medc breakfast 2010
DESCRIPTION
MEDC Breakfast with tools to help our local businessesTRANSCRIPT
Welcome
Thank youSummary of Morning’s Agenda
General InformationMEDC
IPOD Drawing
Village President Marilyn Michelini
Jane K. TompkinsDirector of Community Development
Revolving Loan Fund
Chip St. Jules
Financing Opportunitieswith the SBA 504 Program
Chip St. Jules Vice President
Harris Business Banking(630-420-3362)
The 504 Program is the U.S. Small Business Administration’s (SBA) economic development instrument that supports small business growth and helps communities through business expansion and job creation.
504 Loan Program504 Loan Program
The SBA is an independent Agency of the Executive Federal Government. It is responsible for providing assistance in 4 primary areas:
1. Assistance in management of small businesses2. Procurement of contracts for small businesses3. Providing financial assistance to small
businesses (Accomplished by forming partnerships with banks by offering to provide a guaranty of a portion of loans originated through one of their programs
4. Advocacy of small business
The SBA is dedicated to providing access to capital for small businesses that may not otherwise have the opportunity to obtain a loan through conventional financing. Focused providing funding, not refinancing.
Used to expand businesses through: Purchase/renovation of a building or construction of a new
facility. Purchase machinery or large equipment Asset based company acquisitions Leasehold Improvements (in some cases)
Lower equity injection Increased working capital Roll in other costs (i.e. FF&E, soft costs, interest reserve)
Fixed long-term financing 20 year term full amortization for real estate 10 year term full amortization on equipment Current 20-year rate of 5.61% as of January 2010
IndustrialCapacity or efficiency limitations at current facility Industries: commercial printing, machine shops, freight &
transport, wholesalers, food product distribution
Office Buildings and CondosSubstantial build-out and furnishingsUsers: doctors, dentists, chiropractors, physical therapists,
accountants, lawyers, architects, graphic designers, etc.
RetailMotels, restaurants, car washes, farmer’s markets,
boutiques, auto repair shops, etc.Gas stations (often ineligible)
Minimum Maximum
Project $250,000 Unlimited
CDC (Bond) $100,000 $1,500,000**If a public policy goal $2,000,000
Veteran-owned, minority-owned, woman-owned TIF district, Enterprise or Empowerment Zone, Labor Surplus Expansion of exports Rural development Energy Use Initiative
*If small manufacturer $4,000,000 (NAICS 31, 32, 33) or satisfies a Green Initiative of 10% reduction in energy
Total project costs usually fall between $500,000 and $10,000,000 regardless of CDC participation
Bank Required to provide 50% permanent loan and 90% interim
Certified Development Partner (CDC)Packages, processes and services the SBA portion of the
loan
SBA Provides 100% guarantee on the debenture (CDC Loan)
which allows it to be sold into the market at attractive rates. Debentures are sold monthly to institutional investors
CDCOnce the debentures are sold, proceeds are wired to the
participating bank. The borrower then makes payments via ACH to CDC
Who is Involved in the ProcessWho is Involved in the Process
Typical 504 Financing PackageTypical 504 Financing Package
10%
40%50%
50% - Conventional Bank Loan First Mortgage
40% - SBA 504 Loan Second Mortgage
10% - Owner’s Equity *
* Higher equity requirements exist for start-up or leveraged companies and single-purpose buildings
Building Acquisition 1,250,000Building Remodeling 100,000Machinery & Equipment 0Furniture & Fixtures 90,000TOTAL PROJECT COST $1,440,000
Source of FundsBank 50.0% 1st Mtg. 720,000SBA 40.0% 2nd Mtg. 576,000Equity 10.0% 144,000TOTAL $1,440,000
CDC FeesNet Proceeds $ 576,000CDC Fee (1.5%) 0Closing Cost 2,500Funding Fee (.25%) 1,440SUBTOTAL 579,940Underwriting Fee (.4%) 2,332TOTAL $ 582,272GROSS DEBENTURE $ 583,000
Cash returned to Borrower 728
Bank’s First Mtg. Fee (0.5%) 0
Sample Project C&J CorpSample Project C&J Corp
Lender Amount Rate Term (Years) Payment Bank $ 720,000 6.75% 10 $ 5,475 CDC/SBA $ 583,000 5.61% 20 $ 4,047 Total
$1,303,000 $ 9,522
Total Fees with Stimulus is $6,272 without its $18,512
504 Project Structure Building Acquisition 1,250,000Building Remodeling 100,000Machinery & Equipment 0Furniture & Fixtures 90,000TOTAL PROJECT COST
$1,440,000
Source of FundsBank 50.0% 1st Mtg. 720,000SBA 40.0% 2nd Mtg. 576,000Equity 10.0% 144,000TOTAL $1,440,000
Total Equity $144,000
Bank Conventional StructureBuilding Acquisition 1,250,000Building Remodeling 100,000Machinery & Equipment 0Furniture & Fixtures 90,000TOTAL PROJECT COST $1,440,000
Source of Funds ◊Bank 65.1% 1st Mtg. $ 975,000Equity 34.9% $ 465,000
TOTAL $1,440,000
◊ Assumes an 75% advance on the appraised value of property being $1,300,000.
