Location:
FEDERAL ASSISTANCE PROGRAMS; SMALL BUSINESS; STATE AID;

OLR Research Report


SMALL BUSINESS ASSISTANCE PROGRAMS

By: John Rappa, Chief Analyst

Heather Poole, Legislative Analyst I


ISSUE
Summarize state, federal, and Connecticut nonprofit programs providing grants, loans, and tax breaks to small businesses (business assistance programs), including programs targeting women-, veteran-, and minority-owned businesses. This report updates OLR Report 2014-R-0186.

SUMMARY

Most state, federal, and nonprofit business assistance programs serve both large and small businesses, although some, like Connecticut's Department of Economic and Community Development's (DECD) Small Business Express Program (Express), serve only small businesses.

Small business assistance programs use a variety of criteria, such as number of employees or annual revenue, to determine a business' eligibility. For example, DECD's Express is open only to businesses with 100 or fewer employees while the nonprofit Community Economic Development Fund's loan guarantee programs are open only to businesses with 50 or fewer employees, including separate programs for minority- and women-owned businesses. The Labor Department provides employee training and wage subsidies to small businesses and manufacturers hiring unemployed workers, including veterans. The state's quasi-public development agency, Connecticut Innovation, Inc. provides venture capital for startup, technology-based businesses.

This report's attachments summarize state, federal, and nonprofit business assistance programs, including small businesses owned by women, veterans, and minority group members. It does not include municipal property tax exemptions for constructing or renovating business facilities. Attachment 1 summarizes the programs providing grants, loans, and other types of financial assistance. Attachments 2 and 3, respectively, summarize state and federal programs providing tax incentives. (We have used an asterisk to indicate the programs targeting small businesses, including those owned by women, veterans, and minority group members.)

Several regional and local nonprofit development corporations provide financial and technical assistance to small businesses, often with state and federal funds. Attachment 4 lists these corporations and identifies the geographic areas they serve.

The number of business assistance programs and implementing agencies may make it hard for small business owners to identify those that meet their needs. But several organizations can help provide direction, including the following:

1. Connecticut Economic Resource Center's Business Response Center (http://www.cerc.com/Content/Connecticutand_39_s_Business_Response_Center.asp),

2. DECD's Small Business Affairs Office (http://www.ct.gov/ecd/cwp/view.asp?a=3931&q=462650), and

3. The Small Business Administration (SBA) (https://www.sba.gov/category/navigation-structure/loans-grants).

JR/HP:bs

Attachment 1: Small Business Financial Assistance Programs by Agency

Program

Assistance Limits

Assistance Terms

Eligible Uses

Community Economic Development Fund (CEDF)

*Three separate Micro Loan Guarantees for Business Owners employing 50 or fewer employees (two programs targeted to specific geographic areas, one targeted to women and minority owners)

30% loan guarantee

Terms and conditions tailored to help business secure bank loan

Working capital

Machinery and equipment

Inventory

*CEDF-administered Small Business Administration Micro Loans

Maximum $50,000, but this SBA funded loan can be combined with other loans for a total loan package of up to $150,000

Up to six years loan repayment

Payment amounts based on business' cash flow

Personal guarantee and pledge of business assets

Working capital

Machinery and equipment

Inventory

*Standard Loans for businesses in eligible communities or business owners with household incomes less than $85,700

$50,000-$250,000

Up to 10 years loan repayment

Payment amounts based on business' cash flow

Personal guarantee and pledge of business assets

Fixed and variable interest rates

Working capital

Machinery and equipment

Inventory

Owner-occupied real estate

*Grow Your Business Loans for businesses in eligible communities or business owners with household incomes less than $85,700

$50,000 to $250,000

Business in existence for at least three years

Up to 10 years loan repayment

Payment amounts based on business' cash flow

Personal guarantee and pledge of business assets

Interest rate equals prime rate plus 4%

Fund expansion of existing business

Working capital

Machinery and equipment

Inventory

Owner-occupied real estate

Connecticut Innovations, Inc. (CII)

Urbank

30% first-loss loan guarantee for up to $500,000

15-year loan maturity

Interest rate and other terms set by lender

Capable of repaying debt

1.5%-2.5% borrower fees

Working capital

Machinery and equipment

Purchase, construct, expand, or upgrade facilities

Attachment 1 (Cont.)

