Nevada Week S2 Ep11 | Alternative Financing

Nevada Week S2 Ep11 | Alternative Financing


We’re talking
to underserved entrepreneurs
and economic leaders about small
business growth. That’s next
on Nevada Week. ♪♪♪Support for Nevada Week
is provided by
Senator
William H. Hernstadt,
Cashman Equipmentand additional
supporting sponsors.
Welcome.
I’m Kipp Ortenburger, and thank you for
joining us this week on Nevada Week. Governor Sisolak
wants a bigger stake in small business to
drive Nevada’s economy, and a growing
number of women, people of color
and low-income residents are becoming small
business owners. On this show we’re going
to take a closer look at the challenges
underserved entrepreneurs face both
to get their business off the ground but also
to grow their business beyond what is
considered a startup. Then we’re going to
discuss what supports and what strategies
our state has to foster a diverse and robust
small business economy. To help us shed some
light on these issues, please welcome
Jerrie Merritt, senior vice president
at Bank of Nevada; Medin Gebrezgier,
cofounder of Revive Brand Co.; Jonathan Santos,
also a cofounder of Revive Brand Co., and Kristopher Sanchez,
interim executive director
of the Governor’s Office of Economic
Development. Thank you so much,
all of you, for being here;
we really appreciate it. (all) Thank you
for having us. -Kris, I want
to start with you. The governor has said,
and I quote, small businesses are the
backbone of our economy. Why are small
businesses so important
to Nevada’s economy? (Kristopher Sanchez)
Well, first and foremost,
we have about 270,000 small businesses
in our state, and they employ
about 487,000 people. When we think about the
resilience and vibrancy of our economy,
we’re really talking about the resilience
and vibrancy of our small
businesses. If they succeed
Nevada succeeds, so therefore
they’re the backbone. The governor in saying
they’re the backbone and the engine, it’s
really an apt comparison because we want them
to be successful. We want to be able
to build that resiliency. At the Governor’s Office
of Economic Development, we have many programs
that are aimed at small businesses and helping them
be successful. -And I know that
the focus on previous administrations,
governors of economic development
have been to focus more on
the corporate end and bringing
big business in. Why the shift now
to small business? -Well, there’s a couple
of points there. The Governor’s Office
of Economic Development and the companies
that we’ve assisted, about 92% are companies
of 100 employees or less, and of that 78% have
50 employees or less. We have a number
of programs, the State Trade Export
Promotion program, the Procurement Technical
Assistance Center. One is an export
promotion program that’s funded
through the SBA, about a $250,000 grant. The Procurement Technical
Assistance Center is a staff of six
that’s funded by the Defense
Logistics Agency, and it helps companies,
small businesses, go out and get
contracts with state and local government. And then we have
the Opportunity Fund, the SSBCI funding through
the Treasury Department, as well as VCOZ, the Valley Community
Opportunity Zone, all of which are state
or federal programs that bring resources
to bear down to our small businesses
throughout the state. -Great, and I think
we’ll talk about the specifics of all those
programs in just a sec. Jerrie, beyond
the economic benefits, the intangible benefits
of small businesses, more connected
to the community, what are some
of the other benefits that we see small
businesses bring to a neighborhood
or a community? (Jerrie Merritt)
Well, small businesses
are actually who we are in Nevada. If you think back
to 2009-2010 when we had a downturn
in the economy and many jobs went away
from corporate America, there were actually
individuals who made a major decision
that I am going to be a small business owner,
and those individuals are the ones that are
actually driving small business here
in the state of Nevada. -And Kris, we talk
about gaming a lot as kind of the main
economic driver, but we’ve got
pro sports coming into the Las Vegas
Valley as well; IT and cybersecurity
is talked about a lot. Are there sectors that
we’re seeing prodominantly or more small
business growth in? -Yes, you named a few. As the economy is doing
well in the state and our primary
industries are doing well, mining, hospitality,
gaming and tourism, so we see growth
in those industries. But we also should
think about companies that are really focused
on new technology as well so unmanned
