Six State Tax Credits Maryland Companies Should Know About

Fortunately, tax season is over six months away, however it doesn’t hurt to start planning. The state of Maryland offers a variety of tax credits for everything from R&D, to cyber to veteran-owned businesses. If your business is established or if it’s in the growing phase and looking for funding, these tax credits may help your bottom line. Take a look to see what you may be missing:

More Jobs for Marylanders

One of Governor Hogan’s top legislative priorities of 2017, More Jobs for Marylanders is a new program that incentivizes and encourages manufacturers to create jobs in areas of Maryland that need jobs the most. Created for new and existing manufacturing businesses, the Program provides tax incentives tied to job creation for a 10-year period, encourages additional investment in new equipment through accelerated and bonus depreciation and helps to strengthen Maryland’s workforce.

New manufacturing businesses locating in a Tier 1 county and creating at least five news jobs may be entitled to a 10-year (1) income tax credit based on the number of jobs created; (2) State property tax exemption; (3) sales and use tax refund for specific purchases; and (4) waiver of all State Department of Assessment and Taxation fees. Tier 1 jurisdictions include Baltimore City and Allegany, Dorchester, Somerset, and Worcester Counties. Tier 2 counties that have been promoted for Tier 1 benefits, per the Secretary’s approval authority to designate three counties, are Baltimore, Prince George’s and Washington Counties.

Hire Our Veterans Tax Credit

This program provides a State income tax credit to small businesses for hiring qualified veterans based on wages paid to those veteran employees. A Maryland employer may qualify for an income tax credit equal to 30% of up to the first $6,000 of wages paid to a qualified veteran employee during the first year of employment (i.e. a maximum of $1,800 per qualified veteran employee). A qualified employer is a “small business” operated by an individual, a partnership, a limited partnership, a limited liability partnership, a limited liability company, or a corporation that employs 50 or fewer full-time employees.

Cybersecurity Investment Incentive Tax Credit (CIITC)

CIITC provides a refundable income tax credit to Qualified Maryland Cybersecurity Companies (QMCCs) that secure investment from investors. The purpose of this new program is to incentivize and attract cybersecurity companies to startup in or move to Maryland; and to attract investment to cybersecurity companies in order to help them grow, create jobs and retain intellectual property in Maryland.

Montgomery County passed legislation to offer a local supplement to the Maryland Cybersecurity Investment Incentive Tax Credit to QMCCs that receive a final Maryland tax credit certificate and have their headquarters and base of operations in Montgomery County. The program is subject to appropriation of funds.

Research and Development Tax Credit (R&D)

Businesses that have qualified R&D expenditures in Maryland may qualify for two state income tax credits, the Basic R&D Tax Credit and the Growth R&D Tax Credit. The tax credit remains in effect until January 1, 2020, subject to extension by the General Assembly.

• Basic R&D Tax Credit: Three percent (3%) of eligible R&D expenses that do not exceed the Maryland Base Amount. If the total credits applied for exceed $5.5 million, the business’s Basic tax credit is prorated.
• Growth R&D Tax Credit: Ten percent (10%) of eligible R&D expenses in excess of the Maryland Base Amount. If the total credits applied for exceed $6.5 million, the business’s Growth R&D tax credit is prorated.

Biotechnology Investment Incentive Tax Credit (BIITC)

BIITC provides an investor with income tax credits equal to 50% of an eligible investment in a Qualified Maryland Biotechnology Company (QMBC). The program supports investment in seed and early stage biotech companies to promote and grow the biotech industry in Maryland. 

BIITC provides an income tax credit equal to 50% of an eligible investment in a QMBC up to $250,000 for each QMBC per fiscal year. Total credits issued during the fiscal year cannot exceed the budget amount and are, therefore, issued on a first come basis. The credit is refundable if the investor has no Maryland income tax liability.

Employer Security Clearance Costs (ESCC) Tax Credit

The ESCC Tax Credit provides income tax credits for expenses related to federal security clearance costs, construction of Sensitive Compartmented Information Facilities (SCIFs) and first-year leasing costs for small businesses doing security-based contract work. 

