This post is part of a series of posts designed to help you acquire a loan for your small business. The following posts cover methods for public financing of your small business
- Local MN Programs for Small Business Loans
- Minnesota Reservist and Veteran Business Loan Program
- Minnesota Small Business Loans: Urban Initiative Program
- Value-Added Producer Grants (VAPGs)
- Renewable Energy for America (REAP)
- Investment Companies and Microloans
- Certified Development Company Loans & 504 Loan Program
- Short-term Guaranteed Loans
- Regular Guaranteed Loans
Public Sources of Financing – State Programs
Under State legislation (Minn. Stat. sections 116J.993 to 116J.995), business receiving a “business subsidy” will be required, among other things, to enter into a “business subsidy agreement” that will include goals for wages and jobs to be offered and paid by that business. If those goals are not met within a certain period of time, in almost all cases the business will be required to repay the amount of the subsidy, plus interest.
Minnesota Department Of Employment And Economic Development
Minnesota Department of Employment and Economic Development 1st
National Bank Building, Suite E200
332 Minnesota St.
St. Paul, MN 55101-1351
Minnesota Investment Fund
Contact: Office of JOBZ and Business and Finance, Business and Community Development Division, Minnesota Department of Employment and Economic Development.
The purpose of the Minnesota Investment Fund is to assist expanding businesses in creating and retaining high quality jobs, with an emphasis on manufacturing, technology and professional services employment. Through this program, administered by the Business and Community Development division of DEED, funds are awarded to local units of government to help them create quality employment opportunities and assist with business expansions. Businesses receiving assistance under this program from those local units of government are required to meet job creation and wage goals.
Funds for the Minnesota Investment Fund originate from two sources. The first source is a portion of the federally-funded Small Cities Development Program; the second source of funds is the state’s Minnesota Investment Fund appropriation, authorized by the Minnesota legislature.
This program is not intended to substitute for conventional business financing techniques, nor should it be used in place of programs, such as local revolving loan funds and the Small Business Administration programs described elsewhere in this Guide, which may be better suited to meet specific project needs. Instead, funds from this program are intended to be used in situations in which a funding gap exists and alternative sources of public and private financing are not adequate.
Grants are awarded to local governments which, in turn, make loans for specific business projects. Those loans may be used to finance building construction or renovation, property acquisition or equipment or infrastructure improvements necessary to support businesses located or intending to locate in Minnesota. A local unit of government may receive up to $1 million in economic development grants per state fiscal year.
The first step in accessing a Minnesota Investment Fund grant is for the local unit of government to submit a preliminary inquiry with the office of JOBZ and Business Finance Business and Community Development application to DEED. The applicant and the business may meet with the appropriate loan officer at DEED to further discuss the proposal. If the project meets the program criteria, a final application package is given to the local unit of government to complete. Some of the items that must be included in the final application are:
- A project description and cost breakdown along with a description of the use of funds and jobs to be created.
- For an existing firm, financial statements for the previous three years plus three years of financialprojections.
- For a proposed business, a business plan, including three years of financial projections.
- Resumes and personal financial statements of all principals of the business.
- Marketing and management plan.
- Sources of equity and other private financing. (Generally there must be $3 or $4 of private financing for every $1 of state assistance requested.)
- Letters of commitment from all financial participants.
- Resolution of application from the local unit of government.
- Public hearing minutes.
Applications may be submitted anytime.
Loan repayment terms are negotiated between the applicant and the business and are approved by DEED. If state funds are used, the unit of government may keep up to 20% but not more than $100,000 of principal repayment and all accrued interest to reuse on future economic development projects. Where federal money is the source of the grant, all repayment proceeds may be kept by the unit of government for use in future economic development activities.
CREDITS: This is an excerpt from A Guide to Starting a Business in Minnesota, provided by the Minnesota Department of Employment and Economic Development, Small Business Assistance Office, Twenty-eighth Edition, January 2010, written by Charles A. Schaffer, Madeline Harris, and Mark Simmer. Copies are available without charge from the Minnesota Department of Employment and Economic Development, Small Business Assistance Office.