Programs and Incentives

High-Tech Startup Funding and Investment

Kentucky provides a number of programs that offer investment and matching funds for high-tech startups.

The Cabinet will match, on a competitive basis, Phase 1 and Phase 2 federal Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) awards received by Kentucky high-tech small businesses and those willing to become Kentucky-based businesses.

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Commonwealth Seed Capital, LLC, (CSC) is an independent fund that makes debt or equity investments in early-stage Kentucky business entities to facilitate the commercialization of innovative ideas and technologies.

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The Kentucky Enterprise Fund provides seed-stage capital to Kentucky-based companies that are commercializing a technology-based product or process. The funds exist to stimulate private investment in Kentucky-based technology companies with high growth potential. The Kentucky Science and Technology Corporation administers the funds.

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Mentorship

Kentucky has a strong statewide network of Innovation Hubs that support any entrepreneurs or startup at every stage of the business lifecycle

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Commercialization

Kentucky’s is the first program in America to join the strengths of every one of the state’s public higher education institutions to advance commercialization statewide.

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The KYNETIC grant program funds the commercialization of technologies with potential to benefit human health in Kentucky and around the world. Teams of faculty, staff and students at all of Kentucky’s public universities and colleges whose innovations address an unmet health need are eligible to compete for up to $200,000 to address unmet health needs and have commercialization potential.

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The purpose of the federal EPSCoR program is to help states become competitive for federal research dollars by building research infrastructure, which included faculty, students and facilities. The Cabinet for Economic Development and KY Innovation provide the required match for KY EPSCoR, which currently has active grants with both the National Science Foundation (NSF) and NASA EPSCoR programs.

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Small Business Programs

The Cabinet for Economic Development has a variety of successful tools that match entrepreneurs with the funding they need – whether that is access to investors, small business loans or tax credits. Outlined below are some of those tools.

If your small business has hired at least one new full-time position and invested in qualifying equipment, you could be eligible for a tax credit.

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This federally funded lending support program helps lenders finance creditworthy small businesses that would typically fall just outside of their normal lending guidelines.

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Small business engaged in manufacturing, agribusiness, or service and technology may be eligible for loans to acquire land and buildings, purchase and install equipment, or for working capital.

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Investors

KY Innovation offers tax credits that benefit investors that receive the incentives and startups at critical stages of fundraising and growth.

The Kentucky Angel Investment Tax Credit offers credits of up to 40 percent of an investment in Kentucky small businesses.

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The Kentucky Investment Fund Act offers a 40 percent tax credit to certain personal and corporate investors in approved investment funds.

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If you are a small farmer selling eligible agricultural assets to a beginning farmer, you may qualify for a tax credit.

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EB-5 is an opportunity for immigrants to invest in the United States in exchange for green card eligibility for themselves and qualifying family members.

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Kentucky's pro-business climate provides a number of incentives for businesses. The Kentucky Economic Development Finance Authority (KEDFA), established within the Cabinet for Economic Development to encourage economic development, business expansion, and job creation, provides financial support through an array of financial assistance and tax credit programs.

KEDFA approval is required for participation in the loan and tax incentive programs, except the Skills Training Investment credits, which are approved by the Bluegrass State Skills Corporation (BSSC). KEDFA meets the last Thursday of each month. Projects must be received by the last Friday of the month prior to the KEDFA meeting date in order to be considered.

To find out if your business qualifies contact the Department for Business Development where a professional economic development agent will be assigned to work with you. Your agent can answer your questions and guide you through the application processes.

New and Expanding Industry

Provides income tax credits and wage assessments to new and existing agribusinesses, headquarters operations, manufacturing companies, coal severing and processing companies, hospital operations,  alternative fuel, gasification, energy-efficient alternative fuels, renewable energy production companies, carbon dioxide transmission pipelines and non-retail service or technology related companies that locate or expand operations in Kentucky. Projects locating in certain counties may qualify for enhanced incentives. Click here to view a map of the enhanced incentive counties.

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For new or expanded companies engaged in manufacturing, non-retail service or technology activities, agribusiness, headquarters operations, coal severing and processing, hospital operations, alternative fuel, gasification, energy-efficient alternative fuels, renewable energy production companies, carbon dioxide transmission pipelines, or tourism attraction projects in Kentucky. KEIA provides a refund of Kentucky sales and use tax paid by approved companies for building and construction materials permanently incorporated as an improvement to real property. It is also available for Kentucky sales and use tax refunds for eligible equipment used for research and development, data processing equipment or flight simulation equipment.

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KEDFA encourages economic development business expansion and job creation by providing business loans to supplement other financing. The Direct Loan Program provides loans at below-market interest rates (subject to the availability of state revolving loan funds) for fixed asset financing for agribusiness, tourism, industrial ventures, or the service industry. Retail projects are not eligible.