Program

Assistance Limits

Assistance Terms

Eligible Uses

Connecticut Innovations, Inc. (CII) (Cont.)

Line of Credit

$250,000-$1 million

Business in existence for at least three years

Owner's personal guarantee

Demonstrate ability to create or retain jobs

Capable of repaying debt

Revenue producing equipment

Information technology upgrades

Building expansions

Working Capital Loans

Up to $ 5 million

Business in existence for at least three years

Demonstrate ability to create or retain jobs

Owner's personal guarantee

Maturity tailored to transaction

Working capital

Machinery and equipment

Purchase, construct, expand, or upgrade facilities

Mortgages on owner-occupied real property

Direct Loans

Up to $5 million

Business in existence for at least three years

Owner's personal guarantee

Demonstrate ability to create or retain jobs

Capable of repaying debt

Up to 25 years repayment

Working capital

Machinery and equipment

Purchase, construct, expand, or upgrade facility

Mortgages on owner-occupied real property

Brownfields cleanup and redevelopment

Participation Loans

Up to $5 million “junior participation” loan matching conventional bank loan plus 50% CI share in project cost

Business in existence for at least three years

Owner's personal guarantee

Demonstrate ability to create or retain jobs

Capable of repaying debt

Bank determines interest rate, terms, and maturity; proportionately shares fees and interest with CI; and services the loan

Working capital

Machinery and equipment

Purchasing, constructing, expanding, or upgrading facility

Mortgages on owner-occupied real property

Brownfields cleanup and redevelopment

Venture/Mezzanine Debt Funding

$300,000 to $2 million mezzanine capital (financing structured as subordinated debt or preferred equity)

Businesses with products that have been available in the market for at least one year

Business expansion

Attachment 1 (Cont.)

Program

Assistance Limits

Assistance Terms

Eligible Uses

Connecticut Innovations, Inc. (CII) (Cont.)

*Eli Whitney Equity Fund

Up to $1.5 million per round and up to $7 million per company

Innovative product or service in bioscience, information technology, clean technology, photonics, and advanced materials

Developing new products and services

*Seed, Pre-seed, and Early Stage Investments

$500,000 to $1 million per round in technology-based businesses

Investments based on:

quality of the management team

potential market for product or service

company's proposed product can withstand copyright challenges

Operating expenses incurred while developing new ideas or concepts for commercially viable products and services

*Connecticut Bioscience Innovation Fund

Up to $500,000 in project funding for newly formed businesses (three to seven years) in secured loans and/or equity

Terms depend on the type of assistance received

Projects must demonstrate a quantifiable commercial return on investment

Project expenses

*Regenerative Medicine Research Fund (formerly Stem Cell Research Fund)

Up to $1.5 million in research grants

Grants, loans, loan guarantees equity investments, or other forms of financing

Terms and conditions determined by advisory board based on purpose of the assistance

Direct and indirect project costs

Facilities

Department of Economic and Community Development

*Small Business Express Program, Revolving Loan Fund (100 or fewer employees)

$10,000–$100,000

Business has been registered to conduct business in Connecticut for at least a year

Up to 4% interest

Maximum 10-year term

DECD determines other loan terms, conditions, and collateral requirements to prioritize job growth and retention

No delinquent state or local taxes

Purchasing machinery and equipment

Construction or leasehold improvements

Relocation costs

Working capital

Other commissioner-approved expenses

Attachment 1 (Cont.)

Program

Assistance Limits

Assistance Terms

Eligible Uses

Department of Economic and Community Development (Cont.)

