This report provides information about financial resources available for small businesses. Ideally, it would include all sources of funding for small businesses, regardless of the location of the financing entity. Unfortunately, a search of that magnitude is beyond the scope of this report. Therefore, this report concentrates on sources of capital located in North Carolina.

This material is based upon work supported by the US. Small Business Administration through Cooperative Agreement number SB-2M-00110-10. Any opinions, findings, conclusions or recommendations expressed in this publication are those of the author and do not necessarily reflect the views of the US. Small Business Administration. ...- ...... -...-...... ::. .. &.* &.* -..> . ...~.,

0 1995 by NC Small Business and Technology Development Center TABLE OF CONTENTS

I. Introduction...... Page 1 A. Purpose of this Report B. Current TrendsDevelopments C. Program Additions and Changes

II. How to Obtain Capital...... Page 4 A. Capital Overview B. What Types of Financing are Available? C. Where to Start? D. What Information Do Investorsnenders Want? ...... :.? Financial Institutions Page ...... :.:.: ..... : III...... 9 . ~./-. .: A. Commercial Banks B. Savings & Loans C. Non-BankLenders D. Other Financial Institutions E. Factors F. Leasing Companies G. Credit Unions

IV. Federal Government Sources...... Page 16 A. Small Business Administration 1. Guaranteed Loan Program 2. DirectLoans 3. 504 Certified Development Company Program 4. GreenLine Revolving Line of Credit 5. Pre-qualified Women's Loan Program 6. LowDoc Program 7. Microloan Program 8. Export Financing Programs 9. Small Business Investment Companies (SBIC) 10. Small Business Innovation Research (SBIR) 11. Small Business Technology Transfer Program (STTR) B. Cooperative Research and Development Agreements (CRADAs) C. US Department of Commerce 1. Advanced Technology Program (ATP) 2. Economic Development Administration a) Local Technical Assistance Program ' b) Business Loan Guarantee Program c) National Technical Assistance Program d) Research and Evaluation Projects Program e) Economic Adjustment (Title IX) Program D. US Department of Agriculture - Rural Development Administration 1. Business & Industrial Loan Program 2. Intermediary Relending Program E. US Department of Energy 1. Energy-Related Inventions Program 2. Innovative Concepts Program F. US Department of Housing & Urban Development - Small Cities Community Development Block Grant Program G. US Export-Import Bank 1. Working Capital Guarantee 2. Loans & Loan Guarantees to Foreign Buyers 3. Export Credit Insurance H. US Bureau of Indian Affairs - Indian Economic Development Program

V. State Government Sources ...... Page 42 A. NC Department of Commerce 1. Commerce Finance Center a. Economic Development Program b. Microenterprise Funds c. Industrial Revenue Bonds d. Industrial Development Fund e. Job Creation Tax Credit 2. Division of Community Assistance -Entrepreneurial Empowerment 3. International Trade Division - Shared Foreign Sales Corporation B. Industrial Recruitment Competitive Fund C. North Carolina Investment Tax Credit D. State Surplus Property Agency

VI. Specialized State-Supported Resources...... Page 48 A. NC Biotechnology Center 1. Economic Development Finance Program 2. Commercial Biotechnology Events Grants Program 3. Small Business Innovation Research Matching Fund B. NC Technological Development Authority - Innovation Research Fund C. NC Rural Economic Development Center 1. North Carolina Capital Access Program 2. Microenterprise Loan Program D. MCNC 1. Facilities, Technologies, and Expertise 2. Growth Business Technology Program E. Entrepreneurial Councils

W. Investment Capital ...... Page 56 A. Professional Venture Capital Funds 1. What is Venture Capital? 2. Who are Venture Capitalists? 3. How Hard is it to Raise Institutional Venture Capital? 4. What Do Venture Capital Firms Look For? 5. What To Look For in a Venture Capital Firm 6. Important Venture Capital Concepts 7. Institutional Venture Capital Investment in North Carolina 8. List of North Carolina Venture Capital Firms B. Individual Investors C. Investment Clubs D. Joint Ventures and Corporate Partnerships E. Investment Intermediaries F. Venture Development Companies G. Public Offerings 1. Initial Public Offering 2. Small Company Offering Registration (SCOR)

Vm. Private, Non-Profit, and Local Programs...... Page 66 A. Center for Community Self Help B. Local Government Programs 1. Charlotte City-Within-A-City LoadEquity Pool 2. Wake County Economic Development Loan Fund 3. Raleigh Small Business Success Program 4. Asheville Community Loan Pool 5. Winston-Salem Economic Development Loan Fund 6. Other Local Government Programs C. Certified Development Corporations D. Good Work, Inc. E. Business Consortium Fund F. Mountain Commercial Lending Consortium G. North Carolina Association of Community Development Corporations

M. General Business Assistance .SBTDC ...... Page 72

X. Quick Reference Charts A. Federal Government Sources B. State Government Sources C. Specialized State-Supported Resources D. Private, Non-profit, and Local Programs

XI. Interviews ...... Page 86 Xn. References ...... Page 89

I. INTRODUCTION

In a state where 98% of all businesses employ fewer than 100 people, the creation and survival of small to mid-size companies is crucial. North Carolina’s small business base is a vital economic force that serves as a major source of employment and the largest source of employment growth, consistently accounting for 75% of net job creation in the state. Without appropriate financing, however, growth and opportunity for smaller companies is restricted.

This report is published by the Small Business and Technology Development Center (SBTDC) in an effort to support economic development in North Carolina and to educate and serve the small business community. The SBTDC is a business and technology extension service of The University of North Carolina that assists in the creation and expansion of small businesses by providing one- on-one counseling and technical assistance to existing companies and aspiring entrepreneurs. These services are provided free of charge. For more information about the Small Business and Technology Development Center, see page 72.

A. PURPOSE OF THIS REPORT

This report is meant to be used as a resource by individuals and organizations that help small businesses obtain financing. Each funding source is briefly identified and accompanied by a listing of appropriate contacts. In addition, this report describes recent developments which may affect the availability of these sources or the eligibility of small businesses to access funds.

The sources of capital in this report are grouped into six major categories:

+ Financial Institutions + Federal Government Sources + State Government Sources + Specialized State-Supported Resources + Investment Capital + Private, Not-for-Profit, and Local Programs

Each program has certah guidelines, some of them strictly limiting the availability of funds. It is important to understand that none of these sources represent “free money.” In fact, some of the programs are quite costly. The company or individual looking for start-up funds should have a well thought-out, thorough business plan, including financial projections. Existing businesses will need a plan with both historical and projected financial information. Only then can the needs of the borrower be fully assessed and met by the investor or lender. The company’s stage of development, the background and reputation of the management team, the nature of the product or services offered and market potential will be key factors determining the firm’s ability to raise capital.

6. CURRENT TRENDSlDEVELOPMENTS

Small Business Administration In May 1993 President Clinton appointed Erskine Bowles as Administrator of the US. Small Business Administration (SBA). His mission was to reorganize the SBA to make it more effective and efficient. Mr. Bowles has recently been replaced by Phil Lader, who is expected to continue 1 the initiatives of his predecessor. Over time, SBA personnel will be moving from the central and regional offices to the 68 district offices across the nation. This will put more SBA officials out on the “front line” to provide services. The central office has already been divided into three primary program offices: Economic Development; Govemment Contracting and Minority Enterprise Development; and Management and Administration. The SBA has recently been given significantly expanded loan guarantee authority. In FY 1994-95, the amount of money available to small businesses from the SBA will increase to approximately $1 1 billion up from $6.5 billion the previous year. An estimated $17 billion will be available in FY 1995-96.

Banking Industry The merger trend in the banking industry continued in 1994. In August 1994, BB&T Financial Corp. and Southern National Corp., North Carolina’s fourth and fifth largest banks respectively.

. . ..,. announced plans to merge and create one of the nations largest banks with about $19 billion in , . ... .:::g assets. The merged bank will be the largest in the state in terms of North Carolina deposits and ...... ~.. .: >..., branches. One of North Carolina’s economic development concerns is whether these larger, .i,;< ..,., . consolidated banks will allow small businesses to obtain the capital necessary to start-up or expand.

,.,~ Women and Minorities Between 1982 and 1987, the number of women-owned businesses grew 58% nationally and 63% in North Carolina. During this same period, the number of black-owned businesses grew 38% nationally, and 46% in North Carolina. The SBA has acknowledged that it has poorly served minorities and women in its loan guarantee program, and wants to at least double the number of loans to these targeted groups by September 30,1995. To help accomplish this, the SBAhas set aggressive targets for loans to women and minorities and developed new programs such as the Pre-qualified Women’s Loan Program.

Venture Capital Dan Shea, general partner at Kitty Hawk Capital in Charlotte, stated in a recent report that, “capital formation is the greatest challenge facing North Carolina’s entrepreneurs. Without collateral and or a proven record of financial performance, high-impact, rapidly-growing small companies are seldom candidates for bank financing or public securities markets.” In North Carolina the number of potential high-growth companies seeking risk capital is increasing, and although the dollars available from North Carolina venture funds to invest in these companies is also increasing, North Carolina still attracts less than 1% of the available institutional venture capital nationwide.

C. PROGRAM ADDITIONS and CHANGES

The following financing program additions and changes have occurred since the publication of the ninth edition of the Reuort on Caoital Oooortunities. For more specific information on these programs, see the reference pages.

Financial Znstitutions . Specialized Asset-based Lenders . Page 11

2 Federal Programs . SBA Pre-qualified Women's Loan Program Page 20 . SBA LowDoc Program Page 21 . SBA Export Financing Programs Page 21 . Dual-Use Technologies Program Page 25 . Small Business Technology Transfer Program (STTR) Page 26 . Advanced Technology Program (ATP) Page 33

State Programs . NC Department of Commerce Entrepreneurial Empowerment and Micro Enterprise Programs Page 44 . Industrial Recruitment Competitive Fund Page 45 . State Surplus Supply Agency Page 46 . MCNC Growth Business Technology Program Page 54

Local Programs . Wake County Economic Development Loan Fund Page 61 . Raleigh Small Business Success Program Page 68 . Asheville Community Loan Pool Page 68 . Winston-Salem Economic Development Loan Fund Page 68 PROGRAM CHANGES

Federal Programs . The GreenLine Revolving Line of Credit is now a national program. Page 20 . SBA's SBIC Program has new regulations as of April 1994 that make establishing an SBIC more attractive to investors. Page 22

3 II. HOW TO OBTAIN CAPITAL

The purpose of this section is to provide information about types and sources of capital for small businesses in North Carolina.

A. Capital Overview

Capital is a necessary part of a business. Capital is needed to start-up and expand a business, purchase real estate and equipment, and meet operating expenses. Without adequate capital a business will not be able to grow when opportunities arise, or recover from unexpected cash shortages.

In order to have adequate capital, business owners need to constantly evaluate capital needs by ...... developing cash flow projections and sales forecasts. Obtaining capital can be a lengthy process, so .....~...... allow several months to gather all of the appropriate documentation and go through the approval ...... ~. process. Keep in mind that capital sources are not limited to bank loans; the most common source of capital for business start-ups (75-80%) comes from personal assets and current debt financing instruments such as credit cards. An often overlooked source of capital is generated inside a business through effective cash management techniques, which can increase cash flow from operations.

The type of capital available to a business depends its age, the industry it is in, its growth potential, and how much control the owner is willing to relinquish. Companies in the early stages of development have a more difficult time obtaining external capital than those which have an established track record. If a company has high growth potential, then the owner may seek out sources such as individual investors and venture capitalists, as long as they are willing to sell equity (ownership) in the company.

Remember that when lenders and investors look at a company, they always assess the risk involved in the deal. In a high risk situation a lender will most likely require more collateral from the borrower and charge a higher interest rate to offset the risk. Examples of high risk situations are a start-up company, sales growth below industry averages, extremely rapid growth which may lead to cash flow problems, and low profits. An investor may want to take a larger equity position in the company if the investment is risky, in order to receive a fair return on the investment...... ~ ...... Seed Capital ...... Companies that are just starting out or are in the early stages of development need to rely on seed ...:*<,.....:’. capital sources. A start-up company may find it difficult to obtain a bank loan, since it has no established track record. If a bank will consider lending to a start-up company, they usually require personal guarantees. However, there are ways to compensate for this circumstance through initiatives such as SBA guaranteed loans which help the banks to minimize their risk of loss.

The most common sources of seed capital are: . personal assets . reducing personal expenses . family, friends, and acquaintances . microloan programs . heavily collateralized bank loan 4 . cash flow management

Growth Capital A well established company that has high-growth potential will need access to large amounts of capital to fund its expansion, new product development, or market penetration. Most likely a loan from a bank will not be sufficient, and the company will need to raise equity capital through individual investors, professional venture capital funds, and in some cases initial public offerings.

A company that is growing at a slower, steadier pace should look to debt financing sources for working capital loans or loans to purchase fixed assets such as real estate or equipment. The best external sources for these funds are banks and microloan programs.

B. What Types of Financing are Available?

When starting or expanding a business, most entrepreneurs seek external capital sources. However, the fact is that most small business owners, especially those in the early stage of development, obtain capital from internal sources.

Personal Assets Personal assets are the first source of capital that must be considered. Most banks require at least a 30% personal equity investment as collateral in a start-up business, and anywhere from a 10-30% investment for amore established business. Realistically, the owner of the business must be willing to risk personal capital before someone else will risk theirs. If an owner does not have sufficient personal resources to get through the lean times at the start-up of the business, it may be wise to reevaluate the decision to go into business and determine if the time is right.

Sources: . Checking and savings accounts . Retirement funds such as 401(k) . Credit cards . Stockshonds and other investments . Home equity loans

Cash Management Effective cash management of a business is one of the best ways to raise capital, and it also helps avoid paying interest on debt not needed in the first place.

Areas to Evaluate: . Timeliness of accounts receivable collection . Factoring or selling accounts receivables . Timeliness of accounts payable . Inventory control . Reducing expenses . Bartering opportunities . Equipment lease vs. purchase . Necessity of obtaining fixed assets 5 I Extemal Financinz Debt Financing Debt financing involves borrowing money from an individual or institution for a fee. One advantage of debt is that there is no dilution of ownership. Some debt instruments, however, contain restrictive covenants that limit management decisions. There are many different types of loans. Some are given for longer periods of time than others, but all debt must be repaid at some point or the collateral will be seized by the lender to repay the loan. The interest rate, or the fee for debt financing, raises a company’s expenses. Sufficient cash flow must be available in order to make loan payments. Unlike dividends on equity investments, the interest paid on debt is tax deductible.

Short-Term Loans Short-term loans generally last no longer than twelve months. These loans are useful for financing receivables or inventory purchases. They can also be structured as a line of credit that can be accessed when the cash is needed. Look for a source that offers good service and low interest rates.

Long-Term Loans Long term loans generally last more than five years, and assist in financing purchases for fixed assets such as equipment or real estate. These loans are riskier for the lender since they extend farther into the future. Never use long-term loans to finance short-term assets or the company may end up paying for an asset (such as a car) long after it has been scrapped.

Debt Financing Sources: . Family and friends . Banks . Non-bank lenders . Microloan programs . Private, non-profit, and local programs Equity Financing Equity financing involves selling partial ownership of a company. Regardless of operating conditions and cash flows, there is no legal obligation to pay interest to shareholders and there is no fixed maturity date by which funds must be repaid. Equity financing forces entrepreneurs to give up partial control of their company. Sometimes, investors want a lot of control to compensate for the risk involved in funding a new venture. Conflicts over investor control and ownership frequently causes equity deals to fall through. There can also be significant costs involved in an equity transaction for professional legal and underwriting services.

Equity financing often creates a long-term relationship between the owner and investor. Therefore, business owners should be acquainted with the needs and interests of the prospective investor before any deal is made. The process of obtaining equity funds tends to be longer than for debt, depending on the type of investment.

Sources: . Personal assets . Family and friends 6 . Individual investors . Professional venture capital funds . Suppliers or customers Grants Grant money or “free money” is NOT a common financing tool. Companies rarely qualify for grants. Most grants are provided by federal govemment agencies for research and development and technology commercialization projects through such programs as SBIR and STTR (see pages 25 & 26 for additional information.)

C. Where to Start?

Determine the capital needs of the business, and document exactly how much is needed, why it is needed, and how to pay it back. Make the projections realistic. Next, pool together all personal sources of equity for the business to see if they are adequate. If not, then seek funding from friends, relatives, and acquaintances. If funding for the venture still falls short, then seek out external capital sources. Where to go depends on the amount of capital needed and its planned uses.

For amounts less than $50,000 the most likely sources of extemal capital are: . Microloan programs . Revolving lines of credit . Private, non-profit, and local loan programs . Asset-based lenders or factors . Individual investors . SBAs LowDoc and Womens Pre-Qualified Loan programs

For amounts between $50,000 and $250,000: . Banks . Non-bank lenders . Individual investors

For amounts greater than $250,000: . Banks . Non-bank lenders . Professional venture capital funds . Public Offerings

D. What information do InvestorslLenders Want?

The following information is most likely to be requested from a bank, asset-based lender or venture

7 capitalist:

Business plan - Description of the business - Amount of financing requested and projected use of the proceeds - Market research and analysis - Marketing plan - Production process and facility - Current balance sheet - Annual cash flow projections (3 years) - Projected income statements (3 years) and pro forma balance sheets - Resumes of key people in your organization - Personal financial statements of borrower Collateral available - including secondary source (personal guarantees) Identification of your personal equity investment in the business Business references Tax returns for prior 3 years Number of jobs createdretained List of patents or other proprietary assets

8 111. FINANCIAL INSTITUTIONS

A. COMMERCIAL BANKS

In late 1994, Congress passed a law which allows interstate branch banking, and many small business owners are womed that their options for borrowing money will decrease as a result. Many fear that local banks will be taken over by large super-regional banks, so that the loan officer is far removed from the community and must follow rigid guidelines which do not allow for the flexibility that small business owners need to obtain sufficient capital.

The Community Reinvestment Act (CRA), which was enacted in 1977, requires banks to meet the credit needs of low to moderate income communities. The CRA focused on home mortgages and small businesses. Some banks are making significant efforts to comply with their CRArequirements by developing small business lending programs. Wachovia Bank, for instance, has launched a new loan program to increase its lending to small businesses who do not meet Wachovia's traditional underwriting guidelines, but have a viable business plan, reasonable financial projections, and credible personal references. To find out if a bank has a more aggressive small business lending program, contact your local SBTDC office. (See page 72 for a listing.)

Generally, if bank loans are available they are the least expensive way to finance. There is also a high degree of regulation, information and security associated with banks which make them an attractive source of funding. A typical bank loan requires scheduled interest and principal payments. Loans can be tailored to match seasonal or other income fluctuations. Bank loans are usually provided for short or intermediate terms (one to five years), but postponing payment of the principal, called ballooning, is occasionally permitted. Most loans must be fully collateralized and personal guarantees are almost always required.

