your Core Customer Website Development Successful Business Plans Meet the Lenders Government Contracts Law for Entrepreneurs Buying a Business Crowdfunding and Alternatives How to Pitch Your Company emarketing Bookkeeping

8 Feeling like you are in it alone?

9 ACSBDC Consultants Gerry Baranano Technology Bob Lane Gov. Contracts Carolyn Johnson Bus. Planning Ron Barrett Loan Specialist Dorian Webb Ecommerce/Retail Dave Mitroff emarketing Deagon Williams Food/Restaurants

10 ACSBDC Consultants Ed Duarte Web Technology Don Stoneham Procurement Bob Komoto Import/Export Deb Doyle Branding Dave Bokash Web Technology Paula Mattisonsierrra Retail Henry Charlot Bus. Planning

11 How to register for services

12 Technology Initiative o Focuses on qualified technology companies. o Assists with the commercialization of technology and preparing for fund raising o No fees for its services and takes no ownership interest. o Goal is to help technology companies start, grow and thrive

13 Are we effective? SBDCs are required to track and measure results o New Business Starts o Jobs Created o Jobs Retained o Increases in Sales o New Loans Secured o New Equity Capital Secured

14 ACSBDC Economic Impact 3, Business Starts 266 Jobs $12.8 MM Revenue Generated $25.2 MM Loans Secured $23.2 MM Equity Invested 1,085 Companies Counseled Seminar Attendees

15 Please complete the Evaluation form at the end

16 Presentation Download

17 Our Panelists Name Organization Area of Expertise Corrine Gentile Working Solutions Microloans Scott Lewis OBDC Small Bus. Loans/SBA Anne Lufkin Kiva Zip Peer to peer lending Eric Ng Wells Fargo General Business Lending Carly Perera Pacific Community Ventures Small Business Loans Marlow Schindler SBA SBA Lending and Services Bob Thompson Bay Area Development 504 SBA Loans (real estate)

18 Questions To Get Started How much money do you have? How much money do you need? What type of money is best for your business purpose?

19 FINANCING OPTIONS

20 SBA Loan Programs The Big 3 SBA Microloan 7(a) Business Loan 504 Certified Development Company (CDC) loan 20

21 SBA Microloans at a glance Maximum Loan Amount $50,000 Average Loan Amount $26,000 Interest Rate Fixed. Averages 7.9% Maximum Loan Term Collateral Use of Proceeds 6 years Microlender s own collateral policy Working capital, inventory, supplies, & equipment only start-ups considered Volume of Loan Activity in SFDO 57 loans for $1.5 million volume, FY 2013 Lenders Non-profit Microlenders approved by SBA Special Features Free technical assistance for the borrower 21

22 SBA 7(a) Guaranty Loans at a glance Maximum Loan Amount $5,000,000 Average Loan Amount $539,000 Interest Rate Maximum Loan Term Collateral Use of Proceeds UsuallyVariable. Maximum interest rate is generally Prime % 10 years (up to 25 years for real estate) All available collateral (including personal assets) up to loan amount Working capital, inventory, equipment, RE, debt repayment, bus. acq., franchise Volume of Loan Activity in SFDO 1,125 loans for $607 million, FY 2013 Lenders Special Features Most banks, some credit unions, and a few non-bank lenders No prepayment penalty unless loan term exceeds 15 years 22

23 SBA 504 CDC Loans at a glance Maximum Loan Amount $5,000,000 ($5.5M for manufacturers & energy efficiency projects) Average Loan Amount $890,000 Interest Rate Fixed. 4.99% as of September 2014 Maximum Loan Term Collateral Use of Proceeds 20 years, fully amortizing 2 nd D/T on project property Only for acquisition or construction of commercial RE, or heavy equipment Volume of Loan Activity in SFDO 310 loans for $258 million, FY 2013 Lenders Special Features Non-profit Certified Development Companies (CDC s) approved by SBA SBA loan is 100% guaranteed, may not exceed 40% of project value, & is in 2 nd lien position behind a non-guaranteed bank loan. Minimum 10% borrower injection. 23

24 OTHER LOAN PROGRAMS Non-SBA loan sources include: Conventional Loans Special Funds eg. SAIL OBDC Special Programs Other