• Security Clearance Administrative Expenses Tax Credit
  A business may qualify for an income tax credit up to $200,000 per taxable year for qualified security clearance administrative expenses.
• Sensitive Compartmented Information Facility Costs Tax Credit
  A business may also claim a credit against its Maryland income tax for costs related to the construction or renovation of a SCIF located in Maryland. The SCIF must be accredited by the appropriate federal agency. For costs related to a single SCIF, the credit is equal to the lesser of 50% of the costs or $200,000. For costs related to multiple SCIFs, the credit is the amount of costs up to $500,000 per calendar year.
• The First Year Leasing Costs Tax Credit for Qualified Small Business
  A qualified small business may also claim a credit against its Maryland income tax up to $200,000 for costs for rental payments during the first year of a rental agreement for leasing spaces to perform security-based contracting work.

Check the State of Maryland website for details, exclusions, and updates at http://commerce.maryland.gov/fund/programs-for-businesses.

Source: http://commerce.maryland.gov/fund/programs-for-businesses

Maryland Loan Program for Military Personnel Accepting Applications

The state of Maryland offers a number of financing programs for various segments of business owners. Currently, the state has an open application period for their Military Personnel and Veteran-owned Small Business Loan Program (MPVSBLP). MPVSBLP provides no interest loans that range from $1,000 to $50,000, from one to eight years, for businesses owned by military reservists, veterans, National Guard personnel and for small businesses that employ or are owned by such persons. Business owners and businesses that fit the criteria are able to apply for loans until August 15, 2017.

Eligible applicants include businesses owned by military reservists and National Guard members called to active duty, and small businesses, with fewer than 50 employees that employ them. For reservists or National Guard members called to active duty, Program funds must be used for payment of identifiable costs of the business, including general business expenses, which result from the call to active duty. The loan may be made at any time from the date of the call to active duty through the period ending six months after the end of the individual’s active duty.

For service-disabled veterans, businesses owned by service-disabled veterans, and businesses employing service-disabled veterans, the purpose of the Program is to assist with the cost of making the home, motor vehicle, or place of employment of a service-disabled veteran accessible to individuals with disabilities and to defray other necessary expenses.

The Departments of Commerce and Veterans Affairs notifies prospective applicants on their websites of the availability of funds and the time period for submission of applications. An application must first be submitted to MDVA. Once MDVA determines that an applicant meets basic eligibility rules for the Program, the application will be forwarded to the Department of Commerce for financial review and underwriting.

The Department will review and process each application using standard commercial credit criteria to determine whether it meets the Program’s financial and other requirements for loan approval. The Department will recommend approval of financing for the projects deemed to present the best chance of succeeding.

For more information about the program, eligibility details, and applications, visit bit.ly/2ukSFzU.

Source: Maryland Department of Commerce – bit.ly/2ukSFzU 

A Look at the NIH SBIR and STTR Programs

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, also known as America’s Seed Fund, are one of the largest sources of early-stage capital for technology commercialization in the United States. These programs allow US-owned and operated small businesses to engage in federal research and development that has a strong potential for commercialization. In Fiscal Year 2017, NIH’s SBIR and STTR programs will invest over $925 million into health and life science companies that are creating innovative technologies that align with NIH’s mission to improve health and save lives. A key objective is to translate promising technologies to the private sector and enable life-saving innovations to reach consumer markets.

About the SBIR Program
The NIH SBIR program funds early stage small businesses that are seeking to commercialize innovative biomedical technologies. This competitive program helps small businesses participate in federal research and development, develop life-saving technologies, and create jobs.

The SBIR program allows and encourages research partnerships, within these parameters:

• Phase I: The small business typically performs a minimum of 67% of the work supported by the award.
• Phase II: The small business typically performs a minimum of 50% of the work supported by the award.

For the SBIR program, the Program Director/Principal Investigator must be primarily employed (greater than half time) with the small business at the time of award and for the duration of the project period.

About the STTR Program
Though similar in overall objectives and structure to SBIR, the STTR program aims to facilitate cooperative research and development between small business entities and U.S. non-profit research institutions. To do so, the STTR program requires the small business applicants to formally collaborate with a research institution.

The STTR program also allows and encourages research partnerships, within these parameters:

• The small business must perform at least 40% of the work.
• The research institution must perform at least 30% of the work.
• The remaining 30% may be done by the small business concern, the non-profit research institution partner, or an additional third party.

