"Corporation Access to Capital"
Indiana Economic Development Corporation Access to Capital Lending Tools – RLFs, Mezzanine & Guarantees Fundamentals of Economic Development Finance Seminar May 19, 2009 Programs – Loan Guaranty Programs – IEDC – Capital Access Program (CAP) – IEDC – Business Development Loan Fund – IEDC – Bond Program - IFA • Volume Cap Allocation • Tax-Exempt Bonds – Brownfields Redevelopment Program – IFA – Broadband Development Program – IFA/IEDC – Recycling Promotion and Assistance Fund – IDEM View the IFA and IEDC websites for descriptions of the programs. www.in.gov/ifa www.in.gov/iedc Loan Guaranty Programs • Focus: High-Growth / High-Skilled companies • Targets: Businesses that create significant jobs • Results: • Lower exposure for Lender • Encourages financing partners • Deficiency Guaranty (similar to SBA/USDA-Rural Development) • Does not compete against federal programs Loan Guaranty Program The Industrial Development Project Guaranty Fund is a non-lapsing, revolving fund used to provide a guarantee for a loan made to and held by a lender approved by the corporation as responsible and able to service the loan properly in which the loan is secured by real property or personal property to or for the benefit of an industrial development project or a value added agricultural enterprise. I.C. 5-28-30. Details: Maximum guarantee to any project is $2 million. Max term is 20 years. Maximum guarantee percentage: 90% if secured by real estate 75% if secured by business personal property Maximum guarantee for working capital purposes is the lower of $500,000 or 80%, and is limited to 18 months Rural Development Loan Guaranty The Agricultural Value Added Enterprise Loan and Rural Development Project Guarantee fund follows very similar guidelines as the industrial development project guaranty fund noted above but with lower limits and geographical limitations. I.C. 5-28-31 Details: Maximum guarantee to any project is $300,000. Max term is 20 years. Maximum guarantee percentage: 90% if secured by real estate 75% if secured by business personal property Maximum guarantee for working capital purposes is the lower of $200,000 or 80%, and is limited to 18 months High Growth Company with High Skilled Jobs defined under Indiana Code 5-28-30-4 as: • a company that had at least a fifteen percent (15%) average annual growth in company earnings during the past three (3) years, OR is entering a new product or process area, OR is classified as in an industry that had at least a fifteen percent (15%) average annual growth in earnings during the past three (3) years; and • a company that has a substantial number of employees in jobs that require post secondary education or its equivalent, OR that are in occupational codes classified as high skill by the Bureau of Labor Statistics, United States Department of Labor; and • a company that has a substantial number of employees that earn at least one hundred fifty (150%) percent of Indiana per capita personal income. Capital Access Program (CAP) • Focus: Small business “access to capital” I.C. 5-28-29 • Targets: Small businesses that need additional collateral to receive a loan from the lender • Results: Collateral gap filler (credit enhancement) • Creates cash reserve fund for the lender = additional security for the financing institution • Allows lenders to consider additional risk outside of conventional lending requirements • Cash reserve fund (savings account) belongs to the State of Indiana and is pledged to the lender as additional collateral for the loan Capital Access Program (CAP) • Details: – The Borrower and the State make a payment into a cash reserve fund (savings account) • Borrower = min. 3% to a max. 7% of the amount enrolled. Lender determines the fee (Fair Lending). This is a one time only fee (not annual). Borrower may finance part of this fee. Fee is non- refundable. • State = min. will match the Borrower’s payment. State match may be 1.5, 2 or even 3 times. Capital Access Program (CAP) • Details: – State Will Make Additional Contributions • State match is 1.5 times the borrower’s fee if Lender has < $2 million in aggregate loan volume enrolled in the CAP • State match is 2 times the borrower’s fee on loans to businesses owned and operated by a racial minority borrower • State match is 3 times the borrower’s fee for a – business that is high-growth/high-skill – business that is a licensed child care facility Capital Access Program (CAP) Capital Access Program (CAP) • Details: – Flexible for the Lender to use • Increase, Change, or Renew a CAP enrolled loan • Lender determines all terms and