Automation Loan Participation Program

DEED is now accepting applications from businesses seeking financing from the program.

The Automation Loan Participation Program (ALPP) makes companion loans intended to fill gap financing needs for businesses purchasing machinery, equipment, or software to increase productivity and automation. Loans need to be made in conjunction with private financing, typically a bank, in an amount at least equal to the DEED loan. Loans may be up to $500,000 with 1% interest on a 5 to 7-year term.

Eligible borrowers include manufacturing, distribution, technology and warehousing businesses located in Minnesota. The program targets businesses with fewer than 500 employees.

The program is part of the State Small Business Credit Initiative (SSBCI) funding from the U.S. Department of the Treasury and is subject to SSBCI rules.

Loan Terms
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FAQs

Loan Terms

Companion loans from DEED must be matched at least 1:1 by private financing. Both the ALPP loan and the private financing must be used for machinery, equipment or software to increase productivity and automation.

Regardless of the terms of the other private financing, the ALPP loan will have the following terms:
- Loan amount up to $500,000
- 1% interest rate
- The term will be 5 to 7 years based on the life of the asset per the Internal Revenue Service MACRs tables.
- Payments may be deferred 6 to 12 months
- If requested by lead lender, DEED can take a subordinate position on collateral
Additional considerations:
- The loan may not be used for the same purpose as any federally guaranteed private financing being used for the project.
- The machinery, equipment or software the business will purchase totals less than $20,000,000.
Apply

Completed applications should be submitted to SSBCI.DEED@state.mn.us.

If an accessible version of the application is needed, please consult the SSBCI Unit team at SSBCI.DEED@state.mn.us or call John Endris at 651-259-7452.

Businesses need to meet the following criteria to apply for a loan.

Business type and loan purpose
- The business is in the manufacturing, distribution, technology or warehousing industry.
- The business has fewer than 750 employees.
- The business will be purchasing machinery, equipment, or software to increase productivity and automation.
- The machinery, equipment, or software has not been purchased.
- The machinery, equipment or software will be used in a facility located in Minnesota.
Lead lender requirements
- A lead lender (e.g. bank) has been identified as the primary source of financing.
- Lead lender financing has not closed.
- The lead lender agrees to cooperate with DEED and the business consents to the lead lender sharing information with DEED.
Additional requirements
- There is a gap financing need and the business cannot obtain all required financing through the lead lender.
- The business agrees to provide collateral.
- Business owners agree to guarantee the loan.
- The business agrees to comply with U.S. Treasury SSBCI guidelines, including signed certifications regarding use of proceeds, conflict of interest, and that no principal of the business is a sex offender.
- The business agrees to supply required information for SSBCI reporting purposes.
FAQs

Does owner equity meet the 1:1 private financing requirement?

No. The 1:1 private financing match should be made in the form of a term loan from a qualified financial institution.

Can I use the loan to refinance existing debt?

No. Loan funds may be used solely for the purpose of purchasing machinery, equipment, or software to increase productivity and automation.

Are there additional restrictions for these funds?

Yes. Per 12 USC 5704(e)(7)(A)(i)(II) the loan proceeds cannot be used to:
- Repay delinquent federal or state income taxes unless the eligible business (as defined by SSBCI Policy Guidelines) has a payment plan in place with the relevant taxing authority; or
- Repay taxes held in trust or escrow, e.g., payroll or sales taxes;
- Reimburse funds owed to any owner for startup costs, including any additional equity injection for business continuance; or to purchase any portion of the ownership interest of any owner; or to buy out ownership shares of any limited or general partners;
- Purchase any portion of the ownership interest of any owner of the business, except for the purchase of an interest in an employee stock ownership plan qualifying under Section 401 of Internal Revenue Code, worker cooperative, or related vehicle, provided that the transaction results in the employee stock ownership plan or other employee-owned entity holding a majority interest (on a fully diluted basis) in the business.
- Refinance existing or new debt as a result of the project.
How is automation defined?

Automation Technology - Automation technology is a process or procedure performed with minimal human assistance. Automation or automatic control is the use of various control systems for operating equipment such as machinery, processes in factories or other applications with minimal or reduced human intervention. Adoption, implementation and utilization of any one of three types of automation in production are acceptable for consideration of this program, including, (1) fixed automation, (2) programmable automation, and (3) flexible automation. These are further defined as:
1. Fixed Automation - also known as "hard automation," refers to an automated production facility in which the sequence of processing operations is fixed by the equipment configuration. In effect, the programmed commands are contained in the machines in the form of cams, gears, wiring, and other hardware that is not easily changed over from one product style to another. This form of automation is characterized by high initial investment and high production rates. It is therefore suitable for products that are made in large volumes.
2. Programmable Automation - is a form of automation for producing products in batches. The products are made in batch quantities ranging from several dozen to several thousand units at a time. For each new batch, the production equipment must be reprogrammed and changed over to accommodate the new product style. This reprogramming and changeover take time to accomplish, and there is a period of nonproductive time followed by a production run for each new batch.
3. Flexible Automation - is an extension of programmable automation. In flexible automation, the variety of products is sufficiently limited so that the changeover of the equipment can be done very quickly and automatically. The reprogramming of the equipment in flexible automation is done off-line; that is, the programming is accomplished at a computer terminal without using the production equipment itself.