Greg Christensen

Greg Christensen Commercial Lender in Corridor Market for 20 + years Financed many types of industries BBA Finance Iowa State University MBA University of Iowa SCORE mentor

Outline This presentation is based on common themes from

multiple banks Types of financing sources Tips

Types of Financing Your cash, family, friends Your credit cards Private Investors Grants Bank Alternative Lenders Government Programs Venture Capital

Bank Financing Traditional Commercial loans

-There is an individual component involved-The Credit C’s of banking

Capacity, Capital, Collateral, Conditions, and Character

-There is an individual component involved Personal Loans

- Using personal collateral

Personal Financial Statement Balance sheet for the individual SBA has a great form http://www.sba.gov/content/personal-financial-

statement

Personal History Credit Bureau

www.annualcreditreport.com Personal History Form http://www.sba.gov/sites/default/files/tools_sbf_finas

st912.pdf Small claims, judgments

Iowa Courts Online Search

Personal Tax returns Most lenders want the last three years All schedules included Ability to explain Does it make sense with the financial statements

ie Schedule B interest Itemized deductions Sources of income

SBA Why do banks use the SBA? http://www.sba.gov/Many types are available, two of the most common are:

Small business loans CDC 504 loans

SBA Small Business Loans Operate for profit and eligible industry Be small, as defined by SBA Be engaged in, or propose to do business in, the United

States or its possessions Have reasonable invested equity Use alternative financial resources, including personal

assets, before seeking financial assistance Be able to demonstrate a need for the loan proceeds Use the funds for a sound business purpose Not be delinquent on any existing debt obligations to the

U.S. government including student loans

CDC 504 loans A 504 loan can be used for: The purchase of land, including existing buildings The purchase of improvements, including grading, street

improvements, utilities, parking lots and landscaping The construction of new facilities or modernizing,

renovating or converting existing facilities The purchase of long-term machinery and equipment A 504 loan cannot be used for: Working capital or inventory Consolidating, repaying or refinancing debt Speculation or investment in rental real estate

Iowa Economic Development http://www.iowaeconomicdevelopment.com/ Types of Programs

Business Development International Business Development Community Development Energy Innovation

IED Business Development Iowa Small Business Loan Support ProgramLoans made under

the program may be for $5,000 to $100,000 Up to $50,000 can be borrowed without co-financing Up to $100,000 can be borrowed if at least 1/3 of the total debt is

co-financed through another loan source Recipients must provide collateral to secure the entire loan value The term of any loan made under the program shall not exceed

five years The program allows for subordination to conventional lenders

who provide co-financing Technical assistance is available to borrowers, including a $500

annual grant for pre-approved technical assistance expenditures

Targeted Small Business https://dia.iowa.gov/tsb/ Certified TSBs are eligible to apply for low-interest loans and

equity grants through the Iowa Department of Economic Development (IDED). State purchasing officers also consider TSBs when seeking bids for state-purchased goods and services.

In order to become a certified TSB, the individual's business must meet the following minimum requirements: Be located in the State of Iowa; Be operated for a profit; Have a gross income of less than $4.0 million computed as an

average of the preceding three fiscal years, and Be majority owned, operated, and actively managed by a female, a

minority group member, or a person with a disability.

Iowa Center for Economic Success Credit + Lending department offers microlending and

credit counseling to qualifying small business owners. Women, minorities, disabled persons, and service-disabled vets may be eligible for Targeted Small Business status.

Education + Resources department offers classes targeted specifically to small business owners, with flexible schedules and skill-building coursework. In conjunction with our group education courses, we offer one-on-one small business counseling and coaching services to help you start or grow your small business. We also provide free year-round tax preparation and planning to qualifying individuals. Our Women's Business Center program is also housed under our Education + Resources department.

IED Financial Assistance ProgramStaff will help find the right program Two Step Application Process Step 1 — Business Assistance Project Questionnaire The Iowa Project Questionnaire process enables staff to identify the programs

and resources most beneficial to a project. This pre-application process enables staff to become involved with your project proposal(s) at an early development stage, providing individual assistance and guidance to ensure access to programs that best fit your needs.

Iowa Project Questionnaire Form Step 2 — Application for Financial Assistance Upon completion of the Iowa Project Questionnaire information submission,

applicants invited to apply for financial assistance shall complete the Application for Financial Assistance.

