ENTERPRENEURIAL SUPPORT

Funding Options & Incentives

 

Funding Options & Incentives

The Ohio Development Services Agency’s Collateral Enhancement Program (CEP) was created to facilitate increased lending by banks to small businesses, minority- and women-owned businesses, and businesses located in HubZone areas that need access to capital for growth or expansion. The CEP is designed to enable financing that might otherwise be unavailable due to a collateral shortfall. The program supplies pledged cash collateral accounts to lending institutions to enhance collateral coverage of individual small business loans. The program is designed to target certain situations or industries, such as manufacturing, in which there is a collateral shortfall.

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InvestOhio is a new tool to infuse much needed capital into Ohio’s small businesses, helping them create jobs. The nearly 900,000 small businesses in Ohio are one of the backbones of the state’s economy. InvestOhio encourages investors to actively support these small businesses, sparking growth and improving Ohio’s competitive position. The program, administered by the Ohio Development Services Agency in collaboration with the Ohio Department of Taxation, is expected to generate at least $1 billion in new private investment in Ohio small businesses by 2013.

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The Ohio Development Services Agency received more than $55 million from the U.S. Department of Treasury for the State Small Business Credit Initiative (SSBCI) to encourage lending to small businesses. The Ohio Development Services Agency administers state-run financing programs utilizing SSBCI funds to help finance small businesses and manufacturers that are creditworthy, but are not receiving the financing they need from the private sector to expand and create jobs.

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The Targeted Investment Program (TIP) supports the growth and expansion of targeted small businesses within Ohio’s manufacturing, production logistics, agribusiness, or food processing value chains. TIP offers debt instruments tailored to the specific needs of the company at or below market interest rates. TIP targets small businesses that have received first or second round equity funding.

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The Ohio Capital Access Program (OCAP) is a loan portfolio insurance program (similar to a loan guarantee) that enables small businesses to obtain credit to help them grow and expand their businesses. Since 2002, the OCAP has assisted countless small businesses with their working capital and fixed asset financing needs. In OCAP, when a participating Lender originates a loan, the Lender and Borrower combine to contribute a percentage of the loan (from 3 percent to 6 percent) into a reserve fund, held by the Lender. The Ohio Development Services Agency also sends a state contribution to the Lender-held reserve fund. Each Lender’s total OCAP reserve fund is available to cover losses on any loan in the Lender’s OCAP portfolio. OCAP loans are originated and serviced by the Lender. The Ohio Development Services Agency also uses funds from the State Small Business Credit Initiative to make contributions to the reserve fund.

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The Ohio Historic Preservation Tax Credit Program provides a 25 percent tax credit for the rehabilitation expenses to owners and lessees of historically significant buildings. A building is eligible if it is individually listed on the National Register of Historic Places; contributes to a National Register Historic District, National Park Service Certified Historic District, or Certified Local Government historic district; or is listed as a local landmark by a Certified Local Government. The program is competitive and receives applications bi-annually in March and September.

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The Ohio Enterprise Zone Program is an economic development tool administered by municipal and county governments that provides real and personal property tax exemptions to businesses making investments in Ohio.

Enterprise zones are designated areas of land in which businesses can receive tax incentives in the form of tax exemptions on eligible new investment. The zone’s geographic area is identified by the local communities involved in the creation of the zone. The boundary should (1) include areas appropriate for business development, (2) have a single continuous boundary, (3) meet minimum population requirements, and (4) evidence the distress characteristics, when applicable. Once a zone is defined, the local legislative authority participating in the creation must petition the director of the Development Services Agency. The director must then certify the area for it to become an active Enterprise Zone.

Local communities may offer tax incentives for non-retail projects that are establishing or expanding operations in the State of Ohio. Real property investments are eligible for tax incentives, as well as personal property investments for those entities that continue to pay personal property tax. Tax incentives are negotiated at the local level, and an enterprise zone agreement must be in place before the project begins. Businesses interested in pursuing these incentives should contact the local Enterprise Zone Manager.

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The Ohio Community Reinvestment Area program is an economic development tool administered by municipal and county government that provides real property tax exemptions for property owners who renovate existing or construct new buildings. The program is delineated into two distinct categories, those created prior to July 1994 (“pre-1994”) and those created after.

