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This project received support from the Golden LEAF Foundation |
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By Don Stewart, President,
Neuse River Development Authority
Neuse River Development Authority, Inc. was established in the late 1970’s and is the oldest non-profit, multi-county, federally-designated Certified Development Company in North Carolina. Neuse River Development Authority, Inc. has grown significantly in the last few years and currently administers a variety of United States Small Business Administration, United States Dept. of Agriculture, Economic Development Administration, and other loan funds specifically designed to assist small and mid-sized businesses obtain funding that may not be available in the traditional banking sector.
In mid-2005 Neuse River Development Authority received approval from the Golden Leaf Foundation for a grant to the Authority in the amount of $2 million to establish a Defense Ventures Fund. The Fund became active early last year and is designed to assist North Carolina companies or companies re-locating to North Carolina that are currently active or wish to become active in the Defense Contracting Industry. The “Defense” definition includes all branches of the Armed Forces, Department of Defense, Homeland Security as well as certain State Department activities such as embassy protection, etc. While the Fund concentrates on manufacturing companies, all service and other Defense related industries will be considered for eligibility.
The Fund can invest up to $250,000 per company in the form of “Subordinated Debt”. This type of loan is usually positioned behind senior debt, such as banks, from a collateral perspective, and is offered to the company under terms and conditions that allow a young or growing company a certain amount of “breathing room” in terms of working capital/cash flow issues. The use of funds must be for hard assets such as real estate, machinery, equipment etc. The loans are usually secured by a junior UCC lien or Deed of Trust on company assets and usually require personal guarantees. Terms of the loan include up 10-year financing for machinery and equipment and deferred principal and interest payments for the first year. Rates are usually fixed at the 10%+ range. Most banks consider “subordinated debt” a form of equity, thus the borrower ends up with the advantage of an investment that looks like equity to the senior lender, without the disadvantage of giving up any ownership in their company.
The fund has received statewide and national attention for its innovative approach to assisting small business and the current backlog of requests is quite strong. Total investment and commitments for the fund to date exceed $1,000,000.00, but it is anticipated that an additional round of funding will be submitted to Golden Leaf Foundation in the event the Defense Ventures Fund becomes fully “loaned out”.
Neuse River Development Authority reviews and screens each applicant, negotiates the loan terms, performs due diligence and prepares a credit underwriting package that is first reviewed and approved by the Neuse River Development Authority Board of Directors and then forwarded to the Golden Leaf Foundation for final approval. Since Neuse River Development Authority is an USSBA Certified Development Company, as well as a USDA Intermediary lender, Neuse River Development Authority is often able to package the Defense Ventures Fund with other sources to accommodate most commercial loan requests, regardless of size or use of proceeds.
For more specific information on the Defense Ventures Fund or to submit an application e-mail us at info@nrda.org or contact:
Don Stewart, President
Neuse River Development Authority, Inc.
233 Middle Street
PO Box 1111
New Bern, N.C. 28563
(252) 638-6724 |
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