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					Department of Innovation, Trade
   and Rural Development




               Investment Programs
    Department Background

    –    Lead agency for economic development in Province.
    –    Created in 2004 to emphasize the role of innovation in the
         province’s economic agenda.

Lines of business
    1.   Small and medium-sized enterprise development
    2.   Industrial diversification and value-added initiatives
    3.   Innovation with industry, labour and institutions
    4.   Investment attraction and support
    5.   Economic intelligence

Locations
    –    Corporate office
    –    Portfolio management office
    –    5 regional offices
    –    17 field offices                                Department of Innovation, Trade
                                                            and Rural Development
           Investment Programs –
              General Overview

   Small & Medium Enterprise Fund
   Business & Market Development Program
   Commercialization Program
   Economic Diversification and Growth Enterprises
   Direct Equity Tax Credit




                                  Department of Innovation, Trade
                                     and Rural Development
Small & Medium Enterprise Fund


 For small and medium-sized businesses, funding
 is available for startup, modernization,
 expansion and working capital. The fund targets
 strategic growth sectors as well as businesses
 with export potential that need help entering or
 expanding into external markets.


                                Department of Innovation, Trade
                                   and Rural Development
     Small & Medium Enterprise Fund -
                 Purpose

   $10 Million funding program (March 2005).
   Term loans and equity investments in strategic
    growth sectors (where competitive impact is not an
    issue).
   Fund also targets businesses which have an export
    potential.
   This program complements funding from
    conventional sources where a need has been
    demonstrated.
   Funding is intended to lever new private sector
    investments.
                                     Department of Innovation, Trade
                                        and Rural Development
     Small & Medium Enterprise Fund -
                 Purpose

Targeted Strategic Sectors include:
   The fund will target strategic growth sectors, such as
    manufacturing with special emphasis on value -
    added production, information technology,
    secondary processing, aquaculture, bio-tech, marine
    services, agrifoods and tourism.




                                       Department of Innovation, Trade
                                          and Rural Development
     Small & Medium Enterprise Fund -
                 Purpose

Province’s Targeted Strategic Sectors include:
   Energy: (Hibernia, White Rose, Terra Nova and Hebron)
   Manufacturing: (Hardwood Flooring, Designer Coats, and Marine
    Lighting)
   Marine and Ocean Technology: (Marine Institute and local
    companies)
   Tourism: (cruise ship industry, destination marketing and major
    icons)
   Information Technology: (software development, call centres and
    energy efficiency)
   Fisheries: (Crab and Shrimp, Secondary Processing)
   Agriculture and Agrifoods (Secondary and Organic Processing)


                                              Department of Innovation, Trade
                                                 and Rural Development
   Small & Medium Enterprise Fund –
           Program Activities

Loans may be used for start-up, modernization or
  expansion of a business venture and may include:
 Purchase of fixed assets including land, building and
  equipment, excluding ATV’s, snowmobiles and on-road
  vehicles;
 Construction and/or renovation of building(s) including
  leasehold improvements;
 Working capital for growth; and,
 The purchase of intangible assets where such assets form
  an integral part of a business venture (e.g. patents,
  technology rights).

                                        Department of Innovation, Trade
                                           and Rural Development
    Small & Medium Enterprise Fund –
           Eligible Applicants

 Loan applications may be considered from a sole
  proprietor, partnership, corporation, co-operative or
  non-profit organization operating within the province.
The business applying must demonstrate:
 Leveraged funding including client commitment;
 market potential;
 strong experienced management;
 net economic benefit/job creation;
 the potential for viability, sustainability & growth;
                                                           (continued)


                                     Department of Innovation, Trade
                                        and Rural Development
    Small & Medium Enterprise Fund –
         Eligible Applicants            {continued}




   unable to obtain sufficient funding under reasonable
    terms and conditions from conventional sources;
    and,
   INTRD’s funding support is essential to the success
    of the business.




                                      Department of Innovation, Trade
                                         and Rural Development
    Small & Medium Enterprise Fund –
           Ineligible Applicants

Businesses and sectors which are ineligible include:
   Residential & Commercial Real Estate Services.
   Retail.
   Wholesale & Professional Service Operations.
   Beverage Rooms & Taverns.




                                     Department of Innovation, Trade
                                        and Rural Development
    Small & Medium Enterprise Fund –
           Ineligible Activities

Funds cannot be used:
   to retire existing applicants’ investment;
   for debt consolidation, refinancing and/or purchase
    of existing operations;
   to assist a business to gain market share from other
    local companies; and/or,
   result in a local market becoming further fragmented.


