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Kentucky’s Small Business Support Programs

An Overview of programs and services designed to assist small businesses start and expand operations

Small Business Services Division

• Licensing/Permitting/Legal Start Up

• Advocacy

• Government Procurement

• Exporting Assistance

• Small Business Financing/Tax Credits

– Small Business Loan program

– Kentucky Microenterprise Loan program

– Kentucky Small Business Credit Initiative

– Kentucky Small Business Investment Credit

– Maintain awareness of other state, federal and local small business assistance programs

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Working Together for KY Companies

• Governor Beshear’s effort to build the exporting capacity and productivity of small companies

• KY’s Contribution to the National Export Initiative

• Coordinated, multi-organizational team to connect companies with new markets & international partners

KY Cabinet for Economic Development

World Trade Center Kentucky

U.S. Commercial Service

Kentucky Association of Manufacturers

Kentucky Chamber of Commerce

Northern Kentucky International Trade Association

TradeRoots

•

KEI Members

KY Cabinet for Economic Development

World Trade Center Kentucky

U.S. Commercial Service

Kentucky Association of Manufacturers

Kentucky Chamber of Commerce

Northern Kentucky International Trade Association

TradeRoots

•

KEI Members

Just received notification of our 2nd U.S. Small Business Administration grant to promote small business exporting activity across the state

Companies must apply and submit plan for funds

$6,000 - $7500 to eligible companies

STEP Grant Award

Who is Eligible?

• Small companies

• Registered to do business in KY for at least one year

• Operating profitably based on established U.S. sales

• Demonstrate understanding of costs & commitment involved in exporting

Additional criteria may apply.

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Kentucky Small Business Credit Initiative

Agenda

• Program Introduction

• Process

• Kentucky’s Proposed Programs– CAP Program– Loan Participation Program– Collateral Support Program

• Comments/Questions

• Wrap Up

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Program Introduction• September 27, 2010: Small Business Jobs Act of 2010.

signed into law

• The Act created the State Small Business Credit Initiative (SSBCI), which was funded with $1.5 billion through the U.S. Dept. of Treasury

• Out of those funds and based on several factors, each state was allocated a certain amount of funds.

• The Initiative’s objective is to increase the availability of credit for small businesses by using those federal funds to spur and encourage private sector lending.

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Program Introduction

• Kentucky’s allocation is $15,487,998.

• In order to apply for that allocation, KY submitted a proposal detailing our programs, showing that we could, reasonably, expect to leverage those funds on a $10:1 basis– $15,487,998 almost $155 Million in small

business loans

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Research Process• Cabinet representatives participated in numerous

conference calls to research what programs other states have submitted in their proposals:

California MichiganNorth Carolina Vermont

• Participated in numerous conference calls and webinars hosted by Treasury

• Invited numerous small business bankers, lenders, and support providers from across the Commonwealth to solicit their feedback.

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State Small Business Credit Initiative

• Kentucky’s proposal was submitted to U.S. Treasury Department on June 7, 2011.

• Received notice of approval on July 27, 2011.

State Small Business Credit Initiative

• $15 million allocation will be delivered in thirds. The first $5 million has been received.

• To receive the next $5 million 80% of the previous third must be shown to be expended or obligated.

• Two (2) years to expend/obligate the entire allocation.

• Reporting to U.S. Treasury on program impact will continue for five (5) years after that point.

Kentucky’s Proposed Programs

Based on research, Kentucky proposed the

following programs:

• Capital Access Program (CAP)• Loan Participation Program (LPP)• Collateral Support Program (CSP)

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Capital Access Program (CAP)

• Provides loan portfolio insurance to encourage private financial institutions to lend to small businesses

• State provides a matching contribution to a banks’ loan loss reserve accounts in an amount equal to the sum of insurance premiums paid by borrowers/lenders.

• In the case of a loss, the bank may draw against the account.

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Loan Participation Program

• Designed to help borrowers whose cash flow does not meet the coverage requirements of a lender

• State purchases/participates on a portion of the loan and offers a grace period on payments (of up to 24 months) for that portion’s debt service

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Collateral Support Program

• The State provides a pledged asset (cash) to a lending institution to boost the value of collateral supplied by the borrower.

• Designed to augment the collateral supplied by borrower thereby enhancing the ability of the lender to underwrite the project.

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Milestones

•Proposal Approval From U.S. Treasury

•Receipt of First Disbursement ($5 million)

•Statewide Coverage

•20 Participating Lenders Currently

FYI: Using KSBCI to assist lenders in the areas affected by our recent natural disasters (specifically West Liberty)

Kentucky Small Business Credit Initiative

Please Note

• For loans in which the state’s participation will exceed $250,000, additional processes may be necessary.

• Refinancing of a lender’s existing loan will not qualify. However, a loan refinanced from a different lender is eligible.

