Law provides capital for tech startups, small firms

by Bryan Smith

SBJ Staff

Missouri is looking to add new jobs with the help of new legislation and a program from the Department of Economic Development.

The bill, called the New Enterprise Creation Act, was signed by Gov. Mel Carnahan July 8, along with the Housing Preservation Program, in an effort to improve Missouri communities.

"Building our businesses strengthens our communities. Building our communities makes new business opportunities possible," Carnahan said. "Combined, these two programs will give us the ability to strengthen some of the state's older communities, and at the same time, foster the growth of entrepreneurial businesses that may very well represent the economy of the future."

The act earmarks tax credits to establish a $20 million fund that will be used to finance businesses in Missouri during their early stages.

The program is also geared toward assisting new high-tech companies, in such areas as research and development and biotechnology, that previously had no financial support.

"We know that technology companies must be a significant part of Missouri's economy in the future," Carnahan said. "A source of seed capital will benefit all regions of the state by assisting entrepreneurs that need access to capital in order to see their ideas become marketable."

According to Jim Gardner, director of communications for the Department of Economic Development, the program is an effort to bring more capital to businesses trying to get started.

"The city of Denver has more venture capital than the state of Missouri," Gardner said.

Gardner said the program, and the $20 million that comes with it, is a way to tap into the "tremendous potential" of Missouri businesses.

"It's not a lot of money, but it is a good start," Gardner said.

The act also will create a 13-member Missouri Seed Capital Investment Board, which will be responsible for overseeing the creation of up to four funds for the program.

The DED wants to create new jobs by establishing the Microenterprise Program. The program will be administered through the Community Development Block Grant program.

The new plan will promote the creation and expansion of small businesses and will try to create new, full-time jobs, specifically benefiting low- to moderate-income people.

The department has defined a microenterprise as a business with five or fewer employees, one of them being the owner.

"The department's strategic-planning process has made us fully aware of the need for readily-available funding to help promote new product ideas," said Joseph Driskill, director of the DED.

"We are in the process of creating new strategies geared toward providing financial support for these start-up businesses, with the intent of keeping these companies right here in Missouri and helping them to succeed," he added.

The department will begin accepting applications from city and county governments for the program Sept. 1.

Allen Kunkel, field services coordinator for the DED, said the application process is not a competition.

"We're just going to keep funding projects until we run out of money," Kunkel said.

Because it is the first year for such a project in the state, Kunkel said the department is going to evaluate the demand for the grants and may put more money into the program in the future.

Local governments will distribute the grant money, including establishing low-interest loans, forgivable loans or loan guarantees.

"We give out a grant to a local government, and they set up a loan program," Kunkel said. "They can structure it any way they want to."

The application limit for the program is $100,000. All Missouri cities with a population of fewer than 50,000, or counties with fewer than 200,000, are eligible to apply.

Funding is limited to $25,000 for each business or 70 percent of the project cost. One job must be created for every $15,000 of CDBG funds.

"As with any new program, it is hard to determine what the ultimate impact will be," Driskill said. "But considering the tremendous impact that small business has on the Missouri economy, we are confident that this is one micro program that, ultimately, will have macro results."