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Organics #3 Finance and economics for organics Carol Brennan Mass. Recycling Loan Fund

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Innovative financing from BDC Capital and CDC New England including the Mass. Recycling Loan Fund.

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Organics #3 Finance and economics for organics Carol Brennan Mass. Recycling Loan Fund

  1. 1. Financing for the Recycling Business Community Carol C. Brennan, Director of Business Development, BDC Capital 3/29/11
  2. 2. Loans & Investment Capital for Business <ul><li>At BDC Capital , our mission for over 57 years has been to provide innovative financing to growing companies in New England. </li></ul><ul><li>For permanent working capital, re-financing, machinery & equipment, real estate, and business acquisitions </li></ul><ul><li>When you need: </li></ul><ul><ul><li>Longer repayment term – to help with debt service coverage </li></ul></ul><ul><ul><li>Higher advance rates (100% financing) </li></ul></ul><ul><ul><li>Reduction in leverage </li></ul></ul>
  3. 3. About Us <ul><li>BDC Capital www.bdcnewengland.com </li></ul><ul><li>A privately-funded company-headquarters in Wakefield, MA </li></ul><ul><li>Funded by 28 banks (can work with any lender) </li></ul><ul><li>$300 million under management </li></ul><ul><li>Administers state programs (RLF, BRAC, CAP) </li></ul><ul><li>CDC New England www.cdcnewengland.com </li></ul><ul><li>An affiliate company </li></ul><ul><li>SBA 504 Loans </li></ul><ul><li>For fixed asset financing: </li></ul><ul><li>-real estate and machinery & equipment </li></ul>
  4. 4. <ul><li>Loan and Investment </li></ul><ul><li>Solutions </li></ul><ul><ul><li>Recycling Loan Fund (RLF) Loans: </li></ul></ul><ul><ul><li>$50,000 - $500,000 </li></ul></ul><ul><ul><li>ABL Lines of Credit: </li></ul></ul><ul><ul><li>BDC Term Loans: $500,000 - $3,000,000 </li></ul></ul><ul><ul><li>BDC Mezzanine Investments: $750,000 - $5 million </li></ul></ul><ul><ul><li>CDC New England SBA 504 Loans: typical $250,000 project size and up </li></ul></ul><ul><ul><li>We work with your bank to provide the complete financing that a business needs to grow. </li></ul></ul>
  5. 5. <ul><li>Recycling Loan Fund (RLF) </li></ul><ul><li>Loan program funded by Massachusetts DEP </li></ul><ul><li>Flexible terms to help businesses involved in any recycling activity which keeps non-hazardous materials out of Massachusetts landfills </li></ul><ul><li>Supplements bank financing </li></ul><ul><li>For solid waste recyclers OR companies that use recycled materials in their process </li></ul><ul><ul><ul><li>(e.g. a molder that uses recycled resin) </li></ul></ul></ul><ul><li>Typical loans range from $50,000 to $300,000; up to 10 year term; fixed rates negotiated </li></ul><ul><li>Quick turnaround time </li></ul>
  6. 6. Since 1995, the start of the RLF program 15 years ago: <ul><li>Provided 43 “Recycling Loan Fund” loans to </li></ul><ul><li>assist a diverse group of recycling businesses throughout the Commonwealth. </li></ul><ul><li>We have funded over $8.5 million of loans, more than double the $4 million of state funds that capitalized the program. </li></ul><ul><li>These loans have helped to raise $24 million in private sector financing – and created and/or retained over 900 jobs </li></ul>
  7. 7. <ul><li>RLF Past Borrowers: </li></ul><ul><li>DW Clark </li></ul><ul><ul><li>Manufacturer of metal castings </li></ul></ul><ul><ul><li>$300,000 term loan for debt refinance and working capital </li></ul></ul><ul><li>Universal Plastics </li></ul><ul><ul><li>Plastics manufacturer using recycled resin </li></ul></ul><ul><ul><li>$175,000 term loan for equipment </li></ul></ul><ul><li>Agresource, Inc. </li></ul><ul><ul><li>Organic composting business </li></ul></ul><ul><ul><li>$130,000 term loan for equipment </li></ul></ul>