systems, robotics, artificial
intelligence. As our economy grows
and our industries grow and change to
meet new demand and the new technologies
in those industries, we’re focused on
ensuring those types of companies
can find a home here in Nevada
as well. -Jerrie mentioned
that small businesses kind of grew during
the last recession we had. We have some talk
of a recession coming. Are small businesses
more recession proof than bigger business? -That’s a great
question. Many of the programs
that we have at GOED are focused on building
that resiliency piece. So if I may for
a second talk about the State Trade Export
Promotion program for instance,
we know that companies that export perform
better in every market in which they
participate in. They hire more people
and they pay a higher average
hourly wage rate, and so that’s one
program where if we can help diversify the
market that a particular company has whether
it’s within the U.S. or internationally,
we know that’s going to be a stronger and
more resilient company. If we can do that
in economies of scale, then we’ll strengthen
our economy. The Procurement Technical
Assistance Center has the same
sort of approach but for federal, state
and local contracts. So again
we’re diversifying the company’s
ability to expand their market share
for their product. -Now, Jerrie, let’s talk
a little more about just barriers that small
businesses are facing. What are you seeing, especially
at Bank of Nevada, who focuses so much
on small businesses? What are some of the key
barriers you’re seeing that are really limiting
either that initial growth phase or
piloting something or actually growing
up to scale? -Access to capital. Number one. As a small business
actually gets started, they need that capital
no matter where they are. Whether they’re coming
from being part of an existing
business already to starting up
a new business, access to capital
is always the largest barrier for
a small business. -And John, you’re
definitely a small business here,
Revive Brand Co. Can you tell us a
little bit first off just about
your business. What does your
business do? (Jonathan Santos)
Primarily our brand
designs and manufactures products, sportswear,
sports equipment products. The basketball bag
is one of the ones that we designed
and created which we got on Steve Harvey’s
Funderdome and have been able to
sell pretty successfully. But to kind of go
to Jerrie’s point, yes, access to capital at the start
of the business. I started this
when I was a teenager right out
of high school. Medina and I met
at the college, so at the time–
-And I’m sorry, what college
was that? -At the College
of Southern Nevada. So we started it,
we had a business 101 class and I had this– we put together
this business plan over the course
of the semester and at the end
of the semester, we had this business
plan that said we were going
to make $5 million within the first year. So we went to a bank
and I said I want to get a loan to start
this business, look at how much
money we’re going to make, right,
and of course the answer was no, you cannot
get a business loan because you don’t have
the required assets or whatever it is
you’re requesting. You don’t have
what it is, right? So the only way
that I got it started, luckily I had a good job
and the way that I was able to
get it off the ground was to take out
a personal loan. I used that personal loan
to actually start the business which
had a pretty high interest rate,
and of course as new businesses
and entrepreneurs learn very quickly,
even though you have some access to capital,
you may not know exactly what
you need to know to grow that business. So it was a lot
of learning experience over the years
to really figure out where our market was
and what we’re going to do to really expand it. -And Jerrie,
you’re sighing. Is this something
that we see a lot in small business growth, taking out
that personal loan? -Yes. That personal
loan is usually a huge challenge for
small business owners because even after the
business is up and going, you still have that
on your personal credit and quite often,
a small business owner will make the
business go forward and they do not have
the ability to pay back that money to themselves
that they borrowed. So then that challenges
their credit score, and of course
your credit score is a huge part of you
being able to borrow money not only personally again
but for your business. -So Medin, beyond the
personal loan and kind of starting the business up,
we didn’t mention, but I’ve done some
research on you. In 2011 the business
was founded; is that correct?
