From the March 2003 issue of Entrepreneur

States across the country enthusiastically wave the banner of business friendliness. But when it comes to handing out financial incentives, most companies miss out.

According to a survey released in September 2002 by PricewaterhouseCoopers, one in four of the small and middle-market companies received help to fund expansion or relocation plans. Those who qualify for tax breaks, low-interest loans and cash grants were also more likely to be manufacturers than service companies, though service businesses represent a faster-growing sector of the economy.

Both trends signal a gulf between expanding businesses and state and local governments. "State and local jurisdictions don't target the middle-market companies to the extent they do bigger companies," says Steve Hamm, managing partner of middle-market advisory services for PricewaterhouseCoopers in Los Angeles, "and [smaller] companies are often not savvy about these opportunities."

Some businesses don't make the cut. "Incentives have to make economic sense to both sides of the table," says Mark Kilduff, executive director of the Virginia Economic Development Partnership in Richmond. Virginia was rated in the study as one of the top 10 states most willing to negotiate incentives. New York and California were the least flexible or welcoming for fast-growth companies.

"Small companies think 'We're not big enough for incentives,'" Hamm says. Firms can improve their chances by planning a move or expansion ahead of time so they can apply for incentive programs nationwide. "Every state has a Web site," says Kilduff. "pend time to see what's available."