It is advisable to "shop around" for a bank. Look for an experienced loan officer who is familiar with the industry. Be adequately prepared. Atborough business plan will be expected for start-ups seeking funds. For existing businesses, both historical financial statements and future projections will be evaluated when making a loan decision. A long-standing banking relationship will undoubtedly enhance the possibility of receiving a loan.

According to the North Carolina Banking Commission, as of June 1994 there were fourteen national banks in North Carolina and fifty-five state-chartered banks. The number of state -chartered banks decreased from sixty-three in 1993 due to bank mergers.

North Carolina Banks The three largest banks in North Carolina are NationsBank, First Union and Wachovia. All three are nationally chartered. These banks typically serve larger corporations and support national and international money market operations. Six regional banks operate in North Carolina, including Branch Banking & Trust, First Citizens Bank, Southern National Bank, Centura Bank, United Carolina Bank and Central Carolina Bank. As indicated in the introduction, BB&T and Southern National are planning to merge. The remaining banks are local community banks which generally serve one city or region and have fewer than twenty branches. Contact the SBTDC for a list of commercial banks and home office information or look in the yellow pages.

9 B. SAVINGS AND LOANS

Savings and Loans (S&Ls) are relatively new to the small business lending market. Under banking rules amended in 1982 and 1989, S&Ls can invest up to 10% of their assets in business loans. Federally chartered S&L's can commit an additional percentage of their assets to inventory and equipment financing and commercial real estate lending. Although institutions have typically focused on home mortgage loans in the past, this source should be considered when searching for business capital. As of June 1994, there were 60 state-charteredSavings and Loan Associations. There were twenty-nine federally chartered S&L's for an aggregate of eighty-nine savings institutions. Contact the SBTDC for a list of Savings and Loans and home office information or look in the yellow pages.

C. NON-BANK LENDERS

There are several non-bank lenders operating in North Carolina. These companies serve the small business community in North Carolina by processing and servicing loans under the SBA (7a) Loan Guaranty Program (see page 16). For more information, contact:

Allied Lending Corporation Emergent Business Capital, Inc. 1666 K Street, NW, Suite 901 233 N. Main Street, Suite 350 Washington, DC 20006 Greenville, SC 29606 (202) 331-1112 (803) 232-6197 Contact: Arthur Cooper Contact: John Bickley

ITT Small Business Finance Corp. The Money Store Investment Corp. 4600 Park Road, Suite 300 6669 Fairview Road, Suite 200 Charlotte, NC 28209 Charlotte, NC 28210 (704) 522-0670 (704) 362-5623 Contact: Everett H. Walkel; JI: Contact: Lisa G. Lane

AT&T Small Business Lending First Western SBLC Corporation 1380 Miami Gardens Drive, Suite 225 Suite 329-5 North Miami, FL 33 I79 1135 Kildaire Farm Road (305) 981-0823 Cary, NC 27511 Contact: Frederick Rosemore (919) 319-7340 Contact: Robert D. Fluharty VST Financial Services, Inc. 5410-C Peachtree Dunwoody Road Self-Help Credit Union Suite 420 409 East Chapel Hill Street Atlanta, GA 30328 Durham, NC 27701 (404) 551-8822 (919) 683-3016 Contact: Encent C. Dailey Contact: Jim Owerton

..

10 D. OTHER FINANCIAL INSTITUTIONS

FINANCE COMPANIES

Finance companies offer many services to small businesses. The major differences between banks and finance companies are the criteria used to evaluate borrowers and the level of risk the institutions are willing to assume. Finance companies usually assume higher risk and therefore charge higher interest rates than commercial banks.

Increasingly, finance companies are providing asset-based lending services. Instead of focusing on a firm’s historical operating record and cash flow, finance companies will lend money based on the value of the business’s collateral, such as equipment, inventory or accounts receivable. For more information, contact your local, regional or national finance company.

First Exim Financial Limited Some finance companies have programs which assist certain types of industries. First Exim Financial Limited is a unique finance company that assists North Carolina exporters through three elements of the Export Office Program (EOP). The Pre-Shipment Advance to Manufacturers (PSAM), the Pre-Shipment Advance to Resellers (PSAR), and the Extended Payment Program (EPP) assist exporters in completing credit sales. First Exim also has an Importer Office Program (IOP). First Exim currently has about 20 clients in North Carolina and in other states.

The PSAM program was developed to provide manufacturers with funds for required materials or labor to ship goods sold under a letter of credit. First Exim may advance up to 75% of the value of the letter of credit for up to 90 days prior to shipment. The letter of credit serves as the prime security for the advance. On the other hand, through the PSAR program, First Exim gives resellers of finished goods funding, in the form of an advance, to initially buy the goods resold under a letter of credit. The PSAR will provide up to a maximum of 80% of the value of the letter of credit 90 days or less before shipment. Like the PSAM program, the letter of credit serves as the prime security for the advances, though other forms of security are usually required for both programs. Under the Extended Payment Program, First Exim Financial pays the exporter within ten days after receiving the correct shipping documents. The exporter can then provide consumers with payment terms of 90 to 360 days after shipment. This improves cash flow and helps eliminate credit risk. A minimum $25,000 letter of credit, with First Exim as the beneficiary, is required for the service.

For more information, contact:

First Exim Financial Limited 343 West Main St. Durham, NC 27701 (919) 682-8077 Contact: John M.Reeves II

SPECIALIZED ASSET-BASED LENDING

Purchase order financing can provide manufacturers and retailers with money to purchase raw

11 materials when the business is “order rich, but cash poor.” Most banks will not lend more than 50% against raw materials inventory, but asset-based lenders may be willing to finance up to 100%. One such institution is Transcap Associates, which finances purchase orders by buying the inventory and having the business sign the purchase orders over to Transcap, or by advancing money on account receivables. Another example is Gordon Brothers, who offers small and middle market retailers asset-based loans for turnaround situations, debtor-in-possession financings, growth opportunities, and traditional working capital support loans at a minimum loan amount of $1 million for up to eighteen months.

For more information contact:

Transcap Associates 1845 Oak Street Northfield, IL 60093 (708) 501-2656 Contact: Ira J. Edelson Specializes in manufacturing businesses

Gordon Brothers 40 Broad Street, 11th floor Boston, MA 02109 (617)-426-3233 Contact: Andy Moser Specializes in retail businesses

E. FACTORS

Many different institutions (including commercial banks, financial institutions, and factoring companies) provide factoring services. There are two types of factoring arrangements. First, a factor may lend money to the business owner using a firm’s accounts receivable as collateral. This is commonly known as accounts receivable financing. In the second type of arrangement, the factor actually takes ownership of the receivables and accepts the risk involved with collecting the accounts. This financing method, also called advance factoring or old line factoring, provides the business owner with an immediate cash advance and risk-free collection.

Factors are willing to work with start-ups or companies that have financial problems. The problem with this service is that it tends to be fairly costly. Factors may charge up to 3%-5% above the prime rate, depending on the quality of the accounts, average invoice size, and the type of industry the fmengages in. In addition, some factors require that all acceptable receivables he factored.

Since factors are not as regulated as other lending institutions, owners are advised to check them out thoroughly before completing a deal. The best way to do this is to visit the factor’s place of business, get references, check their financial statements, and evaluate the managers.

Below is a list of companies located in the state that provide factoring services:

12 BNY Financial Corporation Liberty Finance Co. 212 S. Tryon St., Suite 300 3025 S. Church Street Charlotte, NC 28281 Burlington, NC 27215 (704) 342-0300 (910) 584-0017 Contact: Dan Maner Contact: Bill Smith

C & A Trade Group, Inc. Lighthouse Financial P.O. Box 93 P.O. Box 3545 Jamestown, NC 27282 Greensboro, NC 27402 (910) 457-5407 (910) 272-9766 Contact: Grady Campbell Contact: Pat Byrne

Champion Financial Corp. NationsBank Commercial Corp. 2241 Thomridge Road 101 S. Tryon St. Charlotte, NC 28226 NC 1-002-21-30 (704) 366-3633 Charlotte, NC 28255 Contact: Judy Gowdy (704) 388-7400 Contact: Cathy Colton CIT Commercial Services 201 S. Tryon St. North Carolina Commercial Corp. Charlotte, NC 28202 6135 Park South Dr. (704) 339-5341 Suite 108 Contact: Jerry Younts Charlotte, NC 28210 (704) 556-7575 Colonial Financial Services Contact: Merrill Gowdy P.O. Box 949 Mount Holly, NC 28120 Phillips Factors Corporation (704) 827-5853 P.O. Box 310 Contact: Warren Shinn High Point, NC 27261 (910) 889-3355 First Factors Corp. Contact: Bob Niebauer 101 S. Main Street, #200 High Point, NC 27260 Phillips Acceptance Corp. (910) 889-2929 P.O. Box 2314 Contact: Anthony Cestino High Point, NC 27261 (910) 889-3355 J&D Financial Corporation Contact: Bob Niebauer Smith Tower, Suite 303 5555 Highway 29 North Presidential Financial Corp. Harrisburg, NC 28075 5501 Executive Center Dr. (704) 455-5827 Suite 215 Contact: George Karlon Charlotte, NC 28212 (704) 567-2018 Joseph Dean Co. Contact: Knee Conroy P.O. Box 54 HighPoint, NC 27261 (910) 861-5337 Contact: Jim Bumgarner 13 Republic Factors Corp. Systran Financial SVC P.O. Box 221679 4421 Stuart Andrew Blvd., Suite 600 Charlotte, NC 28222 Charlotte, NC 28217 (704) 358-2000 1-800-338-6669, (704)-525-8710 Contact: Ed Hill Contact: Gerri Watts

Riviera Finance Transport Clearings East, Inc. 5250 Seventy Seven Center Drive P.O. Box 1093 Suite 350 Charlotte, NC 28201-1093 Charlotte, NC 28217 (704) 527-1820 (704) 527-4396 Contact: Don Chess Contact: Barry Spencer

Southeastern Factors P.O. Box 2730 High Point, NC 27261-2730 (910) 889-7272 Contact: Melanie Slade

F. LEASING COMPANIES

Leasing is a flexible, creative way to finance. Today, leasing is a $100 billion a year indusby. A typical lease involves the seller of the equipment (called the vendor), the one who will use the equipment (called the lessee), and the leasing company. The leasing company buys the equipment from the vendor and leases it for a specified period of time to the business owner. There are many varieties of leasing that cover most types of equipment.

The most common types of leases are operating and financial leases. Operating leases are rental agreements, and the best time to use them is when the equipment is likely to become obsolete in five years or less. Financial leases are similar to loan agreements, and should be used by businesses that cannot afford the initial capital cost to buy the equipment. Usually close to 100% of the cost can be financed, and no down payment is required. In addition, there are certain tax benefits to leasing depending on the structure of the lease.

Contact the SBTDC for a list of equipment leasing companies in your area, or check the yellow pages.

G. CREDIT UNIONS

Credit Unions are another, often overlooked, source of financing. As defined by the NC Credit Union Laws, a credit union is “a cooperative, non-profit association, providing an opportunity for its members to use and control their own money in order to improve their economic and social condition.” Credit unions are restricted to lending a maximum of $75,000 or 20% of their reserves and undivided earnings, whichever is greater, to any one member. For instance, if a Credit Union has $1 million in reserves, the maximum loan it can make to any one individual is $200,000. As of February 1994, there were 144 state-chartered Credit Unions in North Carolina.

14 To obtain information on a credit union in your area, contact the North Carolina Credit Union Network, a trade association for North Carolina Credit Unions, at 1-800-822-8859.

Minority Credit Unions The Minority Credit Union Program is facilitated by North Carolina’s Rural Economic Development Center (see page 50). There are currently fourteen minority credit unions that participate in the program. To increase the business lending capabilities of these institutions, the General Assembly, in two separate appropriations, allocated $2.14 million to boost capital reserves.

A small business owner who is a minority, as well as the company’s employees, can join a local Minority Credit Union. Joining a minority credit union entails purchasing a share of the credit union for a cost of about $16-$25. The credit union allows its members to borrow money which can be used to purchase capital equipment, secure additional collateral for a bank loan, or be used for other cash needs. However, remember that it may take several years to develop the necessary relationships, and borrowers need to meet specific criteria to obtain the loan, similar to obtaining a bank loan. At the present time, approximately 40 counties have access to a minority credit union.

For a list of minority credit unions contact the SBTDC. For more information on the program contact:

North Carolina Minority Support Center 413 E. Chapel Hill St. Durham, NC 27701 (919) 688-1229 Contact: Len Cox

15 IV. FEDERAL GOVERNMENT SOURCES

The federal government sponsors a variety of programs that provide capital for small business owners. Some of these programs are designed to assist specific types of individuals or businesses and some take a good amount of time to process financing applications. Therefore, business owners and entrepreneurs should fully assess their needs and plan their financial strategies early. The following is a brief outline of the federal programs available to the small business community.

A. SMALL BUSINESS ADMINISTRATION

Guaranteed Loan Program The SBAGuaranteed Loan program, also known as the 7(a) program, is the largest financial assistance ..~...... ,...... ,.... program operated by the SBA. Up to 90% of a private sector loan can be guaranteed by the SBA...... :...... ~ . The maximum guarantee amount is $750,000 and the maximum repayment period is 25 years. A typical loan is about $250,000 with a repayment period of 8-9 years. There is no lower limit on the size of the loan. Interest rates are determined by the individual lenders, with a maximum of 2'14 points over the NY prime charged for loans with less than seven year maturities. Loans with maturities greater than seven years have a maximum interest rate of Z3/4% over prime. (There are exceptions for loans totaling less than $50,000.) Usually, there is a two percent guarantee fee that goes to the SBA. This fee may be lower dependent upon loan amount and terms.

Guaranteed loans allow lenders to greatly reduce their risk and borrowers to receive reasonable credit terms that are otherwise unavailable. To be eligible for an SBA guarantee, the firm must meet certain size requirements (see Exhibit 1). For example, a manufacturing firm must typically have less than 500 employees. A business must also be independently owned, for-profit, not dominant in its field, and unable to obtain financing on reasonable terms without the guarantee. In addition, borrowers must demonstrate the ability to repay and be willing to pledge all available business and personal collateral to secure the loan. Generally, start-up companies must contribute one-third of the total capital needed for the project.

., In FY 1993 the SBA guaranteed 366 loans in North Carolina totaling $100,543,223. This was an

. .. . 18% increase from 1992 in the number of loans and a 45% increase in the dollar amount of loans...... , ....~.... There are several reasons for this large increase, including the improvement of North Carolina's . :..--...... ~...... _.:.. economy and the impact of the Federal Community Reinvestment Act (CRA). Also, in 1991 the ..~...... :. x::: , ..:..*. .. SBAincreased its guarantee limit and restructured its debt refinancing policy. For more information about 7(a) loans contact your local bank, savings and loan, credit union, SBA district office, or the SBTDC.

Direct Loans In rare cases, fixed interest rate loans of up to $150,000 are available directly from the SBA (and up to $350,000 from regional offices). These are only available when other bank loans, including SBAguaranteed loans, are not available. Direct Loans are limited to Vietnam-era or disabled veterans, handicapped persons and organizations, small disadvantaged firms, and firms in high unemployment or low income areas. Due to limited funding, Direct SBA Loans are decreasing. The number of Direct Loans in North Carolina decreased 39% to seven loans in 1993 totaling $498,600.

16 For more information, contact:

Small Business Administration 200 North College Street, Suite A-2015 Charlotte, NC 28202 (704) 344-6563

504 Certified Development Company Program Growing businesses seeking capital are often restricted by high equity requirements, short terms, and variable interest rates. Through the 504 program, the SBA provides long-term, fixed asset financing for small businesses. This program is administered by not-for-profit companies, called Certified Development Companies (CDCs), which are certified by the SBA and sponsored by private interests or state and local govemments. SBA’s 504 loan resources are generated by issuing govemment-guaranteed debentures on behalf of CDCs which are sold to the public.

A complete 504 financial package consists of financing from at least three sources; a Certified Development Company, a third party lender, and the loan applicant. The third party lender, generally the first mortgage lender, finances 50% of the project in a typical deal. The CDC then provides about 40% and the borrower about a 10% equity injection for the project. The CDC’s portion cannot exceed $750,000, except under certain circumstances where $1 million will be the maximum CDC contribution. Loans will have either a 10 or 20 year repayment period. Although 504 loans require only a 10% equity injection, the SBA will consider the overall company debt to equity ratio in making loan decisions.

To be eligible for the 504 program, a firm must meet the 7(a) program size standards (see Exhibit 1). Net worth may not exceed six million dollars and net profits after taxes must average less than two million dollars. Businesses that are not eligible for the 7(a) program are generally not eligible for the 504 program.

As with the Guaranteed Loan program, the 504 program is advantageous for both the bank and the borrower. Private lenders reduce their exposure by sharing the risk with the CDC. Borrowers benefit from long-term, fixed interest rate financing with smaller equity requirements. 504 loans may only be used for fixed asset financing. This includes plant acquisition, renovation or expansion, land and site improvements, and the acquisition and installation of equipment. Each project funded by the 504 program must create or save one job for every $35,000 of CDC funds.

CDC’s are licensed to operate in designated counties only. North Carolina currently has seventeen CDC’s or Associate Development Companies (ADC’s) that serve various counties throughout the state. An ADC may market the development company loan program, but does not have the authority to make and service 504 loans. Self-Help Ventures is a statewide CDC and serves counties with no local CDC and underserved counties.

In FY 1993, there were 65 loans made by North Carolina CDC’s totaling $18,403,000. To date, CDC’s have provided North Carolina businesses with over $130 million (see Exhibit 4). For more information, contact the CDC serving your county.

17 Certified Development Corporations and Associate Development Companies (* applied for re-certification)

Advancement, Inc. (ADC) Centralina Development Corp. 711 North Cedar Street 1300 Baker Street, Suite 452 Lumberton, NC 28358 P.O. Box 35008 (919) 738-4851 Charlotte, NC 28235 Contact: Robert Herring (704) 372-2416 Contact: Paul K. Herringshuw Counties: Anson, Bladen, Columbus, Hamett, Hoke, Moore, Richmond, Counties: Cabarrus, Gaston, Iredell, Lincoln, Meck- Robeson, Sampson, and Scotland. lenburg, Rowan, Stunly, and Union.

Albemarle Development Authority, Charlotte Certified Development Corp. hc.* (ADC) 112 South Tryon Street, Suite 1770 512 South Church Street Charlotte, NC 28284 P.O. Box 646 (704) 373-0160 Hertford, NC 27944 Contact: Fred Miller (919) 426-5755 Contact: John Mulvey County: Mecklenburg.

Counties: Camden, Chowan, Mid-Carolina Regional Development (ADC) Currituck, Dare, Gates, Hyde, 130 Gillespie Street Pasquotank, Perquimans, Tyrell, and P.O. Drawer 1510 Washington. Fayetteville, NC 28302 (919) 323-4191 Contact: Roger Sheats Asheville-Buncombe County Development Counties: Chatham, Cumberland, Harnett, Lee, and 151 Haywood Street Sampson. P.O. Box 1010 Asheville, NC 28802-1010 (704) 258-6122 Mid-East Certified Development (ADC) Contact: Bob Kendrick One Hardin Square P.O. Box 1787 County: Buncombe Washington, NC 27889 (919) 946-1038 Capital Economic Development Contact: Les Twible Corp. 805 New Bem Ave., Suite 220 Counties: Beaufort, Bertie, Hertford, and Martin. P.O. Box 1443 Raleigh, NC 27602 (919) 832-4524

Counties: Durham, Orange, and Wake. .. .

