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Economic Development Finance
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Economic Development Finance



June 2004 | 520 pages | SAGE Publications, Inc
"Incredible.  What a major contribution, just to pull together the diverse array of information out there about development finance into one volume.  I consider this book an 'education' for the lay reader, and a fabulous resource for the practitioner of development finance." –Dr. Rhonda Phillips, AICP, CED, University of Florida

"This is the most comprehensive and best-written economic development text in the market. This would be a good text for a graduate level course and would work well with a one-semester teaching plan. . . The main strength of the book is the author's ability to summarize concepts, programs, and institutions and then draw from them issues, lessons, and challenges."  –John S. Strong, School of Business, College of William and Mary 

Economic Development Finance is a comprehensive and in-depth presentation of private, public, and community financial institutions, policies and methods for financing local and regional economic development projects. The treatment of policies and program models emphasizes their applications and impact, key design and management issues, and best practices. A separate section addresses critical management issues for development finance programs: program and product design, the lending and investment process, and capital management.  Case studies are included throughout the book to help readers develop their skills and apply policies and tools to real practice issues. A glossary of finance terms is also included.

Economic Development Finance provides a foundation for students and professionals in the technical aspects of business and real estate finance and surveys the full range of policies, program models, and financing tools used in economic development practice within the United States.   

Learn more economic development strategies on Karl F. Seidman's Web site at www.kfsconsulting.com

 
Part One Introduction
 
Chapter One Capital Availability and Economic Development
The Growing Field of Economic Development Finance

 
The Purpose and Design of This Book

 
The Role of Finance in the Economic Development Process

 
Capital Availability and Capital Market Imperfections

 
CAPITAL MARKET OPERATIONS, MARKET IMPERFECTIONS AND CAPITAL SUPPLY GAPS

 
Capital Market Imperfections and Their Implications for Economic Development Finance

 
A Framework for Expanding Capital Availability

 
 
Part Two The Basics of Business Finance
 
Chapter Two Financing Business Enterprises: The Role of Equity and Debt
Defining Debt and Equity

 
COMPARING EQUITY AND DEBT CAPITAL / KEY TERMS AND ISSUES IN EQUITY AND DEBT FINANCING / HYBRID FINANCING

 
Financing and the Stages of Firm Development

 
DATA ON SMALL BUSINESS CAPITAL SOURCES

 
The Use of Equity and Debt in Hypothetical Firms

 
 
Chapter Three An Introduction to Business Financial Statements
Accounting Concepts and Accrual Accounting

 
Financial Statements: The Balance Sheet

 
WHAT DO WE LEARN FROM THE BALANCE SHEET?

 
Financial Statements: The Income Statement

 
WHAT DO WE LEARN FROM THE INCOME STATEMENT?

 
Connecting the Balance Sheet and Income Statement

 
 
Chapter Four Analyzing Business Financial Statements
A Framework For Firm Evaluation

 
ASSESSING ECONOMIC DEVELOPMENT BENEFITS / BUSINESS PLAN EVALUATION / ANALYZING FINANCIAL CONDITION AND PERFORMANCE / FINANCIAL PROJECTIONS

 
Cash Flow Analysis

 
CONSTRUCTING A CASH FLOW STATEMENT / CASH FLOW ANALYSIS FOR CRYSTAL CLEAR WINDOW COMPANY / DETERMINING DEBT SERVICE COVERAGE

 
Ratio Analysis

 
PROFITABILITY AND OPERATING RESULTS / SHORT TERM LIQUIDITY AND CASH NEEDS / CAPITAL STRUCTURE AND DEBT CAPACITY /

 
Beyond Ratio Analysis

 
The Final Test: Preparing and Evaluating Financial Projections

 
 
Chapter Five Working Capital Finance
The Importance of Working Capital Finance

 
THREE MEANINGS OF WORKING CAPITAL / BUSINESS USES OF
WORKING CAPITAL / PERMANENT AND CYCLICAL WORKING CAPITAL

 
Forms of Working Capital Financing

 
LINE OF CREDIT / ACCOUNTS RECEIVABLE FINANCING / FACTORING / INVENTORY FINANCING / TERM LOAN

 
Sources of Working Capital for Small Businesses

 
Underwriting Issues in Working Capital Financing

 
Underwriting Issues in Working Capital Financing
Case Study: Crystal Clear Window Company
Underwriting Issues in Working Capital Financing
Case Study: Crystal Clear Window Company
Case Study: Crystal Clear Window Company

 
 
Chapter Six Fixed Asset Financing
Fixed Assets and Business Operations

 
Differences Between Fixed Asset and Working Capital Finance

 
IMPLICATIONS FOR FIRMS / IMPLICATIONS FOR LENDERS

 
Fixed Asset Debt Instruments

 
TERM LOANS / MORTGAGE LOANS / LEASEHOLD IMPROVEMENT LOANS / LEASING /

 
Sources of Fixed Asset Financing

 
FIXED ASSET FINANCING GAPS

 
Case Study: Phoenix Forge

 
 
