Las Vegas. Finance Scene Investigation IAAPA By: Jerry Merola, AEM, LLC

Transcription

1 Las Vegas Finance Scene Investigation 2009 IAAPA By: Jerry Merola, AEM, LLC

2 State Of The Finance Industry Troubled Lending Portfolios Downscaled Financial Workforce New Government Regulations Wary Lenders Frozen Resale Markets

3 Where Are All The Financiers? Institutional Lenders Private Capital Traditional banks Finance Companies SBA, EDA, USDA Community Development Corp Manufacturers Financing Arm Individual Investors Structured Sub Debt Owner Equity REIT s and Hedge Funds

4 Searching For Clues To Success What s The Secret To Getting Financed? Presentation Is Key Performance Is Paramount Concept Is Essential

5 What s In Your Arsenal? Market Feasibility Study The Book Business Plan The Business Case City/Community Support The Market Private Investment Capital The Money

6 Establishing Lender Relationships Get To Know Branch Manager Meet District Lender Understand Your Banker s Lending Authority Attend Every Bank-Sponsored Event Possible Provide Project Updates And Newsworthy Reports Encourage Your Accountant To Communicate With Your Banker Indicate What Can Go Wrong As Well As Remedies Be A Resource For Your Banker

7 Determining Financial Structure How Much Equity Will I Need? How Much Debt Can My Project Afford? What Can I Offer As Collateral? What Terms Might Be Considered Reasonable? Must I Provide A Personal Guarantee?

8 Creating A Collateral Package Understand The Importance Of Collateral Determine What Is Classified As Collateral Confirm Method Of Valuation Is Realistic Identify Collateral Sources Outside Of Project Determine When To Use A Blanket Lien

9 Defend Your Industry! Be A Source of Knowledge Provide Your Own Data Don t Rely On Others! Understand How Bankers Use Industry Averages Identify Recent Success Stories Differentiate Yourself From the Competition

10 Alternate Funding Choices Initial Public Offering Venture Capital Private Investors Institutional Investors

11 Alternate Funding Source Comparison Lender Response Operating Interest Stock Personal Loan To Type Speed Restrictions Rate Interest Guarantee Value Traditional Banks Slow Moderate 6-8% No Yes 75% Max Venture Firms Medium To Fast High 15-20% Yes Sometimes 100% Max Private Investors Low Low 12-15% Sometimes No 90% Max

12 When Your Bank Says No, The Government Might Say Yes! SBA USDA EDA CDC Historic Tax Credits Tax Increment Financing

13 Small Business Administration SBA 504 SBA 7 (a) SBA Patriot Express

14 SBA 504 Loan Program Maximum Loan Amount is $9 Million Downpayment as low as 10% Offers Fixed Rate Options Can Be Used For Real Estate or Equipment Lending Terms Up To 10 Yrs / 20 Yr Amort Mortgage Terms Up To 20 Yrs / 20 Yr Amort Construction Financing Permissible

15 SBA 504 Criteria 50% Funding From Primary Lender 40% Funding via SBA Secondary Loan $1.5 Million Can Be Used For Equipment Net Business Income Must Be Less Than $2 MM Tangible Net Worth Less Than $6 Million Owner Occupied

16 SBA 7(a) Loan Program Loans Up To $2 Million Downpayment As Low As 10% No Prepayment Penalties (15 Yr Term or Less) Preferred Lending Through Local Institutions Available for Real Estate, Construction, Acquisition, REFINANCE, or Equipment Purchases

17 SBA 7 (a) Criteria Annual Revenues Not To Exceed $20 Million Employment Not To Exceed 100 Employees Must Occupy 51% of Existing Building Structure or 67% Of New Construction Maximum LTV on Real Estate = 90% Maximum LTV on Equipment = 100% Maximum LTV on Acquisitions = 80% Full Amortization Required

18 SBA Patriot Express Program Maximum Loan Amount: $500,000 Loan Guarantee of 75% to 85% Interest Rate of Prime % for 7 Years Decision Within 36 Hours Funds Provided By Local Lender

19 Patriot Loan Criteria Available to Veterans, Active Military, Reservists, National Guard & Spouses 51% of Project Must be Owned by Qualifying Individual Noted Above Reasonable Collateral Necessary For Loans Above $350,000 Prohibits The Teaching or Indoctrination Of Religious Beliefs

20 United States Department Of Agriculture WWW. USDA.GOV

21 USDA Business & Industry Loan Guarantee Program Maximum Loan: $10 Million Provides Indirect Financing To Rural Cities With Populations of 50,000 or Less Financing Available For Public or Private Entities Available For Development, Expansion, or Purchase of Equipment Provides Lender Guarantees of 80% (loans up to $5 MM) and 70% (loans up to $10 MM)

22 USDA Loan Criteria Primary Lender Required New Employment Plan Essential Collateral and Personal Guarantees Required Feasibility Study and Appraisal Necessary Maximum Equipment Term = 15 Years Maximum Real Estate Term = 30 Years Minimum Equity of 10% Required

23 Economic Development Authority

24 EDA Public Works & Economic Development Program Grants Created to Support Construction and Rehabilitation of Essential Public Infrastructure Available For Both Public and Private Projects Key Mission Is The Creation of New Jobs or To Retain Current Jobs and Investments Targeted Toward Under-performing Regions

25 EDA - Criteria Project Must Demonstrate A High Degree of Local Commitment Maximum Investment Rate of 50% Average Investment Level of $1.2 Million Infrastructure Improvements Must Benefit The Area s Economic Development, Renovation Of Old Industrial Buildings, Serve As An Area Incubator, Or Redevelop a Brownfield Site

26 Community Development Corporation Facilitates Real Estate Activity & Community Development Projects Targets Projects That Enhance Social, Cultural, Economic Welfare, and Educational Purposes That Serve The Common Good Serves As Incubator in Linking Funding Sources With Qualifying Projects Matching Fund Capability With US Treasury Of Up To $2 Million

27 Historic Tax Credits Applies To The Rehabilitation of Historic Structures Provides Financial Incentives For Preservation And Re-Use of Commercial Properties Incentives Can Be Sold To Generate Immediate Capital HTC s Can Serve As Equity Contributions To Satisfy Lending Requirements

28 Tax Increment Financing Uses Future Gains in Real Estate Taxes To Fund Current Improvements Used By Municipalities As a Method To Lure New Businesses To The Area Typically Districted For Blighted, Lower Income Areas Pays For Items Such As Parking Decks, Landscaping, Roadwork, Utility Access, and Other Infrastructure Elements

29 Potential Financing Structures Option #1 Option #2 50% Traditional Bank Debt 30% Government Direct Loan 20% Developer Equity 75% Traditional Bank Debt Government Sponsored Bank Guarantee 25% Developer Equity

30 Potential Financing Structures Option #3 Option #4 60% Bank Debt 20% Gov t Direct Loan 10% Comm Dev Loan 10% Developer Equity 50% Bank Debt 10% Comm Dev Loan 20% Private Investors 20% Developer Equity

31 Questions? Jerry Merola Amusement Entertainment Management, LLC 12 Elkins Road East Brunswick, NJ AEMLLC.com