Selling to the Federal Government. Federal Government Contracting and The Historically Underutilized Business Zone (HubZone) Program

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2 Selling to the Federal Government Federal Government Contracting and The Historically Underutilized Business Zone (HubZone) Program Bryan, OH November 7, 2018

3 Federal Contracting Consider This! Huge Market ($500+ BILLION!) On-time payment Great repeat customer Bring the $$$$ to Northern Ohio Some company somewhere is getting this work, why not here??

4 Federal Spending Goals Small Business 23% ($100+ Billion) 5% ($25+ Billion) Women-Owned 5% ($25+ Billion) Disadvantaged/8(a) 3% ($15+ Billion) HUBZone 3% ($15+ Billion) Service-Disabled Veterans * The Veterans Administration has a 12% goal for Veteran-Owned Small Businesses and a 10% goal for Service Disabled Veteran Owned Small Businesses.

5 Federal Contracting in State of Ohio!!! $3,000,000,000 Small Businesses $2,500,000,000 $2,000,000,000 $1,500,000,000 Small Businesses $1,000,000,000 $500,000,000 $ Total Sales in 5 years = $10,218,085,094

6 Federal Contracting in 4 Counties of NW Ohio in the past two years Defiance Williams Fulton Henry Federal Contracting dollars the last two years $52,361,127 $410,843 $1,066,693 $0 # Companies with Federal Sales

7 Certifications Formal Certification 8a HubZone Verification (for VA contracts only) SDVOSB VOSB Self Certification Small Business Veterans and SDVOSB Woman Owned SBA Repository 3 rd party certifier Agencies can set-aside (restrict competition) to any of the above groups if market research shows that there is adequate competition. Federal market research is done through the use of a sources sought notices in

8 Required Registrations SAM System for Award Management If you want to do business on the Federal level, you MUST be on SAM! DUNS Number call / SBA Small Business Dynamic Database

9 Small Businesses in SAM in the Four County Area Defiance 12 Fulton 21 Henry 6 Williams 13 9

10 HUBZone Program Purpose The purpose of the HUBZone program is to provide federal contracting assistance for qualified SBCs located in historically underutilized business zones in an effort to increase employment opportunities, investment, and economic development in such areas. 10

11 HUBZone Impact Number of Participants: 5,306 as of 6/30/18 Annual Contracting Levels: $7.3 Billion (FY 2017) Annual Goal: 3.0% FY 2017 HUBZone Achievement: 1.65% FY 2016 HUBZone Achievement: 1.67% HUBZone Benefits Helps Agency meet/exceed HUBZone goal with set-aside option An additional tool for economic revitalization of underutilized areas. 11

12 HUBZone Program Eligibility Small business Be at least 51 percent owned and controlled by U.S. citizens, a Community Development Corporation (CDC), an agricultural cooperative, a Native Hawaiian Organization (NHO), or an Indian tribe Effective May 25, 2018 indirect ownership requirement removed from U.S. citizens Principal office located in a HUBZone At least 35 percent of its employees live in a HUBZone 12

13 HUBZone Contracts HUBZone contracts (including Multiple Award Contracts) include awards to qualified HUBZone SBCs through: Sole source awards 100% HUBZone set-aside awards and partial set-asides Full and open competition, where the HUBZone price evaluation preference is applied Reserves for HUBZone SBCs under Multiple Award Contracts (MAC) Orders set-aside for HUBZone SBCs against a MAC, where the MAC was awarded in full and open competition 13

14 Status as a HUBZone Small Business Concern To be eligible for a HUBZone contract, a concern must be a HUBZone SBC both at the time it submits its initial offer AND at the time of contract award (13 CFR (c)) A HUBZone SBC may joint venture with one or more other small business concerns or its SBA-approved mentor for the purpose of submitting an offer for a HUBZone contract. Note: The joint venture itself need not be certified as a qualified HUBZone SBC. 14

15 Price Evaluation Preference For HUBZone SBCs The HUBZone price evaluation preference (PEP) shall be used in acquisitions conducted using full and open(f&o) competition The CO shall give offers from HUBZone SBCs a price evaluation preference by adding a factor of 10% to the lowest, responsive, responsible large business offeror. 15

16 The All Small Mentor- Protégé Program Protégés get business development help from their mentors: Guidance on internal business management systems, accounting, marketing, manufacturing, and strategic planning Financial assistance in the form of equity investments, loans, and bonding Assistance navigating federal contract bidding, acquisition, and performance process Education about international trade, strategic planning, and finding markets Partnership on Contracts

17 Questions? Cleveland District SBA John Renner Northwest Ohio PTAC Kent Kahn (Office) (Cell) Vanessa Behrend

18 Lending in the HUBZone/Rural Areas November 7 1pm to 230pm 1425 E. High St. Bryan, OH For a copy: Raymond.Graves@sba.gov SBA Cleveland District Office SBA Indiana District Office

19 Ohio Rural Business Initiative Loans to Rural Entrepreneurs by FY Northern Ohio Row Labels Count Dollars 2017 Rural 342 $ 58,756, Rural 363 $ 96,516, Grand Total 705 $ 155,273, Increased Outreach & Partnership with USDA SBA & USDA entered into a new MOU 04/04/2018 Formalized interagency cooperation Outreach efforts Partnering on credit transactions 19