18 Neuse River'Development Authority, Region D Certified Development Corp. (ADC) Inc. P.O. Box 1820 233 Middle Street Boone, NC 28607 P.O. Box 1717 (704) 265-5437 New Bern, NC 28563 Contact: Rick Herndon (919) 638-6724 Contact: Teeny Morton Counties: Alleghany, Ashe, Avery, Mitchell, Watauga, and Wilkes. Counties: Carteret, Craven, Duplin, Greene, Jones, Johnston, Lenoir; Region E Development Corporation Onslow, Pamlico, and Wayne. 3 17 First Avenue, NW Hickory, NC 28601 Northwest Piedmont Development (704) 322-9191 COT. Contact: James Chandler 280 South Liberty Street Winston-Salem, NC 27101 Counties: Alexander; Burke, Caldwell, and Catawba. (910) 722-9348 Contact: Denice Allen Region K Certified Development Corp. (ADC) 238 Orange Street Counties: Davie, Forsyth, Surry, P.O. Box 709 Stokes, and Yadkin. Henderson, NC 27536 (919) 492-8561 Contact: Ronnie Goswick Pitt County Development Commission (ADC) Counties: Franklin, Granville, Person, Vance, and 111 S. Washington St. Warren Greenville, NC 27835-0837 (919) 758-1989 Smokey Mountain Development Corp.* (ADC) Contact: John Chaffee Bird Building, WCU 100 Industrial Park County: Pitt. Cullowhee, NC 28723 (704) 452-1967 Region C Development Authority, Contact: Thomas Fouts InC. P.O. Box 841 Counties: Cherokee, Clay, Graham, Haywood, Rutherfordton, NC 28139 Henderson, Macon, Madison, and Swain. (704) 287-2281 Contact: Paul Hughes Self Help Ventures Fund (state-wide) 409 E. Chapel Hill Street Counties: Cleveland, McDowell, Polk, Durham, NC 27702 and Rutherford. 919-683-3016 Contact: Jim Overton

Counties: Statewide

19 Wilmington Industrial Dev. Corp., Inc. 508 Market Street P.O. Box 1698 Wilmington, NC 28402 (910) 763-0013 Contact: Scott Satteijield

Counties: New Hanover; Pender; and Brunswick.

Greenfine Revolving Line of Credit The GreenLine is a revolving line of credit that assures small businesses access to cyclical and short-term credit for up to five years. Advances can be made at any time priof to maturity, provided the business is not in default. Funds disbursed through the GreenLine Program are intended to finance short term operating needs such as operating capital, inventory, or the consolidation of short term debt, as opposed to the ongoing requirements of a business. Therefore, the borrower may wish to couple GreenLine financing and the regular 7(a) loan program to meet both short and longer term needs.

Applicants for the program must meet the policy and size requirements applicable to SBA's regular 7(a) loan program (see Exhibit I). The SBA's portion of GreenLine loan amounts cannot exceed $750,000 or 75% of the loan, whichever is less. The GreenLine must be secured by a first lien on the assets being financed, with personal guarantees required. Secondary liens on personal assets may be required. Generally a monthly cash flow report is required by the lender. The interest rate on the line of credit will not exceed the prime rate plus 2 1/4 percent.

For more information, contact:

Small Business Administration 200 Noah College Street, Suite A-2015 Charlotte, NC 28202 (704) 344-6563

Pre-qualified Women's Loan Program This program is aimed at women who own at least 51% of their own business. It allows them to be pre-qualified for an SBA Guaranteed Loan of up to $250,000 before they approach a bank. The program was piloted in Mecklenburg county, and expanded statewide on Oct. 1, 1994.

The woman business owner works with a non-profit technical assistance organization, such as the SBTDC or a Certified Development Corporation, to prepare her application, which is then submitted to the SBA for review. The SBA makes its decision in three working days. If the application is approved, the SBA will issue a pre-qualification letter to the woman business owner who in turn will then seek out a bank which will make the loan.

20 For more information contact:

Small Business Administration 200 North College Street, Suite A-2015 Charlotte, NC 28202 (704) 344-6563

LOWDOCProgram This is a new initiative by the SBA that will allow borrowers to use a simple, one-page application for loans of $100,000 or less. The applicant completes the front of a one-page SBA application and the lender completes the back. However, borrowers should be aware that lenders will require additional information to support the loan. The SBA will guarantee up to 90% of the loan. .~...... ~...... - The program is available to: (1) entrepreneurs who are starting their own businesses; (2) businesses whose average annual sales for the preceding three years do not exceed $5 million and employ 100 or less, including affiliates; or (3) businesses that satisfy other statutory criteria. The maturity of the loan cannot exceed 25 years for fixed assets or 10 years for all other uses.

For more information contact:

Small Business Administration 200 North College Street, Suite A-2015 Charlotte, NC 28202 (704) 344-6563

Export Financing Programs Intemational Trade Loan Guarantee Program This program offers loan guarantees to small businesses to expand existing export markets, develop new export markets, or for businesses who are adversely effected by import competition. The program guarantees loans of up to $1 million for facilities and equipment and up to $250,000 for working capital. Loan maturities may extend to 25 years.

Exuort Working Capital Program ...... This program guarantees loans of up to $750,000 for a maximum period of 12 months. The line of ... _...... > ~ .. . ..: .. ...,~. credit may be used for: (1) pre-export financing of labor and materials or purchase of goods and ...... services for export; or (2) to support standby lenders of credit used as bid bonds, performance bonds or payment guarantees to foreign buyers.

For more information on these programs contact:

Small Business Administration 200 North College Street, Suite A-2015 Charlotte, NC 28202 (704) 344-6563

Microloan Program The SBA Microloan Program, established in October 1991, assists those who are unable to obtain

21 a loan from conventional sources, including women, low-income, and minority small business owners who lack the capital needed to operate a small business. To deliver the program, the SBA makes direct loans to qualified intermediary lenders. This money is used by the lenders to make short-term, fixed interest rate microloans to start-up and expanding companies.

Loan amounts range from a few hundred dollars to a maximum of $25,000. The national Microloan average is currently about $10,000. Borrowers seeking more than $15,000 must demonstrate that comparable rates and terms are not available from other sources. The maximum term for a Microloan is six years. Collateral is required for loans, but may be waived in lieu of a character reference and personal guarantee for smaller loans.

The Microloan demonstration project in North Carolina, administered by the Self-Help Ventures Fund, was provided with $1,250,000 by the SBA. North Carolina has lent over $1.3 million to 190 businesses since the program began in Fall 1992.

For more information, contact the Self-Help Ventures Fund (an affiliate of the Center for Community Self-Help):

413 East Chapel Hill Street 34 Wall Street, Suite 502 Durham, NC 27701 Asheville, NC 28801 (919) 683-3016 (704) 253-5251 1-800-476-7428 1-800-229-7428

1373 East Moorehead Street, Suite 201 122 N. Elm Street Charlotte, NC 28204 Suite 810 (704) 376-6778 Greensboro, NC 27401 1-800-394-7428 (910) 378-1840

Small Business Investment Companies The Small Business Investment Company (SBIC) Program was created by Congress in 1958 to provide venture capital for businesses in start-up and growth situations. SBIC’s are privately owned, profit motivated investment fmsthat are licensed and regulated by the SBA. They provide equity capital, long-term loans, and debuequity combinations to small businesses. The focus of the program is on early stage and seed capital financing for small companies, versus later stage financing to larger companies. There are two types of Small Business Investment Companies -regular SBIC’s and specialized SBIC’s (or SSBIC’s). Specialized SBIC’s invest in small businesses owned by socially or economically disadvantaged entrepreneurs.

To be eligible for SBA licensing, SBIC’s and SSBIC’s must raise at least five million dollars of private capital. The SBA helps the SBIC obtain additional funding by providing SBAloan guarantees or by purchasing SBIC preferred stock. SBIC’s are not limited to investments within the state where they are located. However, much of the local SBIC money stays in the state, and most SBIC money invested in North Carolina companies comes from North Carolina SBICs. The potential leverage ratio for SBICs is $3 of federal money for each dollar of private money; the ratio for SSBICs is 4: 1. 22 To be eligible for SBIC or SSBIC financing, firms must meet the SBA's definition of a small firm and an applicant must meet one of the following standards:

. Together with its affiliates it does not have net worth in excess of $18 million, and does not have average net income after federal income taxes (excluding any carryover losses) for the preceding 2 completed fiscal years in excess of $6 million; or

. Together with its affiliates, it meets the size standard for the industry in which it is primarily engaged and, excluding its affiliates, meets the size standard for the industry in which it is primarily engaged. The size standards are set forth in $121.601.

Most SBICs will consider funding all types of service and manufacturing industries (see Exhibit 5). It is important to remember that investors are looking for small companies with enormous growth potential. Some businesses, such as small restaurants or grocers with less growth potential may find it more difficult to get SBIC money.

SBICs are an altemative way for growth companies to obtain the capital they need. The problem in the past has been that SBICs themselves faced a financing dilemma. SBICs were required to make regular interest payments on the principal that they owed to the government. Unfortunately, seed capital and early stage investments made by the SBICs generally take a longer time to generate retums and many SBICs struggled to make payments owed to the govemment.

In the fall of 1993, Congress authorized the issuance of a new type of security that will enable Small Business Investment Companies to leverage federal funds and postpone repayment until their portfolios mature. The final regulations for this new security were published in April 1994. These changes have increased the interest of investors in the SBIC program. The SBA aims to license as many as 200 new SBICs with combined private and federal capital resources of up to $9 billion over the next three years.

In 1993, North Carolina companies received fifteen SBIC financings for a total of $19,538,764 and one SSBIC financing for $1,000,000.

In North Carolina, there is only one operating SBIC (NationsBank), but there is an application pending and several more SBICs are expected to be added in fiscal year 1995. The NationsBank SBIC makes smaller investments than most SBICs. Most firms make investments starting at about $500,000 in companies with sales that do not exceed $5 million, while NationsBank focuses on investments ranging up to $250,000.

For more information, contact:

NationsBank SBIC Corporation The Gateway Center 901 West Trade Street, Suite 1020 Charlotte, NC 28202 (704) 386-7720 Contact: George W. Campbell JI:

23 Small Business Innovation Research Grants The Small Business Innovation Research (SBIR) program helps small hi-tech enterprises commercialize research and development products and services currently in laboratories. The SBA has administrative and marketing responsibility for the program. Eleven participating federal agencies are responsible for selecting SBIR topics and awarding funding to qualified businesses. Each of the agencies involved determines its research and development needs for the year and then solicits specific project proposals from small businesses. According to the Government Accounting Office, about 34% of funded companies attribute more than half of their growth to SBIR awards, and approximately 40% of SBIR projects have been commercialized to date.

The SBA publishes a Master Schedule in its Pre-Solicitdon Announcement (PSA) that lists when

..~.... each agency will release its solicitations. The SBIR PSA is issued quarterly by the SBA and is .. available on the 20th of December, March, June and September. It is necessary to get on the ..,...... __ :> mailing list to receive the PSA and individual solicitations from each agency.

Participating agencies include the Department of Agriculture (USDA), Department of Commerce (DOC), Department of Defense (DOD), Department of Education (DOED), Department of Energy (DOE), Department of Health and Human Services (HHS), Department of Transportation (DOT), Environmental Protection Agency (EPA), National Aeronautics and Space Administration (NASA), National Science Foundation (NSF), and Nuclear Regulatory Commission (NRC). Approximately 90% of the SBIR projects come from five of the eleven agencies (DOD, NASA, HHS, DOE, and NSF).

The SBR program is a three phase process. Phase I awards are made for conceptual research and development to determine the feasibility and scientific merit of a solicited project. These awards can be as high as $100,000 for a period of up to six months. During Phase I, a minimum of 66% of the work must be done by a small business, with up to 33% of the effort subcontracted to outside technical consultants. Phase I1 involves further development and finalization of the most promising Phase I projects. Only Phase 1 awardees are eligible for Phase I1 awards. Phase I1 projects can receive as much as $750,000 for periods of up to two years. A minimum of 50% of the work must be done by the small business, with up to 50% allowable for subcontracting. Phase I11 is the commercialization of Phase I and I1 products and services for non-government use. While this last process is recognized as part of the program, it requires private or non-SBIR funding.

...... ~..1 .... ~..... One of the unique benefits of this program for small businesses is that SBIR awards often become a powerful leveraging tool to attract other sources of funding. In 1992, Congress determined that this program has been so successful in involving $mall businesses in federal R&D and in stimulating commercialization of the resulting technology that it was reauthorized until October 1,2000. For 1994 funding for this program nationally is more than $500 million. It is expected to increase to $1.2 billion by 1997. Since the program’s inception in 1982, small businesses have successfully competed for 25,000 SBIR awards totaling $3.2 billion; and North Carolina companies have received in excess of $40 million. In FY 1993 alone, 32 SBIR awards and contracts were made to North Carolina companies totaling more than $6 million. As of mid-1994, 90 companies in NC have received SBIR grants. It is important to note that only three agencies provide grant money per se (NSF, USDA, and HHS). The other Federal agencies provide SBIR awards under contracts which involve a binding legal relationship so that the grantee has an obligation to furnish an end product or service for the payment specified.

24 The North Carolina Biotechnology Center serves as a clearinghouse for information and assistance to companies in the state interested in the SBIR program. (See page 48 for more information on the North Carolina Biotechnology Center.)

SBIR Advisory Council An SBIRAdvisory Council was created in North Carolina in 1992 to advise and educate businesses and govemment about the SBIR Program. The Advisory Council is composed of individuals representing companies who have successfully conducted Phase I1 SBIR programs. This council fosters SBIR activity in the state, and allows new companies interested in SBIR projects to locate mentors from successful SBIR awardees.

For more information. contact:

North Carolina Biotechnology Center P.O. Box 13547 Research Triangle Park, NC 27709-3547 (919) 541-9366 Contact: Floretta Futrell

To receive a copy of the SBIR Pre-Solicitation Announcement contact either Floretta Futrell at the North Carolina Biotechnology Center or the SBA at:

The Office of Innovation, Research and Technology Small Business Administration 200 North College Street, Suite A-2015 Charlotte, NC 28202 (704) 344-6563

In order to receive SBIR solicitations from each of the eleven federal agencies, contact each agency individually. The phone numbers and addresses can be obtained from the SBA's SBIR Pre- Solicitation Announcement.

To receive a copy of the free SBIR Proposal Preparation Handbook published by the SBA contact:

Small Business Administration 1375 Peachtree St., N.E., 5th Floor Atlanta, GA 30367-8102 (404) 347-4749

Dual Use Technologies Program The Dual Use Technologies program is part of the SBIR program. This funding opportunity involves contracts and not grants, and represents a collective effort by The Advanced Research Projects Agency (ARPA) of the Department of Defense, Department of Energy Defense Programs, Department of Commerce's National Institute of Standards and Technology (NIST), NSF, and NASA. The purpose of these projects is to provide incentives for the conversion of federally sponsored R&D from the defense industry for private commercial use.

25 There are two solicitations for this program each year, and the first is in March. Phase I awards are available for up to six months at a maximum amount of $100,000 with a minimum of 66% of the work to be done by small businesses. Phase I1 awards cannot exceed two years, and the maximum award amount is $375,000 with a minimum of 50% of the work to be done by small businesses. Dual Use program funds are also available for Phase 111 commercialization efforts. This program is authorized through 1994, and future funding plans are unknown.

Small Business Technology Transfer Program The Small Business Technology Transfer Program (STTR) is a pilot program created in 1994 and authorized until 1996 that emphasizes cooperative agreements. The purpose of the program is to stimulate cooperative research and development between technology-based small businesses and universities, non-profit organizations, and federal laboratories. Participating small businesses must ,. . ._> conduct 40% or more of the work; the cooperating non-profit research institution must conduct .&:: ;.~. ,:.:e 30% or more of the work.

Each federal agency that participates in STTR releases an Annual STTR Program Solicitation. This is available from the five federal agencies in the pilot program. These solicitations contain specifications, descriptions of research opportunities, and application forms. Participating agencies include: Department of Defense, Department of Energy, Department of Health &Human Services, National Aeronautics and Space Administration (NASA), and National Science Foundation.

To stimulate scientific and technological innovation, including the commercialization of the federal research effort, the STTR follows three phases. The object of Phase I is to determine the scientific, technical and commercial feasibility of the proposed cooperative effort, and the quality of joint company and federal agency performance prior to Phase II funding. Phase I provides up to $100,000 for one year of research. The object of Phase I1 is to continue the research & development from Phase I. Phase 11 provides up to $500,000 for two years of research. Phase I11 involves the

.. commercial applications of STTR funded research & development, funded by non-federal sources of capital, or awards from non-STTR federal funding sources. The funds set aside for the STTR program for the upcoming fiscal years are estimated at: 1995 ($48 million); and 1996 ($72 million).

To obtain a Re-solicitation Announcement contact:

The Office of Innovation, Research and Technology Small Business Administration 409 Third Street, SW Washington, D.C. 20416 (703) 756-4261 (202) 205-7777

The €'re-solicitation Announcement contains the phone numbers for each agency - call to obtain a copy of their solicitation.

26 EXHIBIT 1

SBA Industry Size Requirements (MOST HAVE EXCEPTIONS)

+ Manufacturers - Must have less than 500 employees.

t Wholesalers - Must have less than 100 employees. + ServiceRetail - Less than $5 million in annual sales receipts.

...... ~...... ~. + Contractors - Between $7 and $17 million in annual sales receipts. ~ ...~...... :...... ~. . ,..~ '.. . t Agriculture - Less than $500,000 in annual sales receipts.

Businesses Not Eligible for the 7(a) Program

Speculative Ventures (e.g., Oil Drilling, Futures, etc.) Gambling Lending or Investment Real Property Held for Sale or Investment Illegal Sales, Monopolies, Pyramid Sales Floor Plan Financing Foreign Controlled Businesses Businesses owned by individuals with pending criminal charges, or who are incarcerated, on probation, on parole.

Businesses With Limited Eligibility for the 7(a) Program

Agriculture Non-profit Institutions Fishing and Shore Operations Private Membership Clubs Medical Facilities, including Doctors/Dentists Mines Businesses Owned by Aliens Buildings on Register of National Historical Places

Source: US.Small Business Administration

27

EXHIBIT 1

SBA Industry Size Requirements (MOST HAVE EXCEPTIONS)

* Manufacturers - Must have less than 500 employees. + Wholesalers - Must have less than 100 employees. * ServiceRetail - Less than $5 million in annual sales receipts. .. ~...... : . :.. .. . Contractors - Between $7 and $17 million in annual sales receipts. .-.~...:..:...... * ...,~ ...... ~...... * Agriculture - Less than $500,000 in annual sales receipts.

