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Financing Your Business in Montana

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					Financing Your Business
      in Montana
                        Financing Your Business in Montana—USDA Rural Development




Step One: Planning Your Business
The first step in securing financing for your business is not filing a loan application. Instead the busi-
ness owner needs to develop and refine a business strategy. Nothing improves one’s chance of secur-
ing financing like a thorough business plan with informed financial projections. Generally, the best
place to start in your search for financing is with “technical assistance’ (i.e., business counseling). Ex-
isting or prospective business owners can get help with their business planning and financial manage-
ment from a number of organizations. Technical assistance providers are very familiar with their local
business community, and they offer invaluable expertise and impartial advice. Furthermore, these
consultants are in routine contact with the local lending community, so they can often provide helpful
referrals. Generally, their advice is free. There are many technical assistance organizations. Each com-
munity is unique in what is available.

Small Business Development Centers (SBDC)                                           http://sbdc.mt.gov
Montana has established SBDC throughout the state. These centers provide advice to small busi-
nesses on marketing, growth, and planning issues as well as guidance on seeking financing.




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                      Financing Your Business in Montana—USDA Rural Development




Montana Business Guide                http://wsd.dli.mt.gov/local/kalispell/bdkv7/index.html
The Flathead Regional Business Center developed a site to guide entrepreneurs through the steps in
starting a business and is an excellent place to start your research.


Service Corps of Retired Executives (SCORE)                                  http://www.score.org
SCORE is a volunteer business counseling program sponsored by the U.S. Small Business Administra-
tion (SBA). Active and retired business executives provide workshops and one-on-one management
advice on all aspects of business operations.
       Great Falls SCORE     601 10th Avenue North                       (406) 761-4434
       Helena SCORE          10 W. 15th Street, Suite 1100               (406) 441-1081
       Bozeman SCORE         2000 Commerce Way                           (406) 586-6241
       Billings SCORE        McDonald Hall, 100 Poly Drive, Suite 108    (406) 294-4422
       Butte SCORE           1000 George Street                          (406) 723-3177
       Bitterroot SCORE      702 N. 1st Street, Hamilton                 (406) 363-6158
       NW Montana SCORE      15 Depot Park, Kalispell                    (406) 756-5271


Montana Department of Commerce                                  http://businessresources.mt.gov
The Department of Commerce has a wealth of information available for business owners. Their com-
prehensive website is an invaluable resource for a small business.


Montana Cooperative Development Center                                     http://www.mcdc.coop
If you are considering a co-op business model, the Montana Cooperative Development Center is an
excellent resource serving our state. They can be reached at (406) 727-1517.


Montana Chamber of Commerce                                  http://www.montanachamber.com
Often the best way to find local help is to contact your nearest Chamber of Commerce. Montana cur-
rently has 88 registered chambers throughout the state, as well as the Montana Chamber of Com-
merce located in Helena.


Techranch                                                               http://www.techranch.org
TechRanch is a leading business development assistance organization focused on the high tech sec-
tors. Based in Bozeman, Techranch seeks to provide entrepreneurs access to capital, business devel-
opment advising, educational events and infrastructure necessary for success



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                       Financing Your Business in Montana—USDA Rural Development



Step Two: Financing Your Business
Once your business plan has been refined through technical assistance, you are ready to seek financ-
ing. In many instances, businesses obtain assistance from more than one of the following sources:

Commercial Loans
Commercial banks and credit unions are the primary source of business financing. The institution with
which you have an established banking relationship is the logical place to start your search for a busi-
ness loan. Be sure to be prepared before you approach your banker, and review step one of this
guide. Lenders make their money by charging businesses for the privilege of using their deposits.
Lenders are conservative because they want to assure that their loans will be repaid with a minimum
of time and cost to themselves. This natural conservatism is reinforced by internal and external audi-
tors who monitor their lending decisions. The things that lenders look for in evaluating a loan applica-
tion are a conservative business plan, a significant equity contribution, capable management, realistic
repayment ability, good credit history, and ample collateral to fall back on, just in case.

