WHATCOM COUNT Y
FINANCE FORUM
CAPITAL SOURCES TO PARTNER WITH
LENDERS
Sponsored by the Port of Bellingham and WWU
Small Business Development Center
October 30, 2012
Western Washington University
Small Business Development Center
Insight ~ Solutions ~ Success
Collaborative Partnership of 1100 SBDCs in
U.S.
U.S. Small Business Administration
Washington State University
Western Washington University
Whatcom County
Port of Bellingham
City of Bellingham
SBDC SERVICES: NO COST
Business Advising : Confidential, Personal
Research: SBDCnet, Export, WWU Graduate Students
Resources: WWU Student Projects, Interns, SBA
Training
Creating &Sustaining Business Success
HOW SUCCESS IS MEASURED
CLIENT CAPITAL FORMATION
SAVED OR CREATED JOBS
CLIENT SALES & INCREASES
Average 26.8 % increase in SBDC client sales growth
vs. 2.7% for WA businesses 2011
Change in Employment for SBDC clients was 9.4% vs
-1.6% for WA businesses 2011
* www.wsbdc.org
SBDC BUSINESS ADVISING
Business Advising
Financial Analysis & Cash Management
Marketing & Sales
Human Resources
Operations
Technology
Profitability
Export
Business Plan Review
Loan Proposal Development
Alternative Financing
HOW WE CAN HELP LOAN PROCESS
Borrower Education
5 C’s
Business Plan Development
Financial Analysis
Financial Projections
Financial Package Preparation
Tailor to lender specs: templates, format, questions
FUNDING PROCESS
Prequalification:
 Bio or Resume
 Cash Flow Forecast
 100% Value to Principal
 Equity Injection– 10-50%
Credit Score –680+ and/or (D & B)
NO
How Much & For What?
YES
 Sources & Uses List
 Cash Flow Forecast
Funding Sources:
 Banks
 Community
 Government
 Investors
 Acquisition
Put Loan Package Together
What can you do?
 Credit Repair
 Business Improvements
Review with SBDC CBA
 Improve Cash Flow
 Improve Financial Ratios
 Close Business
Submit Loan package To Lender(s)
BENEFIT: WHAT’S IN IT FOR LENDERS
Lender saves time screening applicants
Lender shortens approval cycle
Lender reaches goals faster
RECENT FINANCING RESOURCES
Whatcom County Finance Guide
Guide for Canadian Investment in Whatcom County
SBDC OVERVIEW
WSBDC Certification– Certified Business Advisor
Owned or Managed a Small Business
Graduate Level Education and/or Industry Specialty
Work in Depth with Hundreds of Businesses a Year
SBDC: HERE TO SERVE YOU
WWU SBDC
115 Unity St #101
Bellingham, WA 98225
SBDC@wwu.edu
360 778 1762
Whatcom County Finance Forum
Bellingham, WA
October 30, 2012
U.S. Small Business Administration
Serving Washington State and Northern Idaho
Seattle District Office: 206-553-7310
Spokane Branch Office: 509-353-2800
www.sba.gov/wa/seattle
SBA Loan Programs
7(a) loans up to $5 million;
504 loans up to $5 million for standard borrowers
(supporting a total project of $12.5 million), and
$5.5 million for manufacturers (supporting a total
project of $13.75 million); and
Patriot Express to $500,000.
Microloans to $50,000.