20 7(a) Loan Fee Relief What s the SBA Doing To Support Rural Entrepreneurs? Borrowers in rural / HUBZone areas Loans < $150,000 Upfront guaranty fee reduced to basis points (.6667%) Ongoing servicing fee waived entirely Rural includes counties that are 30% or more rural by population Williams, Fulton, Defiance, Henry, Paulding, Putnam not Wood or Allen 504 Rural Initiative Pilot Program CDC s are able to make loans anywhere within their SBA Region You're in SBA Region 5: Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin Available from July 19, 2018 to July 20, 2020 Renewed effort to reach out to rural areas and populations 20

21 HUBZone Map 21

22 Williams County Financing Activity PROJ COUNTY NAME WILLIAMS Row Labels Count Dollars $794,700 Other Specialized Design Services 2 $85,600 General Freight Trucking, Long Distance, Truckload 1 $13,200 Residential Remodelers 1 $20,000 All Other Specialty Trade Contractors 1 $125,000 Other Clothing Stores 1 $50,000 Caterers 1 $13,000 Portfolio Management 1 $55,000 Convenience Stores 1 $44,000 All Other Rubber Product Manufacturing 1 $238,900 General Freight Trucking, Local 1 $150, $2,450,100 General Freight Trucking, Local 5 $312,700 Limited-Service Restaurants 2 $62,400 All Other Plastics Product Manufacturing 2 $755,000 Offices of Physicians (except Mental Health Specialists) 1 $25,000 Pharmacies and Drug Stores 1 $600,000 Other Industrial Machinery Manufacturing 1 $365,000 Plumbing, Heating, and Air-Conditioning Contractors 1 $120,000 Automotive Parts and Accessories Stores 1 $50,000 Drycleaning and Laundry Services (except Coin-Operated) 1 $145,000 Janitorial Services 1 $15,000 Grand Total 27 $3,244,800 22

23 What: Two Major Lending Programs Two flagship business loan guarantee programs help start-up businesses launch and existing business expand: 7(a) Working Capital SBA provides a guarantee of select small business loans made by lender participants Financing Change of Ownership Accounts Receivable and Inventory Equipment Certain Refinancing of Debt 504 Supports job creation and economic development through guaranteed debentures Equipment Real Estate and Buildings Leasehold Improvements Real Estate and Buildings 23

24 What if the Borrower Isn t a Good Fit For Us? SBA s Network of Counseling Partners SCORE Small Business Development Centers Women s Business Center Veteran s Business Outreach Center SBA Microloan Small working capital loans for applicants with higher risk profiles than will be contemplated by a bank. Loans up to $50,000 Maximum term 6 years Interest rates set by Micro Lender Pre and Post loan technical assistance USDA B&I Guarantee Program (see following slides) 24

25 USDA and SBA Guaranteed Loans, Compare and Contrast Requirements: USDA B&I Loan: SBA Loan Guaranty Program (7a): Business location Local area population less than 50,000 Anywhere in the U.S. Loans to non-profits allowed? Yes No Size of business standards NOT required to meet size standards Must meet size standard for its industry or alternative size standard, $5MM PAT and $15MM tangible net worth Loan amount $1 - $25 million $0 to $5 million Minimum Project Size? No Minimum, but need to weigh benefit of program and/or use of SBA. $5,000? Percent guaranteed 80 percent for loans up to $5 million 70 percent from $5-10 million 60 percent for larger loans 85 percent for loans up to $150, percent for larger loans Program Guarantee fees 3.0% plus annual 0.5% servicing fee 2% to about 3.75% % servicing Lender s fees No limit, but must be similar to other non-guaranteed loans. $2,500 packaging fee

26 USDA and SBA Guaranteed Loans, Compare and Contrast Requirements: USDA B&I Loan: SBA Loan Guaranty Program (7a): Maximum loan maturity 7 years working capital 15 years machinery 30 years real estate 10 years working capital 10 years or life, machinery 25 year real estate No agricultural production unless Farm Enterprises: 15 years on equipment, operation is vertically integrated 20 years on real estate Line of Credit permitted? No Yes (SBA Express or Capline) RE purchase occupancy requirement? No Yes: 51% on existing structures, 60-80% on new structures Business investment Startups must have a minimum of 20 percent tangible balance sheet equity Startups must have 10% injection into the project (except for Express) Refinance existing debt? Yes Only if on unreasonable terms Usually requires 10% improvement in D/S Cash Flow Coverage Must be sufficient to cover debt Small Loans: Lender determines Large loans: 1.15x enterprise, 1.0x global Collateral Coverage Loan must be fully collateralized based upon the discounted values. All available collateral concept Shortfalls accepted

27 To Do: How can we engage with you to help solve challenges faced by rural businesses? Entrepreneurial workshops Expand your Business Workshops Lender panels SBA Day at a bank branch or chamber USDA/SBA Compare and Contrast Individual meetings Merchant associations Surety Bonds Webinars

28 Contact SBA and USDA Raymond Graves SBA Cleveland District Office 1350 Euclid Ave., Suite 211 Cleveland OH Christie Hooks USDA Rural Development 200 N. High St., Room 507 Columbus, OH