Guaranteed Commercial Loans
Even a strong business may find commercial lenders reluctant to lend to them without certain incen-
tives. Various federal and state programs have been created to encourage lenders to provide financ-
ing to businesses, usually by providing a guarantee on the bank’s loan.
The guarantee protects the bank against loss, and this helps the bank to justify the loan to its examin-
ers. Often, the guarantee gives the lender other benefits as well, such as the ability to make larger
loans, or to increase their profits by selling the guaranteed portion of the loan on the secondary mar-
ket.
Guaranteed programs are lender driven, meaning it is up to the lender, not the business, to seek the
guarantee. However, you may want to ask your lender to consider a guaranteed program. Here are
the main programs that lenders may consider using:
       SBA 7(a) Guaranty Program
       The Small Business Administration (SBA) can provide 50-85% guarantees for all types of busi-
       ness needs—real estate, equipment, and working capital. Generally, SBA guaranteed loans
       range from $20,000 to S2 million. For loans of $150,000 or less, SBA has a streamlined pro-
       gram called “Low Doc.” For loans of $350,000 or less, SBA has a streamlined program called
       “SBA Express.” SBA can provide you with a list of banks that participate in the SBA program.
       These programs are administered statewide by SBA’s Helena office—(406) 441-1081 or
       http://www.sba.gov/mt.

       Business & Industry (B&I) Guaranteed Loan Program
       Operated by USDA Rural Development, the B&I program picks up where the SBA 7(a) program
       leaves off, providing 70-80% guarantees on loans of up to $10 million. B&I guaranteed loans
       are only available to businesses in rural areas. The program is ineligible within the city limits of
       Missoula and Billings. It is administered through the Rural Development area offices across the
       state. See the coverage map in the appendix or visit http://www.rurdev.usda.gov/mt.


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                       Financing Your Business in Montana—USDA Rural Development



Grants
While government grants are not available for starting or financing typical commodity, retail or
wholesale businesses, those interested in developing innovative new products or services should con-
sider the federal SBIR (Small Business Innovation Research) program, and related STTR (Small Business
Technology Transfer) program, described below. Free assistance in determining if your idea is suit-
able for SBIR or STTR, and in developing a competitive proposal, is available from both the Montana
Department of Commerce’s MTIP program (Montana Technology Innovation Partnership), at
www.mtip.mt.gov, and from TechLink at Montana State University (www.techlinkcenter.org). Mon-
tana companies currently secure about $10 million annually in SBIR/STTR financing, which may take
the form of either grants or contracts.

       SBIR and STTR Programs
       Under the SBIR program, eleven federal agencies (including USDA) award funds to small busi-
       nesses for research and technology development leading to commercializable products or ser-
       vices, through a competitive, structured process. The SBIR program is designed to stimulate
       technological innovation and create new market opportunities for small businesses, with total
       program funding exceeding $2 billion annually nationwide. STTR is a smaller, related program
       that differs from SBIR mainly in requiring collaboration with a university or other research in-
       stitution, while SBIR allows such collaborations. For more information, see www.sbir.gov.

Self Financing
Lenders will want to see that you have money of your own invested in your project (i.e., equity).
Many new business owners end up drawing on savings, personal loans, or other “bootstrap” financing
sources. Be careful with debt and seek technical assistance before incurring obligations.


Venture Capital & Other Investors
Usually, the cheapest but most difficult to find source of financing is venture capital (i.e., finding in-
vestors or partners who are willing to contribute money to your business). Relatives, friends, and
business associates are often the main source of venture capital, though commercial sources of ven-
ture capital also exist. Venture capitalists have exacting standards for choosing an investment and of-
ten require some management and ownership control in the business. A good primer can be found at:
http://www.sba.gov/financialassistance/borrowers/vc.


       Small Business Investment Companies (SBIC)
       SBIC are private venture capital funds overseen by the Small Business Administration (SBA).
       The SBIC licensed to operate in Montana is the Glacier Venture Fund LP at (406) 443-2160.

