The Certified Capital Company, called CAPCO, allows states to offer tax credits to attain venture capital to start small businesses.
The program utilizes insurance companies, who are encouraged to invest in companies. The states give those insurance companies tax credits. Those tax credits eventually result in a large amount of money to be used to invest in small businesses.
It is a government program, but it utilizes private money which is attracted by offering tax credits. Small businesses are a key player in job creation in any community, and providing small businesses money to develop more business, will add to the economy by creating jobs and expanding those small businesses.
The program will encourage small businesses to grow, and will provide more revenue for local government as well, with minimal public money being used.
Louisiana was the first state to use this system, starting in 1983. Since then, Missouri, New York, Florida, Wisconsin, Colorado and Texas have added the CAPCO programs to their economic development incentives.
Economic policies have changed over the past 20 years or so. No longer are states relying on attracting huge businesses that will bring in hundreds of jobs at a time. Instead they are focusing on helping small businesses.
Attracting big businesses is expensive. States are therefore trying to create a more business friendly environment for smaller businesses. They get the same benefits over time but do not have the big expense. Helping several small businesses in the community will offer just as many jobs as one large industry would.
It makes sense for government to help small business, as 24 million of these businesses make up 69 percent of the total workforce, and create 60 percent of new jobs that are created, according to government statistics.
Programs like this recognize the relationship between small business and a growing economy, and it makes sense for states to provide these incentives and programs to help small businesses.
The federal Small Business Administration gives the states some leeway in how they set up the program, and what exactly constitutes a small business. There are federal guidelines but the states may set their own. Wisconsin calls a small business one of no more than 100 employees, for example.
States may also set their own eligibility guidelines. Florida prohibits funding for oil and gas exploration, for instance. Florida’s program is restricted to companies involved in manufacturing, processing, or assembling products; conducting research and development.