*Small Business Express Program, Job Creation Incentive Loans (100 or fewer employees)

$10,000–$300,000 potentially forgivable loans

Business has been registered to conduct business in Connecticut for at least a year

Up to 4% interest

Up to 10-year term

Loan forgiveness based on attainment of job goals

DECD determines other loan terms, conditions, and collateral requirements to prioritize job growth and retention

No delinquent state or local taxes

Training

Marketing

Working capital

Other commissioner-approved expenses that support job creation

*Small Business Express Program, Matching Grants (100 or fewer employees)

$10,000–$100,000 grants

Business has been registered to conduct business in Connecticut for at least a year

No delinquent state or local taxes

Business must match state grants

Training

Working capital

Acquiring machinery and equipment

Construction or leasehold improvements

Relocation within state

Other commissioner-approved expenses

Manufacturing Assistance Act (MAA)

Fixed percent of costs depending on project's location or purpose

Range: Up to 90% in 17 targeted investment communities to up to 50% of costs in other communities

Commissioner sets terms and conditions

State Bond Commission sets interest rate

Feasibility studies, engineering, appraisals, and other planning activities

Property, machinery, and equipment purchases

Facility construction and site improvements

Relocation costs

Working capital

Job training, day care, energy conservation, pollution control, and other specified business support services

First Five Program

Up to 100% MAA for up to 15 projects meeting specified employment and investment targets

Commissioner sets terms and conditions

Same as above

Attachment 1 (Cont.)

Program

Assistance Limits

Assistance Terms

Eligible Uses

Department of Economic and Community Development (Cont.)

Connecticut Manufacturing Innovation Fund

Grants, loans, credit extensions, vouchers, and other types of assistance to businesses specializing in technologically advanced products and services, entities leveraging federal grants, and certified education or training programs

Assistance limits determined by the Manufacturing Innovation Advisory Board

Terms set by the Manufacturing Innovation Advisory Board

Facilities costs

Furniture, fixtures, or equipment

Tooling development and manufacture

Materials and supplies

Proof of concept

Research and development

Compensation and apprenticeships

Other costs board deems eligible

Department of Labor

*Small Business Subsidized Training and Employment Program (STEP UP)

Up to $20 per hour subsidy for new employee's training and compensation

Subsidy amount phases out over employee's first six months of employment

Business must hire new employee who:

was unemployed immediately before being hired and

has a family income of less than 250% of federal poverty level

Subsidize employment and training costs

*Small Manufacturer Training Grant Program (STEP UP)

Monthly grants subsidizing new employee training and compensation

Initial grants up to $2,500; grant amount phases out over six months

Business must hire a new employee

Training and compensation

*Unemployed Armed Forces Member STEP UP Program

Up to $20 per hour (maximum $12,500) subsidy for veteran's employee training and compensation

Subsidy amount phases out over 6 months of employment

Business must hire a new employee who:

served in the Armed Forces or reserves and was honorably discharged and

was unemployed immediately before being hired

Subsidize employment and training costs

Attachment 1 (Cont.)

Program

Assistance Limits

Assistance Terms

Eligible Uses

Department of Economic and Community Development (Cont.)

*New Apprentice STEP UP

Up to $10 per hour subsidy for apprentice's training and compensation

Subsidy amount phases out over 6 months of employment

Business must hire a new employee who is a student at a high school, preparatory school, or higher education institution

Subsidize employment and training costs

Federal Small Business Administration (SBA)

*CDC/504 Loan Program (for businesses with net worth under $15 million and after tax income under $5 million)

Maximum $5 million loans ($4 million for small manufacturers or $5.5 million for those meeting energy reduction goals)

Create or retain one job per $65,000 of SBA assistance ($100,000 per job created or retained for small manufacturers)

10-20 year loan terms

Land and building acquisition

Property improvements

Facility construction, renovation, or conversion

Machinery and equipment purchase

*7(a) Loan Guarantees

Maximum $5 million loans

85% guarantee for loans up to $150,000 and 75% for loans above that amount

Loan term varies depending on purpose

Short- and long-term working capital

Land acquisition

Building construction or renovation

Business expansion

Debt financing


Attachment 2: State Business Tax Incentives

Name and Agency

Applicable Business Taxes

Eligibility

Incentive Amount

Rehabilitation of Historic Business Property for Mixed Residential and Commercial Use

Department of Economic and Community Development (DECD)

Insurance Premium

Corporation

Air Carrier

Railroad Company

Community Antenna

Utility Companies

Certified historic commercial, industrial, mixed residential and nonresidential, cultural, and former municipal, state, and federal property on the national or state Register of Historic Places or located in an historic district on the national or state register