       Small Business Innovation Research (SBIR) Program
       Under the SBIR programs, eleven federal agencies (including USDA) award research and devel-
       opment funds to small business via a highly competitive, targeted process. The SBIR program
       is designed to stimulate technological innovation and provide opportunities for small busi-
       nesses. For more information, see http://www.sbir.gov.

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                            Financing Your Business in Montana—USDA Rural Development



Loans from Non-Commercial Sources - Gap Financing Programs
When a commercial lender is unwilling to make a loan for the full amount requested, even with a
guarantee, it may still be possible to get a loan for a portion of the amount needed. The difference (or
“gap”) may be borrowed from another source in participation with the commercial lender. There are
a number of sources of gap financing.

       Certified Development Companies (CDC) - SBA 504 Program
       CDC, established by the Small Business Administration, are able to provide gap financing on
       real estate and some heavy equipment projects. The applicant puts up 10-20% of the cost; a
       commercial bank generally lends 50%; and the CDC finances the rest. The CDC can lend up to
       $1.5 million at a fixed interest rate on a 10-20 year term. Prepayment penalties are common.
       The following CDC lenders are active in Montana with most operating statewide:
                 Montana Community Finance Corporation                                        (406) 443-3261
                 High Plains Financial, Inc.                                                  (406) 454-1934
                 Big Sky Economic Development Corporation                                     (406) 256-6871

Loans from Non-Commercial Sources - Revolving Loan Funds (RLF) and Microloan Programs
Smaller and newer businesses often cannot qualify for commercial financing or may find that a com-
mercial loan plus gap financing still cannot meet their entire financing needs. In such instances, local
revolving loan funds and microloan programs may be the answer. These loan programs are often run
by economic development non-profits or public bodies, which may be willing to consider lending on
projects that do not meet more conservative commercial standards.

       Intermediary Relending Program (IRP) Revolving Loan Funds
       USDA Rural Development lends money to non-profits and public bodies, which in turn re-lend
       it to small businesses unable to get credit elsewhere. A business loan from an IRP fund can fi-
       nance up to 75% of the cost of a business project. Typically, IRP loans to ultimate recipients do
       not exceed $150,000. The ultimate recipient must be in a rural area (cities below 25,000 popu-
       lation or unincorporated areas). USDA Rural Development has capitalized revolving loan funds
       for the following IRP lenders. Many of these lenders operate other RLF too:
   Anaconda Local Development               (406) 563-5538   Deer Lodge County
   Bear Paw Development Corporation         (406) 265-9226   Hill, Chouteau, Liberty, Blaine, and Phillips County
   Beartooth RC&D                           (406) 962-3914   Big Horn, Carbon, Stillwater, Sweet Grass, and Yellowstone County
   Butte Local Development Corporation      (406) 723-4349   Silver Bow County
   Prospera Business Network                (406) 587-3113   Gallatin and Park County
   City of Kalispell                        (406) 758-7738   City of Kalispell and 5 mile donut
   MT Business Assistance                   (406) 447-1510   Broadwater and Lewis & Clark County
   Great Northern Development               (406) 653-2590   Roosevelt, Valley, Sheridan, Daniels, McCone, and Garfield County
   Headwaters RC&D                          (406) 782-7333   Deer Lodge, Beaverhead, Silver Bow, Broadwater, Granite, Jefferson, Madison, and Powell County
   High Plains Financial                    (406) 454-1934   Cascade, Teton, Toole, Pondera, and Glacier County including the Blackfeet Reservation
   Jobs Now, Inc.                           (406) 257-7711   Flathead County
   Lake County Community Development        (406) 676-5901   Lake, Mineral, Lincoln, and Sanders County including the Flathead Reservation
   Missoula Area Economic Development       (406) 728-3337   Missoula, Ravalli, Lake, and Mineral County
   Montana Community Development Corp.      (406) 728-9234   Missoula, Ravalli, Lake, Sanders, Mineral, Powell, and Granite County
   Ravalli County Economic Development      (406) 375-9416   Ravalli County
   Snowy Mountain Development Corp.         (406) 535-2591   Fergus, Judith Basin, Wheatland, Golden Valley, Musselshell, and Petroleum County
   Southeastern Montana Development Corp.   (406) 748-2990   Rosebud, Custer, Treasure, and Powder River County




