Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Aug 8, 2013

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Emerging industries are companies and fields of business centered on new technology.

At one point or another, most every technology that humanity takes for granted began as an emerging industry, from the creation of combustion engines in the world’s first cars and the first airplanes spawned by the Wright brothers, to the first commercial computers and microchip technology used in so many of our devices today. Innovation has been pushed forward for countless millennia, from stone cutting all the way to space travel.

Many of the modern businesses in emerging fields are fueled by business loans. Some even require that extra financing just to get off the ground mere decades before they become industry titans.

In fact, Apple got started back in 1977 thanks to a $170,000 business loan from ex-Intel manager Mike Markkula. Even though 1977 was almost half a century ago, Apple has grown into one of the most successful companies in recorded history.

Quite simply, business loan financing is needed to fuel emerging industries and human technological advancement.

Financing Fuels the Future

Business loans can fund growth for a variety of different companies in different industries.

However, companies in already established industries, such as toy making or fashion, are not necessarily on the cutting edge of technology or using funds to explore new areas of science.

Corporations on the cutting edge of robotics, medicine, biotechnology, and commercial space travel do tend to focus their efforts on properly funding their research and development divisions.

Michael Mandala, Strategic Relations Manager at BlueHill Strategic, explained to that capital is the first step in empowering emerging industries to further innovate and to eventually produce a commercial product.

In his experience, traditional loans follow traditional businesses and industries.  Understandably, when new and emerging industries — such as remote patient monitoring or the production of hydrogen fuel cells — enter into financing capacity, banks are not as willing to loan money to them as they are with traditional industries such as transportation and energy.

Mandala strongly feels that emerging industries are key to the development of our nation and the world.

“Throughout the years, we’ve experienced great industrial and technological advances due to what was at one point an emerging industry,” he said. “Let’s take semiconductors for example.  The iconoclasts who dedicated their capital to the semiconductor industry, which at that time was unheard of, indirectly funded a revolution of technology that continues to change the world every day.” 

One innovative company that BlueHill Strategic has worked with is ActiveCare. Using commercial financing and business loans, ActiveCare has developed its technology for real-time patient vital sign monitoring. Insurers benefit from this technology since it keeps costs down and provides transparency to the daily health status and needs of patients. Aside from being a new technology, it also allows ActiveCare members to enjoy a higher quality of life due to live vital sign monitoring and diagnosis, a necessary feature as the Baby Boomers retire in ever greater numbers.

Mandala said that ActiveCare was brought about thanks to financing and an innovation spurt triggered by Obamacare. However, that isn’t the only way in which the federal government is involved in innovation.

The Government and Emerging Industries

No stranger to emerging industries, the federal government keeps a close eye on opportunities for science to help the nation.

While critics may be quick to point out that the federal government funded the creation of humanity’s first nuclear weapons and bailed out the culpable big banks in the recent financial collapse, federal funds have been used for positive ends, such as with DARPA funding the internet’s creation.

In fact, the Small Business Administration (SBA) has maintained a focus on emerging industries since these businesses often fail to attract the attention of traditional commercial loan lenders such as banks and credit unions.

Natalia Olson-Urtecho, the United States Small Business Administration Regional Administrator for Region III, told that disruptive technologies are the hardest to find angel investors and venture financing for. As a result, agencies like DARPA provide grants to fund the expansion of technology.

“Green business, particularly the green technology business (fuel cells, hybrid systems, hazardous waste treatment and cleanup) continue to be a growth area, but there aren’t always investors lining up to get onboard,” said Olson-Urtecho.  “There are entrepreneurs and small businesses that need the financing to develop that technology, and once it’s developed for government use, economy of scale takes over and much of this technology finds its way into the general marketplace and is affordable for consumers because the development costs are already covered.”

Amid the threat of climate change, and in the wake of the Fukushima disaster, the SBA, Department of Energy, and the Advanced Research Projects Agency-Energy, jointly launched the Entrepreneurial Mentor Corps program in February 2011. The program has funded competitively selected clean energy business accelerators such as Clean Energy Trust, CleanTECH San Diego, Cleantech Open, and the Nevada Institute for Renewable Energy Commercialization.

While the SBA isn’t solely devoted to helping along emerging industries, there are other federal initiatives that are primarily focused on that endeavor.

Programs for Businesses in Emerging Industries

In order to accelerate technological innovation, the federal government created the Energy Efficient Buildings Hub under the leadership of Penn State University. The goal of the EEB Hub is to improve energy efficiency and operability while reducing carbon emissions for new and existing buildings. The program will also stimulate private investment and quality job creation in the Greater Philadelphia region and the Mid Atlantic region. The EEB hub will eventually expand to retrofit existing commercial and residential buildings with new green technology.

The Wharton Small Business Development Center is another SBA funded program that is also jointly supported by the Department of Energy. Aside from funding energy efficient industrial buildings, the Center also works to create new jobs in more eco-friendly industries.

Even the White House is in on the action to fund along emerging industries.

Startup America is the White House’s own initiative which brings together entrepreneurs, corporations, foundations, universities, and federal agencies to create economic growth, innovation, and jobs. The program increases access to business loans for startups while also offering $148 billion in federally-funded research and development funds. Access to capital is increased by removing barriers that startups often face and by also allowing collaboration between large companies and startups.

The program also formed panels that submitted problems facing entrepreneurs to the Startup America Executive Committee. Even though reforms are still underway, the Committee has allowed for startups to access government data and to speed up processing times for patent applications.

With all this fanfare and attention directed at startups and companies in emerging industries, it is easy to forget that at the end of the day, due diligence is required in business loan lending.

The Equality of Commercial Finance

Despite the importance of emerging industries, they are treated no differently by the SBA than other types of enterprises in need of financing when it comes time for proper due diligence.  

“We guarantee these kinds of loans just like any others, but our micro loan program and the small advantage loan program are the ones mostly used for startups,” said Olson-Urtecho.

The SBA’s Microloan program provides loans up to $50,000 to help small businesses, including startups in fields of emerging industries.

With ongoing economic trouble across the European Union, an arms race in Asia, and debate over surveillance at home, it is important that the federal government and commercial loan lenders continue to fund emerging industries. No matter what struggles may be occupying people in the present moment, the future will always be marked by technological advancement.