Total credits capped at $31.7 million per year beginning FY 16

25% of qualified rehabilitation expenditures; 30% if project includes units affordable to low- and moderate-income people

No project can receive more than $4.5 million

Unused credits may be carried forward for up to five years

Manufacturing and Specified Service Facilities in Enterprise Zones, Enterprise Zone Municipalities, or Designated Airport Development Zones (DECD and Connecticut Airport Authority) (CGS 12-217e)

Corporation

Based on developing facilities and creating jobs

Facility must be:

newly acquired, constructed, or improved

located in the enterprise zone or in another part of the town with the zone

used for manufacturing or specified financial services

Business must have created jobs to do work in the facility

10-year credit against tax allocable to facility:

25% credit or

50% if at least 150 or 30% of new jobs are held by zone or city residents who qualify for federal job training assistance

Credits automatic in zones; available to manufacturers outside the zone at state's discretion

Specified service firms outside the zones qualify for credits under the program below

Service Facilities in Enterprise Zone Municipalities (DECD) (CGS 12-217e)

Corporation

Based on developing facilities and creating jobs

10-year credit based on number of jobs created:

15%, 300-599 jobs

20%, 600-899 jobs

25%, 900-1,199 jobs

30%, 1,200-1,499 jobs

40%, 1,500-1,999 jobs

50%, 2000 or more jobs

Apprenticeship Training , Department of Labor (DOL) (CGS 12-217g)

Corporation

(S Corps and other business entities that are not subject to this tax may earn the manufacturing trade apprenticeship credit and sell, assign, or transfer it to another taxpayer)

Hiring manufacturing, plastics, or construction apprentices participating in state-approved apprenticeship training programs

Businesses hiring plastics trade apprentices qualify if the number hired exceeds the average number of plastic apprentices hired during the prior five years

Maximum $7,500 or 50% of wages paid, whichever is less, for manufacturing and plastics trade apprentices

Maximum $4,000 or 50% of wages, whichever is less, for construction trade

Attachment 2 (Cont.)

Name and Agency

Applicable Business Taxes

Eligibility

Incentive Amount

Incremental Research and Development Expenditures, Department of Revenue Services (DRS) (CGS 12-217j)

Corporation

Businesses that increase their R&D expenditures over the prior year

20% of the amount spent on R&D over the prior year's spending

Research and Development Expenditures (DECD) (CGS 12-217n)

Corporation

Any business incurring R&D expenditures

Credit amount determined according to statutory two-step formula

Credits range from 1% for expenditures under $50 million to 6% for expenditures over $200 million

Only one-third of credit can be taken per year

Unused credits may be carried forward until fully taken

Research and Development Expenditures for Qualified Small Businesses (DECD) (CGS

12-217n)

Corporation

Businesses with gross incomes under $100 million

6% of total R&D expenditure

Only one-third of credit can be taken per year

Unused credits may be carried forward until fully taken

Research and Development Expenditures for Enterprise Zone Businesses (DECD) (CGS 12-217n)

Corporation

Any business headquartered in an enterprise zone employing over 2,500 people and with annual revenues over $3 billion

The greater of 3.5% of total R&D expenditure or the amount derived from the statutory two-step formula used by big businesses outside the zone

Machinery and Equipment (DRS) (CGS 12-217o)

Corporation

Business must have increased the amount it spent for machinery and equipment used in Connecticut over the prior year's amount

Credit depends on the number of employees:

10% for businesses with 250 or fewer employees

5% for businesses with between 251 and 800 employees

Purchase of Electronic Data Processing (DRS) (CGS 12-217t)

Unrelated Business Income of Nonprofit Corporations

Air Carrier

Railroad Company

Community Antenna

Utility Companies

Insurance Premium

Corporation

Businesses paying property taxes on computers, printers, peripheral computer equipment, bundled software, and similar equipment

Credit is 100% of property tax paid on electronic data processing equipment

Attachment 2 (Cont.)

