Entrepreneurial & Small Business Development
Each applicant should be assessed on the following information:
(Process) 1. The debt coverage, 2. Payment ability, 3. The 5 Cs (Character, Capacity, Conditions, Capital and Collateral), and 4. The underwriting and 5. Credit analysis criteria.
Advantages and Disadvantages of Debt Financing
+ No ownership is given up in exchange for debt financing + The business relationship is over once the debt is paid back + Loans can be structured for short term/long term, amortizing or balloon payment - Money must be repaid back within a fixed time - Money must be repaid whether the business is successful or not - Too much debt will label as high risk and hinder ability to raise more funds - Debt financing can leave business vulnerable in lean times when cash is short
Advantages and Disadvantages of Equity Financing
+ Provides greater funds to invest in rapid business growth and development. + Can also lead to business mentoring and management/financial assistance if the equity is from a venture or angel investor. + Less risky than a loan as you do not have to pay back if business is not successful - The entrepreneur loses some control of the business, both ownership and direction - It can take more time to find investors than to find banks/sources of debt capital
What Standard Indicators Should EDs Review to Understand their Community's Entrepreneurial and Small Business Needs?
- Relative amount of IP generated in region - Patent activity - Historical data on new business formation and business death rates - Experience in similar geographies - Analysis of County/Regional Rankings of education attainment, employment in computer sectors, employment in engineering sector, percentage of technology jobs per 1000 workers - Percentage of businesses with less than 20 employees - Track record and occupancy rates of other proximate incubators - State/Regional EDO support of ED through incubation
Potential Incubator Development Network Partners
- US Dept of Commerce and Economic Development Administration through trade adjustment grants - Small Business Administration fixed asset financing through SBA 504 and SBA 7(a) programs - Local business groups like Chamber of Commerce, will occasionally help fund incubators. May also serve as a reference to potential tenants and local lenders. - State governments and foundations have funded special training programs that may be linked to incubator firms. - Educational institutions can offer technical assistance to tenant firms. Can also offer low-cost or donated facilities, university faculty, and professional programs to aid small businesses. - Small Business Development Centers (SBDCs)
Competitive Analysis
-After industry characteristics have been identified, the strengths and weaknesses of competing firms must be realistically assessed. -Entrepreneurs should find out how major competitors and industry leaders are doing. This includes researching their financials, products, and marketing strategies -Assess what each competitor offers in response to various customer needs and decide what the new business will offer in comparison
Incubator Feasibility Steps
1) Assessing the market niche of small businesses likely to seek space in a new incubator. It is essential that incubator operators identify their market niche so they can make sound real estate and program design decisions. 2) Assess the community's business climate and network of organizations that affect Economic Development 3) Analysis of potential incubator sites 4) Cash Flow Analysis to determine minimum rental rates to break even 5) Management Structure 6) Legal Issues
Incubator Development Feasibility Study Advantages
1) Assist when making real estate and service planning decisions 2) Increase community awareness of the project 3) Allow incubator administrators to establish important community contacts 4) Serve as a requisite for application of federal, state, and local funds 5) Provide information to make informed decisions
To receive an SBA loan, applicant must
1) Be of good character 2) Demonstrate sufficient management expertise and commitment to running a successful operation 3) Have sufficient funds, including the SBA guaranteed loan, to operate the business on a sound financial basis
Ways to Segment Markets:
1) By demographics 2) By Psychographics (psychological influences on consumer behavior) 3) Geography 4) Behavior 5) Businesses Will help to identify who and where the primary business customers are.
How to Identify a Market/Segment a Market
1) Classify the venture's industry and the principal consumer groups within that industry 2) Describe the markets major segments Market research divides the consumer market into relatively homogenous groups with common preferences and needs. 3) Determine what motivates purchases and what marketing strategy will capture the target markets.
CDFI Structures
1) Community Development Banks- structured and regulated like regular banks, primary mission is to serve low-income communities. 2) Community Development Credit Unions (CDCUs)- CDCUs are financial cooperatives owned by low-income people to serve the needs of their members in areas with limited access to other financial institutions. 3) Community Development Loan Funds (CDLFs)-nonprofit financial groups that lend social investment monies from individuals and institutions to community development projects in low income communities.
Five points to address before writing a business plan:
1) Express the reasons why customers will but and use the product or service, rather than the competitors products or services 2) Explain why larger competitors will not copy the product or service and push the new venture out of the market with lower prices, wider distribution, and more promotion 3) Project adequate financial returns and achievable financial needs in a simple income statement and balance sheet 4) Describe the background knowledge, skills, and managerial abilities that make the entrepreneur able to start this venture and contribute to its success 5) Define the personal goals, current needs, and future interests that make the entrepreneur willing to devote the next five to ten years to the venture's growth and success
Two main questions EDOs ask any interested entrepreneur
1) How much relevant business management experience do they have in this field? 2) How much of your own money will you be willing to put into this business enterprise?
Organizational Requirements for CDC Certification
1) Incorporation- must be nonprofit, state chartered corporation in good standing. 2) Management-required to have a BoD, officers, and professional staff with sufficient management ability to direct CDC daily functions 3) Board of Directors 4) Professional Staff 5) Staff Capacity 6) Management Services-either provide directly or refer to SBDC's or SCORE 7) Financial Capabilities 8) Area of Operations 9) Membership
Risks of Evicting Business Incubator Tenants
1) Not being able to locate a new tenant to meet operating costs 2) Removing business before they are able to survive outside the incubator environment and they fail 3) The business leaves the region
How to Measure Incubator Impact (from NBIA)
1) Number of current clients 2) Total number of graduates since program inception 3) Number of graduate firms still in business or that have merged or been acquired 4) Number of people employed full-time by client and graduate firms 5) Number of people employed part-time by client and graduate firms 6) Current monthly salaries and wages paid by client and graduate firms 7) Gross revenues for the most recent full year for client and graduate firms 8) Dollar amount of debt capital raised in most recent full year by client and graduate firms 9) Dollar amount of equity capital the client or graduate raised in most recent full year 10) Dollar amount of grant funds raised in most recent year by client and graduate firms (SBIR, state grants, etc.)
How to Become Certified as a Woman Owned Business:
1) Provide clear and documented evidence that at least 51% or more of the business is owned, managed, or controlled by women. 2) Prove that the business has been open for at least six months 3) Be a U.S. citizen or legal resident alien
Most Common Barriers to Entrepreneurs Business Growth
1) Securing Capital- lack of collateral, lack of credit history, lack of equity, riskiness of start-ups, small loan amounts not attractive to banks, cost of loans 2) Effective Management Skills- Most business failures are attributed to poor management. Many new businesses cannot afford the funds or time to acquire necessary business/management skills. 3) Access to Markets to Sell Products or Services-underestimate the importance of market studies or do not have access to quality data.
