CREDIT-WORTHINESS:

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CREDIT-WORTHINESS

• A critical factor in a competitive application

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The State is not a bank . . .
So why do you care about credit?
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The State takes informed risk

• Public financing for economic development is most
  typically gap financing (some incentive deals
  excluded)
• State E.D. programs take risks many private
  lenders will not take, or will not take alone
• However, as stewards of taxpayer resources, the
  state must invest the limited funds available for
  economic development in VIABLE projects that will
  actually create jobs and investment
• ITS A DELICATE BALANCE!

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Making it work

• Underwriting public financing requires
• Flexibility
• Keeping an eye open for potential
• Remembering the public purpose
• Looking at the whole project
• Not a rigorous quantitative scoring method!

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The Five Cs of Credit

• CAPITAL
• CHARACTER
• CAPACITY
• COLLATERAL
• CONDITIONS

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CAPITAL

• How well capitalized is your company?
• FIRST STRING SPACE, INC.
• Atkinson County EIP project
• Modular building manufacturing company

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CHARACTER

• What is managements reputation?
• ALTEA THERAPEUTICS CORP.
• Technology Exchange Park LSFF project
• Development-stage biotech company

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CAPACITY

• Can you repay the debt?
• COX RESTAURANT ENTERPRISES
• Valdosta DD RLF and GCF project
• Restaurants and catering business

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COLLATERAL

• What is the secondary source of repayment?
• THE LULA BUILDING PROJECT
• Covington DD RLF and GCF project
• Commercial rental property

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CONDITIONS

• What are the trends for your industry?
• MBM CORPORATION
• Bibb County EDGE project
• Food-service distributor

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Real Estate Development Projects

• Attributes of strong feasibility
• Experienced developers
• Significant equity injection
• Committed bank financing
• Good debt-coverage ratios
• Adequate collateral
• Interested or committed tenants

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CREDIT INDICATORS

• Sales Trends
• Profitability
• Management
• Cash Flow Trends
• Working Capital Adequacy
• Capitalization
• Industry Conditions
• Years in Business

• Business Plan
• DB Rating
• Equity Injection into project
• Bank Participation in project
• Cash reserves/lines of credit
• Personal credit of principals

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Business Plan

• Description of Business
• Form, type, product/service
• Marketing Plan
• Customers, market analysis and trends,
  competition
• Management Plan
• Background, experience of principals, personnel
  needs, employee benefits
• Financial Plan
• Budget, working capital adequacy, break-even
  analysis, historical and projected financial
  statements

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So where do you draw the line?
SOLVENCY
GREY AREA
Solid Credit
PROFITABILITY
High Risk
GREY AREA
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Funding the Grey Area Look for Positive
Trends(negative trends are tough!)
SOLVENCY
PROFITABILIY
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Funding the Grey Area Look for Other Positive
Attributes
?Strong Management ? Access to Capital ?
Marketplace Opportunities ? Targeted Industry ?
Strong Commitment by Local Leadership
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Funding the Grey Area

• Fine-tune the project
• Strengthen funding commitments
• Identify alternative funding sources
• Incorporate special conditions to mitigate risk

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Office of Economic Development Credit Unit

• John Kingery, Credit Manager
• 404-679-1586 jkingery_at_dca.state.ga.us
• Ross Avina, Senior Credit Underwriter
• 404-679-1593 ravina_at_dca.state.ga.us
• Coleen Gelot, Credit Underwriter Loan Servicing
• 404-679-3110 cgelot_at_dca.state.ga.us
• Russell Morrison, Credit Underwriter
• 404-679-4825 rmorriso_at_dca.state.ga.us