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Capital Opportunities for Small Businesses CAPITAL OPPORTUNITIES FOR SMALL BUSINESSES Capital Opportunities for Small Businesses A Guide to Financial Resources for Small Business in North Carolina Prepared by the Small Business & Technology Development Center CAPITAL OPPORTUNITIES FOR SMALL BUSINESSES CAPITAL OPPORTUNITIES FOR SMALL BUSINESSES © 2009 by The University of North Carolina’s Small Business and Technology Development Center 5 West Hargett Street, Suite 600, Raleigh, NC 27601 phone: 919.715.7272 e-mail: [email protected] website: www.sbtdc.org All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise – without the prior written permission of the publisher. This material is based upon work supported by the US Small Business Administration (SBA). Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author[s] and do not necessarily reflect the views of the SBA. Development of this guide was partially underwritten by the North Carolina Rural Economic Development Center, Inc. The SBTDC would like to thank the following for their valuable contributions to this guide: Linda Esterling Angela Farrior FEEDBACK Eileen Joyce George McAllister If you have any suggestions or Carol McLaurin questions about this guide, please Lisa Ruckdeschel call 919. 715-7272 Horace Stimson Jordan Williams or e-mail [email protected]. CAPITAL OPPORTUNITIES FOR SMALL BUSINESSES CAPITAL OPPORTUNITIES FOR SMALL BUSINESSES TABLE OF CONTENTS Page CHAPTER 1: Introduction Purpose of this Report.…………………………………… …………………………1 CHAPTER 2: Overview of Financing Sources Getting Started…………………………………………………………………………3 Start-Up (or “Seed”) Stage……………………………………………………………3 - Personal Assets………………………………………………………………4 - Family and Friends……...……………………………………………………4 - Home Equity Loans……..……………………………………………………4 Growth Phase………………………………………………………..…………………5 Internal Financing………………………………………………………………...…5 - Cash Management Tools……………………………………………………5 a. Lockbox……………………………………………………………...…5 b. Controlled Disbursement Account…………………………………..5 c. Sweep Account……………………………………………………..…5 - Accounts Receivable Management…………………………………………5 - Inventory Control…………………………………………………………...…6 - Electronic Commerce…………………………………………………………6 - Barter……………………………………………………………………...……8 External Financing…………………………………………………………………7 - Short-term Financing…………………………………………………………7 a. Trade Credit……………………………………………………………8 b. Term Loan…………………………………………………………..…8 c. Line of Credit………………………………………………………..…8 d. Letter of Credit……………………………………………………...…8 - Long-term Financing…………………………………………………………8 a. Debt & Equity Financing……………………………………………...8 - Debt Financing………………………………………………..…8 - Equity Financing…………………………………………………9 - Debt Financing vs. Equity Financing……………………….…9 - Debt-to-Equity Ratio………………………………………...…10 b. Obtaining a Loan………………………………………………….…12 - Grants…………………………………………………………………………13 CHAPTER 3: Financial Institutions Commercial Banks…………………………………………………………….………14 Savings Institutions……………………………………………………………………15 Non-Bank Lenders…………………………………………………………….………18 - Asset-Based Lenders………………………………………………………18 - Specialized Asset-Based Lenders………………………………..………20 - Factors………………………………………………………………………20 - Leasing Companies………………………………………………..………21 Credit Unions…………………………………………………………………..………23 Community Development Credit Unions (CDCUs) ……………………......………23 CAPITAL OPPORTUNITIES FOR SMALL BUSINESSES Page CHAPTER 4: Federal Government Sources U.S. Small Business Administration (SBA) ………………………………………25 7(a) Loan Guaranty Program………………………………………………26 - Restrictions on Eligibility of Businesses…………………………..…26 - Loan Maturities…………………………………………………………27 - Interest Rates and Fees…………………………………………….…27 - Certified/Preferred Lenders……………………………………………29 SBAExpress Program………….……………………...……………………32 Patriot Express Program……………………………………………………32 CommunityExpress Program………………………………………………32 504 Certified Development Company Program……………………….…33 Short Term Loans and Revolving Lines of Credit (CAPLines) ……...…35 Community Adjustment & Investment Program (CAIP) ……………...…35 Pollution Control Loan………………………………………………………36 SBA Surety Bond Program………………………...…………………….…36 MicroLoan Program………………………………...………………...…..…36 America’s Recovery Capital (ARC) Loan Program……...………...…..…37 Dealer Floor Plan Financing Program……………….……………...…..…38 Defense Loan and Technical Assistance Program (DELTA) …..………38 Small Business Investment Company (SBIC) Program…………………39 Small Business Innovation Research (SBIR) / Small Business Technology Transfer (STTR) Programs………..………………………44 - SBIR Program…………………………………………………………44 - STTR Program…………………………………………………………45 8(a) Program…………………………………………………………………49 U.S. Department of Commerce Economic Development Administration (EDA) ……………………………50 - Revolving Loan Fund (RLF) Program…………………………..