Just about every entrepreneur is looking for funding for their startup; this is particularly true for technology companies.  Republished here with permission from the author (The Tech Czar himself), is a great recap of economic incentives for the high tech sector.  From the city level to the state, whether it’s tax credits or loan funds, the information below is a wide-ranging snapshot of incentive options for your high-tech startup. A big thanks to Michael and LNE for pulling this together.

NEOinc would add to the list to include the Innovation Loan Fund at Lorain County Community College (grants up to 25K, loans up to 100K), and the Cuyahoga County New Product Development Fund, administered by MAGNET (loans up to 60K).

Without further ado – on to the incentives.

Economic Incentives for the High Tech Industry

City of Cleveland

Technology Business Grant Program

This program was designed by the City of Cleveland to attract new business to the City while helping reinforce the City’s “brain gain.” Grant assistance can be applied to both new and existing technology businesses with strong prospects of growth and commercialization of proprietary technologies. Approved companies will receive up to $50,000 per year for three years, based on 50% of new City of Cleveland income taxes generated.

Economic Development Loan Program

The Economic Development Loan Program is designed to help companies from across all industries. This program offers long-term, fixed-rate financing at 4.0% interest. Loans for this program range from $35,000 to $500,000 and cannot exceed 40% of the total project’s cost. Terms are typically 5-7 years on equipment and to up 15 years on land and buildings. The City will take a subordinated collateral position to a private lender.

Vacant Property Initiative Fund

For technology-based companies looking to buy a building for office space or to build their new headquarters or technology showcase space, the Vacant Property Initiative Fund may help secure the facility you need. These loans are designed to overcome barriers to the re-use of abandoned, idled or underutilized commercial properties. Loans may be used for property acquisition, environment site assessments, site clearance and demolition and new construction. The funding is up to 45.0% forgivable. The loans have a 6.0% fixed interest rate and are made for a maximum of one-year.

The City of Cleveland has various other economic incentives available for business and commercial development, please contact us at the LNE Group to discuss in more detail.

Cuyahoga County

NorthCoast Opportunities Technology Fund

The NCO Tech Fund program targets technology companies that are excellent candidates for future venture capital investment and possess high growth job creation potential. Approved companies will receive a payment-deferred, low interest loan to complete a specific initiative or project that is expected to make the company significantly more attractive to pre-seed investors. Evaluation and selection will be performed by the County in collaboration with the State of Ohio funded TechLift entrepreneurial signature program. Funding rounds will occur on a bi-monthly basis.

Key Business Requirements

• Loans can be for $25K- $125K, with typical loans in the $50-75K range
• Interest rate of 5%
• Payments deferred for five years or until:
  Significant financing event (greater than $1.5 million)
  Sale of company or company assets
  Failure to comply with terms of agreement (i.e. leaving Cuyahoga County)
• Loan proceeds must be used for a specific project or initiative that will bring the company closer to achieving pre-seed funding.
• Loan is secured by the personal property and assets of company

Grow Cuyahoga Fund

The Grow Cuyahoga County Fund is a regional economic development fund operated in conjunction with the National Development Council which is a licensed SBA 7(a) lender. The National Development Council (NDC) is one of the nation’s oldest non-profit organizations for community and economic development. Through its Grow America Fund subsidiary, NDC provides SBA-guaranteed 7(a) loans to small businesses in partnership with client communities throughout the country.

The Grow Cuyahoga County Fund can make loans ranging from $100,000 to $1 million. The loans will generally be at rates of prime minus 2% to prime plus 2%, for terms up to 25 years depending on the proposed use of funds. Loan proceeds may be used for any legitimate business purpose, including working capital, machinery and equipment, acquisition of land and building, construction, renovations and tenant improvements. The Grow Cuyahoga County Fund does not provide venture capital and cannot provide funds for research and development or to satisfy equity or near-equity needs.

Economic Development Loan Program

The Economic Development Loan Fund provides businesses with financial assistance to support the retention and creation of jobs for County residents. The fund provides long term, fixed-rate financing at interest rates lower than conventional financing. Interest rate is typically four and a quarter percent (4.25%). The fund is intended to fill a financing gap beyond the amount of private participation and equity investment that can be raised. Loans generally range from a minimum of $35,000 to a maximum of $350,000, up to forty percent (40.00%) of total project cost. Loan terms are up to seven (7) years on equipment and up to fifteen (15) years on land and building. Loans can be used to finance the acquisition of land, buildings, machinery and equipment as well as for new construction, renovation, expansion and/or conversion of facilities. Loans cannot be used to refinance debt, purchase inventory, pay other non-capital costs or on speculative projects. The County will take a subordinated collateral position provided there is adequate collateral available as security, up to a ninety percent (90.00%) loan to value ratio.

