Fund your South Dakota business

When your own money is not enough, start with an advisor, then read which program actually lends. The South Dakota SBDC does not lend. REDI and South Dakota Works are loans the Board of Economic Development can make. Regular SBA loans come from a lender.

What’s different in South Dakota

• One-on-one SBDC advising is no-cost. The SBDC offers one-on-one, confidential, no-cost business consulting¹. The state’s listing says fees are none in most cases².
• REDI is a loan from the Board, not a bank guarantee and not a grant. The cap on the public-records page is 45%⁶ of the project. The base rate is 3%⁵.
• South Dakota Works needs a lender in the deal. The state loan can sit behind that lender. It can pay working capital. REDI’s published uses are buildings and equipment.
• The named grants do not pay a typical opening day. One of them, the community child-care grant, is closed.
• One SBA office covers the state. Sioux Falls serves all 66 counties⁴.

Do this

1. Write down what the money is for. Buildings and equipment can fit REDI. Working capital, inventory, and start-up costs can fit South Dakota Works. Passive real estate and refinancing are on the Works ineligible list. A research project is Proof of Concept, not either loan.
2. Book advising. The SBDC’s consulting page offers one-on-one, confidential, no-cost business consulting¹. The state listing of the Pierre SBDC says it provides professional, confidential, and no-cost business consulting and training, and that fees are none in most cases². The SBDC site is where you ask for a contact in your county.
3. Use the SBA office. The South Dakota District Office in Sioux Falls offers funding programs, counseling, federal contracting certifications, and disaster recovery for all 66 counties⁴.
4. Understand who lends the regular SBA loans. 7(a) and the other ordinary SBA loans come from participating lenders, not the SBA. The SBA loans guide explains who makes each kind.
5. Read REDI if the project is land, a building, or equipment. The REDI page says the loan is for start-up firms, businesses expanding or relocating in South Dakota, and local economic development corporations. Projects can include land, site improvements, constructing or buying or renovating a building, and machinery and equipment. It requires 10% equity and a shared first lien on the financed assets. 3%⁵ is the current base rate. The public-records page says the fund provides up to 45% of the project’s total cost. The public-records page says to line up interim construction financing, matching funds, and at least 10 percent equity before applying to the Board of Economic Development⁶. You apply to the Board. The program page does not say the Board will fund the whole project.
6. Read South Dakota Works if you need working capital or a gap next to a bank. The Works page says it is a gap loan for working capital, fixed assets, and interim construction, aimed at 20% of eligible costs, that can sit in a subordinated lien behind the lead lender. Uses include start-up costs, working capital, inventory, and interim construction loans. Ineligible uses include passive real estate, refinancing, delinquent income taxes, and taxes held in trust. The borrower works with a participating lender for the matching funds. Terms on the page: at least a 1-to-1 match with another lender, a 3% fixed rate, 10% equity, a 1% origination fee, and amortization matched to the asset, at most 20 years, with a 5-year balloon⁷.
7. Read the grant pages the same way. Proof of Concept provides up to $25,000 for technical and economic feasibility work. It is open to entrepreneurs, universities, existing South Dakota companies, and others who will commercialize the work in South Dakota. Applications are accepted at any time. A match of at least 10% is required. It does not pay the principal's or the researcher's salary, legal fees for incorporation, sales expenses, or general operating expenses⁸. Workforce Development is up to half of eligible training costs, paid back to the company after the training. Training must be technical. New-employee training must come from growth, not from replacing someone who left. The company must pay part of the employee's health insurance. The wage before training must be at least $19.50⁹ an hour. Apply at least three weeks before training is scheduled to begin¹⁰. Community development block grants pay for community projects, and industrial infrastructure that helps businesses create jobs for people with low or moderate incomes¹¹. They are not a check to a new business for opening day. The child-care grant page says the program is closed and was a one-time funding opportunity¹². Be wary of anyone selling access to a guaranteed grant.
8. Keep your paperwork ready. Lenders and advisors ask for your formation documents and EIN: Register your business and Get your tax IDs.
9. After a declared disaster, the SBA can lend directly. Disaster assistance covers physical damage loans, economic injury disaster loans, and military reservist economic injury loans. Economic injury loans are for small businesses the SBA decides cannot get credit elsewhere¹³. A disaster by itself does not qualify you. Check the declaration and the loan type before you apply.

What you get back

An appointment with an advisor, and help preparing what a lender or the Board asks for. A REDI or South Dakota Works decision comes from the Board of Economic Development, and Works also needs the matching lender. A regular SBA loan decision comes from the lender. The SBA decides a disaster loan only when you qualify for that program. These pages do not promise a finished plan or an approval.