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Do Not Overlook State Programs When Considering Business Development and Expansion Projects

Winter 1995

If your company is planning a business expansion or construction of new facilities, you should consider your eligibility for state-sponsored financing programs as part of your financing package. Various state agencies and authorities offer financing programs to encourage and assist economic development projects. This article will briefly discuss several programs offered by the Wisconsin Department of Development (DOD) and the Wisconsin Housing and Economic Development Authority (WHEDA).

The DOD is responsible for administering financial assistance programs through the Wisconsin Development Fund. The Fund’s principal programs are the Major Economic Development Program, the Customized Labor Training Program, and the Technology Development Fund.

The Major Economic Development Program provides loans to Wisconsin businesses for fixed-asset acquisitions and working capital. Companies participating in MED projects are required to make a substantial capital investment and create or maintain a significant number of jobs. Loan amounts generally range between $200,000 to $500,000 with flexible terms depending on the size and scope of the project and the needs of the business. Loan forgiveness is an option available where the project has a substantial economic impact and public benefit, particularly in areas where economic distress is present.

The Customized Labor Training Program is designed to promote the training or retraining of workers in specialized skills. The CLT Program provides grants to businesses to cover up to 50% of the educational cost of training employees as well as payment of base wages while the employee is in an instructional, non-production setting. Payment of wages while the employee is in a production setting is available in limited circumstances where the project has a significant impact on the community, the training will influence a distressed area, or the technology involved is considered significantly new and valuable to the state.

The Technology Development Fund provides assistance to businesses to fund technical research being undertaken to develop a new product or process or to improve an existing product or process. Businesses that have formed a consortium with a research institution are eligible for TDF awards that can fund up to 40% of the eligible costs of a project. Eligible costs include salaries of research personnel, materials, supplies, and certain equipment costs. Awards are made as a loan with provisions for forgiveness if the research does not result in a marketable product or process. Repayment is on a royalty basis.

WHEDA administers a number of financing programs to assist small business owners. These programs are administered through WHEDA’s Economic Development Group.

The Agribusiness Fund provides loan guarantees of up to $675,000 to businesses engaged in projects which result in the development of new or improved methods of processing or marketing a Wisconsin-grown commodity. Any company engaged in agribusiness located in a community having a population of 50,000 or under is eligible to apply. Loan proceeds can be used for working capital, acquisition of buildings or equipment, or initial marketing expenses.

The Target Area Fund assists businesses located in or relocating to an economically distressed area. The Target Area Fund provides loan guarantees of up to $225,000. Loans made under this program can be used for the purchase or improvement of land, buildings, equipment, machinery, and inventory. WHEDA has identified "target areas" in every county in the state except Ozaukee and Waukesha counties.

The Tourism Fund provides loan guarantees of up to $90,000 to assist the expansion of existing tourism businesses. Businesses that derive more than half of their sales from furnishing goods or services to a tourism-related business may also be eligible. The Tourism Fund can also provide interest rate subsidies when financial need is demonstrated. Loan proceeds can be used to purchase or improve land, buildings, equipment, and inventory.

In addition, WHEDA issues industrial development bonds through its Business Development Bond Program. Bond proceeds, available in amounts from $750,000 to $8 million, can be used to finance improvements to Wisconsin manufacturing facilities that will add or retain jobs. Loans are made at tax-exempt rates on either a fixed or variable rate basis. Businesses engaged in manufacturing with current gross annual sales of $35 million or less are eligible for the program.

These and other state programs should be considered when your company is developing a financing package for a planned business expansion. Used in tandem with conventional financing resources, these programs can be a key component in the financing strategy that brings your project from the planning stages to reality.

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