Businesses Not Eligible for the 7(a) Program

Speculative Ventures (e.g., Oil Drilling, Futures, etc.) Gambling Lending or Investment Real Property Held for Sale or Investment Illegal Sales, Monopolies, Pyraniid Sales Floor Plan Financing Foreign Controlled Businesses Businesses owned by individuals with pending criminal charges, or who are incarcerated, on probation, on parole.

Businesses With Limited Eligibility for the 7(a) Program

Agriculture Non-profit Institutions Fishing and Shore Operations Private Membership Clubs Medical Facilities, including DoctorsDentists Mines Businesses Owned by Aliens Buildings on Register of National Historical Places

Source: U.S. Small Business Administration

27 EXHIBIT 2

NORTH CAROLINA SBA LOAN STATISTICS FISCAL YEAR 1993

LOANS LOANS (000) 1 Women 1 66 1 15% 1 $10,710 1 9% 1 I Minority I 70 1 16% I $21,420 1 18% 1 ...... :.:.-:: Veteran Owned 48 11% $13,090 11% ...... ~ ..,...... Exporters 31 7% $15,470 13%

.~. Others 223 51% $59,500 49% I TOTAL 1 438 1 100% I 120,190,000 1 100% 1 ISource: SBA Charlotte I

TEN MOST ACTIVE COUNTIES IN 7(a) GUARANTY PROGRAM FISCAL YEAR 1993 COUNTY TOTAL % OF TOTAL TOTAL % OF TOTAL NUMBER OF AMOUNT OF LOANS LOANS (000) I Mecklenburg $1 1,368 13% 53 15% $12,134 13% FGuilford 33 9% $8,092 9% I Forsyth 17 5% $4,779 5% New Hanover 14 I 4% 1 $1,228 1% 11 I 3% $1,315 1% I Pitt 9 I 2% 1 $1,776 2% Orange 9 2% $1,055 1%

~ 8 2% $2,680 3% Chatham 8 I 2% I $2,357 3% I I 137 I 40% I $44,415 49% I TOTAL 355 100% I $91,199 100% Source: SBA Charlorre

28 EXHIBIT 3

NAME TOTAL 7(a) 504 Nationsbank 56 43 13 BB&T 45 31 First Citizens 45 38 ...... ~.,~...... Centura 44 34 ... ..~. ..~.. ~~.._.....~... .- .. .,. .-...-... . . :.*. . . ~.. .~...... ~ : 1 SouthemNational 1 41 I 35 I 6 I ...... ~.~....,,~ . .. CCB 35 27 8 First Union 33 19 14 Wachovia 33 31 2 UCB 28 20 8 The Money Store 20 20 0

TOP SBA LENDERS - DOLLAR VOLUME FISCAL YEAR 1994 NAME TOTAL ($000) 7(a) ($000) 504 ($000) Nationsbank $12,932 $9,296 $3,636 BB&T $11,419 $6,367 $5,052 . Centura $9,835 $7,816 $2,019

I TheMoney Store I $9,820 1 $9,820 I $0 I Southem National $9,032 $7,491 $1,541 - First Citizens $8,853 $6,344 $2,509 Bank of Granite $8,594 $4,764 $3,830 First Union $8,232 $4,535 $3,697 CCB $6,923 $3,955 $2,968 Wachovia $6,041 $5,483 $558

Source: SEA Charlotre

29 EXHIBIT 4

504 LOAN PROGRAM CDC Loan Activity

Loans (93) Dollars (93)

Advancement * 0 0

Albemarle * 0 0 Asheville - Buncombe 0 0 Capital Economic (CEDCO) 5 $1,150,000

Centralina 24 $6,731,000

Charlotte Certified 17 $3,880,000

1 .., . Mid-Carolina * $3 10,000 ...... , .,. ..., .,., . "",.. Mid-East * 0 0 :.I. ,.~, Neuse River 3 $883,000

Northwest Piedmont 4 $856,000

Pitt County * 0 0

Region C 2 $181,000

Region D * 0 0

Region E 4 $1,609,000

Region K * 0 0

Smokey Mountain* 0 0

W-n 4 $1,722,000

Total 64 $17,322,000

* Associate Development Companies

Source: SBA Charlotte

30 EXHIBIT 5

Industry Division of SBIC Financing - 1993

Services All Others ...... ~ Retail Trade 16% ,.~.....::: ...... >:.:.;.: ...... >:.:.;.: ...... ~..

Transportation, Communications, Utilities 56%

31 Industry Division of SSBIC Financing - 1993

.....~. ....~...... -..., .. .~.

Manufacturing Real Estate 35% 9%

32 B. COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS (CRADAs)

There is a growing effort by the federal government to cooperate with the private sector to enhance American competitiveness in the world marketplace. Over 700 federal research and development laboratories and centers, and their managing agencies, are looking to the private sector to convert federal technology into marketable applications. The aim is to improve the US. economy by helping industry gain access to the federal system and collectively transforming ideas into products.

Federal law now permits federal laboratories to join forces with private companies to perform specific R&D projects. Both the companies and the labs contribute personnel, equipment and services, but the resulting products are commercialized by the private entity. Through this type of arrangement, called a Cooperative Research and Development Agreement (CRADA), companies or groups of companies can pool resources and share risks with one or more federal labs.

Several new technology-based companies in North Carolina, such as EMBREX, Inc. have benefited from CRADAs. By joining forces with the U.S. Department of Agriculture (USDA), EMBREX commercialized an egg-injection vaccination machine called INOVOJECT. The machine enables farmers to inject a large number of eggs and thereby control a disease known as Avian coccidiosis that is found in young chickens. In 1991, the USDA entered more than 250 CRADAs with private entities. As a result, 103 patents and 26 licenses were issued and several new technology-based companies in North Carolina, such as EMBREX, Inc., have benefited.

Today, every federal agency is actively seeking these type of arrangements. The National Technology Transfer Center (NTTC), Regional Technology Transfer Centers and the Federal Laboratory Consortium (FLC) Locator Network are three important organizations that can assist businesses in locating technical resources and other information within the federal system.

For more information, contact:

National Technology Transfer Center Wheeling Jesuit College 3 16 Washington Ave. Wheeling, WV 26003 (304) 243-2455

C. US. DEPARTMENT OF COMMERCE

Advanced Technology Program The Advanced Technology Program (ATP) is administered by the National Institute of Standards and Technology (NIST), part of the U.S. Department of Commerce’s Technology Administration. The mission of the ATPis to stimulate economic growth in the U.S. through technology development for critical technologies important to U.S. global competitiveness. The awards are generally in the form of cooperative agreements, since NIST plays a substantial role in monitoring the technical work. The ATP awards are only made through announced competitions, and the proposals are evaluated for their business and technical merit.

33 For fiscal year 1994, $200 million has been appropriated to the program, and each competition announcement will include an indication of approximately how much funding has been allocated for that competition. By 1997 this program is expected to grow to $750 million. The goal of the ATPis to challenge industry to take on higher risk projects than they otherwise would in an effort to promote technology development likely to lead to U.S. economic growth. The ATP is willing to finance high technical risks, however, they prefer projects with low business risk.

There are two types of applicants for the ATPprogram. Single-company applicants can receive up to $2 million of ATP funds over a three year period. They do not have to provide matching funds, but are only reimbursed for their direct costs. Joint venture applicants can be funded up to a maximum of five years with no dollar limit. They must provide matching funds of at least 50% of the total funding for each quarter that the ATP funds the project. An ATP Joint Venture consists of at least two for-profit companies, both of which are involved in R&D and contribute toward the matching fund requirement.

For assistance in the development of a proposal, request a copy of the Proposal Preparation Kit. The ATP emphasizes high-risk research and a high degree of innovation in addressing the R&D tasks. The deadline for receipt of proposals is absolutely firm and enforced to the minute.

For more information contact:

National Institute of Standards and Technology Advanced Technology Program Administration Building (Bldg. 101), Room A430 Gaithersburg, MD 20899 1-800-287-3863

Economic Development Administration The Economic Development Administration (EDA) supports a variety of programs designed to alleviate severe and persistent economic problems in distressed areas. In 1994, the EDA plans to place a special emphasis upon export, entrepreneurship, and technology initiatives. The EDA will consider projects that help an area overcome special development or infrastructure problems that are preventing employment growth and economic development. The total amount of EDA assistance available is $322.6 million. EDA programs of interest to small businesses and entrepreneurs include the Local Technical Assistance Program, the National Technical Assistance Program, the Research and Evaluation Projects Program, and the Economic Adjustment (Title E)Program.

Local Technical Assistance Program The Local Technical Assistance Program provides grants to non-profits, local governments and sometimes private individuals and businesses. Funding must be used to respond to specific economic problems and opportunities including export promotion, technology transfer and minority enterprise. This year $1.5 million is available for the program.

Grants and cooperative agreements provided by the EDA may not exceed 75% of the proposed project costs. Generally, each project receiving funding through this program will be limited to $25,000. Potential applicants should contact the regional EDAoffice in Atlanta for more information (see below).

34 Business Loan Guarantee Program The EDA may guarantee up to 80% of business loans made by private lenders to private sector borrowers. Loan funds can be used for the acquisition of fixed assets or for working capital, and the investors must provide 15 to 25 percent of the project funding. Interest rates may range up to 2.5% above prime.

To qualify, businesses must be located in an EDAdesignated Redevelopment Area (RA) or Economic Development Center, or benefit residents of these areas. Applicants must demonstrate that financial aid is not available from other sources on terms and conditions that will permit accomplishment of the project’s economic objectives. In addition, borrowers must meet statutory requirements and be creditworthy. Because of these provisions, EDA guarantees are very difficult to get.

National Technical Assistance Program The National Technical Assistance Program provides grants to non-profits, local governments and sometimes private individuals and businesses. Applicants need to demonstrate innovative approaches to stimulating economic development. This year $1.53 million is available for the program.

Grants and cooperative agreements provided by the EDA may not exceed 75% of the proposed project costs. Generally, each project receiving funding through this program will be limited to $200,000. Potential applicants should contact the regional EDA office in Atlanta for more information (see below).

Research and Evaluation Projects Program The purpose of the Research and Evaluation Projects Program is to support studies that will increase knowledge about the causes of economic distress and approaches to alleviating such problems. Grants are provided to private individuals, partnerships, corporations, associations, colleges and universities, and other suitable organizations with expertise relevant to economic development research.

The EDA will provide grants covering up to 100%of project costs. Funds in the amount of $500,000 are available for this program, but individual awards will usually not exceed $100,000. Potential applicants should contact the regional EDA office in Atlanta for more information (see below).

Economic Adjustment (Title IX) Program The Economic Adjustment Program is designed to assist areas experiencing long-term unemployment and low income problems, or areas threatened by a sudden economic dislocation. Eligible Title IX applicants include Redevelopment Areas (RAs), Economic Development Centers, Indian tribes, state and local governments, Community Development Corporations (CDCs), and non-profit organizations designated as RA representatives. The total amount of funding for this program is $35.5 million. Individual awards will range between $100,000 and $1.5 million.

The Long-Term Economic Deterioration (LTED) component of the program provides grants to establish Revolving Loan Funds (RLFs) in depressed areas. The Sudden and Severe Economic Dislocation (SSED) component provides grants to finance activities that will prevent an economic dislocation or reestablish stability after a dislocation occurs. Most projects that can benefit from . Title IX assistance are identified by county and city planning departments. Businesses or individuals with economic development projects should contact their city and county planners. City and county planners in eligible areas should contact the EDA. For more information on EDA programs, contact: 35 Economic Development Administration PO Box 2522 Raleigh, NC 27601 (919) 856-4570 Contact: Dale Jones

Atlanta Regional Office 401 West Peachtree Street, N.W., Suite 1820 Atlanta, GA 30308-3510 (404) 730-3002

... .. D. DEPARTMENT OF AGRICULTURE ..... -...... >..I .::, : ;...... :.:. ~ ...... 1 Rural DeveloDment Administration (RDA)

The Rural Development Administration (RDA) operates two financial assistance programs for small businesses - the Business and Industrial Loan Program and the Intermediary Relending Program.

Business and Industrial Loan Program The Business and Industrial Loan Program (B&I) is similar to the SBA's Guaranteed Loan Program (see page 16). Under the B&I Program, the RDA may guarantee up to 90% of private loan amounts ranging from $100,000 to $10 million. Guaranteed funds may be used to finance construction, conversion, acquisition, equipment purchases, working capital and business start-up. The average B&I loan is about $1 million. Costs of the program include a one-time, two percent guarantee fee.

The B&I Program focuses on the economic development of rural areas. Eligible businesses cannot be located in or immediately adjacent to cities with a population exceeding 50,000. The majority of loans are made in towns with populations of 10,000 or less. Applicants must provide sufficient collateral and have demonstrated management skills. A minimum of 10% tangible balance sheet equity is required for existing businesses and 20%-25% is required for start-ups...... ~ .>:: ... In 1993, 12 B&I's were guaranteed for over $6.3 million. For more information, contact: . .. . .~...... :. .::...... Rural Development Administration 4405 Bland Rd., Suite 260 Raleigh, NC 27609 (919) 790-2731 Contact: B.A. Parker. Jr.

intermediary Relending Program Through the Intermediary Relending Program (IRP), the RDAmakes loans to non-profit organizations that relend the funds to small businesses in their service area. The RDA provides up to 75% of project costs not to exceed $150,000. The minimum loan amount is $25,000.

36 To be eligible for the program, applicants must have been tumed down by at least two other funding sources. Only businesses located in towns with less than 25,000 people may receive IRP funds. In addition, the RDA requires that all projects receiving funding create new jobs or save existing ones.

Currently, there are five organizations with IRP programs operating in the state. For more information, contact the organization serving your county. For information on establishing an I-, contact Pat Jones at the Raleigh RDA office.

Following is a list of IRP's in North Carolina:

.: ~....~... Advancement, Inc. North Carolina Fund for Rural .~...... _ . 711 North Cedar Street Development ...... :...... Lumberton, NC 28358 P.O. Box 3415 (919) 738-4851 New Bem, NC 28560 Contact: Robert Herring (919) 638-3041 Contact: Royce Jordan

Serves Bladen, Columbus, Hoke, Operates statewide. and Robeson counties.

Dunn Area Committee of 100, Inc. Self-Help Ventures Fund 600 South Magnolia Ave. 413 East Chapel Hill Street Dunn, NC 28334 Durham, NC 27701 (919) 892-2884 (919) 683-3016 Contact: Nancy Blackmun Contact: Bob Schall

Serves Anson, Bladen, Brunswick, Operates statewide Chatam, Columbus, Cumberland, Duplin, Hoke, Hamett, Johnston, Lee, Montgomery Charlotte, Moore, Pender; Richmond, Robeson Sampson, Scotland, and Wayne counties.

Neuse River Development Authority. Inc. 233 Middle Street P.O. Box 1717 New Bem, NC 28563 (919) 638-6724 Contact: Teeny Morton

Serves Carteret, Craven, Duplin, Greene, Johnston, Jones, Lenoil; Onslow, Pamlico, and Wayne counties.

37 E. US. DEPARTMENT OF ENERGY

Energy-Related Inventions Program The U.S. Department of Energy (DOE) and the National Institute of Standards and Technology (NIST) of the US. Department of Commerce jointly sponsor a grant program for independent inventors and small businesses called the Energy-Related Inventions Program (ERIP). The purpose of the program is to encourage the development of energy technology. Any new energy-related concept, device, product, or process can qualify if it has commercial potential. This includes inventions at any stage of development, from concept to production. Inventors apply to NIST, and receive a free, confidential evaluation of hisher technology. Should the invention meet the criteria of the program, then NIST recommends that DOE provide the inventor with technical and financial assistance to commercialize the invention.

Generally, ERIP money represents a very small portion of the total funding required to complete the project. Out of more than 31,000 applications since 1975, only 627 were recommended for an award by NIST and 469 received funding. In North Carolina seven grants have been funded out of the 480 requests for evaluation. In the past, the average grant or contract award has been about $83,000. The maximum award was just under $100,000.

To submit an energy-related invention for evaluation, write to:

Office of Technology Evaluation and Assessment National Institute of Standards and Technology Gaithersburg, MD 20899 (301) 975-2000

Innovative Concepts Program The Innovative Concepts Program (InnCon) began in 1983. Since its inception, 70 projects have been funded and 55 have been completed. Of the completed projects, 45% received funding from other sources to continue the work. The cycle for the program is approximately 1-2 years during which InnCon chooses an energy-related topic and invites inventors to submit proposals. Usually up to 15 innovators per cycle are awarded seed money of about $15,000-$20,000.

The program is designed to fund novel ideas for energy efficiency that are significant departures from existing technologies. Well-developed ideas that are past the conceptual stage should apply to the ERIP rather than InnCon. Awards in the past have been made to individuals, small companies, start-up companies, university researchers, and consultants. At the start of each program cycle, a Request for Proposals is published in the Commerce Business Daily and the Federal Register.

For more information contact:

US. Department of Energy Forrestal Building, CE-521 1000 Independence Ave., SW Washington D.C. 20585 (202) 586-1478 Contact: Elliot Levine, Program Manager

38 For more information on opportunities for small businesses to work with the Department of Energy contact:

Office of Technology Utilization Department of Energy 1000 Independence Ave., SW Washington D.C. 20585 (202) 586-5388 Contact: Sandy Glatt, Small Business Coordinator

F. US. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

...... Small Cities Community Development Block Grant Program ...... -. Each year the United States Department of Housing and Urban Development (HUD) makes funds .:.::...... ~. available to the State of North Carolina that are designated as the Small Cities Community Development Block Grant Program (CDBG). In 1994, North Carolina will receive $49,869,000 in federal CDBG funds. North Carolina administers the program and establishes objectives consistent with the Housing and Community Development Act of 1974. In North Carolina, the objective of this program is to provide decent housing, and to expand economic opportunities for persons with low to moderate income (LMI). North Carolina’s program is designed so that at least 70% of the 1994 funds will be used to benefit LMI persons.

Eligibility for CDBG funds is restricted. Twenty-one entitlement cities in North Carolina and ten urban county municipalities within Wake County receive funding directly from the HUD, so they are not eligible for Small City CDBG funds. Entitlement cities include: Asheville, Burlington, Chapel Hill, Charlotte, Concord, Durham, Fayetteville, Gastonia, Goldsboro, Greensboro, Greenville, Hickory, High Point, Jacksonville, Kannapolis, Morganton, Raleigh, Rocky Mount, Salisbury, Wilmington, and Winston-Salem. The ten urban county municipalities in Wake County are: Apex, Cary, Fuquay-Varina, Garner, Knightdale, Morrisville, Rolesville, Wake Forest, Wendell, and Zebulon. The town of Holly Springs is eligible to receive CBDG funds sinca-they opted not to be included in the urban county designation. All other counties and municipalities not listed may apply for these funds.