For the STTR program, the PD/PI may be primarily employed either by the small business concern or the collaborating non-profit research institution.

Both the SBIR and STTR programs include three phases.

Phase I: Feasibility and Proof of Concept
The objective of Phase I (R41 or R43) is to establish the technical merit, feasibility, and commercial potential of the proposed R&D efforts and to determine the quality of performance of the small business awardee organization prior to providing further federal support in Phase II.
Phase II: Research and Development
The objective of Phase II (R42 or R44) is to continue the R&D efforts initiated in Phase I to develop the project’s commercial viability. Funding is based on the results achieved in Phase I and the scientific and technical merit and commercial potential of the project proposed in Phase II.
Phase III: Commercialization
The objective of Phase III, where appropriate, is for the small business to pursue commercialization objectives resulting from the Phase I/II R/R&D activities. The NIH SBIR/STTR programs do not fund Phase III.

The NIH has a fast-track application option that allows small businesses to submit one application for Phase I and Phase II. It also offers a pilot Direct-to-Phase-II SBIR solicitation that permits small businesses to receive a Phase II award even if they have not previously received a Phase I award for the research/research and development of their technology.

To learn more about the NIH grants and contracts, statistics and success stories, visit bit.ly/2td7CWu.

Source: sbir.nih.gov

State of Maryland Creates Gap Investment Fund

Managing the financing of a company in its growth stages can be challenging, especially in that gap period between when it receives seed funding and when it’s large enough to attract venture capital. Fortunately, the state of Maryland announced $1 million in new economic development funds that will provide technology companies with investment capital specifically for that gap between seed funding and venture capital investments. The fund aims to spur economic development and it encourages companies to remain in the state. The Gap Investment Fund program is part of Governor Hogan’s Fiscal Year 2018 budget and is being developed and administered by TEDCO. The fund will be available on July 1 of this year.

According to TEDCO’s press release, the state’s current Seed Investment programs support approximately 50 companies per year – creating a funnel of companies that serve as a source of deal flow for the new Gap Investment Fund initiative. A Seed Investment of $100,000 can support a project that advances a technology toward commercialization. TEDCO’s later-stage fund, the Maryland Venture Fund, and other venture capital funds support companies further along in their development – often with significant revenues and complete management teams – that are raising investment rounds of more than $2 million. This established structure leaves a significant funding gap between the state’s seed investments and the investments made by institutional investors, such as venture capitalists.

In outlining the goals for the Fund, Newt Fowler, TEDCO Board Chair and business transactions partner of Womble Carlyle, LLP said in the TEDCO press release, “To help ensure that companies started in Maryland stay in Maryland, resources were needed to address the financing needs of growing companies, especially those that had already received investment through one of the State’s seed investment programs but are still vulnerable to leaving the State to receive their next round of funding. The Governor has provided a critical tool for building one of the nation’s leading technology clusters and TEDCO, which sees many of these companies at the seed investment stage, is well-equipped to administer the funding.”

TEDCO is seeking innovative, technology-based, and highly-scalable companies that are likely to be ready for a venture investment 12-18 months following a Gap Investment. Competition for the limited Gap Investment Funds is anticipated to be strong, so the selection process will be very competitive. TEDCO anticipates making two investments in its first 12 months, but hopes to have the ability to make up to 10 investments in subsequent years.

Source
http://tedco.md/press/tedco-announces-new-gap-funding-for-startup-companies/

University System of Maryland Launches $25 Million Fund to Back Start-Up Companies Formed from Campus Research

The University System of Maryland (USM), has launched its own $25 million early-stage investment fund, called the Maryland Momentum Fund. USM Vice Chancellor J. Thomas Sadowski stated in the system’s press release that the new Maryland Momentum Fund will “…help our entrepreneurs address funding gaps, gain access to other sources of investment capital and gain marketplace footing, further enhancing the system’s high impact on the Maryland economy.” Sadowski also stated, “The endeavor to build on USM’s success in new company creation brings more national prestige to the system.”