……50 U.S. Department of Agriculture Farm Service Agency…………………………………………………………51 - Farm Ownership Loans………………………………………..………51 - Farm Operating Loans…………………………………………………51 Rural Development Program………………………………………………...52 - Business and Industrial Loan Program………………………………52 - Intermediary Re-lending Program (IRP) …………………….………52 - Rural Business Enterprise Grants…………………………….………53 U.S. Department of Energy Inventions and Innovation Program…………………………………………54 Export Financing (SBA) The Export Working Capital Guarantee Program (EWCP) ………………54 The International Trade Loan Program…………………………………..…55 CAPITAL OPPORTUNITIES FOR SMALL BUSINESSES CHAPTER 5: State Government Sources NC Department of Commerce Commerce Finance Center………………………………………………………59 - Community Development Block Grant (CDBG) Program………………59 - Industrial Development Fund………………………………………………60 - Job Development Investment Grants…..…………………………………60 - Shell Building Program…………………………………………………..…62 - Industrial Revenue Bond (IRB) Program……….…………………………62 -NC Board of Science and Technology ………….…………………………63 NC Qualified Investment Tax Credit……………………………………………64 William S. Lee Quality Jobs & Business Expansion Tax Credit……………..65 Credits - Credit for Growing Businesses…………………………………………….65 - Technology Commercialization Credit………………………………….…69 - Credit for Research and Development……………………………………69 - One North Carolina Fund……………………..……………………………69 - Credit for Worker Training………………………………………………….70 - Credit for Investing in Central Office or Aircraft Facility Property…………………………………………………………70 - Credit for Substantial Investment in Other Property……………………..71 Other Credits and Incentives for Businesses NC Ports Tax Credit………………………………………………………………71 NC Agricultural Finance Authority Farm Ownership Loan Program…………………………………………………71 Agribusiness Loan Program………………………………….……………..……72 Agricultural Development Bonds…………………………….……………..……72 Renewable Energy Tax Credits…………...………….…………………………………………………72 NC Community College System Economic & Workforce Development Services -- Industry Training Program………………………………………………………………73 NC Capital Highway ………………………………………………………………… CHAPTER 6: Equity Capital Sources Equity Funding “Food Chain” …………………………………………………..……74 Individual Investors (Angel Capital) …………………………………………………76 Angel Funds……………………………………………………………………………77 Venture Capital…………………………………………………………………...……79 - Stages of VC Financing……………………………………………….……80 - Raising Venture Capital……………………………………………….……81 CAPITAL OPPORTUNITIES FOR SMALL BUSINESSES Page - Venture Capital Funds Active in North Carolina…………………………85 - Finding Venture Capital Opportunities online……………….……….…106 - Finding Venture Capital Statistics & Trends, and Monitoring Current (NC) VC Activity on-line……………………………………….106 Commercial Bank Investing Arms……………………………………………….…106 Private Equity Providers (Private Equity Firms) ……………………………….…107 Securities Offerings…………………………………………………………………111 - Regulation D (Rule 504) …………………………………………………111 - Small Corporate Offering Registration (SCOR) …………………….…111 - Initial Public Offering (IPO) ………………………………………………112 - Investment Intermediaries- Investment Banking………………………112 Joint Ventures and Strategic Alliances……………………………………………114 CHAPTER 7: Private, Not-for-Profit and Local Programs NC Biotechnology Center (NCBC) ………………………………………………115 - Small Business Research Loan Program……..………………………115 - Business Acceleration and Technology Dual-Licensing Network (BATON) Program…………..…….…115 - Business Development Loan Program…………………………………116 - Collaborative Funding Grant (CFG) Program…………………………116 - SBIR Bridge Loan…………………………………………………………116 Entrepreneur Focused Support Groups/Councils/Networks……………………117 NC Rural Economic Development Center…………………………………………118 - Microenterprise Loan Program…………………………………………118 - Defense Ventures Fund…………………………………………………120 - NC Capital Access Program……………………………………………120 - Child Day Care Loan Guarantee Fund…………………………………120 Rural Venture Fund………………………..…………………………………………121 NC Innovative Development for Economic Advancement (NC IDEA)…………………………………122 Self-Help………………………………………………………………………………122 - Special Child Care Business Programs…………………………………123 Good Work, Inc. ………………………………………………………..……………124 NC Economic Opportunities Fund / Dogwood Equity……………….……………125 Business Consortium Fund (BCF) …………………………………………………125 The Conservation Fund – Natural Capital Investment Fund……….……………126 Sequoyah Fund ………………………………………………………………………126 Local Government Programs - Appalachian Regional Commission (ARC) ………………..……………127 - Carrboro Revolving Loan Fund……………………………..……………127 - Charlotte City Within A City (CWAC) Equity Loan Program…..………127 - City of Winston-Salem- Economic Development Revolving
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