11.15.22 Webinar
Opportunity Zones Strategies for Small Businesses
Recording & Highlights
On November 15, 2022, the Chicagoland Opportunity Zones Consortium’s (COZC) hosted a discussion on Opportunity Zones (OZ) strategies for small businesses to share expert insights on the types of businesses well-positioned to receive OZ investment, how investments support business growth, and strategies for engaging investors.
Speakers:
● Vanessa Huerta, gener8tor
● Matt Strauss, Rise Kit
● Jeff Goldman, Polsinelli
● Robin Schabes, COZC
● Rachel Reilly, Aces & Archers
Webinar Highlights
Operating businesses continue to represent a small share of total OZ investment activity per Novogradac’s ongoing survey of Qualified Opportunity Funds (QOFs). However, business owners have found creative ways to tap into OZ capital to support growth and expansion. In Washington, D.C., City-State Brewing established its own QOF to source small-dollar OZ investments, as opposed to working with a third-party fund manager. Outlook Company in Baltimore, MD, Calypso Continuing Education in Randolph, VT, and Micronic Technologies secured OZ investments from QOFs investing solely in operating businesses (Verte OZ Fund, CORI Innovation Fund, and The Pearl Fund respectively).
There is flexibility in how OZ investments in operating businesses are sourced and structured. Jeff Goldman of Polsinelli provided sample fund structures for businesses establishing their own QOF, as well as the general QOF structure.
Goldman also reviewed the statutory and regulatory requirements that govern whether a business can be a Qualified Opportunity Zone Business (QOZB) and whether an investment in a QOZB qualifies to receive OZ tax benefits. Certain “tests'' can be used to determine eligibility including the:
● 70% Tangible Qualifying Asset Test
● Intangible Property Test
● Gross Income Test
● 5% Non-qualifed Financial Property Test
● Sin Business Test
Vanessa Huerta of gener8tor provided advice for businesses seeking capital from OZ investors, based on her experience running the gBeta Opportunity Zone Capital Accelerator Program in partnership with the Colorado Office of Economic Development & International Trade.
Matt Strauss of RiseKit, a young tech-firm based in Chicago, also shared insights on his experience raising capital from OZ investors and offered advice for similarly-positioned businesses looking to do the same. Strauss underscored the importance of finding a law firm with an OZ practice to guide you through the process. He also provided tips for identifying and pitching investors, creating a pitch deck, and finding office space located within a Qualified Opportunity Zone (QOZ).
Businesses must be located within a QOZ and/or operating within a QOZ in order to receive OZ investment. There are opportunities to support businesses through OZ investments in real estate, such as The Terminal in Chicagoland. Expanding the supply of available office or commercial space provides increased optionality for businesses to locate within QOZs, and potentially receive OZ investment.