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Office of Economic Development and International Trade - Business Finance

OED & IT Business Finance Programs

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Certified Capital Companies (CAPCO) Program

CAPCO Program Documents

THE CAPCO PROGRAM – MOST FREQUENTLY ASKED QUESTIONS

The following questions and answers are provided for general information purposes. The CAPCO legislation (www.AdvanceColorado.com/finance/capco/CapcoBillHB1097.pdf) and regulation (www.AdvanceColorado.com/finance/capco/CAPCO_Reg.pdf) provide specific program detail.

WHAT IS THE CAPCO PROGRAM?

The CAPCO Program was created by the Colorado Legislature with the goal of making venture capital funds available to new or expanding small businesses throughout Colorado.

WHY A CAPCO PROGRAM FOR COLORADO?

The CAPCO Program is anticipated to create new employment opportunities within the state and to stimulate economic growth.

WHAT DOES "CAPCO" MEAN?

"CAPCO" means a Certified Capital Company. A CAPCO must be a for-profit business organized to provide venture capital funds to "qualifying" Colorado businesses.

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HOW DOES THE CAPCO PROGRAM WORK?

The State of Colorado provided $100 million for this program in the form of premium tax credits. The $100 million in premium tax credits were given to insurance companies in exchange for the insurance companies giving $100 million in cash to the CAPCOs. The CAPCOs then use these funds to invest in qualifying Colorado businesses.

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IS THE CAPCO PROGRAM STILL IN OPERATION?

The CAPCO program is still in operation. The Colorado legislature initially made $200 million in premium tax credits available for this program. However, the 2004 legislature redirected $100 million of the premium tax credits to other programs. The CAPCOs are currently investing the $100 million pool of cash received in April 2002, in Colorado businesses. Please contact the 6 CAPCOs to determine funding availability (www.AdvanceColorado.com/business-finance/capco-list.cfm).

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WHO CAN BECOME A CAPCO?

To become a CAPCO, a for-profit venture capital business must have submitted an application to the Colorado Office of Economic Development. Applications are on-line at www.AdvanceColorado.com/finance/CAPCO.cfm (Part I, Part II, Part III).

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WHAT IS THE TIMEFRAME TO BECOME A CAPCO?

Beginning October 2001, the Colorado Office of Economic Development accepted, reviewed, and certified or denied CAPCO applications. In April 2002, the Office allocated premium tax credits to CAPCOs and the respective insurance companies. In exchange for the premium tax credits, the insurance companies gave cash to the CAPCOs. The CAPCOs are currently using the cash to invest in qualifying Colorado businesses.

All premium tax credits have been allocated for this program. The Office will no longer consider applications regarding premium tax credits.

WHEN WILL CAPCO MONEY BE AVAILABLE TO COLORADO BUSINESSES?

The CAPCOs are currently investing in qualifying Colorado businesses as a result of this program, following the allocation of premium tax credits.

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HOW CAN A COLORADO BUSINESS RECEIVE FUNDING FROM A CAPCO?

There are certain minimum requirements that a Colorado business must meet in order to qualify for this program. These minimum requirements are contained in the legislation and regulation for this program. Except for these specific, minimum requirements, each CAPCO has complete flexibility in determining the types of investments it will consider. Colorado businesses should contact individual CAPCOs directly to determine if the business meets the minimum program requirements and if the business is one that the CAPCO would consider in general. Each CAPCO will independently provide application and approval information to businesses seeking funding. The list of CAPCOs is available on-line at www.AdvanceColorado.com/business-finance/capco-list.cfm.

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HOW DOES A COLORADO BUSINESS "QUALIFY" UNDER THIS PROGRAM?

