Incentives/Finance:

FINANCIAL INCENTIVE PROGRAMS

The Regional Growth Partnership provides Northwest Ohio businesses with direct access to a variety of financial programs and other incentives designed to assist your company to grow and prosper. Whether it is local, state or federal programs, the RGP will help you find the financing package that best suits the needs of your company. For assistance or questions contact RGP Business Development.
In addition, the RGP is here to assist technology-oriented businesses in accessing the necessary financing and incentives to ensure that you stay at the forefront of technology development. For assistance or questions contact RGP Technology Dept.

FINANCIAL PACKAGING ASSISTANCE

TOLEDO AREA SMALL BUSINESS ASSOCIATION-TOLEDO AREA CHAMBER OF COMMERCE
The Toledo Area Small Business Association (TASBA) directs the small business programs for the Toledo Area Chamber of Commerce. Organized in 1941, TASBA has very strong ties to the private sector through its 26-member board of business leaders who set the policies for its programs. Standing committees implement the programs and task forces work on special projects.
TASBA's mission is to promote the prosperity of the small business community through advocacy, education and leadership. TASBA provides a comprehensive program of small business services and helps organize the small business community for the purpose of establishing the best environment in which businesses can grow and prosper.

SMALL BUSINESS DEVELOPMENT CENTER

The Toledo Small Business Development Center (SBDC), a division of TASBA, provides free counseling to both start-up and existing companies. The SBDC will assist a small business in preparing a business plan to be used in conjunction with the Small Business Finance Programs or will help a firm address a particular concern such as developing a marketing plan or accessing non-traditional sources of capital.
While the majority of the Center's counseling is provided by its full-time staff, referrals are often made to private-sector volunteers or public agencies that provide more in-depth assistance. The Center also co-sponsors a number of training seminars that focus on specialized topics of interest that affect existing businesses.
The SBDC also has published excellent resource materials including the Start-Up Business Guide, a comprehensive guide to starting a business and Building Your Business Plan, an outline.
The SBDC is funded by the Toledo Area Chamber of Commerce, the U.S. Small Business Administration and the Ohio Department of Development. The support given through such funding does not constitute an expressed or implied endorsement of any of the co-sponsors' or participants' opinions, products or services.
Special arrangements for the handicapped will be made if requested in advance. All programs are provided on a non-discriminatory basis. Contact: Toledo Area Small Business Development Center at (419) 243-8191.

STATE TAX CREDITS & EXEMPTIONS

ENTERPRISE ZONE PROGRAM

The Enterprise Zone Program provides real and personal property tax incentives for businesses that expand or locate in a certified, designated zone in Ohio. Companies located in incorporated areas can receive an exemption up to 75 percent and up to 60 percent exemption in unincorporated areas on real property improvements or tangible personal property tax valuation for up to 10 years. To secure benefits, non-retail businesses must apply to the local community for local property tax exemptions and to the State Development Director for state franchise or state income tax incentives.
Qualifying businesses must agree to retain or create employment; establish, expand, renovate or occupy a facility in an Enterprise Zone; and invest in new real and/or personal property prior to project initiation. Local school board approval is required.

JOB CREATION TAX CREDIT

The Ohio Job Creation Tax Credit (JCTC) provides a refundable tax credit against a company’s corporate franchise or income tax based on the state income tax withheld from new, full-time employees. The credit, ranging from 50 percent to 75 percent, is available to businesses that create at least 25 net new full-time positions at a facility in Ohio and pay a minimum of 150 percent of the federal minimum wage. The JCTC program has a term of up to 10 years.

OHIO JOB RETENTION TAX CREDIT

The Ohio Job Retention Tax Credit provides a corporate franchise or state income tax credit for businesses that commit to retain a significant number of full-time jobs. Businesses currently employing at least 1,000 full-time employees and make a fixed investment of at least $200 million are eligible. The non-refundable corporate franchise or state income tax credits will minimize the costs of maintaining an operation in the State of Ohio, and must be a major factor in retaining jobs at the Ohio facility. A partnership with the effected local government is required.

MANUFACTURING MACHINERY & EQUIPMENT INVESTMENT TAX CREDIT PROGRAM

The Machinery & Equipment Investment Tax Credit is a non-refundable corporate franchise or state income tax credit for Ohio companies purchasing or retooling machinery and equipment used primarily in manufacturing activities. Machinery and equipment must be new to Ohio. “New to Ohio” includes new purchased machinery and equipment and used machinery and equipment purchased and delivered to Ohio from out of state.

MANUFACTURING MACHINERY & EQUIPMENT SALES TAX EXEMPTION

The Machinery & Equipment Sales Tax Exemption provides an exemption from state and county sales tax for companies that purchase machinery and equipment for manufacturing activities. An exemption may apply for machinery, equipment, supplies and fuel used primarily in a manufacturing operation to produce tangible personal property for sales.

