CDF Minutes

September 28, 2015

Page 7

COUNCIL ON DEVELOPMENT FINANCE

September 28, 2015

PUBLIC HEARING 414

THOSE PRESENT:

Mr. Andrew Lubin, Chairperson Director Bernice Whaley

Honorable Nancy Cook Mrs. Kirsten Wolfington

Mr. Tarik Haskins Mr. Lawrence Lewis, DAG

Mr. Richard Rowland Mr. James Pennewell

Mr. Fred Sears Mrs. Jodie Green

Mrs. Richelle Vible Ms. Emily Baird

Mr. Jack Riddle Mr. Kenneth Anderson

Rep. Byron Short Mr. David Root

Sen. Brian Bushweller Ms. Kimberly Cruz

Mr. Tim McLaughlin Mrs. Karen Smith

ALSO PRESENT: First State Community Loan Fund – Mr. Vandell Hampton, Mr. Clinton Tymes, Ms. Jessica Gibson, and Ms. Lola Campas; RLDP Holding, LP – Donald Hollenbeck; Ms. Lindsay Lewis, Office of Management and Budget; and, Mr. Nick Wasileski

LOCATION: Buena Vista

TIME: 9:00 A.M.

CALL TO ORDER:

The meeting was called to order at 9:00 A.M. by Chairperson Lubin, on Monday, September 28, 2015.

OLD BUSINESS:

Mr. Lubin made a motion that the minutes of the July 27, 2015, Council on Development Finance meeting be approved as presented. Mr. Sears approved the motion, and Mr. Rowland seconded the motion, which was then adopted by unanimous vote.

NEW BUSINESS:

First State Community Loan Fund (“FSCLF” or the “Applicant”) – The Applicant is requesting a Delaware Strategic Fund grant in an amount not to exceed $20,000. The Applicant proposes to use the funds to invest in the support of two new technical assistance initiatives with the Women’s Business Center (WBC) and the Delaware Hispanic Business Development Initiative (DHBDI).

Mr. Rowland recused himself from the project review.

Mr. Anderson presented this request to the Council. He stated that the efforts to research and facilitate the creation of the DHBDI have been a two-year long process, with the help of Sonia Aguilar, a DEDO member of a subcommittee for economic development. A need for a bilingual entrepreneurial development resource center was identified, and in July 2013 they observed a resource center located in Reading, PA, which has a representative Hispanic population of 69%. The importance of this resource center is that it is active and effective in the community, and includes completely bilingual discussions with its clientele. A proposal was submitted at that time to then-DEDO Director Alan Levin, in order to evaluate the concept for the state of Delaware. Additionally, last year the YWCA did not renew its designation as the WBC, and through a competitive process, FSCLF was selected as the new WBC.

Mr. Anderson then introduced Mr. Hampton, the President and CEO of FSCLF; Mr. Tymes, Technical Coordinator; Ms. Gibson, Director of WBC; and Ms. Campas, Program Coordinator of DHBDI.

Mr. Hampton stated that FSCLF was a nonprofit community development financial institution, and since 1992 has provided loan capital and technical assistance programs within the state of Delaware. In their twenty-three year history, FSCLF has provided financing to over eleven-hundred businesses, ranging between $5,000 and $250,000. In addition to financial support, technical assistance support is provided to funded businesses, and they are developing new programs that provide technical assistance to the general public, as well.

Mr. Tymes stated that over the past few years, there has been a change of moving away from providing assistance to borrowers only, but also expanding that assistance to the general public. The technical assistance is important to FSCLF, and their experience has shown that those businesses that receive some sort of assistance are more successful, and in most cases, are also more apt to pay back the loans. The two initiatives with the DHBDI and WBC are a direct result of focused need, specifically for training and education. Other programs that the FSCLF provide include a retail assistance program that is industry specific with onsite assessment; financial analysis for expansion of business; and a digital accomplishment program in conjunction with the Small Business Association. The FSCLF provides outreach efforts that address needs and specific services that are valued within the community, and also collaborates with other state entities.