-Yes. -So we’ve got about eight
years of business now. What’s day to day like? Is this your
primary job or do you have
other jobs and this is kind of
your secondary thing? (Medin Gebrezgier)
Well, from the jump
Jonathan and I wanted full control
over the direction and development
of our company. We knew that there was
plenty of opportunities out there
for partnerships with powerful
entities and people that would want
to take us on just because for optics
or any other reason, but we wanted
to create something that would be a staple
here in this city. And Revive,
the tag line, “Wake Up and Win”
and all that, we want to be
a part of the growth of the city of Las Vegas. So with that in mind,
we had to make a lot of sacrifices including
how we went about the company’s
financials, and we had to
sacrifice a lot. Personally,
we had to use our own personal funds from work. A lot of times
we were broke. We messed up our credit. We went out in the
public and just started selling the bags
that we were making. Sometimes
it didn’t sell, sometimes we failed,
and so over the years, we had just
been taking hit after hit but
we kept coming back. You mentioned
resiliency, and we just decided
to keep pushing forward. So here we are now with
a company that’s a lot more robust in terms
of what we’re able to create but still
with a lot of room for growth in terms of
how we want to execute. -Is that barrier then
still capital? Are we really struggling
to get the capital? -I would say so, and it
comes from the fact like I mentioned
earlier, I mean, just to be
completely honest, there was a lot
of mistakes made financially early on
into the company meaning, you know,
a bunch of guys growing up in Vegas
and we took out loans, messed up credit,
took out credit cards. You know, that kind
of stuff really was a stumbling
block for us. Now trying to get back
after we’re growing and we developed
this brand, try to get a loan
has been– or any kind of financing
has been tough. -So Jerrie,
we’re hearing some interesting things
here, right? We don’t have capital,
we’ve made some mistakes but we’re very resilient, we’re out
in the community, we’ve been on
national programming and things like that, so we’ve got
some awareness. In Nevada, what
opportunities do we have for small businesses
that are kind of dealing with these
types of issues? -Well, we’re fortunate
enough, as Kris mentioned earlier,
that through the state of Nevada
and through GOED, there is the Nevada
Opportunity Fund. The Nevada Opportunity
Fund was created by Senate Bill 126
to be able to give opportunities to small
businesses such as these young men that are
starting their business. Not only that, if you’re
a startup company or a startup business
and you just want to go into business,
the Nevada Opportunity Fund
actually has a certain amount of dollars actually
set aside to help businesses that would
like to start up. But for these young
men that have been in business for a while,
that have gone through all the challenges that
they’ve talked about, and I think over the
years we’ve even had the opportunity to talk
about some of them from a banking
standpoint, the Nevada Opportunity
Fund is there to give them kind of an injection
to get started. Number one,
we no longer look at the business score. That business score stops
many small businesses from being able
to move forward. We actually take
your credit score, your personal
score of 625. You could even have had
a bankruptcy along the way. But if you’ve been able
to reestablish your credit and get your credit
score back up to 625– and when this program was
actually put together, the reason we use that
as a baseline is because we know that small
businesses have done the things that
the two of you have. They were totally
unaware of the things they needed to do,
so their credit was actually hurt
so we said okay, 625, you rebuild
your credit score. Let’s try to help
these small businesses move forward. -Beyond that,
what else do you need to qualify or be
eligible for this? -Well, here’s
the big part: How about
a business plan? The business
plan is huge, and the reason
the business plan is such an
important part of the Nevada Opportunity
Fund is because many small businesses
will not have the cash flow to be able
to cash flow the loan that they’re going
to be asking us for. That is usually one
of the biggest challenges. You know, they’re
actually making money, but the money they’re
making would not enable them
to come to the bank, borrow a loan and
be able to pay it back. So within
that business plan, we use the projections. So to have a very
solid business plan that says I project
this is how much money my business
is going to make in the next three years,
in the next five years, we take those numbers
and use it as your cash flow instead
of the financials that you would
normally have. -Now, Jerrie
and Kris both, while we’re talking
about small businesses that maybe don’t have
extensive education in business or maybe
they’ve learned through some of their mistakes
but yet they don’t have the essential skills
you might need to put together
a big business plan, what kind of resources
are available within our state to support
things like that, Kris? -You know, there’s
quite a few, and one of things
that we do at GOED is we serve as a connector,
in connecting people, and in all our communities
across the state, we have very vibrant
chambers and regional development authorities
that focus on business retention and the
growth of businesses. We also have
a lot of programs at the federal level through the Small
Business Administration. Often what happens is
the story that you shared is similar to a lot
of stories we hear about, but it’s just finding
those access points and making sure that people
are aware those programs are there and those
resources are there. But what we need
to look at is, especially as
we move forward, what the gaps are
in that ecosystem, how we address those gaps
and how we make sure that there’s hand-offs
as companies start to progress and grow
to make sure that they get that early stage capital,
that they continue to be well capitalized
