financing value-added ag ventures gail gesell. sources of small business financing self-funding...

Financing Value-Added Ag Ventures

Gail Gesell

Sources of Small Business FinancingSources of Small Business Financing

• Self-funding

• Expand current business

• Re-direct to new niche

DogDayz Playhouse and RetreatDogDayz Playhouse and Retreat


• R & D

• Grants

• Cooperative Agreements

Small Business Innovative ResearchSmall Business Innovative Research

• Department of Agriculture • Department of Commerce • Department of Defense • Department of Education • Department of Energy • Department of Health and Human Services • Department of Transportation • Environmental Protection Agency • National Aeronautics and Space

Administration • National Science Foundation

SBIRSBIR

Qualifications:• American-owned and

independently operated • For-profit • Principal researcher employed by

business • Company size limited to 500

employees

Three PhasesThree PhasesPhase I - startup phase• Up to $100,000 • 6 months• explore technical merit or feasibility of idea/technology

Phase II • Up to $750,000• 2 years

Phase III • Phase II innovation moves from the laboratory into the

marketplace• No SBIR funds support this phase. The small business must

find funding in the private sector or other non-SBIR federal agency funding.

Access to SBIR MoneyAccess to SBIR Money

• Pre-Solicitation Announcement (PSA) - single source for the topics and anticipated release and closing dates for each agency's solicitations

• US Small Business Administration Office of Technology 409 Third Street, SW Washington, DC 20416 (202) 205-6450

Sources of Small Business Sources of Small Business FinancingFinancing

• Government contracts

• FedBizOpps.gov is the single government point-of-entry (GPE) for Federal government procurement opportunities over $25,000

• Government buyers publicize their business opportunities by posting information directly to FedBizOpps via the Internet

• FedBizOpps (FBO) – single portal for commercial vendors seeking Federal markets for their products and services; search, monitor and retrieve opportunities solicited by the entire Federal contracting community

http://www2.eps.gov/spg/index.html

http://www2.eps.gov/spg/index.html

• Angel funds

• Venture capital



• Receivables factoring

• Equipment financing


• Loan from financial institution

• Line of credit

• Term loan

SBA Guaranteed Loan ProgramsSBA Guaranteed Loan Programs

• 504 Certified Development Company Loan Program

• 7(a) Loan Guarantee Program

Benefits of an SBA Guaranteed LoanBenefits of an SBA Guaranteed Loan

• SBA guarantee encourages lenders to loan money

• Money available for start-up

• No pre-payment penalty for loans under 15 years

• Reduced Owner Investment & Collateral Requirements

• No balloon payments

• Interest rate limits

• Longer amortization

Eligibility for SBA Guaranteed LoansEligibility for SBA Guaranteed Loans Must qualify as “Small” based on NAICS Must qualify as “Small” based on NAICS

• Manufacturing: 500-1,500 employees

• Wholesaling: 100 employees for financial assistance programs(500 employees for contracting assistance programs)

• Services: $6 million to $29 million in annual receipts, or1,500 employees

• Retailing: $6 million to $24.5 million in annual receipts

• General and heavy construction: $17 million to $28.5 million in annual receipts

• Special trade construction: $12 million in annual receipts

• Agriculture: From $750,000 to $6 million in annual receipts

Eligibility for SBA Guaranteed LoansEligibility for SBA Guaranteed Loans

• Operated for profit

• Open to the general public

• Owners must be U.S. citizens or have permanent residence status

• Owners must have financial stake in the business

Copper Ridge Alpacas, LLCCopper Ridge Alpacas, LLC

504 Certified Development 504 Certified Development Company (CDC) Loan ProgramCompany (CDC) Loan Program

• Proceeds from 504 may be used for:• Purchasing land• Construction of new facilities• Improvements to existing facilities• Improvements to real estate • Purchase major machinery and

equipment

• Financing• SBA Debenture (CDC) 40%• Bank 40-50%• Borrower 10-20%


• Debenture • Maximum typically $1,500,000 • $ 2 million for projects meeting public policy goals• $4 million for small manufacturers• Create or retain one job for every $50,000

• Fees approximately three (3) percent of the debenture

• Interest rate calculated from the current rate for 5-year and 10-year U.S. Treasury issues

• Maturities of 10 or 20 years

• Collateral - project assets being financed

• Personal guaranties required from principals


• Owners must be of good character • Size Standards:

Tangible net worth up to $7 million Preceding 2 year average net

income after taxes up to $2.5 million

• Business cannot be engaged in speculation or investment in rental real estate

7(a) Loan Guarantee Program7(a) Loan Guarantee Program

• Working Capital

• Purchase Equipment/ Furniture/ Fixtures

• Acquire Land/Building

• Construct New Facilities

• Debt Refinancing

• Purchase an Existing Business

INELIGIBLE UsesINELIGIBLE Uses

• Purchase partial ownership of a business• Repay owners for their investment in the

business• Pay for delinquent taxes• Refinance of delinquent loans• Speculative, lending or investing purposes• Real Estate held for investment, sale or

rent• Illegal or gambling activities nor for

sexually oriented businesses• Business Pyramids• Political, lobbying or religious activities

7(a) SBA Guarantee Program

• Loans up to $2.0 million– SBA can guarantee up to $1,500,000

• Multiple loans permitted up to $2.0 million total guarantee

Percent of Guarantee• 85% guarantee for loan amounts of $150,000 or

less

• 75% guarantee for loan amounts over $150,000

• SBA guarantee for lenders

• Borrowers responsible for 100% loan repayment

7(a) Guarantee Loan Maturities

• Working Capital• 1 to 10 years depending on cash flow

needs

• Equipment• up to its expected useful life

• Building/Land• up to 25 years

Financial Information Required Financial Information Required - - Established Business -Established Business -

Current balance sheet & past 3 full years income (profit & loss)

Projection of revenues, expenses & profits for the next 12 months

Cash flow projection for the next 12 months Written business plan with narrative of major

assumptions Current personal financial statement for each

owner, partner, or stockholder List of collateral Statement of the amount and intended uses of

the loan

Financial Information Required Financial Information Required - - New Business -New Business -

Prepare a detailed estimate of how much capital is needed to start

12 month projection of revenues, expenses and profits

12 month projection of cash flow

Written business plan with narrative of major assumptions

List of collateral

SBA ResourcesSBA Resources

• District Office

• www.sba.gov/in

• Small Business Development Centers

• SCORE

• Women’s Business Centers

Financing Value-Added Ag VenturesFinancing Value-Added Ag Ventures

financing value-added ag ventures gail gesell. sources of small business financing self-funding...

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