As a small business owner, recovering from the pandemic can take time. To help small business owners get through this time, the State Small Business Credit Initiative (SSBCI) is distributing $10 billion in funding across all 50 states and territories in the United States. States are opening programs one at a time, and now it’s Minnesota’s turn.
Minnesota has $97M in SSBCI funding to distribute. While some states distribute funding directly to business owners, Minnesota has elected to distribute funding to lenders. The Minnesota Loan Guarantee Program (MNLGP) will provide guarantees to enrolled lenders for up to 80% of the principal on loans to eligible businesses. This will help Minnesota lenders mitigate risk; that way, they can increase capital given to small businesses.
This means that small business owners will have to go through an enrolled lender to obtain funding.
What kinds of funding can Minnesota businesses receive?
Each state distributes SSBCI funding in its own way, mainly through loan, equity, or venture capital programs. In Minnesota, small businesses will apply for funding primarily through loan programs – though there are venture capital options for start-ups.
Here is what you will see:
Loan Participation Program: This structure allows the state to provide direct lending to small businesses by working with lending companies such as certified economic development organizations.
Which SSBCI programs are open now in Minnesota?
Small business owners in Minnesota can apply for SSBCI funding through their enrolled lenders. Here are the different loan programs:
Growth Loan Fund: These loans are intended to foster business growth. They are for early-stage businesses that have raised less than $250,000 to date.
Later-stage businesses can also apply if they have not started raising Series A funding.
Small Business Loan Participation Program: This program serves small businesses. Participations will range from $10,000 to $250,000.
Automation Loan Participation Program: This program serves Minnesota manufacturing, distribution, technology, and warehousing businesses with fewer than 500 employees. Businesses can receive loans up to $500,000 with a 5-to-7-year term and a 1% interest rate.
What businesses are eligible for SSBCI funding?
While each loan program will have its own eligibility requirements, here are some general guidelines to help you determine if your business is eligible for funding in Minnesota:
- Your business must be headquartered in Minnesota
- Your business must have fewer than 750 employees
- You must use your loan for eligible business purposes
What can the funding be spent on?
- Start-Up Costs
- Working Capital
- The purchase, construction, renovation, or tenant improvements of an eligible place of business
- The purchase of any tangible or intangible assets except goodwill
What CAN’T the funding be spent on?
- Projects with no bank involvement
- Passive real estate
- Speculative activities
- Pyramid sales
- Stock ownership
- Activities prohibited by Federal or State law
How to apply for SSBCI funding in Minnesota:
All loans – and lending decisions – come from enrolled lenders. This means that small business owners can only apply for SSBCI funding directly from the enrolled lender that they choose to work with. Lenders could be a bank, a credit union, or a community development financial institution.
The state of Minnesota has not released a list of enrolled lenders. Therefore, we recommend reaching out to the financial institutions you currently work with to find out if they are involved with distributing SSBCI funding.
Our Client Success Managers are also here to help you find a lender. You can book a personal consultation to receive the support you need.
Once you find a lender, the official process of applying for your loan can begin. The details of the process will likely vary from lender to lender, but no matter which institution you work with you should be prepared to provide documentation for your business. Make sure you have:
- a business plan
- your business tax returns from the last two years
- your personal tax returns
- business projections for the next five years
- a list of business liabilities
Common challenges in applying for SSBCI funding:
Since Minnesota has delegated the distribution of funds to enrolled lenders, this makes getting started on your application a bit more complicated. Finding an enrolled lender that’s aligned with your business may take some time and research.
Applying for loans can be tedious, and you must understand the terms of the loan being offered to you. Often, it’s helpful to have an objective third party offer insight and consultation. You can book a call with Our Client Success Managers to help you navigate your options.
Applying for SSBCI funding takes work, but it has the potential to pay off tremendously. Don’t let a lengthy process intimidate you into leaving money on the table. If you feel overwhelmed, know that you always have experts in your corner here at Skip.