With the introduction of the Small Business Loan Guarantee Program and the Small Business Emergency Loan Program, Minnesota small business owners now have access to two loan programs in addition to the Paycheck Protection Program Loans and the Economic Injury Disaster Loans introduced under the Federal Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
Small Business Loan Guarantee Program
The Minnesota Small Business Loan Guarantee Program, established by the Minnesota Department of Employment and Economic Development (DEED) in response to the COVID-19 pandemic, is a temporary program intended to help Minnesota lenders provide capital to small businesses affected by COVID-19. DEED estimates the program can guarantee $20–$25 million in private loans to 100-200 small businesses. As long as funds are available, the Small Business Loan Guarantee program will support the origination of loans made to Minnesota small businesses within the 12 months following Gov. Walz’s March 13, 2020 declaration of a peacetime public health emergency.
Who is eligible?
The funds can only be provided to Minnesota businesses with fewer than the equivalent of 250 employees, which includes employees of parent companies and at locations outside of Minnesota. Businesses that derive income from passive investments without operational ties to operating businesses, primarily generate income from gambling activities, and/or generate any part of its income from adult-oriented activities are not eligible.
What are the terms?
All loans will be made by lenders enrolled in the program – no loans will come directly from DEED. The rate, term, and collateral requirements will be set by each lender's policies and the program will provide an 80% guarantee up to a maximum of $200,000. A fee of .25 percent on the guarantee loan principal will be charged for each loan enrolled into the program.
How can I use my funds?
Funds can be used for machinery or equipment purchases, maintenance or repair; expenses related to moving into or within Minnesota; and working capital. All uses must be exclusively for Minnesota operations.
How do I apply?
Businesses must apply for assistance through lenders that are enrolled in the program. Lender contact information will be posted here. Each lender will utilize their own underwriting and loan evaluation criteria, and the lending decisions will be at the sole discretion of the lending institution.
Small Business Emergency Loan Program
The Small Business Emergency Loan (SBEL) program was established by peacetime emergency Executive Order 20-15. The program provides up to $30 million to the Commissioner of DEED to be disbursed in loan amounts ranging from $2,500 to $35,000 for Minnesota businesses that were directly and adversely affected by Executive Orders 20-04 and 20-08. These loans will be available until funds are exhausted which is expected occur no later than August 1.
Who is eligible?
Businesses, regardless of organizational form (i.e., independent contractor, sole proprietorship, limited liability company, etc.) in the industries noted in Executive Orders 20-04 and 20-08 including restaurants, bars, breweries, theaters, concert halls, fitness centers, salons and barber shops, recreational facilities, and golf clubs are eligible. If an eligible industry represents at least 51% of business revenues (and the ineligible operation represents no more than 49%), then the business is eligible. The above is not an exhaustive list – please consult here for the complete list of industries noted in Executive Orders 20-04 and 20-08. Additionally, businesses needs to file applicable insurance claims and be ineligible for a standard loan from a lender (which may include a SBEL certified lender).
Businesses must also:
- be current on financial obligations as of March 1, 2020;
- be an existing small business (whatever the form of their organization);
- have been operating in Minnesota long enough to demonstrate financial viability;
- be willing to provide collateral or a personal guarantee for at least 20% of loan;
- be unable to qualify for a standard loan through a bank, credit union, or nonprofit lending organization; and
- pay-off the emergency loan if financing is received subsequent to loan approval.
What are the terms?
Loans are between $2,500 and $35,000 – the actual amount depending on the lender's determination of business need (e.g., operating expenses) and ability to repay. The loans will be 50% forgivable, and offered at a 0% interest rate but will not be for an amount exceeding three (3) months operating expenses. They will be paid back monthly over five (5) years and the first payment will be deferred six (6) months If other financing (e.g., an SBA loan under the CARES Act) becomes available to small businesses that received a Minnesota Small Business Emergency Loan, the emergency loan must be promptly repaid.
How can I use my funds?
Among other things, SBEL funds can be used for rent or mortgage payments, payroll for current employees and working capital. The loan must not be used to refinance debt that existed at the time of the COVID-19 peacetime emergency declaration.
How do I apply?
To apply, a borrower must complete DEED’s application and submit it to one of 19 certified nonprofit lenders based on the county in which the business operates. All applicants must supply historical and projected financial information for the business, as well as a personal financial statement for each owner who holds at least a 20% interest in the business. Lenders may ask for additional information required to process the loan, including permission to pull credit reports, after the initial application is submitted. Funds are disbursed to lenders on a project-by-project basis after the DEED Commissioner approves the loan as recommended by lenders.