Chapter Seven Real Estate Finance
The Real Estate Development and Finance Process

 
PREDEVELOPMENT PHASE / CONSTRUCTION AND DEVELOPMENT PHASE / OCCUPANCY AND MANAGEMENT PHASE / FINANCING PROCESS

 
Real Estate Financial Statements

 
DEVELOPMENT BUDGET / OPERATING PRO-FORMA / DETERMINING SUPPORTABLE DEBT AND EQUITY

 
Real Estate Debt Instruments

 
PRE-DEVELOPMENT FINANCING / CONSTRUCTION LOANS / PERMANENT MORTGAGE LOANS / MINI-PERM LOANS / BRIDGE LOANS / UNDERWRITING REAL ESTATE DEBT

 
Sources of Real Estate Financing and Capital Availability
Problems
Sources of Real Estate Financing and Capital Availability
Problems
v

 
FINANCING GAPS FOR DEVELOPMENT PROJECTS

 
Case Study: City Plaza

 
 
Part Three Policies To Perfect Private Capital Markets
 
Chapter Eight Loan Guarantee Programs
Loan Guarantees and Capital Availability

 
THE MYRIAD FORMS OF GUARANTEES / ADVANTAGES AND DISADVANTAGES OF GUARANTEES /

 
Small Business Administration 7(a) Program

 
State Loan Guarantee Programs

 
Capital Access Programs

 
Issues in the Design and Management of Guarantee Programs

 
GUARANTEE PROGRAM POLICY LEVERS / PROGRAM CHALLENGES AND BEST PRACTICES

 
Case Study: Massachusetts Emerging Technology Fund

 
 
Chapter Nine Bank Regulations And Development Banks
The Critical Role of Banks in Economic Development Finance

 
The Community Reinvestment Act

 
HISTORY AND OVERVIEW OF THE COMMUNITY REINVESTMENT ACT / USING CRA TO EXPAND CAPITAL AVAILABILITY / CRA'S IMPACT ON BANK LENDING / NEW CHALLENGES FOR THE COMMUNITY REINVESTMENT ACT / COMMUNITY REINVESMENT AND THE INSURANCE INDUSTRY

 
Bank Community Development Corporations

 
BANK CDC REGULATIONS / BANK CDC EXPERIENCE

 
Commercial Banks as Development Finance Institutions

 
CHALLENGES TO CREATING AND OPERATING A COMMERCIAL BANK / SPECIAL OPERATING REQUIREMENTS /

 
Case Study: Wilmington CRA Campaign

 
 
Part Four Institutional Models for Economic Development Finance
 
Chapter Ten Revolving Loans Funds
The Revolving Loan Fund Model

 
Revolving Loan Funds Characteristics and Performance

 
RLF CHARACTERISTICS / RLF PERFORMANCE

 
Design Issues for Revolving Loan Funds

 
TARGETING POLICY / FINANCIAL POLICIES / CAPITAL POLICIES / UNDERWRITING CRITERIA / DEVELOPMENT SERVICES / RELATIONSHIP BUILDING POLICIES

 
Management Challenges and Best Practices

 
BEST PRACTICES IN RLF MANAGEMENT

 
 
Chapter Eleven Venture Capital and Equity Investment Funds
The Private Venture Capital Industry

 
FUNDRAISING / INVESTING / EXITING INVESTMENTS / IMPLICATIONS FOR DEVELOPMENT FINANCE

 
The SBIC and SSBIC Programs

 
State Government Venture Capital Policy

 
Community Development Venture Capital

 
INDUSTY PROFILE / INDUSTRY TRENDS AND CHALLENGES

 
Addressing Venture Capital Challenges

 
STRATEGY CHALLENGES / OPERATING CHALLENGES / CAPITALIZATION CHALLENGES

 
 
Chapter Twelve Community-Based Financial Institutions
Community Development Loan Funds

 
CDLF CHARACTERISTICS / CDLF FINANCING ROLES / CDLF OPERATING CHALLENGES AND NEEDS /

 
Community Development Credit Unions

 
CDCU CHARACTERISTICS / CDCU LENDING AND DEVELOPMENT ROLES / CDCU OPERATING CHALLENGES AND NEEDS

 
 
Chapter Thirteen Microenterprise Finance
Three Models of Microenterprise Finance

 
PEER GROUP LENDING / INDIVIDUAL LENDING MODEL / TRAINING-LED MODEL

 
An Overview of the US Industry and Its Performance

 
PROGRAM PERFORMANCE / PROGRAM OUTCOMES / THE ECONOMIC DEVELOPMENT ROLE OF MICROENTEPRISE DEVELOPMENT

 
Design Issues and Management Challenges

 
Best Practices in Microenterprise Finance Development

 
MARKETING / TRAINING / TECHNICAL ASSISTANCE SERVICES

 
Case Study: Lawrence Working Capital

 
 
