Upload
jordan-bennett
View
213
Download
0
Embed Size (px)
Citation preview
Jeff KistnerJeff KistnerBusiness DevelopmentBusiness Development
CoBankCoBank
1.800.346.5717 ext. 20251.800.346.5717 ext. 2025
[email protected]@cobank.com
FINANCING VALUE ADDED --GETTING THE GREEN LIGHT
FROM YOUR BANKER
WHAT DOES IT TAKE TO ATTRACT FINANCING?
• Capacity--Repayment ability
• Capital--Financial condition
• Character--Management
• Collateral--Quality and value
• Conditions--Purpose, amount and requirements– External– Internal
START UP STAGES FOR ADDED VALUE START UP STAGES
FOR ADDED VALUE Initial meetingInitial meetingOrganization formedOrganization formedPre-Feasibility studyPre-Feasibility studySecure seed moneySecure seed moneyDevelop business planDevelop business plan
Operation planOperation plan Marketing planMarketing plan Management planManagement plan Financial planFinancial plan
Develop prospectusDevelop prospectus
Membership driveMembership drive Annual meetingAnnual meeting Finance projectFinance project
Feasibility studyFeasibility study Economic, MarketEconomic, Market Technical, FinancialTechnical, Financial ManagementManagement
Hire managerHire manager Project construction Project construction Begin operation Begin operation
CONDUCT FEASIBILITY STUDY
• Use third-party assistance Use third-party assistance
• Market analysis/Marketing plan:Market analysis/Marketing plan:– Supply and demand characteristics (inputs & output)Supply and demand characteristics (inputs & output)– Market shareMarket share– Pricing trends and Pricing trends and sensitivity sensitivity for finished goodsfor finished goods
and raw materialand raw material– Transportation of products and raw materialsTransportation of products and raw materials– Response of competitors to additional Response of competitors to additional
supplies/supplierssupplies/suppliers– Technology employedTechnology employed– Relative cost competitivenessRelative cost competitiveness
FEASIBILITY STUDY (CONT.)
• Ease of market entryEase of market entry– Contracts with buyersContracts with buyers
• Realistic income projectionsRealistic income projections– ““What if” assessmentWhat if” assessment– Worst / best caseWorst / best case
scenariosscenarios
• CapitalizationCapitalization
COMPREHENSIVE BUSINESS PLAN
• Markets– Who
– What
– How much
– Management• Board or local leadership
• Operational
• Money– Capital
– Cash flow
MARKETING ELEMENTS OF BUSINESS PLAN
• Marketing planMarketing plan– Strategic and tactical orientationStrategic and tactical orientation– Who are your customers, competitors?Who are your customers, competitors?– Distribution channelsDistribution channels– Alliances and partneringAlliances and partnering– Nature of marketing contract(s) - Nature of marketing contract(s) -
legal reviewlegal review– Contingencies / back up plansContingencies / back up plans
MANAGEMENT ELEMENTS OF BUSINESS PLAN
• Operating planOperating plan Building facilitiesBuilding facilities
* Utilize engineers and technology expertsUtilize engineers and technology experts
* Plan for cost overruns (minimum of 10%)Plan for cost overruns (minimum of 10%)
Select managementSelect management* Broad-based searchBroad-based search
* Employee early in processEmployee early in process
* Compensate to attract the bestCompensate to attract the best
* Reward based on long-term resultsReward based on long-term results
• Financial planFinancial plan– Return on InvestmentReturn on Investment– EquityEquity– DebtDebt
• Guarantees? Guarantees?
And now more about DEBT...And now more about DEBT...
MONEY ELEMENTS OF BUSINESS PLAN
RISK AND RETURN--WHAT ADDS VALUE
FOR YOU?• Return on investment?
– Should equity investors expect 15% for a value-added venture? – Higher target w/ venture capital involved - 20%-25%Higher target w/ venture capital involved - 20%-25%
• Return for additional expense?• Investor analysis should not include return from the sale of any raw material input - Project basis only!Investor analysis should not include return from the sale of any raw material input - Project basis only!• Ability to stay on the farm?
When should you expect to break even with a new venture? Three years?
ITEMS TO CONSIDER WHEN PLANNING A
VALUE-ADDED PROJECT • Total cost of plant, property and
equipment
• Start up expense planning to full capacity period
• Beginning working capital
Plan to have 40-60% equity
CAPACITY--REPAYMENT ABILITY
DEPENDS ON...• General condition
of the economy
• Competition
• The need for goods and services sold
• Technical changes in the industry
• Regulatory climate
• Cyclical nature of the industry
• Environmental or other threats
KEYS TO SUCCESSKEYS TO SUCCESS– Leadership - Local investors; Leadership - Local investors; JV partnersJV partners; project manager; project manager– Excellent managementExcellent management– Sound business and marketing planSound business and marketing plan– Excellent risk management plan and execution - Excellent risk management plan and execution -
solid contractssolid contracts– Well capitalized to cushion unplanned adversityWell capitalized to cushion unplanned adversity– Communications with investors:Communications with investors: frequent, open, honestfrequent, open, honest– Remember to focus on value of your stock, Remember to focus on value of your stock,
not just return to products committed not just return to products committed – Remembering your no longer a commodity or livestock producer, but that added value processor Remembering your no longer a commodity or livestock producer, but that added value processor
Jeff KistnerJeff KistnerBusiness DevelopmentBusiness Development
CoBankCoBank
1.800.346.5717 ext. 20251.800.346.5717 ext. 2025
[email protected]@cobank.com
Start-up Assistance
Information on Sources of Start-
up Assistance
Jeff Jobe
Cooperative Services
USDA Rural Development
(515) 284-5192
Technical Assistance Resources
• Iowa State University Extension to Value-Added
• Iowa Institute for Cooperatives
• CoBank’s Business Advisory Services
• AgMRC: visit their site at agmrc.org for a complete list of consultants
REVAMP - Rural EconomicValue-Added Mentoring Program
• Provides grants up to $1,000 todevelop or refine business plans
• Because of state budget cuts,only $10,000 is available.
