Medc Breakfast 2010

Thank you Summary of Morning’s Agenda General Information MEDC IPOD Drawing

Village President Marilyn Michelini

Jane K. Tompkins Director of Community Development Revolving Loan Fund

Financing Opportunities with the SBA 504 Program Chip St. Jules Vice President Harris Business Banking (630-420-3362)

The 504 Program is the U.S. Small Business Administration’s (SBA) economic development instrument that supports small business growth and helps communities through business expansion and job creation. 504 Loan Program

The SBA is an independent Agency of the Executive Federal Government. It is responsible for providing assistance in 4 primary areas: Assistance in management of small businesses Procurement of contracts for small businesses Providing financial assistance to small businesses (Accomplished by forming partnerships with banks by offering to provide a guaranty of a portion of loans originated through one of their programs Advocacy of small business The SBA is dedicated to providing access to capital for small businesses that may not otherwise have the opportunity to obtain a loan through conventional financing. Focused providing funding, not refinancing.

Used to expand businesses through: Purchase/renovation of a building or construction of a new facility. Purchase machinery or large equipment Asset based company acquisitions Leasehold Improvements (in some cases) Lower equity injection Increased working capital Roll in other costs (i.e. FF&E, soft costs, interest reserve) Fixed long-term financing 20 year term full amortization for real estate 10 year term full amortization on equipment Current 20-year rate of 5.61% as of January 2010

Industrial Capacity or efficiency limitations at current facility Industries: commercial printing, machine shops, freight & transport, wholesalers, food product distribution Office Buildings and Condos Substantial build-out and furnishings Users: doctors, dentists, chiropractors, physical therapists, accountants, lawyers, architects, graphic designers, etc. Retail Motels, restaurants, car washes, farmer’s markets, boutiques, auto repair shops, etc. Gas stations (often ineligible)

Minimum Maximum Project $250,000 Unlimited CDC (Bond) $100,000 $1,500,000* * If a public policy goal $2,000,000 Veteran-owned, minority-owned, woman-owned TIF district, Enterprise or Empowerment Zone, Labor Surplus Expansion of exports Rural development Energy Use Initiative *If small manufacturer $4,000,000 (NAICS 31, 32, 33) or satisfies a Green Initiative of 10% reduction in energy Total project costs usually fall between $500,000 and $10,000,000 regardless of CDC participation

Bank Required to provide 50% permanent loan and 90% interim Certified Development Partner (CDC) Packages, processes and services the SBA portion of the loan SBA Provides 100% guarantee on the debenture (CDC Loan) which allows it to be sold into the market at attractive rates. Debentures are sold monthly to institutional investors CDC Once the debentures are sold, proceeds are wired to the participating bank. The borrower then makes payments via ACH to CDC Who is Involved in the Process

Typical 504 Financing Package 50% - Conventional Bank Loan First Mortgage 40% - SBA 504 Loan Second Mortgage 10% - Owner’s Equity * * Higher equity requirements exist for start-up or leveraged companies and single-purpose buildings

Building Acquisition 1,250,000 Building Remodeling 100,000 Machinery & Equipment 0 Furniture & Fixtures 90,000 TOTAL PROJECT COST $1,440,000 Source of Funds Bank 50.0% 1st Mtg. 720,000 SBA 40.0% 2nd Mtg. 576,000 Equity 10.0% 144,000 TOTAL $1,440,000 CDC Fees Net Proceeds $ 576,000 CDC Fee (1.5%) 0 Closing Cost 2,500 Funding Fee (.25%) 1,440 SUBTOTAL 579,940 Underwriting Fee (.4%) 2,332 TOTAL $ 582,272 GROSS DEBENTURE $ 583,000 Cash returned to Borrower 728 Bank’s First Mtg. Fee (0.5%) 0 Sample Project C&J Corp Lender Amount Rate Term (Years) Payment Bank $ 720,000 6.75% 10 $ 5,475 CDC/SBA $ 583,000 5.61% 20 $ 4,047 Total $1,303,000 $ 9,522 Total Fees with Stimulus is $6,272 without its $18,512