RESEARCH AND DEVELOPMENT SALES TAX EXEMPTION (TECHNOLOGY INCENTIVE)

Capitalized tangible personal property, used primarily in direct and pure research and development, may be eligible for state and county sales tax exemption. “Research and development” refers to designing, creating or formulating new or enhanced products, equipment, or manufacturing processes, and conducting scientific or technological inquiry and experimentation in the physical sciences with the goal of increasing scientific knowledge which may reveal the basis for new or enhanced products, equipment or manufacturing processes.

RESEARCH AND DEVELOPMENT INVESTMENT TAX CREDIT (TECHNOLOGY INCENTIVE)

The Research and Development Investment Tax Credit was designed to encourage Ohio’s corporations to invest in increased research and development activities. Companies investing in “qualified research expenses” can receive a credit again Ohio’s corporate franchise tax. “Qualified research expenses” include both in-house research expenses (wages and supplies) and contract research expenses.
“ Qualified research” is research undertaken for the purpose of discovering information that is technological in nature and the application of which is intended to be useful in the development of a new or improved product, process, technique, formula, or invention.
The credit equals 7 percent of the excess of qualified research expenses incurred by the taxpayer in Ohio that exceeds the average annual qualified research expenses for the three preceding years. Credit amounts may be carried forward for seven years.

OHIO TECHNOLOGY INVESTMENT TAX CREDIT (TECHNOLOGY INCENTIVE)

The Ohio Technology Investment Tax Credit offers benefits to Ohio taxpayers who invest in small research and development and technology-oriented firms. Through this program, Ohio investors may reduce their state taxes by up to 25 percent of the amount they invest in qualified technology-based Ohio companies.
Businesses for which an investment can be made include those primarily focused on research and development, technology transfer, or the application of a new technology.
Ohio taxpayers that invest in small research-and-development and technology-oriented firms may receive a maximum of $37,000 per investment, applicable to personal income tax, corporate franchise tax, public utility excise tax or the tax on dealers in intangibles.
Investors must invest in Ohio companies through the purchase of common stock, preferred stock, membership interest, partnership or other equity position.

NET WORTH TAX EXEMPTION FOR HIGH-TECH START-UP COMPANIES (TECHNOLOGY INCENTIVE)

The Net Worth Tax Exemption applies to new, start-up “high technology” corporations that are less than three years old. High technology corporations are eligible for an exemption from their net worth tax base from tax years 2003 through 2007; the first three years in which the corporation is required to file a corporate franchise tax report.

LOCAL TAX CREDITS & EXEMPTIONS

ENTERPRISE ZONE PROGRAM (COUNTY)

The Enterprise Zone Program provides real and personal property tax incentives for businesses that expand or locate in a certified, designated zone in Ohio. Companies located in incorporated areas can receive an exemption up to 75 percent and up to 60 percent exemption in unincorporated areas on real property improvements or tangible personal property tax valuation for up to 10 years. To secure benefits, non-retail businesses must apply to the local community for local property tax exemptions and to the State Development Director for state franchise or state income tax incentives.
Qualifying businesses must agree to retain or create employment; establish, expand, renovate or occupy a facility in an Enterprise Zone; and invest in new real and/or personal property prior to project initiation. Local school board approval is required.

COMMUNITY REINVESTMENT AREAS (CRA) (COUNTY)

Community Reinvestment Areas (CRAs) provide local real-property tax incentives for residents and businesses that invest in designated areas of Ohio. In order to apply, the municipality or county must obtain CRA confirmation from the State Development Director. Investors meeting the local criteria must apply to the municipality or county for real property tax exemptions. Up to 100 percent exemption of the improved real property tax valuation for up to 15 years depending on the project is available to qualifying companies or individuals. Real property investment incentives are available for residential, commercial, and/or industrial projects involving remodeling or new construction. Commercial and industrial projects must have an agreement in place prior to investment.
Local legislative authority establishes project eligibility. In some instances, local school board approval may be required.

FOREIGN TRADE ZONE (TOLEDO-LUCAS COUNTY PORT AUTHORITY)

A foreign trade zone (FTZ) is physically located in the United States but considered outside the United States customs territory. In a zone, goods can be stored, exhibited, repackaged, manipulated, manufactured or mixed with other foreign/domestic merchandise duty-free. Duty is paid only when goods are moved out of the Zone and into the United States.

