Event:2016/07/13 Fundraising Call with Stephaney

Call w/ Stephaney, 13 July 2016

= Attendees =
 * Stephaney, David, Laura, Jenny, Marcus

= Notes =
 * Just get financial review until required by law to get an audit
 * Up to date on financials? Yes, until June 2016
 * Proof of donation - Laura is working on it, they're setting up a trust, and will send a statement from the trust account and a letter from their lawyer
 * Feels strongly about a payment guarantee
 * Jenny: Interest in multi-guarantors
 * DK: Only a few banks mentioned they would require this off the bat - a lot seems to depend on the intiial docs we send. Two years was stated minimum in terms of finances.
 * Risk profile according to lenders we approached?
 * DK: Some banks were flat-out "no", other banks (Mechanics, Western Fed), range of 4.5-5.3%, 5 or 10 year terms ammortized for 10-25 years
 * Laura: BSB said they wouldn't ask for guarantors. Banks said they would consider it
 * DK: Talked to CDFI, BoA, Western. They did ask for a building appraisal, unclear if that's conditional or needed up-front
 * Steph: With your risk profile, I'd be stoked if you could get a traditional bank to finance you - better rates, maybe not the flexibility needed (might want you to refinance in 5yrs or exit and find a refinancing partner). The CDFI folks are more flexible, tho money does cost more. Not a point, but around 5.5-6%
 * DK: Need proof of the $1mil
 * Steph: Some of the CDFI lenders can provide you with half a year interest only, different things they can be flexible on depending on situation and sensitivity. Absolutely appraisal will be required, $4-5K cost. Either bank will order it and finance it into your loan, sometimes needs to be paid out of pocket. Environmental and capital needs assessment done on the building. Environ engineer tests the soil and water under the building to make sure there aren't any hazards. Might drill a tiny hole through the foundation to test the soil down there if they can't get to it. Capital needs assessment / Existing Conditions report. These reports total $10K altogether, often out-of-pocket, though lender can finance it into the loan for you, but most invoice you for those reports. Part of the underwriting process to ensure all of the risks are mitigated. Any outstanding issues that need to be remedied, you'll have to determine if it's worth it.. but if it's something big, that could be a condition of the loan (could add on to the loan). Whatever those capital costs are, don't want any structural problems, corrosion in main beams, etc. Anything that needs to happen needs to happen within 6-12 months of loan closing (eg appraisal)
 * DK: Sewer lateral inspected a long time ago, that will need to get replaced for sure... probably will cost $10-20K
 * No other reports from landlord.
 * DK: Worried about these inspections... total projected cost of necessary renovations might impact ability to get a loan. Is this something we need to start raising money for now?
 * Steph: Def part of their process... Not anything you have to order today, but part of the next steps
 * Steph: Operating Pro Forma going forward, what it may look like with debt on it. Rents you may charge your tenants. Paramaters of where you need to be - net operating income realistically look like you have ability to pay + 20-25% income. CDFI & nonprofit lenders will have more flexibility, 1.15-1.2, traditional banks 1.2-1.3 depending on your risk profile. Consider now that you're owning an asset, will need to save for capital repairs according to the capital needs assessment. Say you've got a 25-year life roof and you're 20yrs old, they'll want to see you have a savings plan for that, and making deposits into a capital reserve fund
 * Can show any lender that you're serious and have a plan
 * DK: Our rent is so high, even a reserve of 30% would be so much less than what we're paying in rent now.
 * Steph: That's going to be on the organizational level... but you as an operating entity are separate from the building. They're going to be looking at the impact of the building on your cash flow. I can help you on this next step and what those impacts are on you organizationally. Will take me a few weeks but can provide analysis and give you updates re: broader financial picture, incorporating all these variables (no rent, operating

[...]


 * Clarification over fiscal sponsorship vs tenancy model, how fees are broken down (or not)
 * Steph: If donations are coming in for a project, and going out for a project, the fee is yours but the rest is theirs?
 * DK: Moving forward, need to show bank we're raising at least 20% beyond our minimum, and that money would be banked right now
 * Steph: Need to present as clear and comprehensible a business plan as possible... try to not look kooky

= Checklist =
 * Pro Formas
 * Financial Review
 * 3 years financials, including year-to-date

= Action Items =
 * Look into multiple guarantors [Stephaney]
 * Start accruing financials for anchor tenants [Jenny]
 * Upload remaining fiscal sponsorship & sublease agreements [Jenny]
 * Send updated pro forma draft [DK]