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Resources Available for Our Community
April 19, 2012 - Ernest Hohmeyer
The world of “economic development financing” can be a complicated one. The good news is that there are a slew of options ranging from real estate projects to working capital.
The bad news is that many of these programs have different applications and diverse criteria for eligibility.
In general terms, here are some things you may want to keep in mind when applying to these funds:
• You will need a clear, concise and complete plan. Remember, that while you may be talking to a local economic development representative, their “approval board” may be from a place where the Adirondacks are confused with the Catskills.
• While not impossible, it is difficult to obtain “grants” for small business. Grants or more typically found in the world of innovation and infrastructure often related to serious job creating projects.
• You should not consider economic development financing only as “cheap money.” Economic development financing can be most helpful to fill in a “gap” to make the deal work. For example, you cannot get all of your funding from a bank and you need another lender to make it happen.
• Economic development funds are generally not “primary” lenders. They like to work with banks as “secondary” or subordinated lenders. What this means is that they may take a second or sometimes even a third position behind a bank on collateral.
• Shop around. There are many different economic development programs, each with different mandates and criteria. If you are rejected by one it may not necessarily mean you do not have a good plan – it may not have met their criteria. Most do not do retail and some do tourism. Manufacturing and those that provide technical job opportunities often are the most sought after.
• Be sure to separate your financing needs. Some economic development programs only do real estate while others consider it an in-eligible use. Others do only equipment loans.
• As a first step, it may be good to create an “Executive Summary” of your project then you can leave with them. This may include:
- A brief summary of your organization - The goals of your project - Key project details - A breakdown of financing required - Discussions with other lenders - Projected community impact - Community support
Remember, that the rationale for most economic development programs is to “kick-start” a project that will provide a positive community impact. In addition to project viability, how much you may be able to borrow may depend on the number of jobs you create, increase the tax base or provide for a significant community need.
If you are a non-profit or local government official, there is a whole new world out there from very non-traditional sources. We will discuss this in the future.
To help get you started, here is a list of some of these resources in our area. It is by no means complete so talk to these people early on in the development of your project. They are most often very helpful with identifying other resources that may be available to you.
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