The Maine Seed Capital Tax Credit, which provides tax credits to investors to encourage greater investment in Maine startups, has reached its annual cap of $5 million with three months left to go in 2017.

The end came quickly. A few weeks ago, there was still $2 million left in the pot, but investors in a large investment round scooped up the entire remainder, with the applications for the remaining credits being received on Sept. 22, according to the Finance Authority of Maine, or FAME, which administers the program. The program also hit its cap last year before the end of the year, though in November.

The early depletion of the tax credits could suppress investment activity during the fourth quarter as companies push off fundraising until 2018 to allow their investors to access the fresh pot of $5 million in credits, according to Sam Fratoni, chair of the Maine Angels.

“I think companies will consider not going after the money until January,” said Fratoni, who as an angel investor has received tax credits through the program. “I think this puts an incentive on the companies to ask that question… If I can wait a couple months, I could sweeten the deal.”

Fratoni said the tax credits don’t necessarily entice investors to invest in companies they wouldn’t otherwise invest in. The company still needs to be a good investment, he said. But the tax credit lowers the risk profile of that investment, which could encourage an investor to put in more money than he or she otherwise would.

“It doesn’t create the deals, but it supports more investment in the deals that are there,” he said.

The Maine Seed Capital Tax Credit program allows investors—both individuals and venture capital funds—to recoup 50% of their investment (up to $500,000) in an eligible, early-stage Maine company in the form of tax credits, which can be used over at least a four-year period to reduce state income tax liability. To be eligible, the company must have sales of less than $5 million in the prior 12 months, and it must either be a manufacturer, derive at least 60% of its sales from outside the state, develop or apply advanced technologies, be a visual media production company, or a value-added natural resource enterprise. Investors must also own less than 50% of the business to receive the tax credits. The aggregate investment limit per business is $5 million for which tax credits may be received.

The program was originally created in the late 1980s, but it took roughly 25 years for it to meet its lifetime cap of $30 million, which it did in 2013. The Legislature revived it in 2014, changing it from a lifetime cap to an annual cap. That annual cap equaled only $635,000 in 2014, but ramped up to $4 million in 2015 and to $5 million in 2016 and each year after.

The Legislature also tweaked the program so the tax credits could be enticing to out-of-state venture capital funds, which don’t have any tax liability in Maine. The program now provides out-of-state VC firms (and only out-of-state VC firms) with what are known as “refundable” tax credits, meaning they could be redeemed for cash if no tax liability exists.

Out of the $5 million in tax credits claimed this year, approximately $3.14 million are in the form of refundable credits approved for VC firms, according to FAME. The organization is not yet prepared to reveal the identity of the investors who have submitted the applications for the credits.

“We think it is very likely they will be approved, but because we have not yet completed our review and issued the tax credits, any disclosure of the award would be premature,” Chris Roney, FAME’s general counsel, wrote in an email.

On the bright side, all the tax credits being claimed before the end of the year does mean companies are successfully raising money, according to Tim Agnew, who helped create the program in the late 1980s as CEO of FAME. The $5 million in claimed credits represents $10 million in investment, after all.

Given that the program also hits the $5 million annual cap before the end of the last year, Agnew thinks it’s time to consider raising the annual cap.

“Now we know it’s working. The next question is how do we build on that,” said Agnew, who’s now a principal at Masthead Venture Partners and sits on the board of the Maine Venture Fund. “I think the best way to build on it is to increase the amount of the credit. We’ll have to demonstrate to the state that that’s a worthwhile investment.”