WISCONSIN HOUSING AND ECONOMIC DEVELOPMENT

AUTHORITY (WHEDA)

Business DevelopmentGuarantees, Venture Funds,

Participation Loans and New Market Tax Credits

WHEDA is a public body corporate and politic, created in 1972 by the Wisconsin Legislature, that provides low‐cost financing for housing, small business and agricultural development

WHEDA

Governed by a Board of Directors, WHEDA is a self-supporting, public corporation, not a state agency

WHEDA relies on revenue from interest on loans and investments, origination and servicing fees and housing management services

WHEDA

• Worked with lenders to extend credit to more than 118,000 families to purchase their first homes

• Assisted developers and lenders to finance more than 77,000 affordable rental units

• Backed lenders who’ve made more than 29,000 small business and agricultural loan guarantees.

PARTNERING WITH LENDERS

COMMERCIAL LENDING – BUSINESS DEVELOPMENT

LOAN GUARANTEES

VENTURE FUNDS

PARTICIPATION LENDING

NEW MARKET TAX CREDITS

WHEDA LOAN GUARANTEES

• Small Business

• Agribusiness

• Neighborhood Business Revitalization

• Contractors

• Transform Milwaukee

• Farm Asset Reinvestment Management (FARM)

• Credit Relief Outreach Program (CROP)

LOAN GUARANTEES

• Small business– 50% up to $750,000

– 50% up to $200,000 (working capital )

• Neighborhood Business– Small Biz for mixed use

– > 35,000 population

• Agribusiness– 50% up to $375,000

– May be start up

LOAN GUARANTEES

• Contractors– 50% up to $750,000

• Farm Asset Reinvestment Management (FARM)– 25% up to $200,000

• Credit Relief Outreach Management (CROP)– 90% up to $50,000

– 80% $50,000 - $150,000

LOAN GUARANTEES

VENTURE DEBT AND EQUITY

STATE SMALL BUSINESS CREDIT INITIATIVE (SSBCI)

• US Treasury provides direct funding to states for programs that expand access to credit for small businesses. Each program is designed by the State to address local market conditions

• Wisconsin has chosen venture capital programs (debt and equity)

SSBCI Venture Fund

• Designed to provide debt financing to growth companies that create new, high-quality jobs in Wisconsin

• These debt funds are intended to be complimentary to early stage equity allowing companies to access capital at predictable costs

DEBT FUND

• Designed to spur equity investments in growing Wisconsin companies

• The fund will be used for direct investment into small businesses in the state

• The financing provided will leverage private capital investment

EQUITY FUND

VENTURE FUNDS

Dynamis Software, Corp.Enhancement Medical, LLCHopster, Inc.Intuitive BiosciencesInvenra, Inc.Magma FlooringMCT of WisconsinMurfieNeuWave Medical Inc.PerBlue Inc.Phoenix Nuclear Labs LLCQuietyme, Inc.

VENTURE FUNDS

Silatronix, Inc.Simply Incredible Foods LLCSoLoMo TechnologiesSpaulding Clinical Research, LLCSpeechTails, Inc.Stemina Biomaker Discovery, Inc.Swallow Solutions LLCThe Good Jobs, Inc.Veridt Inc.Wellbe IncXolve, Inc.Zurex PharmAgra, LLC

VENTURE FUNDSCompany Location Contact Name Organization

Dane

David ScholtensVice President Lending

MadisonDevelopmentCorporation

MilwaukeeRacineKenoshaWaukeshaWalworthWashingtonOzaukee

John MillerVice President

MilwaukeeEconomicDevelopmentCorporation

All LocationsAaron HagarSenior Technology Manager

WisconsinEconomicDevelopmentCorporation

PARTICIPATIONLENDING PROGRAM (WPLP)

• Revision to Chapter 234

– Legislative changes

• Expanded Economic Development Resources and Capacities– Beginning 2012

– Commercial real estate

– Long-term working capital

• Economic Development Bonds – Capacity of $150 MM

AUTHORITY

• Collateralized Loans– Mezzanine (hybrid debt-equity)

– Gap financing

• Community Impact

• Considerations– Maintain or increase employment

– Area of high unemployment

– Area of low average income

– Financial institutions participating

PURPOSE

• Loan Limit Lending– Lender reaches maximum loan amount

– Allows loan to be serviced by lender

• Subordinate Position Lending – Financing for those having difficulty lending

beyond the 60% loan to value

– Participation brings lenders LTV up to 85%

• Non-Traditional Lending Institutions– Certified Development Financial Institutions

(CDFI)

– Community development corporations

– Economic development corporations

– Municipal revolving loan funds

PURPOSE

• SBA 504

Construction Lending

– 50% senior lender in 1st

lien position

– 40% SBA Bond in subordinate lien position

– 10% borrower

– WHEDA participation at 40%; subordinate on the construction note

PURPOSE

• With New Markets Tax Credit (NMTC)

– Indirect lien position

“synthetic first”

– Eliminate concern over collateral

• With CDFI Lending

– Matching capital as loan to CDFI

– CDFI benefits from additional capital

– Authority has benefit of loan proceeds protected by CDFI guarantee of repayment.

