What Owners Need to Know About Funding Their Growth – Jennifer Cummings

Have you ever run into a cash crunch in your business? Was there a time when you wish you had access to more capital to expand, hire more employees, or get a critical piece of equipment for your business? FAME, the Finance Authority of Maine, helps companies even without pristine credit access business and agricultural loans so they can grow. Jennifer Cummings, the Director of Business Programs, shares the ins and outs of this program.


Rich: Our next guest is Director of Business Programs at the Finance Authority of Maine, aka FAME. She oversees a strong and experienced lending team that works with Maine lenders and businesses to help them get to ‘yes’. She has over 15 years of experience as a commercial finance professional both as a commercial loan officer and workout officer.

She joined fame in 2013 as a Senior Workout Officer and now serves as Director of Business Programs. A Maine native, she received her BS in international business and logistics from Maine Maritime Academy, and earned her MBA from Thomas College.

While not at work. She enjoys spending time outside with her family skiing and “upta camp”. She can be found competing at local CrossFit competitions and is a CrossFit trainer. We’re very excited to have with us today, Jennifer Cummings. Jen, welcome to the show.

Jennifer: Hi. Thanks for having me.

Rich: And when I said a “senior workout officer”, I was going to make a joke about you being fit, but it turns out actually you are fit.

Jennifer: I’ve heard that joke before.

Rich: Nix that!

Yury: So Jen, could you tell us a little bit about how you got involved with FAME and what exactly do you do there?

Jennifer: Sure. So in my commercial banking career, I dealt with FAME quite a bit in their insurance programs that they offer to lending institutions. And I really liked the organization and their economic development drive in the state, and a job opportunity came up and I went over there. So I’ve been there about six years and things are going well.

Rich: Awesome. So tell us a little bit about the role of FAME within the Maine business ecosystem. Because we’re checking out your website and you seem to have services and programs for both businesses and education.

Jennifer: Yes, we do. So we have an education division that manages and services the 529 NextGen program for the state of Maine, as well as some within the country as well. So we service the Harold Alfond scholarship, the $500 per every baby that’s born in the state, as well as a lot of financial education modules, help with student debt.

On the business side we offer commercial loan insurance to lending institutions in the state, and even out of the state actually that qualify. And we also have a direct loan programs, so consumer directly from FAME, to help with business startup all the way through the business life cycle. We also have some equity capital in the form of Maine seed tax credits, and new market tax credits that we act as a conduit for the state.

Rich: Wow.

Yury: So in the pre-recording interview, we were talking about some of the kind of issues that businesses may deal with and a cash crunch was mentioned a couple of times. So can you tell us some of the reasons why a growing business may have a cash crunch?

Jennifer: Sure, there’s a bunch of different reasons I can think of, but a couple to focus on would be quick growth. That’s been an issue that we’ve seen recently, as well as just some aging on receivables. So if money’s taking a little while to come in, that might serve as a cash crunch if their timing of receipts of payment is a little slower.

Rich: So this could be, the cash crunch could come from both good and bad reasons it sounds like. I mean it’s a negative thing because obviously your growth is a little bit strangled, but it could be because of positive things happening in your business.

Jennifer: That’s right.

Yury: Is that something that it can be preemptive, like can you anticipate that? What are the key indicators that can help me mitigate running into that issue ahead of time?

Jennifer: I think if you’re a business person that’s really on top of your financial situation you’re always going to have financial information that’s accurate and data that’s accurate for you to make decisions on as you look for an ongoing basis. But one of the things that’s really important is to have projections, so you’re knowing where those revenue streams are coming from and you’ll be able to tailor that as well as your expenses to know when a cash crunch is going to come. So you can kind of hedge that and make plans accordingly.

Yury: Is that what you’re doing, Rich?

Rich: I was about to say they can’t see this at home, but my head is hanging low right now. Definitely one of my many Achilles heels when it comes to running my business.

So you definitely help companies that have this cash crunch. What are some of the ways in which businesses can fund their growth? Like do they overcome this or what are some of the ways that they can generate some of the revenue necessary?

Jennifer: So FAME likes to act as a kind of a last resort. We like our businesses to start with their banking partners. They know you the best, they understand your business the best as well as you do, and we’re kind of that person in the background guiding the lending partners on how best to make a deal go through. But they’re going to be the ones that can give you financing right off the bat if it makes sense. If it doesn’t, that’s when…

Rich: Sorry to interrupt. But banks are often most likely to give us either alone or extend us a line of credit. They’re the two main ways?

Jennifer: Or both. Or you could get equity from outside capital. But I think a line of credit or a loan would be the main way a bank could help you. But there’s also some other resources available that are helpful in business planning. So the small business development centers, SCORE mentors, so they’re able to help you really fine tune a business plan and understand your financials and where you’re going.

Yury: Jen, let’s pretend for a second that I own the business. So when do I know that I need to come to you versus going to my bank? Or do I always begin the relationship with the bank before approaching FAME?