• Enrolled loans may be refinanced, but only to the extent additional principal is added to the refinanced amount. The additional principal amount only is eligible.

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Please Note

• None of these programs ask private sector lenders to forego or to in any way disregard their own already-established underwriting criteria.

• It is anticipated that participating lenders will use these programs creatively to fund small business loans that they would be unable to make otherwise.

For Additional Information

www.thinkkentucky.com/smallbizlending

www.treasury.gov/resource-center/sb-programs/Pages/ssbci.aspx

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Wrap Up

Comments and Questions

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The Kentucky Small Business Investment Credit Program (KSBIC)

A Tax Credit Program Operated By The Cabinet for Economic Development’s Small Business Services Division

Agenda

• Program Overview

• Eligible and Ineligible Applicants

• Eligible Positions

• Qualifying Equipment/Technology

• Tax Credit Incentive Amount Calculation

• Scoring and Submission Process

• Program Contact Information

Program Overview

Authorized under KRS 154.60-010 et. seq. and designed to stimulate small business growth by providing a nonrefundablestate income tax credit to eligible small businesses that:

– Create one or more eligible positions

AND

– Invest $5,000 or more in qualifying equipment/technology

• Tax credit can range from $3,500 to $25,000 per businessper state fiscal year

• State Fiscal Year Program Allocation Maximum: $3,000,000• Applications will be accepted starting in January 2011

Program Overview

Eligible applicants cannot apply to the programuntil one year after the latter of:

• The eligible position(s) being created

OR

• After $5,000 or more in qualifying equipment/technology is purchased

Eligible Applicants

• Any for profit small business that has 50 or fewer full time employees at the time of application, excluding newly created eligible positions

• Pays corporate income tax, limited liability entity tax, or individual income tax

• Including:• Sole proprietorships• Partnerships and Limited Partnerships• Corporations and Limited Liability Companies• Associations, Cooperatives and Joint Ventures

Ineligible Applicants• Companies engaged in any illegal activity• Companies in default on any federal, state, or local

taxes; not in good standing with the Kentucky Secretary of State’s Office (if required) or do not hold all appropriate licenses, permits or registrations

• Companies that present, display or rent products or services of a prurient sexual nature

• Companies engaged in overt religious indoctrination or that derive more than 50% of annual gross revenues from lobbying activities

Eligible Position

• Filled by an employee subject to Kentucky income tax requirements and working an average of 35 or more hours per week for a minimum of twelve consecutive months

• Increases the base employment of the business by creating a new position that has never before been filled or that has been continuously vacant for a minimum period of twelve consecutive months

• Pays a base hourly wage including tips and commissions but excluding bonuses and reimbursements of at least 150 percent of the federal minimum wage $10.88 per hour currently

Qualifying Equipment/Technology

• Must be tangible property purchased by the applicant for use in the business (not for resale or personal use)

• Must have a minimum per-unit cost of $300, excluding rebates and refunds (does not include taxes, installation, delivery charges, etc)

• Must have an expected useful life of more than one year

• Must be owned at the time of application submission to KEDFA

Note: Real property, buildings, and consumable supplies are excluded

Tax Credit Amount Calculation

Tax Credit=($1,000*NEP)+ (50 percent of QETP)

where NEP=number of eligible positionsandQETP=qualified equipment/technology purchase amount

Note: Tax credit amount cannot exceed $3,500 per eligible position and no qualified applicant may receive more than $25,000 per state fiscal year.

Submission Process

1. Applicant fulfills the minimum program requirements and submits KSBIC application and all supporting documentation to the Small Business Services Division within 90 days of meeting eligibility.

2. Completed applications will be scored and the dollar amount of the potential tax credit will be determined.

ScoringAll applications that meet minimum program standards

will be scored based on the following four criteria:

1. The amount of qualifying equipment/technology purchased from a physical business location in Kentucky

2. The base hourly wage for eligible position(s)

3. The number of eligible positions created and filled in an Enhanced Incentive County

4. Whether the applicant has previously been approved for a KSBIC tax credit

Submission Process 3. Applications will be submitted to KEDFA on a

monthly basis, and from those applications, a 1 percent fee will be collected.

Note: A monthly maximum amount of tax credits availableper KEDFA meeting will be established based on theMaximum credit availability.

Scoring and credit availability will determine whichapplicants receive approval.

Once $3,000,000 in tax credits has been allocated perfiscal year, no further applications will be submitted. Thus,qualified companies are not guaranteed approval.

THANK YOU

QUESTIONS????

Mark L. Johnson, Assistant DirectorSmall Business Services Division Kentucky Cabinet for Economic DevelopmentOld Capitol Annex300 West Broadway   Frankfort, KY 40601502-782-1956 (direct)502- 330-9273 (mobile)   800-626-2930 (toll free)Fax: 502-564-3256Web: http://www.thinkkentucky.com

Contact

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