Lenders
Interested lenders will find the RFP on DEED's Competitive Grants and Contracts page. Criteria for lender eligibility and additional program details are outlined in the RFP.
No loans may be enrolled in the program prior to lender approval and contract execution. DEED will provide required program enrollment documents to each approved lender. Loan participations are approved on a first come, first served basis. All loans must meet SSBCI requirements.
Most purchased participations will be for 25% of the originated loan principal. Loans to business that qualify under the SSBCI definition of Socially and Economically Disadvantaged Individuals (SEDI) will qualify for a purchased participation of 30%.
The minimum purchased participation is $10,000. The maximum purchased participation is $250,000. A lender may make a loan larger than the amount required to reach the maximum purchase participation, but DEED will only purchase up to $250,000. DEED's exposure to a single borrower may not exceed the maximum purchase participation amount even if multiple loans are issued.
Please review the list of Frequently Asked Questions available under the FAQs tab for answers to common questions about the program.
FAQs
For Businesses
When will lender contact information be available?
As this is a new program, DEED must first enroll lenders who apply. We expect to approve lenders in January 2023 and will post a lender directory at that time.
What kind of businesses can apply for loans through this program?
Borrowers need to be small businesses located in Minnesota that have fewer than 500 employees. Eligible 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?
Businesses engaged in speculative activities that profit from fluctuations in price are not eligible to participate in the program. This includes 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. Other types of businesses that are not eligible for the program include:
- 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 the loans. However, the number of existing employees will be requested during application and the business will be required to report on jobs created.
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.
For Lenders
Will DEED purchase a participation in a loan that has already been made?
No. Loans cannot be closed prior to DEED approval to be eligible for a purchased participation under this program.
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.
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.
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.
Is private financing required to enroll a loan in the program?
Loans enrolled in the program must meet a minimum 4:1 of private financing to SSBCI funds (3:1 if a SEDI-owned business). Lenders will supply 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 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.