For more information, see the Commerce Finance Center and the Division of Community Assistance Programs on pages 42 & 44 or contact;

Department of Commerce Commerce Finance Center 430 North Salisbury Street, Room 2174 Raleigh, NC 2761 1 (919) 733-5297 Contact: Robert Hinshaw G. US EXPORT-IMPORT BANK

The US Export-Import Bank (Eximbank) is an independent federal agency that offers programs to assist US exporters. The Working Capital Guarantee program offers funds directly to exporters. The remaining programs benefit U.S. exporters indirectly by providing potential buyers of US. 39 goods with financing and insurance. Eximbank is currently working with the SBA to make sources of funding more accessible to smaller firms. Due to the dynamic environment that Eximbank operates in, several programs may undergo changes during the year, and new programs may be added. Contact Eximbank to obtain up-to-date information on their programs.

Working Capital Guarantee Eximbank's Working Capital Guarantee program encourages commercial lenders to provide pre- export financing to small and mid-size businesses for exporting activities. Funds may be used for pre-export activities such as raw material purchases and marketing. To qualify, firms must have been operating for at least one year, have a positive net worth, and at least one full-time principal. Also, financial statements must show that the exporter can pay back the requested debt. The guarantee covers up to 90% of the principal amount and the maximum repayment period is generally one year...... ~.. To date, North Carolina has not been very active with respect to Eximbank working capital financing. ~ ...'~ ~..,... _>...::;. .> In 1993, only one North Carolina firm received a Working Capital Guarantee. . .~..-..:.: ...._.. .. Loans and Loan Guarantees to Foreign Buyers Eximbank provides fixed interest rate loans to foreign buyers of U.S. capital equipment and services. Eximbank also makes loan guarantees to credit-worthy buyers of U.S.goods and services. Loan coverage of up to 85% of the US export value is available with repayment terms of one year or more. Most guarantees cover both commercial and political losses.

Export Credit Insurance Eximbank offers an Export Credit Insurance Program to insure against political and commercial risks on export receivables. The New-to-Export Policy, one of several policies, is for small businesses that averaged less than $2 million in export credit sales in the past two years and that meet the SBA guidelines for the definition of a small business. The policy offers enhanced coverage and a lower premium than usually found in regular insurance policies.

For more information, call the Export Financing Hotline at (800) 424-5201 or contact:

Export-Import Bank of the United States 8 11 Vermont Avenue NW Washington, DC 20571 (202) 566-8981

H. U.S. BUREAU OF INDIAN AFFAIRS

There is a rapidly increasing number of businesses owned by Indian tribes and individual Indian entrepreneurs. The Indian Financine Act of 1974 declared it a Congressional policy to provide capital to help Indian entrepreneurs and tribes become self-sufficient. The Bureau of Indian Affairs (BIA) makes direct loans, loan guarantees, and non-reimbursable grants to assist Indians and Indian tribes in their efforts to establish or expand their own businesses.

To be eligible for the direct loan program, businesses must benefit the economy of an Indian Reservation and demonstrate a reasonable prospect of repayment. Priority is given to businesses located on a reservation. Direct loans to individuals are limited to $350,000. Guarantees will cover up to 90% of loans made by private lenders, not to exceed $500,000. The grant program provides

40 between $50,000 and $100,000 for individuals and up to $250,000 for Indian tribes. However, grant money cannot exceed 25% of the total project cost. Applicants for loans and grants can also receive technical and management assistance covering all areas of expertise required to start and effectively manage a business.

For more information on Indian Economic Development programs, contact:

Bureau of Indian Affairs Credit Office loo0 N. Glebe Road Broyhill Building, Rm 712 Arlington, VA 22201 (703) 235-1303

41 V, STATE GOVERNMENT SOURCES

Agrowing number of states are recognizing the vital role which small businesses play in the economy. North Carolina has developed several programs to support small business star-up and growth. The following is a brief outline of these programs and a list of appropriate contacts.

A. NORTH CAROLINA DEPARTMENT OF COMMERCE

The Department of Commerce provides financial assistance to manufacturing and industrial processing companies through two of its divisions, the Commerce Finance Center and the Division of Community Assistance. The International Trade Division sponsors a program designed to encourage exports. The State Surplus Property Agency provides state surplus equipment and furniture at reduced prices to the highest bidder.

COMMERCE FINANCE CENTER Each year the United States Department of Housing and Urban Development makes funds available to the State of North Carolina that are designated as the Small Cities Community Development Block Grant Program (CDBG). The North Carolina CDBG Program has six different categories in 1994, and the Commerce Finance Center administers two programs: Economic Development and Micro-Enterprise programs.

Economic Development Program The Economic Development Program utilizes CDBG-ED funds available from the Department of Housing and Urban Development (HUD) as Economic Development project money. All counties, except HUD-designated urban counties, are eligible to apply for Small Cities CDBG funds. Proposed projects must include specific, eligible activities which will result in the creation or retention of specified jobs, at least 60% of which will benefit persons with previous low and moderate family- income levels. In 1994, the State of North Carolina allocated $9.7 million to the program.

For the 1994 program year, $4.2 million of the CDBG-ED category funds will be set aside for small business loan projects. The loan funds temporarily reserved until February 1995 will be subject to "first come, first served" applications for eligible loan projects. Applications can only be made by eligible local government units. It is important to note that the application process includes a multitude of steps including public hearings and a pre-application conference. Typical loan projects will assist a private company with new construction, land acquisition, or the purchase and installation of new equipment. The CDBG assisted projects must directly relate to specific jobs to be created or retained, with activities including achievement of job goals within 24 months. Generally, the Commerce Finance Center will consider investing $5,000 per job created or saved, but there are exceptions for which applications may be funded in amounts up to $15,000.

Micro-Enterprise Program Funds up to $1 million will be set aside for local governments or a consortium of localities to assist non-profit organizations, small businesses, and individual entrepreneurs with specific micro- enterprise projects. Project funds are provided as loans to benefit predominately low to moderate income persons. Local government applicants will be required to receive technical assistance from

42 an organization experienced in micro-enterprise activities.

In addition to the CBDG programs, the Commerce Finance Center has several other programs that provide incentives to small businesses.

Industrial Revenue Bonds The Industrial Revenue Bonds (IRBs), the Commerce Finance Center’s major funding tool, is a form of long-term, low-interest financing. Congress funds these bonds and designates, by population, the amount each state may issue annually. The income derived by the bond holder is not subject to federal income tax, resulting in the lower interest rates.

The issuance of IRBs is govemed by federal and state regulations. Proceeds can only be used by manufacturing companies for capital expenditures; fixed assets, land, building and new equipment. For new ventures, the applicant must contribute an amount equal to 25% of the bond for beginning working capital, since bond proceeds may only be used for capital expenditures. Firms must also pay a wage that is above the county average manufacturing wage or 10% above the state average manufacturing wage, or be located in an area of “especially severe unemployment.” Essentially, these bonds assist new and expanding industry, and ensure that North Carolinians receive better jobs.

To be cost effective, a bond should be for at least $1.5 million. The maximum bond amount in any given jurisdiction is $10 million. North Carolina’s allowance is $300 million annually.

Industrial Development Fund The Industrial Development Fund was created to provide an incentive forjob creation in the State’s economically-distressed counties. Eligible counties can apply for funds for the renovation of industrial buildings on behalf of private manufacturing businesses located, or locating, in their jurisdictions. By statute, 52 counties are designated as economically distressed. Contact the Commerce Finance Center for an updated list.

The Building Renovation Program only applies to manufacturing projects. Funds may be used to renovate, modify or repair buildings, or to provide connecting infrastructure to buildings that will be constructed in one of 52 designated counties. When funds are expended for publicly-owned water, sewer, gas or electric lines, the local unit of govemment is not required to repay the state. If aprivate entity receives the funds, a loan will be made and the funds will be repaid to the state. The amount of such a loan is determined by multiplying the number of jobs to be created by $2,400 up to a maxinium of $250,000 or the cost of the project, whichever is less.

Job Creation Tax Credit Businesses that create full-time jobs in the 52 economically-distressed counties are usually eligible for a tax credit of $2,800 per new manufacturing or food processing job created above a threshold of nine. The credit is prorated over a four-year period and can offset up to 50% of the firm’s North Carolina tax liability. Firms must commit to hiring at least 20 new employees over a two-year period.

43 For more information, contact:

NC Department of Commerce Commerce Finance Center 430 North Salisbury Street Room 2174 - Dobbs Building Raleigh, NC 27611 (919) 733-5297 Contact: Bruce Strickland, JK

DIVISION OF COMMUNITY ASSISTANCE The Division of Community Assistance (DCA) administers four of the North Carolina CDBG Programs: Community Revitalization, Urgent NeedsKontingency, Housing Development, and Entrepreneurial Empowerment. The focus of these programs, except for Entrepreneurial .... Empowerment, is on public infrastructure and housing. Local governments receive funds from the DCA for projects such as new housing that small businesses can bid on. Since these programs are part of the CBDG, all of their requirements apply.

Entrepreneurial Empowerment This is a new developmental category for distressed areas. Three or more localities forming a regional consortium will undertake comprehensive, community-based economic revival to increase jobs and small business opportunities, raise incomes of local residents, and foster economic self- sufficiency among low and middle income families.

For fiscal year 1994, $4.8 million is available for these projects. The DCA will award up to a maximum of $1 million for an individual project. The application due date is in January 1995. The awards will be issued by March 1995 to the appropriate local governments.

For more information, contact:

Department of Commerce Division of Community Assistance 1307 Glenwood Ave., Suite 250 Raleigh, NC 27605 (919) 733-2850 Contact: Pam Wilson

INTERNATIONAL TRADE DIVISION

Shared Foreign Sales Coyoration Program As an export incentive, the Intemational Trade Division offers the Shared Foreign Sales Corporation (FSC) program to North Carolina exporters who have established a working relationship with a foreign distributor, dealer, or buyer. This program allows an export company to reduce the taxable amount of profits on exports by as much as 30% on federal and state taxes. Thus, exporters can increase their profit margins immediately.

Large and small FSCs can be created. Small FSCs are for companies with less than $5 million in

44 annual sales. The Shared FSC was formed to benefit several corporate shareholders. The Shared FSC relieves exporters of the cost and administrative hurdles of forming a solely-owned FSC to obtain tax savings. Instead, the exporter may simply acquire an interest in an existing FSC. The North Carolina Shared FSC has chosen to be a small FSC to minimize compliance requirements for shareholders. For a Shared FSC, the company will need at least $8,000 in profits before the benefits of the program exceed the annual costs.

For more information, contact:

Department of Commerce International Trade Division 430 N. Salisbury Street .. Raleigh, NC 27611 .. .:.: (919) 733-7193 .’>.. .. Contact: Mac Epps 6. INDUSTRIAL RECRUITMENT COMPETITIVE FUND

The General Assembly appropriated $7 million for this fund in July 1994. The purpose of this fund is to provide financial assistance to those businesses or industries deemed by the Govemor to be vital to a healthy growing state economy and that are making efforts to establish or expand in North Carolina. The money can be used to install or purchase equipment; make structural repairs, improvements, or renovations of existing buildings to be used for expansion; and construction of or improvements to new or existing water, sewer, gas or electric utility distribution lines or equipment for existing buildings.

For more information contact:

Department of Commerce Business and Industry Division 430 N. Salisbury Street Raleigh, NC 27611 (919) 733-4151 Contact: Watts Carr

.” C. NORTH CAROLINA INVESTMENTTAX CREDIT

The Business Investment Tax Credit was created by the North Carolina General Assembly in 1987 and is described fully in N.C. General Statute 5s 105-163.010-.014. The legislature provides a credit against state taxes for investments in qualified business ventures, grantee businesses, and North Carolina Enterprise Corporations. The credit is designed to benefit certain types of ventures; primarily manufacturing, processing, warehousing, research and development, and service-related fms. In 1993, the legislature expanded the tax credit provision to include new types of Qualified Business Ventures and make the credit applicable to pass through entities.

To qualify for the credit, S-Corporations, partnerships, limited liability companies (LLCs) and individuals must purchase the equity securities or the subordinated debt of a qualified business

45 venture or grantee business. To be approved as a qualified business venture, a business must have its headquarters and principal business operations in North Carolina. In addition, revenues must not exceed $5 million for the most recent fiscal year. Firms engaged primarily in real estate, professional services, personal grooming, cosmetics, entertainment, construction, retail sales, and investments cannot be registered as qualified businesses. Decisions regarding the certification of business ventures are made by the Department of the Secretary of State. Only investments made after a business is certified can qualify for the credit. A qualified grantee business is one that is registered with the Secretary of State and that has received a grant or other funding from the North Carolina Technological Development Authority, the North Carolina Biotechnology Center, MCNC, or the federal SBIR program within the last three years.

Up to 25% of the amount invested may be taken as a tax credit starting the year in which the application for the credit becomes effective. The credit used in any particular year cannot exceed the investor’s total tax liability for that same year. The maximum credit allowed is limited to $50,000 per year for an individual and $750,000 per year for a corporation. Unused credit can he carried forward for the next five years. The total amount of credits available under this program is $12 million per year. If applications for the credit exceed the $12 million limit, credits will he proportionately divided between applicants. As of April 26, 1994, the total amount of credits for ,1993 was $4,381,740; 11% higher than the $3,934,332 total credits used in 1992.

For additional information, contact:

Department of Secretary of State Securities Division 300 North Salisbury Street Raleigh, NC 27603 (919) 733-3924

D. STATE SURPLUS PROPERTY AGENCY

The responsibility for selling and disposing of all supplies, materials, and equipment owned by the state and declared surplus belongs to the State Surplus Supply Agency (SSPA). Surplus property includes automobiles, dump trucks, tractors, mowers, office equipment, scientific equipment, computers, furniture, farm equipment, and more. Property is disposed of through sealed bids to the public, negotiated sales to qualified buyers and live auctions. This can be a great way to reduce the capital expenditures required to start-up or expand a business.

Property for sale is on display at the SSPA warehouse in Raleigh and at various agency locations in the state. The property for sale is listed on bid sheets, including location, contact person, address, and phone number. Free bid sheets are available at the SSPA and at agencies throughout North Carolina that have surplus property listed for public sale. Also, weekly bid sheets are available by mail on an annual subscription basis for a nominal fee. There are guidelines on the back of each bidsheet that must be followed exactly. The property can be inspected up until the time of bid opening, and the property is sold “as is” and “where is.” Bids are opened publicly every Tuesday at 1 p.m. at the SSPA warehouse in Raleigh. The highest bid is awarded the property provided all guidelines are met. Payment must be made within 15 days of the award.

46 For more information contact:

State Surplus Property Agency P.O. Box 33900 Raleigh, NC 27636-3900 (919)733-3889

47 VI. SPECIALIZED STATE-SUPPORTED RESOURCES

A. NORTH CAROLINA BIOTECHNOLOGY CENTER

There is a strong and growing biotechnology industry in North Carolina currently consisting of about 67 companies. The North Carolina Biotechnology Center is a non-profit corporation that was established in 198 1. It is funded primarily by the North Carolina General Assembly and serves to ensure that North Carolina benefits economically from biotechnology research and development. The Center provides debt financing with a warrant position and favorable interest rates to North Carolina biotechnology companies to help fund the companies’ early, risky stage of development so that they can be in a stronger position to seek funds from additional sources.

The Biotechnology Center’s Business and Technology Development Program provides general business assistance to biotechnology companies and sponsors three financial assistance programs. These programs are the Economic Development Finance Program, the Commercial Biotechnology Events Grants Program, and the SBIR Matching Fund Program. Over $4.2 million has been awarded to North Carolina companies through these programs. The Center also serves as a clearinghouse for small businesses interested in the SBA’s Small Business Innovation Research Grants (SBIR) program (see page 24).

Economic Development Finance Program The Economic Development Finance (EDF) Program provides financial assistance to promote commercial applications of biotechnology in North Carolina. Under this program, new or existing businesses with innovative ideas in biotechnology or related bioscience are eligible to apply for low interest loans of up to $250,000 for 18 months’ support of research and development activities. Any North Carolina-based company may submit an EDF proposal. The proposal must include a Research Program Description and a Business/Commercialization Plan. Loan proceeds may be used for costs associated with research and development activities necessary to prove the feasibility or reliability of a biotechnology product or process. The company is expected to repay the full amount of the loan, plus a service fee. Typically the repayment period is five years. In 1993, two applications were approved for about $400,000.

Commercial Biotechnology Events Grants Program The Commercial Biotechnology Events Grants Program funds seminars, workshops, and other activities with a commercial or economic development focus that will lead to a better environment for commercial applications of biotechnology in North Carolina. Any North Carolina group, organization, agency, or institution may apply for the grants. Grants typically range from $1,000 to $3,000, and preference is given to events with open participation and those that are clearly intended to benefit the participahts and not the organizers. In 1993, the Biotech Center awarded four graits totaling about $8,000.

Small Business Innovation Research Matching Fund Small companies involved in the federal government’s SBIR program (see page 24) usually face a six month gap between Phase I funding ($100,000) and Phase I1 funding ($750,000). This program provides financial assistance to help North Carolina biotechnology companies bridge this gap and compete more successfully for Phase I1 funding. This program is open to all North Carolina biotechnology companies that have received a Phase I SBIR award and intend to submit a Phase I1 48 research proposal. The Center will provide up to $50,000 for direct costs associated with research and development activities that refine Phase I research results and initiate work on Phase I1 project objectives. The funds are available to a company for a period of up to three years, but at the end of the period the entire amount of the award principal and a service fee is due. There was one Matching Fund award in 1993 totaling $50,000.

For application materials and procedures contact:

North Carolina Biotechnology Center 15 T.W. Alexander Drive P.0, Box 13547 Research Triangle Park, NC 27709-3547 ... (919) 541-9366 .. Contact: Neil Moore ...... 9. NORTH CAROLINA TECHNOLOGICAL DEVELOPMENT AUTHORITY, INC.

In 1983, the New Technolom Jobs Act created a state agency called the Technological Development Authority (TDA). TDA was converted to aprivate, not-for-profit corporation in 1991 by the North Carolina General Assembly. TDA currently administers three programs: The Innovation Research Fund, the First Flight Venture Center (a small business incubator operating in Research Triangle Park serving local technology-based companies and serving as TDA headquarters), and the First Flight System (a program though which financial and program support is provided to small business incubators across the state).

Innovation Research Fund The Innovation Research Fund (IRF) is an investment fund established to serve the equity needs of early-stage high-growth businesses in North Carolina. The fund concentrates on firms with superior management teams and quality products in expanding markets, with an opportunity for significant long-term capital appreciation. Investments may be made anywhere in the State, in any industry or product which promises a high rate of return. Since its formation in 1984, the IRF has invested in over sixty companies, ranging from agriculture to biotechnology to computer software.

In most cases, investments are in the form of equity or a debt instrument that is convertible into equity. The Fund will usually co-invest with other investment firms; however, in special cases, the IRF may be the only investor. Typically the money will be placed into the business based upon the needs of the company and performance milestones agreed to by the management team and the IRF. Investments for the IRF range from $50,000 to $250,000 per company.

