Loans Help Nebraskan Companies Attract Major Investors

In an earlier post, we talked with Dan Hoffman, executive director of Invest Nebraska, about their Venture Competitions. In this post, we’ll find out about their Operational Assistance program. The program offers the equivalent of a low-interest loan of up to $25,000 with favorable terms for qualifying businesses. Invest Nebraska is a nonprofit corporation that advises and invests in entrepreneurial businesses in Nebraska.

Q: What types of businesses should apply for the Operational Assistance program?

A: The Operational Assistance program helps companies with potential to attract major investors. These companies are either based in Nebraska or willing to relocate headquarters here. We want to focus on scalable or high-growth businesses. These businesses have creative, competitive ideas and often start with a model that can be replicated. They have potential to earn at least $20 million in sales or revenue. They typically export goods or services out of the local economy to bring dollars to local communities. We’re looking for entrepreneurs who thoroughly understand their businesses and business models.

Q: Who are these major investors?

A. They are venture capitalists, who are professional investors, and angel investors, individuals with a high net worth. These investors are putting in substantial dollars so they want a high return, usually between 20-30 percent. The higher return is necessary due to the risky nature of these investments.

Q: How do companies use the program?

A: The loans help entrepreneurs prepare their companies to attract major investors. The money needs to be used to build out that additional piece they need. For example, they might use it for adding server capacity or paying for patent costs.

We also help them with good corporate governance. We attend board meetings as an observer. It’s important to have good corporate records and structure to attract angel investors and venture capitalists. We bring experience to those issues.

Q: How does the loan work?

A: It’s an Invest Nebraska loan at a below-market interest rate. The four-year loan is payable in the last three years of the loan. There are no payments the first year. We don’t want to make it so burdensome for entrepreneurs who have a lot to deal with already.

You can find more information at www.investnebraska.com.

Q: Where does the Operational Assistance money come from?

A: The Nebraska legislature created the Nebraska Operational Assistance Act, LB 425, in 2007 to provide assistance to high-growth businesses that could be attractive to venture capital. The act calls for the legislature to appropriate funds for a state Department of Economic Development grant. The grant is for a nonprofit organization that will administer the program and match part of the funds. Invest Nebraska applied for and received $500,000 for 2008-2009. We resubmitted our request for 2010-2011, and we expect to sign for it in February.