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IRBs issued by state and local governments in Kentucky can be used to finance manufacturing projects and their warehousing areas, major transportation and communication facilities, most health care facilities, and mineral extraction and processing projects. Click here for the IRB Procedures.

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Federally funded low interest loans made available through the Department for Local Government.

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Resources and programs applicable to cryptocurrency mining and related projects.

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Job Retention

Provides tax credits to existing Kentucky companies engaged in manufacturing, agribusiness, non-retail service or technology activities, headquarters operations, hospital operations, coal severing and processing, alternative fuel, gasification, energy-efficient alternative fuels, renewable energy, or carbon dioxide transmission pipelines on a permanent basis for a reasonable period of time that will be investing in eligible equipment and related costs of at least $2,500,000 for owned facilities and $1,000,000 for leased facilities (excluding rent).

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Energy and Environment

The Kentucky New EnergyVentures Fund provides seed stage capital to support the development and commercialization of alternative fuel and renewable energy products, processes, and services in Kentucky. The funds exist to stimulate private investment in Kentucky-based technology companies with high growth potential. KNEV makes grants of $30,000 and investments ranging from $250,000 to $750,000+. Qualified companies must be Kentucky-based and funds are to be used for business development activities.

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Workforce Training

Provides credit against Kentucky income tax to existing businesses that sponsor occupational or skills upgrade training programs for the benefit of their employees.

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Provides matching grant funds for customized business and industry-specific training programs.

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Tax Increment Financing (TIF)

Tax Increment Financing (TIF) is an economic development tool to use future gains in taxes to finance the current public infrastructure improvements for development that will create those gains. The state participates with local governments and eligible agencies in three TIF programs:

  • Real Property Ad Valorem Tax Revenues
  • Signature Projects
  • Mixed-Use Redevelopment in Blighted Urban Areas
Click here to view a list of Frequently Asked Questions (FAQs) about the Tax Increment Financing program. Click here to view a list of active state participation Tax Increment Financing projects. Click here to view the Consumer Price Index (CPI) Rates to use for Adjusting Old Revenues for Tax Increment Financing Projects.

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Agri-business Opportunities

The Kentucky Agricultural Development Fund provides incentives for innovative proposals that increase net farm income, stimulates markets for Kentucky agricultural products, creates new ways to add value to Kentucky agricultural products, and explores new opportunities for Kentucky farmers. For more information visit the Governor’s Office of Agricultural Policy’s website, agpolicy.ky.gov or call (502) 564-4627.

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The Kentucky Agricultural Finance Corporation provides capital access for agricultural diversification and infrastructure projects. Participating Loan Programs Include: Agricultural Infrastructure, Beginning Farmer, Diversification through Entrepreneurship in Agri-business and Large Animal Veterinary Programs. Direct Loan Programs include the Agricultural Process Loan Program and the Coordinated Value-Added Assistance Loan Program. For more information visit the Governor’s Office of Agricultural Policy’s KAFC website, kafc.ky.gov or contact Bill McCloskey at (502) 564-4627.

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The purpose of the Kentucky Selling Farmer Tax Credit program is to encourage the continued use of agricultural land for farming purposes by granting tax credits to selling farmers who agree to sell agricultural land and assets to beginning farmers. Selling farmers who complete an eligible sale may qualify for a tax credit up to 5% of the purchase price of qualifying agricultural assets, subject to caps of $25,000 per calendar year and $100,000 lifetime.

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Tourism Development

The following tourism-related incentives are administered through the Kentucky Tourism, Arts and Heritage Cabinet.

The Tourism Development Act provides developers of approved new or expanding tourism projects the ability to recover up to 25 percent of the project’s development costs over a 10-year term. Projects including, but not limited to, lodging facilities constructed on state park, federal park or national forest lands are eligible to recover up to 50 percent of the development costs over a 20-year term.

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The Kentucky Film Incentive is designed to encourage the development of the film industry in Kentucky. The incentive provides qualifying applicants the ability to recover up a portion of qualified expenditures through a refundable income tax credit. Click on the link for specific details.

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Expanding Your Market

Diversifying your customer base is an important component to growing a small business. Exporting can provide a business with an entirely new customer base. Even if you have never exported before, we can help.

The Cabinet, through its involvement in the Kentucky Export Initative, offers support for small businesses exploring exporting, including the federal STEP Grant. We can assist with educational efforts, trade missions and grants that will make the process easier.

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The Kentucky PTAC offers free procurement assistance via counseling, valuable resources, and connections to help companies sell their products and services to the appropriate government agencies.

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Connect with KY Innovation

Kentucky is home to a deeply connected network of resources.
Find out what our statewide entrepreneurial ecosystem has to offer.


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