At a minimum, the legislation and regulation for this program state that a business must generally meet ALL of the following conditions as of the time of a Certified Capital Company's first investment in the business to "qualify":  

  1. the business must be headquartered in Colorado and its principal business operations must be located in Colorado (principal business operations is defined as having more than 50% of the business's total assets physically present in Colorado; and more than 50% of the business's net income is allocable to Colorado in accordance with Colorado income tax law, regardless of whether the business is taxable or tax-exempt for Colorado income tax purposes; and more than 75% of the business's existing total salaries, wages and/or other compensation are paid to Colorado employees, calculated on a full-time equivalent basis);
  2. the business must meet the United States Small Business Administration’s (SBA) definition of a "small business concern" which is contained in the SBA’s small business size regulations (available on-line at http://www.sba.gov/size/)
  3. the business must not be predominantly engaged in professional services provided by accountants or lawyers;
  4. prior to making any Qualified Investment in the form of debt or a convertible instrument which could result in debt or debt characteristics, then the CAPCO shall submit or maintain, as applicable, the following information for the Office's review:
    a.   the business must be unable to obtain bank financing for all or a portion of the funds that it needs;
    b.   if the business is located in a primarily rural area, the business must be unable to obtain all or a portion of the funds from the Revolving Loan Fund that serves the business's location;
  5. the business must be located in an area that is eligible for the funds that a CAPCO has available;
  6. the CAPCO must determine that the business is one which meets the general investment requirements that have been established by each CAPCO; and
  7. other requirements, as applicable, based on the investment structure of the CAPCO.

Colorado businesses seeking funding should contact the CAPCOs directly for the CAPCO’s determination of whether the business "qualifies" under the state’s minimum requirements and whether the business is one that the CAPCO is willing to consider. The list of CAPCOs is available on-line at www.AdvanceColorado.com/business-finance/capco-list.cfm.

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WHAT IS THE MAXIMUM LEVEL OF FUNDING THAT A CAPCO CAN PROVIDE TO A COLORADO BUSINESS? HOW LONG WILL IT TAKE?

The legislation for this program states that a CAPCO may invest up to 15% of the funds that it receives from insurance companies in any qualifying Colorado business. However, each CAPCO may set different maximum investment levels for individual businesses as long as it meets the 15% maximum restriction. Each CAPCO may establish varying review processes that result in a variety of processing times. Businesses seeking funding should contact the CAPCOs directly to determine each CAPCO’s maximum level of funding and the timeframe. The list of CAPCOs is available on-line at www.AdvanceColorado.com/business-finance/capco-list.cfm.

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WILL THE CAPCO PROGRAM HELP BUSINESSES LOCATED IN RURAL PARTS OF THE STATE? WHAT DEFINES A RURAL PART OF THE STATE?

The legislature set-aside $25 million from the $100 million pool of funds for use in rural counties only. Additionally, the legislature provided an incentive for the CAPCOs to use funds from the $75 million statewide pool for businesses located in rural counties and in economically distressed urban communities.

The legislation has defined designated rural counties. The following do not qualify as designated rural counties for the purposes of this program: Adams, Arapahoe, Broomfield, Boulder, Denver, Douglas, Eagle, El Paso, Fremont, Garfield, Jefferson, Larimer, Summit, Teller, Weld. However, businesses in these counties are eligible to request funding from the $75 million statewide pool.

All other counties in the State qualify as designated rural counties under this program.

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WILL THE CAPCO PROGRAM HELP BUSINESSES LOCATED IN DISTRESSED URBAN COMMUNITIES WITHIN THE STATE? WHAT DEFINES A DISTRESSED URBAN COMMUNITY?

The legislature provided an incentive for the CAPCOs to use funds from the $75 million statewide pool for businesses located in rural counties and in economically distressed urban communities. A distressed urban community for the purpose of this program is any area within the list of counties that is not a designated rural county (listed above) and that has been designated as an Enterprise Zone by the Colorado Economic Development Commission. A list of local Enterprise Zone Administrators is available on-line at www.AdvanceColorado.com/enterprise-zones/enterprise-zones-list.cfm.

John Reece
CAPCO Program Manager
1625 Broadway, Suite 1700
Denver, CO 80202
(T) 303-892-3840 (F) 303-892-3848
john.reece@state.co.us

Alice Kotrlik
Director of Business Finance
alice.kotrlik@state.co.us