IEDC Intro book with Finance & essay emphasis – Flashcards
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8 steps of SP
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1. preplanning 2. assessing the local economy & its competitiveness 3. formulating mission, vision, goals & objectives 4. identifying, evaluating & prioritizing projects 5. developing plans of action 6. implementing those plans 7. monitoring & evaluating outcomes 8. retooling & readjusting
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3 ways in which ED Financing addresses the objectives of an ED program
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1. increasing business start-up, growth, and expansion opps 2. increasing employment opps in the community 3. improving the quality of life
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5 ways a BRE program addresses the objectives of ED
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1.maintaining & increasing employment opps 2. maintaining a stable tax base (income tax, corp tax, prop tax) 3. stabilizing & maintaining a vibrant economy 4. identifying problems that need attention and/or correction 5. exploiting new business linkages & attraction opportunities
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6 factors to a successful BRE program
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1. industry knowledge 2. local firm knowledge 3. professional services 4. results oriented 5. eye to long term business climate 6. coordinates services
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11 tools used in BRE programs
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1. marketing 2. assistance with land and buildings 3. infrastructure 4. financial assistance 5. workforce training & retraining 6. TA 7. availability of technical resources 8. export assistance 9. energy assistance & compliance 10. permitting & licensing 11. tax & non-tax incentives
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6 common capital gaps
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1. equity capital 2. long-term loans 3. loans under $50,000 4. loans to start-ups and small firms 5. loans to businesses in industries unfamiliar to lenders/investors 6. credit to low-income customers/minority owned enterprises
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8 factors influencing small businesses
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1. cost and availability of capital 2. presence of experienced entrepreneurs 3. presence of technically skilled WF 4. accessibility of suppliers 5. accessibility of customers or markets 6. availability of supporting services 7. proximity to universities or research institutes 8. networks of professional service providers skilled with start-ups
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4 factors in determining a deal's risk
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1. Debt Coverage Ratio which reveals ability to pay 2. Loan to Value Ratio which reveals collateral 3. validity of guarantees which demonstrates "skin in the game" 4. personal integrity of the borrowers which demonstrate management ability
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3 objectives in creating a business incubator
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1. to spur tech based development 2. to diversify the local economy 3. to assist in community revilatization
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4 marketing techniques
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1. advertising 2. promotional & informational material 3. direct mail 4. personal selling--trade shows, prospecting, hosting events
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5 workforce trends
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1. cluster based 2. incumbent worker training 3. business consortia 4. regional workforce partnerships 5. better integration of WF & ED
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8 steps in the Export as a Business Strategy process
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1. becomes aware of exporting in general and develops and interest in exporting as a business strategy 2. determining whether to make an initial investment in export market development 3. identifying market opportunities for selling a product or service abroad 4. assessing the competitive challenges within a selected market 5. selecting an exporting method and financial strategy 6. promoting & marketing the product/service 7. following up on leads & maintaining a continual presence 8. negotiating the sale, the financial package if appropriate, & providing on-going customer service
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10 ED players
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1. Government-local, state & fed 2. special authorities 3. chambers of commerce 4. universities & research institutions 5. community colleges 6. neighborhood groups 7. utilities 8. public/private partnerships 9 workforce development orgs 10. philanthropic orgs
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5 C's of credit
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cash flow character capacity collateral conditions
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5 sources of equity
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friends & family angels VCs public or private sale of common or preferred stock private or corporate investors
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5 federal financing sources
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CDFI SBA EDA HUD USDA
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2 main forms of finance capital
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debt financing equity financing
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explain how to calculate Loan to Value Ratio and what does LVR reveal?
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LVR = Loan Amount/Money Value of Collateral LVR reveals collateral
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give 4 factors in determining a project's risk along with the applicable ratios
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1. is there adequate cash to service the loan? Figure the DCR Ratio. Operating Income/Total Debt Service. The higher the better: 1:2 or 1:3 2. will collateral value be sufficient? Figure the LVR. Loan Amount/Money Value of Collateral Assets 3. Validity of guarantees or Equity AKA "skin in the game" 4. does the borrower demonstrate personal integrity? (have management ability)
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define Economic Development
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ED can be defined as a program, group of policies, or set of activities that seek to improve the economic well-being & quality of life for a community by creating and/or retaining jobs that facilitate growth and provide a stable tax base.
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define Bankable
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a person or project that can qualify for a loan at a commercial lending institution.