What should an incubator mission statement include?
1) Specify the primary reason for the incubator's existence (most cases create jobs or diversify the local economy) 2) Establish the scope of the incubator's activities 3) Provide overall direction for the incubator (sector or industry specific) 4) Reflect the incubator's unique strengths (broadband, talent pool)
Ways that Education Institutions can assist Economic Gardening
1) Tech-transfer & Commercialization intermediaries and offices 2) MBA & other advanced business degree programs assisting with research 3) Community college entrepreneurship courses and research in specific industries and sectors.
What two factors are debt financing based on
1) The businesses ability to repay (cash flow and debt coverage ratio) 2) The borrower's collateral strength (loan to value ratio)
For effective marketing, target areas where:
1) The market is not being served; or 2) Consumer needs are currently not being adequately satisfied, or 3) Growth potential for new provider remains
In order for an incubator to be financially solvent it must ensure
1) There are sufficient tenant businesses to fill an incubator 2) The incubator is competitively responding to market demands
Most net new jobs are created by businesses how old?
1-5 years old.
Underwriting is often based on the following 5 C's of Credit:
1. Cash flow - Can the company's operating cash flow repay the loan? Cash flow greater than debt service is a positive indicator. 2. Character - Does the potential borrower have the capability, maturity, character and will to repay the loan? A check of the personal and corporate credit history gives an idea of the business owner's willingness to fulfill financial obligations. 3. Capacity - Does the company's past records demonstrate the capacity to manage debt service and loan repayment? It is important to know the existing repayment priorities and debts of the company. 4. Collateral- Does the borrower have adequate collateral to secure the loan? For startup businesses, the personal assets of entrepreneurs may be enlisted as collateral. 5. Conditions -How does the external economic environment and trends in a particular industry influence the level of risk associated with a particular business loan or investment?
Before setting up an RLF, the organization needs to do what?
1. Determine the mission, goals and policies of the fund. 2. Develop operating procedures and set up the legal structure. 3. Identify the target population. 4. Determine the RLF original and sustaining funding sources. 5. Establish loan rates and loan collection policies.
What are the steps to Organize and Implement a Technical Assistance Program?
1. Identify Technical Assistance Partners and their roles 2. Set Program Policies 3. Provide Technical Assistance 4. Follow up and Evaluate
Practitioners should be aware of the following RLF guiding principles when considering the economic development growth strategy.
1. Technical proficiency- RLF managers should be proficient with credit analysis and underwriting techniques for evaluating small business applications. 2. Diversification-The portfolio should be diverse, to avoid geographic or sector concentration. 3. Flexibility-Market changes and demands should not threaten the RLF. Regulations and policies that do not protect the assets of the fund, benefit small business concerns, or facilitate economic development should be avoided. 4. Monitoring- A specific loan monitoring process should be devised, including when to contact the borrower about late payments, how to collect late payments, and how to handle default loans. 5. Sharing Risk- RLFs should be designed to attract other sources of capital in order to share the risk. 6. Speed up the revolving aspect of the fund-Loans should be designed to optimize interest rates and terms, and should avoid staying in projects too long. A large portfolio with staggered rates of repayment will generate reliable program income and lendable funds. 7. Holistic post-loan servicing- Collections, portfolio monitoring, timely reports, consistent provision management, and technical assistance will lower the portfolio risk.
questions that practitioners should ask public and private stakeholders before developing a RLF:
1. Will it preserve and expand services and products available to targeted areas by small businesses? 2. Will it preserve and create employment for low- and moderate income individuals in small business? 3. Is a RLF the best possible way to diversify the business base though the creation of minority and women-owned business? 4. Will a RLF revitalize commercial districts or corridors?
Small Business Success rate
70% survive in two years, 50% five years, 33% 10 years, 25% fifteen years or more
Certified Development Company 504 Loan Lender
A certified development company loan lender (504 CDC) provides financial assistance in participation with SBA under Title V of the Small Business Investment Act. CDC's may also aid a small business in obtaining other assistance from SBA by preparing loan applications, facilitating management and procurement assistance, and obtaining assistance from other government and non-government programs.
What is a "Lock Box"?
A deposit account for a business' receivables that are used as security against the loan.If a borrower is delinquent or defaults, the receipts are used to make the loan current. If the borrower is current, the receivables are given to the borrower. Most appropriate for working capital loans which are more intangible than equipment or a building.
What is equity financing
A dilutive investment requiring the entrepreneur to give up a portion of ownership in return for capital.
What is a promissory note?
A legally binding recognition of a borrower's loan obligation. The rights of a promissory note may be transferred to another party if it is a negotiable note. The note should be standard, cite the amount, interest rate, and repayment schedule of the loan.
What is a market niche?
A narrow market segment that is underserved and has easily identifiable needs.
What is an RLF?
A revolving loan fund is one of the primary forms of gap financing used in economic development because it "bridges the gap" between what business are able to obtain from a commercial bank and what they require to complete a development project. They are designed to supplement the financing sought by small businesses and should always be considered only after a loan determination has been made by a traditional bank.
What Should be Included in an Incubator Entrance Policy?
A standardized application process which includes a business plan References, credit and background checks Meet with and interview tenant Look at potential tenants ability to: -Create new jobs for community Pay operating costs and attract the capital that's necessary to grow and -survive -Does the tenant compete directly with other existing tenants? -Does the available space meet the business's needs? -Does the company need services offered by the incubator?
A RLF targeting small businesses should be designed for either access or inducement to funds. Which approach to take depends on the mission and objectives of the fund.
Access RLF programs are designed to increase the availability of capital for businesses that potentially could fulfill community development objectives but do not qualify for loans from traditional lenders. Access RLFs can either provide primary loans directly to the business or can serve as a secondary source of funds that fills financing gaps by providing subordinated debts, guaranty to other loans, or other forms of assistance. Inducement programs provide "incentive financing". These loans may offer below market interest rates, extended loan terms, payment deferments or other attractive loan terms to the small business owner or investor in order to stimulate economic activity.
What is lateral thinking?
An alternative problem solving method that does not rely on using traditional step by step common logic. A person uses lateral thinking to move from one known idea to creating new ideas. Edward de Bono defines four types of thinking tools: -Idea generating tools that are designed to break current thinking patterns-routine patterns, the status quo -Focus tools that are designed to broaden where to search for new ideas -Harvest tools that are designed to ensure more value is received from idea generating output -Treatment tools that are designed to consider real-world constraints, resources, and support
What is economic gardening?
