The Commerce Department's National Institute of Standards and Technology is funding four pilot projects to help smaller manufacturers better understand, identify and access sources of financing and credit options that will enhance their ability to compete. The pilots will be conducted at four of NIST's Manufacturing Extension Partnership affiliates: the Chicago Manufacturing Center, the Michigan Manufacturing Technology Center/ Industrial Technology Institute, the Mid-America Manufacturing Technology Center and the New York City Industrial Technology Assistance Corporation.
Access to credit and financing is vital for small manufacturing firms to survive and prosper. A study by the National Research Council found that a scarcity of capital and difficulty acquiring sufficient investment funds are barriers to increased manufacturing competitiveness for America's smaller manufacturers. Many of the smaller manufacturers working with MEP's nationwide network of extension centers indicate their financing options do not sufficiently match their needs. Most say they lack sufficient financing or do not have access to investors with long-term patient capital.
In many instances, says David Cranmer, manager of strategic partnerships at NIST's MEP, small manufacturing firms have not made the most of their financial arrangements. For example, they may not be aware of financing options, such as adjusting the terms and conditions of existing arrangements, or alternative methods of financing.
"The purpose of this pilot project is to develop a method by which service providers at the MEP centers can forge strong relationships with financial intermediaries and institutions such as investment banking firms, merchant bank operations, leasing firms, venture capital firms and private investors that are looking for qualified firms with which they can do business," says Cranmer. He adds, "Ultimately, our goal is to satisfy the financing demands of extension center clientele by developing innovative services which expand their range of financing alternatives."
The alternative means of financing and credit that these pilot projects will help smaller manufacturers identify and access include: private placements of debt and equity, industrial revenue and bonds, employee stock ownership plans, mergers and acquisitions, and equipment leasing.
NIST funding for the pilot projects is $2.9 million. The four centers will provide at least an additional $1.3 million in matching funds. The centers will charge fees for these financial intermediary services and expect the services to become self-sustaining in less than five years. Pilot start-up activities include establishing relationships with local, regional and national sources of capital and learning the processes needed to qualify client companies for financing sources.
The MEP is a growing nationwide system of services and support for smaller manufacturers giving them unprecedented access to new technologies, resources and expertise. Today, 42 states and Puerto Rico have centers affiliated with the MEP. Through this network, MEP is putting hard-to-find technical and business assistance and information within the reach of the nation's 381,000 small and medium-sized manufacturing establishments.
As a non-regulatory agency of the Commerce Department's Technology Administration, NIST promotes U.S. economic growth by working with industry to develop and apply technology, measurements and standards.