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Bentley University graduates Josh Davis and Bruno Tropeano were determined to discover the traditional practices and techniques for making Italian gelato. They researched the products and experimented with innovative flavors, eventually creating recipes for over 1,000 flavors. After submitting 22 applications to banks for loans, they received funding from Camden National Bank to bring their “Italian ice cream” to Brunswick, Maine. They opened a retail shop in 2007 and began to build wholesale distribution at that time. Four years later, Josh and Bruno had the knowledge, skills, and experience to create delicious gelato treats and to operate their business, and they were ready to take the business to the next level. They decided to expand into Portland, Maine, and spent eight months searching for the best location. They found that location, but one critical ingredient was needed to bring their dream to reality—money. The owners of Gelato Fiasco had built a banking relationship, including loans that they repaid with a lender. They went to the bank with their proposal, toured the site, and received encouraging feedback. Josh and Bruno signed the lease and began leasehold improvements only to have the application rejected due to insufficient collateral. They were astonished and greatly disappointed Coastal Enterprises As A Source Of Capital Discussion Paper.ORDER YOUR PAPER NOW
Over the next eight weeks, they were turned down by five or six other banks, and they reached a point where the funds were needed quickly. Fortunately, they found Coastal Enterprises, Inc., a Maine-based community development financial institution that had received loan funds through Create Jobs for USA, a partner-ship of Starbucks and the Opportunity Finance Network. It took two weeks from application to approval, and Gelato Fiasco had $140,000 in financing. In addition, Josh and Bruno tapped the Maine Seed Capital Tax Credit Program to acquire some $600,000 in private investments for company growth in 2012. In 2014, Gelato Fiasco became available at Fresh Market’s 150 stores. By August 2014, the products were sold in over 2,000 stores in 45 states. Six months later, Gelato Fiasco was avail-able in more than 5,000 grocery stores. During 2016, the company’s sales reached nearly $10 million, and it completed a $2 million expansion of operations. Gelato Fiasco has been recognized with the Empact 100 Award, as well as by the James Beard Foundation, the Associated Press, Food Network magazine, Everyday with Rachael Ray, and various “Best of” contests. The company has two locations in Maine and sells its gelato and sorbetto to customers throughout Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. It also has a mobile unit for catering. With the right financing, Gelato Fiasco is experiencing the sweet taste of success. Critical Thinking Questions: 1. Why did Josh and Bruno turn to Coastal Enterprises as a source of capital for their business? 2. Did the Maine Seed Capital Tax Credit Program provide 100 percent of the financing? If not, how much did it provide? How do you know? 3. What factors made Gelato Fiasco a business that did not qualify for mainstream bank financing (specifically discuss the Cs of credit)? 4. When, if ever, would you advise Josh and Bruno to approach mainstream lenders?Step-by-step
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1. Josh and Bruno turned to Coastal Enterprises as a source of capital for their business because they had been turned down by several mainstream banks due to insufficient collateral. Coastal Enterprises is a community development financial institution that specializes in providing funding to businesses that may not qualify for traditional bank loans. 2. No, the Maine Seed Capital Tax Credit Program did not provide 100 percent of the financing. The article states that Josh and Bruno tapped the program to acquire some $600,000 in private investments for company growth in 2012. This suggests that the program provided some portion of the funding, but not all of it. 3. Several factors may have made Gelato Fiasco a business that did not qualify for mainstream bank financing, specifically related to the Cs of credit. The Cs of credit include character, capacity, collateral, capital, and conditions. It is unclear which specific factors were at play in Gelato Fiasco's case, but some possibilities include: Collateral: Gelato Fiasco may not have had sufficient collateral to secure a loan from a mainstream bank. Banks often require collateral that is worth as much as or more than the loan amount to minimize their risk. Capital: Gelato Fiasco may not have had enough capital or a strong enough financial position to convince mainstream banks that they were a good investment. Banks typically want to see a certain level of profitability, cash flow, and/or equity before lending money. Conditions: Gelato Fiasco may have been operating in a challenging business environment or industry, which could have made banks hesitant to lend to them. For example, the food and beverage industry is highly competitive and requires significant investments in equipment, ingredients, and labor. 4. Josh and Bruno may want to approach mainstream lenders in the future if their financial position improves and they have more collateral, profitability, or cash flow to demonstrate their creditworthiness. However, it may also be beneficial for them to continue working with alternative sources of funding, such as community development financial institutions or private investors, as these entities may be more willing to take risks on newer or smaller businesses. Ultimately, the decision to approach mainstream lenders will depend on Gelato Fiasco's specific financial situation and growth goals Coastal Enterprises As A Source Of Capital Discussion Paper.
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1. Josh and Bruno turned to Coastal Enterprises as a source of capital for their business because they had been turned down by several mainstream banks due to insufficient collateral. Coastal Enterprises is a community development financial institution that specializes in providing funding to businesses that may not qualify for traditional bank loans.
2. No, the Maine Seed Capital Tax Credit Program did not provide 100 percent of the financing. The article states that Josh and Bruno tapped the program to acquire some $600,000 in private investments for company growth in 2012. This suggests that the program provided some portion of the funding, but not all of it.
3. Several factors may have made Gelato Fiasco a business that did not qualify for mainstream bank financing, specifically related to the Cs of credit. The Cs of credit include character, capacity, collateral, capital, and conditions. It is unclear which specific factors were at play in Gelato Fiasco's case, but some possibilities include:
Collateral: Gelato Fiasco may not have had sufficient collateral to secure a loan from a mainstream bank. Banks often require collateral that is worth as much as or more than the loan amount to minimize their risk.
Capital: Gelato Fiasco may not have had enough capital or a strong enough financial position to convince mainstream banks that they were a good investment. Banks typically want to see a certain level of profitability, cash flow, and/or equity before lending money Coastal Enterprises As A Source Of Capital Discussion Paper.
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Conditions: Gelato Fiasco may have been operating in a challenging business environment or industry, which could have made banks hesitant to lend to them. For example, the food and beverage industry is highly competitive and requires significant investments in equipment, ingredients, and labor.
4. Josh and Bruno may want to approach mainstream lenders in the future if their financial position improves and they have more collateral, profitability, or cash flow to demonstrate their creditworthiness. However, it may also be beneficial for them to continue working with alternative sources of funding, such as community development financial institutions or private investors, as these entities may be more willing to take risks on newer or smaller businesses. Ultimately, the decision to approach mainstream lenders will depend on Gelato Fiasco's specific financial situation and growth goals. Coastal Enterprises As A Source Of Capital Discussion Paper
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