Avionics News May 2013 - 30

CAPITAL QUEST

Continued from page 29

Aeronautical University roommate, is their equal partner.
McKinnon earned a degree in accounting at the University of Central Florida and spent three years as a CPA with
Ernst & Whinney (now Ernst & Young). “We figured it was
good to have someone that had an accounting and business viewpoint running things, because Mike or I would
probably run us into the ground,” he said. “We tend to
focus on the product and not the value.”
The lesson here is to clearly and specifically identify
why a business needs capital and how it will use it.
These are all details that lenders will demand because
their approval depends, in large part, on the answers
to the third question – how will the business repay
the loan? These details also will identify the appropriate capital program, guaranteed loan, surety bond (a
three-part financial instrument where an entity accepts
responsibility for the debt or financial obligation of
another) or venture capital (a public/private investment
partnership that bridges the availability of capital to
grow a business and small-business needs).
The SBA website subdivides what can be an overwhelming administrative task into manageable steps.
Start with determining your financial needs, because it
will help identify and collect the appropriate business
information the owner will need to answer the lender’s
questions. Credit factors address the topics lenders
consider when reviewing an application. This includes
equity, earning requirements, financial obligations, magnitude of risk, working capital, resource management
and collateral.
The state of the industry, business cycles and cash
flow are important factors.
“When you present your company to a lender, you
must include all of your sales information, including who
your customers are, and they don’t want to see that the
majority of your sales come from 10 percent of your
customers,” McKinnon said.
Beyond approval of the capital request, these factors
influence the loan’s cost, if approved. Applicants must
be prepared to present information on all of their personal finances, as well.
Because, “bottom line with the banks is that they will
require you to personally guarantee the note,” McKinnon said.
When Tom Hass started Minnesota’s Park Rapids Avi30

avionics news

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may

2013

onics in 2001, “I mortgaged my house and all my credit
cards to get started,” he said. “We suffered for a few
years until it started to come around.”
When he expanded the business with the acquisition
of Approach Fast Stack in 2006, he had more options.
He borrowed the down payment from his local bank and
“the seller wrote a contract for the rest.”
Banks are the primary source of capital for shops
that need funds to make ends meet. Those starting
new shops or, like Park Rapids, expand and diversify
their businesses have more options. When Greg Earnest planted Jamestown Avionics in the North Dakota
plains in 2006, he went to the Jamestown Development
Bureau. Like similar agencies and organizations in cities,
counties, regions and states nationwide, it exists to help
bring new businesses – and jobs – to town.
“I came to town with an idea, presented my business
plan and put up everything I owned as collateral,” he
explained.
The application process took about three months, after which he received two loans with good rates, one of
them from funds dedicated to new businesses in town,
and the second through a local bank. The requirements
of these agencies vary, but one of the most common
is that the new business does not compete with an
existing business in the development agency’s territory. Many development agencies also help businesses
expand, especially if it leads to new jobs.
New or expanding businesses should also visit with
their airport boards, suggested Earnest and McKinnon.
Like economic development agencies, some of them
have or will create plans to bring a new business to
the airport or help an existing tenant expand. In many
cases, this assistance deals with the lease of facilities on
airport property. Another opportunity that depends on
location and networking is finding an investor, according
to McKinnon. She said it happens more often than one
would think, where a person successful in another field
“really loves aviation and wants to get more involved in
it by investing in the business.”
Having just paid off one of the loans that started
Jamestown Avionics, Earnest said given another opportunity, instead of buying the latest and greatest test
equipment, he would reduce his initial debt load by opting for new or used equipment that would reliably meet
the shop’s everyday needs. Ultimately, controlling debt
and managing cash flow are old-school business basics
that, for everyday operations, preclude capital quests. q