An economic development approach that focuses on growing businesses and jobs within the community through entrepreneurial support programs rather than recruiting employers with attraction activities. Was developed in Littleton Colorado in the 1980s. Requires investing in business intelligence services that help entrepreneurs, start-ups and existing businesses of all sizes. Philosophy is to focus on businesses that create a niche instead of produce a commonality. Niche businesses have a competitive advantage in the local community versus a business that can have more success elsewhere.
Balance Sheet
Assets- economic resources owned by or owed to the business. Include property, cash, accounts receivable, inventory. Current assets (will mature into cash in 12 months or less) and non-current assets (greater than 12 months). Liabilities- Obligations of the business. Loans, Accounts payable, deferred revenue (gift cards or gift certificate). Current or short term debt (12 months or less) and non-current or long term debt. Debts paid in installments are called current portion of long term debt (year's worth of installment payments) Equity (or net worth)- is the amount of claim the owners or stockholders have to the busines. Equity increases either through capital investment by the owners or profitable operation/retained earnings of the business. Profits not reinvested are paid out to stockholders in the form of dividends
Economic Gardening Traits:
Assist businesses that create niche, not produce a commonality Focus on identifying and nurturing businesses with most growth potential Do not focus on assisting specific sectors, assist GOOD companies Provide business intelligence services such as GIS planning and marketing research. Offer value added, in-kind assistance tailored to the businesses needs.
Incubator Goals
Assist new businesses establish self sufficiency Encourage tenant businesses to leave once they no longer depend upon incubator support
Financial Statements
Balance Sheet- assets, liabilities, equity Income Statement (profit & loss statement) Statement of Cash Flows
Why must incubator managers promote synergy?
Because one of the strongest advantages to incubation is the networking that takes place between tenants and the peer interaction. Shared kitchens, conference rooms, break spaces, bathrooms, and common spaces help to promote networking and tenant interaction.
Basic Training Needs of Microentrepreneurs
Business Development Training: al-encompassing course that introduces participants to the process of starting a business. Topic-Specific Training: In-depth training on particular issues that cannot be addressed in a survey course. Industry Training: Addresses unique issues related to a specific industry such as licensing and permit requirements for a trucking business.
Business Narrative
Business Location Description of Product of Service Market Segmentation/Identification Industry/Competitive Analyses Profiles of Members of the Management Team Descriptions of Staff Positions Overall Schedule/Timeline Community Benefits
Technical Assistance Needs of Microentrepreneurs
Business Planning Financial Administration Cash Flow Market Research Product Design and Development Marketing/Selling Strategies Management Assistance Credit Repayment
Technical Assistance Available to Small Businesses
Business plan development- SBDC, SCORE Assistance with grant and loan applications Training and managing staff Advice regarding financing, marketing and product development Improving the design of a product or the manufacturing process Accounting and other record-keeping functions Site selection and workforce development assistance
How can the quality of a network be measured?
By its ability to connect resources across industries and people. A community with dense networks that support entrepreneurship will be better equipped to assist rapid innovation and globalization.
5 C's of credit
Capacity- ability to repay Capital- net worth/equity in the business Character- record of repaying/reputation Collateral- assets to secure the loan Conditions- external impacts
Non-Federal Sources of Technical Assistance
Chambers of Commerce Community Colleges Workforce Development Career Centers Lawyers Accountants Business Roundtables Small Business Incubators
Ways to secure a microenterprise loan:
Collateral- traditional assets used to secure a loan. Easier when the loan is used to purchase/construct fixed assets. Conditions Co-Signers Forced Savings-requires borrowers to place a percentage of the loan in a savings account which can be drawn upon by the lender in the event of delinquency or default. Personal Guarantee Promissory Note Lock Box Uniform Commercial Code (UCC) Filings- official liens on business' assets. One may request an application to file a UCC at the state or county level depending on the state.
What are CDFI's?
Community Development Financial Institutions provide lines of credit and other financial services to underserved markets and populations throughout the United State. Six Basic types of CDFI's: 1) community development banks 2) loan funds 3) corporation based lenders 4) corporation based investors 5) venture funds 6) micro-enterprise funds CDFI Fund was established by the Reigle Community Development and Investment Act of 1994 and is administered by the U.S. Treasury Department. It is the most important source of support for CDFI's by providing capital grants, equity investments, and leveraging private sector resources into distressed communities.
Characteristics to Investigate when Selecting an Incubator Site
Condition Fire Sprinkler System Environmental Audit Utilties Shipping Dock Access Floor Load Limits and Ceiling Heights Access for Employees- handicap, etc. Parking - one spot for every 300 square feet of tenant space Security Advantages and Disadvantages Restrooms Elevator Cranes
When Working with Start Up or Second Stage Companies, Main Features of a Gardening Program are:
Connectivity: An environment of teaching, mentoring, and networking, especially in post secondary institutions. Market Research: A hallmark of economic gardening is the emphasis on higher power tools for competitive intelligence- including the use of marketing databases, GIS software, trademark research, web optimization, and other value added, knowledge-based tools. Community and Workforce Development and Infrastructure: entrepreneurs thrive in an environment rich in community assets including education, community amenities, meeting places and incubators.
Ways Communities have empowered their entrepreneurial culture:
Converting grocery stores into local good production centers Creating a single, agency driven overlapping network of investors and entrepreneurs Teaching people how to network and providing networking opportunities Turning public libraries into economic gardening hotspots Creating a Business Plan Awards Program Establishing an Entrepreneur Day at local high schools Building an Entrepreneur Hall of Fame Recognizing home-based businesses and helping them grow
Business Plan Components
Cover Sheet Executive Summary Table of Contents The Business Narrative Financial Data Supporting Documents
Business Life Cycle- important to determine technical assistance to provide
Creating the Business Idea- ED will need to ask entrepreneur to vocalize their business idea and help client determine if they are ready to make the commitment. Important to determine if the entrepreneur has thought the process through and ready to deal with consequences good or bad. Formalizing the Business Plan- ED should be prepared to assist with business plan development, marketing planning, and financial projections. Entrepreneur should have fully developed product and identify source of financing. Opening the Business- Implementation of the business plan. ED should instruct business how to manage cash flow, accounting, inventory. Give entrepreneurs tools to monitor progress and learn from mistakes. Expansion and Growth- ED can provide assistance with how to access local talent, workforce devt programs, how to financially support growth, identify new buildings/sites.
Questions to Pose to a potential Entrepreneur
Decided what type of business venture they would like to start? What qualifications do they have? Determined if it is feasible to make a profit in the chosen business in this particular community? Researched their target market and identified their target niche? Written business, financial, and marketing plans? Chosen a place to set up the business, taking into consideration traffic/parking/visibility/delivery space? Make a list of materials needed to start the business? Identified potential funding sources? Learned how to effectively manage bookkeeping and financial statements? Consulted legal teams and regulatory agencies if needed? Weighed the disadvantages of being an entrepreneur? Considered the changes in personal and family conditions, including long business hours? Developed a strong sense of self reliance?
