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Area Development

South Dakota Direct Financial Incentives 2010

South Dakota's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include the Workforce Development Program, REDI Fund Program, Value-Added Agriculture Subfund, and Tourism Enhancement Program.

Feb/Mar 10
Industrial development bonds:
Municipalities, counties, state government and sanitary districts issue industrial development bonds to finance manufacturing; industrial; water and air pollution-control; and certain health, research, commercial, educational, and recreational services.

Customized training:
The state's main funding source for training is the Workforce Development Program. Through matching grants, this program funds industry-education partnerships.

The program supports three types of training: new employee training, current employee retraining, and current employee upgrade training. Training of hard skills - those skills that deal with the technical aspects of the job - is the main goal of this program. The state does, however, recognize that soft skills and basic academic skills are also an important part of a successful training project.

The program is designed as a 50/50 match-funding source. Every Workforce Development dollar must be matched with private sector contributions - either financial or in-kind.

Other Programs
REDI Fund Program:
The REDI (Revolving Economic Development and Initiative) Fund is designed to help promote job growth in South Dakota. This low-interest loan fund is available to startup firms and businesses that are expanding or relocating.

This fund provides permanent financing for the purchase of land and associated site improvements, construction, acquisition, renovations of buildings and equipment. It also can be used to help cover fees, services and other costs associated with construction.

The REDI Fund works by providing up to 45 percent of the total project costs. Companies should secure matching funds and be able to provide a 10 percent minimum equity contribution before applying to the Board of Economic Development for a REDI Fund loan.

Interest rates have remained at three percent since the program's inception, and loans are amortized up to 20 years on a building and 10 years on equipment, with a balloon payment due after five years.

Economic Development Finance Authority (EDFA):
Another financing option available in South Dakota is the Pooled Bond Program, available through the state's Economic Development Finance Authority (EDFA). This loan program, designed for more capital-intensive projects, provides small businesses access to the public bond market through the issuance of tax exempt and/or taxable bonds. The program can fund projects individually or pool them to help lower the cost of the bond issuance. One of the biggest advantages of this program is that borrowers are guaranteed a long-term fixed interest rate.

Another benefit is the EDFA's A rating by Standard & Poor's. By maintaining an A rating, EDFA is able to offer a lower interest rate to the borrower.

This program is open to for-profit manufacturing businesses. The bonds can be used for three main purposes: construction; storage, distribution or manufacturing of products; or the purchase of new machinery and equipment used in an industrial process. Tax-exempt bonds can fund projects with less than $20 million in capital expenditures. We also offer taxable bonds that do not limit the capital expenditures. The maximum issuance amount on any project is $5 million.

SBA 504 Program
The SBA 504 loan program is another attractive and effective financing tool. This is available to for-profit businesses. This program, which offers long-term, fixed-rate financing, is available for fixed asset purchases only. That could include land, buildings, new construction and equipment with a useful life of 10 or more years.

The SBA 504 recognizes the financial risk of startup businesses and single purpose facilities and is willing to participate in these ventures, although they do require more equity.

Another benefit of this program is that the participating lender receives the first mortgage on the project.

APEX Loan Program:
The APEX Loan Program is designed to assist companies in communities with a population of 25,000 or less.

The program is open to for-profit businesses and some non-profit businesses. The money can be used to purchase land, purchase equipment or buy or renovate a building.

The program may provide up to 75 percent of the total project costs and requires 10 percent minimum equity contribution. The loans are amortized over the useful life of the assets and have a five to seven percent interest rate with a balloon payment at six years.

MicroLOAN Program:
This program was designed to help small businesses grow and help rural communities remain viable. It is the first GOED financing program that offers businesses access to working capital and it is subordinated debt.

Local banks must fund at least 50 percent of the project costs. The state may fund up to 50 percent of the project costs, but not more than $50,000. Total project costs may not exceed $200,000. Interest rate is three percent.

Value-Added Agriculture Subfund:
The Value-Added Agriculture Subfund was created in 1999 to specifically assist in funding feasibility and marketing studies for prospective value-added agricultural business.

The goal of the program is threefold: to find niche markets that will add value to South Dakota agricultural commodities; to help fund market and feasibility studies; and to assist in the creation of a business plan for value-added agriculture projects.

Tourism Enhancement Program:
The Tourism Enhancement Program is intended for feasibility and marketing studies of potential tourism related projects. This program, under the REDI Fund, is another step toward growing tourism in South Dakota, another goal of the 2010 Initiative.

South Dakota State Contact:
Governor's Office of Economic Development
711 E. Wells Avenue
Pierre, SD 57501-3369
(605) 773-3301

Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.

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