Avionics News May 2013

Table of Contents for the Digital Edition of Avionics News May 2013

Point of Communication
AEA now
The View from Washington
International News and Regulatory Updates
Beltway Briefing
Power Redundancy in the Age of Digital Cockpits
Member Profile
Capital Quest
Avionics News Through the Years
Equipping for International Operations
A Conversation With...
Member Profile
What is Australia Waiting For?
AEAviators
Going Global
Business Basics
The History of Avionics
Meet the AEA Board of Directors
A Real-Time Look at Airborne Weather Radar
Aviation Aces
Legal Ease
What's New
Marketplace Classifieds
Avionics News May 2013 - Intro
Avionics News May 2013 - Cover1
Avionics News May 2013 - Cover2
Avionics News May 2013 - 1
Avionics News May 2013 - 2
Avionics News May 2013 - 3
Avionics News May 2013 - Point of Communication
Avionics News May 2013 - 5
Avionics News May 2013 - AEA now
Avionics News May 2013 - 7
Avionics News May 2013 - 8
Avionics News May 2013 - 9
Avionics News May 2013 - 10
Avionics News May 2013 - 11
Avionics News May 2013 - 12
Avionics News May 2013 - 13
Avionics News May 2013 - The View from Washington
Avionics News May 2013 - 15
Avionics News May 2013 - International News and Regulatory Updates
Avionics News May 2013 - 17
Avionics News May 2013 - 18
Avionics News May 2013 - Beltway Briefing
Avionics News May 2013 - Power Redundancy in the Age of Digital Cockpits
Avionics News May 2013 - 21
Avionics News May 2013 - 22
Avionics News May 2013 - 23
Avionics News May 2013 - Member Profile
Avionics News May 2013 - 25
Avionics News May 2013 - 26
Avionics News May 2013 - 27
Avionics News May 2013 - Capital Quest
Avionics News May 2013 - 29
Avionics News May 2013 - 30
Avionics News May 2013 - 31
Avionics News May 2013 - Avionics News Through the Years
Avionics News May 2013 - 33
Avionics News May 2013 - Equipping for International Operations
Avionics News May 2013 - 35
Avionics News May 2013 - 36
Avionics News May 2013 - 37
Avionics News May 2013 - 38
Avionics News May 2013 - 39
Avionics News May 2013 - A Conversation With...
Avionics News May 2013 - 41
Avionics News May 2013 - Member Profile
Avionics News May 2013 - 43
Avionics News May 2013 - 44
Avionics News May 2013 - 45
Avionics News May 2013 - What is Australia Waiting For?
Avionics News May 2013 - 47
Avionics News May 2013 - 48
Avionics News May 2013 - 49
Avionics News May 2013 - AEAviators
Avionics News May 2013 - 51
Avionics News May 2013 - Going Global
Avionics News May 2013 - 53
Avionics News May 2013 - 54
Avionics News May 2013 - 55
Avionics News May 2013 - Business Basics
Avionics News May 2013 - 57
Avionics News May 2013 - 58
Avionics News May 2013 - 59
Avionics News May 2013 - The History of Avionics
Avionics News May 2013 - 61
Avionics News May 2013 - 62
Avionics News May 2013 - 63
Avionics News May 2013 - Meet the AEA Board of Directors
Avionics News May 2013 - 65
Avionics News May 2013 - 66
Avionics News May 2013 - 67
Avionics News May 2013 - A Real-Time Look at Airborne Weather Radar
Avionics News May 2013 - 69
Avionics News May 2013 - 70
Avionics News May 2013 - 71
Avionics News May 2013 - 72
Avionics News May 2013 - 73
Avionics News May 2013 - Aviation Aces
Avionics News May 2013 - 75
Avionics News May 2013 - Legal Ease
Avionics News May 2013 - 77
Avionics News May 2013 - What's New
Avionics News May 2013 - 79
Avionics News May 2013 - 80
Avionics News May 2013 - 81
Avionics News May 2013 - Marketplace Classifieds
Avionics News May 2013 - 83
Avionics News May 2013 - 84
Avionics News May 2013 - Cover3
Avionics News May 2013 - Cover4
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