Entrepreneurs and small businesses owners need help in the following areas:
Determining what legal enterprise they should form Deciphering specific legal regulations and codes Understanding applicable tax requirements Writing a business plan Access to capital Financial management techniques Market and competition analysis Workforce development Commercialization and technology-transfer programs Exit strategies
Minority Business Development Agency (MBDA)
Developed by U.S. Department of Commerce. Was created specifically to encourage growth of business owned by ethnic and racial minorities. Includes socially and economically disadvantaged individuals specifically: Hispanic Americans, Asian and Pacific Island-Americans, Alaska natives and Native Americans, African Americans, and Hasidic Jews. Also operates Native American Program through Native American Business Development Centers.
What are some large, rural areas doing to develop incubator services?
Developing mobile classrooms to provide training, business counseling, and workshops that can be taken to business locations, incubators. Louisiana's "Incubator on Wheels" is an example.
What is the most important part of all business ventures?
Development of a sound business plan
Two Main Approaches to Microlending
Direct Lending- similar to bank lending. Borrowers guarantee repayment through collateral, co-signers, personal guarantee, etc. + Greater staff control over use of funds + Fewer concerns about maintaining group solidarity + Borrowers are directly accountable to the microenterprise lender - Staff time spent assessing and tracking loans and providing tech assistanct - Difficult to identify loan review committee that truly understands the needs and characteristics of microentrepreneurs Peer Lending- also called solidarity circles or group lending, provides financing to groups of microentrepreneurs. Group sizes depend on program and target market. Because group members are responsible for each other's loan repayments, peer lending reiles on peer pressure rather than collateral to enforce repayments. Group members can also provide tech assistance and follow up to one another. + Cost Effective: peer group replaces need for loan officer and review board +Group members provide a valuable support network for each other - Group must be able to work together and remain active over the long term - Relies heavily on instilling solidarity amongst group members - Peer pressure is not always sufficient to enforce repayment.
Three traits of Equity Capital
Does not require repayment of interest and principal Provides a capital base on which debt can be leveraged Requires the initial owner to give up partial ownership of the business
Before an economic gardening program is put in place, what step must be taken?
EDOs may need to influence the community's perception of entrepreneurship and risk tolerance. Sometimes changing culture and perspective on how growth happens is more difficult than implementing the program.
Incubator Development Funding Sources
Economic Development Administration (EDA) - offers grants for eligible projects that will increase the potential for sustaining or creating permanent jobs, industry or business. Must be located within Redevelopment Area (RA) or an Economic Development District. EDA encourages only those projects that will benefit areas suffering from economic distress. Community Development Block Grants (CDBG) Grants come through entitlement communities directly or through state administered programs if they are non-entitlement communities. Criteria of funding is that it must be used to create job opportunities for low and moderate income individuals. Industrial Development Bonds- can be used to finance the acquisition, construction, expansion or renovation of an existing incubator facility. In some cases, can be financed with tax exempt bond financing which is more enticing to potential investors (purchasers of the bonds). Donations Foundations Real Estate Syndication- investors provide equity into a project, receive tax credits, depreciation, and a share of the profits while the developer would be in charge of cash flow, management and would also receive a share of the net sale proceeds.
Incubator Facility Managers
Economic Development Organizations 31% Government 21% Academic Institution 20% No Sponsoring Entity 8% Hybrid 8% For-Profit Entity 4% Other 8%
Economic Gardening Support Organization: Edward Lowe Foundation
Edward Lowe Foundation- created to provide informational and educational support to second-stage entrepreneurs. No grants, but primary goal is to provide a peer support system that facilitates interaction between entrepreneurs to increase knowledge sharing. Developed an award program called "Companies to Watch" and the www.youreconomy.org website which provides an updated pool of performance data on businesses, trends, and local economy.
Small Business Serve As:
Employers Tax Revenue Generators Economic Supporters-recirculation of wealth in local economy Property Owners and Renters Providers of Economic Stability- more likely to stay in community
What is the role of a small Business?
Entrepreneurial and small business development creates local jobs, increases the local tax base, and can help diversify the economic base for local residents.
Microenterprise Program Goals
Entrepreneurship Promotion Job Creation and Retention Poverty Alleviation Public Assistance Reduction Increased Access to Credit Business Creation in Disadvantaged Communities
Two Sources of Entrepreneurial Financing
Equity Financing Debt Financing
First Source of Financing that Businesses Tend to Receive
Equity from Family, Friends, and Fools (3 F's)
Technical Assistance Resources
Federal Govt State Govt Small Business Administration (SBA) and Small Business Development Centers (SBDCs) USDA HUD Service Corps of Retired Executives (SCORE) Minority Business Development Agency (MBDA) Youth entrepreneurship programs Community organizations Chambers of Commerce Business assistance centers Incubator/accelerators Economic gardeners Commercialization intermediaries/Tech-transfer programs Educational institutions (K-12, community colleges, universities)
First Two Steps when Setting up a Financial Assistance Programs
First Step- Determine why there is a problem accessing capital in the local area. Second Step- Determine what role the organization will play in solving client's financing problem. Can start RLF, leverage private sector investment through programs like SBA 504, loan guarantees, etc.
Equity Includes
General partnerships Limited Partnerships Preferred stock common stock warrants
Sources of internal business financing
Generate funds by reducing overhead expenses Managing cash flows and assets Disposing of non-productive inventory, machinery and equipment Collecting deposits or progress payments from clients Ensuring capital assets are used efficiently Negotiating low prices from suppliers Leasing equipment/locations instead of purchasing them Establishing trade credit with suppliers through consignment, installment contractors or longer credit terms
What should be included in an incubator exit policy?
Graduated rent schedules Lease terms with an exit date that can be extended if warranted Facility purposes- meet thresholds to remain in incubator. Could include job creation, business net profits, etc.
USDA Value-Added Producer Grants (VAPG)
Grants are awarded to applications for planning activities and for working capital for marketing value added agricultural products and for farm-based renewable energy. Eligible applicants are independent producers, farmer and rancher cooperatives, agricultural producer groups, and majority controlled producer based business ventures.
Three Capitalization Strategy Sources for Microenterprise loans
Grants- most favorable as they increase the program's financial net worth. Allow programs to take on riskier loans because there is no repayment required Term Loans- Tend to discourage microenterprise programs from making riskier loans because the program will need to repay the funds whether the project succeeds or not. Programs must be set up carefully to make sure that loan payments are sufficient to cover repayment costs. Lines of Credit- better suited for microenterprise programs than term loans because they only need to have access to crdit on an as-needed basis and only have to pay interest on the funds used. Usually have higher interest rates than most loan funds and non-permanent financing.