504 Project Structure Building Acquisition 1,250,000 Building Remodeling 100,000 Machinery & Equipment 0 Furniture & Fixtures 90,000 TOTAL PROJECT COST $1,440,000 Source of Funds Bank 50.0% 1st Mtg. 720,000 SBA 40.0% 2nd Mtg. 576,000 Equity 10.0% 144,000 TOTAL $1,440,000 Total Equity $144,000 Bank Conventional Structure Building Acquisition 1,250,000 Building Remodeling 100,000 Machinery & Equipment 0 Furniture & Fixtures 90,00 0 TOTAL PROJECT COST $1,440,000 Source of Funds ◊ Bank 65.1% 1 st Mtg. $ 975,000 Equity 34.9% $ 465,000 TOTAL $1,440,000 ◊ Assumes an 75% advance on the appraised value of property being $1,300,000. Total Equity $465,000 Difference $321,000 C & J Corp - Comparison

Lower down payment means increased working capital 20-year fixed rate financing reduces uncertainty over future rate increases Higher Advance Rate than Conventional Bank Loan In most cases collateral is based upon project assets only Extended amortization provides lower monthly payment

Joseph P. McKeown Michelle Michals

Rob McCann Who , What , Where & Why?

About IMEC IMEC Mission: Accelerating Business Improvement We do it by…. helping companies be more productive and globally competitive. IMEC is a hands on service provider.

Acronyms? IMEC – Illinois Manufacturing Extension Center MEP – Manufacturing Extension Partnership NIST – National Institute of Standards and Technologies EDC – Economic Development Corporation DCEO – Department of Commerce and Economic Opportunity

10 Statewide Offices NIST/MEP Nationwide System 59 National MEP Centers – 2000 Field Engineers

NIST / MEP: A National Resource 350,000 Manufacturers 2,000 + MEP Mfg Experts 350 Service Locations 59 MEP Centers NIST Over 3,000 Affiliated Service Providers National Coverage - Over 25,000 Served annually National Network Guidance, Evaluation, Product Dev.

IMEC Expertise 26 specialists Specialists average 19 years of experience Advanced training in key continuous improvement methods National MEP system experts

IMEC works with companies to…. Develop sustainable business strategies Create and Sustain an OSHA compliant work environment Operate more efficiently – increase capacity and flexibility Build quality management systems that comply with ISO9000, TS16949, AS9100 standards Contain costs and increase profits Integrate advanced technologies and business processes Pursue innovative products and services and be globally competitive

We do it by…. Providing hands-on implementation, training and services focusing on… Safety Top-line Growth Cost Reduction Capacity and Flexibility Efficiency Quality Innovation Leadership and Workforce Development

Today’s business challenges Economy Price competition Hiring, training and retaining qualified workers Rising business costs Changing technology and new business systems Stagnant markets and commoditized products Growing the Top-line

IMEC Capabilities Process Improvement Lean enterprise transformation OSHA certified safety programs Quality Improvement PPM reduction 6 Sigma Balancing quality with costs, velocity and financial performance Quality management system development & implementation (ISO/TS/AS standards)

IMEC Capabilities Business Strategy Growth strategies Assessment & prioritization of initiatives/projects portfolio Strategic repositioning Information Technology Architecture design/solutions development Technology/software selection Systems implementation and integration e-Commerce website development

Project Benefits - 2008 Assistance to 392 companies 514 Value-added services and formal project engagements $2.3 million sales improvements $72,000 in cost savings per project 12 to 1 return on investment in first year 1,750 Jobs Created or Retained

MEDC – DCEO – IMEC EDC – Plugged into the community – Concerned with growth and retention of the community’s business foundation DCEO – Dedicated to providing support IMEC – Has the tools to accelerate business development Retention visits – Companies need to know what resources are available. Where can they chose to get help?

Thank you for your time Rob McCann Business Development Specialist IMEC - DeKalb 815.919.1300

Thanks to our Sponsors & Speakers

Medc Breakfast 2010

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