There are several issues to be aware of regarding the investment:
Invests (after Nov. 29, 1990) or is actively in the process of investing, capital of $1,000,000; or
Invests (after Nov. 29, 1990) or is in process of investing, $500,000 if the investment is in a targeted employment area (i.e., a rural area of less than 20,000 population or an area which has experienced high unemployment of at least 150% of the national average). A rural area is defined as “any area other than an area within a metropolitan statistical area or within the outer boundary of any city or town having a population of 20,000 or more (based on the most recent decennial census).
Investment can be cash, equipment, inventory, other tangible property, cash equivalents, and indebtedness secured by assets owned by the entrepreneur, provided that the entrepreneur is personally and primarily liable and that the assets of the new commercial enterprise are not used to secure any of the indebtedness. A loan to the commercial enterprise or any other debt arrangement between the entrepreneur and the new commercial enterprise does not constitute an investment. Retained earnings are also not considered an investment. Payment of partnership expenses does not constitute an investment because it is not “for the purpose of generating a return on the capital placed at risk.
All capital is valued in U.S. dollars and at fair market value. Fair market value of a note is determined by factors such as the fair market value of the assets securing the note, the extent to which the assets are amendable to seizure, and the present value of the note.
The investment must be in only one commercial enterprise and an investor cannot meet the requirements for the removal of conditions by combining investments in multiple commercial enterprises.