George McAllistergmcallister@sbtdc.org

704-548-1090 ext. 3343

The SBTDC is a business advisory service of The University of North Carolina System

operated in partnership with the U.S. Small Business Administration.

sbtdc.org

Financing Options and Support for Funding Your Business

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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.

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• Getting ready to seek funding.

• Funding options for a startup.

• What the funding sources are looking for.

• Area resources to assist you.

Agenda

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Good Sciencedoes not equal

Good ROI

Getting Ready

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

science.

Getting Ready

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Not all money is created equal.

Getting Ready

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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?

Getting Ready

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• 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.

Types of Funding

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YOU

Your First Investor is ……

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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.

Founder’s Money

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• 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

Angel Investors

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• 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.

What Angels are looking for

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• 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.

Banks

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•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.

Bank Term Loan

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•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.

Bank Line of Credit

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• 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.

Five C’s of Credit

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• 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.

Grant Funding

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• 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

NC Idea Grant

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• 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

NC Idea Grant

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• R&D technology the government wants.

• Solicitations from 11 Federal agencies.

• Eligible companies must have technical expertise and infrastructure.

• Few companies qualify nationwide

Small Business Innovation Research Grant (SBIR)

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• Three Phases– 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.

Small Business Innovation Research Grant (SBIR)

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• 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

Capital Opportunities for Small Businesses

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• 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

Funding Support Resources

George McAllistergmcallister@sbtdc.org

704-548-1090 ext. 3343

The SBTDC is a business advisory service of The University of North Carolina System

operated in partnership with the U.S. Small Business Administration.

sbtdc.org

Financing Options and Support for Funding Your Business