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The Near Equity Loan Fund provides loans to incubator stage companies located in Caroline, Dorchester and Talbot Counties, Maryland. The funds are to be used for working capital in order to assist a company with expansion, market entry, or other initiatives. Terms
and Fees: – A nonrefundable application fee of $150 is due at the time of application submittal. – Loan term is normally 3 to 5 years with a minimum term of 6 months. – Personal guarantees satisfactory to MSRC will be required by all principals in the company. – Matching funds may be required.
Funds for this program have been provided by the U.S. Department of Commerce Economic Development Administration and the Maryland Technology Development Corporation.
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Model Description:
Initial lending capital of $155,000 is being provided through grants from the USDA Rural Development Program and the Maryland Economic Assistance Fund administered by the Maryland Department of Business and Economic Development. Startup and operational funds totaling $120.000 are being provided by the Department of Commerce Economic Development Administration and a contribution of $10,000 a year for two years from Talbot, Caroline and Dorchester Counties. This initial investment will position the fund to receive up to $1M per year after establishing our ability to be a credible lender.
We expect the fund to grow to at least $1M within the next two years and will develop a formal angel network to provide equity financing as deal flow increases and companies are positioned for their second stage of funding. It is projected that the fund will become financially sustainable from loan revenues within 5 years.
The Near Equity Fund will set a fixed interest rate and an additional "variable interest component" fee tied to the recipient's revenues generated from the Fund's investment. The Fund wil also have the power to take and exercise warrants on a case by case basis.
Repayments will be flexible, typically allowing an 18 month deferrment of principal. In some cases, interest or fees may be capitalized. It is important to note that the Mid Shore Development fund can only lend up to 75 % of the total loan request. We are required by federal regulations to partner with local banks, investment firms and other revolving loan funds. The MBDF moderately projects a Fund leveraging ratio of 1:4, and will track private investment gerenated from Fund activity.
Eligible
Uses:
o Working Capital
o Personnel Additions
o Technology Improvements
o Implementation of Marketing Plans
o Increased Operating Efficiencies
o Equipment Purchases
The Fund is not intended as a direct substitute for commercial loans. The Mid Shore Business Development Fund (MBDF) will be wholly owned by the MSRC's Eastern Shore Entrepreneurial Center which is a 501(C)3 corporation, IRS determination pending.
The Mid Shore Regional Council, a planning and economic development agency that serves Caroline, Dorchester and Talbot counties, is pursuing a strategy designed to balance the Region's disproportionate reliance on large employers, diversify the economy, and build our capacity to attract and foster the growth of knowledge and technology based companies that pay higher than average wage.
Several companies have already approached the MSRC looking for this type of financing so we hope to expedite startup and have the fund operating in early 2005.
© Eastern Shore Entrepreneurial Center 2009