conditions • CAP follows the enrolled amount until either paid-in-full or charged-off • Lender determines claim amount • Use in conjunction with Federal programs (use caution) Capital Access Program (CAP) • Details: – Eligibility • Business purpose • Project or enterprise located in Indiana – Ineligible Loans • Prior debt owed to the lender not covered by CAP • Housing related • Non-owner occupied real estate (income producing) • “Insider” loans (bank employee or immediate family) • Religious affiliated Business Development Loan Fund The business development loan fund is a non-lapsing, revolving fund used to provide a borrower a direct loan as an incentive for an economic development project to a business located in Indiana if the IEDC makes a written finding that the loan would enable the business to carry out a project that will do any of the following: improve the technological capacity or productivity of the business; enhance the protection of Indiana's environment; or permit the business to expand facilities, establish new facilities, or make site improvements or infrastructure improvements. With respect to any loan made a loan agreement with the corporation must contain the following terms: a requirement that the loan proceeds be used for specified purposes consistent with and in furtherance of the purposes of the corporation; the term of the loan, which must not be later than fifteen (15) years after the date of the loan; the repayment schedule; the interest rate or rates of the loan, which may include variations in the rate; and any other terms and provisions that the corporation requires. I.C. 5-28-32 Broadband Development Program - IFA • Focus: To encourage deployment and access in underserved rural areas • Targets: SB578 allows for the flexibility to develop a program that can cover a wide variety of purposes (from planning to acquisition of assets) • Results: The IEDC guaranty program can provide a Lender with a deficiency guaranty for a loan made to a small operator expanding broadband service in an underserved rural area. Recycling Promotion and Assistance Fund RLF from Indiana Department of Environmental Management - Office of Pollution Prevention and Technical Assistance 317-234-4055 Focus: reduce waste or increase the manufacturing of recycled content products or industrial feedstock inputs • Zero percent interest loan • Up to $1,000,000 or 50% of eligible costs, whichever is less • Max. seven year term or the life of the asset, whichever is less • Loan can be made in conjunction with private-sector lender • State may consider a subordinated position to a lender • For the acquisition of equipment used for the purpose of recycling secondary materials Examples: plastics, mixed glass, coal-combustion materials, tires, metals, wood, cardboard/paper, and foundry sand Source of funding is a percentage of tipping fees Toolbox Guide to Development Funds Ball State University Ball State University’s Toolbox Guide to Development Funds is a comprehensive listing of grants, loans, tax programs, and incentives available in the state of Indiana. You can search the entire database of programs to find the information that best fits your needs. http://cms.bsu.edu/About/AdministrativeOffices/BBC/Resources/ToolboxGuide.aspx Toolbox chapters: Art/Humanities/Human Services; Business Development; Community Development; Environmental Development; Housing Development; International Development; Parks and Recreation; Tax/Revenue; Workforce Development; Community Foundations; Funding Directories; and Venture Capital Firms. SBA and USDA-Rural Development SBA 7(a) Loan Guaranty Maximum Loan Amount: $2.0 million Maximum Guaranty Amount: $1.5 million Loan Guarantee Percentage: 75%, up to 85% Multiple loans permitted up to $2.0 million www.sba.gov Company size limitations apply (revenue or number of employees) USDA Business & Industry Guaranty Maximum Loan Amount: generally $10 million, may go up to $25 million Loan Guarantee Percentage: 80% for loans of $5 million or less 70% for loans over $5 million up to $10 million 60% for loans over $10 million and up to $25 million For areas containing under 50,000 in population www.rurdev.usda.gov Contact Information Indiana Economic Development Corporation Business Development Central Office One North Capitol, Suite 700, Indianapolis, IN 46204 (317) 232-8800 www.in.gov/iedc Business Development Regional Offices Crown Point, South Bend, Fort Wayne, Evansville and North Vernon Small Business & Entrepreneurship One North Capitol, Suite 900, Indianapolis, IN. 46204 (317) 233-9138 www.in.gov/iedc Matt Tuohy, Program Manager email@example.com