SBA Programs for Small Business
Guaranteed Loans Small Business Investment Companies (SBICs) Federal Contracts
Executive summary
Highlights key information contained in the body of the business plan. No longer than one page. Contains a series of one or two sentence answers to the following questions: What is the business? What product or service does the business provide? What is the target market and how will the business differentiate its product from other competing products in the marketplace? How much money is needed, and what will this new financing be used for? How will this improve the business? How will the loan be repaid? What unique management team strengths and backgrounds will enable them to achieve the business objectives?
What is the ideal size for an incubator facility?
In an urban setting, the ideal size is 50,000 total SF, and 35,000 leasable space for tenant use. This size is recommended because it will generate sufficient rent revenues without being too large to be overwhelm the incubator capacities (technical service providers, incubator management).
Potential Problems
In practice, RLFs need to occasionally replenish their capital base. Inflation can eat away at the value of the loan pool especially if the pool does not grow at a rate above inflation. In addition, a series of defaults and/ or bad loans could deplete the capital stock of a RLF. Some RLFs are fortunate to have regular scheduled recapitalization from the capital source. HUD annually recapitalizes some of its RLFs, while others may be recapitalized by Urban Development Action Grants (UDAG), or regular payment from a local government.
Cover sheet
Includes business name, full address, contact information, names of principals, and lending institution if being submitted to one
Federal Taxes
Income Taxes Employer and Empoyee Social Security Tax (FICA) Federal Unemployment Tax (FUTA) Excise Taxes- charged for certain services that put burden on federal infrastructure like heavy trucks
What is a Virtual Incubator?
Incubators that operate without a building. Offer incubator services and technical assistance without physical tenant space. Effective in rural areas and with micro-enterprises like home-based businesses, particularly with IT industries that focus on web and e-commerce. Services can be free, low cost, or exchanged for royalties or equity in the company.
What do Business Networks Offer?
Information Counsel Encouragement Leads Access to resources
Characteristics of a Small Business
Innovation-more than half of the nation's technological innovations originate from small businesses. More likely to experiment with new products and processes than large businesses. Ties to the Community- Less likely to relocate and more likely to hire local residents. Join local chambers, support charities, sponsor neighborhood events. Flexibility- Small business adapt more quickly to rapid changes in market demand. Start with Little Capital- Around half of small businesses start with less than $20,000
Most Common Causes for Small Business Failure
Insufficient preparation (little knowledge of chosen industry) Inability to deliver the product (delivery and distribution not yet created, or does not meet demand) Inconsistent quality of products/services Uncompetitive product design or packaging Underestimating the competition Under-capitalization Lack of knowledge or experience with advanced technologies and manufacturing methods Problems selecting appropriate equipment, vendors and consultants Lack of understanding of government regulation
What is the National Minority Supplier Development Council (NMSDC)
It is a business membership organization that certifies and matches more than 15,000 minority owned businesses with member corporations that wish to purchase goods and services. Certification is designed to ensure that a small business is actually 51% majority owned, controlled, or operated by the applicants to ensure eligibility for programs.
What is a business plan?
It is a guide for future business growth and development, and should include sales and profitibility milestones It identifies customers and target markets, and the methods by which the product or service will be sold It analyzes the competitive environment, including the strengths and weaknesses of competitors Most importantly, it will open the doors to the investment process
What is Stepping?
It is providing repeat loans which gradually increase in size based upon repayment history of prior loans. Advantages are: 1) keeps risk low by protecting the fund from large credit risks early in the relationship with the borrower 2) Provides incentives for borrowers to develop strong repayment track records. 3) Can be used in both direct and peer lending.
What is the National Business Incubator Association (NBIA)?
It serves as a clearinghouse for information on incubator management and development issues. Help practitioners understand the feasibility process and related concerns.Conducts research and compiles statistics on the incubation industry, consults with government and corporations on indubator development, and organizes conferences and specialized training.
What is a business incubator?
It's a pro-active economic development tool and resource that provides many economic and entrepreneurial advantages to its tenants including flexible space, subsidized rent, networking opportunities, and shared general services.
Potential Incubator Problems and Pitfalls
Liability- insurance costs, lease contracts Safety Problems- asbestos, lead and other health and environmental hazards Heating/Cooling Efficiency- Older systems replacement and repair costs. Cost effective solutions Costs and Taxes Zoning Location Accessibility Broadband Internet Access
Types of Entrepreneur Networks
Location-Based Networks Web-Based Platforms Mentorship Networks Commercialization Intermediaries Financial Networks
Potential Incubator Shared Services
Logistics or Physical Services- custodial, conference room, lunch room, furniture rental Shared Office Support Services- receptionist, clerical, word processing, bookkeeping Mangement/Consulting Services- marketing, accounting, preparation of business plans, legal services
SBA 504 Loans through a Certified Development Company (CDC)
Long term financing tool for community economic development. The 504 Program provides small businesses requiring brick and mortar financing with long-term fixed rate financing to acquire major fixed assets for expansion or modernization. Requires a participating bank to provide at least 50% of the financing, 40% SBA financing, and a minimum of 10% equity. Start-ups or special purpose fixed assets may require 15% equity and only 35% SBA financing.
Small Business Incubator Services & Advantages
Low Rent- below market rate/subsidized rent. Shared Support Services Network Opportunities
Economic Diversification Based Incubator Development
Many communities encourage the development of solid, job-creating businesses such as manufacturing or service firms to promote economic development rather than high risk, high growth firms. These offer stable employment base and keep the local economy competitive and strong. Require moderate equity and financial assistance. Public sector can play a role but only if the organization has a clear connection to a community's overall economic development plan.
Performance Measurements for Microenterprise programs
Market Penetration- number of intakes, active borrowers, and summary of training participants demographics Impact-jobs created/retained, % increase in incomes, # of businesses created, maintained or expanded Operating Results- cost per average loan, revenues per average loan, clients per staff, cost per dollar lent Portfolio/Financial Performance-number of defaulted loans, level of diversification, funding sources, type and conditions, loan size distribution
% of Incubator Types
Mixed Use 54% Technology 39% Manufacturing 3% Service 1% Other 4%
Who Else?
Money is not just available from banks and regular financial institutions. Many states, communities, corporations, utilities, and CDCs have created revolving loan funds to provide a permanent money pool for community economic development. These loan funds are like regular bank loans but are for smaller amounts and are usually directed to small and growing businesses.
Debt includes
Mortgages Term loans Lines of credit Subordinated debt Bonds Purchase Money
When dealing with giving small businesses technical assistance, EDOs:
Must know what resources are available to them Understand the types of questions they will field from small business owners Be prepared to refer clients to the resource that can best meet their needs
Who Should Conduct Incubator Feasibility Study?
