Economic Development: Public Services

Mississippi offers an attractive array of financial incentives to new and expanding businesses including exemptions from certain taxes and many finance programs beneficial to businesses. In a special session during the summer of 2000, the Mississippi State Legislature passed the "Advantage Mississippi Initiative" (Senate Bill 2002). This plan is designed to create higher paying jobs for Mississippians, and creates several unique incentives for new and expanding business. For more information go to www.mississippi.org.

Mississippi Business Finance Corporation Programs

The Mississippi Business Finance Corporation (MBFC), an entity of the Mississippi Department of Economic and Community Development (MDECD), administers a variety of finance programs designed to assist businesses in locating and expanding in the state. MBFC provides companies an opportunity to review all financial information through one source. MBFC works with other public entities and the private sector to coordinate efforts to stimulate both commercial and industrial development. State and local experts are happy to work with individual companies to tailor finance packages to meet specific needs.

Loan Guaranty Program
504 Loan Program
Minority Business Enterprise Loan Program
Industrial Development Revenue Bond Program
Small Enterprise Development Program
Rural Economic Development Assistance Program

LOAN GUARANTY PROGRAM

This program provides guarantees to private lenders on loans made to small businesses. Loan proceeds may be used for all project costs including fixed assets, working capital, start-up costs, rental payments, interest expense during construction, and professional fees. The maximum guarantee is 75% of the total loan, or $375,000, whichever is less. The loan is restricted to a maximum term of twenty years with an interest rate limited to the current legal rate. The borrower must have equity in the business, no matter how small, and pay a guaranty fee of 2% of the guaranteed portion of the loan. The lender will require the necessary collateral to secure the loan. Loans cannot exceed 90% of the fair market value of this collateral.

504 LOAN PROGRAM

The 504 Loan Program allows certified development companies through the Small Business Administration, to coordinate funding through private lenders and SBA to finance projects for eligible small businesses as defined by SBA. As much as 90% of the total project may be financed under this program, requiring owner equity of as little as 10%. The maximum loan amount is usually $1,850,000, with the SBA portion not exceeding $750,000 or 40%, whichever is less. The structure of a financial package, while somewhat flexible, is typically as follows:

• Participating bank's loan of 50% on the bank's terms and interest rate, with the bank taking a first mortgage position.
• SBA guaranteed debenture of 40%, with interest rates comparable to long-term U.S. Treasuries fixed for ten or twenty years.
• Small business concern equity of 10%. Proceeds may be used for fixed assets, renovations, machinery, equipment, leasehold improvements, and professional fees.

MINORITY BUSINESS ENTERPRISE LOAN PROGRAM

This program is designed to make grants or loans to qualified entities to establish revolving loan funds to assist in financing minority economic development. A listing of entities administering these revolving loan funds may be obtained from MDECD or the Oktibbeha County Economic Development Authority. A minority business means a socially and economically disadvantaged small business organized for profit, performing a commercially useful function which is owned and controlled by one or more minorities, or a minority business which is certified by MBFC. Socially and economically disadvantaged has the same meaning as described in the Small Business Act (15 U.S.C.S. Section 637a), and shall include women. If the minority business is a proprietorship, the borrower must be a resident of the State. If the business is a corporation or partnership, at least 50% of the owners must be residents. In either case, ownership must be 60% minority. The maximum MBFC loan amount to any one borrower is $250,000 or 25% of the total project cost, whichever is less. Maximum terms are seven years for working capital, ten years for machinery and equipment, and fifteen years for land and buildings. The maximum interest rate which may be charged of the MBFC portion of the loan is 2% above the Federal Reserve Discount Rate, and the minimum is 2% below.

INDUSTRIAL DEVELOPMENT REVENUE BOND PROGRAM

The Industrial Development Revenue Bond Program reduces the interest costs of financing projects for companies through the issuance of both taxable and tax exempt bonds. Additionally, ad valorem (except school taxes) and sales tax exemptions are granted in conjunction with this type of public financing. The bonds must be secured by an irrevocable, direct-pay letter of credit or other credit enhancement acceptable to MBFC. The proceeds of a bond issue may be used for the acquisition and construction of real property, machinery and equipment, capitalized interest, reserve funds, and a limited amount o of the cost of issuance in accordance with provisions of the Internal Revenue Code. Although there is no restriction on the amount of taxable debt which may be incurred, there is a $10 million cap on tax-exempt financing. The maximum term of a bond issue will be equal to 120% of the average life of the fixed assets or thirty years, whichever is less. The effective rate of a loan to a company will be determined by using a combination of the interest rate on the bonds, the cost of issuance, and any applicable fees.

SMALL ENTERPRISE DEVELOPMENT PROGRAM

The issuance of State General Obligation Bonds provides funds for manufacturing and processing companies to finance fixed assets, including land, buildings, new machinery, and new equipment at below market interest rates for terms of up to fifteen years. Although a company may qualify for more than one loan under this program, the aggregate amount loaned to any company cannot exceed $2 million. Interest rates on these loans are equal to the net interest rate on the bonds issued by the State plus 1/8 of 1%. A proposed project must create a minimum of ten jobs, and loans cannot exceed 90% of the market value of the financed assets. Companies participating in the program will be required to obtain a letter of credit guaranteeing the loan.

RURAL ECONOMIC DEVELOPMENT ASSISTANCE PROGRAM

Companies financing projects through the Small Enterprise Development or Industrial Revenue Bond Programs which are administered by MBFC are eligible to participate in the Rural Economic Development Assistance Program. The program allows these companies to receive credits on Mississippi corporate income taxes and assess new employees job development fees to offset annual debt service on the bonds. Mississippi corporate income tax credits will be granted at the end of a company's fiscal year and will be based on the Mississippi tax liability at that time. The amount a company will be required to pay in Mississippi income tax will be reduced by the amount of debt service paid during the tax year. Employees whose gross wages are minimum wage or more per hour may be assessed a certain percentage of gross wages per hour up to a maximum of 6%. These employees will receive credits on their Mississippi personal income taxes in an amount equal to the assessment. The total amount of tax credits and assessments may not exceed the annual debt service on the bond issue. Only employees whose jobs are created as a direct result of the project may be assessed.