By Harold Stanislawski
We’d like to make you aware of two programs, one proposed and one recently released by the Minnesota Department of Employment and Economic Development. The programs will be implemented through the State Small Business Credit Initiative, which uses federal funding to stimulate private-sector lending and improve access to capital for small businesses and manufacturers that are creditworthy but not getting the loans they need to expand and create jobs.
Early Stage Fund
The state proposes to use $1 million in SSBCI funds to provide additional investment in early stage businesses throughout Minnesota. These investments would be made alongside angel investment groups and angel investors.
The Early Stage Fund is intended to help accelerate the growth of companies seeking angel investments; accelerate private capital investment in Minnesota companies; help position companies to attract additional, later stage investments; and provide angel investors additional capital to close investment rounds.
Eligibility for the funding is restricted to businesses with no more than 500 employees. Funds may be used for any business purpose, including, but not limited to: start-up costs, working capital, business procurement, franchise fees, equipment, inventory, as well as the purchase, construction, renovation, or tenant improvements of an eligible place of business. Projects that include passive real estate are only allowed on a limited basis as determined by U.S. Department of the Treasury guidelines. The maximum Early Stage Fund side-car contribution may be between $25,000 and $150,000.
Qualified investment entities accept applications on a rolling basis. Application forms and procedures vary by investor. Interest rates and terms are negotiated between borrower and investment entity. Businesses should apply with participating Investment Entities. DEED is notified of all investments approved to ensure that all program guidelines are followed.
There is currently a request for proposals issued to solicit investment entities for this program. Once the process is completed, a list of qualified investment entities will be provided.
Emerging Entrepreneurs Fund
The Emerging Entrepreneurs Fund primarily supports micro-enterprises and small businesses with fewer than 50 employees, targeting minority- and women-owned businesses and those located in economically distressed areas. Distressed areas are measured by population loss, higher than statewide average unemployment rate, and lower than statewide median household income.
EEF funds may be used for start-up costs, working capital, business procurement, franchise fees, equipment, inventory, as well as the purchase, construction renovation, or tenant improvements of an eligible place of business that is not for passive real estate investment. Projects that include passive real estate are only allowed on a limited basis as determined by U.S. Department of the Treasury guidelines. Financing of existing debt is not permitted. Funds may total up to $150,000 per loan and must be matched on at least a one-to-one basis. Participating lenders are encouraged to structure loan proposals to achieve at least a five-to-one leverage of program funds. Each qualified program lender has authority to determine interest rates and collateral requirements within program guidelines.
Qualified lenders accept applications on a rolling basis. Application forms and procedures vary by lender. Businesses should apply with participating lenders. DEED is notified of all loans approved to ensure that all program guidelines are followed.
It’s good to see programs for entrepreneurs being implemented and we encourage entrepreneurs to give these tools a closer look. Additional information about both programs is available at www.positivelyminnesota.com/ssbci.
Reprinted with permission. Originally appeared in Prairie Business Magazine.