504 Loans
 Suited
for larger capital expansion projects
 50/40/10 structure is typical
 SBA share up to $1.5M - $2M
 Designed to facilitate job creation
 CDC’s:
 Evergreen
CDA - (206) 622-3731
 Northwest BDA - (800) 540-1748
 Ameritrust CDC - (206) 274-5152
Microloans
 Designed
for “pre-bank” customers
 Loans range from $500 to $50,000
 Intensive technical assistance prior to
funding
 Microlender:
 Community
Capital Dev. – (206)324-4330
Patriot Express

A streamlined loan product available to:
•
•
•
•
Veterans, service-disabled Veterans, Active-duty Service
members in the Transition Assistance Program (TAP),
Reservists & National Guard
Current spouses of the above
Widowed spouses of Service member or veteran who died
during service or of a Service-connected disability
Express processing – up to $500,000
Why Lenders Use SBA Financing
 SBA Guarantees up to 85% of loan
 Mitigates risk to Lender
 Lender wants to give borrower a longer term
 Collateral may not be adequate for loan
 Business Sector / Industry issues
 New businesses
 Lending institution policy
Resource Partners
www.
wsbdc.org
 SBDC
Bellingham:Jennifer
Shelton, (360) 7781762
 WBC – Everett WA
Giselle Saguid,(425)
423-9090
 SCORE – Bellingham
(360) 685-4259
www.seattleccd.com
Training Available
 Online
via SBA website, for small business
 Loan briefings virtual 1st Thursday each
month noon-1:00pm, offered by SBA
 Score Workshops
 WBC – Partnering with SBDC once a
month
Conduit Financing
 Traditional Option
 Port’s Development Corporation
 Created by the Port in 1981
 Completely separate from the Port
 Directors are the Port Commissioners
 Meets anytime – with notice
Powers
 Can issue tax-exempt bonds to finance capital
expenditures in Whatcom County
 Capital expenditures by private businesses
 Types of qualified expenditures
 Manufacturing businesses
 Processing businesses
 Airport facilities
 Shipping Facilities (by water)
 Solid Waste/Sewage Facilities
Qualifying facilities
 Industrial parks
 Sports facilities
 Energy facilities
 Activities within a federally designated enterprise
or empowerment zone
 But federal tax rules will apply to limit certain
projects from qualifying
Why this is beneficial
 The Development Corporation can issue debt that
is tax-exempt
 Tax-exempt debt carries a lower interest rate
 Debt is long term debt – 20/30 years
 Sold in public markets
 Interest rate is generally variable
 Backed by letter of credit
The Market Since 2008
 Letters of credit -- a vanishing species
 Decline of bank credit
 Changing securities laws
 Volume has dropped precipitously
Role for Banks in Today’s Market
 Letter of credit
 Impact of Basel 3 – capital reserve requirements
 Direct purchase
 Several banks are making direct purchases of bonds
 Pricing – generally based on Libor
 Commitment – 3 years before repricing
What’s next?
 New Market Developing
 As an alternative to banks
 Corporate bonds – to be sold to mutual funds
 Yields … attractive relative to alternative
investments
New Authority
 Port’s Public Authority



May issue taxable debt
Interest rate – market interest rate/no subsidy
Debt may be combined with tax-exempt debt
 Certain securities law exemption
 Washington Example: Private prison in Tacoma
For more information:
Cynthia Weed
K&L Gates LLP
925 4th Avenue
Suite 2900
Seattle, WA 98104
(206) 370-7801
cynthia.weed@klgates.com
Dodd Snodgrass
Economic Development Specialist
Port of Bellingham
1801 Roeder Avenue
Bellingham, WA 98225
(360) 715-7376
dodds@portofbellingham.com
Industrial Development Bond Application available at www.portofbellingham.com
Washington State
Small Business Credit
Initiative
Helping You Get The Loan You Need For Your Small Business
October 2012
What is SSBCI?
The Washington State Small
Business Credit Initiative is a
new, federally-funded
initiative aimed at providing
capital to spur small
business growth and create
jobs throughout the state.
What is SSBCI?
Funds will be distributed
through three programs:
• Capital Access Program
• Craft3 Loan Program
• W Fund
Who can participate?
•Most small business,
including non-profits, can
qualify for one or more of
these programs.
•Employ 500 employees or
fewer (* <750 for Craft 3)
•Will utilize funds for an
approved business purpose
What types of loans qualify?