                                      Department of Innovation, Trade
                                         and Rural Development
   Small & Medium Enterprise Fund –
           Available Funding

TERM LOAN
 Up to $500,000 per project.
 Interest rate is Department’s base rate plus 3%
  (7.75%).
 Applicant Investment
   –   New Client: 20% of the total project costs, with at least 50%
       of the required investment MUST be cash.
   –   Existing Client: 10% of the total project costs (cash).


                                             Department of Innovation, Trade
                                                and Rural Development
    Small & Medium Enterprise Fund –
         Available Funding {continued}

EQUITY LOAN
   Equity participation is intended to increase the capital base
    of SMEs allowing leverage for new private sector
    investment.
   Up to $500,000 per year; maximum aggregate $1 million per
    client and affiliated/associated companies.
   50% of total project costs is maximum contribution. The
    remaining 50% must be demonstrated from other sources.
   Matching basis with “new” capital investment in the form of
    cash or equivalent equity.

                                            Department of Innovation, Trade
                                               and Rural Development
    Small & Medium Enterprise Fund –
       Pre-Shipment Financing Agreement

   Partnership between the Province and EDC to provide access
    to loans (500k max) for working capital or for the acquisition of
    fixed assets needed to complete export contracts (i.e. contracts
    to supply goods or services outside of Canada).
   EDC provides a risk-sharing guarantee, which in turn provides
    a pre-shipment loan, with a view to assisting businesses in their
    efforts to open new markets and thus expand their businesses.
   International contract (outside Canada) must be in place.
   interest-bearing loan with all normal security taken for working
    capital financing including an assignment of the credit
    insurance.

                                              Department of Innovation, Trade
                                                 and Rural Development
Business & Market Development Program



  Designed to provide new entrepreneurs and
  expanding small businesses with funding to help
  them acquire the necessary expertise to pursue new
  business ideas and new markets for their products
  and services. The program supports new growth
  opportunities in the economy, such as value-added
  manufacturing and exporting. Program funding
  budget is $1 million/yr.


                                   Department of Innovation, Trade
                                      and Rural Development
     Business & Market Development –
            Program Activities

BMD provides support in 3 main areas:

   For new market development activities or researching new
    product development opportunities.

   For technical feasibility research relating to potential new
    business opportunities.

   Acquiring external expertise on production processes,
    marketing, financial management or other internal company
    needs for growth and expansion.

                                                Department of Innovation, Trade
                                                   and Rural Development
     Business & Market Development –
            Eligible Applicants

   Small businesses (less than 50 employees and less
    than $ 5 million in annual sales) located and
    operating in NL, including corporations, cooperatives
    and other similar structures, are eligible applicants.

   The business must demonstrate that it has the
    appropriate financial structure and management
    ability to carry out the proposed project.



                                       Department of Innovation, Trade
                                          and Rural Development
     Business & Market Development –
            Ineligible Activities

   Will not fund pre-commercial industrial research and
    development activity.
   Will not fund generic business plans for new
    business start-ups or expansion unless extenuating
    circumstances exist.
   Funding must be used to pay incremental cost
    incurred and paid by the company.
   In-kind or “sweat equity” contributions are not eligible
    costs.

                                        Department of Innovation, Trade
                                           and Rural Development
    Business & Market Development –
           Available Funding

   Up to $25,000 in the form of a non-repayable
    contribution is available to eligible applicants.
   These funds must be matched on an equal basis by
    the business itself.




                                    Department of Innovation, Trade
                                       and Rural Development
    Innovation Strategy –
    Commercialization Program

Purpose:
    Bridge funding gap between product research and
     product marketing
    Support the development of innovative products and
     services
    Support for private sector R&D
    IP protection funding
    Technology transfer support

                                      Department of Innovation, Trade
                                         and Rural Development
Innovation Strategy –
Commercialization Program

Funding:
     Up to 75% of total cost
     Maximum contribution of $500,000 per project

Investment Options:
     Conditionally repayable loan
     Direct equity


                                     Department of Innovation, Trade
                                        and Rural Development
Innovation Strategy –
Commercialization Program

Conditionally Repayable Loan
  Repayment terms
        20% after tax cashflow
        Repayment should be completed within 10 years


Direct Equity
  Redemption
        20% after tax cashflow
        Repayment should be completed within 10 years


                                            Department of Innovation, Trade
                                               and Rural Development
 Innovation Strategy –
 Commercialization Program

Eligibility
      Incorporated business
      Based in NL
      Project must be in post research stage of product and market
       development, leading to full commercialization

Ineligible
      Core administration
      Competing with existing local private enterprise
      Residential and commercial real estate services, retail, wholesale
       and consumer-orientated establishments
      Federal, provincial and municipal governments and their agencies


                                                 Department of Innovation, Trade
                                                    and Rural Development
Innovation Strategy –
Commercialization Program

Eligible Activities:
     Fixed assets
     Technical expertise and support
     Travel for events in support of ongoing projects
     Final stage prototyping
     Product, market and standards testing
     Working capital
     Other related costs
                                      Department of Innovation, Trade
                                         and Rural Development
Economic Diversification and
Growth Enterprises Program


The Economic Diversification and Growth
Enterprises Program (EDGE) provides a
package of incentives to encourage significant
new business investment in the province to help
diversify our economy and stimulate new private
sector job creation, particularly in rural areas.


