Medc Breakfast 2010

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.


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


10 Statewide OfficesNIST/MEP Nationwide System

59 National MEP Centers – 2000 Field Engineers


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 Expertise

• 26 specialists

• Specialists average 19 years of experience

• Advanced training in key continuous improvement methods

• National MEP system experts


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


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


Notable Clients


Notable Partners


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 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 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


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


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?


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

Medc Breakfast 2010

Documents

total equity

loan sba

total fees

conventional bank loan

energy total project

loan program

debenture cdc loan

building remodeling