Agenda - 03-13-2007-9e Orange County Small Business Loan Program

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~~~h mom-}- ~ ~- Orange County Loan Fund Discussion "Demonstration" project . o This initial pool of funds should be viewed as "seed" money only. o Additional capital funds will be needed over time for pool to survive and flourish. o This pool of funds is sufficient to lend to 3 to 10 businesses. o Losses will range from 5% to 20% of the fund. , o Goal is to lend them money so they can eventually borrow from a bank: . Set expectations in the right place. o. Focus should be'on people who have realistic chance of starting a successful business. o A positive outcome is keeping someone from starting a business whose odds for success are low. o Loans for $5K to $25K will create few jobs .until significant numbers of nevv businesses are started.... at the outset, the program will not be a powerful job creation tool on a "macro" level. o For those starting a new business, keeping their day job and getting help from SBC or SBTDC are very important. Financial literacy is an issue -~ many do not understand the basics of how a business is started and how it survives. o Many cannot put revenue, expense, and profit numbers to.paper in a way that others understand. o For many, the exercise of developing apro-forma income statement is important, yet very challenging. o Credit issues will be a barrier for many.. o "On time".payments are a must to preserve the fund and to instill discipline in borrowers. o Some will ask for 100% funding of their project. Borrowers need to inject some of their own money. Credit approval issues . o Many existing businesses are started using credit card debt. Our guidelines say that we will not re-finance existing .debt, yet we will face requests to add new debt on top of existing, high interest rate, credit card debt. o Many have weak equity positions -few outside assets they can use as collateral. J.im Evans Harrington Bank 913-3212 jevans@bankatharrington.com