Virginia program ups the ante for small business investors
Small business owners, take note: Virginia just sweetened the pot for financiers willing to bet on your company.
Starting July 1, a new program will offer qualified investors a grant equal to 10 percent of their investment in small businesses. Gov. Bob McDonnell on June 6 signed legislation creating the Small Business Investment Grant Fund, a two-year program that encourages investment in small businesses and improves their access to capital.
Sen. Ryan McDougle, R-Mechanicsville, and Delegate Donald Merricks, R-Chatham, sponsored the legislation (SB 344 and HB 585). The fund will provide a total of $3 million between 2012 and 2014. The Virginia Department of Business Assistance will manage and administer the fund, which could nudge investors to gamble on startups. For example, if an investor pours $100,000 into a small business – and both parties meet the program’s criteria – the investor gets $10,000. The business, meanwhile, gets much-needed capital to pay employees, buy inventory and fund other expenses.
“When you have a startup business, you really can’t tell if it’s going to be the next Google or the next Crocs,” said Duc Truong, senior operations manager at the DBA. “With our grant, the investor does get a 10 percent automatic return on investment, and the business gets money to operate.”
Investors must commit to the small business for at least two years, or risk reimbursing the grant with interest, Truong said. And the small business must meet certain qualifications, such as having annual revenues under $3 million.
The DBA is still ironing out the program’s final details. More information, including an application form, will be available next month at www.dba.virginia.gov.