Recognizing the value of a foreign-trade zone, Toledo is “reconfiguring and expanding” its zone to ensure its future marketability. Toledo’s FTZ enjoys general purpose areas at the Port of Toledo, the airport and a recent addition of 462 acres, dubbed the Cedar Point Development Park, in Oregon, Ohio. Three rail lines serve Cedar Point, just two miles from the port. At the mouth of the Maumee River, the largest river entering the Great Lakes, the Port of Toledo is the second largest deep-water port on the Great Lakes/St. Lawrence Seaway System. Also deep in history, Toledo’s FTZ was the first created on the Great Lakes. Today, the FTZ boasts eight sub-zones, including three created for DaimlerChrysler operations.

In addition to the various federal customs benefits connected with a foreign trade zone, Toledo's zone supplies numerous state and local benefits. The zone at the Port of Toledo is designated as part of the Toledo Enterprise Zone, providing some property tax abatement for site improvements. In addition, the State of Ohio provides a waiver of state inventory tax for companies doing business in a foreign trade zone established prior to January 1, 1990.
For more information on the Foreign Trade Zone contact the following:
Foreign Trade Zone (Grantee)
Toledo-Lucas County Port Authority
One Maritime Plaza
Toledo, Ohio 43604-1866
Phone: (419) 243-8251
Fax: (419) 243-1835
Contact: Kelly Y. Rivera

STATE FINANCIAL PROGRAMS LOANS/GRANTS

CAPITAL ACCESS PROGRAM

The Ohio Capital Access Program encourages state chartered financial institutions to make loans to For Profit or Non Profit small businesses that are having difficulty obtaining business loans through conventional underwriting standards.
The Ohio Capital Access Program encourages lending by establishing a unique loan "guarantee" reserve pool at an Ohio Capital Access Program participating lending institution. The state, the lender and the borrower each pay a small fee contribution into the pool. The reserve pool is available to the participating lender for recovery of any losses on any loan they have enrolled in the Ohio Capital Access Program.
Borrower must be a small business with annual sales of less than $10 million and have its principal place of business in Ohio. Use of proceeds may include working capital or the purchase, or construction of fixed assets such as buildings and equipment.

166 DIRECT LOAN

The 166 Direct Loan provides loans for land and building acquisition, expansion or renovation, and equipment purchases. Financing is available for up to 30 percent of the total eligible fixed costs ($350,000 – $1 million) of a project. The typical interest rate for the 166 Direct Loan is two-thirds of the prime fixed rate and can be carried out for 5-15 years. Companies must create or retain one job for every $15,000 received and show repayment and management capabilities for the life of the loan.

OHIO ENTERPRISE BOND FUND

The Ohio Enterprise Bond Fund (OEBF), rated AA- by Standard & Poor’s, allows large and small credit worthy, but unrated businesses access to the national capital markets. Through the OEBF, the Ohio Department of Development (ODOD) issues bonds, the proceeds of which are provided to businesses for eligible projects in the form of a loan.

The OEBF was created to provide long-term, fixed-rate, one-stop project financing for qualifying businesses that create or retain jobs in the state of Ohio.

The OEBF enables large and small creditworthy businesses access to capital at costs comparable to those of rated multi-national corporations.

Eligible Businesses

Eligible businesses include those engaged in, but not limited to, manufacturing, research and development and distribution. Retail projects are ineligible for the OEBF.

Eligible Project Costs

* Purchase of land and/or building; if the project involves the purchase of an existing building, the business must occupy at least 51 percent of the premises
* Purchase of machinery and equipment
* Building construction and/or renovation costs; if the project involves new construction, the business must occupy at least 75 percent of the premises
* Long-term leasehold improvements
* Purchase of ongoing business’ fixed assets
* Limited soft costs directly related to the fixed-asset purchase
* Refinancing is ineligible

Available Funding

The OEBF may provide financing up to 90 percent of the total eligible project costs directly related to the fixed-asset purchase. The minimum loan amount is $1.5 million and the maximum loan amount is $10 million.

Term

The term of any loan awarded through the OEBF is conditioned upon the useful life of the financed assets, with the maximum limit up to 15 years for real estate and up to 10 years for machinery & equipment.

Interest Rate

The interest rate is fixed for the term o f the loan and is determined at the time the bond is sold. For current rates, please contact the ODOD staff.

Job Creation/Retention

The ODOD requires, under the OEBF, the creation or retention of one job for each $75,000 of OEBF proceeds within a three-year period to the State of Ohio.*

(* If the eligible project is located in a priority investment area, the job to dollar ratio shall be 1 to $100,000.)

Equity

The ODOD requires, under the OEBF, a minimum of 10 percent equity. The equity requirement may be higher for start-ups and special purpose facilities.

Collateral

The ODOD will require a first priority mortgage and/or lien position on assets financed with OEBF proceeds to be established via a multi-party agreement between the participating lender(s), the ODOD and the borrower.

Security Requirements

The following may be required:
* Personal guarantees from owners with more than 20 percent ownership in the company;
* Corporate guarantees from related companies;
* Full or partial letter of credit;
* Life insurance on key business owners and/or managers; and
* Other types of credit enhancement, if necessary.