Key Business Requirements

• Businesses are required to create one new, full time, permanent job for every $35,000 loaned within three years of loan closing.
• Businesses must provide a minimum of ten percent (10.00%) equity. The business owner or majority stockholder must provide a personal guarantee for the loan amount.
• A majority or fifty-one percent (51.00%) of the jobs created must be made available to low and moderate income persons as defined by the federal government.
• The business must execute Workforce Cooperation Agreement with the County that designates as first source of referral for mutually agreed positions at the company.
• Business must demonstrate the ability to repay the loan as well as have adequate collateral and acceptable credit.
• When loan funds are used for construction, federal prevailing wage rates must be paid and a departmental environmental review must be conducted.
• The business owner or majority stockholder must provide a personal guaranty in the amount of the loan. Additionally, key man insurance and hazard of business insurance is required in the amount of the loan with Cuyahoga County Board of County Commissioners as the loss payee

Enterprise Zone Tax Incentives

A business enterprise located within a Cuyahoga County Enterprise Zone is eligible for negotiated tax incentives for new investment. Currently there are twenty-six (26) enterprise zones designated in Cuyahoga County municipalities which include: Bedford, Bedford Heights, Berea, Brook Park, Cuyahoga Heights, Euclid, Garfield Heights, Glenwillow, Highland Heights, Highland Hills, Maple Heights, Mayfield Heights, Newburgh Heights, North Olmsted, North Royalton, Oakwood, Olmsted Falls, Parma, Richmond Heights, Shaker Heights, Solon, South Euclid, Strongsville, Valley View, Walton Hills and Westlake.

Key Business Requirements

• Businesses must apply directly to the municipality which is the site of the new investment. Local governments can grant exemptions of up to seventy five percent (75%) on eligible new investments. The term of these incentives can be for up to ten (10) years. Once an agreement is negotiated between the company and the municipality, the agreement must be approved by the Board of Cuyahoga County Commissioners. The project cannot begin prior to the Commissioners’ approval.
• The companies are required to negotiate and execute a Workforce Cooperation Agreement with the County, which designates the County as the first source of referral for mutually agreed entry-level positions at the company.
• All intra-state relocations require a relocation waiver issued by the Ohio Department of Development. A letter from the mayor of the exited community is required on intra-county relocations.
• Fees include a one-time application fee of $750.00 payable to the Ohio Department of Development. There is also an annual monitoring fee charged by the municipality and split with the County. This fee is equal to one percent (1%) of the taxes exempted, minimum $500 and not to exceed $2,500 per year for the life of the agreement.

For more information on the Cuyahoga County economic incentives please feel welcome to contact me at 216.781.9000 or at mdealoia@lnegroup.com.

State of Ohio

Job Creation Tax Credit

The Job Creation Tax Credit allows companies that are creating at least 25 new full-time jobs that are paying at least 150% of federal minimum wage to apply for state income tax credits. Certain project that create 10 or more full-time jobs and pay more than 400% of the federal minimum wage may also be eligible for the tax credits. The credit is calculated as a percentage of state income tax revenue withheld by the business for new employees. The credit also allows a municipality to grant a credit against its income tax to business that receives it from the state.

Technology Investment Tax Credit Program

This credit program offers a variety of benefits to Ohio taxpayers who invest in small, research and development or tech-based firms. Through this innovative program, Ohio investors may reduce their state taxes by 25.0% (and in some cases 30.0%) of the amount they invest in qualified, technology-based Ohio companies. Both the companies and the investor’s must meet several requirements specified by Ohio law in order to gain access to this program.

Ohio Research & Development Investment Tax Credit

The Ohio Research & Development Investment Tax Credit provides a non-refundable tax credit against the corporate franchise tax and is designed to encourage Ohio-based companies to invest in increased research and development activities.

Research & Development Sales Tax Exemption

A unique way for a company to support its research and development activities is the Research & Development Sales Tax Exemption which allows for an exemption from the usual state and county sales tax for companies that purchase equipment for research and development activities. This allows Ohio-based companies to enjoy significant tax savings while undertaking research and development activities.

Ohio Innovation Loan Fund

The Innovation Ohio Loan Fund (“IOF”) was created to assist existing Ohio companies develop next generation products and services within certain “Targeted Industry Sectors” by financing the acquisition, construction and related costs of technology, facilities and equipment. The IOF provide competitive financing terms on loans to finance projects that will positively impact Ohio by creating high-value jobs, increased tax revenues and improve the welfare of the State.

The IOF is intended to supply capital to Ohio companies having difficulty securing funds from conventional sources due to technical and commercial risk factors associated with the development of a new product or service. The IOF can finance up to75.0% of a project’s allowable costs to a maximum of $3.0 million and a minimum of $500,000.

Key Business Requirements

The IOF will target industry sectors involving the production or use of:

• Advanced Materials
• Instruments, Controls & Electronics (“ICE”)
• Power & Propulsion
• Biosciences
• Information Technology

The IOF is intended to support the capital needs of established Ohio companies that have:

• A recent history of positive cash flow
• A minimum of three years of operating history
• Attracted or are likely to attract additional third party capital to the project