NBIA recommends using experienced incubator development or management consultants to conduct feasibility studies. They will avoid common pitfalls, minimize biases, and lend credibility to obtain grants and funding for the incubator development.
Community Development Corporations
Non-profit organizations that devote their time to assisting in real estate development projects, community revitalization efforts and small business/entrepreneurial assistance.
Capital Equipment List
Office furniture, business machines, store fixtures, Machinery used to make products or deliver services, Delivery vehicles.
Sole Proprietorship
One person having sole ownership and control over a business. Most common business structure. Advantages are only one person to make decisions, reduces paperwork, permits owner to retain all profits, allows for quick and efficient termination of the business. Disadvantages are raising capital, personal liability, and discontinuation at time of owners death. Always have option of changing to a partnership or corporation.
S Corporations
Organized under Sub Chapter S of the IRS Code. Under this code, individual shareholders pay corporate net income personally, as thought it were a partnership. Income and expenses are divided among the shareholders in proportion to their holdings, and profits are taxed at the shareholders respective tax rates.
Youth Entrepreneurship
Partnership between EDOs and youth organizations. Unlike business management courses and corporate exposure programs, youth entrepreneurship is multi-faceted and hands-on in training approach. One such program is the Junior Achievement Award. These programs: -Teach children about their environment and how to view it differently. They teach lateral thinking, an alternative method of problem solving. -Show low income children the opportunities that surround them by examining different types of business that serve their neighborhoods. -Emphasize attitudes and basic values, such as optimism and perseverance which are characteristics of entrepreneurs. -Promote the values of microenterprises, such as mom and pop shops which support much of the economy. -Proide practical applications of these ideas to help children internalize the concepts.
Types of Business Networks
Peer Networks Mentor Networks
Small Business Investment Companies (SBICs)
Private venture capital firms that make equity investments and long-term loans to small businesses. SBIC funding comes from the private sector, supplemented by US Government guaranteed debt from the SBA which is added to the SBIC investment pool. SBA receives money back from the investment as a venture capital investor, as well as the money from the interest on the loan. Main goal of SBICs is to provide equity capital and long-term credit (maturity of at least 5 years) to small businesses.
Entrepreneurs have the following strongs
Problem Solving Self Confidence Persistent Strong Communication Project/ Goal Oriented Risk Taking Diligent Good Networking Skills Ambition Decision Making Leadership
Four P's of Marketing
Product Price Placement Promotion
What are Mentor Networks?
Program in which older, more experienced business owners are matched up with newer entrepreneurs to share experience and avoid common pit-falls. Mentors provide entrepreneurs with real world experience in arranging, financing, managing staff, managing cash flow, selling products, etc. Mentors may also be able to connect entrepreneurs with sources of capital.
Limited Liability Corporation
Provide the protection of a corporation with the flexibility of a corporation. Combines the limited liability that a corporation affords its shareholders with the tax status a partnership receives. Similar to a corporation, responsibility for claims against the corporation rests with the corporation itself and not with the individual owners. Like a partnership, income and losses are distributed to the owners of the business.
Statement of Cash Flows
Provides information about a company's cash receipts and cash payments. In essence, it shows the sources and uses of cash. Estimated projected sales Costs and Expected Forecast Cost of Sales/Manufacturing Selling, General and Administrative Expenses
SBA Pre-Qualification Pilot Loan Program (Pre-Qual)
Provides support and assistance in the 7a small business loan application process to those segments of the business community that are traditionally underserved by lenders. Was developed to assist: minorities, women, veterans, exporters, rural markets & certain designated geographical areas and industries. To be eligible a business must be owned 51% by one of the groups above. Export loans are made to projects for the intention of significantly expanding existing export activities or developing new export markets.
Incubator Manager Goals
Public/non-profit- Job growth, economic diversification, tax base expansion, building rehab/reuse, improving business climate/image Academic Institutions- commercializing research and technology, employment opportunities for students, faculty, improving image of the institution to potential researchers, faculty, and students Private sectors- Desire either substantial equity stake in tenants or return on investment in commercial and industrial real estate. Job growth and business development while not primary goals of private sector incubators, are positive indirect impacts.
Ineligible Businesses for SBA programs
Real Estate investment firms Dealers of rare coins and stamps Financial Institutions Pyramid Sales Plans Firms Involves in Illegal Activities Gambling Activities Charitable, religious or other nonprofit institutions
C Corporations
Refers to a standard state-formed corporation. The corporation assumes a separate legal and tax life distinct from its shareholders. The corporation pays taxes at a corporate income rate and files corporate tax forms each year (IRS form 1120). Unlike an S corp, there is no limit to the amount of share holders. Foreigners can hold shares in C Corps unlike in S corporations. C Corporations can carry corporate losses forward into future years.
Three Traits of Debt Capital
Relies primarily on a business's ability to repay the loan Relies secondarily on the value of assets offered as collateral Allows the owner to not lose any part of ownership of the business
Limited Partnership
Requires at least three people, two general partners and a limited partner. General partners have the same responsibilities if they were participating in a regular partnership. In contrast, limited partners are not involved in the regular management and in turn have limited liability. Thus they are different in that at least one of the partners has less responsibility and involvement.
General Partnership
Requires two or more people included in the business enterprise. Advantages are the organization has multiple financial and administrative resources to rely on, and that profits are not taxed directly. Disadvantages are that owners bear unlimited liability for all debts and liability. Also, the enterprise ends with the death of one of the partners, and any partner can change the orientation of the organization.
Small Business Administration Entrepreneur Programs
SBA Office of Advocacy- independent voice for entrepreneurs and small business within the federal government. Chief Counsel advances the views, concerns, and interest of small business before Congress, the White House, federal agencies, federal courts, and state policy makers. U.S. Business Advisor- this website provides a list of business information and services offered by the government. This convenient one stop link allows small businesses to download business forms and review how tax and zoning regulations relate to them. SBA Online- an online bulletin board providing points of contact, services, a calendar of events, access to SBA publications, and general information on SBA programs.
What is a small business
SBA defines a small business as entities with less than 500 employees.
What is difference between and SBDC and a business incubator?
SBDC is mandated to assist any eligible business requesting assistance SBDC must provide assistance at any stage of development SBDCs do not target early stage companies SBDC clients are generally 90% service and retail, not product based. Incubators are selective Incubators usually focus on high growth potential businesses Incubators usually focus on high job creation/high wage potential companies
Varieties of Microenterprise Programs
Self-Sufficiency Programs Self-Employment Programs Small-Scale Enterprise Programs
Basic criteria to screen applicants for entrepreneurial training
Self-selection Target group characteristics Commitment Merit of the business idea Informal judgment about the candidate's personal situation and ability to complete the program
What is SCORE?