The press release goes on to explain the objectives and requirements for the fund:

The fund has a $10 million commitment from the USM in place, and the system is collaborating with UM Ventures and the University of Maryland, Baltimore County (UMBC) to reach out to area venture capitalists and angel investors for an additional $15 million. UM Ventures is a joint initiative of the University of Maryland, Baltimore (UMB) and University of Maryland, College Park (UMCP) to commercialize technologies and expand industry collaboration.

As it approaches the $25 million level, the Maryland Momentum Fund will leverage this financial support to achieve several objectives:

• Accelerate the success and profitability of USM start-ups
• Attract promising entrepreneurs and innovators to USM institutions
• Seize the opportunity to commercialize valuable USM intellectual property
• Develop long-term financial returns that can be reinvested in future start-ups affiliated with the USM

Eligible companies must be in Maryland. Eligible companies must also be based on USM-owned intellectual property; founded by USM faculty, students, or alumni; or in USM incubators, research parks, or RISE Zones.

Individual investments will range from $50,000 to $500,000 per company. Select investments will require at least a one-to-one match by outside investors.

An external investment board, comprised of successful investors, will set policies, make investment recommendations, and refer potential opportunities. The external investment board will consist of six-to-eight leaders from the private sector, including venture capitalists.

The USM accelerated its efforts in technology commercialization during fiscal year (FY) 2014, when the USM Board of Regents approved the Policy on Investments and Loans to Maryland‐based Businesses that License University Intellectual Property (Policy No: VIII – 14.00). The policy helped establish investments and loans totaling $400,000 in five start-ups during FY 2015 from UM Ventures.

Crowdlending – Another Source of Funding for Small Businesses

Now you really can do almost everything on the Internet. With the rise of crowdsharing, crowdfunding, and crowdsourcing comes crowdlending. Most often called peer-to-peer lending, it’s a way for individuals and businesses to get loans online relatively quickly and easily. Online lending platforms facilitate funding the loan through institutions directly and from individuals who’ve decided to invest, so they eliminate the middle man—the banks. After the borrower submits an application, it’s graded and then some platforms post the application for a few weeks to let investors review it to determine if they want to invest. Other companies have a pool of blind investors that they draw money from which expedites the process. The draw of online lending is that the borrower pays lower interest rates than they would from traditional lending institutions, while the lenders receive fixed returns at higher rates. Peer-to-peer lending may be right for funding your business or may even help with personal loans as well. Loan amounts vary but average between $3,000 – $500,000 and terms are typically about 3-5 years.

Here is an overview of some of the top platforms.

Kabbage – http://www.kabbage.com/

• Should be in business for one year and have $50,000 in annual revenue or $4,200 per month over the last three months
• Offers unsecured small business loans, secured small business loans, industry-specific loans, and minority loans
• Offers business lines of credit up to $100,000  

Lending Club – http://www.lendingclub.com/

• Focused on small businesses that have been in business for at least two years
• Offers business loans and lines of credit from $5,000 – $300,000
• Loans are funded as fast as two days but typically take a week or two

Upstart – http://www.upstart.com/

• Offers business and personal loans from $1,000 – $50,000
• Terms are offered at 3 and 5 years
• Consideration based on FICO score, years of credit, education, area of study, and job history 

Prosper – http://www.prosper.com/

• Offers one of the lowest beginning APR rates available
• Loans are capped at $35,000
• Offer a variety of personal options for debt consolidation, home improvement, auto, green, adoption, and military loans

Funding Circle – www.fundingcircle.com

• Focused on small businesses that have been in business for at least two years
• All loans are secured and range from $25,000 – $500,000 over 1-5 years
• Loans are funded in about 10 days

Does it sound like it’s for you? Since many of the platforms require minimum FICO scores of about 600, it’s often a good alternative to asking friends and relatives for money, using traditional bank loans, or using credit cards. Many of the platforms are transparent about their terms, and if you have questions most of them offer multiple options for contacting their customer service representatives.

The Angels Among Us

For the most part, the transition from being an employee to being an entrepreneur is a really exciting time. You can implement your vision of how to create and sell a product or service, hire the people you want, and take the company in the direction of your choosing. In theory, that’s all true, however, you also need capital to make all of those things happen. In the very early stages, bootstrapping may be a good option; you could use money from your savings account or ask friends and relatives for an initial investment. So what happens when that money runs out and you’re not ready for venture capital funding? This is often a great time to look for an angel investor to give your company the capital it needs for that in-between stage.