Jennifer: Most of the time we’d suggest that you go to your bank first. So let’s say you go that route. The bank is going to qualify you to get a loan or a line of credit. You know, a term loan or a line of credit. If they feel that that risk is a little high and they want to feel more comfortable, they’ll purchase an insurance policy from FAME in which that contract is between FAME and a bank. So we don’t really have any direct correspondence with a business owner in that sense. So that’s our commercial loan insurance.

On the direct loan side, we look at loans that banks actually may turn down. So kind of a last resort if the bank says no, they may say check with FAME, they might offer some financing even though we can’t help you.

Rich: Is that only on the commercial side or did you also say that that’s also for more of the consumer side as well?

Jennifer: Just commercial.

Rich: Just commercial. Okay. So for the owners out there who may have gone to the bank and for whatever reason the bank has turned them down, sometimes a bank may suggest you, other times they’re just going to have to be aware that FAME exists. Correct?

Jennifer: That’s right.

Rich: Alright, so I guess I’m curious to know two things. One is, how do banks partner with you? Like, what does that relationship look like, do they need to come back to me first and say, “Hey, listen, you’re a little high risk for us, Rich. But we think we have a solution. We want you to come with us and go talk to FAME”, or what does that relationship look like?

And then as a follow-up question, I’d like you to kind of explain, if I have been turned down by a lending institution, how might I approach FAME to get the best chance of getting that funding?

Jennifer: Sure. So before a lending institution will come to FAME, they’ll require the borrower to sign an application so that the borrower is aware that their financials and their personal information is being shared with us as we look for a request. And, and at times we do meet with the bank and the borrower and try to come up with a strategy that works for everyone. Other times the bank will use our online portal. So it’s kind of an electronic answer system that will give them an answer immediately as to whether or not they qualify for loan insurance.

A borrower would come directly to FAME in an instance where they’ve been declined by the bank, but they may just have heard of us or used us in the past or had a friend that’s used us. And that’s okay too.

There’s also times when we participate with other institutions in the state, like CEI or MTI or EMDC, SMDC. So there’s many different organizations throughout the state that are here to help the economy grow and they want to see our small businesses succeed.

Rich: And so in that case where I had been turned down by a financial institution, do I go to your website, do I call a phone number, or do I just need to get in touch with a FAME first?

Jennifer: Sure. Our website is www.famemaine.com. You can certainly go there. There’s a wealth of information and it has my contact information as well as our lending team. So certainly reach out to any of us.

Yury: Are there any particular recommendations that you have for business owners that may help them to improve their chances of actually being considered by FAME?

Jennifer: Sure. So as any banking institution would do, and a financial institution, we’re looking for a few things. Cash flow, credit worthiness, character, and collateral. You know, the main things that anyone looks at when making a credit decision. But what we like to do is say that we can’t predict that all of them are going to be great because if they were, you’d just be at a bank, you wouldn’t be with us.

So we understand that it’s not going to look perfect. We may look to try to shore up or sturdy the legs of a couple legs of the stool per se. So we may ask for maybe a junior mortgage on someone’s home or that we may put some covenants in to try to make the deal look a little better and mitigate our risk slightly.

Rich: Can you talk a little bit about the third C I think it was, which is character. How does that play a role in whether or not I’m, because I’m quite a character. Sorry, can we cut that piece too? No. But I am curious about how you come to a decision of whether or not the business or the business owner has the right character for a loan.

Jennifer: So it’s very gray, that’s not a black and white that you can measure on paper. But one of the things we like to do, especially when working with our banking partners on that, we can understand if they’ve been a customer for a long time, if they’ve always paid their bills, they had a reason for a slip up. You know, something happened, maybe there was a disaster at their store or maybe they got robbed. There’s obviously certain things that could happen that would explain a dip in performance.

So if we can quantify that and show it as a onetime event, then we’d be more likely to move forward with a borrower like that. And we also like to see that people are interested in their community and working to maintain their business in the state of Maine.

Yury: So speaking about businesses in different industries, are you better positioned to assist different types of businesses, or are there some specific industries that you prefer to work with?

Jennifer: We have a few that we’re not allowed to work with. So gambling, adult entertainment, religious sectors. But other than that, we’re pretty open. Right now we cannot do marijuana lending, but we can do hemp. So yeah, so basically we’re able to do all industries. We are highly focused on STEM industries, aquaculture, manufacturing. Those are some of the hot buttons that were pointed out in the state strategic plan that was issued a couple months ago.

Yury: We actually had an interview about that strategic plan several months ago, I think with Yellow Light Breen.

Rich: Oh yeah, that was right around that time. So no one wants to think about this, Jen, but what happens when a loan goes bad?

Jennifer: So when a loan goes bad, you want to be really transparent with your banking partner, whether that involves FAME or not. And just really be clear about what’s going on and what your expectations are as a business owner.

We’ve seen instances where people come in and just hand the keys over to their convenience store because maybe they’re really sick, maybe the business isn’t performing. And at that time there’s a lot of different things that have to happen. But I would say the main thing is to be really transparent and open and honest with your banking partners.

Rich: Alright.

Yury: So you shouldn’t treat it as a failure, per se. Like, if the loan goes bad, then you recover or kind of like bounce back. Can you apply for another loan?