For more information contact:

North Carolina Technological Development Authority, Inc. Innovation Research Fund P.O. Box 13169 Research Triangle Park, NC 27709-3169 (919) 990-8558 Contact: Scott Albert, Chief Investment OfJicer

49 C. NORTH CAROLINA RURAL ECONOMIC DEVELOPMENT CENTER

The North Carolina Rural Economic Development Center was formed in 1987 to stimulate economic

growth and job creation in North Carolina's rural areas. ' The Rural Center sponsors the Capital Access Program, Microenterprise Loan Program (MLP), and publishes the Rural Services Directory which lists sources of information and funds for economic development in rural North Carolina. The MLP, which became a permanent program of the Center in 1992, has emerged as the largest microenterprise lending program in the United States.

North Carolina Capital Access Program The North Carolina Capital Access Program was created in 1994 as part of the Rural Initiative. Through this program a special loan loss reserve will be created to back higher-risk business loans. These loans will be available to companies that have good management and positive cash flow, but lack some element in qualifying for a conventional business loan such as collateral or business experience. Presently ten states and three cities across the country have similar programs.

This program will operate through individual participating banks. Borrowers will apply for a loan at a bank as they ordinarily would, and if the application has merit, but higher than average risk, the bank has the option of making the loan through the Capital Access Program. The borrower is then required to pay a loan guarantee fee which will be matched by public sector funds. The combined monies will be placed in a special reserve account to cover all loans made by the bank through this program. The state of North Carolina contribllted $1 million to this program and the SBAcontributed $650,000. The following banks have pledged their support: BB&T, Centura, First Citizens, First Union, NationsBank, Southern National, United Carolina, and Wachovia.

For more information contact:

North Carolina Rural Economic Development Center 4 North Blount Street Raleigh, NC 27601 (919) 821-1154 Contact: Michael Atkinson, Director of Business Finance

Microenterprise Loan Program The Microenterprise Loan Program (MLP) provides smaller loans to meet the needs of start-up and expanding businesses who cannot qualify for conventional loans. The mission of the NC Microenterprise Loan Program is to promote self-employment, small-scale business creation, and economic independence in rural North Carolina. The program is funded by public and private sources. The typical MLP borrower is arural, low-income, minority or female with a good business idea, skills, and the drive to succeed. Microenterprise loans range from $1,500 to $25,000. In addition to the loans, the borrowers can receive business assistance tailored to their needs. The Center uses two models to achieveits goals: Group-based lending and Institutional-based lending.

Group-based lending provides loans from $500 to $8,000 to small groups of businesses and entrepreneurs. Most of the microenterprise sites operate this type of program. Borrowers are required to form groups of four to ten individuals who meet regularly to make credit decisions, discuss business problems and receive loan payments. Initially, small loans of less than $1,500 are

50 made. As loans are repaid, borrowers become eligible for additional financing in larger amounts. The Center relies on group support, peer pressure, and accountability in place of collateral and a traditional credit review process.

Znstitutiond-based lending targets more established companies and more experienced individuals with credit needs of $8,000 to $20,000. These loans are usually secured by personal or business assets. Borrowers who demonstrate their creditworthiness through participation in this type of lending may qualify to obtain larger loans from traditional lending institutions.

As of July 1994,338 loans (totaling over $1.8 million) were made to businesses in 63 rural counties. More than 480 individuals participated, and approximately 20% of them had incomes below the federal poverty level. Of the participants, 51% were female and 57% were black. Eighty-eight percent of the businesses that received loans remain in operation. Individual program sites decide what types of lending they want to do, but the Rural Economic Development Center controls loan terms and conditions.

For general information about the Microenterprise Loan Program contact:

North Carolina Rural Economic Development Center NC Microenterprise Program Four North Blount Street Raleigh, NC 27601 (919) 821-1154 Contact: Phillip Black

For more information on the Microenterprise loan program, contact the local program site that serves your area.

51 Albemarle Commission Mid-Carolina Council of Governments 512 S. Church St. 130 Gillespie Street P.O. Box 646 P.O. Drawer 1510 Hertford, NC 27944 Fayetteville, NC 28302 (919) 426-5753 (910) 323-4191 Contact: John Mulvey Contact: Roger Sheats, Gregory DeShields Type: Institutional Type: Institutional and Group Counties: Camden, Chowan, Counties: Chatham, Cumberland, Hamett, Sampson, Currituck, Dare, Gates, Hyde, and Lee Pasquotank, Perquimans, Tyrrell, and Washington Mid-East Commission P.O. Box 1787 East Carolina Microenterprise Fund Washington, NC 27889 Carteret Community Action (919) 946-8043 P.O. Drawer 90 (400 Front Street) Contact: Les Twible, Karen Gilkey Beaufort, NC 28516-0090 Type: Institutional (919) 504-2424 Counties: Beaufort, Bertie, Hergord, Martin, and Pitt. Contact: Bill Hubbard Type: Group Mountain Microenterprise Fund Counties: Carteret and Craven 29 1/2 Page Street, Suite E Asheville, NC 28801 Dillard Building, Inc. (704) 253-2834/29 19 P.O. Box 1543 Contact: Chris Just, Christy Allred Goldsboro, NC 27533-1543 Type: Group (919) 736-0605; 734-8118 Counties: Buncombe, Cherokee, Clay, Graham, Contact: Jean Ann Harris, Elvin Exum, Haywood, Henderson, Jackson, Macon, Madison, George Lloyd Mitchell, Swain, Transylvania, and Yancey Type: Group Counties: Duplin, Greene, Johnston, NC REAL Enterprises Sampson, and Wayne. 115 Market St., Suite 320 Durham, NC 27701 McDowell Technology Community (919) 688-7325 College Contact: Rick Larson Route 1, Box 170 Type: Institutional Marion, NC 28752 Counties: Alamance, Alleghany, Anson, Brunswick, (704) 652-6021 (ext. 504) Burke, Caldwell, Chatham, Cleveland, Columbus, Contact: Dean Kanipe Edgecombe, Hal@x, Haywood, Lee, Northampton, Type: Institutional Qnslow, Richmond, Robeson, Scotland, Stanley, Counties: Avery, McDowell, Mitchell, Union, Watauga, and Wilkes. Polk, Rutherford, and Yancey.

52 Richmond Community College Small Wilson Community Improvement Association Business Center 1817 Butteflield Lane P.O. Box 1189 Wilson, NC 27893 Hamlet, NC 28345 (919) 243-4855 (910)582-7000 Contact: Fannie Corbett, Alvin Hickman Contact: Lowery Ballard Type: Institutional and Group Type: Group County: Wilson Counties: Montgomery, Moore, Richmond, and Scotland Yadkin Valley Economic Development District, Inc. P.O. Box 309 Rocky Mounmdgecombe Boonville, NC 2701 1 Community Development Corp. (910) 367-7251 ...... , 106 S. Washington Street, Suite 201 Contact: Bobby Todd .. $ .. -i...... : ... P.O. Drawer 1477 Type: Institutional and Group ...... Rocky Mount, NC 27802-1477 Counties: Davie, Stokes, Surry, and Yadkin (919) 442-5178 Contact: Joyce Dickens, Victor Marrow Type: Institutional and Group Counties: Edgecombe and Nash

Southeaslzrn Community College & Columbus County Minority Business Council P.O. Box 151 Whiteville, NC 28472 (910) 642-7141 Contact: Janice Simms, David Pickett Type: Group Counties: Bladen, Brunswick, Columbus, and Robeson

~. .: .: I D. MCNC ... .i . , ..:.. . , .,...... , . ...~~..-~..~. MCNC was established in 1980 as a private, non-profit corporation with the support of individual .:;..: state leaders and the North Carolina General Assembly. The goals of MCNC include economic development, start-up growth and retention of the electronics and information technology industries in North Carolina, and the recruitment of new industry to the state. Although MCNC is not a source of funding, it provides entrepreneurs and researchers with low-cost access to facilities, technology, and expertise.

Facilities, Technologies and Expertise

The Facilities at MCNC are specialized, and not easily located elsewhere. Facilities include a cleanroom for semiconductor fabrication, test and analytical labs, the North Carolina Research and Education Network, and the North Carolina Supercomputing Center.

53 The Technologies at MCNC are incorporated into traditional industries to help make North Carolina more competitive and productive. These technologies include microelectronics, communications, and high-performance computing.

The Expertise at MCNC includes a staff with specialized skills in microelectronics, communications, and high-performance computing. Small businesses can access this technical expertise through collaborative efforts, joint proposals, subcontracts, or direct contracts. MCNC has an extensive track record of providing testing, analysis, and consultation to high-growth industries.

Growth Business Technology Program MCNC’s North Carolina Supercomputing Center has created a small-business/entrepreneurial program to encourage exploration of computational technologies to help small companies across the state. This is a pilot program that provides small businesses with access to computer resources and training, third party research application software, and consulting services. Awards are made to small North Carolina companies that can have a positive effect on the state’s economy, demonstrate a commitment to leverage the new technology skills, and show the potential for continued use of computational services. Under the program, six entrepreneurial companies have received awards to develop technology.

For more information contact:

MCNC North Carolina Supercomputing Center (919)248-1166 Contact: Facilities, Technologies & Expertise: Holt Anderson Growth Business Technology Program: Bill Coe

E. ENTREPRENEURIALCOUNCILS

Entrepreneurial Councils help small businesses establish contacts, improve management skills and exchange information. The Council for Entrepreneurial Development (CED), serving the Research Triangle Park community, is the largest private, non-profit organization of its kind in the United States with over 1000 members and representing more than 600 companies. The CED was founded in 1983 and is funded entirely by dues, member contributions, and program revenues. It sponsors monthly programs, seminars, and publications, and works with other councils across the state to create a productive environment for emerging growth companies and venture investors.

In addition to their basic services, many councils sponsor annual events. For example, each May the CED sponsors an Annual Venture Capital Conference that attracts over two hundred financiers. They come to meet the Southeast’s most promising investment opportunities. During the conference, innovative and growth companies present business plans and solicit capital for growth to an audience of potential investors.

For more information about Entrepreneurial Council programs and events, contact:

54 Council for Entrepreneurial Development (CED) P.O. Box 13353 Research Triangle Park, NC 27709 (919) 460-3845 Contact: Monica Doss

Catawba Valley Entrepreneurs 3474 Duck Pond Drive Conover, NC 286 13 (7Q4) 459-2426 Contact: Joe Spears

Entrepreneurial Development Council of Eastern North Carolina P.O. Box 20393 Greenville, NC 27858-0393 (919) 328-6385 Contact: AZ Delia

Metrolina Entrepreneurial Council (MEC) 5950 Fairview Road, Suite 802 Charlotte, NC 28210 (704) 553-1660 Contact: Janice M. Stevens

NorthEastern Entrepreneurial Roundtable (NEER) Rocky Mount Chamber P.O. Box 392 Rocky Mount, NC 27802-0392 (919) 442-5111 Contact: Sherry Johnson

Piedmont Entrepreneurs Network (PEN) 1101 S. Marshall Street, Suite 14 Winston-Salem, NC 27101 (910) 607-8400 (Voice Mail)

SouthEastem Entrepreneurial Roundtable (SEER) Mid-Carolina Central Development Corporation P.O. Box 1510 Fayetteville, NC 28302 (910) 323-4191 Contact: Roger Sheats

55 VII. INVESTMENT CAPITAL

Private investment capital comes from independent investors and institutional professional venture capital funds. These capital sources invest in private companies that have high growth potential, and that provide a rate of return comparable to the investment risk. Independent investors invest their own capital directly, whereas professional investors invest the capital of others.

The largest source of equity capital for small businesses is the informal individual investor who expects at least an average of 26% annual return at the time they invest. However, they only accept an average of 30% of the investment opportunities presented to them, and they usually like to co- invest with other informal or professional investors. Over 80% of the companies they invest in have less than 20 employees. The informal investor will usually hold the investment for 5 years, and then liquidate the investment by selling it to the company or a co-investor. The Informal Supply of Capital, published by the SBA in 1988 estimates that the annual flow of informal equity capital is in excess of $32 billion.

There are only about 600 professional venture capital or investment funds in the United States and over one-half of the venture capital is controlled by approximately 11% of the venture firms. The firms in the Southeast manage approximately 3% of the venture capital pool. Venture Economics reported that during 1993 venture capitalists invested $2.5 billion in companies. North Carolina firms received about $56 million of this amount, which is less than 1% of the available venture capital.

One of the major differences between informal individual investors and professional venture capital funds is that informal investors prefer early-stage investing, whereas professional investors favor expansion financing. Informal investors are more likely to invest in manufacturing companies, whereas professional investors favor “high tech” companies. Informal investors usually receive common stock for their investment, but professional investors prefer convertible preferred stock, convertible debentures, or subordinated debt with warrants. Informal investors can typically provide about $200,000 in capital, but professional investors will usually not invest less than $250,000 and prefer investments of $1 million or more.

Pratts Guide to Venture Cauital Sources categorizes the types of financing available by stage of project development as follows:

Early Stage Financing . Seed - Small amount of capital provided to prove a concept or qualify for startup capital. . Research & Development - A tax-advantaged partnership set up to finance product development for startup as well as more mature companies. . Startup - Provided to companies who have completed product development, initial marketing studies, have a management team in place, and are ready to do business. . First-Stage - Provided to companies who have expanded their initial capital, and require funds to initiate full-scale manufacturing and sales.

Expansion Financing . Second-Stage - Working capital for the expansion of a company that has 56 growing receivables and inventories. . Third-Stage or Mezzanine - Provided for major expansion of a company whose sales volume is increasing and that is breaking-even or profitable. . Bridge - Provided when a company plans to go public within six months to one year.

AcquisitiodBuyout Financing . Acquisition - Provides funds to acquire another company. . Management/Leveraged Buyout - Enables an operating management group to acquire a product line or business from a company.

Following is a brief discussion of private and public investment capital opportunities and a list of appropriate contacts.

A. PROFESSIONAL VENTURE CAPITAL FUNDS

What Is Venture Capital? The National Venture Capital Association (NVCA) defines venture capital as “capital provided by fms of full-time professionals who invest alongside management in young, rapidly growing or changing companies that have the potential to develop into significant competitors in regional, national, and global markets.”

Who Are Venture Capitalists? Aside from the informal individual investor, there are three general types of organized or institutional venture capital funds:

. SBA’s Small Business Investment Company’s (see page 22) . Venture Capital Subsidiaries . Private Venture Capital Firms

Venture capital subsidiaries are established by major corporations, commercial bank holding companies and other financial institutions. Investments by these groups are usually in later-stage businesses and leveraged buyouts.

The primary institutional source of venture capital is a venture capital firm. Venture capitalists take higher risks by investing in an early-stage company with little or no history, and they expect a higher return for their high-risk equity investment. Different venture groups prefer different types of investments. Some specialize in seed capital and early expansion while others focus on exit financing. Biotechnology, medical services, communications, electronic components, and software companies seem to be attracting the most attention from venture firms and receiving the most financing.

For a list of venture capital firms in North Carolina see page 60.

How Hard Is It To Raise Institutional Venture Capital? Securing an investment from an institutional venture capital fund is extremely difficult. Pratt’s

51 Guide to Venture Caoital Sources estimates that only five business plans in 100 are viable investment opportunities and only three in 100 result in successful financing. Other sources estimate that the odds could be as low as one in 100. Pratts also points out that 60% of the proposals to venture capitalists are usually rejected after a 20-30 minute scanning, and 25% are discarded after a lengthier review. The remaining 15% are looked at in more detail, but at least 10% of these are dismissed due to irreconcilable flaws in the management team or the business plan.

Another consideration in the ability to raise institutional venture capital is the amount of venture capital being sought. For amounts greater than several million dollars, a company can seek out capital sources in distant locations like New York. However, companies seeking $1 million to $3 million face a different task when seeking capital because they need strategic guidance that can be provided most productively by local venture capitalists.

Small businesses and start-ups can improve their chances of receiving venture capital by presenting a well-organized and detailed business plan with realistic financial projections. Entrepreneurs should emphasize their managerial capability, market attractiveness and cashout potential. However, remember that the business plan will only result in a meeting. At the meeting, be prepared to make a formal, persuasive presentation that will give the venture capitalist a positive impression of the product and management team.

What DO Venture Capital Firms Look For? Pratts stated that venture capitalists look for the following:

Strone- Management Team -Each member of the team must have an adequate level of skills, commitment, and motivation that creates a balance between members in areas such as marketing, finance, and operations, research & development, general management, personnel management, and legal and tax issues.

Viable Idea - Establish the market for the product or service, why customers will purchase the product, who the ultimate users are, who the competition is, and the projected growth of the industry.

Business Plan - The plan should concisely describe the nature of the business, the qualifications of the members of the management team, how well the business has performed, and business projections and forecasts.

With respect to investing in a business, institutional venture capitalists look for average returns of at least 40%-50% for start-up funding. Second and later stage funding usually requires at least a 20%to 40% return compounded per annum. Most firms require large portions of equity in exchange for start-up financing. In calculating rates of return, many investment funds end up owning substantial amounts of company stock, which sometimes gives them equity control. The professional investor will look at the value of the company prior to investment and the investor’s financial contribution when determining how much equity is necessary for the fund to receive an adequate return on investment. This issue is often the largest financing hurdle for venture funds and owners to work through.

58 Key Elements in ldentifring a Venture Capital Firm Identifying which venture capitalists to seek capital from is crucial. The key elements to look at in selecting a venture capital firm are:

. Geography . Stages of development financed . Amount of capital needed . Industry specialization . Experience of venture capital leadership . Fund size and age . Amount of funds available for investment . What other investments they have made . Industry reputation . How long they stay invested in a company

The venture capitalist, especially in early-stage companies, will want to work closely with the management team to “monitor” their investment and provide experienced consultation. A peer relationship between the two parties can increase the chance for success.

Before approaching a venture capital firm, it is wise to thoroughly research it. Having a “quality introduction” is the best way to approach a venture capital firm. These introductions are usually provided by a banker, lawyer, accountant, or another entrepreneur who has been backed by a professional venture fund.

Exhibit 6 provides basic information about North Carolina venture capital firms.

Important Venture Capital Concepts . Many venture capital firms publicize the amount of funds they have “under management.” However, not all of the funds may be available for investment. The firm may have already invested it in venture deals, or they may have the funds earmarked to fund the expansion of companies already in their portfolio.

. Venture capital firms raise money and place it into a “blind pool” for investment in small companies. The venture capitalist receives a return on the investment as does the initial investor who provided the funds. The most common sources of funds are private and public pension funds, insurance companies, banks, corporations, wealthy individuals, foundations, and endowments. However, raising new venture funds is not an easy task. For example, the North Carolina legislature rejected a proposal to increase the amount of pension funds available for venture capital investments from $30 million to $60 million. However, on a more positive note, two North Carolina ventures firms have recently been able to raise an additional $40 million of available capital, and several venture firms in surrounding states have expressed an interest in North Carolina companies. Although there is more money in North Carolina than ever before, it is still a small percentage of the total venture capital available nationwide.