In a nutshell, angel investors are high net-worth individuals who invest their own money in new companies. Angels typically invest between $25,000 and $100,000 and get in at the final, or beta stage, of product development. Angels invest in a company in exchange for equity ownership or convertible debt and because angels have no one to answer to or pay back, their investment terms are often negotiable based on a variety of self-determined factors. Alone, most angels can’t make a living off of their investments, however, angels do form groups, or syndicates, which enable them to invest larger amounts. Because these groups of angels pool their money for larger investments and bigger paybacks, the flexibility of the process is greatly reduced and naturally requires more due diligence.

As they say, angels are everywhere, and we’ve provided a short list of local angel investors along with some information about their companies.

Dingman Center Angels

The Dingman Center Angels is a Maryland-based angel investment group that provides funding to early stage companies located within the Mid-Atlantic region. They are looking for innovative, technology-driven startup companies addressing a significant market opportunity where their investment and expertise can make a difference. They introduce entrepreneurs to potential investors through presentations at monthly meetings which are held from September to June. Their group looks to invest $100,000 to $1,000,000 in seed/early stage companies and will often syndicate with other angel groups and VCs for deals up to $2 million. The Dingman Center Angels is not a fund and does not invest as a group. Their members collaborate on due diligence but make individual investment decisions. If you’re interested in the Dingman Center Angels, visit bit.ly/2l1Hwkl.

Baltimore Angels

Baltimore Angels is an angel investor group founded in 2009. Its mission is to invest profitably in the regional entrepreneurial ecosystem and advance early stage innovators to the next stage of capital formation. They are looking for early stage technology-based companies run by entrepreneurs with a strong vision and who are typically just beyond a friends-and-family round. Investments are made in a variety of industries including business products, computers, consumer goods, education, and several other categories. The Baltimore Angels have invested in, among others, Canvas, Parking Panda, Social Toaster, and ZeroFOX. Meetings are held monthly in Baltimore and they welcome interested investors and entrepreneurs from around the country. You can find more information about the Baltimore Angels at www.baltimoreangels.com./

Hivers and Strivers 

Hivers and Strivers is an angel investment group focusing on early stage investments to support start-up companies founded and run by graduates of the U.S. military academies. Most of their investors have served in the military and are successful senior executives with experience in a broad range of industries and business models. They typically invest $250,000 to $1,000,000 in a single round. When larger financing rounds are needed, they will actively look to syndicate deals with other investment groups in their network. Their goals are to support young veteran entrepreneurs and to facilitate a successful exit for both company founders and investors alike that provides a return of 10x the initial investment. More information about Hivers and Strivers can be found at http://www.hiversandstrivers.com./

Crowdfunding Grows Up

Ways to raise early stage capital has finally caught up to the innovation demonstrated by the companies that are trying to raise the money. In case you missed it, equity crowdfunding got the thumbs up from the SEC in the middle of last year. So if you’re looking for ways to bring in more investment dollars in the new year, equity fundraising may be the path for you.

Most of you have probably heard of the JOBS Act (Jumpstart Our Business Startups Act) that was signed into law by former President Barack Obama in 2012. The goal of the legislation was to help small businesses access capital quicker and easier. Part of that legislation was Title 3 that provides an exemption from registration certain crowdfunding transactions. In 2015, the new rules stated that eligible companies will be allowed to raise capital using Regulation Crowdfunding starting on May 16, 2015. In an interview with Entrepreneur, Ellen Grady, an attorney and corporate governance specialist at the law firm Cozen O’Connor said, “For the first time, anyone can become an investor in a business and be able to share in its profits and growth regardless of income, net worth, or level of financial sophistication, and this will open up a new source of potential financing for entrepreneurs, which could be a game changer.”