                                Department of Innovation, Trade
                                   and Rural Development
                     EDGE –
                Program Eligibility

   Potential to create 10 new jobs.
   Make an investment of $300,000 or generate
    incremental sales of $500,000.
    Needs EDGE to expand.
    Incentives will not give a direct competitive
    advantage over other business in the province.
    Activity must be of substantial economic benefit to
    the province.


                                       Department of Innovation, Trade
                                          and Rural Development
                     EDGE –
                Incentive Package

   100% rebate on provincial corporate income tax and
    payroll tax for up to 10-15 years.
   50% rebate on federal corporate income tax for up to
    10-15 years.
   100% rebate on municipal property/business tax for
    up to 10 -15 years.
   Access to un-serviced Crown land for a $1 where
    required by business plan.



                                      Department of Innovation, Trade
                                         and Rural Development
                      EDGE –
                    How to Apply

   Application forms are available at any office of the
    Department of Innovation, Trade and Rural
    Development or from the Department’s website
    www.gov.nl.ca/intrd or by calling 709-729-5066.




                                        Department of Innovation, Trade
                                           and Rural Development
Direct Equity Tax Credit Program


 The Direct Equity Tax Credit Program is designed to
 encourage private investment in new or expanding
 small businesses as a means of creating new jobs
 and diversifying the economy. An investment credit,
 in the form of a provincial personal income tax credit,
 is available to individuals who invest as shareholders
 in eligible small business activities and who are
 prepared to keep their investment in that small
 business for at least five years.

                                     Department of Innovation, Trade
                                        and Rural Development
          Direct Equity Tax Credit –
                Tax Incentive

   A tax credit equal to 20% of the investment
    made by an individual in an eligible business
    located in the Northeast Avalon area.
   A tax credit equal to 35% of the investment
    made by an individual in an eligible business
    located outside the Northeast Avalon area.
   The maximum investment a business may
    receive is $700,000.

                                  Department of Innovation, Trade
                                     and Rural Development
         Direct Equity Tax Credit –
            Eligible Businesses

Small non-publicly traded businesses with:
 Assets < $ 20 million and < 50 full time employees.
 Business must be Canadian controlled.
 Permanent establishment in this province.
 Business in growing area of the economy, such as:
  IT, aquaculture, advanced technologies, dimension
  stone, manufacturing, value-added resource based
  enterprises (forestry and agrifoods), tourism and
  cultural industries.
                                    Department of Innovation, Trade
                                       and Rural Development
         Direct Equity Tax Credit –
           Ineligible Businesses

Ineligible businesses are those engaged in:
 Wholesale.
 Retail.
 Food & Beverage Services.
 Real Estate.
 Professional Practices & Trades.
 Oil/Gas/Mineral Exploration.
 Financial Services.
 Fish Harvesting & Primary Fish Processing.

                                   Department of Innovation, Trade
                                      and Rural Development
         Direct Equity Tax Credit –
           Investment Activities

Invested funds can be used to finance:
 Start-up, modernization, expansion or growth of a
  small eligible business.
Invested funds cannot be used to:
 Retire existing debt in a company.
 Purchase or refinance of an existing business
  operation.



                                    Department of Innovation, Trade
                                       and Rural Development
           Direct Equity Tax Credit –
                 How to Apply

   For application forms and more details on how small
    businesses can take advantage of the program, call
    the Department of Finance: tel: 1-800-563-2299, or
    by email taxadmin@gov.nl.ca.




                                     Department of Innovation, Trade
                                        and Rural Development
Other Programs and Services


     Craft Industry Development Program
     Business Networks Program
     Co-op Development Fund (NLFC partnership)
     Community Capacity Building Program
     Supplier Development
     Fisheries Loan Guarantee
     Strategic Sector Development
     Trade and Investment




                                            Department of Innovation, Trade
                                               and Rural Development
          Questions/Discussion


Daxton Pinsent
Economic Development Officer
Department of Innovation, Trade and Rural Development
28 Pippy Place
St. John's, NL A1B 3X4
Telephone: 729-7112
www.intrd.gov.nl.ca




                                      Department of Innovation, Trade
                                         and Rural Development

				
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