Malia Spencer Staff Reporter Portland Business Journal
Oregon's economic development arm is launching a new program aimed at helping high potential startups bridge the funding gap between launching and receiving traditional bank or venture financing.
Business Oregon's Revenue Financing program falls under the Small Business Expansion umbrella and the Oregon Business Development Fund direct loan program.
It consists of a $5 million pool of money that will be loaned to traded-sector businesses — or those that sell products and services outside Oregon — and allows for a periodic revenue-based payment along with scheduled monthly payments.
The state expects typical financing amounts of up to $250,000, said Vince Porter, policy advisor for jobs and the economy for the governor and interim director of Business Oregon.
The program was first explored under previous Business Oregon director Sean Robbins, Porter said and resulted from the success of the existing direct loan program.
“Generally it’s been fairly successful, there are not a lot of default loans,” Porter said of the existing program. “One thing we identified is while there is not a lot of failures there has been room to take on added risk in the program and get more money out there.”
According to the state, the program will target companies that are between “almost bankable and angel or venture capital deals.”
As Business Oregon staff evaluated the program, it found a handful of other states have financing tools with revenue or royalty payments: Massachusetts, Maryland, Maine and Connecticut, said spokesman Ryan Frank.
Funding applications of up to $250,000 will be evaluated by Business Oregon’s Business Finance division staff. Applications above that amount will go to the Business Oregon’s Finance Committee.
“We don’t anticipate 100 percent success rate, due to the nature of the companies,” Porter said. “We are making one piece of the program a sort of royalty deal, where the state takes a very small royalty percent to help offset the risk of the loan.”
The state's move marks an effort to address the longstanding challenge that many Oregon entrepreneurs face: limited funding options within our boarders. Early stage funding of high growth companies is critical since it can get these startups to a place where traditional bank options or venture capital becomes an option.
Many entrepreneurs have long lamented that in order to get early-stage or growth funds, they must go out of state.
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