Economic Development: Packaging A Loan in Today’s Market

Economic development organizations are stepping in to help plug the credit hole.  We all know what the economy is like today, and it is unlikely that the industrial and commercial real estate markets will soon turn around. As an economic developer, I see another side of the economy where both communities and businesses are seeking opportunities and looking at alternatives ways to secure capital.

Aside from the federal stimulus incentives, municipal, state governments and educational institutions offer a variety of incentives to encourage businesses to remain in their jurisdictions. Here’s an example:

I am currently working with a printer, a cutting-edge small business with Fortune 500 customers, to preserve more than 100 good-paying jobs in a small municipality. The company’s primary obstacle: borrowing money for new equipment and other capital improvements. The deal requires $1.5 million, all of it collateralized.  Because the company was in financial straits, an angel investor recently purchased the company and is investing heavily.  Even with this influx of new capital, lenders consider the company a high risk. To make the deal happen, we are using state, county and municipal revolving loan funds to underwrite $750,000 of the project to add to the $750,000 conventional bank loan. The lender has virtually no exposure and has first position on all assets, including building and land that are free and clear of debt.

A key player in putting the deal together is the Illinois Department of Commerce and Economic Opportunity’s Participation Loan Program, one of the few available state incentives until Illinois adopts a capital budget. For more information about the program, contact Stanley Luboff, Capital Programs Manager at stanley.luboff@illinois.gov.

Chris Manheim is our guest blogger.  He is the President of Manheim Solutions, Inc., a consulting firm specializing in community, workforce and small business economic development programs.