Application for Financial Assistance To learn more: Phone: 515.725.3134

businessfinance@iowa.gov

East Central Iowa Council of Governments http://www.ecicog.org/revolving-loan-funds.html Revolving Loan Fund Cedar Rapids Revolving Fund Czech Village/New Bohemia Revolving Loan Fund

East Central Iowa Council of Governments http://www.ecicog.org/revolving-loan-funds.html Revolving Loan Fund Cedar Rapids Micro Marion Economic Development Corp Revolving Funds City of Marion Marion Chamber Commerce Revolving

Loan Fund Czech Village/New Bohemia Revolving Loan Fund

Government Check with the city for programs you contemplating

your business location Chamber of Commerce

Iowa Micro Loans Legal Iowa resident 18 years or older Business must be located in Iowa Credit denial letter required from lender No more than 10 full time employees

Iowa Micro Loans http://www.iowamicroloan.org/ Financing for start-up, expansion and refinancing of

Microbusinesses in Iowa Financing of loans of $5,000 up to $50,000 for a six year

term Co-financing with a local lender or loan pool up to $150,000 Credit approval within 10 working days of receiving a

complete credit application and business plan Technical Assistance grants up to $500/client/year Local team building assistance to help you succeed The ability to improve your credit score through

IowaMicroloan reporting

Balance Sheet techniques Suppliers, riding the trade, obtaining terms Asset based lending Accounts Receivable financing Factoring

Asset Based lending Higher priced than Bank lending Borrowing on receivables and inventory Closer to cash is always better Based on percentage of eligible More restrictions Can find loans down into the $500,000 range

Credit card financing Can be pricey A merchant cash advance (MCA) is not a loan, but

rather an advance based upon the future revenues or credit card sales

Each day, an agreed upon percentage of the daily revenues or credit card receipts are withheld to pay back the MCA. This is called a “holdback” and will continue until the advance is paid in full.

Accounts Receivable Borrow a percentage Available in the area from banks and third parties Or factor them Factoring is an outright sale at a discount Higher cost than Asset Based lending

Equipment Leasing Reduces amount of down payement Banks, leasing companies, vendors

Iowa Area Development GroupREC The IADG Energy Bank Revolving Loan Fund The Iowa Area Development Group (IADG) now offers Iowa businesses and

industries a low interest financing option for energy efficiency improvements, renewable energy projects and energy management and implementation plans.

Rural Economic Development Loan & Grant Program (REDL&G) 0% Rural Economic Development Loan The Rural Economic Development Loan Program was specifically designed to

assist job creation projects in rural areas. Rural Electric Cooperatives can apply to this unique USDA program that allows for up to $1 million in 0% interest financing to assist with your business expansion.

Maximum Loan Amount: $1 millionMaximum Term: 10 yearsInterest Rate: 0% InterestMaximum Payment Deferment: 24 Months

USDA BUSINESS AND INDUSTRY GUARANTEED LOANS (B&I) The purpose of the B&I Guaranteed Loan Program is to improve,

develop, or finance business, industry, and employment and improve the economic and environmental climate in rural communities.

Business and industrial acquisitions when the loan will keep the business from closing, prevent the loss of employment opportunities, or provide expanded job opportunities.

Business conversion, enlargement, repair, modernization, or development.

Purchase and development of land, easements, rights-of-way, buildings, or facilities.

Purchase of equipment, leasehold improvements, machinery, supplies, or inventory

$10 million

Crowdfunding Pick the right platform

each has a best target market Prepare for the campaign Engage and keep vibrant

Online lenders Research carefully Cost is not just the rate, fees, prepayment, etc. Can be fast access to funds but maybe expensive Nerdwallet OnDeck

Help Sources SCORE Banker Attorney Accountant SBDC University of Iowa University of Northern Iowa ISU

Others Establish a relationship with a banker, attorney, and

accountant early on in the process. They want your business so pick the right one for you Networking opportunities Universities

Tips & Common Issues Poor credit history Selection of the wrong lender Inability to explain the business plan Lack of equity and cash Personal budgeting Accuracy, aggressive projections

Business Plan Focused on the business Understandable Verifiable SCORE How To Really Start Your Business

Discussion