Financial Incentives for Business Expansion
There are a number of financial incentives available to companies expanding in Aberdeen, South Dakota, both at the state and local levels. The total funds available from each program varies but typically is based on overall project costs, the company’s participation, the number of jobs created, usage of funds, and financial review, among other things. If you would like to learn more about any of these programs and how they can be used to assist with your business expansion or relocation to Aberdeen, please contact us.
This type of debt financing is obtained without the borrower’s pledge of specific assets to serve as collateral. Examples may include credit cards, short-term loans or lines of credit, trade credit or accruals.
This type of financing may be made available by commercial banks and finance companies, by factoring accounts receivables and through an SBA guaranteed loan. All require collateral for the loan.
An Alternate Financing Option: Equity Financing
Equity financing means that you give an ownership share of your business to your investor. Your new “partner” expects to share in the profits of your business. There is no payment schedule and the stream of income can vary over time. This is a riskier situation for the investor, so the hope is for an even higher return than a lender would get. Investors are interested in more than the stream of income and may want to sell their share in the business for additional profit. There are two common types of equity financing.
A venture capital fund is used for very narrow or niche equity financing. It is professionally managed money that seeks to make a high rate of return for its investors by taking high risks in investing in early-stage businesses. These businesses must demonstrate the possibility of extremely rapid growth (i.e. $50 million annual sales after 5-7 years). Venture capital is repaid by capital gains, through the sale of stock. Venture capital investors are typically short to intermediate-term investors (1-7 years) who generally invest over $1 million in a company.
An angel investor is a person or group who invests in a business venture, providing capital for start-up or expansion. These investors are looking for a higher rate of return than would be given by more traditional investments - typically 25% or more. Often an angel investor has business experience as well as financing and wants to play a role in managing the company.