Funding can be used for:
Business term loans and
lines of credit including
• Start-up costs
• Working capital
• Equipment and inventory
• Acquisition, construction
or renovation of a place
of business
• Franchise fees
Capital Access Program (CAP)
Designed to encourage
lenders to make loans to
businesses that fall just
short of a conventional
approval criteria.
CAP borrowers will be small
businesses with credit needs
in the range of $5,000 up to
$5,000,000, and may have
had difficulty accessing
credit since the onset of the
financial crisis.
Why do Businesses Choose CAP?
• Gives a business another chance for loan
approval if they previously were rejected
because of a marginal credit or financial
situation.
• Helps a business obtain capital even if they
are in an industry that lenders might consider
higher risk.
• Allows a business to keep their relationship at
their current bank (if it participates in CAP).
Craft3 Loan Program
The Craft3 Fund aims to
help small businesses in
underserved communities,
and the formerly banked.
Craft3 direct loans will
primarily serve business
financing needs of $1-5
million. Its collaboration
efforts with other CFDIs and
lenders will target smaller
loan amounts.
W Fund
A Venture Capital fund that
invests in early-stage life
science, biotech, medical
device, alternative energy,
and information technology.
The objective is to spur
company formation and job
creation from Washington’s
significant research and
development base.
What should I do next?
Visit our website to learn
more. Our online
information will help you
determine which
programs my be able to
assist your businesses
needs. Contact
information is listed for all
participating lenders, so
please give them a call.
What do I do next?
• Visit the SSBCI website at:
• http://www.commerce.wa.gov/Programs/busines
s/SmallBusiness/Pages/default.aspx
• For more information on the Craft3 Loan
Program and the W Fund, visit their websites
at:
• www.craft3.org
• www.thewfund.com
Lenders
• If you are a lender interested in learning more
about how your organization can participate
please contact me:
Jane Swanson
Program Manager SSBCI
(206) 256-6155
Thank you!
Exploring
Export Finance
Whatcom County Finance Forum
October 30, 2012
Doug Kemper – President & CEO
Export Finance Assistance Center of Washington (EFACW)
Export Finance Assistance Center of
Washington (EFACW)
• Established by the state legislature in 1983 as a
non-profit to provide free export finance
counseling assistance to small and medium-sized
businesses that are currently exporting or are
interested in exporting their goods and services
• Funding comes from state legislature through
Washington State Department of Commerce
Export Finance Assistance Center of
Washington (EFACW)
• Export-Import Bank of the United States (Ex-Im Bank)
City-State Partner
• Overseas Private Investment Corporation (OPIC)
Partner
• US Trade and Development Agency (USTDA) Partner
• Works closely in cooperation with SBA International
Trade Specialist
Export Finance Assistance Center of
Washington (EFACW) Roles
Export Finance Advisor
• Provide information and counseling to companies
on how to get paid, mitigate risk, and access
financing
• Provide information and counseling to banks on
how to use export finance products and programs
to support clients who want to export
Export Finance Assistance Center of
Washington (EFACW) Roles
Export Finance Matchmaker
• Referral source for Banks, Non-Bank Lenders, Export
Credit Insurance Brokers who support export
finance
• Referral source for other Service Providers who
support trade transactions i.e. Shipping & Logistics
And Air & Marine Insurance
Export Finance Assistance Center of
Washington (EFACW) Roles
Export Finance Matchmaker
• Referral source for local, state and federal agencies
and organizations who promote trade
• Referral source for public and private organizations
that foster trade, economic growth, and business
development
Export Finance Assistance Center of
Washington (EFACW) Roles
Export Finance Educator
• Provide seminars and training to companies that
are new-to-export and new-to market exporters
• Provide seminars and training to banks and lenders
that want to support their export clients
Survey: Barriers to Export
What do you consider the main barriers
to selling your goods and / or services
to foreign customers?
