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March 4, 2015

Wisconsin Business Development: Connecting Small Businesses to Capital

Q&A with Diane Pasley, Vice President, Wisconsin Business Development Finance Corporation

Q: What are the origins of the Wisconsin Business Development Finance Corporation (WBD) and the types of programming you make available to businesses?

A: WBD was formed in 1981 as a non-profit Certified Development Company. We were certified by the U.S. Small Business Administration (SBA) to deliver the SBA 504 loan program. We partner with a lending institution and take a second lien position on fixed assets (real estate or equipment). We offer a 10 or 20 year fully amortized fixed rate loan to provide long term financing stability to small business owners.   We also help preserve working capital by requiring a lower down payment for existing businesses with as little as a 10% borrower contribution.  Over the years we have expanded our product offerings by forming affiliate companies.  Wisconsin Business Growth Fund is an affiliate that provides New Market Tax Credits (NMTC).  Our initial allocations of $65 million of NMTC have been fully deployed.  We do have a pending application for $45 million of additional credits.  Allocation of those credits will be announced in May/June of this year.   WBD Service Company provides packaging services to our lending partners to help them obtain a 7A loan guaranty on their bank note.  We are an approved SBA 7A lender service provider, but we also provide other packaging services for other guaranty programs.   This affiliate does provide some back office support services for small lenders and other non-profit lenders. The WBD’s final affiliate is the Lincoln Opportunity Fund, a non-profit Certified Community Development Financial Institution (CDFI) that provides loans as well as services to small businesses throughout Wisconsin with a focus on low income communities. We were recently designated by the SBA as a Community Advantage direct lender for loans of $250,000 or less.

Q:  Is there a best time during the development/growth cycle for a business to approach WBD and what do you look for from them in order to access your programming?

A: We can lend to start-up or existing for profit small businesses.  For an existing business (more than two years old) where the real estate is not considered special use, the minimum down payment is 10%.  However, if the business is less than two years old or if it is a change in ownership, we require 5% more down payment, or 15% down.  If the real estate is considered special use we would need another 5% down.  Therefore, the down payment range is between 10% and 20% down.   We can also be flexible with what we consider the borrower's contribution as it doesn't necessarily have to be cash down payment.  Our main underwriting focus is the purpose of the loan and their ability to repay.  Therefore, cash flow and management are very important to us when considering the loan application.  A business plan with projections and detailed assumptions are essential.   However, we are willing to talk to any business owner and are happy to refer them to other resources if we are not able to help directly.  Therefore, it is never too soon to give us a call.

Q: Are there any particular sectors or industries you target for your programming?  Can you give us some idea of the sector concentrations in your portfolio?

A: We are able to lend to any for-profit small business.   This is a job creation program, but we are able to waive minimal job creation requirements if the project meets certain public policy goals.    Majority owned women, minority or veteran business owners fall into the public policy goals.  Rural areas, labor surplus areas and construction projects also meet community policy objectives, allowing us to waive job creation requirements.   Occupancy requirements are only 51% for the purchase of an existing building but increase to 80% overall for new construction.   The maximum SBA loan limits to any one borrower is $5 million.  However, manufactures or energy savings/renewal energy projects are entitled to $5.5 million per project.   Therefore, this program is very attractive to assist the manufacturing sector with virtually unlimited SBA 504 authority as they continue to grow and add jobs.  The chart below summarizes our loan portfolio by industry.



Q: What is your view on the current state of the economy in the Madison Region?

A: We have seen increased activity so it appears that the economy is getting better.  We are seeing more aggressive terms from our lending partners as their confidence in the economy and businesses improve. Also, we are getting more loan requests for construction projects which is also a good sign.

Q: A lot of comments are made about the lack of capital for deals in our area.  Do you have some thoughts you would like to share concerning the overall availability of capital in the region?

A: From what we are seeing, banks and credit unions have money to lend, and financing is loosening up. The SBA is also encouraging lenders to make smaller loans by waiving all of their fees on loans of $150,000 or less. The SBA program has also lowered fees for loans to veterans. As a Community Advantage Lender, we are now able to provide direct financing to small business owners who have a gap that needs to be filled that the lenders are not able to do directly. Therefore, overall we see access to capital opening up in this area and around the state.

Q: If people are interested, how can they get in touch with you?

A: They can contact me either via email at dpasley@wbd.org or by phone 608.316.7132.  You can also access information at our web site at www.wbd.org.