Service Corps of Retired Executives is a volunteer organization made up of over 10,500 working and retired executives. They educate entrepreneurs and promoting the formation, growth, and success of small businesses. They provide inexpensive workshops and publish articles to help train emerging business leaders.The goal of the program is to tap into and retain the knowledge of seasoned executives paving the way for better business practices. Have helped nearly 8 million new businesses.
Sources of Microloan Program Capital
Small Business Administration Microloan Program: SBA makes funds available to intermediary lender who make max loans of $35,000 and average loan size of $13,000. May be used for working capital, inventory, furniture/fixtures or machinery and equipment. HUD Section 108 Loan Guarantee- can borrow against yearly CDBG allotments to develop loan pools for microenterprises. Needs to assist low-mod income projects. If loan goes bad, it will be deducted from future CDBG allotments. CDFI Fund- provides one to one matching loan funds to certified financial institutions for assisting low-income persons or individuals who lack adequate access to loans or equity investments. Job opportunities for Low-Income Individuals Program (JOLI)- JOLI supports grants for up to $500,000 to develop programs such as microenterprise programs for welfare recipients and other low-income households. CDBG Funds Banks Corporations Foundations
Federal Programs Providing Technical Assistance
Small Business Development Center (SBDC) Service Core of Retired Professionals (SCORE) SBA Microenterprise Program US Department of Agriculture Internal Revenue Service
What are SBDCs?
Small Business Development Centers are a nationwide network of one stop centers for small business technical assistance that have 50% of funds provided by SBA. They are often housed at universities, community colleges, chambers of commerce and EDOs. They provide services free of charge to small businesses. They provide three major types of service: Basic Business Counseling Training Programs Information Research Services
Microlending differs from conventional lending in terms of:
Smaller loan size Shorter Terms Lack of sufficient collateral Character based underwriting rather than credit based. Higher level of acceptable risk
Six Business Legal Structures
Sole Proprietorship General Partnership Limited Partnership Limited Liability Corporation S Corporation C Corporation
Three Basic Legal Structures for Starting a Business
Sole Proprietorship Partnership Corporation
Three Different Stages of Entrepreneuial and Small Business Growth for Economic Gardening
Start Up Companies: New business ventures where innovation drives a person or a group of people to formally organize and start a business. Second stage companies: Companies that have grown past the startup stage but have not grown to maturity. Enough employees to exceed the comfort of one owner/CEO and benefit from adding professional managers but they do not yet have a full professional management team. Gazelles or High Impact Companies: Gazelles often emerge in business to business markets (usually in deregulated or newly emerging industries) where they can capitalize on niche opportunities. Most importantly, gazelles experience a rapid stage of expansion, growing at least 20 percent per year over the previous four years.
Public policy supports entrepreneurism at the local level for the following reasons
Start-up and growing small businesses add to the net sum gain of jobs Homegrown businesses are more likely to stay loyal and remain in the area With the increased use of technology to transfer information, more people are able to run businesses out of their home Small business respond quickly to market shifts, whereas large manufacturers do not have the same felxibility
State Taxes/Laws
State Occupational License Workers Compensation Corporate and Personal Income Tax State Sales and Use Taxes Real and Personal Property Taxes State Unemployment Insurance Business and Occupational Tax Public Utilities Tax Leasehold Excise Tax State Intangible Tax Hazardous Waste Generator Tax
Marketing Strategy
Stating what marketing will be done, how the marketing will be done, and who will be doing the marketing. The Four P's of Marketing is a good format.
The Income Statement
Summarizes the income, expenses, and profitability of a business over a certain period of time. Net Sales Revenues Cost of Goods Sold Gross Profit Other Income Sales and General Administrative Expenses Net Income
Minority Business Opportunity Centers (MBDCs)
Supported by MBDA and funded by private and federal dollars. Work to create conditions in the marketplace that foster minority business success. Provide in-depth technical advice at a low cost. Run by various non-profits, government agencies, educational institutions, Native American tribes, and privates businesses. MBDA District offices are responsible for all MBDCs. Some services include: general management assistance, finance and accounting assistance, and personnel management.
What is the best way to determine what specific needs businesses have/what services to offer?
Survey existing local businesses
A Community's Small Business Development Strategy Depends on:
Surveying Neighborhood Local lending institutions Evaluating existing services Availability of credit in community
Three Main Resources Available to Small Businesses
Technical Assistance Providing Business space Financial assistance
Three Incubator Objectives
Technology Based Development Economic Diversification Community Revitalization
Three Incubator Specialties
Technology-Based Development Local Economic Diversification Revitalization
Why is flexible space crucial in incubator facilities?
Tenants are often growing or shrinking changing their space needs yearly or even monthly. They have high turnover rate and serve a wide diversity of business uses requiring spaces to be able to be used by different industry types or easily and cost effectively retro-fitted for specific use. Manufacturing uses should be separated from other tenants due to noise, smells, and liability purposes.
Community Revitalization Based Incubator Development
Tenants tend to be small independently owned and operated firms in a narrow geographical market. Typically sponsored by public or non-profit organizations, these incubators are located in areas with low economic activity like aging industrial districts, declining commercial areas, or areas experiencing plant closings or major layoffs. They focus on providing tenants with business basics such as marketing, cash flow management and accounting control making them relatively low-cost compared to other incubator types.
Four Basic Areas in Which Incubators Assist Tenant Businesses
The Incubator Organization/Environment Multi-tenant Real Estate Business Consulting Services Shared Office Services
Information EDOs can Share with Small Business
The Territory- should know the general business environment of the area. Knowing the business types in area, what business sectors are represented, what businesses typically flourish and which do not. Problems- Must be constantly aware of the problems small businesses struggle with. Monitoring and evaluation or success rate of types of businesses. Ability to identify businesses that are succeeding and ones that are stagnant or heading towards failure. Local Business History- EDOs can inform new business owners of the history of business success in the area. By knowing trends, an ED can assist an entrepreneur select the best location for their business to ensure success. Business Climate- Data collection through surveys/other tools to get a feel for the business climate and what services are in demand. This information is used to refine technical assistance programs. How to Relate- One of first tasks of an EDO is to relate to its clients.EDOs also need to know how to relate to banks, politicians, govt agencies, etc. to communicate the message in a way that all can understand. How to Market- Small business resources go underutilized because business owners are unaware they exist. Ways to promote services: articles in newspapers, social media, periodic mailings, announcements at business association meetings, word of mouth/referral When to Quit- It is important to remind a struggling owner that it may be better to let go of the business and hurt the ego than pull resources away from raising a family.
What is a network?
