Individual Development Accounts - A Great Way to Finance Your Business

We are now taking applications for 2012. Give us a call if you are interested in applying for an IDA.

These special savings accounts can provide a great way to finance start-up or expansion of a business. If you meet income and net worth guidelines, you can use an Individual Development Account to quadruple your savings through donated matching funds. Read on for more information on how the program works.

What is an IDA?

The Individual Development Account, or IDA, is a special savings account to help business owners and entrepreneurs of modest finances save money to invest in their businesses. The IDA program is a 3:1 matched savings program. This means that for every $1.00 you save, the program will match it with $3.00. Once you reach your savings goal, the money can be spent on your business. In addition to saving money, participants learn important business skills such as cash flow, financial management, and marketing through free, required classes facilitated by NEOEDD. The goal of the IDA program is to encourage a habit of saving money in order to increase future earning potential. Save a little bit today, grow your business tomorrow.

Where do the matching funds come from?

The IDA Initiative is supported by funding from the Oregon IDA Tax Credit.  The Oregon IDA Tax Credit allows anyone to support IDA participants like you and get back a 75% credit on their State tax return.  For more information go to http://ida.neighborhoodpartnerships.org

What can I use IDA funds for?

IDA funds can be used for business expenses such as fixed assets (equipment, buildings, vehicle, etc.) or working capital or training (rent, inventory, utilities, supplies, specialized training, etc.).

What can I not use IDA funds for?

You cannot pay yourself, pay past debts (purchases made with credit cards or other loan products) or pay for trips or home improvements.  Funds are paid directly to vendors who sell you the items or training.

Are there limits to the amount I can save?

Yes.  The amount varies depending on what you are saving for and how long you want to save.  You must save at least $25 a month and you must save for a minimum of 6 months up to a maximum of 36 months. You cannot save more than $1,000 in any 12 month period.

If you are saving for working capital (rent, inventory, marketing, website, etc.) or for gaining skills necessary for your business, you can save up to a total of $1,000. This would be matched by $3,000 for a total of $4,000 available to invest in operating, start-up or training expenses for your business.

If you are saving for a fixed asset (equipment, buildings, vehicle, etc.) you can save up to at total of $2,500. This would be matched by $7,500 for a total of $10,000 available to invest in your business. NEOEDD staff will help you create a savings plan and timeline that fits your ability to save and your goals.

What are the criteria to qualify for an IDA?

You must be 12 years old or older and be able to open a bank account.  Household net worth must be equal to or less than $20,000 – we can help you figure this out.  You must have income, and proof that household income is at or less than what is shown in the Household Income Qualification table below.  Also, you need to have a business concept and have an idea what you want to spend your money on.

How do I prove my household income/net worth?

Household income is based on the combined income of every person in the household. Your household includes everyone that you live with or report as a dependent on your income tax return, regardless of whether or not they are related to you.  The following are examples of household income: taxable wages, salaries, tips, net earnings from self-employment, gross income as a statutory employee, Social Security, Social Security Disability Income, and Temporary Aid to Needy Families.

Net worth is determined by subtracting the total of all of the household debts (loans, medical debt, past due bills, etc.) from the total market value of all household assets (savings, retirement, property, etc.), excluding the value of your first car and your primary house. NEOEDD staff can help you figure out your net worth.

Refer to the table below for income and eligibility guidelines.  The most common proof of household income is your federal tax return.  If your situation has changed since you did your taxes, you will need to show proof of current household income. This can be your current pay check stubs and/or unemployment statement. 

Example:  To qualify, a household of 2 adults and 2 children (household of 4) in Baker County would need to have income at or below $57,450 adjusted gross per year.

                                                   Household Income Qualification                                              

What are the steps to open an IDA account?

Call NEOEDD staff to make sure you are eligible.  If you are eligible, we will set up a time to meet with you and help you complete the application. You will be asked to provide copies of 3 months of bank statements from an existing checking or savings account so staff can evaluate your ability to save on a regular basis. You will also complete an IDA application worksheet, provide proof of income (copies of tax return, pay stubs, etc.) and pay a $60 application fee.  If you do not have an existing checking or savings account, staff will work with you to find other ways to document your ability to save on a regular basis.

How/when do I spend my IDA savings and match?

You must reach your savings goal (this could take from 6 months to 36 months depending on the amount you plan to save). You will be required to complete 21 hours of business planning classes and a financial literacy course provided by NEOEDD.  You will be asked to complete a business plan with cash flow projections in order to graduate from the program and spend your IDA funds. NEOEDD can provide assistance as you complete your business plan. Once your business plan is approved, you will be sent withdrawal forms to request funds to make your purchases.  Receipts are required for all purchases. If you miss three monthly deposits in a six month period, you will be terminated from the IDA program.

Need more information? 

Contact NEOEDD at 541-426-3598, 800-645-9454.

Or email one of our staff:

Jeff Moss

Sara Miller

Lisa Dawson