In order to use the Community Reinvestment Area program, a city, village, or county petitions to the Ohio Development Services Agency (ODSA) for confirmation of a geographical area in which investment in housing has traditionally been discouraged (click here for the process to establish a Community Reinvestment Area). Once an area is confirmed by the Director of ODSA, communities may offer real property tax exemptions to taxpayers that invest in that area.

Businesses interested in pursuing this incentive should contact the local Community Reinvestment Area Housing Officer in the city, village, or county (in the case of a township location) of the potential investment.

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The CDC/504 Loan Program provides financing for major fixed assets such as equipment or real estate.

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The 7(a) Loan Program, SBA’s most common loan program, includes financial help for businesses with special requirements.

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The Microloan program provides loans up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand. The average microloan is about $13,000.

The U.S. Small Business Administration provides funds to specially designated intermediary lenders, which are nonprofit community-based organizations with experience in lending as well as management and technical assistance. These intermediaries administer the Microloan program for eligible borrowers

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The purpose of the B&I Guaranteed Loan Program is to improve, develop, or finance business, industry, and employment and improve the economic and environmental climate in rural communities. This purpose is achieved by bolstering the existing private credit structure through the guarantee of quality loans which will provide lasting community benefits. It is not intended that the guarantee authority will be used for marginal or substandard loans or for relief of lenders having such loans.

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Unlocking the full potential of diverse and ambitious entrepreneurs to economically transform entire communities.

In response to the need for job and wealth creation in Northeast Ohio, the region’s civic, community, and philanthropic leaders came together in 2003 and provided the vision and leadership for a solution: a unique partnership between public and private entities charged with creating economic transformation in Northeast Ohio through the growth of an entrepreneurial ecosystem.

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Tech Sprout provides small amounts of funding to help early stage entrepreneurs turn their high-tech ideas into viable businesses. The regionally focused fund, administered by Mansfield’s Braintree Business Development Center, is designed to help move ideas toward commercialization.

These micro grant awards provide resources to help startups validate their technology and develop their business model. Awards can be used for a variety of purposes, including prototyping, patents, testing, and hiring outside experts. Applicants work with mentors to develop or refine their business model before presenting at a funding event.

Tech Sprout uses competitive funding rounds to determine grantees. Companies located in the 21 counties of Northeast Ohio are eligible for up to $2000 in Tech Sprout grant money; Braintree tenant companies can receive up to $6000.

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Appleseed Microfinance, which is based at the Braintree Business Development Center in Mansfield, provides small capital for small businesses in the 21 counties of Northeast Ohio. Eligible businesses with annual revenues of less than $1 million can receive loans between $1,000 and $35,000, which can be used for equipment, inventory, business debt restructuring, working capital and short-term projects. Startups and existing businesses, as well as home-based companies, are all encouraged to apply.

The length of these loans depends on the loan amount and the investor’s use of funds, with a maximum term of five years. In addition:

  • The loan’s interest rate is fixed at the prime rate + 4%
  • Loans require a personal guarantee from all owners

A non-refundable $50 application fee is required, and the closing fee is 1% of the loan amount.

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The CAPlines program for loans up to $5 million is designed to help small businesses meet their short-term and cyclical working capital needs. The programs can be used to finance seasonal working capital needs; finance the direct costs of performing certain construction, service and supply contracts, subcontracts, or purchase orders; finance the direct cost associated with commercial and residential construction; or provide general working capital lines of credit that have specific requirements for repayment. There are four distinct loan programs under the CAPlines umbrella.

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In 1958, Congress created the Small Business Investment Company (SBIC) program to facilitate the flow of long-term capital to America’s small businesses. SBA does not provide capital directly to businesses. Instead, SBA partners with private investors to capitalize professionally-managed investment funds (known as “SBICs”) that finance small businesses.

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Natural resource-based business / recycling loans, downtown revitalization loans in communities of less than 25,000 population, and renewable energy loans to help farms and rural businesses to be more energy efficient through renewable energy sources: geothermal, solar, and wind.

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Entrepreneurial Support