. Generally include an exit plan at the outset, because most venture capitalists do not want to be long-term owners or long-term equity holders. The profile of the business should allow for one the three basic exit strategies: public offering, sale of the company, and, in rare 59 cases, a buy back.

Institutional Venture Capital Investment in North Carolina: Coopers & Lybrand’s North Carolina Venture Capital MoneyTree Investment Survey indicated $55 million of venture capital raised for 1993 in North Carolina. Many of the companies received their equity investments from several sources. There are 13 institutional venture capital funds active in North Carolina. Presently the amount of investment capital available in North Carolina is insufficient to fund growing entrepreneurial companies which spur the state’s employment growth and wealth creation.

Business leaders in Stanly County responded to the venture capital shortage in their area by creating their own venture capital firm, Stanly Ventures, Inc., to encourage local investment, economic development, and job creation. In order to qualify for venture capital funds, the company must be willing to locate in Stanly County and offer above-average paying jobs. Stanly Ventures is funded by 70 community and business leaders from throughout the county who have committed their funding on an ad hoc basis. In addition, Stanly Ventures is willing to look at small investment deals as well as large ones.

The following is a list of venture capital companies in North Carolina. Please see Exhibit 6 for more details on the individual funds. Atlantic Venture Partners Montrose Capital 380 Knollwood, Suite 600 2200 West Main Street, Suite 900 Winston-Salem, NC 27103 Durham, NC 27705 (919) 725-2961 (919)286-7000 Contact: Edward K. Crawford Contact: David Blivin Carolinas Capital North Carolina Enterprise Fund 6337 Morrison Blvd. 3600 Glenwood Ave., Suite 107 Charlotte, NC 28211 Raleigh, NC 27612 (704) 362-8222 (919) 781-2691 Contact: Edward S. Goode Contact: Joseph A. Velk Intersouth Partners Ruddick Investment Company 1000 Park 40 Plaza, Suite 290 2000 Two First Union Center Durham,NC 277 13 Charlotte, NC 28282 (919) 544-6473 (704) 372-5404 Contact: Dennis Dougherty Contact: Richard N. Brigden Kittv Hawk Caoital Soringdale Venture Partners IndGendence Center, Suite 1640 212 South Tryon St., Suite 960 Charlotte, NC 28246 Charlotte, NC 28281 (704) 333-3777 (704) 344-8290 Contact: Chris Hegele or Dan Shea Contact: S. Epes Robinson Massey Burch Investment Group Stanly Ventures, Inc. 10oO Park Forty Plaza, Suite 300 P.O. Box 338 Durham, NC 27713 Albemarle, NC 28002-0338 (919) 544-6162 (704) 983-6181 Contact: William Earthman Contact: Leonard Mabry, Roger Dick

60 Venture First Associates Wakefield Group P.O. Box 13219 1110 East Morehead Street Research Triangle Park, NC 27709 P.O. Box 36329 (919) 929-1065 Charlotte, NC 28236 Contact: Andrew Grubbs (704) 372-0355 Contact: Anne Spangler Nelson Vitale Holdings, Inc. 6337 Morrison Blvd. Charlotte, NC 28211 (704) 362-8225 Contact: Jody vitale

6. INDIVIDUAL INVESTORS

Although it is a good idea to approach close friends and family members when seeking early stage capital, an alternative is to locate wealthy individual investors. These capital sources are commonly referred to as “Angels.” In addition to a direct investment, these individuals can provide direct loans, personal loan guarantees, or collateral that will enable the entrepreneur to get traditional bank financing. Individual investors in North Carolina may qualify for a 25% tax credit for investments in qualified business ventures.

Most entrepreneurs enter into discussions with investors by means of referrals. Attorneys, accountants, and bankers can often suggest possible sources for private investment capital. Also, contact your local Entrepreneurial Development Council and consider a computer matching network.

An entrepreneur or small business owner should have a thorough business plan prepared. Also, it is advised to seek the advice of a competent attomey before approaching investors. Legal advice may prevent lawsuits over misrepresentations of the business plan. Furthermore, the Securities and Exchange Commission (SEC) and the State Securities Division have specific guidelines regarding limited private offerings and disclosure of information.

Computer-BasedNetworks Several nationwide and regional computer-based networks exist that match entrepreneurs with interested investors. For a subscription fee, these networks will introduce compatible entrepreneurs and investors to one another. For more information contact:

Mid-Atlantic Investment Network College of Business and Management University of Maryland College Park, MD 20742-1 8 15 (301) 405-2144 Subscription Fee: $15O/yr.

Technology Capital Network, Inc. 201 Vassar Street Cambridge, MA 02139 (617) 253-7163 Subscription Fee: $300/yr.

61 The Capital Network 8920 Business Park Drive Suite 275 Austin, TX 78759 (512) 794-9398 Subscription Fee: $350/yr. C. INVESTMENT CLUBS

There are more than 30,000 investment clubs across the country. These groups have become a great way for individuals to learn about stocks and investment. These clubs are administered by the National Association of Investors Corporation (NAIC). Clubs are structured with different investment strategies and requirements depending on the mindset of the members. Some clubs require individuals to pay a certain amount into a fund that is pooled with other capital and then invested. Others select companies to make presentations to members who then invest as they see fit. Although the most popular investments are in large companies like Wal-Mart Stores, Inc. and McDonald’s Cop, many clubs look to diversify their portfolio or support local businesses. These clubs listen to presentations by entrepreneurs and may include stock from small, local firms in their portfolio. A number of investment clubs, such as Tri-State Investment in Chapel Hill, have been formed in North Carolina. They make a concentrated effort to invest their money in North Carolina small businesses.

D. JOINT VENTURES AND CORPORATE PARTNERSHIPS

Joint ventures and corporate partnerships are another popular method for small businesses to obtain capital. Corporate investors usually fund and support small businesses through either a venture capital relationship in which the company purchases a minority equity position, or a collaborative business partnership. Corporate partnerships are long-term relationships, typically between corporate giants with an established strategic direction and small, local firms with the ability to meet certain needs of the larger firm. Joint technology, manufacturing or marketing agreements are usually the initial basis for the partnership.

Well-structured partnerships benefit both partners. The small firm will gain capital and other resources, such as marketing channels, that it needs to grow. The larger partner gains access to cutting edge technology, niche markets, and specialized production. It is a good idea to study the prospective partner and establish a close relationship with a key executive before making any agreements.

Owners seriously considering a joint venture or partnership agreement should consult a competent attorney who has experience in new ventures. To find out if a corporation is interested in a partnership arrangement, contact the company’s corporate development officer or the Chairman of the Board, and look through the corporation’s annual report. E. INVESTMENT INTERMEDIARIES

A number of individuals and private companies help owners find capital, advise on structuring business plans, help introduce products and access markets, and provide an ongoing source of

62 investment advice. These individuals are often referred to as investment intermediaries, and they provide a wide range of services to small business owners for a fee.

Some intermediaries will find capital for clients, but only after receiving an up-front fee. Business owners should carefully evaluate the experience and prior results of those intermediaries before securing this type of service. Check the phone book under Financing Consultants, Financial Planning Consultants or Business Brokers for local intermediaries.

F. VENTURE DEVELOPMENT COMPANIES

The Synertech Group, Inc., located in the Research Triangle Park, specializes in building technology- based businesses. After identifying and researching a field of emerging technology, Synertech puts together a management and scientific team and begins the process of creating a start-up company. The new company develops the research and commercializes resulting products. Synertech focuses on businesses in health care, environmental, engineering and biotechnology related fields. Four different companies have been created by the group in North Carolina since 1985, including: EMBREX Inc., ENSYS Inc., OPTIKO Inc., and CAROGEN, Inc. Total capital invested in these firms exceeds $60 million.

Unlike traditional venture capital firms, Synertech does not finance companies initiated by others. This group seeks to identify new venture concepts and innovative technologies. Once a promising field is discovered, a business based on the new technology or concept is formed. Synertech provides funding at the start-up phase and continues to provide business expertise and management assistance as the company passes through subsequent stages of development. In addition, the Synertech Group is interested in pursuing university technology transfers, corporate partnerships, and suitable acquisition opportunities for their portfolio companies.

For more information, contact:

Synertech Group, Inc. 6320 Quadrangle Drive, Suite 370 Chapel Hill, NC 27514 (919) 419-4446 Contact: Jim Sheldon

G. PUBLIC OFFERINGS

Initial Public Offering Selling stock to the public through a registered public stock offering is a way to raise larger amounts of money. Many business owners think that raising money in the public equity markets is only for bigger, more established companies. But small initial public offerings (IPO’s) of less than $5 million are becoming more common. It is difficult to find brokerage firms and underwriters to participate in this size offering, but some firms (called “boutiques”) are becoming more interested in smaller deals. It is standard for these brokers to ask for money up front to cover their expenses. For a $4 million deal, costs could run up to 20 percent. Before any agreements are made, it is important to investigate the underwriter thoroughly and seek the advice of a knowledgeable, experienced corporate securities attorney. IPOs are complex and are governed by many state and federal laws. 63 There are many factors to consider before going public. Most entrepreneurs aren’t willing to take their company public since it forces them to relinquish control of the company. Companies that do, however, find it much easier to get media attention and to convince future lenders or investors of the value of the company. Public companies also have the option of issuing more stock to obtain new capital infusions, but only if the company performs well and is moving towards liquidity. Once a company has gone public, it must comply with all SEC regulations. This is a costly prospect since quarterly and annual SEC statements must be prepared and reviewed by accountants and attorneys.

Small Company Offering Registration An alternative to searching for private individuals and companies for a growing business is the Small Company Offering Registration (SCOR) stock filing. This method of raising equity capital for small firms was approved by the SEC in 1989. A SCOR offering tends to be easier and less expensive than an initial public offering with the SEC. The SCOR program is beneficial because an original registration statement need not be drawn up as with the IPO program. The U-7 form, which is a “fill-in-the-blank” form, is used instead. Although it is fairly self-explanatory and easy to use, legal assistance is highly recommended.

The SCOR program has generated a lot of interest nationwide and in North Carolina. Small business owners shunned by banks are finding equity financing to be a valuable source of funds. Currently, about 35 states have adopted the U-7 registration form. An additional number of states do not officially recognize the program, but use the U-7 form. North Carolina has adopted the SCOR program by law. There were approximately 40 filings since July 1993.

The SCOR program has both federal and state provisions that limit the dollar amount that can be raised. Existing corporations can raise a maximum of $1 million at a minimum offering price of five dollars per share. Additionally, other restrictions may apply. Also, it may be difficult to find a major brokerage house to underwrite a SCOR offering because the profit potential is too small.

For more information, contact:

Department of the Secretary of State, Securities Division 300 North Salisbury Street Raleigh, NC 27603 - 5909 (919) 733-3924

64 EXHIBIT 6

VENTURE CAPITAL FIRMS

$35 mm Mid-Atlantic Second Stage $500,000 to Five (no start-ups) $1" ...... I.: Seven .._-.:. .. $5" NC and SC All $200,000 to $1" $45" Southeast, Early $500,000 to Sixteen Mid-Atlantic $1.5mm $50mm Southeast All more than Five $500,000 $170mm Southeast Early more than Three $lmm Raising Southeast Any stage - About $2mm None - this is money for a visual a new firm fund technology industry $20" NC only All $250,000 to Thirteen $1.75mm

$14" Southeast 1st and later $250,000 to Five $1" $22.5" Southeast, 1st and later $500,000 to NA Southwest $1" $400,000 Open Any stage Open Three

$54" Southeast Early $500,000 to NA $1" $35mm Nationwide Later $500,000 to Four $1" NA NC and SC Expansion more than NA $500,000

NA - Information is not available

65 PRIVATE, NON PROFIT, AND LOCAL PROGRAMS

A. CENTER FOR COMMUNITY SELF-HELP

The Center for Community Self-Help was established in 1980. Through its affiliates, the Self- Help Credit Union (SHCU) and the Self-Help Ventures Fund (SHVF), the Center provides a broad range of lending options that enhance economic and community development in North Carolina. The SHCU and SHVF make nearly $5 million in loans annually to small businesses and not-for- profit organizations. Loans are available in all sizes, up to $1 million. The Self-Help Ventures Fund operates SBA's Microloan program, FmHA's Intermediary Relending Program, and several locally-based microenterprise programs. The Self-Help Credit Union is particularly active in making SBA guaranteed loans.

Self-Help specializes in loans to financially sound borrowers that cannot be made by a bank. Loans to businesses that have substantial collateral but weak cash flows are common. Most of Self-Help's borrowers are existing businesses, but start-ups are considered if the owners of that start-up are making a significant investment in the business.

For more information about the SHCU or the SHVF, contact:

Center for Community Self-Help Center for Community Self-Help 413 East Chapel Hill Street 34 Wall Street, Suite 502 Durham, NC 27701 Asheville, NC 28801 (919) 683-3016 (704) 253-5251 1-800-476-7428 1-800-229-7428 Contact: Bob Schall

Center for Community Self-Help Center for Community Self-Help 1373 East Morehead Street 122 N. Elm St. Suite 201 Suite 810 Charlotte, NC 28204 Greensboro, NC 27401 (704) 376-6778 (910) 378-1840 1-800-394-7428

B. LOCAL GOVERNMENT PROGRAMS

Many local organizations offer economic incentives to attract industry. Local councils of government and individual counties and cities will invest money in utilities such as water, sewer, and electric lines for business sites in their jurisdiction. Arecent legislative bill expanded the financing capabilities of local governments by permitting cities and counties to finance economic development projects with bond issues. Local govemments can also receive federal grant money from agencies like the EDA or the Department of Housing and Urban Development. Sometimes this money is retumed to the local authorities by the original borrowers to remain available to the community. In such cases, local governments are free to use this money to set up new lending or guarantee programs of their

66 own. Charlotte City Within a City Loan/Equity Pool The City of Charlotte, in cooperation with the West Charlotte Business Incubator, established the City Within a City LoadEquity Pool. Twelve participating banks offer assistance to meet the capital needs of new and expanding businesses located in a 60 square mile area. Participating banks include the Bank of Mecklenburg, BB&T, Central Carolina, Centura Bank, First Citizens, First Union, NationsBank, Park Meridian, South Trust, Southern National, United Carolina, and Wachovia. The city has allocated $2,281,000 and participating banks have set aside $10,286,400 to fund the program.

The pool is primarily a job creation program designed to produce jobs for low and moderate income individuals. Since the program’s inception, I14 jobs have been created and 35 loans have been made to businesses in Charlotte for $960,952 in city loans and $3,842,864 in bank loans. The ...... term of each loan ranges from 2-10 years at a rate of prime + 1% for a minimum loan amount of .... $15,000. The bank provides 80% of the loan amount, and the City of Charlotte provides 20% of the loan amount. A small business must go to the bank first and meet their underwriting criteria, but the city funds help to mitigate the bank’s risk by providing equity for the bank’s loan.

Eligible businesses must employ low to moderate income individuals (defined as individuals earning less than 80% of Charlotte’s median family income.) Individuals who fall into this income bracket may also apply to establish or expand their own businesses. For loans under $50,000, the borrower must create at least one low to moderate income job. For larger loans, at least one job must be created for every $lO,OOO of city funds.

City of Charlotte Neighborhood Development Department 600 E. Trade St. Charlotte, NC 28202-2859 (704) 336-2491 Contact: Steve Washington

Wake County Economic Development Loan Fund Ln 1994, Wake County and the Self-Help Ventures Fund formed a partnership to support small business development. The resulting loan fund is one of Wake County’s Housing and Community Revitalization Programs. The fund makes loans to businesses owned by people with low or moderate incomes, or fms that create or retain jobs for low or moderate income employees. All business .( located in Wake County can qualify except for those in Raleigh and Holly Springs. Loan funds can be used for real estate, fumiture and equipment, inventory, supplies, and working capital.

The fund has $350,000 available for loans that are expected to range from $10,000 to $50,000. Since the fund is administered by the Self-Help Ventures Fund, it is possible to seek their assistance in obtaining any additional capital that may be necessary to meet business needs.

For more information call:

Lanier Blum (919) 683-3016

67 Raleigh Small Business Success Program This program is an outgrowth of the Southeast Raleigh Improvement Commission and was formed by the major banks in the city and the City of Raleigh to stimulate business development and the creation of jobs in the Capital City. The program targets those small businesses located in the southeast quadrant of the city. The amount of a loan will range from $10,000 to $75,000, subject to the availability of funds, with a maximum term of five years. The loan can only be used for working capital, equipment, commercial-use vehicles or machinery, expansion of business products or services, start-up funding, or improvement of owner-occupied commercial property.

For more information call:

Luther Williams (919) 890-3505 or Hortense Francis (919) 890-3170

Asheville Community Loan Pool The purpose of the Community Loan Pool (CLP) is to provide applicants with the resources, training and capital necessary to enhance or create their own successful businesses. It can also assist them in establishing long-term relationships with area financial institutions for the benefit of minority individuals and communities. Applicants must be an adult resident ofAshevilleBuncombe County and an ethnic minority. Loans of up to $30,000 are available for terms of three months to 5 years.

For more information contact:

Asheville Community Loan Pool 34 Wall St., Suite 402-A Asheville, NC 28801 (704) 253-0105 Contact: Karen D. Jacobsen

Winston-Salem Economic Development Loan Fund The City's loan program provides loans to qualified small businesses which are unable to secure bank financing, but which have viable businesses or business plans and a certain degree of financial strength. The maximum loan amount is $50,000 with a maximum term of 10 years. The funds may be used for the acquisition of fixed assets, working capital or any legitimate business purpose.

For more information call:

Janet DeCreny (910) 727-2741

Other Local Government Programs Another example of a local program is Kerr-Tar Council of Government's revolving loan fund. Borrowers in Franklin, Granville, Vance, and Warren counties can receive between $25,000 and $200,000 provided the prospective project will create one job for every $10,000 borrowed. Using Community Development Block Grant (CDBG) income, the town of Carrhoro provides funds for

68 projects that will create or save jobs. Over $660,000 has been loaned to Carrboro companies through this program. Chatham County has its own loan guarantee program. Projects that create 51% low to moderate income jobs can receive up to a $50,000 guarantee. Chapel Hill has also allocated $110,000 of community development funds for small businesses, job training, and public improvements.

These are just a few examples of the programs that are available at the local level. For more information on local government programs in your area, contact the Small Business and Technology Development Center (see page 72).

C. CERTIFIED DEVELOPMENT CORPORATIONS

... In addition to SBA lending, several regional Certified Development Corporations (CDC’s) have -.,_. ~~ .. their own micro loan and revolving loan programs. For example, the Neuse River Development :.-...... ~ Authority in New Bem makes referrals to The Community Center for Self-Help, who makes micro loans to entrepreneurs with good credit and financially feasible business plans. CEDCO, the Certified Development Company serving the Capital region, has a loan guarantee program. For more information on CDC programs contact the CDC in your area (see page 18) or the Small Business and Technology Development Centerpage 72).3).