Debt Service Reserve

Each borrower is required to fund a debt service reserve equal to 10 percent of the original bond amount. If the borrower defaults on the OEBF loan, this reserve is forfeited and will be used by the ODOD to make debt payments. The reserve can be funded with a letter of credit and/or cash.

Program Fees

* A $1,500 non-refundable application fee is required upon filing a completed Financial Assistance Application.
* A $20,000 deposit is required upon signing the ODOD’s term sheet. These funds will be applied to the project’s closing costs.
* Closing costs are estimated to equal two to three percent of the amount of the bond and are due at closing.
* An annual servicing fee equal to .25 percent of the outstanding principal balance of the loan will be assessed, pro-rated and payable monthly.

Prepayment

Prepayment of any bond is subject to a make-whole premium, if applicable.

Prevailing Wage

Ohio prevailing wage is required to be paid for construction, renovation and installation of machinery and equipment. Rates and payment of prevailing wages are determined by the Ohio Department of Commerce’s Wage and Hour Bureau.

Application Process

* Contact the ODOD staff to discuss the project.
* Submit a completed Financial Assistance Application, which includes applicable items on the application checklist below.
* An eligibility review and credit analysis will be conducted by the ODOD staff.
* A preliminary project term sheet will be provided by the ODOD staff.
* Loans will be presented to the Development Financing Advisory Council (DFAC) for review and recommendation. (DFAC generally meets on the last Monday of every month.)
* Loans will be presented to the State Controlling Board for final approval.
* Upon receipt of a signed term sheet and commitment fee, closing documents will be prepared.
* Loan proceeds will normally be disbursed after the loan closing (interim financing may need to be arranged by the business).

Application Checklist

* History and description of business
* Description of market, industry and competition
* Resumes of owners and/or key managers
* Project description including sources and uses of funds (include specific use of loan proceeds)
* Business financial information:

o Income statement and balance sheet for past three fiscal years, and accompanying notes;
o Current business financial statements (less than 90 days old);
o Business financial projections for three fiscal years (privately held companies only); and
o Business financial information for the last three fiscal years on affiliate businesses (if applicable).

* Current personal financial statement from all 20 percent or more owners
* Conditional bank commitment and/or term sheet (if applicable)
* Phase I environmental audit (if applicable)
* Cost verification-purchase agreement and/or third party cost estimates
* Appraisal by qualified appraiser

COMMUNITY DEVELOPMENT BLOCK GRANTS (CDBG)

Non-urban counties and their cities (with a population of less than 50,000) are eligible to directly apply and receive funding to assist a local business. Counties must apply on behalf of villages and townships within their jurisdiction.
Project funding may be for expansions, revitalization or development of either the industrial, manufacturing, commercial, retail, or service sectors.
A project may receive one grant of up to $350,000 in a fiscal year; a city may receive up to $700,000 and a county may receive up to a maximum of $1,000,000 during a program year. To qualify for funding, a project must meet at least the following requirements:
Create/retain at least five jobs
Target 51% of jobs to low-to-moderate-income (LMI) citizens
Complete environmental review
Federal prevailing wage rates apply to construction
50% maximum participation by CDBG
Minimum 5% equity

OHIO RESEARCH COMMERCIALIZATION GRANT PROGRAM (TECHNOLOGY INCENTIVE)

This program is designed to improve the commercial viability of Ohio’s small technology companies through grant assistance. In order to qualify for the Ohio Research Commercialization Grant, companies must be Ohio-based and currently receiving funding under federal research and technology programs, including the Small Business Innovation Research Program, Small Business Technology Transfer Program or the Advanced Technology Program.
Grants are awarded on behalf of the Ohio Department of Development, on a competitive basis, for commercialization of a core competency technology, which includes (but is not limited to):
Advanced materials
Instruments
Controls
Electronics
Biosciences
Power and propulsion
Information technology
Grant awards will typically range between $150,000 and $175,000.

WRIGHT CAPITAL PROJECT GRANTS (TECHNOLOGY INCENTIVE)

Wright Project Grants are designed to support specifically defined, near term commercialization projects requiring major capital acquisitions and improvements at Ohio higher education institutions and non-profit research organizations. Projects must involve one or more Ohio companies and be in the areas of advanced materials, power and propulsion, information technology and instruments, controls and electronics. Awarded grants are extended for a three-year period.

OHIO ENERGY LOAN FUND (TECHNOLOGY INCENTIVE)

The Ohio Energy Loan Fund provides financial incentives through interest reduction on loans for investments in energy saving products, technologies or services that will: conserve energy; increase the use of renewable energy technologies; and/or reduce energy consumption and costs.
Eligible projects include but are not limited to the purchase and installation of: solar energy; wind energy; bio-mass/bio-energy; hydropower; and fuel cells. For businesses and institutional projects, participation is limited to a minimum of $10,000 and a maximum of $500,000.

