Minnesota Loan Guarantee Program

Businesses

Businesses seeking loans through the program apply through lenders that are enrolled in the program. Use our interactive directory to find a lender; this page will open in a new window. The directory will be updated as new lenders are added.

Tips on navigating the directory:

• Lenders can be filtered by Region Served, Language or Services Offered using the dropdown menus.
• Lenders can be sorted by City by clicking on that column header.
• Use the scroll bar next to the lender contact info to scroll through the complete list of lenders.

DEED does not make direct loans through the program and is not responsible for lender credit decisions.

Each lender uses its own established application and underwriting processes. The lender you choose will provide instructions on how to apply for a loan. Lending decisions will be based on the lender's underwriting and loan evaluation criteria and are at the sole discretion of the lender. The rate, term, and collateral requirements will be set by the lender's policies.

Eligible borrowers need to be located in Minnesota and have fewer than 500 employees. The loan must be used for eligible business purposes. The lender will request that the business certify it is compliant with SSBCI terms, including use of proceeds, that no conflict of interest exists, that no principal of the business has been convicted of a sex offense, whether the business is owned and controlled by one or more Socially and Economically Disadvantaged Individuals. The lender will also request certain demographic data for all individuals who own at least 25% of the business.

Additional details about eligible business types and use of loan proceeds, as well as answers to other common questions about the program, are available in the list of Frequently Asked Questions under the FAQs tab.

Lender Enrollment

To begin enrolling loans in the guarantee program, lenders first complete the lender enrollment application. The following entities are eligible to participate as lenders in the program:

• Banks
• Credit Unions
• CDFI Loan Funds
• Other private nonprofit economic development lenders located in Minnesota.

All lenders need to have existing lending programs for small businesses, as well as a lending staff with an average at least three years of active lending experience. A lender must be able to demonstrate that it has the commercial lending experience and financial and managerial capacity to participate in the SSBCI program.

Lender Application Forms

Please download the appropriate lender application below. Once downloaded, lenders should be able to save and electronically sign the completed application.

• Depository Lender Enrollment Application
• Non-Depository CDFI and Nonprofit Lender Enrollment Application

Please see the list of Frequently Asked Questions available under the FAQ tab for answers to common questions about the program.

Lender Enrollment Applications and any questions about the program may be sent to the SSBCI Unit team at MNGuarantee.DEED@state.mn.us.

Loan Enrollment

Upon approval to participate, a lender may submit loans for enrollment in the program using a Loan Enrollment Application. Each Enrolled Lender's primary program contact has access to the Loan Enrollment Application form. A separate application must be submitted for each loan. Guarantees are approved on a first come, first served basis. All loans must meet SSBCI requirements.

In order to request enrollment, the lender will provide DEED with the enrollment application, its completed credit summary, and supporting documentation for the underwriting and proposed uses.

Loans should be enrolled in the program and the lender should enter into a Loan Enrollment Agreement with DEED prior to closing the loan. Loans closed prior to DEED approval and contracting are ineligible. Once enrolled, the lender uses its own capital to fund the loan from a private source of capital. DEED will only transfer funds to the lender in the event of a default.

Guarantee Overview

The program will guarantee 80% of the loan principal up to $800,000. A lender may make a loan that is larger than $1 million, but DEED will cap the guarantee amount at the program maximum. If any portion of the loan will not be retained by the lender, that portion will be excluded from the guarantee calculation. The guarantee amount remains at 80% of the outstanding principal balance, not to exceed $800,000, for the term of the guarantee. DEED's exposure to a single borrower may not exceed the maximum guarantee amount even if multiple loans are issued.

The term of the guarantee for a term loan will typically be for the lesser of the term of the loan or ten years. Lines of credit may be enrolled in the program and will be guaranteed for no more than three years, typically an initial one-year period plus up to two annual renewals. The program design contemplates lenders following industry standards tying the loan term to the loan purpose or the life of the asset being financed. To allow for flexibility while complying with the approved program design, DEED may limit the guarantee term to fit the loan purpose or life of the asset if the lender has chosen to provide a longer term and/or amortization.

A guarantee fee equal to 2% of the amount of the guarantee is due within 30 days of loan closing unless the business qualifies as either 1) Socially and Economically Disadvantaged Individuals (SEDI)-owned, or 2) the loan term is less than one year. To qualify as SEDI, borrowers must either self-certify that they meet one or more of the qualifying SEDI characteristics or that their residence or business location is in a qualified CDFI Investment Area.