The formal and informal links that exist between individuals, firms, and institutions. A strong network enables the free flow of knowledge, services, and other business resources to network participants.
Small-Scale Microenterprise Programs
These program target microentrepreneurs with existing businesses that are poised for expansion. The goal of these programs is to help these businesses make the transition to small-scale growth enterprises. Training and tech assistance focuses on management assistance that is either topic specific or industry specific. Loans typically range from $15,000 to $25,000 and are used to finance permanent working capital, fixed assets, or growth.
Self-Sufficiency Microenterprise Programs
These programs target low-income individuals with little or no formal entrepreneurial skills. Such programs seek to increase the economic self-sufficiency of their clientele though basic business training and social services which help borrowers overcome social and personal barriers to financial independence. Loans are very small: $500 to $5,000. This program is best suited for peer lending programs. Usually used for working capital.
Self-Employment Microenterprise Programs
These programs target more entrepreneurially skilled individuals, encouraging both the start-up and expansion of existing businesses as a source of self employment. Tech assistance includes basic business training, topic specific training such as financial management and marketing, and industry specific training. Loans are larger than self-sufficiency loans ($5,000 to $15,000) and are used to finance both working capital and fixed assets.
What are Co-Working Collaborative Spaces?
These spaces offer entrepreneurs small office facilities and conference rooms that are shared by multiple tenants. Can include community work areas as well as private offices.
What do entrepreneurs need from Economic Development
They are driven, have strong leadership skills, creative, and remain motivated in the face of setbacks. They do however need training, technical assistance, capital, and networking opportunities.
What are Peer Networks?
They are networks made of peer entrepreneurs that can discuss experiences, ask questions, and discuss the issues they share. They offer encouragement, support and answers to questions. It's easier to open up to peers because they are going through the same issues, growing pains. Also a good way to market products and services to complementary businesses or pool resources to reach further market penetration.
Chambers of Commerce
They are the primary advocates for businesses in a designated area. Primarily member ship based, chambers focus on issues facing local firms, giving firms a voice in the legislature and the community, and keeping businesses up to date on issues that are important for their growth. They offer services such as referral, workshops on health care, and one on one consulting. Usually 501(c)6 Business League.
What is an incubator anchor tenant?
They are typically large, long term business tenants that provide a steady income stream to offset the short term tenants and vacancies.
What are Microenterprises?
They are very small business ventures that generally have fewer than five employees with the majority operated by the owner alone. Usually structured as sole proprietorships or partnerships (rarely corporations). Tend to be retail or service oriented with few capital assets. They typically only support the owner and many were started to supplement the owners income. Typically require less than $25,000.
What is a Retail Incubator?
This incubator is typically smaller than regular incubators. They are market driven and dependent on shoppers with specific preferences and buying habits. Location is very important- foot traffic and visibility is crucial to generate sales. A critical mass of small shops is required to attract shoppers. Typically encourage longer tenancies than regular incubators.
USDA Rural Business Entrepreneurship Development Initiative
This is designed to encourage 1890 institutions and historically black colleges and universities to establish and promote business entrepreneurship as a viable occupational alternative for students in all academic disciplines. Also designed to promote entrepreneurial practices within existing businesses located in underserved communities through creative thinking, information and technology utilization, strategic alliances, use of R&D, business planning, and global and international market relationships.
SBA 7(a) Community Express Loan Program
This loan program allows SBA approved lenders to provide a unique combination of financial and technical assistance to borrowers located in the nation's underserved communities. Eligible communities include SBA's Historically Underutilized Zones (HUBZones) and those communities identified as distressed through the Community Reinvestment Act (CRA).
SBA 7(a)
This loan program is SBA's primary program to help start-up and existing small businesses obtain financing when they may not be eligible for loans through normal channels. Names comes from section 7(a) of the Small business act, which authorizes SBA to provide business loans to American small businesses. SBA does not make the loans, just guarantees a portion of the loan made and administered by commercial lending institutions.
SBA Disaster Assistance Loan Program
This program provides low interest loans to homeowners, renters, businesses of all sizes and most private nonprofit organizations to repair or replace real estate, personal property, machinery and equipment, inventory and business assets that are damaged or destroyed in a declared disaster.
SBA Microloan Program
This program provides small (up to $35,000) short-term loans for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment. It is designed for small businesses needing small-scale financing and technical assistance to start up or expand, and is delivered through specially designated intermediary lenders (nonprofits with experience in lending and technical assistance).
What is the role of economic developer in economic gardening?
To act as a facilitator, leveraging public and private sector resources available in the region and beyond. EDO practicioners should conduct a thorough assessment of the existing entrepreneurial climate in the area. This assessment will make it easier to determine what services and programs will have the greatest positive impact on the local community.
Technology Based Incubator Development
Usually associated with colleges, universities, federal research or medical center to provide the source of research and technology. Fostering high growth technological development requires extra marketing, financial assistance and sophisticated technical assistance.
What is a microenterprise?
Usually employ less than 5 people and are often home-based businesses.
Special Incubator Programs
Virtual Incubators Retail Incubators Co-Working Collaborative Spaces
United Stated Community Adjustment & Investment Programs (USCAIP)
Was created in tandem with the North American Free Trade Agreement (NAFTA) to provide credit to new or expanding businesses in communities with significant job losses due to changes in trade with Canada and Mexico. Congress initiated the program to help communities in need of adjustment assistance. The program works primarily through the loan programs of the Small Business Administration (SBA) and the US Department of Agriculture (USDA), however it can also provide direct financing where conventional sources are not available.
Information Dissemination
Way that EDOs use to get information to businesses. Comprehensive calendar of activities, including business round tables, informal business network lunches, chamber of commerce meetings, minority business leagues, etc.
What types of questions should be on a business survey?
What sort of business assistance do they want? What business assistance efforts are most helpful? In what areas of business management do they feel most weak? Do existing businesses use technical assistance providers? How informative and useful are existing assistance providers services? How many technical assistance providers are they aware of? What suggestions does the business have for improving technical assistance services?
Industry Analysis
Will provide the facts that convince the readers that the business idea is a sound one. It is essential to demonstrate a thorough understanding of the industry, the market, and specific competing firms. Answer: Are firms entering or exiting the industry? How do firms in the industry compete? How do firms deliver the product to consumers and/or retailers? What impact will political, environmental, social and technological changes have on the industry? How do firms in the industry obtain financing? Are there any emerging trends in the industry?
Local Government
Zoning Laws Occupancy Permits Certificate of Use or Zoning Use Permits Building Change Permits City Street or Sidewalk Permits Boiler and Pressure Vessel Codes Housing and Construction Codes Air Quality Permits Miscellaneous
How many small businesses in the U.S?
over 29 million small businesses Have generated 64% of new jobs in last 15 years