INNOVATION OHIO LOAN FUND (TECHNOLOGY INCENTIVE)

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. Ohio’s manufacturing sector will be a key target of this program. The IOF provides competitive financing terms on loans to finance projects that will positively impact Ohio by creating high-value jobs, increased tax revenues and improve the economic welfare of the State.

The IOF addresses an identified need in the capital-funding continuum. 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 the new product or service. The IOF can finance up to 75 percent of a project’s allowable costs to a maximum of $5 million and a minimum of $250,000.

Targeted Industry Sectors

The IOF will target industry sectors involving the production or use of:
* Advanced Materials;
* Instruments, Controls and Electronics;
* Power and Propulsion;
* Biosciences; and
* Information Technology.

Investment Focus

The IOF is intended to support the capital needs of established Ohio companies with:
* Recent history of positive cash flow;
* Minimum of three (3) years of operating history;
* History of debt repayment; and
* Companies that have attracted or are likely to attract additional third party capital to the project.

Eligible Innovation Costs

Eligible costs include the cost of acquisition, construction, renovation, expanding or improving project facilities and the acquisition and installation of equipment for eligible innovation projects. Allowable costs are limited to costs that can be capitalized under then applicable generally accepted accounting principles (GAAP). The IOF will not provide funding for working capital or other operating costs. The IOF will not be used to refinance existing debt obligations.

Evaluation Criteria

Proposals will be reviewed and scored in accordance with a 100-point scoring system described in the Request for Loan (RFL). Factors that will be considered in the review and score include:
* Number of high-value jobs created as a result of the successful commercialization of a new product;
* Level of risk associated with the commercialization of the new product or service;
* Degree to which the applicant has attracted or will be able to attract additional third party capital;
* Degree to which the company’s business plan identifies the market need and demonstrates a feasible plan for serving that need; and
* Level of financial risk and ability of the borrower to repay the loan.

Loan Selection Process

* Applicants will submit proposals in response to a RFL published by the Ohio Department of Development (ODOD).
* Upon receipt of the loan proposals, the ODOD will conduct an administrative review of each proposal for compliance with the RFL requirements.
* The ODOD will forward to a third party independent reviewer those proposals that pass the administrative review. The third party independent reviewer will review, as applicable, the business plan, project plan, technical feasibility and financial details contained in each proposal and score the proposal in accordance with the scoring guidelines described in each RFL.
* The ODOD will conduct its own financial feasibility review of the higher ranked proposals. This process will also include a project cost eligibility determination.
* The ODOD will then make funding recommendations to the Development Financing Advisory Council (DFAC) based on the scoring provided by the third party independent reviewer and the ODOD’s own financial review. The ODOD reserves the right to recommend no loans be made.
* The DFAC will make funding recommendations to the Director of the ODOD and the State Controlling Board for final approval.

Applicant Contribution

The applicant must fund, either directly or through third party subordinated financing (or some combination thereof), at least 25 percent of the project’s allowable costs. The following shall not satisfy the applicant’s contribution:
* Expenditures made by or on behalf of the applicant prior to the IOF application deadline or receiving a go forward letter from ODOD; and
* In-kind contributions of labor, equipment or similar items.

Term

Applicants will propose the loan term, which should preferably be in the range of four (4) to seven (7) years; although, in limited circumstances, the ODOD may consider longer terms. In no event, however, will the loan terms exceed the earlier of the average useful life of the allowable costs or 15 years.

Interest Rate

The interest rate for the IOF loans will be fixed at or below private sector loans for comparable levels of risk. The IOF loans will bear an interest rate of prime plus two (2) percent to be determined on the date of the deadline of the RFL.

Collateral

The ODOD may require a first priority mortgage and/or lien position on property (whether intangible or tangible) or equipment funded in whole or in part with IOF loan proceeds. The ODOD will consider, in appropriate circumstances, subordination of its mortgage and/or security position to the security of banks and other providers of traditional senior debt.

Security

The ODOD may negotiate additional security in the form of one or more of the following:
* Personal guarantees from owners with more than 20 percent ownership in the company;
* Corporate guarantees from related companies;
* Full or partial letter of credit;
* Life insurance on key business owners and/or managers; and/or
* Other comparable credit enhancement, if necessary.

Program Fees

* A $1,500 non-refundable application fee is required upon submitting an RFL;
* A processing fee of three (3) percent of the principal of the loan, due upon receipt of the signed commitment letter;
* An annual servicing fee equal to one (1) percent of the outstanding principal balance of the loan, pro rated and payable monthly; and
* A participation fee of ten (10) percent will be applied to the initial principal amount of the loan and will be payable upon maturity of the loan. The ODOD’s participation fee is in lieu of ODOD’s ability to take an equity position in a company and thus share in the company’s success as is typical and required in private sector funded transactions.