as they go through their growth,
that they can develop a meaningful
business plan and make sure
they’ve got a mentor and a partner
to walk them through those steps
along the way. The great thing is
that we have a very entrepreneurial
community and spirit in Nevada so we have
the raw material and we have all
the knowledge here. It’s just a matter
of making sure we structure that in
such a way to make sure those access points
are available and open and people know
where they are. -I want to come back to
the awareness side of this. John, let’s
start with you. We’re talking about
a lot of resources here. Were you aware
of these resources before we were
actually in-studio or prepping
for this show? -Well, when
I first started, after I got
my personal loan, I was aware of the SBA
and some of the business counseling that’s
provided by SCORE and the SBDC
so that was after I got the loan
and they told me, why did you get
this loan? And I said I thought
this was what I needed. They said you
could have done it differently, right? So those resources were
available after the fact. I heard about it through
the college, actually, the College
of Southern Nevada. We actually started
using them, so we found a lot
of good mentors in there. But the main thing is
a lot of them were not in certain industries
that we were in, but they did provide
really good feedback, but I think as we were
young and kind of like, you know, okay, this
person doesn’t really understand what
we’re trying to do. We didn’t realize that
they did understand what we were
trying to do. Because we were young,
we didn’t think that they knew–
they didn’t know who we were about,
right? But that’s not
the truth. Now looking back
and every time I get to meet with people
that are part of those programs,
they’re very insightful in regards to what
they have to say. But when you’re young and
you’re just starting off, you think you know
more than they do and that’s not
always the case. -Medin, did you
want to add to that? -I was going to say
that misconception is big time, you know,
you think you know everything
that you need, and part of it is
just the information that you don’t
have access to when you’re
starting off. So I just wanted
to make sure that I really, you know,
gave a shout-out and appreciation
to the College of Southern Nevada,
the leadership, staff and faculty
that’s there, because we learned
so much from not only the business department
and Kevin Rayford, but every department was
helpful in our success. I think that was
really critical in getting information
to start off. -And then Jerrie,
beyond CSN then, if you’re a business and
you’re in a situation, either you’re in
the early stages or potentially trying
to grow and scale up your business,
and we’re talking about a lot of nuances
here depending on what your business is,
what’s the best access point to then
kind of get started and be able to
navigate this system? -I would say
start with SCORE. If you go into SCORE
and just kind of throw your hands up
and say I am here because I either want
to start a business or I’m already challenged
with your business, there are counselors
there that, like you said, would
totally understand. They may not be very
versed in what your business is today,
but they understand all the details
of actually starting and running
a business. I have referred
through the Nevada Opportunity Fund small
businesses to SCORE. Number one,
to start with their business plan,
to make sure they understood
their business plan because many small
businesses say oh, I can get
a business plan. They’ll go online
and fill in the blanks, you know, to actually
create a business plan, but they do not
understand what they are
actually creating. So that’s the help
you get from SCORE. I have referred small
businesses to SCORE that have come back
to me later and said Ms. Jerrie, I’m not ready
and I didn’t understand that I wasn’t ready
until I sat down with a SCORE counselor. They were able
to help me understand why I want to
start this business, what the
challenges will be, and if I should
actually move forward. -And when you get
to that stage, you just put
a hold on the loan at that point?
-Oh, definitely. Like I said earlier when
you asked me the question: Key,
the business plan. The business plan is
like starting to leave the country and you’ve
never gone before. So what do you need? You need a plan, right,
and that’s what a business plan is
to any small business that wants to start. And quite often
an individual would say oh,
I worked– I did this for
the corporation that I worked for
for the last 20 years, so now I am going
to do it on my own. Even for those
individuals, I would say do not get
started unless you have your own personal plan
of how to get it done. -Now, we have
a million dollars in the Nevada
Opportunity Fund. Is that enough
to grow business in the right way? I mean, we’re not
talking about every small business has
access to these funds. Beyond that is there
a way to grow this within the state
or are there other federal programs
or local programs where we have similar
opportunity funds that we could
have access to? -Well, Kris talked
about earlier that most of them would actually
be through the state, but the one now that
I’m most familiar with is the Nevada
Opportunity Fund. And back
to the question is a million
dollars enough? Some day it will not be,
but now it is because it’s actually
a revolving fund. For every single loan
that we make, on a monthly basis
that small business will come in and they
make their payment, and when they make
their payment, it goes back into the
fund which actually gives us dollars
to be able to lend to another small business
when they come in. -Now, Kris,
you mentioned the opportunity zones. This goes back to
the federal Trump administration’s tax
cuts and job acts, and opportunity zones
were identified there. Do you foresee–
I know it’s still somewhat new, but do you
foresee some of these opportunity zones
really being areas where entrepreneurs
can grow? -We sure hope so. The program is new and
they’re yet to be proven. There are some models
around the country that we’re
