Capital boost: Wyoming Smart Capital Network helps small businesses
In the fall of 2010, Congress passed the Small Business Jobs Act, which allocated a minimum of $13.2 million per state to stimulate the growth of small businesses by providing greater access to capital.
Wyoming elected not to participate in the program in 2010, passing the opportunity to the municipalities within the state. Seventeen communities collaborated in the fall of 2011 to apply to the U.S. Treasury to bring the funds to Wyoming residents.
Small business money
“The program did not close until December 2012,” says Paul Huleatt, managing director of Wyoming Smart Capital Network (WSCN), “so the resources have not been available until this year.”
WSCN was hired to implement the Small Business Job Act by working with local banks to support small business loans. Executive Director Diane Wolverton is presently traveling around Wyoming, speaking with local lenders to inform them of the program.
“We are currently meeting with banks all around our 17 city region so when they meet with a business that seems to fit our program, they will give us a call,” explains Wolverton.
WSCN aids in the development of businesses by providing collateral to back businesses when they take out a loan from a bank.
“The loan is with the bank. WSCN is just the third party that provides the collateral,” elaborates Wolverton.
“We hope that by pledging collateral, the lender will be more comfortable with lending to the small business owner,” says Huleatt.
Once a business is approved by the bank and WSCN, WSCN will place a Certificate of Deposit, or CD, in the bank to act as collateral. Huleatt says WSCN can pledge up to 50 percent cash collateral.
“It is a good tool for this gap of collateral,” Wolverton adds. “It has been really pleasant to go into the banks and talk with lenders and get such a warm reception to this program. It is a simple program, and it fulfills the need. If the borrower’s banker does not know about this opportunity, we are happy to do the outreach to educate them.”
A small origination fee of up to two percent of the amount of the loan is charged at closing.
“The actual fee is determined by three factors,” continues Wolverton. “The first is the amount of collateral. The more collateral that is placed with the bank, the greater the fee. The length of the term also has an impact. We can keep the collateral with the bank for up to five years, and shorter terms may reduce the fee.”
“Finally,” she continues, “we look at the strength of the credit of the applicant who is applying for the loan.”
To utilize the program, businesses must be located within the 17 municipalities that are partners in the program. These include Casper, Cheyenne, Cody, Douglas, Edgerton, Gillette, Green River, Hanna, Hartville, Laramie, Midwest, Pine Bluffs, Powell, Rawlins, Rock Springs, Sundance and Wheatland.
“If a business is located outside of the city limits but has an economic benefit for a participating municipality, they can potentially qualify for the program,” says Wolverton.
Presently, no other municipality may join the program because the funds have already been allocated.
“If there comes another allocation of funds by the Treasury, there may be an opportunity for other municipalities to join. Right now, it is only the 17 that qualify,” she adds.
Within the participating municipalities, any non-profit or small business may apply for the collateral.
“What is exciting about this program is that it is up to the state on how they want to tailor it. We have a lot of flexibility on loan structure and types of companies that are eligible,” adds Huleatt. “Businesses do not have to be a manufacturing operation or agricultural enterprise to qualify.”
Some limitations have been placed on the program so it fulfills the goal of helping small businesses.
“This is not intended for developers who want to purchase a building,” explains Wolverton. “The businesses must be owner occupied. It cannot be used for illegal activity or gambling and is not for the purchase of business stock or equity.”
“If there is even the smallest interest in the program, pick up to the phone and speak with Diane,” urges Huleatt. “We speak to lenders all the time and this is how the process always starts. People sometimes talk themselves out of the hypothetical dialogue, but there is no harm in it.”
The Seed Capital Network Tool is another method utilized by Wyoming Smart Capital Network (WSCN) to assist small businesses. This program supports local business development by providing Wyoming-based seed funding for Wyoming companies.
“We are working with accredited investors from around the state that want to invest in Wyoming businesses,” explains Diane Wolverton, executive director of WSCN. “Investors join together in a fund and make the decisions on which businesses they want to invest in.”