Total Equity $465,000Difference $321,000
C & J Corp - ComparisonC & J Corp - Comparison
Lower down payment means increased working capital
20-year fixed rate financing reduces uncertainty over future rate increases
Higher Advance Rate than Conventional Bank Loan
In most cases collateral is based upon project assets only
Extended amortization provides lower monthly payment
UIRVDAAndrew Hamilton
Ten – Fifteen Minutes
Joseph P. McKeownMichelle Michals
Rob McCannWho , What , Where & Why?
IMEC General Overview
About IMEC
IMEC Mission:Accelerating Business Improvement
We do it by….helping companies be more productive and
globally competitive. IMEC is a hands on service provider.
IMEC General Overview
Acronyms?
• IMEC – Illinois Manufacturing Extension Center
• MEP – Manufacturing Extension Partnership
• NIST – National Institute of Standards and Technologies
• EDC – Economic Development Corporation
• DCEO – Department of Commerce and Economic Opportunity
IMEC General Overview
10 Statewide OfficesNIST/MEP Nationwide System
59 National MEP Centers – 2000 Field Engineers
IMEC General Overview
NIST / MEP: A National Resource
350,000 Manufacturers
2,000 + MEP Mfg Experts
350 Service Locations
59 MEP Centers
NIST
Over 3,000 Affiliated Service Providers
National Network
Guidance, Evaluation, Product Dev.
National Coverage -Over 25,000Served annually
IMEC General Overview
IMEC Expertise
• 26 specialists
• Specialists average 19 years of experience
• Advanced training in key continuous improvement methods
• National MEP system experts
IMEC General Overview
IMEC works with companies to….• Develop sustainable business strategies
• Create and Sustain an OSHA compliant work environment
• Operate more efficiently – increase capacity and flexibility
• Build quality management systems that comply with ISO9000,
TS16949, AS9100 standards
• Contain costs and increase profits
• Integrate advanced technologies and business processes
• Pursue innovative products and services and be globally
competitive
IMEC General Overview
We do it by….Providing hands-on implementation, training
and services focusing on… • Safety• Top-line Growth• Cost Reduction• Capacity and Flexibility• Efficiency• Quality • Innovation• Leadership and Workforce Development
IMEC General Overview
Notable Clients
IMEC General Overview
Notable Partners
IMEC General Overview
Today’s business challenges
• Economy
• Price competition
• Hiring, training and retaining qualified workers
• Rising business costs
• Changing technology and new business systems
• Stagnant markets and commoditized products
• Growing the Top-line
IMEC General Overview
IMEC Capabilities• Process Improvement
– Lean enterprise transformation– OSHA certified safety programs
• Quality Improvement– PPM reduction– 6 Sigma– Balancing quality with costs, velocity and financial
performance– Quality management system development &
implementation (ISO/TS/AS standards)
IMEC General Overview
IMEC Capabilities• Business Strategy
– Growth strategies– Assessment & prioritization of initiatives/projects
portfolio– Strategic repositioning
• Information Technology– Architecture design/solutions development– Technology/software selection– Systems implementation and integration– e-Commerce website development
IMEC General Overview
Project Benefits - 2008
• Assistance to 392 companies
• 514 Value-added services and formal project engagements
• $2.3 million sales improvements
• $72,000 in cost savings per project
• 12 to 1 return on investment in first year
• 1,750 Jobs Created or Retained
IMEC General Overview
MEDC – DCEO – IMEC
• EDC – Plugged into the community – Concerned with growth and retention of the community’s business foundation
• DCEO – Dedicated to providing support
• IMEC – Has the tools to accelerate business development
Retention visits – Companies need to know what resources are available. Where can they chose to get help?
IMEC General Overview
Thank you for your time
Rob McCann
Business Development Specialist
IMEC - DeKalb
815.919.1300
Mr. Steve Baab
Lesa Norris
I-POD Drawing
Charlene Coulombe-Fiore
Thanks to our Sponsors & Speakers