Chairperson Lubin asked the Council if there were any questions at that time, of which there were none.

Ms. Gibson stated that, as director of the WBC, she was excited about the opportunity to work with FSCLF, adding value to the program. The majority of lending from the WBC goes to women, providing them with the opportunity to access capital. Since the program began in January, assistance has been provided to one hundred-eighty women, including three hundred and five hours of training and one-on-one sessions that cover various areas of business planning, strategies, social media, and insurance, for example. There have been thirty workshops that work with resource partners in a unique way. They are now launching into their second year of work, initiating the Passport to Business Success Program, and are working in Sussex County to gain the same traction as in New Castle County.

Mr. Sears asked what types of business were represented by the WBC. Ms. Gibson stated that there was a portfolio of two hundred and forty-five women that represented a range from home-based businesses to companies encompassing $3.5 million in personal financial statements. She stated that women are the largest percentage of business owners who are sole-proprietors, and the WBC has been working to facilitate the opening of everything from home-based to retail and high-level innovations. They also participated in a national competition in conjunction with the Small Business Administration with women who had products and services that were able to go to market. The WBC knew that there were women innovators in Delaware, and that they were happy to highlight women’s businesses nationally.

Mr. Sears asked if people come to the WBC with only an idea, or are they already somewhat established as a business. Ms. Gibson said that around 70% of their clientele were early-stage businesses, and that the other 30% were looking to expand or restructure. Women-owned businesses, as a minority, are generally underserved. The women have great ideas that need to be refined, and the WBC helps provide that service.

Mr. Lubin stated that the FSCLF has impressive board membership, and asked if the board members assist in the training programs. Ms. Gibson stated that the FSCLF advisory committee was involved in every aspect of the business, and are also required to facilitate two to three sessions per year. They also utilize contractors who are experts in their fields. Mr. Hampton added that they have a unique advisory board that provide mentoring and network opportunities, as well as resource and training programs.

Mrs. Vible asked how much of the clientele are involved in childcare, and how has FSCLF assisted. Mr. Hampton stated that childcare has always been a priority, and a lot of work has gone into understanding the required regulations. Ms. Gibson stated that one business example has expanded from home care to a larger facility, and utilized business owners on the advisory committee in order to ensure that the expansion met the criteria for a smooth transition. Support has been provided with marketing outreach, and that there are two childcare providers on the advisory committee.

Ms. Campas stated that, as the Program Coordinator for the DHBDI, her expertise was in partner mediation and countries with emerging economies. Her work encompassed a comprehensive program that works to facilitate and assist entrepreneurs. Through her work, one challenge has been a lack of cultural sensitivity, partners, and resources. The DHBDI provides help; their goal is for one-on-one mentoring, and taking the businesses from an informal to a formal economy. There is difficulty mentoring and transitioning when personnel qualified in the language are not available.

Mr. Hampton stated that they were working on translating all of the material into Spanish, and working with other resource providers in order to plan workshops to reach the community. Resources need to be made available, with sensitivity to other cultures. The FSCLF understand the need to set the example by doing the work themselves, and implementing a grassroots effort that requires a lot of work. He added that they were excited about putting together a powerful program.

Mr. Tymes stated that they have a good training program, but there was no infrastructure or assistance. FSCLF is attempting to build a comprehensive program with outreach, training, and educational programs that include access to capital. They recently hired a new loan office for Kent and Sussex counties that is bilingual.

Ms. Campas stated that the success of the program depends on its partners in order to better serve the community. She added that she is an immigrant herself who understands the struggles, and would like to see established tools like those utilized in a larger city, such as Chicago. There is a need for more resources in dual languages, particularly considering census numbers for the state.

