Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Funding Strategic Growth for Advanced Manufacturers

For manufacturing companies that need to fund the growth of their business, there are distinct advantages of SBA and USDA financing.

  • Be the first to comment

  • Be the first to like this

Funding Strategic Growth for Advanced Manufacturers

  1. 1. ABI Advanced Manufacturing Conference Funding Strategic Growth: Distinct Advantages of SBA and USDA Financing
  2. 2. Jason Walters Lincoln Savings Bank Mike Slater VITAL Financial Services
  3. 3. • Lender preference for real estate loans • Collateral shortages or poor marketability • Financial documentation • Financing working capital • Shorter loan terms • What other challenges do you face? Challenges Manufacturers face different challenges obtaining conventional loans.
  4. 4. Example Manufacturer secures new customer and in six months needs to deliver new parts
  5. 5. • No longer option of “last resort” • More mainstream and abundant • Fast access to capital • Can charge higher rates • Less transparency Changing Lending Landscape Nonbank Lenders and “Fintech”
  6. 6. Example Machine shop in Texas producing proprietary products for oil and gas industry. Went out of business after loan from alternative lender charging 30% interest.
  7. 7. • Inability to get a bank loan – even when your business is successful • Maxed out line of credit • Debt service that’s too high • Out-of-control interest rates from alternative lender • Unsecured creditors getting paid ahead of secured creditors • What’s the answer? Implications The implications of these financing challenges can be serious
  8. 8. Better Alternative The SBA and USDA have missions to support the development of the nation’s small businesses and rural areas.
  9. 9. SBA Loan Programs USDA Loan Programs • For U.S. based small businesses • Definition of small varies by industry • Some industries, more than 1,000 employees • For businesses operating in rural areas • No size standards • Community population less than 50,000
  10. 10. • Difficult to obtain • Government is lender • Not for successful businesses • Only for “small” businesses • Any bank can do them • What else have you heard? Top Misconceptions About SBA and USDA Loans
  11. 11. • Bank is the lender • Government provides “guarantee” • Majority are eligible, but must meet eligibility rules • Must demonstrate repayment ability from ongoing operations • Lender must be approved by SBA/USDA • VITAL is Lender Service Provider Facts About SBA and USDA Loans
  12. 12. • Made on cash flow • Can have less than ideal collateral • Seasonal/cyclical businesses • Finance working capital • Longer terms = manageable repayment • Rates Key Advantages Of SBA and USDA Loans
  13. 13. • Seed capital • Low collateral • Maximize cash flow Best Opportunities Funding Growth
  14. 14. • Needed to move into larger parts – smaller parts business had moved to China • Needed to remain competitive • New equipment to manufacture larger parts • New employees to run equipment • $6 million USDA loan with 15-year terms on equipment • Refinance existing debt • Add working capital • Manageable repayment Success Story Die-Casting Company
  15. 15. • Intangible assets • Working capital • Closing costs • Longer terms Best Opportunities Acquisitions
  16. 16. • Business acquisition and refinance existing debt • Buyout of company in bankruptcy • Able borrow additional $3.2 million without increasing debt service • Debt structure • SBA loan - $5 million • Real estate - $2 million • Operating loan - $3 million Success Story Central Wisconsin Manufacturer
  17. 17. • Longer terms • Manageable debt repayment • Working capital for transition period Best Opportunities Business Transitions
  18. 18. • Successful company expanded to new location • Management at existing location made missteps, jeopardizing business • Had to abandon expansion plans and retrench his core business • $5 million SBA loan • Restructure debt • Added working capital • Automated processes Success Story Pallet Company
  19. 19. • Lower debt service payments • Improve cash flow • Consolidate debts • Financing after loss year Best Opportunities Refinance
  20. 20. Success Story Military contractor weathers downturn before securing new contracts. • Business went through contraction cycle • Owner knew expansion cycle was coming • Restructure existing debt - pay down accounts payable and extended amortization • Saved $50,000/month in debt service
  21. 21. Questions?
  22. 22. Jason Walters Mike Slater