Enrollment Requirements and Limitations on Loan Terms

Loan terms such as rate, term and collateral requirements are determined by the lender subject to compliance SSBCI guidelines, including those listed below. Loans should also comply with the lender's loan policies or requirements set forth by lender's regulators. DEED reviews all enrollment requests and lender underwriting to determine whether the proposed loan meets DEED risk requirements. Requesting enrollment does not guarantee approval.

• The interest rate may not exceed the NCUA rate cap;
• Application, origination, document preparation and similar fees may not exceed 2% of the loan value;
• Certification regarding the use of proceeds of the loan and that the lead lender does not have a conflict of interest;
• The loan terms may not include any prepayment penalty;
• The loan terms may not include any confessions of judgment;
• If the loan includes multiple uses, each must qualify under the definition of an eligible business purpose;
• The loan may not be closed prior to approval and encumbrance of funds by DEED;
• The lender may not refinance debt currently held by itself or an affiliate;
• Refinance of debt by a third-party creditor must demonstrably benefit the borrower and may not include any personal or credit card debt previously incurred by the borrower or business owners;
• Loans that are enrolled in the program may not be for the same purpose as any federally guaranteed private financing, including loans made through the SBA 7(a), SBA 504, Community Advantage or USDA B&I programs. The unguaranteed portion of a loan guaranteed by an SBA or USDA program may not be guaranteed under this program.

Please review the list of Frequently Asked Questions available under the FAQs tab for answers to common questions about the program.

Loan Enrollment Applications and any questions about whether a specific loan may qualify for the program may be sent to the SSBCI Unit team at MNGuarantee.DEED@state.mn.us.

FAQs

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 a business 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 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. Collateral is required for all loans, although a shortfall may exist. Interest rates, fees and certain loan terms are subject to SSBCI restrictions.

What kind of businesses can apply for loans through this program?

Eligible borrowers include small business located in Minnesota with preferably fewer than 500 and no more than 750 employees, including any parent company and all locations. Borrowers may 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?

The following are not eligible to access SSBCI-supported financing:

• 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.

What can the loan 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 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.

Can the loan be used for real estate?

Loan proceeds may be used for real estate with certain limitations. Depending on the ownership structure of the real estate, there are certain percentages of the property that must be occupied by the small business. Any real estate owned by a holding company must lease the entire property to an affiliated operating company. Funds may not be used for passive real estate.

What is considered passive real estate?

Loan proceeds are used for passive real estate investment purposes when the proceeds of the loan are used to invest in real estate acquired and held primarily for sale, lease, or investment. Passive real estate investment includes most real estate development (including construction) in which the developer does not intend to occupy or actively use the resulting real property.

A passive company such as a holding company that acquires real property using an SSBCI-supported loan may have an eligible business purpose where 100 percent of the rentable property is leased to the passive company's affiliated operating companies that are actively involved in conducting business operations. To meet this exception, the following criteria must also be met:

• The passive company must be an eligible small business using the SSBCI guidelines' affiliate and employee definitions;
• The operating company must be subject to the same sublease restrictions as the owner affiliate;
• The operating company must be a guarantor or co-borrower on the SSBCI-supported loan to the eligible passive company;
• Both the passive company and the operating company must execute SSBCI borrower use-of-proceeds certifications and sex-offender certifications covering all principals;
• Each natural person holding an ownership interest constituting at least 20 percent of either the passive company or the operating company must provide a personal guarantee for the SSBCI-supported loan; and
• The passive company and the operating company have a written lease with a term at least equal to the term of the SSBCI-supported loan (which may include options to renew exercisable solely by the operating company).

What restrictions exist for the use of the loan?

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.

Is any reporting required from the business?

In addition to any information required by the lender, the business will need to provide data that will be reported to U.S. Treasury, including revenue, net income, and job creation for each year the loan is outstanding. Lenders are required to report quarterly on loan performance.

Is the guarantee fee included in the fee cap?

No. The 2% fee cap includes all fees charged for application, origination, document preparation and similar fees charged at origination. The cap does not include the .25% guarantee fee.

What type of contract is required for each transaction?

Lenders will receive and sign a Loan Enrollment Agreement for each loan prior to loan close. The agreement lists all SSBCI terms and conditions and details on what to do to request a guarantee on a loan default.

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 must use private capital for the loan and may need to supply additional information about the source of capital.

How does DEED manage defaults and claims 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. The guarantee payment amount will be equal to 80% of the outstanding loan principal, not to exceed $800,000.

How long will this program be available?

The program will be available until funds are exhausted or until SSBCI 2.0 sunsets. Funds will revolve during the course of the program as enrolled loans are repaid.