Incentives & Financing

South Dakota’s REDI (Revolving Economic Development and Initiative) Fund is South Dakota’s flagship financing tool. It is available to start-up firms, businesses that are expanding or relocating in South Dakota, as well as local economic development corporations.

HOW IT WORKS

The REDI Fund provides financial assistance up to 45 percent of a project’s total cost financing for the purchase of land and associated site improvements, construction, acquisition, and renovations of buildings. It also can be used to help cover fees, services and other costs associated with construction.

Companies should secure matching funds and be able to provide a 10% minimum equity contribution before applying to the Board of Economic Development for a REDI Fund Loan.

LOAN BASICS

• Low, fixed interest rate
• Amortized over useful life of asset
• Five-year balloon payment

South Dakota Works is a flexible loan program that offers business and commercial loans to companies in need of working capital, fixed assets, and interim construction financing. The Works program is a true gap financing tool that target 20% of eligible costs on a project’s need for financing. The SD Works loan can be in a subordinated lien position to the lead lender’s financing. Eligible uses include building construction, equipment purchases, real estate financing, and working capital.

Use of Funds

South Dakota Works may be used for business purposes, including start-up costs, working capital, inventory, and interim construction loans.

Ineligible uses of funds include:

• Purchasing, constructing, renovating, or tenant improvements of an eligible place of business that is for passive real estate investment
• Refinancing
• Repaying delinquent federal or state income taxes
• Repaying taxes held in trust or escrow

Terms

• Minimum 1:1 match with another lender
• 3% fixed interest rate
• 10% equity required
• 1% origination fee
• Amortization matched to a useful asset life
• Maximum 20-year amortization; 5 year balloon
• True gap financing

Through the GOED’s Workforce Development Program, companies can access money to help train new and existing employees that require additional skills as the result of company growth. The program can fund up to 50% of eligible training expenses to companies that meet certain wage and benefit criteria. The funds are awarded on a reimbursement basis.

Companies must meet the following criteria to participate in the program:

Criteria

• All training must be technical in nature
• New employee training must be the result of growth in the company, not attrition
• The wage of the employees before the training begins must be at least $19.50 per hour
• Current employee trainees must receive an increase in their wages that is directly attributed to the training
• Companies must offer employees health insurance that is at least partially paid by the employer

How it Works

Application packets are available online. When the applicant is approved, the award is made on a reimbursement basis upon completion of the training. Awards will be paid on a per-person basis with 85% of the grant paid upon receipt of the initial report and 15% paid upon receipt of the follow-up report.

Application Details

The application must be completed and submitted at least three weeks before training is scheduled to begin. The application must contain the following:

• Business and project information
• Budget detail
• Program narrative

The SBA 504 Loan program was designed to foster economic growth by making affordable financing available for small businesses.

Through FDDC, loans are extended for terms of 10, 20 and 25 years at fixed, below-market interest rates to South Dakota businesses adding full time positions in the state. Loans are also available for businesses meeting public policy goals which include rural development, woman, minority or veteran ownership, expansion of exports, energy efficiency, labor surplus area or business district revitalization.

LOAN BASICS

• Long-term, fixed-rate financing
• Available to for-profit businesses
• Subordinated to first mortgage lenders

Learn More

Codington County offers a five-year discretionary property tax on any new commercial or industrial construction over $30,000 as follows:

• 1st Year: 0% of the assessed property value
• 2nd Year: 0% of the assessed property value
• 3rd Year: 0% of the assessed property value
• 4th Year: 0% of the assessed property value
• 5th Year: 0% of the assessed property value

The discretionary formula does not apply to existing buildings. The discretionary formula is applied in the first year following completion of the facility.

Watertown, South Dakota, has the best tax incentives any business can ask for:

• No corporate income tax
• No personal income tax
• No personal property tax
• No Inheritance tax
• No business inventory tax

How it Works

The project owner must apply to the Board of Economic Development for the consideration for a reinvestment payment no later than 90 days after starting construction.  If the board approves the application, the project owner must comply with the conditions of the approval, to include the payment of all taxes it owes on the project before it receives the payment.  At the conclusion of the project the project owner must file an Affidavit for Reinvestment Payment with GOED, and if all of the conditions of the reinvestment payment have been met, GOED issues the reinvestment payment to the project owner.  The following steps outline the process in more detail:

1. Timely file an application with GOED.
2. After GOED has received the completed application, the applicant must make a written request to GOED for the board to take action to approve or deny its application for reinvestment payment.
3. Within 90 days of board approval of the application, the applicant shall accept the approval in writing.
4. Within 30 days after written acceptance is received, GOED shall issue a permit entitling the applicant to submit an affidavit for reinvestment payment.
5. Construction on the project begins.  The applicant is required to notify GOED within 30 days from the date of construction.
6. Applicant files quarterly progress reports as required by GOED.
7. Applicant submits the affidavit for reinvestment payment with GOED, along with any required conditions of the approval, within six months of completion, which is the first date when the project is operational.
8. The payment will be remitted within 90 days of receipt of the affidavit and required information.

Eligible Recipients

Companies pursuing new or expanded facilities with a total project costs in excess of $20,000,000 or equipment upgrades with a total project cost in excess of $2,000,000 are eligible to apply to the Board of Economic Development for a reinvestment payment under this program.  One of the key criteria considered by the board when approving or denying an application is the likelihood the project would have occurred without the reinvestment payment.  Reinvestment payments are intended for projects that would not have occurred without the payment.  The following projects are not eligible for a reinvestment payment:

• Buildings or structures used predominantly for the sale of products at retail, other than the sale of electricity at retail, to individual consumers;
• Buildings or structures used predominantly for residential housing or transient lodging;
• Buildings or structures used predominantly to provide health care services;
• Buildings or structures used predominantly for the transportation or transmission of natural gas, oil, or crude oil by means of a pipeline; or
• Buildings or structures that are not subject ad valorem real property taxation or equivalent taxes measured by gross receipts.

Application Details

The application must be completed and submitted no later than 90 days after construction or installation of equipment begins.