CNY Quasi-Equity Fund
The Central New York Quasi-Equity Fund is designed to support the growth, start-up and retention of manufacturing and producer-service firms in Central New York by providing “quasi-equity” or mezzanine type financing.
Participants
The Fund currently includes two other participants: Onondaga County Industrial Development Corporation (OCIDA) and Central New York Regional Planning & Development Board (CNY RPDB). Additional economic development partners in other counties may participate.
Eligible Projects
Funds can be used for almost any purpose with an aim towards job creation. Quality and quantity of jobs are important components.
Eligible Businesses
Manufacturers and producer service businesses are eligible. Businesses which derive most of their revenues from outside Central New York are preferred. Unlike venture capital firms, our emphasis is not on companies who might go “public” or be bought out by a large non-local company.
Lien Position
Where bank financing is involved, our lien position would usually be subordinate. Otherwise, GSBDC may seek appropriate corporate and/or personal collateral.
Loan Specifications
Our risk profile falls between venture capital funds and conventional financing. Seed capital is not envisioned.
Loans are usually undersecured or unsecured. Personal guaranties will be sought.
The structure is typically a debt instrument. The maximum GSBDC loan would be $100,000 but the total maximum loan size may be much higher than GSBDC’s individual maximum of $100,000 depending upon the number of “other participants”.
Term
Typical amortization period would be 5-7 years with a typical term of 3-5 years.
Interest Rate
Frequently structured with an initial period of no principal and interest payments or with an interest-only period, followed by equal principal payments plus interest for the remainder of the term. The interest rates are fixed at a below-market rate.
Fees
A commitment fee of 1% of the total loan amount and reimbursement of GSBDC legal fees is required. In addition, a variable success fee is payable at the end of the term and is calculated based on the company’s “success” at loan maturity. This fee will compensate GSBDC for the level of risk undertaken, fund losses, and operational expenses, etc. while helping to “pay it forward” and build the fund.
Application Process
- Business contacts GSBDC to outline project/financing need and determine eligibility.
- GSBDC provides application and list of other required information.
- After application is qualified by staff, a meeting is scheduled with the “other Participants” (if required and approved by applicant) to determine their interest level.
- The GSBDC Loan Committee and representatives of the Participants review with principals present. If satisfactory, the Loan Committee recommends approval to the GSBDC Board within days. A commitment letter is executed between GSBDC and the applicant subject to the “other participants’” participation. Upon project completion, a closing will take place.