PURPOSE

• Borrowers– Located in the State of Wisconsin

– One or more financial institutions participate

– Loan secured or collateralized

– Name of the borrowers(s) does not appear on the statewide support lien docket

ELIGIBILITY

• Facilities– Manufacturing

– Commercial real estate

– National or regional headquarters facilities

– Storage or distribution

– Retail sale of goods or services

– Research and development

– Recreation and tourism

– Raw ag commodity processing

– Railroad operations

ELIGIBILITY

• Equipment, materials or labor– Energy conserving improvements

– Commercial facilities

– Industrial facilities

• Activities– Long-term research and development

– Long-term working capital

ELIGIBILITY

• Borrower– Less than $35 MM in current gross annual sales (may be waived)

– Less than 250 employees (may be waived)

– Primary purpose is not to refinance existing debt, although a portion may be if financing business expansion, job creation and community benefits

PREFERENCES

• Participation up to 50%

• Participation up to $2 MM

• Terms– SBA Construction < 2 years

– USDA FSA Construction < 2 years

– Gap financing < 3 years

– Mezzanine financing < 5 years

– Other SBA Programs < 7 years

– Fixed assets < 10 years

– Real Estate < 15 years

AMOUNT AND TERM

• Pro-Rata– Match Lender’s rate and terms

• Subordinated– Risk priced during underwriting

– Term-limited

• SBA 504 Construction– Underwrite using Lender’s interest rate

– Short-term

• Servicing Fee– 0.25% retained by the Lender

RATES

• Application Fee - $250

• Loan Origination Fee– Ranges from 1% to 3%

• Pro-rata, near term 1%

• Second position or

longer term 2% to 3%

– Half upon loan approval

– Half upon loan closing

– Fee payment structure requires borrower to pay all loan closing fees

FEES

• Debt Service Coverage (Minimum of 1.20%)

• Collateral Coverage

• (110% market; 80% liquidation value)

• Loan-to-Value (up to 85% in cases)

• Equity Contribution

• Debt-to-Worth

• Liquidity Ratio

• Market/Business Plan & Financial Management Strength (Global cash flow, credit score, personal debt ratios)

• Business Tenure

RISK RATING

• Initial Inquiry & Review

• Application

– Credit Team Review– Underwriting

• Internal Loan Committee

• Members Loan Committee

APPROVAL PROCESS

• LaClare Farms, LLC

• KTown Transportation, Inc.

• Compo Steel Products, Inc.

• Four Generations, LLP

• Benitz Farms, LLC

• Exodus Machines, LLC

EXAMPLE SOLUTIONS

• Company Profile– LaClare Farms is a goat dairy farm and processing facility in Pipe, WI

• WHEDA Financing– New barn, milking herd, milking parlor, farmstead creamery (bottling, yogurt, cheese), commercial kitchen and demonstration area, café-banquet and retail.

LaClare Farms

• Term and Interest Rate– 21-year term and 20-year amortization

– Initial rate of 5% (resetting every 5 years)

– First year is interest only

– Rate resets at Prime + 2.32%

– Rate floor of 5.57%

– Expected exit in 7 years

• WHEDA Fees– 3% closing fee of our participation amount:

• 1.5% due at time of participation commitment

• 1.5% due at closing

LaClare Farms

• Company Profile– Specialized transportation services for senior

citizens, handicapped and individuals for non-emergency medical treatment. Company expansion required a new, larger facility to accommodate more vehicles and additional employees

• WHEDA Financing– Line of Credit for working capital and purchase of

additional vehicles

– WHEDA participation (50%)

KTown Transportation, Inc.

• Terms, Rate & Collateral– 5-year term and 15-year amortization

– Rate of 5.25%

– Expected maturity and exit in 5 years

– 50% pro-rata, shared lien on real estate (83% LTV)

• WHEDA Fees– 2% closing fee of our participation

• 1.0% due at time of participation commitment

• 1.0% due at closing

KTown Transportation, Inc.

• Company Profile– Innovative fabricator and contract manufacturer

of metal products

– Also provides extensive engineering services to customers in the metal fabrication business

• WHEDA Financing– Purchased a used 6,000 watt CNC laser capable of

cutting through thicker pieces of steel

– The new equipment enabled the business to secure/diversify their customer base

Compo Steel Products

• Participation, Term and Rate– WHEDA participation 50%

– Term of 3 years with a 3-year amortization

– Note rate fixed at Bank’s cost of funds + 3.25% (currently 4.11%)

Compo Steel Products

• Company Profile– Grocery store and SuperValu Store franchise in Sherwood, WI

• Participation, Term and Rate– WHEDA participation at 50% with senior lender

– SBA 504 construction loan

– Owners Equity at 14% (qualifying SBA)

– Note rate at 6%, interest only

– Fees 1% (SBA 504)

– 0.25% for servicing

Four Generations, LLP

• Company Profile– Manufacturer of material handling machines principally used to run shears or grapples in scrap-metal recycling operations

– Has a 10-year alliance agreement with Caterpillar, Inc.