•
•
•
•
•
•
I don’t have goods and/or services that are exportable
Don’t know much about it and not sure where to start
I’d worry too much about getting paid
Too costly
It takes too much time away from my domestic sales
Can’t get financing to offer foreign customers
Source: 2010 NSBA/SBEA Small Business Exporting Survey
49%
38%
29%
27%
17%
7%
Survey: Sources of Export Finance
What is your primary method of financing
your export operations?
•
•
•
•
•
Earnings / Savings of the business
Traditional bank loan, no government program
Credit cards
Government programs (SBA and Ex-Im Bank)
Personal savings
Source: 2010 NSBA/SBEA Small Business Exporting Survey
62%
17%
15%
4%
2%
Export Readiness
How does a company handle an export inquiry?
• Proactive approach
– Exporters who take a proactive approach build an export
plan for their overseas sales
• Reactive approach
– Exporters who are reactive wait for an inquiry to arrive
before they assemble a plan to support the foreign sale
Proactive Approach
• Determine your financing needs
• Consider Buyer finance needs
• Create a credit policy for foreign Buyers
• Develop an export quotation worksheet
• Create payment instructions/LC instructions
• Assemble a team of service providers to
facilitate export transaction.
Reactive Approach
• Buyer dictates sales terms more favorable to
them
• Seller does not determine costs and may lose
money on the transaction
• Seller does not properly assess risk and
therefore does not properly mitigate it
• Seller does not take time to line up service
providers to support the transaction
Risks in International Trade
International transactions bring risks greater
and different than domestic transactions:
• Political risk – includes war, nationalization,
currency/monetary policy
• Buyer credit risk – Buyer default, insolvency, and
bankruptcy
• Foreign exchange risk – exchange rate fluctuation
Payment Methods
There are four primary methods of payment for global
transactions, with the level of risk varying for each
Export-Import Bank of the
United States (Ex-Im Bank)
• Support U.S. exports when faced with competition
supported by foreign government entities in order to create
and sustain U.S. jobs
– Induces domestic banks to lend outside of usual practices
– Strategic initiatives for certain industries and countries
• Supplements commercial financing for pre and post-export
financing at small business rates
– Working Capital Guarantee Program for sellers
– Export Credit Insurance Programs for sellers
– Medium and Long-Term Loan Guarantees Program for buyers
U.S. Small Business Administration
(SBA)
• Aid, counsel, assist and protect the interests of small
business concerns, to preserve free competitive enterprise
and to maintain and strengthen the overall economy
• Resources for small business exporters
— Export Express Loan Program
— International Trade Loan Program
— Export Working Capital Program
EFACW Contacts
Doug Kemper
President & CEO
(206)-256-6127
doug.kemper@efacw.org
Zara Castillo
Program Manager
(206)-256-6115
zara.castillo@efacw.org
Export Finance Assistance Center of Washington
2001 Sixth Avenue, Suite 2600
Seattle, WA 98121
www.efacw.org
We Build
Communities
From The
Ground Up
Programs to Meet Our Mission
• Business & Cooperative Programs
• Community Facilities Programs
• Utility Programs
• Housing Programs
Most of Washington State Is Rural
Business &
Business & Industry Loans
Cooperative
Programs
Business & Industry Loans
Business & Industry Loans
BUSINESS & INDUSTRY
GUARANTEED LOANS
LOANS MAY BE USED FOR:
• Working capital
• Machinery and equipment
purchases
• Buildings purchase or
construction
• Real estate acquisition
• Certain types of debt
refinancing
Movie Theater
BUSINESS & INDUSTRY
GUARANTEED LOANS
• Lines of credit cannot be guaranteed
• Guarantee can be issued before
construction under some circumstances
• Borrower Tangible Balance Sheet Equity
– 10% + for existing business
– 20% + for new business
• New enterprises will need feasibility study
• Majority ownership by US Citizens
• Located in rural area – population under
50,000
Fish Processing
BUSINESS & INDUSTRY
GUARANTEED LOANS
• No minimum loan size. Max. $10 million
• Terms
– Working capital – 7 yrs max.