25 ALTERNATIVE FINANCING

26 Alternative Financing Factoring Leasing Grants Crowd Funding/Peer to Peer

27 Factoring When in business sell accounts receivable to a third party (factor) Typically: Factor provides cash advance (70-85%) of the receivables Upon receipt (payment is directed to the factor), the factor pays the remainder less its commission and fees Allows company to use value of funds due in the future Usually a higher cost that many other forms of financing

28 Leasing Lessee obtains the use of assets owned by Lessor for a fixed period Lessee pays Lessor regular, tax-deductible lease payments May be applicable for items such as retail FF&E, restaurant equipment, technology Lease payment dependent on equipment type, deal terms, and lessee credit

29 Peer to Peer Lending Arrangement of lending money to unrelated individuals with an intermediary Takes place on online platforms that facilitate and service the loan Typically unsecured loans Platforms validate borrower information Lenders (individuals) choose to whom they loan funds Lending Club, Prosper, Kiva Zip

30 Crowdfunding A new source of finance for startups A Crowd Funding or Crowdfunding platform can be used to raise money for a campaign (may include startup funding) Contributors do not receive ownership, rather they receive something of value (tickets to events, t-shirts, etc.) Very marketing/social media intensive Recently, the JOBS Act expanded this concept to provide for money to be raised from investors up to $1 million in exchange for equity ownership Signed into law April 2012 SEC proposal issued October 2013 In comment period, expected effective date unknown

31 Grants Are you a for-profit or a not-forprofit business? Most grants are for non-profits. SBIR Grant (Small Business Innovative Research) i.e. for profit scientific companies like bio-tech

32 WHAT LENDERS LOOK FOR

33 The 5 C s of Credit 1. Coverage 2. Capital 3. Capacity 4. Character 5. Collateral

34 1. What is coverage?

35 1. Coverage Coverage means: Does the business generate enough profit to pay back the interest and principal on the loan?

36 1. Coverage Will the business earn enough revenue to: Pay all the bills Make the loan payments Pay the owner the value of work performed Leave profit to grow the business Prepare a cash flow statement showing how the loan can be repaid

37 1. Coverage (Revenue Expense Owner Salary) / (Principal & Interest Payment) Typically at least 1.25 or more

38 2. What is Capital? Getting a Loan 38

39 2. Capital Capital means: Can the owner put some of their own money into the company?

40 2. Capital No lender will lend all of the money needed to operate the business The business owner is expected to contribute some of the money- this is called equity or owner s capital Expect to provide approximately 20-33% of the funds needed to start a new business

41 3. What is Capacity?

42 3. Capacity Capacity means: Does the owner have the necessary experience to run the business?

43 3. Capacity Lenders will always look to see if the business is in a position to succeed Owner and the management team Demonstrated experience in the industry for which you desire a loan Ways to improve your chances if you lack experience: Get a partner Get a committed advisory board

44 4. What is character?

45 4. Character Character means: Is the owner trustworthy and do they have good character?

46 4. Character Lenders are interested in who you are They are lending you money & want to be repaid Do you honor your agreements? Credit reports are the major source of information on character Fair Isaac Corporation (FICO) score is the defacto industry standard Know your FICO score before you start creditkarma.com, creditsesame.com, myfico.com

47 Work with a professional credit counselor if your FICO score is below 640 operationhope.org 47

48 5. What is Collateral? The Onion Issue 44 18

49 5. Collateral Collateral means: What can be used to repay the loan if the company goes out of business?

50 5. Collateral While cash-flow is the primary source of loan repayment, lenders often want a back-up or secondary source of repayment should anything go wrong Collateral is anything of value used as security for a loan Examples: equity in real estate, bonds, inventory, equipment, accounts receivable

51 What else banks look for Years in Business Business History Your Business Plan 2 years of monthly financial projections Secondary Source of Income Personal Guarantee Hmmm that is a REALLY good Business Plan!

52 What Documents to Bring A current Profit and Loss Statement and Projected Cash Flow Current Personal Financial Statement Itemized Use of Proceeds List of Collateral and estimated value. Business Plan Schedule of Business Debt Personal and Business Tax Returns last 3 years Copy of leases and all pertinent agreements

53 3. How to Choose

54 THANKS EVERYONE