FAQs
For Businesses
Can I apply directly to DEED for a loan through this program?
No, the guarantee provides coverage for loans made by enrolled lenders and loans are not available directly from DEED through this program.
When will lender contact information be available?
As this is a new program, DEED must enroll lenders who apply and we will expedite that process as much as we are able, a date is not available at this time. Please keep checking this site for updates.
What kind of information will I need to provide to apply for a loan?
Each lender will utilize their own established application and underwriting processes for loans. Please discuss the requirements with the lender that you choose and they will outline what is needed.
What kind of businesses can apply for loans through this program?
Minnesota businesses with less than the equivalent of 250 employees statewide.
What kind of businesses can not apply for loans through this program?
The following businesses would not be eligible:
- a business manufacturing, distributing, selling or conducting related activities of sexually explicit materials;
- a business that derives income from passive investments without operational ties to operating businesses;
- a business whose activities are primarily focused on speculative activities that develop profits from fluctuations in price rather than through the normal course of trade;
- a business that earns more than half of its annual net revenue from lending activities;
- a business engaged in pyramid sales, where a participant's primary incentive is based on the sales made by an ever-increasing number of participants;
- a business engaged in activities that are prohibited by federal law or applicable law in the jurisdiction where the business is located or conducted; and
- a business engaged in gambling enterprises, unless the business earns less than 50% of its annual net revenue from lottery sales.
Do I have to create jobs for a loan?
No, there are no job creation requirements for SBLGP loans.
What can the funds be used for?
Allowable loan uses are machinery or equipment purchases, maintenance, or repair; expenses related to moving into or within Minnesota; and working capital when the working capital is secured by fixed assets when possible. All uses must be exclusively for Minnesota operations.
Can the funds be used for business acquisition and/or the purchase of land or building?
No, these uses were not approved by the legislature.
Can the funds be used for building renovation or build-out costs?
No, these uses were not approved by the Legislature.
Can the funds be used for business startup costs?
The funds can be used for some business startup costs like purchasing equipment or working capital, but they cannot be used for land or building acquisition, business acquisition, or building renovation/build-out as these uses are not eligible under the program.
What will the rate, term and collateral requirements be for the loan?
The rate, term, and collateral requirements will be set by each individual lender's policies.
For Lenders
What kind of lenders are eligible to utilize this program?
The following entities are eligible to participate as lenders in the program: a bank, or other commercial lender, a public entity, or a private nonprofit economic development organization whose headquarters is located in Minnesota. All must have at least three years of active lending experience and provide financing to small businesses.
How much will the guarantee be?
The program provides an 80% guarantee up to $200,000. The guarantee will adjust over the life of the loan and will never be for more than 80% of the outstanding principal of the loan. At no time shall total outstanding loan guarantees exceed five times the amount on deposit in the loan guarantee trust fund. If guarantee claims exceed the amount on deposit in the loan guarantee trust fund, claims will be paid in proportionate amount until exhausted. We are currently proposing that we will issue guarantees for no more than $25 million in loan guarantee balances which equates to a leverage ratio of 2.5:1 (or a 40% default rate) as we are funded at $10 million. We believe that level of guarantee should be good to provide everyone assurance that we have adequate coverage. The amount on deposit in the loan guarantee trust fund may be adjusted higher if increased coverage is indicated.
Can I get a guarantee on a loan I have already made?
No. Loans cannot be closed prior to DEED approval. If DEED approves a loan to be closed prior to loan enrollment, the loan closing must be contingent upon loan guarantee approval.
If there a fee for enrolling loans?
Yes, a fee of 0.25% of the loan principal is required for loan enrollment. For example, .25% x 100,000 loan ($80,000 guaranteed) = $250 loan enrollment fee.
Will lenders receive an official guarantee for enrolled loans?
Yes, all enrolled loans will require a Loan Enrollment Agreement executed by the State and the Lender outlining each party's responsibilities.
Does DEED determine the rate, term and collateral requirement for these loans?
DEED does not dictate the rate, term or collateral requirements for the loan.
Can I sell a loan that I have enrolled in the program?
No, in order to receive the guarantee all loans must be retained and serviced by the SBLGP originating lender.
Are lenders each allocated a certain amount of funding?
No, loans will be enrolled into the program on a first come, first-served basis as funds are available.
Does there have to be a matching loan or other financing provided to the borrower to enroll a loan in the program?
No, matching private financing is not required.
Are there job creation requirements or wage goals that must be met for loans enrolled in this program?
No, there are no job creation or wage requirements associated with enrolled loans.
Can I enroll an existing loan I made to the borrower into this program?
No, all enrollments must be for new lending transactions and cannot include any refinancing of existing financing between the lender and the borrower.
Are there any business types that are prohibited for this program?
The following businesses would not be eligible:
- businesses with greater than the equivalent of 250 employees statewide;
- a business manufacturing, distributing, selling or conducting related activities of sexually explicit materials;
- a business that derives income from passive investments without operational ties to operating businesses;
- a business whose activities are primarily focused on speculative activities that develop profits from fluctuations in price rather than through the normal course of trade;
- a business that earns more than half of its annual net revenue from lending activities;
- a business engaged in pyramid sales, where a participant's primary incentive is based on the sales made by an ever-increasing number of participants;
- a business engaged in activities that are prohibited by federal law or applicable law in the jurisdiction where the business is located or conducted; and
- a business engaged in gambling enterprises, unless the business earns less than 50% of its annual net revenue from lottery sales.
Will enrolling a loan in this program trigger State Prevailing Wage requirements for a construction project?
No, State Prevailing Wage Requirements are not triggered by the loan guarantee as the guarantee falls below the prevailing wage award threshold.
What do I do if I have a loan that defaults under the program?
Requirements will be outlined in the Loan Enrollment Agreement, but at a high level, lenders will exercise their customary default remedies for loans that are over 60 days delinquent. If no recovery or work out is possible after default remedies have been exhausted, the lender will submit a clam form to DEED for approval by the Commissioner. Once the claim is approved, funds will be disbursed to cover the loss as outlined in the Loan Enrollment Agreement.
How long will this program last?
Applications closed February 28, 2021. Applications for the Small Business Loan Guarantee Program are no longer being accepted.
