Minnesota Offers Interest-Free Loans to Business Startups

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Minnesota Offers 0% Interest Loans to Startups

The State of Minnesota’s Angel Loan Fund offers interest-free loans to startup businesses in Minnesota.

If you start a new business in Minnesota, you can apply for an interest-free loan through a new Minnesota program. The Angel Loan Fund is a government project offering small businesses a loan for seven years at a 0% interest rate.

How Can the Angel Loan Fund Money be Used?

The loan can be used for start-up costs, working capital, business acquisitions and expansions, franchise financing, equipment loans, inventory financing, construction, and commercial, non-passive real estate acquisitions.

What’s the Catch?

The loan is limited to 10% of the amount of equity invested in your business. For example, a startup with $1 million in investment funds from the owners could seek $100,000 from the Angel Loan Fund. The loan minimum is $20,000 and the maximum loan amount is $250,000.

Also, one of the business owners must be certified by the MN Angel Tax Credit Program and qualified as an Accredited Investor.

How Do You Apply for a Loan?

To apply for a 0% interest loan through the Angel Loan Fund, contact the Minnesota Department of Employment and Economic Development (DEED).

DEED provided this summary of the Angel Loan Fund program:

Program Purpose: To support entrepreneurial growth throughout Minnesota by offering attractive funding for early-stage businesses.
How it Works: The ALF is designed as a direct loan for 10% of the total amount of equity investment received in the business’ approved funding round subsequent to ALF approval. Only one loan may be issued to each business for the duration of the ALF. At least one equity investment must be made by an investor that is both certified by the MN Angel Tax Credit Program and qualified as an Accredited Investor per the U.S. Securities and Exchange Commission under Rule 501 of Regulation D. However, the total equity investment attained for the round is not exclusive to investments made to meet the requirements of the Angel Tax Credit Program.
Eligible Applicants: Businesses certified to participate in the Angel Tax Credit Program during any of the program years with fewer than 500 employees.
Eligible Uses of Funds: Funds may be used for start-up costs, working capital, business acquisitions and expansions, franchise financing, equipment loans, inventory financing, construction, and commercial, non-passive real estate acquisitions.
Maximum Available: 10% of equity raised after program enrollment; $20,000 minimum loan amount, $250,000 maximum
Interest Rate/Terms: 0% interest, 7 year term, non-recourse, deferred, with a balloon. If the business is sold during the term, business will submit risk mitigation fee compensation equal to 30% of the original loan principal.
Application Process: Businesses must apply for enrollment in the ALF and submit the ALF Business Enrollment Application along with required supporting documentation.
Website: www.mn.gov/deed/ssbci
Contact: Lisa Dargis, Angel Loan Fund
MN Department of Employment and Economic Development (DEED)
Phone: 651-259-7446 or 800-657-3858
E-Mail: Lisa.Dargis@state.mn.us