Section 261.74.4. Entrepreneurial component.

       74.4(1) Purpose. The purpose of this component is to encourage the development of early-stage businesses in conjunction with the delivery of a financial assistance program.

       74.4(2) Definitions. In addition to the standard definitions in 261—Chapter 173, the following definitions shall apply to this component:

“Early-stage business” means a business that has been competing in a particular industry for three years or less.

“Eligible applicant” means a business that has consulted with and obtained a letter of endorsement from either a business accelerator approved by the department or from an entrepreneurial development organization recognized by the department.

“Eligible business” means an early-stage business that is developing a new product or technology.

       74.4(3) Eligibility. In order to qualify for financial assistance under the entrepreneurial component of the program, a business shall meet all of the following requirements:

        a.           In order to be eligible for assistance, the business, or proposed business, must be located in the state of Iowa.

        b.           The business shall be an early-stage business.

        c.           If the business is a sole proprietorship or a partnership, all applicable business owners must apply. If the business is a limited liability company, a limited liability partnership, or a corporation, the application must be submitted and signed by an individual who has been authorized by the business to do so.

        d.           The business owner or owners (or appropriate individual(s) in a limited liability company, limited liability partnership or corporation) must consult with and obtain a letter of endorsement from either a business accelerator approved by the department or from an entrepreneurial development organization recognized by the department.

        e.           The individual or business must have a business plan which details the business’s growth strategy, management team, production/management plan, marketing plan, financial plan, and other standard elements of a business plan.

       74.4(4) Local match not required. A business applying for financial assistance under the entrepreneurial component is eligible for financial assistance regardless of whether the business has received matching funds from a city or county.

       74.4(5) Funding priorities. In awarding financial assistance under the entrepreneurial component of the program, the department and the board shall give priority to businesses in those sectors of the Iowa economy with the greatest potential for growth and expansion. Sectors having such potential include but are not limited to biotechnology, recyclable materials, software development, computer-related products, advanced materials, and advanced manufacturing.

       74.4(6) Financial assistance. An applicant may apply to the department for financial assistance to assist with the applicant's early-stage business growth. The applicant may request up to $250,000 for early-stage growth activities to be used for business expenses and to leverage conventional financing from commercial lenders or private investors. Assistance will generally be made in staged investments with amounts to be determined by company development, growth, and defined milestones. The assistance under this program is limited to 50 percent or less of the total original capitalization, if a new business, or total project costs, if an existing business. Funds may be used to purchase machinery, equipment, or software or for working capital needs or other business expenses deemed reasonable and appropriate by the department. Awards will be in the form of a loan, royalty agreement, or other form of an equity-like investment. A single recipient is limited to $250,000 in total financial assistance.

       74.4(7) Technical assistance. Applicants may apply for assistance in paying for consulting or other third-party technical assistance either in conjunction with the request for financial assistance or in a separate application. Applications submitted that are not in conjunction with a request for financial assistance must demonstrate financial need for the technical assistance. Financial need will be determined by the department based on review of the applicant’s financial statements, narrative submitted by the applicant outlining the financial need, and other documentation as requested by the department. Awards will be in the form of a grant, loan, royalty agreement, or other form of an equity-like investment. Technical assistance of this nature is limited to no more than $25,000 per applicant.

       74.4(8) Application process. Applications must be submitted in the format required by the department. Applications, the business plan, and related material shall be submitted online or by mail to the department at the address listed in 261—subrule 175.2(7).

       74.4(9) Review criteria.

        a.           Applications will first be reviewed for completeness. If additional information is required, the program staff shall send the applicant notice to submit the additional needed information. The applicant shall submit the requested information within a reasonable time period in order to ensure further action on the request.

        b.           Applications will then be reviewed for content of the business plan and to evaluate the business’s viability and potential for growth. The department may consult with the business accelerators or other knowledgable agencies or individuals as a part of the review process.

        c.           The following items will be reviewed:

       (1)             Type of business.

        1.            Highest priority will be given to businesses in sectors of the Iowa economy with the greatest start-up and growth potential for Iowa, including but not limited to:

        ●             Biotechnology (including drugs and pharmaceuticals and value-added agricultural products);

        ●             Recyclable materials;

        ●             Software development and computer-related products;

        ●             Advanced materials; and

        ●             Advanced manufacturing.

        2.            Assistance may be provided to industries other than those listed in paragraph “1” above; however, the applicant shall provide strong rationale regarding how that industry diversifies, strengthens or otherwise enhances Iowa’s economy. Eligibility may be established by an industry other than those listed if that industry can provide rationale regarding the industry’s benefit to Iowa’s economic base. Rationale that is provided will be reviewed by the department staff to determine eligibility as a targeted industry. Factors that will be considered in determining an industry’s benefit to Iowa’s economic base include:

        ●             The majority of the products produced by the industry are exported out of Iowa;

        ●             The inputs for the products produced in the industry are raw materials available in Iowa or are provided by Iowa suppliers;

        ●             The goods produced by the industry diversify Iowa’s economy;

        ●             The goods produced by the industry resulted in, or will result in, a decrease in the importation of foreign-made goods into the United States;

        ●             The industry shows potential for future growth; and

        ●             The functions of the industry do not produce harmful effects for Iowa’s natural environment.

Businesses engaged in retail sales, personal services, consulting, franchises, the provision of health care or other professional services, or the distribution of products or services will not be considered targeted industries and are not eligible for the program.

       (2)             Management team and management expertise. Factors considered for this criterion are whether the applicant(s) has a background (including education, training, work experience, and other factors) that will be helpful and useful in the business in question. The department will also consider the degree to which the applicant’s background is fully documented.

       (3)             Business capitalization. Factors considered for this criterion are the original sources of financing for the business. Although all projects must have at least 50 percent of their financing from sources other than the entrepreneurial component, the department will give preference to those applications in which the other sources of financing are higher than 50 percent.

       (4)             Strength of business plan. The strength of the business plan is the most important factor in the evaluation of applications. Factors considered for this criterion are the quality of the business plan and how well it addresses all elements of the business, such as:

        1.            A description of the company and the overall industry;

        2.            The product and production plan;

        3.            The market, competition, and the marketing strategy;

        4.            The management team and business operation;

        5.            A well-defined project time line;

        6.            Patent issues (if applicable), critical risks and problems; and

        7.            Financial information and plan.

[ARC 7970B, IAB 7/15/09, effective 7/1/09; ARC 8145B, IAB 9/23/09, effective 10/28/09]