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                     Financing Your Business in Montana—USDA Rural Development



Loans from Non-Commercial Sources - Revolving Loan Funds (RLF) and Microloan Cont.
      Other Local Revolving Loan Funds and Microloan Funds
      In addition to IRP lenders mentioned previously, there are many other non-profit economic
      development organizations that operate RLF programs. Their loan funds derive from a variety
      of federal (including USDA Rural Development, U.S. Forest Service, Small Business Administra-
      tion, Economic Development Administration, Housing and Urban Development), state, and
      local grant sources. As with the IRP program, they provide a variety of direct loan products to
      small businesses unable to qualify for bank loans. Your local SBDC can help you find RLF in
      your area.

Special Montana State Loan Programs
      Alternative Energy Revolving Loan Program (AERLP)
      The Montana Department of Environmental Quality (DEQ) offers a financing option to Mon-
      tana homeowners, small businesses, non-profits and government entities to install alternative
      energy systems. The program is designed so that the energy produced is used by the generat-
      ing entity, although net-metering is allowed. The program offers low interest, fixed rate loans
      of up to $40,000. For more information, call (406) 841-5243 or http://deq.mt.gov/energy/
      renewable/altenergyloan.mcpx.

      Brownfields Program
      The Brownfields Loan and Grant Program is administered by the Montana Department of Envi-
      ronmental Quality. It provides funding to support the redevelopment of property with envi-
      ronmental concerns. For more information contact the DEQ at (406) 444-2544 or http://
      www.deq.mt.gov/Brownfields/Grants.mcpx.

      Growth Through Agriculture (GTA)
      The GTA program works to strengthen and diversify Montana’s agricultural industry. Through
      grants and loans, the program assists in the development of innovative agricultural products
      and processes to add value to the agriculture industry, create new jobs, and expand small
      business opportunities. Visit http://www.agr.mt.gov/business/GTA.asp for more information.

      Beginning Farm/Ranch and Rural Assistance Loans
      These loans may be used to purchase agricultural land and other depreciable agricultural
      property and/or to enhance producer’s operations. More information may be found at: http://
      www.agr.mt.gov/business/finance.asp.

Special Federal Loan Programs
      Farm Operating and Farm Ownership Loans
      These loans are available to family size farm operators from the USDA Farm Service Agency
      (FSA). Direct loans up to $300,000 and guaranteed loans up to $1,112,000 are available for ei-
      ther operating expenses, livestock & equipment, or real estate. For information, call (406) 587-
      6872 or http://www.fsa.usda.gov/mt.

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                     Financing Your Business in Montana—USDA Rural Development



      Native American Loan Guarantee Program
      This program is administered by the Bureau of Indian Affairs (BIA) and can provide up to 90%
      guarantees on business loans up to $500,000. For a business to be eligible, (1) members of
      federally recognized tribes must own at least 51% of the business, and (2) the businesses must
      be located in a county where there is a reservation. For more information, contact BIA at (406)
      247-7943 or http://www.bia.gov/WhoWeAre/AS-IA/IEED/LoanProgram/index.htm.

Export Oriented Loan Programs
      SBA Export Finance Program
      The Small Business Administration has several guaranteed loan programs; Export Working
      Capital Program (EWCP) and Export Express to support small business exporters. Montana’s
      Export Assistance Center is an excellent starting point. Call (406) 370-0097 or visit http://
      www.buyusa.gov/montana.

      Export-Import Bank and Overseas Private Investment Corporation
      These two organizations provide direct and guaranteed financing for U.S. exporters. Find more
      information at http://www.exim.gov and http://www.opic.gov.

      Foreign Agricultural Service (FAS) Guaranteed Programs
      USDA FAS has several guaranteed loan programs; Supplier Credit Guarantee Program, Facility
      Guarantee Program, and Export Credit Guarantee Program (GSM-102 & GSM-103) to support
      businesses involved in exporting farm commodities and related products. More information
      can be found at http://www.fas.usda.gov/excredits/ecgp.asp.