  8. 8. RLF: Low Interest Rate Program for Management of Food Waste <ul><li>Loans for activities involving food waste can receive up to $500,000 at a rate as low as 4% fixed </li></ul><ul><li>Up to 10 year term </li></ul><ul><li>For any reasonable business purpose! </li></ul><ul><li>Examples of eligible types of customers: 1) generators of food waste - totes for recycling 2) haulers - equipment to move the food waste 3) composters - equipment to make compost from food waste </li></ul>
  9. 9. BDC Asset-Based Lines of Credit <ul><li>$500,000 to $3,000,000 secured by: </li></ul><ul><ul><ul><li>Accounts Receivable and Inventory </li></ul></ul></ul><ul><li>Cash is controlled via a lockbox and collateral account at a bank </li></ul><ul><li>Any type of business – but no progress billings </li></ul><ul><li>Ability to get cash immediately – even if </li></ul><ul><ul><li>Temporary earnings or leverage issues </li></ul></ul>
  10. 10. <ul><li>Term loans: $500,000 to $3,000,000 </li></ul><ul><li>With or without an SBA 7(a) guarantee (BDC Capital is an SBA preferred lender) </li></ul><ul><li>In a senior or junior secured position or in a participation loan with a lender </li></ul><ul><li>March 2011 rates as low as 5.5% </li></ul>BDC Term Loans
  11. 11. <ul><li>BDC Term Loans </li></ul><ul><li>Example of Borrower Needs: </li></ul><ul><li>Additional working capital needs: </li></ul><ul><ul><li>line of credit fully advanced </li></ul></ul><ul><ul><li>took 2 nd position on assets </li></ul></ul><ul><li>Restructure existing term debt to free up cash flow for real estate acquisition </li></ul><ul><li>Business acquisition – participation loan with bank and SBA 7(a) guarantee </li></ul>
  12. 12. <ul><li>For owner-occupied real estate and M&E: </li></ul><ul><li>Borrower conserves working capital: 10% down payment (vs. 20% conventionally) </li></ul><ul><li>Bank has 50% loan-to-value 1st mortgage </li></ul><ul><li>SBA funds 40% share (through CDC New England) </li></ul><ul><li> -with low, 20-year fixed rate : 6.4% </li></ul><ul><li>in March 2011 </li></ul>SBA 504 Loans through CDC New England
  13. 13. <ul><li>BDC Mezzanine </li></ul><ul><li>Investments </li></ul><ul><ul><li>3rd Mezzanine Fund – Raised $28 million </li></ul></ul><ul><ul><ul><li>For acquisitions, leveraged buyouts, management buyouts </li></ul></ul></ul><ul><ul><ul><li>For healthy, growing companies looking for “growth capital” - equity base too thin </li></ul></ul></ul><ul><li>Companies with: </li></ul><ul><ul><ul><li>Solid management </li></ul></ul></ul><ul><ul><ul><li>Strong cash flows (usually limited collateral) </li></ul></ul></ul><ul><ul><ul><li>Barriers to entry </li></ul></ul></ul>
  14. 14. <ul><li>Investment size: $750,000 to $5,000,000 </li></ul><ul><li>A market rate of interest (12%); 5 year term </li></ul><ul><li>Plus either : </li></ul><ul><ul><li>- a royalty fee tied to sales (tax deductible) </li></ul></ul><ul><ul><li>- or a warrant </li></ul></ul><ul><li>Don't give up ownership / control </li></ul><ul><li>Don’t require personal guarantees </li></ul><ul><li>Less dilutive than equity </li></ul><ul><li>Can fill the “collateral gap” </li></ul>BDC Mezzanine Investments
  15. 15. BDC Capital 500 Edgewater Drive, Suite 555 781-928-1100 Wakefield, MA 01088 781-028-1101 fax <ul><li>LOAN OFFICERS: </li></ul><ul><li>Karen Michalski 781-928-1107 </li></ul><ul><li> [email_address] </li></ul><ul><li>Joe Herzog 781-928-1109 </li></ul><ul><ul><li>[email_address] </li></ul></ul><ul><li>BUSINESS DEVELOPMENT OFFICERS: </li></ul><ul><li>Carol Brennan (WMass.) cell 413-237-6648 [email_address] </li></ul><ul><li>Nancy Gibeau (South & SE Mass.) cell 508-254-7891 [email_address] </li></ul><ul><li>John Figmic (Central & Eastern Mass.) 781-928-1122 [email_address] </li></ul>

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