In general, equity crowdfunding works much like rewards-based crowdfunding where you choose a crowdfunding portal, create an online profile, and submit a funding campaign for approval. Rather than giving investors a preview sample of a new product in return for their investment, however, you are required to give people stock or pay them a percentage of sales for a certain amount of time. The process of raising funds this way means that you will have to find an equity crowdfunding site to facilitate these types of transactions. Some sites charge a subscription fee while others get a percentage of the total amount raised. As part of setting up a profile page, companies have to show how they plan to use the money along with other information like the minimum amount of investment that it will accept and the offering terms. Investment funds sit in escrow until the investment closes, and each investor pays a processing fee. After the investment period has closed, the company is required to routinely share information with their investors about how the business is doing. Popular equity crowdfunding sites include: bolstr, CircleUp, crowdfunder, EarlyShares, EquityNet, Fundable, localstake, onevest, and seedinvest.

If your company isn’t getting attention from VCs or angel investors, equity crowdfunding can be a quick way to raise funds provided that you have a viable product that people believe in and that you promote it effectively and to a wide audience. At the same time, the sheer speed and number of random investors, many of whom are inexperienced and looking to make their money back in multiples, can be a bit overwhelming. Though this type of fundraising is relatively new, the SEC has set up a framework and laid the ground rules, some of which are listed below, for investing which startups should understand.

• A company issuing securities in reliance on Regulation Crowdfunding (an “issuer”) is permitted to raise a maximum aggregate amount of $1 million in a 12-month period.

• Individual investors are limited in the amounts they are allowed to invest in all Regulation Crowdfunding offerings over the course of a 12-month period.

• Individual investors are limited in the amounts they are allowed to invest in all Regulation Crowdfunding offerings over the course of a 12-month period.

• Certain companies are not eligible to use the Regulation Crowdfunding exemption including, among others, non-U.S. companies and companies currently Exchange Act reporting companies.

Analysts predict that equity crowdfunding will pour billions of dollars into early-stage startups which is good news for both the companies and the people who invest in them. Early-stage investors will be able to have control over the companies that they invest with, which means they can buy a stake in products and services that have meaning to them. This may make it easier for startups to successfully promote their vision to investors on a more personal level. 

Sources:
Entrepreneur – bit.ly/2jJJUtW
Securities and Exchange Commission – bit.ly/2jier3o

Finding Funding Locally

Sources of funding for businesses come in a variety of forms and from different government entities both locally and nationally. In our two previous articles we covered funding resources from the federal government (SBA) and from the State of Maryland. This month we’ll highlight programs on the local level that are offered by Montgomery County.

Montgomery County Economic Development Grant and Loan Program

Who is eligible? The County provides financial assistance to private employers who retain jobs or stimulate new job creation in Montgomery County. Priority is given to high tech companies, manufacturing companies, businesses located in urban revitalization areas, and private employers providing the greatest public benefits.

Amount: The typical amount ranges from $5,000 – $10,000 but higher amounts are possible for larger projects.

Priority: Priority is given to private employers who will create significant growth, significant capital investment in the County, will improve the County’s economic development strategies, and where it leverages existing state and private sector funding.

Montgomery County MOVE Program

Who is eligible? Businesses that are new to the County that lease up to 10,000 square feet of Class A or B office space. All industries, except retail and restaurants, and all leases up to 10,000 square feet are eligible.

Amount: $8/square feet

Requirement: Sign a minimum 3-year lease 

Montgomery County Small Business Revolving Loan Program

Who is eligible? Small businesses based in Montgomery County with gross revenues of less than $5,000,000 annually and fewer than 75 employees. Program funds must assist the expansion of the business or help retain and stabilize the business.

Amount: Ranges from $5,000 – $100,000 with maximum terms up to 5 years.

Criteria:
Program applicants will be rated on these elements:

• Financial history (if applicable, including personal financial/credit history) and projections, including balance sheets, income statements, cash flow statements, and bank statements (if applicable)
• Background, experience, and financial commitment of the company principal(s) and key management personnel
• Statement of the amount, timing, and projected use of the County’s assistance and any co-venture capital
• Projected employment growth, and/or other positive economic impacts that the County’s assistance will facilitate
• Ability of the recipient business to generate sufficient income to service the requested loan

Priority will be given to:

• Assistance that will materially improve the County’s economy and advance the County’s economic development objectives and strategies
• Cases where the County’s assistance will function as a catalyst to the company’s subsequent capitalization
• Cases where the business will create significant employment growth by creating new jobs within 3 to 5 years of funding
• Businesses for whom private/bank financing is not available at the time of application

Commercial Lending

Montgomery County contributes funds into community banks that have agreed to focus on lending to small businesses in the County. Banks that participate with the County are listed below.