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helping a business structure an overall financial plan and preparing the application to apply for financing is known as what? (2 words)
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Loan Packaging
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define debt service
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the cash required in a given period, usually one year, for payment of interest and principal on outstanding debt. it is also known as the borrower's ability to meet debt and interest obligatns
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in terms of financial statements define Net Sales
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on the Income Statement AKA the P & L, Net Sales=Revenues - Minor Deductions. Minor Deductions are basically "returns"
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Funds from a lender to a borrower through another entity, process, or incentives, like Loan Guarantees, Linked Deposits, and Tax Breaks or Credits are known as
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Indirect Financing
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Debt Capital repayable according to a specific schedule is the definition of what?
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Term Loans
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define COGS or Cost of Goods Sold
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direct costs in the production of goods sold by an entity
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define SGA or Sales & General Administrative expenses
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any operating expenses not directly tied to product or service production (like rent)
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Explain the concept of balancing the accounts (in terms of the balance sheet)
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Assets = Liabilities + Equity AKA Net Worth To balance, if the Assets exceed Liabilities + Net Worth, the difference should be credited to the Notes Payable If the Liabilities + Net Worth exceed Assets, the difference should be credited to Cash.
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define Ethics
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it is about maintaining a higher standard of conduct than narrower rules of laws might dictate
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In terms of Tech Transer, define Commercialization vs. Deployment
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1. Commercialization is to place new products or processes in the marketplace through existing companies or through new companies built around a particular technology. 2. Deployment is to place new or off-the-shelf technologies in existing businesses, particularly "non-tech" companies in order to improve their competitiveness or to enable them to produce new product lines or new product services.
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7 types of risk in evaluating funding a project
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1. Credit 2. Debt 3. Maturity 4. Security 5. Market 6. Operating 7. Start-up business
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In terms of BRE, define outcomes versus outputs
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Outputs are how many people participated in a program. Outcomes are what resulted from those people participating. It is a clearer picture of impact and provides more info to evaluate and improve a program. It can be qualitative, quantitative, or both.
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Essay exercise/practice: CEcD Certification
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During a recent report to your board, you shared with them a brief comment saying that you were thinking about working towards you CEcD Certification. You were then asked to prepare a write up to explain what the CEcD is, the value of the designation to the organization, your staff, and you, how the CEcD is obtained, the anticipated amount of resources that will be required to obtain it, and when you expect to obtain the certification.
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Essay exercise/practice: Drilldown Method
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Explain the Drilldown model of analyzing neighborhood economic data. What data indicators can be tracked through this method, and how can the data be used to generate new investment?
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Essay exercise/practice: EDO Governance Structures
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What are the 3 primary types of EDOs, based on their governance structure? Distinguish the 3 types and describe the advantages and disadvantages of each organizational structure.
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Essay exercise/practice: ED Finance
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Almost every aspect of implementing economic development projects or programs involves securing financing. One source of financing is the private sector. Financial institutions in this sector provide 2 main forms of financial capital, namely debt and equity financing. What distiguishes debt financing and equity financing? What does the lender charge for his/her investment? Finally, list 3 sources of debt financing.
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Essay exercise/practice: Sectoral Ananlysis
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The Board is convinced that the "rifle" approach is the most cost effective way to market your community which has a metro area population of 400,000. You have been directed to devel a target industry/business identification process through which at least 6 types of employers will be identified for which your community has demonstrable advantages. Your board has committed to raise adequate funds to implement the plan. Describe the process you would use to identify the target industries using the Sectoral Analysis approach.
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Essay exercise/practice: BRE Program
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Your board has asked you to develop a BRE Program for your city. Explain your process of establishing and organizing the program, the goals of the program, and the methods that could be utilized to assure program effectiveness.
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Sectoral Analysis
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this approach to identifying target industries looks at different industrial sectors in broad terms and identifies industries that fit the community
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5 Steps in Sectoral Analysis
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1. ID the key generic factors that are important to different industry sectors. 2. Determine the relative importance of those factors for each sector. 3. Evaluate the community's capacity to satisfy those factors/preferences. 4. Rank industries on the basis of the community's overall economic development objectives. 5. ID the industries that best fit with community goals.
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8 Sources of Info for Sectoral Analysis
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1. Existing firms in the community 2. Industry Associations of CofCs 3. Industry associations' conferences & trade shows attended to ID issues that are important to the industry 4. Surveys & interviews with local companies 5. Industry representatives, contact the industry themselves 6. Relevant books & articles on different industries 7. Marketing & industry consultants 8. US Department of Commerce
