Can a business 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.
What kind of information will I need to provide to apply for a loan?
Each lender will use 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?
Borrowers need to be Minnesota-headquartered businesses with fewer than 750 employees. Borrowers include state-designated charitable, religious, or other non-profit or philanthropic institutions; government-owned corporations; consumer and marketing cooperatives; and faith-based organizations, provided the loan is for a "business purpose" as defined by SSBCI 2.0 guidelines. Borrowers may also include sole proprietors, independent contractors, worker cooperatives, and other employee-owned entities, as well as Tribal enterprises, provided that all applicable program requirements are satisfied.
What type of businesses are prohibited?
A business engaged in speculative activities that profit from fluctuations in price, such as wildcatting for oil and dealing in commodities futures, unless those activities are incidental to the regular activities of the business and part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business or through the normal course of trade.
- A business that earns more than half of its annual net revenue from lending activities, unless the business is (1) a CDFI that is not a depository institution or a bank holding company, or (2) a Tribal enterprise lender that is not a depository institution or a bank holding company;
- 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, if permitted by federal law, applicable law in the jurisdiction where the business is located or conducted (this includes businesses that make, sell, service, or distribute products or services used in connection with illegal activity, unless such use can be shown to be completely outside of the business's intended market); this category of businesses includes direct and indirect marijuana or other THC-related businesses;
- A business deriving more than one-third of gross annual revenue from legal gambling activities.
Do borrowers have to create jobs for a loan?
No, there are no job creation requirements for guaranteed loans. However, the number of existing employees will be requested during application.
What can the funds be used for?
Allowable loan uses include startup costs, working capital, equipment, inventory, the purchase, construction, renovation, or tenant improvements of an eligible place of business that is not for passive real estate investment purposes, and the purchase any tangible or intangible assets except goodwill. All uses must be exclusively for Minnesota operations.
Can the funds be used for building renovation or build-out costs?
Funding may be used to support commercial real estate transactions for owner-occupied spaces or leasehold improvements. Enrolled loans may not be used for passive real estate.
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 may not be used for goodwill related to business acquisitions.
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.
What type of lenders are eligible to enroll in this program?
Banks, credit unions, CDFIs and other nonprofit lenders throughout the state are eligible to be a qualified lender and participate in the program. DEED will require an interested lender to demonstrate that it has the commercial lending experience and financial and managerial capacity to participate in the SSBCI program.
Can I request a guarantee on a loan I have already made?
No. Loans cannot be closed prior to DEED approval to be eligible for a guarantee under this program.
Is there a fee for enrolling loans?
Yes. There is a fee of .25% based on the 80% guarantee amount that is due at the time of closing. This fee is waived for qualified SEDI-Owned businesses and for loans with a term of less than 12 months.
How does the lender determine if the business is SEDI-Owned?
The loan enrollment application includes a self-certification form for SEDI-owned businesses to complete.
Will lenders receive an official contract for enrolled loans?
Yes. Lenders will receive and sign a Loan Enrollment Agreement for each loan; it list all SSBCI terms and conditions and details on what to do to request a guarantee on a loan default.
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, although lenders must follow the standard guidelines provided by SSBCI through the Treasury. Lenders must also comply with other lending standards set by their regulators or loan policies.
Are there limits on loan fees?
SSBCI limits fees on a loan to 2% of the principal for loans greater than $25,000 or $500 for loans under $25,000. The fee limit is based on SBA’s closing fee limit with details in 13 CFR 107.860(c). The program guarantee fee is not included in the 2% cap.
Can I sell a loan that I have enrolled in the program?
Loans enrolled in the program may not be sold.
Can this program be combined with other federal programs?
Loans that are enrolled in the program may not also be covered by any SBA or USDA guarantee program. The unguaranteed portion of a loan guaranteed by an SBA or USDA program may not be guaranteed under this program.
What is the maximum guarantee amount per borrower?
No borrower will be approved for a guarantee in excess of $800,000 regardless of whether multiple loans are issued.
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 long 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?
All SSBCI transactions require a minimum 1:1 ratio of private financing to SSBCI funds. The loan being enrolled in the program meets SSBCI private financing requirements. Nonprofit lenders may need to supply additional information about the source of capital for the loan.
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. However, job numbers will be tracked for Treasury reporting.
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.
Can a loan be refinanced and enrolled in the program?
Most loans that are being refinanced, whether by the same lender or a different lender, will not qualify under SSBCI rules. See Lender Assurances: Refinancing and New Extensions of Credit in the SSBCI Capital Program Policy Guidelines or inquire with DEED staff regarding specific circumstances.
Will enrolling a loan in this program trigger State Prevailing Wage requirements for a construction project?
No, State Prevailing Wage Requirements do not apply to SSBCI.
What do I do if I have a loan that defaults under the program?
Lenders must report defaults with their quarterly reporting to DEED. Lenders must manage the collection process in accordance with their policies and exhaust collections efforts prior to filing a guarantee claim. Guarantee claims must be submitted in writing and should include collection activity details, approval from the appropriate governing entity of the lender to write off balances and loan ledger activity.
How long will this program be available?
The program will be available until funds are exhausted or September 30, 2030, when SSBCI 2.0 sunsets.