• Capital Bank
• Congressional Bank
• Eagle Bank
• Wells Fargo Woman/Diverse Business Owner Programs

In addition to funding resources, the County also offers business advice, licenses/permits, and a variety of services at the Montgomery County Business Portal at http://bit.ly/2gCTTP6.

Source: Montgomery County Business Portal – http://bit.ly/2gCTTP6

How the Small Business Administration Can Help Finance Your Business

Starting or expanding a business comes with a range of responsibilities from strategy to hiring to most importantly, funding. Learning about financing options and choosing a lender can be intimidating, but the Small Business Administration (SBA) is a good place to start. The agency provides an array of financing for small businesses from the smallest needs in micro-lending to substantial debt and equity investment capital (venture capital). Loans are made through banks, credit unions, and other lenders who partner with the SBA.

The SBA provides assistances primarily through these programmatic functions:

Starting and Expanding Businesses

• Basic 7(a) Loan Program: Gives 7(a) loans to eligible borrowers for starting, acquiring and expanding a small business. This type of loan is the most basic and the most used within SBA’s business loan programs. Borrowers must apply through a participating lender institution.
• Certified Development Company (CDC) 504 Loan Program: Provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.
• Microloan Program: Offers very small loans to start-up, newly established, or growing small businesses. SBA makes funds available to nonprofit community-based lenders which, in turn, make loans to eligible borrowers in amounts up to a maximum of $50,000. Applications are submitted to the local intermediary and all credit decisions are made on the local level.

 Disaster Loans

• Disaster Assistance Loans:
Provide financial assistance to victims of disasters or to individuals in a declared disaster area. You may be eligible for this type of loan even if you don’t own a business.
• Economic Injury Loans:
Assist small businesses, small agricultural cooperatives, and nonprofit organizations as they recover from economic losses resulting from physical disaster or an agricultural production disaster.

Export Assistance Loans

• Export Express: Provide exporters and lenders with a streamlined method of obtaining financing for loans and lines of credit up to $500,000. Lenders use their own credit decision process and loan documentation; exporters get access to their funds faster. SBA provides an expedited eligibility review with a response in less than 24 hours.
• Export Working Capital: Offers loans targeted at businesses that are able to generate export sales but need additional working capital to support these opportunities.
• International Trade Loans: Gives term loans that are designed for businesses that plan to start/continue exporting or those that have been adversely affected by competition from imports. The proceeds of the loan must enable the borrower to be in a better position to compete. 

Veteran and Military Community Loans

• Military Reservist Economic Injury Disaster Loan:
Offers funds to eligible small businesses to meet ordinary and necessary operating expenses that could have been met, but are unable to meet, because an essential employee was “called-up” to active duty in their role as a military reservist.

Special Purpose Loans

• CAPLines:
Help small businesses meet their short-term and cyclical working-capital needs through the SBA umbrella program called CAPLines.
• Pollution Control Loans:
Provides financing to eligible small businesses for the planning, design, or installation of a pollution control facility.
• S. Community Adjustment And Investment Program (CAIP):
CAIP is a program established to assist U.S. companies that are doing business in areas of the country that have been negatively affected by the North American Free Trade Agreement (NAFTA). To be eligible, a business must reside in a county noted as being negatively affected by NAFTA, based on job losses and the unemployment rate of the county.

Grants
The SBA does not provide grants for starting and expanding a business, but they do provide grants for small businesses that are engaged in scientific R&D. You can qualify for federal grants under the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs. SBIR and STTR programs encourage small businesses to undertake R&D projects that meet federal R&D objectives and a have high potential for commercialization. More information on SBA research grants can be found at SBIR.gov.

To make the process easier for borrowers, the agency has an online referral tool called LINC. The tool connects small business owners with participating SBA lenders in their communities by enabling prospective borrowers to complete a short online questionnaire. The responses are forwarded to participating SBA lenders that operate within the small business’ county, and if lenders are interested, then contact information will be exchanged.

To learn more about the SBA and its lending programs, visit www.sba.gov.

Source: Small Business Administration – https://www.sba.gov