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How Delaware’s grants, incentives and tax credits support next steps for innovators

No one can accuse Damian DeStefano of having small goals.

Damian DeStefano | Photo c/o Delaware’s Division of Small Business

The Director of Delaware’s Division of Small Business has been on the job just under two years, but he has a clear vision for what he wants the department to accomplish and where he wants Delaware to be on the national scene when it comes to emerging companies.

“Our number one goal is to support the entire [business] community across all industries and make Delaware the number one state in the country to start and grow a new business,” he says.

DeStefano and his staff assembled a network of organizations capable of providing support for entrepreneurs, in addition to the financial assistance that is available. The result is a strong ecosystem that gives those who need it capital infusions, technological expertise, organizational aid and help with the regulatory requirements that can create headaches at the outset for any new concern.

It’s part of a state-wide desire to create a climate in which small businesses can thrive, particularly in the tech sector. As the national economy continues its sturdy growth, it is important for Delaware to help those looking to find their places in it. The Division of Small Business has plenty of ways to do that.

“We want to help grow small businesses,” DeStefano says. “We also want to remain competitive in terms of receiving investments from firms across the country and the world.”

EDGE Grants provide cash infusion

Although it’s important for fledgling ventures to get the kind of expert advice and counsel necessary to take the right steps at the outsets of their journeys, perhaps the most important ingredient early on is financing.

One of the more important developments on that front is the state’s EDGE Grant program, which was started in May 2019 and provides up to $100,000 to STEM companies and $50,000 for non-STEM concerns. The competitive selection process rewards up to 10 firms each round and is open to ventures that are majority-located in Delaware, have been running for fewer than five years and employ fewer than 10 people. 

“The goal is to get grant funding in the hands of early-stage companies,” DeStefano says. “It’s designed to create a competitive process and maximize the use of the money the state has to spend.”

The EDGE program aims to reward those companies with the best plans, ideas and products, but special consideration is given to those businesses operating in one of the state’s 25 Opportunity Zones. The program is designed to help with things like website design, rent support for laboratories, and building infrastructure and cosmetic improvements. 

DeStefano reports the EDGE Grants have been funded by the state government for FY 2021 and hopes they will become “permanent” moving forward. By creating a thriving class of small companies, the state can spawn greater interest in its economy from the outside, as well as helping the employment picture in the state.

Those grants can be combined with the almost 100 different organizations and government entities the state has assembled to serve as resources for businesses looking to navigate the regulatory and licensing climates to give startups quite a bit of support.

“EDGE Grants definitely try to create jobs and target specific industries that the state has identified as key,” says Myunghee Geerts, a principal at the Wilmington-based Cover & Rossiter CPA firm. “Delaware is investing in these industries so that their outcomes are better.”

Tax credits and other funding options

Geerts’ specialty is in identifying tax incentives and credits for clients. Two that she considers specifically helpful for business owners trying to gain funding are the Angel Investor Tax Credit and the Research & Development Tax Credit. High-tech companies looking to connect with sources of capital can pitch “angels” on refundable credits that permit them to gain a stake in the company’s longer-term success while also allowing the angels to reap tax benefits in the short run.

According to Geerts, the R&D credit benefits young companies with less than $20 million in gross receipts. Delaware provides a cash refund of 100% of the federal government credit amount. “That can be a sizeable amount,” Geerts says.

The Delaware Technical Innovation Program offers funding for companies that have completed Phase I of their development and have applied for Phase II of federal Small Business Innovation Research or Small Business Technology Programs as they work to bring products to market. 

Firms that locate in “environmentally stressed sites,” as determined by the state Council on Development Finance, can receive grants from the Brownfield Assistance Program. And companies choosing to settle in one of the state’s 25 Opportunity Zones will receive tax credits and other incentives to assist their early efforts.

According to Geerts, small business owners can apply for and receive as many of these benefits as they can qualify for. The state is extremely willing to let them “stack” the credits to minimize tax liability and maximize available resources to promote growth.

“What Delaware has done well is identify what the strongest industries are in the state,” she says. “That includes tech and fintech. The state programs are good at focusing on and offering tax incentives and credits to create opportunities for economic development. That’s really creating results.”

By Michael Bradley

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