Special Federal Grant Programs
      Rural Energy for America Program (REAP)
      USDA Rural Development has a loan and grant combination program that awards funds to ru-
      ral small businesses and agricultural producers proposing to either install energy efficiency im-
      provements in their operation or to develop renewable energy generating systems (wind, bio-
      mass, solar, geothermal). Administered by the Rural Development area offices, see the cover-
      age map in the appendix or visit http://www.rurdev.usda.gov/mt.

      Value Added Producer Grant Program (VAPG)
      USDA Rural Development has a grant program that awards funds to agricultural producers for
      planning or working capital to establish a value-added agricultural product.. Administered by
      the Rural Development area offices, see the coverage map in the appendix or visit http://
      www.rurdev.usda.gov/mt.

      Trade Adjustment Assistance for Firms Program (TAA)
      This Economic Development Administration administered program provides cost sharing fed-
      eral assistance to pay for half the cost of consultants or industry-specific experts for projects
      that improve the competitiveness of manufacturers affected by import competition. For infor-
      mation, call the Northwest TAA Center at (206) 622-2730 or see http://taacenters.org.

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                      Financing Your Business in Montana—USDA Rural Development



Grant Programs You May Hear Of NOT for Businesses Directly
Most government grants are not available directly to for-profit enterprises. Instead, grants are typi-
cally awarded to non-profit groups, local governments, and tribes in support of the general economic
well-being of the community. Examples of grants that support business but are not available directly
to businesses include:

       Rural Business Enterprise Grant (RBEG) Program
       USDA Rural Development’s RBEG program provides funds for technical assistance, workforce
       training, feasibility studies, revolving loan funds, demonstration projects, and real estate de-
       velopment in support of specifically identified small rural businesses. See the coverage map in
       the appendix or visit http://www.rurdev.usda.gov/mt for more information.

       Rural Business Opportunity Grant (RBOG) Program
       USDA Rural Development’s RBOG program provides funds for strategic planning, technical as-
       sistance, leadership training, and feasibility studies that promote sustainable economic devel-
       opment in rural areas. See the coverage map in the appendix or visit http://
       www.rurdev.usda.gov/mt for more information.

       Rural Microentrepreneur Assistance Program (RMAP)
       USDA Rural Development’s RMAP is a new program for organizations that make loans and pro-
       vide technical assistance to microentrepreneurs in rural areas. See the coverage map in the
       appendix or visit http://www.rurdev.usda.gov/mt for more information.

       Rural Cooperative Development Grant (RCDG) Program
       USDA Rural Development’s RCDG program provides funds to centers for cooperative develop-
       ment to help establish and strengthen coops in rural areas. See the coverage map in the ap-
       pendix or visit http://www.rurdev.usda.gov/mt for more information.


Other Useful Links To Financing & Business Resources
       USDA Rural Development in Montana               http://www.rurdev.usda.gov/mt
       Small Business School                           http://smallbusinessschool.org
       Entrepreneur Resource Center                    http://www.lowe.org
       My Own Business                                 http://www.myownbusiness.org
       U.S. Business Advisor                           http://www.business.gov
       U.S. Small Business Administration              http://www.sba.gov
       Minority Business Development                   http://www.mbda.gov
       IRS Business Topics                             http://www.irs.gov/businesses
       Montana Bankers Association                     http://www.montanabankers.com
       Montana Cooperative Development Center          http://www.mcdc.coop



                                                 -8-
The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race,
color, national origin, age, disability, and where applicable, sex, marital status, familial status, parental status, religion, sexual
orientation, genetic information, political beliefs, reprisal, or because all or a part of an individual's income is derived from
any public assistance program. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alter-
native means for communication of program information (braille, large print, audiotape, etc.) should contact USDA's TARGET
Center at (202) 720-2600 (voice and TDD).
To file a complaint of discrimination write to USDA, Director, Office of Civil Rights, 1400 Independence Avenue, S.W., Wash-
ington, D.C. 20250-9410 or call (800) 795-3272 (voice) or (202) 720-6382 (TDD). USDA is an equal opportunity provider,
employer, and lender.

				
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