Exodus Machines

• Participation, Term and Rate– NMTC allocation

– WHEDA Participation with senior lender at 50%

– Other financing:

• City of Superior Tax Incremental Financing

• Wisconsin Economic Development

– Term of 5 years and 20-year amortization.

– Rate fixed at 6% for 5-year term

– Servicing fee of 0.25%; Closing fee of 3%

Exodus Machines

• Company Profile– Multi-generational dairy farm with milking facilities at two locations near Maiden Rock, WI Combined new facilities for 700 dairy cows

• Participation, Term and Rate– SBA 504 construction loan

– WHEDA participation of 50% of construction

– Bank financing along with USDA-FSA (direct loan and guarantee) and WHEDA FARM guarantee

– Rate 4.25%; interest only

– 0.25% servicing

– Fees 1 %

Benitz Farms, LLC

NEW MARKETTAX CREDITS

• Application to US Treasury

• WHEDA receives credits through it’s Community Development Entity (CDE)

– The Greater Wisconsin Opportunity Fund (GWOF)

– Formerly Wisconsin Community Development Legacy Fund (WCDLF)

• Awarded more than $500MM in credits

OVERVIEW OF PROCESS

• Federal Investment Tax Credit claimed over 7 years starting on the date when the equity investment is made in the Community Development Entity (“CDE”) and each subsequent anniversary.

• A project usually receives either a subordinate seven year interest only loan that is mostly converted to equity at the end of the seven year tax credit period. This loan is for approximately 20% of the total qualifying costs of a project.

NMTC

Or the interest rate on the total financing is “bought down” to a

below-market-rate, usually around 2% below-market

For example, a $10 million project could receive a $2 million interest only loan with most of the $2 million converted into equity at the end of the seven year tax credit period

NMTC

Tax Credit Investor Economic InvestorInvestment Fund, LLC

GWOF SubsidiaryCommunity Dev. Entity

Sinking Fund

$2.5 MM $7.5 MM

Interest payments and principal at end of tax credit period

$10 MM$3.9 MM over Six years and a day

A Note:$7.5 MM loan

B Note: $2.5 MM equity equivalent loan: All or part is transferred through put option after seven years

NMTC LEVERAGE MODEL

• Non metro manufacturing projects

• Major/Minor metro community facilities projects

• Major metro in Transform Milwaukee

• Create a small business loan pool

NMTC STRATEGIES

• Leveraging the Greater Wisconsin Opportunity Fund Community Partnerships

STRATEGIES

• For NMTC, Low Income Communities (LIC) and Low Income Persons (LIP) are given priority.

• As part of the application to the US Treasury -- calculated estimates using University of Wisconsin Extension, IMPLAN

• For Example – 2014 Application

– Estimated FTE: 2,108

– Estimated LTE: 992

JOB CREATION

• Access Community Health Centers - Health

care

• Aloft Hotel -Hotel/Hospitality

• Brewery Parking Structure -

Parking/Commercial real estate

• Dwell Bay View - Mixed-use

• Exodus Machines - Manufacturing

• Foremost Farms USA – Milk processing

• GE Hotpoint - Commercial office and retail

• Global Water Center - Commercial office

NMTC

• Graceville LLC - Commercial office and retail

• Iron Horse Hotel - Hotel/Hospitality

• Logistics Health Inc. - Health care services

• Madison-Kipp Corporation - Manufacturing

• Main Street Ingredients - Manufacturing

• Marriott Hotel - Hotel/Hospitality

• Milwaukee Health Services - Health care

• Milwaukee World Festivals, Inc. Entertainment/Festival

grounds

• Palermo Villa -Manufacturing/Distribution

NMTC

• Richland Center Renewable Energy - Digester

• S&S Cycle - Motorcycle manufacturer

• ST Paper - Paper mill

• Summit Place - Commercial office

• Superior City Center - Office and retail

• Villager Mall - Commercial office and retail

• WaterMark - Mixed-use commercial retail

• Wingra Family Medical - Health care services

• Winsert, Inc. - Steel manufacturer

• Ziegler-Bence/Proven Direct - Office and

industrial

NMTC

CONTACT

201 West Washington Avenue

Suite 700 P.O. Box 1728

Madison, Wisconsin 53701

www.WHEDA.com

M i k e P o w e r s Business DevelopmentMike.Powers@wheda.com

(608) 261-5925