Cost of Funds

The effective interest rate of the IOF loan (including all program fees) will typically range from eight (8) percent to 12 percent over the term of the loan. In all cases, the cost of funds for the IOF loans will be at or below private market costs for comparable levels of risk.

Prevailing Wage

Ohio prevailing wage is required for construction, renovation and installation of machinery and equipment. The Ohio Department of Commerce’s Wage and Hour Bureau determines rates and payment of prevailing wages.

Pre-Proposal Notification

The Ohio Department of Development offers potential applicants the opportunity to submit a short, pre-proposal document that the Department will review to determine whether the applicant understands the intent and eligibility requirements of the IOF (this is not required). In a document of no more than two pages, potential applicants are asked to:

Describe the company:

* Location, size and length of operations
* Summarize the operating history
* Products and services currently offered

Describe the proposed project:

* The innovative product or service to be commercialized
* How the IOF loan proceeds will be used
* The economic impact (employment and revenue growth) of the project
* The applicant’s position that use of loan proceeds can be capitalized under GAAP

Describe proposed terms of the IOF Loan:
* Amount of funds
* Term of loan
* Source of matching funds

The ODOD will provide feedback to the potential applicant as to whether the company’s planned application appears to meet the eligibility requirements and intent of the IOF program. The document will not be scored or considered in the evaluation of formal proposals. Rather, this is an opportunity for potential applicants to gain confidence that the application will be considered responsive to the IOF Loan program requirements.

THE RESEARCH and DEVELOPMENT INVESTMENT LOAN FUND (R&D Fund)

The Research and Development Investment Loan Fund (R&D Fund) was created to position Ohio to compete aggressively for private-sector R&D investments that will create high-wage jobs. The R&D Fund will target large investments from companies with significant assets and sales. The R&D Fund will be used to aggressively pursue research and development operations and facilities and to fund the cost of capital purchases. Assistance from the State would be in the form of a low-interest loan, partnered with a tax credit.

Businesses that are meeting the program requirements (i.e. job creation commitments, timely loan repayments, etc.) will be eligible for a dollar-for-dollar credit against their Ohio Corporate Franchise Tax, equal to the amount of principal and interest repaid on the loan. The maximum annual credit is $150,000. The credit will be non-refundable, but can be carried forward.

Before a company can claim a credit on its tax return, it must first receive a tax credit certificate from the ODOD certifying that the company is meeting the terms of its loan agreement. To receive a tax credit certificate, the company must file an annual progress report with the ODOD by March 1st. In this report, the company would detail its progress in meeting the job creation, wage, and investment commitments made as a condition of receiving the loan. The reporting period will include activity for the prior calendar year. The ODOD Staff will review the report and the company’s record of timely loan repayments and certify the amount of principal paid on the loan for the preceding calendar year. A certificate in the amount of the loan payments would then be prepared and forwarded to the company to file with its annual State of Ohio tax return.

Eligible Projects

Eligible facilities/operations are defined as projects in which research is undertaken for the purpose of discovering information that is technological in nature, and the application of which is intended to be useful in the development of a new or improved product, process, technique, formula or invention. It is expected that project employment will be comprised of a significant representation of scientists, researchers and technicians.

Eligible Project Costs

* Purchase of land and/or building; if the project involves the purchase of an existing building, the business must occupy at least 51 percent of the premises
* Purchase of machinery and equipment
* Building construction and/or renovation costs; if the project involves new construction, the business must occupy at least 75 percent of the premises
* Long-term leasehold improvements
* Purchase of an ongoing business’ fixed-assets
* Limited soft costs directly related to the fixed-asset purchase
* Refinancing is ineligible

Available Funding

The R&D Fund can finance up to 50 percent of a project’s allowable costs, with loans ranging in size from $1.5 to $25 million.

Term

The term of any loan awarded through the R&D Fund is conditioned upon the useful life of the financed assets, with the maximum limits of up to 15 years for real estate and up to 10 years for machinery and equipment.

Interest Rate

Interest rates for the R&D Fund are fixed at/or below market rates and typically do not exceed ½ of the current prime rate.

Job Creation/Retention

The ODOD requires, under the R&D Fund, a commitment to create or retain jobs to the State of Ohio. While there is not a specified dollar per job ratio, the number of jobs committed, as well as the annual payroll, will be considered when determining the funding amount.

Applicant Contribution

The applicant must fund, either directly or through a third party (or some combination thereof), at least 50 percent of the project’s allowable R&D Fund costs.

