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Member News: C.C. Eship / NACCE Journal Fall/Winter 2007

Entrepreneurial Center as Financiers

Thursday, January 14, 2010   (0 Comments)
Posted by: Matthew Montoya
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By Tim Putnam, MPA
Associate Director
John Pappajohn Entrepreneurial Center
North Iowa Area Community College, IA
Entrepreneurial Centers that aspire to help create new businesses will have constant inquiries regarding funding, especially grants. The North Iowa Area Community College John Pappajohn Entrepreneurial Center (NIACC JPEC) wrestled with this issue since its inception ten years ago. Its initial role was to assist the entrepreneurs with their business plans and loan applications and provide education. Companies were then routed to different funding sources. It became apparent that a more active role in financing a business was needed. Thus, offering "one stop shopping” for business development became our goal. Today, the NIACC-JPEC offers three direct sources of funds to entrepreneurs that supplement other local, state and federal programs: Venture Capital, Revolving Loan Fund and MicroFinancing.

Venture Capital: The North Iowa Venture Capital Fund, LLC. (NIVCF) is a $1.69-million-dollar fund with 61 investors all from the NIACC North Iowa region. This money can be used for early stage seed funding, start-ups, business succession, and growth and business turnarounds. The fund has invested from $50,000 to $250,000 in nine businesses.

The NIVCF has also proven to be a valuable tool for economic development in saving businesses, recruiting early stage start-up businesses or growing existing businesses. The NIVCF was a new funding mechanism that had not been previously available in North Iowa. Today there are over 13 community based seed funds in Iowa, and the NIACC JPEC is already creating a second venture fund.

Revolving Loan Fund: Debt financing is the most requested capital need in rural markets. Working with the USDA, the NIACC JPEC received a Rural Business Enterprise Grant for $99,000. Adding a $34,000 local match created a revolving loan fund for gap financing. This financing tool allows investments of $10,000 to $25,000 into a business to supplement conventional financing, community based revolving loans funds and other community funding. The revolving loan program has helped a wide variety of new business starts, expansions and successions, keeping and adding jobs in their respective communities.

MicroFinance: The NIACC JPEC NanoLoan Program targets a specific, underserved segment of the entrepreneurial community: businesses in the ‘pre-bankable’ phase. NanoLoans of up to $2,500 can be used to move a business model farther along in its development by paying for prototype development, patents, equipment, working capital and other start-up costs.

The NanoLoan Program is a perfect vehicle for many home-based business enterprises (HBE) to move forward. Many HBE’s do not need a lot of money to get over the tipping point as they already operate a business to some degree and the challenges associated with starting and operating a new business are understood. Since it represents ‘first in’ money, NanoLoans can be leveraged to encourage participation by reluctant lenders.

It is critically important to package funding with a combination of business assistance services customized to meet each company’s unique needs. For many programs, recipients are required to attend FastTrac® NewVenture or GrowthVenture®, establish a board of advisors, and complete and report quarterly financials. It is paramount that each business receives the specific business assistance and consulting from expert advisors that will enable each to build, grow and sustain.

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