looking at in terms of structuring growth
in the community to capitalize
on the opportunity that those
zones present. But there’s still work
to be done both at the federal level
and subsequently how we integrate that
into our framework for economic development
in the state. -And at the state level,
what may we see in the next couple years both within the
governor’s office but then also at
the legislative level? -Sure. So first and
foremost talking about small businesses
as I mentioned, the ecosystem and
really understanding where those gaps are,
we want to make sure that as we’re
talking about today, time and money,
the two most important things to a small business,
and we want to intercede and make sure that
they get the capital, but we also want to save
them time in the process of development
and not having to make the same mistakes that
a lot of folks make when they partake
in this endeavor and start that process. As we get into the next
iteration of these types of loans and everything,
it’s learning from what’s worked
and what hasn’t and how we can do
a better job. Also we have a very low
unemployment rate across the state,
around 4%. I think with that
in mind, we need to look at economic development
moving forward and how we structure
our incentive programs to match the intent
that we have in bringing high-tech companies
into Nevada and really focusing
on the technologies that are going to drive
our community forward and making sure
that we are focused on education
and workforce. Education and
workforce are key, central to any economic
development plan we may embark on,
so you’ll hear a lot about that and making
sure that we’re preparing our workforce for
20th century jobs. I mentioned robotics and
artificial intelligence and autonomy. Those technologies are
driving a lot of changes in our primary
industries, and we need to be
prepared for that. -Jerrie, let’s talk about
the corporate policy piece of this too. We mentioned that banks
aren’t necessarily giving loans to more
underrepresented populations especially
new businesses. Can we change policy
within a bank to maybe open things up and be
a little more accepting or pliable with
these types of loans? -Well, that will
actually come. Hopefully we’ll get
a little relief from the federal level
because you have to take in consideration
that all banks are actually governed
by the Federal Reserve and of course the FDIC. So there are certain
guidelines that banks just really can’t
step outside of and actually make loans
to small businesses. As far as policies
are concerned, I’m almost positively
sure that all banks are constantly taking
a look at their policy to see how they
can actually help small businesses
in general. But as far as the
federal end of it, I do feel that as
we grow as an economy, it will kind of loosen up
just a little bit so that we can,
but there are certain guidelines that
financial institutions have to stay inside of
in order to be within the guidelines of the FDIC
and the Federal Reserve. -John and Medin,
it sounds like you are eligible for
a potential loan here at the Opportunity Fund,
so we want to follow up with you and kind of
see how that goes and how things develop. But we just have
a couple minutes left. John, I’ll
start with you. Advice for the other
small business owners and entrepreneurs
that might be watching right now. What’s the one key
thing you’d like to impart to them? -The biggest thing
is that we discussed business planning
a lot and I think it’s very crucial,
but I also think it’s very intimidating
at first. Depending on your
skill level or your– you know, it’s a lot
of writing, right? It’s a lot of planning. So I would really advise
them to look into the Lean Canvas
business model which is a great
one-page type of thing which walks you through
some of the main questions which will then
allow you to actually take some sort of action. Not like an action
like taking out a business loan,
but it will allow you to take action in
maybe starting to develop the product on a small scale,
on a smaller level. Instead of wanting
or needing $50,000 to develop this product, you may be able to do
3D printing on it and actually develop it
on a small scale to see if it’s going to work,
and that might only cost you a couple
hundred bucks. So the Lean Canvas
business model so you can kind of
set up the direction of your business
or your brand is going to be key,
and then start small and start prototyping
those designs. Start showing it to
the business counselors at SCORE so they can
start envisioning maybe where you are
going to go with that, and then maybe they’ll
be able to direct you on how to write
a better business plan, and maybe they’ll
connect you to Jerrie and what funds
are available for that new idea
and concept. And then the second
thing is always have really good
people around you. Try to get involved
with as many like-minded individuals,
entrepreneurs, mentors that have done something
like you’re doing or that are in
a similar space but they’re
all progressing towards
something greater. I think Las Vegas
is a very unique city, and growing up here,
I’ve seen how the community
really functions. It’s a very
transient city, but I think more
recently it’s started to develop a community,
and I think through the high-tech jobs and
sectors that are coming in we’re going to have a more
established community, and part of it is just
going to be about finding it,
finding your niche and where you fit in it,
and try to get that mentorship before
you put any money down. -That’s wonderful
advice, and great advice around
the table completely. We really appreciate
you being here. Thank you so much.
(all) Thank you. -And thank you as
always for joining our discussion
on Nevada Week. Please visit our website to watch
this episode again or access resources
discussed on this show. Also, if you have
a topic or issue that you’d like us to explore
on a future Nevada Week, we’d always love
to hear from you so find us on social
media or email us at [email protected] Thanks again,
and I’ll see you on the next
Nevada Week. ♪♪♪

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