Name and Agency

Applicable Business Taxes

Eligibility

Incentive Amount

Fixed Capital Investments (DRS) (CGS 12-217w)

Corporation

Property must:

Have a minimum five-year class life

Not be sold or transferred

Be held or used in Connecticut

5% of fixed capital costs incurred during income year

Human Capital Investments (DRS) (CGS 12-217x)

Corporation

Eligible activities include:

job training

work education

child care subsidies

day care facilities

donations to colleges and universities for technology

5% of expenditure

Unused credits may be carried forward for up to five years

Urban and Industrial Sites Reinvestment (DECD) (CGS 32-9t)

Insurance Premium

Corporation

Air Carriers

Railroad Company

Community Antenna

Utility Companies

Other specified business taxes

Business investing in projects developing or redeveloping property, including brownfields, that meet statutory criteria, including generating new tax revenue and other economic benefits

Business may invest the funds directly in a project or through a fund manager

Total credits available for all projects capped at $ 950 million

100% credit, up to $100 million, spread out over 10 years: 0% in first three years after the investment was made, 10% per year in the next four years, and 20% per year in the remaining three years

Unused credits may be carried forward for up to five years or assigned to another taxpayer

*Corporations Created in Enterprise Zones (DECD) (CGS 12-217v)

Corporation

Corporation must be created in a zone and meet one of these job goals:

has at least 375 employees, at least 40% of whom reside in the zone or its city and qualify for federal job training assistance or

has less than 375 employees, at least 150 of whom reside in the zone or its city or qualify for federal job training benefits

10-year credit:

100% for the first three years

50% for the next seven years

Attachment 2 (Cont.)

Name and Agency

Applicable Business Taxes

Eligibility

Incentive Amount

*Manufacturing Reinvestment Account (DECD) (CGS 32-9zz, as amended by PA 14-69)

100% of the funds withdrawn from the account and used for eligible purposes are exempted from

Corporation

Personal Income

Up to 50 small manufacturers (150 or fewer employees)

Up to five-year tax deferral on up to $100,000 deposited in interest-bearing bank account.

Funds withdrawn within five years are exempted from taxes if used for worker training, capital expenses, and other eligible uses.

Invest CT Funds (formerly, Insurance Reinvestment Program) ((CGS 38a-88a, 1994)

Insurance Premium

Insurance companies investing cash in state-certified “insurance reinvestment funds”

Funds must invest the cash only in eligible Connecticut-based businesses and meet other investment requirements

100% of cash investment claimed over 10 years, beginning in the fourth year after investment was made:

10% per year in years four through seven

20% per year in years eight through 10 Five-year carry forward; no carryback

Total credits capped at $350 million, annual cap, $40 million

*Angel Investment (CGS 12-704d, 2010; no new credits may be allocated after June 30, 2016)

Personal Income

Minimum $25,000 investments in start-up technology-based businesses operating in Connecticut

Credit equals 25% of cash investment up to $250,000

Five-year carryforward; no carryback

Total annual credits capped at $3 million

Attachment 3: Federal Tax Incentives

Program and Agency

Applicable Business Taxes

Eligibility

Incentive Amount

Section 179 Tax Deduction for qualifying purchases of property, Internal Revenue Service (IRS)

Corporation

Personal Income

Wide range of depreciable tangible personal property, including:

machinery and equipment

office equipment

gasoline storage tanks and pumps

Deduction equal to the cost of qualifying property, subject to dollar and business income limits determined by the type of property

Section 199 Domestic Production Activities Tax Deduction (DPAD); (IRS)

Corporation

Personal Income

Eligible activities include:

U.S.-based manufacturing

selling, leasing, or licensing U.S. made goods

selling, leasing, or licensing films produced in U.S.

construction services related to a U.S. construction project

Generally, 9% of the smaller of:

qualified production activities income or

adjusted gross income for an individual, estate, or trust figured without the DPAD

Empowerment Zones (IRS)

Corporation

Businesses hiring zone residents or acquiring property eligible for Section 179 deduction

Wage credits of up to $3,000 for qualifying employees

Increased Section 179 deductions

Increased Work Opportunity Tax credit

New Market Tax Credit (IRS)

Corporation

Corporations and individuals investing in eligible “Community Development Entities”

Credit equals 39% of original investment amount and is claimed over a 7-year period

Work Opportunity Tax Credits (IRS)

Corporation

Hiring and retaining veterans and people from other qualified groups

Tax credit amount varies from 25-40% of an individual's first year wages, depending which “target group” the individual belongs to

Attachment 4: Connecticut Economic Development Corporations

Name

IRS Code

Designation

Purpose

Geographic Area Served

Regional

Municipal Only

Neighborhood Only

Bradley Development League Inc.