D. GOOD WORK, INC.

Good Work is a not-for-profit, Triangle-based project that provides training, group support and small loans to people wanting to start or expand their own business. Small groups of highly motivated individuals interested in starting or expanding their own businesses can form “Loan Circles.” Good Work takes these groups through an orientation process and then offers initial loans of up to $500 to members of the group. As members repay their loans and continue working in their circles, larger loans of up to $10,000 become available. Instead of requiring collateral, Good Work relies on the trust and support of the circles to ensure that members repay their loans and grow successful businesses. No member of a loan circle can receive funds unless all other members are current with their loan payments.

Anyone 18 years or older who is starting or expanding a business can form a loan circle. Loan circles contain 4-7 people and meet two times a month to collect loan payments, receive additional training, and offer mutual support.

All loans issued through Good Work are administered by the Self-Help Credit Union (see page 22) which pledged an initial $100,000 for the loan pool. Good Work began recruiting loan circles in April 1992. Since then, 50 businesses have formed loan circles and received loans totaling $25,000.

For more information, contact:

Good Work, Inc. Bull City Business Center 115 Market Street Suite 211 P.O. Box 25250 Durham, NC 27702

69 (919) 682-8473 Contact: David Buchholz, Executive Director

E. BUSINESS CONSORTIUM FUND

The Business Consortium Fund Inc. (BCF) is a not-for-profit minority development company of the National Minority Supplier Development Council (NMSDC). Forty-four regional affiliates including Carolina’s Minority Supplier Development Council Inc. in Charlotte work with certified lenders to help finance expenses or purchases related to a specific transaction. Certified lenders in North Carolina include First Union National Bank and NationsBank.

The BCF requires that the ethnic minority business seeking funds be a certified member of a Regional Minority Supplier Development Council (RMSDC) or a Regional Minority Purchasing Council (RMPC). In addition, the company must have a confirmed contract with a corporate member of the National Minority Supplier Development Council or an affiliate regional council. Loan size ranges from $50,000 to $500,000 but cannot exceed the value of the contract. The term of the loan must be consistent with the term of the contract or purchase order, not to exceed a four- year period from take down of the first loan. Although the Certified Bank Lender is responsible for the credit decision, BCF does require that proceeds of the transaction being financed be assigned as security for the loan. The lender may require additional collateral. BCF loans cannot fund non- profit enterprises and they cannot be used to pay off other outstanding debt.

For more information, contact:

Carolina’s Minority Supplier Development Council 5624 Executive Center Drive Charlotte, NC 28212 (704) 536-2884 Contact: Malcolm Graham F. MOUNTAIN COMMERCIAL LENDING CONSORTIUM

Eight banks, together with the Smoky Mountain Development Corporation, have created a joint program to lend one million dollars for the start-up and expansion of small businesses in Westem North Carolina. This program enables banks to make small business loans which do not meet conventional lending standards by pooling the risk of loss and coupling loans with intensive management and education assistance.

Participants in the consortium include BB&T, Clyde Savings Bank, First Citizens Bank, First Commercial Bank, First Union National Bank, NationsBank, Self-Help Credit Union, and Wachovia. The Small Business andTechnology Development Center (SBTDC), with regional offices at Westem Carolina University and Appalachian State University, is also participating in the program. The SBTDC will assist applicants in the preparation of business plans and provide ongoing assistance to borrowers as determined by the consortium’s loan approval committee. The Smoky Mountain Development Corporation, a Certified Development Corporation in Waynesville, will receive and

70 package loan applications.

The program covers the Westem counties of North Carolina, including Avery, Buncombe, Burke, Caldwell, Cherokee, Clay, Cleveland, Graham, Haywood, Jackson, McDowell, Macon, Madison, Mitchell, Polk, Rutherford, Swain, Transylvania, Watauga, and Yancey.

For more information, contact:

Smoky Mountain Development Corporation 100 Industrial Park Drive Waynesville, NC 28786 (704) 452-1967

,...,.,, ,., Contact: Thomas Fouts I . ..,:~...... ~.,...... G. NORTH CAROLINA ASSOCIATION OF COMMUNITY DEVELOPMENT CORPORATIONS

The North Carolina Association of Community Development Corporations (NCACDC) is a statewide, membership organization of community based, non-profit corporations designed to foster economic growth in the state’s underdeveloped and rural communities.

Equity and Pre-Development Loan Fund The Equity and Re-Development Loan Fund is a specialized fund that provides capital to community- based, non-profit corporations and Certified Development Corporations (CDCs) that meet certain requirements. Entrepreneurs with businesses in the community can also receive funding if they are involved in a joint venture with a CDC or non-profit. Members of the NCACDC get first priority for limited resources.

Eligible projects include retail, office, and industrial real estate investments. Pre-development loan funds may be used for project specific costs incurred before proceeds from construction financing are available. Uses are restricted to mortgageable costs that are reimbursable at construction loan closing. The maximum loan amount is $30,000 per project and $60,000 per borrower. The cost of the loans is one point below the prime lending rate at the time of the loan commitment. Because of a strong bias towards pre-development lending, equity funds are extremely limited. The maximum equity investment is $30,000. Uses of equity funding and ownership percentages will be determined through negotiation.

In addition to direct capital assistance, the fund will consider providing credit enhancement through loan guarantees to a qualified borrower. The maximum amount of a guarantee is $30,000. There is a two point commitment fee for this service. Again, only a limited number of guarantees are available because of the fund’s bias towards pre-development lending.

For more information, contact:

North Carolina Association of Community Development Corporations (NCACDC) P.O. Box 28958 Raleigh, NC 2761 1 (919) 856-2172 Contact: Barbara Boone 71 GENERAL BUSINESS ASSISTANCE

SMALL BUSINESS AND TECHNOLOGY DEVELOPMENT CENTER

The Small Business & Technology Development Center (SBTDC) is a business and technology extension service that operates as an inter-institutional program of The University of North Carolina. Its mission is to support economic development in the state by providing one-on-one, confidential counseling and technical assistance to entrepreneurs and small business owners. Specialized services include government procurement assistance, international business development, technology development, marketing research support, and marine trades business development. In the past, SBTDC clients have experienced sales and profit growth that significantly exceeded the national average. In 1993,92% of clients counseled rated SBTDC services good to excellent Counseling services provided by the SBTDC are free of charge.

Although the SBTDC doesn’t provide financing, it does assist businesses in identifying capital sources and applying for financing. In 1993, SBTDC clients received more than $33 million in financing. Since 1990, more than $127 million in debt and equity funds have been obtained for SBTDC clients, which has resulted in the creation or retention of over4,000 jobs in North Carolina.

For more information. contact the center in your area:

Headquarters Office Cape Fear Region 4509 Creedmoor Rd., Suite 201 Fayetteville State University Raleigh, NC 27612 Continuing Education Center (919) 571-4154 P.O. Box 1334 Scott R. Daugherty, Executive Director Fayetteville, NC 28302 (910) 486-1727 Capital Region Pembrake State University: North Carolina State University (910) 521-6603 MCI Small Business Resource Center 800 1/2 S. Salisbury St. Eastern Region Raleigh, NC 27601 East Carolina University (919) 715-0520 300 East First St. Willis Building Catawba Valley Region Greenville, NC 27858-4353 514 Highway 321, NW (919) 328-6157 Suite A NC Wesleyan College: Hickory, NC 28601 (919) 985-5130 (704) 345-1110 Northeastern Region Central Carolina Region Elizabeth City State University UNC - Chapel Hill Box 874 608 Airport Rd., Suite B Elizabeth City, NC 27909 Chapel Hill, NC 275 I4 (919) 335-3247 (919) 962-0389

72 Northeastern Piedmont Region Southeastern Region NC A&T State University UNC-Wilmington P.O. BOXD-22 Westside Hall Greensboro, NC 27411 601 South College Rd. (910) 334-7005 Wilmington, NC 28403 (910) 395-3744 Northern Piedmont Region Winston-Salem State University Southern Piedmont Region P.O. Box 13025 The Ben Craig Center Winston-Salem, NC 27110 8701 Mallard Creek Rd. (910) 750-2030 Charlotte, NC 28262 (704) 548-1090 ... :. Northwestern Region ..,., ...... ~., Walker College of Business Western Region ...... ~..... Appalachian State University Center for Improving Mountain Living Boone, NC 28608 Westem Carolina University (704) 262-2492 Cullowhee, NC 28723 (704) 227-7494 Asheville-Buncombe Technical College: (704) 285-0021

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73 .. ..

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74 FEDERAL GOVERNMENT SOURCES

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75 FEDERAL GOVERNMENT SOURCES I

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77 78 79 STATE GOVERNMENT SOURCES

era. Dr. em" NC

NC

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NC

NC ~ STATE GOVERNMENT SOURCES

I-I I I I SPECIALIZED STATE SUPPORTED RESOURCES 1

PROGRAM NAME GEOGRAPHIC AREA COMPANY NPE DESCRImlON YlNlMUM DISBURSEMENI

Grant pmgmm mot hrnda ~emlnorswork6hoP% and Commeiclol Blotschnology Event$ Or inanhrtlon "" mW other actlvitler lhot promote technology tronder ond GmnNRogmm IIPPIV Informationrhorlng. I NC I

SBIRMafshlng Fund NC

EoilyStoge Fund foker on equlty podtlon In the compony. I ssIIco) I

NohproRt Economic Development FblFllght Syrlem NC Gcank lo ertobliih bualneor incvMbn. S5oco) I Orgonlla+lonr

110 Fllght Venhlre Center RTP RegIan Technology-BmedSmoll ComPonieS hcubotor Providing SpocelSeNlcea. NIA

Loow wlll be ovallable to bualneuen wlth OOMi

-. I------I

MCNC

82 SPECIALIZED STATE SUPPORTED RESOURCES

MUlMUM DISBURSEMENT RE3"lONS IWS DISBURSEMENIS coNlAcI I Nom ambul BlotesMolopy Cenl~

Funds mwt be used foi RBD In 01 biotechnolwy 01 s2m m Two flnanciol pockogei for $403 CGU Blotech Center (W?) M1-93M bloaclsncereloled field

Proceed8 must be us~dfor speeclflc Information lhonng 01 s3m (some exceptiolu) Four gmntitotollng S8wO BlatechCentar QI?)Ml-?3M technology tmanrfer ocllwhes

Biotech Center (91454I-PM

N C. Rum Economic Oevelopment CenterMlke Atkinron (WV) 821-1154

Group lendlng requlre~thatmembenmeel cegulorly. 1 Rum Economic Development center 1- 1- for groupr and S2O.m far more eitobllrhed Generally members ore not obls to receiv~oddition01 Slnce 1989 more thon S1.8 mlllbn hoJ Deer Ftll Black companies who receive lnrtitullonol~boaedflnanclng. tlnoncmg ~nll/oIIlndlvldual membenare up to dote given lo 338 bonower3. on (PIq821-1154 their 100" poymen*.

ENIREPRENEUWU COUNCILS I See page 65 tor 0 llrt of counclil In the Nons NIA mte.

83 PRIVATE, NON-PROFIT, AND LOCAL PROGRAMS

PPOGWM NAME I GEOGRAPHIC AREA I COMPANY NPE DESCRIFTON I MINIMUM DISBURSEMENI

Chanom ClW Wllhlna CW fromthecitywiminacitybounda~erin~hoi~ane. Any bunlnesitype LoonIEgulW Pool I Bonks provlde 8ffi oi the Rnonclng ond the Clty of

Loan pool created by sigh+paniclpatlng bonks. MovnlalnCommerclai Lmding ! Welter" NC monWpsand Loon%me coupled with lntenrlve monogemen! and "olies consonium NC. ! sd"cOfi0nOI O.IJtO"CB,

84 MAXIMUM OISWESMEM PlSTlllCnONS 1993 DISBURSEMENTS COMACI

Sel f-He1p Durham (1-8m4767428) Loam of 011 ore hlolloble. UP to $750033. "on- About $ 5 million clnnuolly, Chorlons (1~8Dl394-7428) Ashevllle (1-803-229-7428)

Cltyol Charlone Burlneuea must employ low 10 moderote Income Slnce the progrom begon. the CIW has Slave Worhington mdlyiduou. boned SPbO952and the banks S3,8d2,8M UM)33b24Pl

Bushem must be owned by or creote lobo lor low lo New program In 1W4 (p19)683-3016 modeiate Income BmpIOyeeL

Loan can only be uredfor limited Pulporel 1 New program In 1994

Company must hove 0 conflrmsd confract wlth a Carolina'sMinority Supplier Developme corporate member Of the Notion01 Minority Supplier Not ovallable. i Council Deve1opmantCO""Cil(0, On am,,atereg1onai councp. I Malcolm Gvoham (7M:

Smoky Mountoln Development Cow NOW momos Foufs(7M) 452-1961

NCACDC 1 AndrewRobl~ian(919)832~12

85 I INTERVIEWS

The author would like to thank the following people for their time and expertise.

Anderson, Holt. MCNC.

Atkinson, Mike. NC Rural Economic Development Center.

Bailis, Mary. Council for Entrepreneurial Development.

Bargol, Richard. City of Charlotte - Charlotte Loan Pool.

Bennett, David. North Carolina Credit Union Network.

Black, Phil. N.C. Rural Economic Development Center.

Blackman, Nancy. Dunn Area Committee of 100, Inc.

Borchardt, Gary. Small Business Administration.

Boseman, Perry. Department of the Secretary of State, Securities Division.

Brady, Annetta. Small Business & Technology Development Center - Headquarters.

Brendt, Chris. Town of Chapel Hill.

Brown, Melody. North Carolina Technological Development Authority.

Buchholz, David. Good Work, Inc.

Campbell, George. Nationsbank SBIC Corporation.

Closson, Chuck. North Carolina Enterprise Corporation.

Cox, Len. North Carolina Minority Support Center.

Cristeal, David. Wake County Economic Development Loan Fund.

Daugherty, Scott. Small Business &Technology Development Center - Headquarters.

Denning, Walter. Southern National Bank.

Dick, Roger L. Stanly Ventures.

Dooms, Wauna. Small Business & Technology Development Center - NE Region.

Doss, Monica. Council for Entrepreneurial Development.

Dowe, W.R. Small Business & Technology Development Center - Northem Piedmont.

Earthman, William. Massey Burch Investment Group.

Edelson, Ira. Transcap Associates, Inc.

86 Epps, Mac. Department of Commerce - International Trade Division.

Fagan, Lenn. US.Small Business Administration.

Fitts, Walter. Small Business & Technology Development Center - Eastem Region.

Fluharty, Robert. AT&T Capital Corporation.

Fouts, Thomas. Smokey Mountain Development Corporation.

Futrell, Floretta. North Carolina Biotechnology Center.

Gillespie, Ed. Department of the Secretary of State, Securities Division.

Glatt, Sandy. US.Department of Energy.

Graham, Malcolm. Carolinas Minority Supplier Development Councils, Inc.

Graham, William. North Carolina State Banking Commission.

Harcum, Lenzie. Small Business &Technology Development Center - Capital Region.

Hhs,James. Town of Cmboro.

Hem, Will. NC Department of Commerce - Business & Industry Division.

Hinshaw, Robert. NC Depment of Commerce.

Hood, Rodney. Nationshank.

Hunter, Tom. Small Business &Technology Development Center - Capital Region.

James, Nat. Small Business & Technology Development Center - Capital Region.

Jones, Dale. Economic Development Administration.

King, Marc. Small Business &Technology Development Center - Headquarters.

Levinson, Terry. US.Department of Energy.

Loucks, Larry. Small Business &Technology Development Center - Cape Fear Region.

Margopoulos, Marlee. Small Business & Technology Development Center - Headquarters.

McAllister, George. Small Business & Technology Development Center - Southern Piedmont.

McGough, Kelly. Venture Economics, Inc.

Moore, Neil. North Carolina Biotechnology Center.

Morton, Teeny. Neuse River Development Authority, Inc.

Mumma, Mitch. Intersouth Partners.

Nash, Parker Lee. Piedmont Entrepreneur.

Nelson, Tom. Wakefield Group. 87 Nesbitt, Debra. Farmers Home Administration.

O’Callaghan, Mike. U.S. Small Business Administration.

O’Connell, Melanie. Chatham County.

Owens, Dan. Small Business &Technology Development Center - Headquarters.

Parker, B.A. Jr. Rural Development Administration.

Parrish, William L. Small Business & Technology Development Center - Northwest Region.

Paul, Julie. Small Business & Technology Development Center - Headquarters.

Reeves, John M. First Exim Financial Limited.

Riedrich, Rand. Small Business & Technology Development Center - Catawba Valley.

Rnckdeschel, Lisa. Small Business & Technology Development Center - Headquarters.

Sarro, Eileen. MCNC.

Scarboro, Shannon. NC Department of Commerce - International Trade Division.

Schall, Bob. Community Center for Self Help.

Shea, Dan. Kitty Hawk Capital.

Sheldon, Jim. Synertech Group.

Shinn, Warren. Colonial Financial Services.

Smith, Warren. Coopers & Lybrand

Steinberg, Allan. Small Business & Technology Development Center - Western Region.

Strickland, Bruce. NC Department of Commerce.

Watts, Gerri. Systran Financial.

Wilson, Pam. NC Department of Commerce - Division of Community Assistance.

88 REFERENCES

Bowles, Erskine, “Reaching Out: Plans to Reorganize the SBA Will Make it Easier for Small-Business Owners to Get Help,” Entrepreneur. April 1994.

Bradford, Marcia, “Borrower Beware,” Entreoreneur. May 1994.

“Capital Gains: SBICs Get a New Life,” Entrenreneur, June 1994.

Evanson, David R., “1994 Money Outlook,” Entrepreneur, April 1994.

Fourth Annual Economic ImDact of Venture Caoital Study, Coopers & Lybrand, 1994.

Gaston, Robert J. and Bell, Sharron., The Informal Suoolv of Cauital. SBA Contract No. SBA-2024-AER-87,29 January, 1988.

Gladstone, David, “Prove it! How to make your case in the Hunt for Venture Capital,” Small Business Success, 1994.

Gray, Tim, “BB&T, Southem National Banks Plan to Merge,” The News & Observer, August 2,1994.

Heath, Gibson, Funding Ontions for Small Businesses, 1990.

Knight, Deena, “Venture Capital: The Process In Motion,” Piedmont Entreoreneur, Junehly 1994.

“Making North Carolina a High Performance State” A Comnrehensive Strategic Economic Develoument Plan of the North Carolina Economic Develonment Board, April 1994.

Mamis, Robert A,, “How to Finance Anything,” h.,February 1994.

“MCNC Offers Subsidies,” News & Observer, July 20, 1994.

Murray, Bridget E., editor, National Venture Canital Association 1992 Annual Renort prepared by Venture Econom- ics, 1993 edition.

“Niche Financing: Money for Raw Materials, ” h.,October 1993.

North Carolina Entrepreneurial Development Board, A Renort to the Governor and the N.C. State Legislature, January31, 1994.

North Carolina Rural Services Directory, North Carolina Rural Economic Development Center, April 1993.

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