The goal of the Technology Development Loan (TDL) Program is to support technology-based startup and emerging growth companies in the state of Wisconsin.
This program primarily supports the following WEDC Strategic Pillar and Focus Area:
Business Development: Entrepreneurship and Innovation
The program provides direct financial assistance to startup and emerging growth companies in Wisconsin that are developing and commercializing innovative products and services at critical stages in their development. The TDL program is intended to provide capital to those companies that have the potential to add to Wisconsin’s economic base over the long term by attracting and training a high-wage, high skill workforce and establishing a unique competitive advantage. The funds can be used as working capital and require leverage from outside funding for the business development project or funding round under consideration. Funding levels are dependent on the stage of growth, capital need, financial leverage, economic potential, risk evaluation, and other factors deemed by WEDC to impact the funding request under consideration.
Funds are awarded for various activities according to the following eligibility criteria:
- Product/Process development
- Supports R&D, proof of concept and prototype development
- Company should generally be an early-stage company or spin-out with fewer than 25 employees
- Demonstrates financial need and potential for business growth
- Product/Process Development phase funding is generally limited to $250,000 per company
- Product/Service Commercial Launch
- Company is raising funds for initial launch of a developed product into the primary market after proof of concept and development testing
- Product/Service Commercial Launch phase is generally limited to $500,000 per company
- A lower limit may be imposed for moving into test markets if the technology or industry requires incremental steps to commercialization
- Growth/Expansion Stage
- Company is in growth mode with recurring sales of fully developed product into the intended market
- Company should have strong and growing market traction and have a clear path to sustainability
- Intended to provide capital for increasing production and approaching profitability
- Growth/Expansion Stage phase is generally limited to $750,000 per company
WEDC maintains flexibility in evaluating applications for loan funding in order to best direct the limited funding available on an annual basis.
USE: Working capital or equipment financing.
FEE: An origination fee of two (2.0) percent of the award amount
INTEREST RATE: 6 percent fixed interest rate
REPAYMENT: The loan shall generally have a term of up to 7 years with a deferral of principal and interest payments of up to 36 months and an option for an additional 12 months of interest-only payments, followed by equal monthly payments of principal and interest. The deferral period will be based on the company’s expected time to market and regulatory barriers. For loans with more than 12 months of Principal and interest payment deferral, WEDC may require an annual renewal of the deferment period.
TOTAL RETURN: Fixed multiple of principal disbursed, typically 1.15-1.5x dependent on anticipated financing duration, equivalent interest rate, risk and other relevant factors.
PAYMENT: 1.5-3 percent of monthly gross revenue
LIMITATIONS: WEDC may set a maximum duration of repayment period, establish minimum payments, or insert other financing requirements on a case-by-case basis.
COLLATERAL: General Business Security Agreement or Specific Security Agreement. In cases where WEDC feels it necessary, it may additionally require assignment of a life insurance policy(ies) for key founders/managers in an amount up to the maximum value of the loan.
GUARANTOR(S): Under certain circumstances, WEDC may require Limited or Unlimited personal guaranties for nay owner, generally with ownership in the company equal to or more than 20%. WEDC may also choose to add contingencies for release of these guaranties following additional financing or other milestones.
MATCH REQUIREMENT: The Borrower shall provide a minimum of 4:1 match of private investment funds to TDL loan proceeds. This requirement shall be met prior to the disbursement of TDL funds.
CONVERTIBLE NOTES: WEDC may require an ability to convert into an equity position as a condition of the loan, the option will allow WEDC to convert any portion of the outstanding loan balance, including principal and interest, to equity equivalent with the terms of the matching equity event. WEDC may use either a convertible note or a warrant as the vehicle for conversion. WEDC’s ability to convert to equity shall not exceed the term of the note, and the conversion will generally be tied to an anticipated liquidity event (e.g., the sale of the company). However, WEDC will include safeguards in the appropriate agreement(s) should it exercise an option to covert into an equity position. These safeguards will include: (1) WEDC will not have an ownership interest of 20% or more; (2) WEDC will not have voting rights or obligations, or any other indicia of control; (3) WEDC will not accept obligations to indemnify or repay additional debt taken on by any company; (4) WEDC will require a company to repurchase any equ8ity held by WEDC if the company relocates out of Wisconsin within five years, in accordance with Wis. Stat. §238.12; (5) WEDC will consider the circumstances of each loan and will limit its liability to the greatest extent possible.
*WEDC may consider previous funding as part of the initial leverage if the previous funding is part of the funding required for the project under consideration. In general, previous funding should be characterized as part of the current “funding round” and should not have occurred more than 12 months prior to the application date and is part of an active funding raise effort. WEDC may, in certain circumstances, elect to count founder funding as a portion of eligible match if the funding under consideration is part the initial company capitalization or seed round.
In addition to the factors outlined above, WEDC will evaluate applications based on factors that will include:
- Growth Potential – the company’s overall growth potential
- Timeline – the company’s development and commercialization timeline
- Funding – the company’s ability to identify and secure sufficient capital
- Technology – technology risk
- Market – size and anticipated acceptance of the idea by customers
- Execution – management, plan and performance to date
- Cash Flow – company’s repayment capacity and timeline
- Secondary Benefits – income taxes, payroll taxes, supply chain, real estate taxes, other economic benefits
- Need and Business Impact – the company’s need for funding and the impact that funding is likely to have on future success
Incentives and Available Funding (FY19): $5,000,000
Funding will be provided in the form of loans and will be awarded through an ongoing application process.
Activities and Expected Outcomes:
Assist 15 businesses and achieve a 4:1 leverage of other investment.
Recipients will be required to annually submit a performance report documenting investment activities, job creation, job retention, average wages, company financials, and eligibility checklist, as well as any other contract deliverable.
WEDC may impose additional reporting requirements to evaluate project performance and to ensure compliance with contract deliverables.
Application and Awards Process:
The TDL Program has a continuous application process. Applicants for a TDL should complete an application through an account manager. The completed application will be assigned to an underwriter and go through the award review process.
For more information on application review, internal process and award distribution, please refer to WEDC’s award administration policies and procedures.