501(c)(4)

Market airport and region for economic growth

East Granby, Suffield, Windsor, and Windsor Locks

   

Broad-Park Development Corporation

501(c)(3)

Upgrade physical housing and economic development in specific Hartford neighborhoods

57 Hartford-area municipalities

 

Frog Hollow and South Green

Connecticut Community Investment Corporation

501(c)(4)

Promote economic growth and community development statewide

All regions

   

Greater Hartford Business Development Center, Inc.

501(c)(3)

Stimulate economic development in the Hartford metropolitan area by collaborating with public and private organizations to help start, finance, retain, and recruit small businesses within region

Hartford region

   

Housatonic Industrial Development Corporation

Nonstock Corporation

Help Connecticut businesses grow, create, or retain jobs and achieve economic development goals

Statewide

   

Orange Economic Development Corporation

501(c)(3)

Encourage economic growth in Orange's retail, commercial, industrial zones

 

Orange

 

Mansfield Downtown Partnership, Inc.

501(c)(3)

Direct the rehabilitation and enhancement of specific areas

   

Storrs Center, King Hill Road, and Four Corners Areas

MetorHartford Alliance

501(c)(6)

Provide visible leadership enabling region to fulfill opportunities related to sustainable economic growth

     

Naugatuck Economic Development Corporation

501(c)(3)

Promote and facilitate professional, systematic approach to economic development in Naugatuck

 

Naugatuck

 

New London Main Street

501(c)(3)

Preserve, develop, and enhance economic, social, and cultural quality of life in downtown New London

   

Downtown New London

Attachment 4 (Cont.)

Name

IRS Code

Designation

Purpose

Geographic Area Served

Regional

Municipal Only

Neighborhood Only

Northeast Connecticut Economic Alliance

501(c)(3)

Promote, stimulate, and expand Northeast CT economic base by providing resources, consulting, and business networking

Ashford, Brooklyn, Canterbury, Chaplin, Columbia, Coventry, Eastford, Hampton, Killingly, Lebanon, Mansfield, Plainfield, Pomfret, Scotland, Sterling, Thompson, Union, Willington, Windham, and Woodstock

   

Northwest Connecticut Economic Development Corporation

501(c)(4)

Public and private collaboration for creating jobs, strengthening tax base and improving the economic well being in region

Barkhamsted, Canaan, Colebrook, Cornwall, Goshen, Hartland, Harwinton, Kent, Litchfield, Morris, North Canaan, New Hartford, Norfolk, Roxbury, Salisbury, Sharon, Thomaston, Torrington, Warren, Washington, and Winsted/Winchester

   

Stamford Partnership, Inc.

501(c)(3)

Plan, promote, and implement orderly economic development

 

Stamford

 

South Central Connecticut Regional Economic Development Corporation

501(c)(4)

Promote regional economic development

Bethany, Branford, East Haven, Guilford, Hamden, Madison, Meriden, Milford, New Haven, North Branford, North Haven, Orange, Wallingford, West Haven, and Woodbridge

   

Southeastern Connecticut Enterprise Region Corporation

501(c)(3)

Stimulate and support economic development and diversification of southeast region by fostering climate favorable for development, supporting business retention and expansion, recruiting new businesses, coordinating municipal economic development efforts, and defining and updating region's goals

Bozrah, Colchester, East Lyme, Franklin, Griswold, Groton, Groton City, Ledyard, Lisbon, Lyme, Montville, New London, North Stonington, Norwich, Preston, Salem, Sprague, Stonington, Stonington Borough, Waterford

   

Soutthside Institutions Neighborhood Alliance, Inc.

501(c)(3)

Work cooperatively with community to develop leadership and improve economic, physical, and social characteristics in specific Hartford neighborhoods

   

Frog Hollow, Barry Square, and South Green