Iowa Department of Agriculture and Land StewardshipOffice of Renewable Fuels and Co-Products
REVAMP Project Requirements• Business must start or expand in Iowa
• No farming or livestock operations
• Use agricultural commodity or output
• Must be innovative product or process
or
• Renewable Fuels Production Facility
Iowa Department of Agriculture and Land StewardshipOffice of Renewable Fuels and Co-Products
REVAMPContact Information
Pat PaustianOffice of Renewable Fuels and Co-Products
Iowa Department of Agriculture and Land Stewardship
(515) 281-6936
www.agriculture.state.ia.us/revrev.html
Value Added Agricultural Products and Processes
Financial Assistance Program
(VAAPFAP)
Joe JonesIowa Department of Economic Development
June 5, 2002
VAAPFAP
Created in 1994
Primary Purposes:
– Renewable Fuels
– Innovative Products and Processes
– Project Creation
Program Operations
Funds awarded as Loan/Forgivable Loan
Generally $20,000 or less is a grant or forgivable loan
Over $20,000 is combination loan/forgivable loan
Maximum award is 25% of annual appropriation– Higher the award, the higher the loan portion
141 projects awarded to date (September 2001)
two-thirds of counties represented to date
Program Rules Application – Complete Business
Plan
Ag Products Advisory Council recommends to Director of IDED
Cannot fund production agriculture
Facilities must be located in State
Project Creation Assistance:
Focus on Strategic Initiatives affecting broad ag interests
Requires consultation with major agricultural organizations
May utilize 20% of annual appropriation
VAAPFAP Assistance
Project Creation - Strategic Initiatives: Research and feasibility studies to address significant new opportunities
Organization of collaborative ventures among Iowa farm operators
Livestock waste management and food quality assurance issues
Development of systems to manage identity preserved grains
Cooperative programs for advanced plant or animal biotechnology
Development and marketing of new food products utilizing soybeans
Innovative agricultural risk management projects
VAAPFAP Initiatives
Contact Information
Web - www.iowasmart.com/financial.htm#vaapfap
E-mail – [email protected]
Phone – (515) 242-4801
Technical Assistance for Multiple Owner Businesses
– meeting & process facilitation– basic cooperative knowledge– organizational development-
articles & by-laws – surveys & feasibility studies– market research– business planning– board training– strategic planning
The primary objective:
Is to help eligible producers of agricultural commodities, agricultural producer groups, farmer and rancher cooperatives, and majority-owned producer-based business ventures develop business plans for viable marketing opportunities and develop strategies to create marketing opportunities in emerging markets.
The Farm Security and Rural Investment Act of 2002
• Farm Bill Highlights– $40 million per year for 6 years– Maximum Grant Amount
$500,000 (priority points will be given for
applications under the $500,000 max) – Applicants must provide
matching non-Federal funds at least equal to the grant.
– Expanded eligibility
The Farm Security and Rural Investment Act of 2002
Is Your Project Eligible?
1) Are the funds being used for an eligible purpose?
– Planning
– Working Capital
2) Is your project an eligible entity?
– Independent Producers
– Farmer or Rancher Cooperatives
– Ag Producer Groups (Commodity Organizations)
– Majority Owned Producer Based Businesses (50% or more)
Three Questions to Ask?
Is Your Project Eligible?• Does your project meet one of the four categories of
value-added activities?– Change in the physical state of the product
– The production of a agriculture commodity or product in a manner that enhances its value, as demonstrated through a business plan.
– The physically segregating of an agricultural commodity or product in a manner that results in the enhancement of the value of that commodity or product.
– Any Agriculture commodity or product that is used to produce renewable energy on a farm or ranch.
• These Activities Must:– Expands customer base for the product or commodity, and
– Result in a greater portion of the revenues derived from the value-added activity that is available to the producer.
Application Process
• An original and two copies of the proposal, with all required forms and documentation, must be submitted in one package to the appropriate USDA State Office.
• Electronic submission is encouraged!
Original
Copy
Copy
Other Grant SourcesFederal
• The United States Department of Agriculture has a variety of funding
opportunities. – www.reeusda.gov– www.sare.org/htdocs/sare/.– www.rurdev.usda.gov/rbs/– .reeusda.gov/crgam/cfp/
community.htm– www.fedmoney.com/grants/
fn0000.htm
State & Private• Numerous state funding programs are available
– www.reeusda.gov/smallfarm/valuedir.htm
– www.nasda.org/nasda/nasda/member_information/usmap.
– www.reeusda.gov/1700/statepartners/usa.htm
– www. fdncenter.org/funders/
– http://www.iowacorn.org/pdf/TAGP%20Gudielines.pdf
Grant Writing Recommendations
• Grants have limited funds and applications are selected using a competitive scoring system.– Address all selection factors – Provide all application materials – Submit application early – Be clear and concise
FOR MORE INFORMATION
• Contact the Rural Development Area Office nearest you
Storm Lake 712-732-1851Humboldt 515-332-4411New Hampton 641-394-3183Tipton 563-886-6006
Albia 641-932-3031Indianola 515-961-5365Atlantic 712-243-2107Or
Rural Development State Office in Des Moines at 515-284-4714
www.rurdev.usda.gov