DDEC Seed Capital: How to Apply, Who Qualifies, and What Expenses It Covers

One of the most accessible economic support programs for small businesses in Puerto Rico has been available for years, and a large share of eligible entrepreneurs never apply — sometimes out of lack of awareness, sometimes because they assume they do not qualify, and sometimes because the process seems more complicated than it is.

The Department of Economic Development and Commerce (DDEC) SME Seed Capital Incentive offers real money — up to $15,000 for new businesses and up to $35,000 for existing ones — through a direct reimbursement system. It is not a loan. You do not have to pay the money back. It is a Puerto Rico government incentive to strengthen local business operations.

This article explains exactly how it works, who can apply, what expenses it covers, what documents you need, and what mistakes to avoid so your application is not rejected.

What exactly is DDEC Seed Capital?

The program is established under Act No. 60-2019 (Puerto Rico Incentives Code) and is administered by the DDEC Trade and Export Program. Its purpose is to give an economic boost to local small and medium-sized businesses — both those just starting and those that have been operating for years — so they can invest in equipment, operations, payroll, rent, or marketing without taking on debt.

The program operates through reimbursement: you make the investment first and the DDEC reimburses the approved percentage. This is important to understand from the start — you do not receive the money before you spend it, but after you document that you already spent it on something eligible.

There are three modalities within the program:

1. Seed Capital for New SMEs — up to $15,000, 100% reimbursement of amounts spent.

2. Seed Capital for Existing SMEs — up to $35,000, 50% to 75% reimbursement of amounts spent.

3. Special Marketing Incentive — up to $10,000, 50% reimbursement, specifically for local and export marketing expenses.

Who can apply?

New SMEs (less than 3 years in operation)

To qualify under this modality, your business must:

• Have been in operation for less than 36 months since it formally began
• Be a microenterprise (gross income under $500,000 per year, with 7 or fewer employees) or a small business (gross income under $3,000,000 per year, with between 2 and 25 full-time employees)
• Have at least 1 full-time employee on payroll
• Not have a tax exemption decree under Act 60-2019 or prior incentive laws

In addition, for the new-business program, the DDEC requires you to submit evidence of matching funds — meaning you must show that you already have or secured your own or financed capital to complement the incentive. That match can be through a bank loan, an approved incentive from another source (not from the DDEC), or documented owner investment with invoices and bank statements. The match cannot be more than 18 months old.

Existing SMEs (3 years or more in operation)

For this modality, the requirements are simpler:

• 3 years or more in operation
• Annual sales of up to $3,000,000
• Payroll of 25 employees or fewer
• Not show losses on your most recent income tax return — businesses with losses are not eligible

The amount approved under this modality depends on your annual net income per the return:

What disqualifies any business

The DDEC does not accept applications from:

• Short- or long-term rental businesses (Airbnb, properties)
• Medical cannabis dispensaries
• Businesses with an exemption decree under Act 60-2019 (except young entrepreneurs)
• Businesses that show losses on their most recent return

What can you use the money for?

This is the part that confuses applicants most. Seed Capital has specific approved uses. Spending on something outside this list means that expense will not be reimbursed, even if your application was approved.

Eligible expenses for New and Existing SMEs:

• New machinery and equipment directly related to business operations
• Food cart — only if your business operates from a cart and the current one is not in optimal condition (does not apply to other motor vehicles)
• Payroll subsidy — 50% of net salary for newly created full-time jobs hired during the agreement term
• Commercial premises rent — there must be a lease in the business’s name; the landlord cannot be related to the applicant
• Infrastructure improvements to the premises (barrier removal, service area expansion, electrical or plumbing upgrades) — only if the entrepreneur owns the property
• Software and technology licenses needed to operate the business

Expenses specific to restaurants and food businesses:

They may only use the incentive to purchase equipment needed for food preparation. Everything related to alcoholic beverage sales is excluded.

⚠️ What Seed Capital does NOT cover (and many people assume it does):

• Air conditioning systems
• Office or premises furniture
• Motor vehicles (except food carts)
• Expenses incurred before signing the contract with the DDEC
• Cash payments or money orders — not reimbursable under any circumstance

This last point is critical: no expense before the contract is signed is reimbursable. If you make purchases expecting the DDEC to cover them after you apply, and the contract is not yet signed, those expenses do not qualify.