Rich: Or maybe renegotiate?

Jennifer: So depending on the circumstance, if there’s a reason that something happened and there’s a way to come out of it with a plan, then most banking institutions are going be open to listening to suggestions from you as the business owner. So maybe you want to lower your payment for a certain period of time or maybe you want to sell a piece of collateral to pay the loan down to get that payment lower to make it more manageable for you for a certain timeframe.

Rich: Because at the end of the day, I’m assuming the bank really would prefer to get its money back rather than the keys to a convenience store.

Jennifer: That’s right.

Yury: Or would prefer to see you succeed.

Rich: Well that’s a very positive Machias Savings Bank sort of approach, for sure.

Yury: Thank you. So I’m curious about the difference between a business loan and the agriculture loan, the different stipulations.

Jennifer: Sure. So we service the state of Maine Department of Agriculture loan portfolio. So any loan application that comes through has to go through an eligibility requirement through the Department of AG. And then it comes to us and we do all the underwriting. So kind of the background work for that. There are certain programs that might offer a more favorable interest rate than say, a FAME direct loan would. So there’s one specific to dairy, one specific to potato farmers. So there’s a bunch of different nuances there that allow our agriculture environment in the state to have options as well.

Rich: And I think you mentioned aquaculture as well. Does that fall under agriculture loans?

Jennifer: It actually can fall into either or, or both. In some cases we can add them together,

Rich: That’s interesting. There definitely seems to be a recurring theme on the show is the importance of aquaculture for the state of Maine. Jen, how is Maine funded and what type of KPIs do you track on the business side?

Jennifer: So do you mean Maine funded or FAME?

Rich: FAME. Like, are you funded solely from, for lack of a better phrase, the payback of the loans or does the state fund you, do tax payers fund you?

Jennifer: So our direct loan portfolio comes from a stream of money that was originally from the state. But we were given over time millions of dollars of which we’ve essentially tapped into none of it. We have our reserves still standing and those monies, that’s a revolving loan fund. So essentially it’s the money that’s paid back is used to then relend out.

Rich: Excellent. And so do you need to track KPIs for anybody since you originally got the money from the state, or do you track KPIs? Like are there certain things that you guys are really interested in being like, the money FAME puts back into the Maine ecosystem is beneficial because… and be able to tell a story?

Jennifer: So we look at job retention and job growth as some indicators. We report back to the state on an annual basis when essentially we’re looking for more reserve money annually through the legislative process.

Yury: Do you have any stats about the number of businesses that you guys help to create or the new jobs in the last few years or so?

Jennifer: We do, and I thought about grabbing that right before I left and I didn’t grab it.

Rich: Well Jen, your job is going to be to get us those and we’re going to share those in the show notes.

Jennifer: Okay. Perfect.

Yury: All right. So Jen, can you tell us a little bit about the equity capital and tax credits through FAME?

Jennifer: Sure. So we have the Maine seed capital tax credit program, and that’s designed to encourage equity and near equity investments in young businesses directly and through private venture cap fund. And FAME can authorize state income tax credits to investors for up to 50% of their cash equity they provide to eligible Maine businesses. Investments can be used for fixed assets or research on working capital.

Yury: So this is kind of like a way to incentivize equity into a young businesses or startups. Is that the right understanding?

Jennifer: That’s right. There are some parameters around that, the revenue of the company can’t be more than $5 million. Okay. So there are some parameters, but there’s acceptance of investments from individuals or venture firms. So those can be looked at on our website if you want more detail. But just to add a little context, over the last three years the tax credits were given out over an eight or nine month period three years ago. Last year they were given out in two days. And this year they were gone by 4:00 PM on January 2nd. So there’s definitely a need and a drive to get those credits.

This year there were 141 applications for 25 businesses, and there were $14.5 million of investment applications, which came down to 34.5% credit per application approximately. So a great program and allows some real good incentives to get some money into the state.

Yury: That is fantastic. Thank you.

Rich: Jen, if there was one thing that you want to make sure that owners of growing Maine businesses know about FAME, what would it be?

Jennifer: I would say to keep us in mind at any stage of the business life cycle. So we’re really trying to push and be relevant for startups all the way through growth.

Yury: Fantastic. Jen, this is the part of the show where we ask one of the best questions on the show.

Rich: He is very excited about this part of the show.

Yury: I just love this question because it clearly shows what practitioners and people who are changing the environment are truly thinking about on day to day basis. So I really wanted to know if there was one thing that you could improve about the Maine business or Maine ecosystem, what would it be?

Jennifer: I would say I thought about your question a lot and I think that as we go through the new era of technology and on all these great things that are happening in our state and seeing them Maine seed capital tax credit program and how much investments it’s bringing into our state, having more allocations from the legislature would be my answer to that question.

Rich: All right. Jen, this is great. You did mention the website famemaine.com. But where else might people find you online if they want to reach out<

Jennifer: LinkedIn.

Rich: All right. So we’ll make sure that we have a LinkedIn connection for you online as well. And Jen, this has been great. Thank you so much for swinging by today.

Jennifer: Thank you guys.

Yury: That was very helpful. I appreciate it.