Collateral

The ODOD will require a first priority mortgage and/or lien position on assets financed with R&D Fund proceeds to be established via a multi-party agreement between the participating lender(s), the ODOD and the borrower.

Security Requirements

The following may be required:
* Personal guarantees from owners with more than 20 percent ownership in the company;
* Corporate guarantees from related companies;
* Full or partial letter of credit;
* Life insurance on key business owners and/or managers; and/or
* Other types of credit enhancement, if necessary.

Program Fees

* A $1,500 non-refundable application fee is required upon filing a completed Financial Assistance Application.
* A processing and commitment fee of one percent of the loan amount up to a maximum of $50,000, due upon receipt of a signed loan commitment letter.
* An annual servicing fee equal to .25 percent of the outstanding principal balance of the loan, pro-rated and payable monthly.

Pre-payment

The ODOD imposes no pre-payment penalty.

Prevailing Wage

Ohio prevailing wage is required for construction, renovation and installation of machinery and equipment. Rates and payment of prevailing wages are determined by the Ohio Department of Commerce’s Wage and Hour Bureau.

Application Process

* Contact the ODOD staff to discuss the project.
* Submit a completed Financial Assistance Application which includes applicable items on the application checklist below.
* An eligibility review and credit analysis will be conducted by the ODOD staff.
* A preliminary project term sheet will be provided by the ODOD staff.
* Loans will be presented to the Development Financing Advisory Council (DFAC) for review and recommendation (DFAC generally meets on the last Monday of each month).
* Loans will be presented to the State Controlling Board for final approval.
* A loan commitment letter will be issued by the ODOD upon approval by the State Controlling Board.
* Upon receipt of the signed loan commitment letter and processing fee, loan-closing documents will be prepared.
* Loan proceeds will normally be disbursed after project completion and loan closing (interim financing may need to be arranged by the business).

Application Checklist

* History and description of business
* Description of market, industry and competition
* Resumes of owners and/or key managers
* Project description including sources and uses of funds (include specific use of loan proceeds)
* Business financial information:
* Income statements and balance sheets for past three fiscal years, and accompanying notes;
* Current business financial statements (less than 90 days old);
* Business financial projections for three fiscal years (privately held companies only); and
* Business financial information for the last three fiscal years on affiliate businesses (if applicable).
* Current personal financial statement(s) from all 20 percent or more owners
* Conditional bank commitment and/or term sheet (if applicable)
* Phase I environmental audit (if applicable)
* Cost verification-purchase agreement and/or third party cost estimates
* Appraisal by qualified appraiser

LOCAL FINANCIAL PROGRAMS LOANS/GRANTS

VOLUME CAP PROGRAM

The Volume Cap Program is a federally authorized program, which allows the State of Ohio to allocate tax-exempt bond authority to various projects throughout the state. Projects eligible for funding must 1) involve the construction or improvement of certain types of manufacturing facilities, solid waste treatment equipment or pollution abatement facilities, and 2) not have been placed in service for at least two years prior to the bonds’ date of issue.
Financing may be used for capital expenses and up to 2 percent of issuance costs. Qualified small-issue bonds can finance up to 100 percent of the cost of land, buildings and equipment in new construction, expansion or rehabilitation of industrial facilities. Total capital expenditures of both the company and related parties cannot exceed $10 million in any one political subdivision. Maximum expenditure includes a time period 3 years before and 3 years after the bond issue.

OHIO 166 REGIONAL LOAN PROGRAM (TOLEDO-LUCAS COUNTY PORT AUTHORITY)

The Ohio 166 Regional Loan Program provides financing of up to 40 percent of the costs of fixed assets such as land, building, machinery or equipment for manufacturing, manufacturing-related, distribution, and research & development businesses. Regional 166 loans are available to qualifying companies for up to $350,000, based on jobs created or retained. Typically, a business must create one job for every $35,000 loaned.
The term of the loan is based on the life of the assets being financed; from 5 to 15 years.
The interest rate is a fixed rate and is determined by the Ohio Department of Development. The current rate is 3.5 percent.
The Port Authority may administer this program in Lucas, Wood, Fulton, Henry, Ottawa, Sandusky, Williams, Defiance, Seneca and Erie counties.

SMALL BUSINESS ADMINISTRATION 504 LOAN PROGRAM (TOLEDO-LUCAS COUNTY PORT AUTHORITY)

The SBA 504 Loan Program is available to qualifying companies for financing of up to 40 percent in costs of fixed assets such as land, building, machinery or equipment for manufacturing, distribution and commercial facilities. The maximum loan amount is $1 million (up to $1.3 million is available if the project meets specific public policy objectives) and the loan may be carried out from 10 to 20 years. The interest rate is fixed, at or slightly below market rate, and is based on monthly sale of SBA debentures.
Any for-profit business with a net worth of not more that $7 million and net profit after-tax of not more than $2.5 million is eligible for the SBA 504 Loan Program. The typical structure of the SBA 504 loan is 50 percent bank financing; 40 percent SBA (the SBA takes a second collateral position), and 10 percent equity.
The Port Authority may administer this program in Lucas County.

