The Martin Community Development
can help businesses obtain several
different incentives that are available, should
the business be eligible for those incentives.
Here are links to the various incentives:
TENNESSEE FAST TRACK - INDUSTRIAL INFRASTRUCTURE PROGRAM
The Tennessee Department of Economic & Community Development has monies
allocated to assist local governments in providing infrastructure to support new
or expanding industries.
The Fast Track is used for the following types of activities:
- Water Systems
-- Source development, intake structures, treatment plants, storage tanks,
transmission lines, and other improvements normally associated with the
provision of public water service.
- Wastewater
Systems -- Collector lines, treatment plants, and other improvements
normally associated with the provision of public wastewater service.
- Transportation
Systems -- Access roads, rail sidings, port facilities, airport
improvements, and other improvements normally associated with the provision
of public transportation service.
- Site
Improvements -- Leveling, grading, or drainage of real property in order to
make it suitable for the location or expansion of business.
- Other
improvements to the physical infrastructure may be eligible if it can be
demonstrated that the improvement are required to support economic growth.
Eligible
Businesses
The following types of businesses are eligible for TIIP monies:
- Manufacturing
and other economic activities exporting more than half of their product or
services outside Tennessee.
- Businesses
where more than half of their product or service enters into the production
of exported products.
- Uses, which
primarily result in import substitution or replacement of, imported products
or services with those produced in Tennessee.
- Other economic
activities may be supported by TIIP funds if they are determined to have a
beneficial impact on the economy of Tennessee.
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COMMUNITY DEVELOPMENT BLOCK GRANTS (CDBG)
Small Cities
Community Development Block Grants funds are available in Tennessee. These funds
are awarded to new and expanding industrial manufacturing and distribution
companies for infrastructure, building and capital equipment loans.
The maximum loan or grant any community/company
can receive is $500,000. The amount of financing
is negotiated with the company and is based
on the location of the project.
Infrastructure
grants are available for necessary infrastructure for new and expanding
industries. The local community is required to match all grants for
infrastructure. Grants must have direct public as well as private benefit.
Interest rates
fluctuate as the prime rate fluctuates. The prime rate is established quarterly
on the first day of the following months: January, April, July, and October. The
base prime rate of the loan is determined by the quarter in which the loan is
awarded. Once the base prime rate is established, it will be in effect for the
life of the loan.
Applicants for
start-up funding must have 20 percent equity and 30 percent of project financing
must come from private sources.
Application
Companies applying
for CDBG assistance must show that the loan is necessary and appropriate.
Application must
show documentation of a company's need for assistance as well as public benefit
factors for the assistance. Standard loan underwriting procedures are followed
with CDBG's. A pre-application meeting is required for all economic development
projects. Complete application should be submitted to Tennessee Department of
Economic & Community Development's Program Management Division. Once the
application is received, it is reviewed on a first come, first serve basis.
Start-up project loans/grants usually take one month longer to review and make
recommendations.
For CDBG funding,
two federal requirements must be met. A federal environmental review is required
with the loan or grant. No project costs can be incurred prior to the end of the
environmental review period. During this time, no equipment can be ordered, no
construction can begin and no dirt can be moved related to the project.
Companies must also comply with the federal equal opportunity laws.
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PRIVATE ACTIVITY BONDS
While the Department of Economic & Community Development is responsible for the
allocation of the state's volume limitation, or state cap, of private activity
bond authority, private activity bonds are issued at the local level in
Tennessee. Because of the intricacies of bond financing, potential users of
private activity bonds should discuss their needs with a qualified bond counsel
to determine when and under what conditions such financing may be used
Eligible Activities
Only uses of private activity bonds that are directly related to economic
development are those included in the exempt. facilities category. These
activities include:
- Airports
- Docks and
Wharfs
- Mass Commuting
Facilities
- Water, Sewer,
Solid Waste, or Hazardous Waste Facilities
- Electric Energy
or Gas Facilities
- Certain Heating
or Cooling Facilities
- Intercity Rail
Transportation Facilities
Eligible
Businesses
To maximize the beneficial use of the state's allocation of tax exempt private
activity bond authority, a priority structure for funding is established.
Priority 1 businesses are as follows:
- Manufacturing
and other types of economic activities which export more than half of their
product or service outside of Tennessee.
- Products of
which more than half of the output enters into -the production of exported
products.
- Uses that
primarily result in import substitution or the replacement of imported
products or services with those produced in Tennessee.
- Other uses
determined by the Commissioner of the Department of Economic and Community
Development (ECD) to have a major impact on the economy of Tennessee.
Also eligible, but listed as Priority II are:
- Uses that
provide essential community services or which support Priority I uses.
- Other uses
determined by the Commissioner of the Department of Economic & Community
Development to have a secondary impact on the economy of Tennessee.
Priority III businesses are as follows:
- Other eligible uses of private activity bonds.
Funding
Monies are set aside for state projects that may require a share of the state
cap. State projects are approved at the direction of the Commissioner of ECD.
Each county area in the state has a target allocation of the state's bond
authority that is equal to that county's percentage share of the total state
population in effect January 1 of each year. Tennessee's cap is $247,650,000.
Application and Approval
Private activity bonds are approved based on two considerations: the credit
worthiness of the company requesting the bond, and the county in which the bond
will be used. The burden of bond purchase is the responsibility of the company
interested in securing the bond. Applications for an allocation of this bond
authority are made to the Tennessee Department of ECD by local bond boards.