– Equipment – 15 yrs max.
– Real Estate – 30 yrs max.
• No balloon payments
• USDA Fees
– Initial fee 2% of guaranteed amount
– Annual renewal fee, currently 0.25% on unpaid balance
• Personal/corporate guarantees normally required
from all proprietors, partners (except limited
partners), or majority shareholders (20% or more)
Lumber Mill
Dairy Waste Digester,
Whatcom County
Renewable
Energy
Renewable
Energy&
Energy Efficiency
Renewable Energy and Energy Efficiency
Guaranteed Loans and Grants
• Grants, Guaranteed loans, Combination guaranteed loans/grants
• Eligible Entities
– Agricultural Producers
– Rural Small Businesses
• Population limit – 50,000
• ‘Small’ business – defined by SBA and depends on business type –
typically <500 employees & revenue <$6.5 million
• Agricultural producers (including nurseries and dairies) – 50% of gross
income from agriculture
• Majority ownership must be held by US citizens or permanent residents
• Nonprofits and public entities are not eligible
Small Energy Efficiency Grants
• Energy Efficiency improvements – grants up to 25% of cost
– Maximum grant $250,000
Minimum grant $1,500
• Authorized uses
– Purchase and install energy-efficient fixtures, machinery & equipment (new or
refurbished)
– Energy-efficient real estate improvements
– New facilities are ineligible unless they exactly replace an existing facility
– Energy Audits, permits, professional fees, feasibility studies,
• Costs must be incurred AFTER submitting application
• Matching funds must come from non-Federal funds
• Energy Audit required with application for requests of $50,000 or more
• Interim financing may be needed – grant funds are not disbursed until
project is complete, tested and certified operational
Renewable Energy and Energy Efficiency
Guaranteed Loans and Grants
• Land, real estate improvements, equipment, working capital for new or
existing renewable energy projects
– Biofuel, biomass, anaerobic digester, solar, wind, geothermal, energy efficiency
• Commercially available technology
– i.e. has a proven operating history and an established design, installation and service
industry
• Feasibility Study by independent consultant required on projects over
$200,000
• Technical report, including engineering drawings prepared by
professional engineer required. (Project <$200,000 may be exempt)
• Projects to be interconnected with an electric utility must have an
interconnection agreement or power purchase agreement at time of
application
Renewable Energy and Energy Efficiency
Guaranteed Loans and Grants
• Applicant must own/control, but a qualified 3rd party may operate it
• Guaranteed loan up to 75% of project costs
• Grant up to 25% of project costs
– Max $500,000
Minimum $2,500
• Total assistance (guar. loan + grant) can’t exceed 75% of project costs
• Match must come from non-federal sources. ‘In-kind’ contributions from
3rd partied up to 10% of project costs may be included.
• 85% guarantee on loans up to $600,000
• 80% guarantee on loans from $600,000 - $5 million
• USDA charges 1% up front fee and 0.25% annual servicing fee
Intermediary Relending Program
IRP Program
On The Avenue Ice Cream
Omak, WA
Intermediary Relending Program
• Intermediaries offer small loans to small businesses
• Population less than 25,000
• Intermediaries serving our area
– Seattle Economic Development Association dba Community Capital
Development , 206-324-4330, Island, King, Pierce, San Juan,
Skagit, Snohomish and Whatcom Counties
– Evergreen Business Capital, 206-577-1433, King, Skagit and 13
other counties
– Affiliated Tribes of NW Indians, 503-917-0550
MT. VERNON
Pt. Angeles
WENATCHEE
Spokane
OLYMPIA
YAKIMA
Brush Prairie
AREA OFFICES
Satellite Offices
Website
http://www.rurdev.usda.gov/wa
Mount Vernon Area Office
2021 E. College Way, Ste 216
Mount Vernon, WA 98273
360-428-4322 ext. 4
TTY 360-704-7772