Financing Options and Support for Funding Your Business

1. Financing Options and Support for Funding Your Business George McAllistergmcallister@sbtdc.org704-548-1090 ext. 3343The SBTDC is a business advisory service of The University ofNorth Carolina System operated in partnership with the U.S. Small Business Administration.sbtdc.org

2. Who is the SBTDC? • Provides one-on-one confidential business counseling in the areas of: • Sales/Marketing • Human Resources • Operations • Financing • Government Procurement • Technology Development • Funded by the SBA and the University of NC System. • 15 Offices across the state. • UNC Charlotte office worked with over 800 clients in 2012.

3. Agenda • Getting ready to seek funding. • Funding options for a startup. • What the funding sources are looking for. • Area resources to assist you.

4. Getting Ready Good Science does not equal Good ROI

5. Getting Ready Learn how to “speak” business. In the beginning don’t expect funding sources to “speak” science.

6. Getting Ready Not all money is created equal.

7. Getting Ready Be prepared • Know what the funding source is looking for. • Know how much money you need to reach your goals. • Know what the money will be used for. • Have the documents needed. Business plan, cash flow projections, etc. How is your funding source going to make the appropriate return?

8. Types of Funding • Debt: You have to pay back the money borrowed. • Equity: You do not have to pay back the money you receive. • Grants: You do not have to pay back the money you receive.

9. Your First Investor is …… YOU

10. Founder’s Money The vast majority of founders contribute personal funds, along with sweat equity, to their ventures. • Sweat equity represents the value of the time and effort that a founder puts into a new venture. • Valued more in equity deals rather than debt deals.

11. Angel Investors • Friends, family and fools. More relationship based verses the business model. • Customers, suppliers and people in the industry. They understand what you are doing. Combination of relationship and business model. • Professional angels. Focus on the business model more than the relationship. • Individuals • Angel Funds: Organizations with a fund. Imafcharlotte.com

12. What Angels are looking for • Rapidly growing company or business model. • A good Angel – Company match. • Invests $10,000 to $1.5 million. • Early stage returns 5 to 10x within 5-7 years. Or, 31% to 47% annual growth based on 5 years. • Competitive advantage. • An exit strategy.

13. Banks • Historically, commercial banks have not been viewed as a practical sources of financing for start-up firms. • This sentiment is not a knock against banks; it is just that banks are risk adverse, and financing start-ups is a risky business. • Banks are interested in firms that have a strong cash flow, low leverage, complete/accurate financials, good management, and a healthy balance sheet.

14. Bank Term Loan • The borrower agrees to repay x amount of dollars over x period of time at y % interest rate. • Loan proceeds can be used for almost anything. • Terms should reflect the useful life of items purchased.

15. Bank Line of Credit • Borrower only pays interest on the amount of the loan outstanding. • The loan should be used only to finance short term aspects of the company like inventory or large orders. • The loan has to be paid off within a 12 month period before continuing with the loan.

16. Five C’s of Credit • Capacity – The business must be able to support its debts and expenses, and be profitable. • Capital – Money you or investors are putting in or equity you already have in the business. • Collateral – The value of assets that secure the loan. • Character – of the borrower and guarantors. • Conditions – The economy, industry trends, or anything that will affect your business.

17. Grant Funding • Academic and for profit grant funding is totally different. • Niche oriented. • Small amounts of money. Not enough to start a company. • Localized geographical area. • Primarily for non-profits or local governments.

18. NC Idea Grant • Innovative Development for Economic Advancement (IDEA) • For NC based high-tech start up companies with high growth potential. • Any stage but prefer after “Proof of Concept” but before “First Institutional Funding”. • Amount: Up to $50,000

19. NC Idea Grant • Two grant cycles per year: Earlier this March and in the fall. • Awarded 72 grants totaling over $2.7 million. 5-6 winners per cycle. • Charlotte award winners • InfoSense • MailVU • DealCloud • ncidea.org

20. Small Business Innovation Research Grant (SBIR) • R&D technology the government wants. • Solicitations from 11 Federal agencies. • Eligible companies must have technical expertise and infrastructure. • Few companies qualify nationwide

21. Small Business Innovation Research Grant (SBIR) • ThreePhases • Phase 1: Evaluate viability and feasibility of an idea. • Up to $150,000 • Phase 2: Expand results and further development. • Up to $1,000,000 • Phase 3: Commercialization. • Funded by some of the federal agencies; not SBIR program. No set funding amount.

22. Capital Opportunities for Small Businesses • Online resource listing all funding resources available to NC businesses including start ups. • 144 pages describing each funding source with contact information. • Updated on a regular basis. • Go to sbdc.org

23. Funding Support Resources • UNC Charlotte’s Ventureprise • Paul Wetenhall 704-548-9113 • UNC Charlotte’s Office of Technology Transfer • Carl Mahler II 704-687-8012 • UNC Charlotte’s SBTDC • George McAllister 704-548-1090

24. Financing Options and Support for Funding Your Business George McAllistergmcallister@sbtdc.org704-548-1090 ext. 3343The SBTDC is a business advisory service of The University ofNorth Carolina System operated in partnership with the U.S. Small Business Administration.sbtdc.org