Competitive Financing Options Make Arkansas an Attractive Option for Business

 September 15, 2017
The Business Finance Division of the Arkansas Economic Development Commission (AEDC)facilitates competitive financing options to assist businesses with the purchase of land, buildings, technology and equipment to expand operations and provide substantial employment opportunities in Arkansas. New and expanding businesses can access a wide variety of state and federal funding sources for start-ups and expansions in the state. The AEDC is working to reduce the cost of doing business by supporting access to the most cost-efficient financing available for eligible businesses. The programs offered are designed for both early-stage and well-established companies.
Amendment 82 Bond Financing
Amendment 82 allows the State of Arkansas to issue General Obligation Bonds to finance infrastructure costs associate with eligible companies locating or expanding operations in Arkansas. The state can issue bonds to fund a prospect’s infrastructure needs through the Arkansas Development Finance Authority.
Industrial Revenue Bonds
Industrial revenue bonds (IRBs), commonly known as “Act 9 Bonds” in Arkansas, provide eligible companies with competitive financing options. The primary goal of this financing is to enable manufacturers to purchase land, buildings and equipment to expand their operations. In addition to tax-exempt industrial-revenue bonds, taxable industrial-revenue bonds may be used for manufacturing projects that exceed $20 million in capital costs or other eligible business types that do not meet federal guidelines relative to tax-exempt bond financing. To learn more about eligibility requirements for tax-exempt bonds, click here.
Bond Guaranty Program
Under this program the commission “guarantees” timely payment of principle and interest, up to $5 million principle per bond issue, to the bondholders. This guaranty gives the bonds a better rating, thereby making the bonds more attractive to investors and reducing the company’s cost to borrow money. The Arkansas Development Finance Authority (ADFA) also provides a bond guaranty program that enables a company to obtain competitive, fixed interest rates.
Community Development Block Grants
Community Development Block Grant (CDBG) funds may be loaned to eligible companies for fixed-asset financing on projects that create jobs for low- to moderate-income families. Eligible activities for this program include acquisition of property, purchase of equipment, leasehold improvements and construction or expansion of buildings or physical plants.
Minority & Women-Owned Loan Mobilization Program
The Arkansas Minority & Women-Owned Loan Mobilization Program was created to assist certified minority and women-owned business enterprises in obtaining funding when starting a state funded or other approved project. The goal of the program is to provide loans to minority and women-owned business enterprises that are unable to secure financing on reasonable terms through normal lending channels. The program is committed to guaranteeing up to 90% of loans to help eligible certified business enterprises get the capital needed.
Equity Investment Tax Credit
The Equity Investment Incentive Program is a discretionary incentive targeted toward new, technology-based businesses paying wages in excess of 150 percent of the state or county average wage, whichever is lower. The program allows an approved business to offer a 33 1/3 percent state income tax credit to investors purchasing an equity investment in the business. The tax credit is transferable within one year of issuance if no part of it has been claimed against the taxpayer’s state income tax liability. Businesses that do not fit the definition of a targeted business may also qualify for approval if they meet other eligibility criteria, provided they meet the primary 150 percent average wage threshold.
Division of Science and Technology’s Seed Capital Investment Fund 
This fund of $1.9 million can provide seed capital for new and developing technology-based businesses through loans, royalty agreements and limited stock purchases. In addition, AEDC administers a program that encourages transfer of technology from the laboratory to the manufacturing or processing plant and technology development programs.
Other Financing Programs
The Arkansas Development Finance Authority (ADFA) Development Finance Division offers loans and bond guarantees under various programs. The programs offered by the ADFA include:
• The Economic Development Bond Guaranty Program, which provides long-term, below market, fixed-interest rate financing to qualifying industries through bond guarantees up to $6,000,000. The ADFA can also be the issuer of an IRB.
• The Capital Access Program, which creates a method for making slightly higher-risk loans more attractive to participating lending institutions through a reserve-driven fund.
• The Arkansas Credit Reserve Program (ACR) encourages financial institutions to make loans to small businesses that fall just outside their conventional underwriting standards. 
• The Disadvantaged Business Enterprise/Small Business Loan Guarantee Program provides a short-term loan guarantee to lenders who in turn lend to small businesses that have government of private contracts but lack the necessary cash flow to adequately finance their working capital needs.
• The Arkansas Risk Capital Matching Fund provides matching investments in technology-based enterprises that are in the early stages of development and not yet able to attract adequate private sources of traditional financing.
• The Arkansas Institutional Fund provides investment in proven, professionally managed private equity and venture capital funds that commit to include Arkansas in aggressive and visible deal prospecting. 

AEDC Business Finance Report