There are many reasons why companies expand or relocate, including:
- An increase in revenues and/or market penetration sufficient to justify additional production capacity
- Increased proximity to key customers
- Increased access to employees
- Perceived “corporate friendliness” of one state over another
From a state’s perspective, as in-state businesses expand or out-of-state businesses relocate to that state, the tax revenues increase, more jobs are created and local and state economies grow. You can truly say that business expansion/relocation is a “win-win” for both states and companies. This is why many states incentivize facility expansion and relocation through grants and other incentives.
What Types Of Grants Are Out There For Business Expansion or Relocation?
Grants for this purpose typically fall into two categories:
- Discretionary funds – These grants are negotiated directly between the state and the company that is expanding or relocating to that state. These are typically large grants that support very high investment and large levels of job creation. States use these grants to compete against other states for business relocation and the grants are typically combined with tax credits to form an incentive package.
- Economic Development Grants – These are grants offered by the state’s department of economic development to incentivize business expansion and re-location. These grants are typically announced by the state government (usually the Governor), and companies can apply for these grants if they qualify through an application process. These grants are not typically negotiated and usually have a funding maximum that one company can receive. These grants may be offered on an ongoing (rolling) basis, or may be offered throughout the state’s fiscal year.
What Should You Know or Do Before Applying for These Business Relocation Grants?
Based on my experience and knowledge, I’ve put together three invaluable tips for anyone considering pursuing business relocation grants:
Be Clear on Your Project and Its Impact
This is the case with either type of grant. You will have to be clear on what you intend to do and what impact it will have. For example, if you state on a grant application that you think you will relocate to an area of the state and may hire some people, the reviewer will not see solid evidence that anything impactful to the state will happen. Think SMART goals – Specific, Measurable, Attainable, Realistic and Time-Bound!
It is much better to say to any funder, “We are going to relocate to Ann Arbor, MI in the first quarter of 2024. In preparation, we are working with a commercial real estate company to identify properties that are 100,000 square feet with the ability to expand if needed in the region. We plan to finalize a location by the end of the 3rd quarter of 2023. In the 4th quarter of 2023 and 1st quarter of 2024, we plan to hire a minimum of 10 people to initially staff the facility, and spend $1,000,000 on equipment to start production by the 2nd quarter of 2024.”
Do you see the difference? The latter approach is much more likely to grab a funder’s attention!
Give Yourself Plenty of Runway
You may have noticed that I didn’t aim to rent a building in one month in the second scenario above. I also was pursuing funding approximately a year in advance. I understand it may be hard for companies to think and plan that far ahead. After all, in the ever-changing world of manufacturing, who knows what business will be there in a year? But I tell my clients to start having conversations with economic development officials in the states they are targeting for relocation or expansion as soon as their plans start to gel. As soon as you start talking to commercial real estate agents and putting plans to paper, contact the economic development departments in the state or states you are considering or engage a company that can help negotiate state relocation or expansion packages and assist with site selection, like my friends at Biggins, Lacy and Shapiro. It takes time to negotiate and create a competitive environment for relocation, which is necessary to maximize funding for your project.
Don’t forget about the R in SMART goals! Remember that your estimates for job creation and expansion will eventually be entered into a contract with the funder and the amount that you receive in incentives will be based on those goals. If you fall short, the award will likely be prorated based on the reduction in goals. Be careful when you are negotiating or completing a grant application!
The bottom line is that, if your expansion or relocation project will have an impact on a state’s economy, as measured by jobs created and capital and facility investment, you absolutely should be keeping your finger on the pulse of your target state’s incentive environment. Contact me if you wish to learn more about doing so and about funding your expansion or relocation plans!