For the Marketing Incentive (Modality C):

This modality has its own eligible expenses, all focused on promoting the business:

• Digital marketing (content, email marketing, online ads, videos, blogs)
• Website creation or improvements
• Social media (posts, paid ads, influencers)
• Search engine optimization (SEO)
• Participation in local trade shows and commercial events

Documents you need ready

This is where most applications fail. The DDEC rejects incomplete applications, and any missing document counts as incomplete.

For individuals (DBA):

• Valid photo ID
• Active Merchant Registration
• Municipal Patent
• Single Permit or Consultation Letter
• Certification of no debt with the Department of the Treasury (Hacienda)
• Certification of filing tax returns for the last 5 years
• Certification of no debt with CRIM (all concepts)
• Certification of no debt with ASUME

For corporations, LLCs, or legal entities, in addition to the above:

• Certificate of Organization
• Certificate of Incorporation from the Department of State
• Current Certificate of Compliance ("Good Standing")
• Copy of the income tax return (for existing businesses)
• Quarterly unemployment and disability contribution return with DTRH payroll (for existing businesses)
• Employer Identification Number (EIN)

If you have debt with any agency:

It does not necessarily disqualify you, but you must submit evidence of an active, current payment plan. Unfiled returns, unaddressed debts with Hacienda, or expired certifications are the most common reasons applications are rejected before reaching the evaluation committee.

How the process works, step by step

Understanding the full process helps you avoid surprises and losing the incentive due to procedural errors.

Step 1 — Application: Complete the form at desarrollo.pr.gov and include the business proposal with all required documents. The proposal must explain how the incentive will help you develop the business and include a detailed breakdown of what you plan to purchase with the funds.

Step 2 — Evaluation: An Evaluation Committee of DDEC officials reviews the application. For New SMEs, they evaluate matching funds, net income, and demonstrated need. For Existing SMEs, they mainly evaluate annual net income from the return.

Step 3 — Approval and contract: If the Committee recommends approval, the DDEC Secretary authorizes it. You have 15 business days to submit all necessary documents and formalize the contract. If you do not complete this step on time, you lose the approval.

Step 4 — Make the expenses: Only after the contract is signed and registered with the Comptroller’s Office can you begin making eligible expenses. Again: expenses before the contract are not reimbursable.

Step 5 — Request reimbursement: You can request reimbursement quarterly during the contract term. You must submit original invoices, receipts, bank statements, and photos of acquired equipment installed and operating. The Seed Capital contract is valid for 12 months. If 6 months pass without you requesting reimbursement, the contract is automatically canceled.

Step 6 — Compliance: The DDEC may conduct audits or physical visits to the business at any time to verify that funds were used as agreed. Noncompliance can result in revocation of the incentive and repayment of amounts reimbursed — plus 10% legal fees.

Frequently asked questions worth clarifying before you apply

Can I receive Seed Capital more than once?

Yes, but you must wait 12 months after your previous contract expires before you are eligible again.

Can I apply if I have debt with Hacienda?

Yes, as long as you submit evidence of an active, current payment plan. What you cannot have is unaddressed debt.

Can the business owner receive part of the payroll subsidy?

No. Owners, partners, shareholders, directors, and their relatives up to the fourth degree of consanguinity cannot receive salary subsidy from Seed Capital funds.

What if the DDEC approves less money than I requested?

The committee has discretion to approve a lower amount based on your application evaluation and fund availability. If they approved less, you can only claim reimbursement up to that amount.

Is the program always open?

It is subject to fund availability. When funds run out, the program closes. That is why it pays to apply without waiting.

A point many overlook: the importance of having your tax paperwork in order

To apply for Seed Capital you need, among other things, certifications of no debt with Hacienda, CRIM, and ASUME, and certification of filing returns for the last 5 years. That means if you have overdue returns, unaddressed debts, or problems with your SURI accounts, you will not be able to complete the application.

This is not just bureaucratic red tape. It reflects that the DDEC wants to ensure public money reaches businesses operating formally and responsibly. Before investing time preparing the application, the first step is to verify that your tax situation is in order.

The information in this article is based on DDEC Circular Letter No. 2025-014, current as of the publication date. Program terms may change.