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TENNESSEE VALLEY AUTHORITY ECONOMIC DEVELOPMENT LOAN FUND
The Economic
Development Loan Fund is a multi-million dollar revolving loan program
established to stimulate industrial development and leverage capital investment
in the "VA power service area. "VA uses the fund to promote economic
expansion, encourage job creation and foster the increased sale of electricity
by TVA and its power distributors.
Loans are made for
new industrial plants, plant expansions, plant retention, infrastructure
development (such as speculative industrial buildings and industrial parks), and
a limited number of other loans.
Loans are
evaluated based upon a project's financial viability, management quality,
community economic impact, funds leveraged, and increased power sales.
Each "VA
dollar invested should leverage additional funding from other sources
Generally, a
minimum of 1 job should be created or retained for every $5,000 invested by
"VA. Maximum loan amounts vary according to type of project. No "VA
loan is likely to exceed $2 million. "VA funds should be used for the
acquisition of fixed assets. Real estate and equipment are acceptable
collateral.
Loans are
typically below market rate, with specific rates determined on a case-by-case
basis after considering the loan evaluation criteria. Maximum length of terms is
10 years for new plants, plant expansion and plant retention loans, 7 years for
service industry loans, and 5 years for infrastructure loans. Repayment
schedules will be determined on a project-by-project basis.
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RURAL ELECTRIFICATION ADMINISTRATION (REA) RURAL ECONOMIC DEVELOPMENT LOAN PROGRAM
The Rural
Electrification Administration revolving loan program is designed to promote
rural economic development and job creation by providing zero interest loans to
REA borrowers.
Eligible Activities
Rural economic development and job creation activities, funding for project
feasibility studies, start-up costs, incubator projects, and other reasonable
expenses for the purpose of fostering economic development are eligible for the
REA loan program. No loans or grants shall be made for any projects of which any
director, officer, or owner of the borrower. or close relative thereof is an
owner or which would create a conflict of interest; provided, however,
cooperative members are not to be considered owners of borrowers in this
determination.
Eligible Businesses
Electric and telephone utilities on behalf of the job creating entity are
eligible for REA revolving loans.
Funding
The program will fund up to $250,000 per project. The maximum term of the loan
is ten years at zero interest rate with a two-year deferred payment.
Application and Approval
A preapplication may be filed during six (6) periods each year: February 1 - 14,
April 1 - 14, June 1 - 14, August 1 - 14, October 1 - 14, and December 1 - 14.
The selection and approval of applications for either loans and/or grants rests
solely within the discretion of the REA Administrator. The REA must approve all
agreements between the electric borrower and the project, including all grant,
loan, and security agreements, loan notes and all subsequent revisions or
amendments thereof.
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SMALL BUSINESS ADMINISTRATION 504 LOAN PROGRAM
The U.S. Small
Business Administration's 504 Direct Loan Program is designed to stimulate job
creation and to increase private sector involvement in the financing of
long-term, fixed assets for small businesses. Through the pooling of projects,
the SBA 504 Direct Loan Program allows the small business concern to take
advantage of the open capital markets but avoid much of the costs associated
with entry into these financial markets.
Eligible Activities
The following activities are eligible for funding: land, building, or machinery
and equipment acquisition; building expansion or renovation; and new
construction. Certain activities are ineligible for SBA 504 loans, including
refinancing of existing debt, provision of working capital, and restructuring of
existing debt.
Eligible Businesses
SBA 504 loans are available to for-profit corporations, partnerships or
proprietorships whose net worth does not exceed $6 million and whose average
profit after tax for the last two years doesn't exceed $2 million. Certain
companies are ineligible for SBA 504 loans; they include passive investment
companies, unregulated media forms, real estate investment companies, non-
profit corporations and financial institutions.
Funding
Under the SBA loan program a company must be willing to commit to the creation
of one job for each $35,000 of financing. SBA participation is limited to 40% of
the total project cost, with a minimum investment of $50,000 and a maximum
investment of $750,000. The 504 loan offers a 10 year or 20 year term, depending
on the useful life of the assets financed. Interest rates for the SBA loan are
determined from the SBA debenture sale; the 20-year treasury note is an
indicator.
Costs associated with SBA 504 loans include:
- A 3 percent
financing fee plus attorney fees, not to exceed $2,500. This amount is
financed into the debenture amount.
- A service fee
of .6 percent of the outstanding balance of the loan is included as a part
of the effective interest rate.
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SMALL BUSINESS ADMINISTRATION 7A LOAN PROGRAM
The U.S. Small
Business Loan Program is designed to provide the lender an additional tool for
constructing a long-term package for the small business.
Eligible Activities
SBA 7A loans can be used for land, building, or machinery and equipment
acquisition; receivable and inventory financing; debt refinancing; working
capital or lines of credit; building expansion; and new construction.
Eligible Businesses
The following businesses are eligible for the SBA 7A program:
- Retail and
service businesses with annual receipts of less than $3.5 million.
- Construction
businesses with annual receipts of less than $7 million for special trade
contractors, otherwise, construction businesses with less than $17 million
in annual receipts.
- Wholesale
businesses with less than 100 employees.
- Manufacturing
operations classified as a small business with employment contingent on
industry.
Funding
The maximum SBA guaranteed loan is $750,000. SBA will guarantee up to 90% of a
loan less than $155,000 and no more than 85% of loans greater than $155,000.
Loan limits are based on the type of loan as follows:
- Working
capital, inventory and debt refinancing loans are limited to seven (7)
years.
- Equipment loans
are limited to ten (10) years.
- Construction
and acquisition of real property are limited to twenty-five (25) years.
Certain costs are associated with the SBA 7A program.
- Loans exceeding
12 months are charged 2% of the amount guarantee.
- Loans less than
12 months are charged 1/4 of 1 percent.
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