Part Five Federal and Municipal Government Finance Tools
 
Chapter Fourteen Federal Economic Development Programs
The Uses of Federal Economic Development Programs

 
Small Business Development Administration

 
PROGRAMS DELIVERED BY BANKS AND FINANCIAL INSTITUTIONS / PROGRAMS DELIVERED THROUGH SBA-APPROVED INTERMEDIARIES /

 
Department of Housing and Urban Development

 
COMMUNITY DEVELOPMENT BLOCK GRANTS / SECTION 108 PROGRAM / ECONOMIC DEVELOPMENT INITIATIVE

 
Community Development Financial Institution (CDFI) Fund

 
CDFI CERTIFICATION / CORE/INTEMEDIARY PROGRAM / SMALL AND EMERGING CDFI ASSISTANCE (SECA) PROGRAM / NATIVE AMERICAN CDFI TECHNICAL ASSISTANCE PROGRAM / NEW MARKET TAX CREDIT PROGRAM.

 
Economic Development Administration

 
PLANNING GRANTS / LOCAL TECHNICAL ASSISTANCE GRANTS / PUBLIC WORKS AND ECONOMIC DEVELOPMENT PROGRAM / ECONOMIC ADJUSTMENT ASSISTANCE PROGRAM / FUNDING PROCESS

 
Health and Human Services

 
Case Study: Financing an Inner-City Supermarket

 
 
Chapter Fifteen Municipal Finance Tools
An Overview of Municipal Debt

 
Economic Development Uses of Municipal Debt

 
Industrial Development Bonds

 
IDB CASE STUDY: NEW BOSTON SEAFOOD CENTER

 
Tax-Increment Financing

 
THE TAX INCREMENT FINANCING PROCESS / ECONOMIC DEVELOPMENT USES OF TIF / ISSUES IN TIF DEBT FINANCING /

 
Assessment District Financing and Business Improvement Districts

 
BUSINESS IMPROVEMENT DISTRICTS

 
Case Study: Downtown Orlando TIF District

 
 
Part Six Managing Development Finance Institutions
 
Chapter Sixteen Program Planning and Design
Defining Development Goals and Targeting Strategy

 
GROWTH FUND EXAMPLE

 
Assessing Demand

 
GROWTH FUND EXAMPLE

 
Analyzing Capital Market Supply and Identifying Financing Gaps

 
GROWTH FUND SUPPLY ANALYSIS

 
Implementation Needs and Resources

 
IMPLEMENTATION NEEDS FOR THE GROWTH FUND

 
Finalizing Program Strategy and Design

 
Case Study: Expanding an Urban Microloan Program

 
 
pter Seventeen Managing The Lending And Investment Process
The Investment Process and Key Management Principles

 
PRINCIPLES FOR SOUND INVESTMENT MANAGEMENT

 
Marketing and Project Identification

 
MARKETING APPROACHES AND AUDIENCES / EFFECTIVE MARKETING PRACTICES

 
Project Screening

 
BEST PRACTICES FOR INVESTMENT SCREENING

 
The Underwriting and Commitment Process

 
BEST PRACTICES IN INVESTMENT-DECISION MAKING

 
Investment Servicing and Monitoring

 
SERVICING AND MONITORING OPTIONS / BEST PRACTICES FOR SERVICING AND MONITORING

 
Case Study: Portland Development Commission Industrial Site Loan Fund

 
 
Chapter Eighteen Raising And Managing Capital
Capital Management and Development Finance

 
Pricing Loans and Investments

 
Managing and Funding Losses

 
Raising New Capital

 
GRANTS AND EQUITY CAPITAL / DEBT SOURCES / MANAGING CAPITAL / ASSET SALES AND SECURITIZATION

 
Financial Modeling of Development Finance Institutions

 
COMPONENTS OF THE FINANCIAL MODEL / CREATING THE MODEL

 
Case Study: Raising New Capital for the Manufacturer's Fund

 
 
Part Seven Conclusions
Part Seven Conclusions
Part Seven Conclusions
 
Chapter Nineteen Economic Development Finance Practice and Its Future
 
Glossary
 
References
Key features
  • Presents a comprehensive treatment of the field include an introduction to the technical aspects of business and real estate finance.
  • A strong focus on both developing financial analysis skills and an understanding of policy, program design and management issues.
  • Case study assignments included for twelve chapters, based on actual programs and projects.
  • Six chapters on policies and program models summarize industry data, and the academic and practitioner literature that provide an overview of industry characteristics, impact and practices.
  • A glossary of finance terms is included. 

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