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Financing Firms: From Garages to Clean Rooms
Bob Isaacson, DEED “Financing Firms – From Garages to Clean Rooms” Explore the range of finance programs offered by the Minnesota Department of Employment and Economic Development and the opportunities for new businesses to tap into these finance opportunities. In particular, he will present the latest addition to the finance portfolio – the Minnesota Emerging Entrepreneur Loan Fund – and how this statewide program can assist businesses owned by women, minorities, vets, persons with disabilities and low-income individuals. Bob Isaacson Executive Director, Office of Business Finance
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Yes…garages
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To clean rooms
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Well…maybe not all clean rooms
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And (nearly) everything in between
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Anywhere in Minnesota
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Attract, retain and grow businesses
Program Purposes Attract, retain and grow businesses Create and retain jobs
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A little about DEED… Economic Development Workforce Development
Business and Community Development Trade Office Broadband Office Workforce Development Unemployment Insurance One of a few state that have merged DES and DTED 1,500…60 are ED BCD – technical and financial services to help businesses and communities grow Trade - provides the training and expertise that small and midsized companies need to export goods and services Broadband - works to improve availability and use of high speed broadband services. WD – variety of programs offered through WIOA and other state and federal programs to help job seekers UI -
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More about Economic Development
Technical Assistance Small Business Assistance Small Business Development Centers Minnesota Trade Office Minnesota First Stop Location Assistance Financial Assistance Community Finance Business Finance
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Drilling down into Finance
Community Finance Infrastructure, housing and redevelopment Business Finance – 20 programs Loans Grants Tax Credits/Refunds $40 million annually Key points: We typically don’t enter into project without private funds leading the way Generally matching private funds
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Life Cycle
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Most Active Programs Angel Tax Credit and Angel Loan Fund
Minnesota Investment Fund & Job Creation Fund Greater Minnesota Job Expansion Program Emerging Entrepreneur Loan Fund
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Easy Strings Attached
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Angel Programs Funding Tax credits for investors in early stage firms
No interest loans with no payments for 7 years Eligibility Proprietary technologies in limited industries Age and investment requirements Timing Tax credits provided at time of investment Loan provided following eligible investment
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Angel Tax Credit
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Angel Performance 26 target businesses received $12.2 million in investment 187 business certified/105 received investment Angel Loans – 10 loans valued at $1.4 million $59 million invested/$14.7 credits awarded 655 investors certified/ 555 invested
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Angel Industries Business Industry Number Receiving Investment
Medical Device/Biotech 33 Software/Internet/IT 29 Consumer Products 10 Other 36 Total 105
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Minnesota Investment Fund
Funding Loan of up to $1,000,000; 50% of costs Amount depends on capital investment, jobs and wages Eligibility Wage requirements Footloose business – can serve same customers regardless of location city Timing Provided as grant to local government who reimburses projects as funds are expended
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MIF Awards,
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Recent MIF Examples $19 million awarded program-wide in 2016 helping to create/retain 2,500 jobs
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Job Creation Fund Funding Cap Ex and Job grant of up to $1,000,000;
Amount depends on scoring which includes capital investment, jobs and wages Eligibility Wage and job requirements Footloose business – can serve same customers regardless of location city Timing Provided as grant to once 10 FT jobs have been in place for a year $500K has been spent
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JCF Awards,
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Recent JCF Examples In 2016: Program awarded $10 million
1,400 new jobs $246 million leverage
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Gtr MN Job Expansion Funding Sales tax refund for any sales tax paid
Amount depends on scoring which includes capital investment, jobs and wages Up to $2 million per year; $10 million total Eligibility 2 FTE or 10% increase whichever is greater Wage Footloose business – can serve same customers regardless of location city Timing Provided as an annual grant
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Emerging Entrepreneur Loans
Funding Up to $150K + private match Under $35K, no match needed Eligibility Business owned by women, people of color, vets, low-income individuals and persons with disabilities Low-income areas highest priority; Gtr MN considered low-income Timing Work through non-profit lender; funds provided once loan approved
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ELP – One Equity Program
Emerging Entrepreneur Loan Program (ELP) one of several provisions in 2016 equity legislation $35 million of which $857,000 committed for ELP Future base proposed to be $750,000 annually but expect less given current legislature proposals Replaces Urban Initiative Loan Program
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ELP Awards $2 million awarded 23 lenders Funds from two sources:
$857,000 - Legislative appropriation $1.143 million in Urban Initiative repayments
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ELP Eligible Lenders African Development Center (ADC)
African Economic Development Solutions (AEDS) Central Minnesota Development Company (CMDC) Community and Economic Development Associates (CEDA) Entrepreneur Fund First Children's Finance 4-Directions Development Inc. Greater Bemidji Inc. Hmong American Partnership (HAP) Immigrant Development Center Initiative Foundation Latino Economic Development Corporation (LEDC) Metropolitan Consortium of Community Developers (MCCD) Metropolitan Economic Development Association (MEDA) Neighborhood Development Center (NDC) North Central Economic Development Association (NCEDA) Northland Foundation Northside Economic Opportunities Network (NEON) Northwest Minnesota Foundation Southern Minnesota Initiative Foundation Southwest Initiative Foundation WomenVenture Worthington Regional Economic Development Corporation (WREDC) Cover the entire states…few spots without regional lenders
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ELP Loan Geography Greater Minnesota and 7-county Twin Cities
$500,000 Aim for 50/50 split Twin Cities $357,000 50% - Dakota, Ramsey and Washington 50% - Anoka, Carver, Hennepin and Scott
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Emerging Entrepreneur Fund
Emerging Entrepreneur Funds Loans,
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Documentation Project review Financial analysis Credit analysis
Application Review application Due diligence Award Award funding Prepare legal documents Disburse Funds provided Monitor Project review Financial analysis Credit analysis But for
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Other Popular Lending Options
SBA and USDA Loans Loan guarantees Intermediary lending Nonprofit lenders CDFI CDC SBA – 504 loan or 7a guarantee USDA – variety of programs – business and industry loan guarantee (B&I Guarantee), loan programs for start-ups and industry-focused assistance for renewable energy facilities CDFI - A community development financial institution is a financial institution that provides credit and financial services to underserved markets and populations. CDFIs are certified by the Community Development Financial Institutions Fund (CDFI Fund) at the U.S. Department of the Treasury. Federal dollars seed the organization CDC – community development corporation are community-based organizations working on social services, housing and economic development If certified, is a CDC that is regulated and certified by SBA to provide SBA financing
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Partners Help Bridge the Gap
Partnerships are key – cities, lenders, EDAs, etc.
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DEED – Filling the Gap Bob Isaacson Executive Director,
Office of Business Finance SBA – 504 loan or 7a guarantee USDA – variety of programs – business and industry loan guarantee (B&I Guarantee), loan programs for start-ups and industry-focused assistance for renewable energy facilities CDFI - A community development financial institution is a financial institution that provides credit and financial services to underserved markets and populations. CDFIs are certified by the Community Development Financial Institutions Fund (CDFI Fund) at the U.S. Department of the Treasury. Federal dollars seed the organization CDC – community development corporation are community-based organizations working on social services, housing and economic development If certified, is a CDC that is regulated and certified by SBA to provide SBA financing
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