FIXED INTEREST RATE BOND PROGRAM (TOLEDO-LUCAS COUNTY PORT AUTHORITY)

The Fixed Interest Rate Bond Program provides financing to eligible companies of up to 90 percent in costs of fixed assets such as land, building, machinery or equipment for “activities that enhance, foster, aid, provide, or promote transportation, economic development, housing, recreation, education, governmental operations, culture, or research within the jurisdiction of the port authority.” (ORC 4582.01 (B)1)
Financing through the Fixed Interest Rate Bond Program ranges between $1 million and $8 million. Tax exempt bonds are administered for qualified manufacturing projects, Non-profit 501 (C)3, and governmental operations. Taxable bonds are administered for all other eligible projects.
The term of the bond program is based on the life of the assets being financed, but typically range from 7 to 20 years.
The interest rate is market rate and based on BBB+ Investment Grade rating of the program. The interest rate is fixed for a term of tax exempt or taxable bonds.
The Port Authority may administer this program in Lucas, Fulton, Henry, Wood, Ottawa, Williams, Defiance, Putnam, Erie, Hancock, Seneca, Sandusky, Allen, Huron, Lorain, Auglaize, Mercer, Van Wert, Paulding, Hardin, Crawford, Wyandot, Ashland, Richland, Holmes, Tuscarawas, Marion, Medina and Jackson counties.

OFF BALANCE SHEET GOV. LEASE (TOLEDO-LUCAS COUNTY PORT AUTHORITY)

The Toledo-Lucas County Port Authority has the capability of financing Off Balance Sheet Leases to qualified companies. Under an off balance sheet lease, the Port Authority finances, constructs, acquires and owns facilities and leases to a qualified company which has control of construction and operation of the facility. Assets and debt associated with the project does not appear on the company’s balance sheet.
The Port Authority provides for off balance sheet financing to the company, which has a fixed price purchase option at the end of the lease term. The company typically owns the constructed facility for federal tax purposes and takes depreciation. Port Authority ownership can exempt construction materials from state sales taxes.
The company generally must make a minimum investment of $5 million.
The Port Authority may administer this program in Lucas, Fulton, Henry, Wood, Ottawa, Williams, Defiance, Putnam, Erie, Hancock, Seneca, Sandusky, Allen, Huron, Lorain, Auglaize, Mercer, Van Wert, Paulding, Hardin, Crawford, Wyandot, Wayne, Ashland, Richland, Holmes, Tuscarawas, Marion, Medina and Jackson counties.

OTHER INCENTIVES

TOLEDO EDISON'S ECONOMIC DEVELOPMENT RIDER (EDR)

Designed to encourage growth, modernization and business retention in Northwest Ohio, Toledo Edison's Economic Development Rider (EDR) provides qualified industrial customers with a reduction in non-fuel utility rates. Qualified customers must prove economic benefits to the community in which the expansion, retention, or location will occur. In addition, qualified industrial customers must show evidence of financial incentives assisting in capital improvements, such as direct loans, financial grants, formalized training programs, tax incentives, bonds, or financing under guarantees provided by authorized governmental and/or economic development agencies. Authorized agencies in Northwest Ohio include the Ohio Department of Development, the Toledo-Lucas County Port Authority, certified Community Improvement Corporations or other similar municipal, county or multi-county organizations.
This Rider is available to small "SG-1", medium "MG-1" and large "PV-45" general service schedule companies that meet a Minimum Investment Unit. A Minimum Investment Unit is the addition of new employees and/or a minimum capital investment in accordance with the following schedule:
Rate New Employees Total Dollars Single Production Piece
SG-1 5 $125,000 $75,000
MG-1 10 $250,000 $125,000
PV-45 20 $500,000 N/A
Capital investments are investments in production equipment including electrical equipment, buildings, etc. necessary for increases in productivity, efficiency and quality. Consumable items such as furniture, vehicles, or maintenance items do not qualify as capital investments.
Reductions in non-fuel utility charges are administered in an incremental fashion, similar to the following schedule:
Months Percent Reduction
1-12 35%
13-24 30%
25-36 25%
37-48 20%
49-60 15%

OHIO INVESTMENT TRAINING PROGRAM (OITP)

Financial assistance and technical resources are available to companies for customized training involving employees of new and expanding Ohio businesses. The Ohio Investment Training Program provides up to 50 percent reimbursement to fund qualified instructional costs, materials and training-related activities. Funds are limited and are available on a first-come, first-serve basis.