Minneapolis is the epicenter of many startups and business development. Through tax credits and local equity sources, businesses continue to grow. Many incentives are directed toward small businesses, including these very beneficial programs.
Tax credits for business growth
Minnesota has several tax credit programs to help local businesses. Each program has its own set of requirements. The Minnesota Department of Employment and Economic Development offers excellent credit programs that Minnesota businesses should know about.
Angel Tax Credit – This program provides a 25 percent tax credit to individual or corporate investors that fund high tech startups. Many small businesses play a major role in discovering and developing new technologies. This year, $10 million in credits are available. Until Sept. 30, $5 million is reserved for women and minority-owned businesses and businesses in Greater Minnesota. This tax credit is also open to qualified residents of other states and foreign countries. Beginning this year, investors who provide startup funding through MNvest can participate in the program.
R&D Tax Credit – Related to technological development, according to mn.gov, “the R&D credit is equal to 10 percent of qualifying expenses up to $2 million, and 2.5 percent for expenses above that level. Qualifying expenses are the same as for the federal R&D credit — defined in Section 41 of the Internal Revenue Code — but must be for research done in Minnesota.”
Border-Cities Enterprise Zone Program – This program provides business tax credits to qualified businesses that invest, develop and/or create jobs in the Border-Cities Enterprise Zone. These cities are Breckenridge, Dilworth, East Grand Forks, Moorhead and Ortonville.
SEED Capital Investment Credit Program – This program focuses on economic development in the Border-Cities Enterprise Zone. Investors may receive a 45 percent tax credit of up to $112,500 per year. The credit is almost like grant money. It’s non-refundable and can be carried forward for up to four years.
Top local funding sources
MNvest – MNvest provides equity crowdfunding to Minnesota businesses. Founded as a 501(c)(4) non-profit, MNvest was signed into law in June 2015 and went into effect in June 2016. It provides a more transparent way for businesses to advertise their need for capital. Also, the equity crowdfunder makes it easier for non-accredited investors to participate in security offerings, which are often, but not restricted to, IPOs.
The Minneapolis Foundation – This foundation supports local non-profits. Its award for 2017 has been nearly $5 million. Started in 1915, this non-profit is one of the first global community foundations. Through donor advised funds and unrestricted grants, the foundation invests in local economic development and initiatives for Minneapolis and its residents. Economic vitality, community engagement and education are the top three initiatives.
Small Business Assistance Office (SBAO)
Small Business Assistance Office assists small businesses with location, relocation and expansion. The office publishes a number of guide books to help business owners establish themselves and their businesses in the community. SBAO is in partnership with the federal government’s Metropolitan Economic Development Association (MEDA). This association helps business owners in government procurements. Specialized support is offered to women, minorities, veterans and Hub Zone businesses. A hub zone is a historically under-served or under-utilized business area.
Minority business development
Minority-owned businesses are quickly emerging in the Twin Cities. Fueling these businesses is the influx of immigrants. Studies show that many minority-owned businesses are successful and have a positive impact on the local economy. The Minority Business Development Agency (MBDA) was formed over 40 years ago to foster minority business growth. The Minnesota Business Center (MBC) in Minneapolis provides consulting and core business services to help minority-owned businesses get access to capital, establish their brand, and pursue procurement opportunities and contracts. The center also assists business owners with customized business plans and strategies.
Housing and food trends in the Twin Cities
The historic river front neighborhood in Northeast Minneapolis is becoming a center for shopping, dining, culture and home buying. It wasn’t always this way. The northeast section had been dilapidated and, by some accounts, crime ridden. However, with the business boom has come a housing boom and demand for affordable living space. Businesses are taking note and opening shops and restaurants. Culinary tastes are gravitating toward international flavors and food trucks. The Twin Cities jumped onto the food truck bandwagon in 2010. Since then, food trucks have quickly moved beyond novelty and become a mainstay here to stay. Businesses that choose the food and hospitality industry can conveniently start out small and mobile with a food truck.
This article was written by Linda Cameron for CBS Small Business Pulse.