Mr. Riddle asked, considering the financial statements that referenced grant revenue at 43% in 2014 where it was zero the previous year, what was changing within the organization, did they predict if that growth would continue, and the prospects for 2015. Mr. Hampton stated that FSCLF received a grant from DEDO last year, and that they were always fundraising. He added that they would like to see the level of growth consistent with the majority of funding with the Small Business Administration continue.

Mr. Riddle asked for clarification about the goals mentioned in the write-up, as to whether they were to be met quarterly or annually. Mr. Hampton stated that they were annual goals.

Mrs. Vible asked about other types of income. Mr. Hampton stated that there were program goals that needed to be met, but that first and foremost the FSCLF was a lending institution, now with loan options through the DSBDI and WBC. He stated that the more loans there were on the books, the more revenue they had for FSCLF, and that fundraising was always important. Mr. Hampton added that among the FSCLF, DHBDI, and WBC, they have the ability to pool their resources, and at the end of the day, the loan pool determines how to move forward.

Director Whaley stated that the work that led to finding a home for the DHBDI and WBC has been in process for over a year, that DEDO was excited that FSCLF wanted to involve them, and DEDO was happy to provide support.

Chairperson Lubin asked if there were any public comments; there were none.

Motion Made By: Mr. Sears

Seconded By: Mr. Rowland and Mrs. Cook

MOTION: After duly considering, inter alia, the nature of the business, its competitive situation in Delaware, its location, the employment and other requirements under applicable statutory and regulatory provisions, the Council made the following findings: (i) the Project will contribute to maintaining or providing gainful employment of the citizens of the State, (ii) the Project will serve a public purpose by contributing to the prosperity, health or general welfare of the State; (iii) the Project will require a capital investment of at least $20,000, which funds, including the grant proceeds, will be available or expended on the date on which The Delaware Economic Development Authority disburses the requested grant funds; (iv) the grant will effectuate the purposes of Chapter 50, Subchapter IV of Title 29 of the Delaware Code, and (v) the Applicant is a financially responsible person to the extent required by statute and has not been convicted of a major labor law violation or other illegal conduct involving moral turpitude by any agency or court of the federal government or agency or court of any state in the two-year period immediately prior to the approval of the Applicant’s application for assistance, the Council shall recommend to Mrs. Bernice Whaley, Chairperson, The Delaware Economic Development Authority, approval of a performance grant in an amount not to exceed Twenty Thousand Dollars ($20,000), to be disbursed from the Delaware Strategic Fund for the Project, contingent upon the approval remaining in effect through and including September 27, 2016.

Approved By Vote of 8 to 0, 1 in absentia.

RLDP Holding, LP (“RLDP” or the “Applicant”) – The Applicant is requesting a modification to a Delaware Strategic Fund Loan that was approved in April 2010 for an extension of the balloon payment to January 1, 2017.

Mr. Root presented this request to the Council. At the time of the initial loan, the note term was for sixty months, with monthly payments of $3,096.17, of which those payments have been made. A balloon payment was schedule for July 2015. RLDP consists of a family of companies located in Seaford Industrial Park. The company was established in 1959 by Craig Hollenbeck, who retired in 1985. Since that time, the company has been managed by Don Hollenbeck, Rob Hollenbeck, and Leo O’Hara. RLDP relocated to Delaware from Pennsylvania in 1998, and also acquired two additional companies in that time. The company currently employs about one hundred and ten people in Sussex County.

Mr. Pennewell stated that, as a business financial specialist for DEDO, he reviewed the financial reports for RLDP between 2012 and 2014, as well as the personal financial statements for the three owners of the company. He stated that the company has a positive position of liquidity, and consistent sales during the review period. Mr. Pennewell added that the owners have personal guarantees on the loan, and that they have a collective net worth to satisfy the balloon amount that was due in July. He stated that it was their recommendation to extend the balloon payment to January 1, 2017, with the same interested rate of 4.25%. Mr. Root added that the company would continue to make monthly principal and interest payments during that time.