Minnesota Expanding Opportunity Fund Program

Eligible Applicants

The nonprofit corporation needs to meet the following eligibility criteria to apply for a loan:

• Have fewer than 100 full-time equivalent positions;
• Meet the statutory definition of a community development financial institution as defined in section 103 of the Riegle Community Development and Regulatory Improvement Act of 1994, U.S. Code Title 12, Sec. 4702;
• Be currently enrolled and actively participating in one or more eligible federally funded state programs.

Applicant should demonstrate the following:

• Has a board of directors or loan or credit committee that includes citizens experienced in small business services and community development;
• Has the technical skills to analyze small business loan requests;
• Is familiar with other available public and private funding sources and economic development programs;
• Has the administrative capacity to manage a loan portfolio.

Nonprofit corporations that receive loans under the program must establish appropriate accounting practices for the purpose of tracking eligible loans. The nonprofit corporation must cooperate with other organizations, including but not limited to community development corporations, community action agencies, and the Minnesota small business development centers.

All borrowers are required to provide annual reports to DEED by February 15 of each year.

For More Information

Contact Linda Asilo at 651-259-7686 or Linda.Asilo@state.mn.us.

Financing and Terms

The loan amount can be requested in increments of $100,000 up to $600,000. After the received funds have been exhausted, if funds are still available, the applicant may apply for additional loans in increments of $100,000 for an amount of up to $600,000.

Loan terms are 0.5% annual interest rate. Repayments will be annual, interest-only payments for 12 years and will coincide with reporting. In year 10, principal and interest are due such that 3 annual payments will be made to repay the principal balance in full by year twelve, the maturity date.

The maximum interest rate charged by a nonprofit corporation for a loan is Wall Street Journal prime rate plus two percent (2%) and the maximum closing fee is two percent (2%) of the loan value. The nonprofit corporation may retain all earnings from fees and interest from loans to small businesses.

Apply

Applications are no longer being accepted.

Application attachments must include:

• Most recent year of independent financial audit;
• IRS Tax Form 990;
• The organization's loan policies, procedures, and underwriting guidelines;
• The organization's current debt schedule and include the purpose of each loan. For example, "revolving loan capital" or "general operations."
• An Outreach Plan that includes how the organization will increase lending activities in Minnesota;
• A Board Resolution to borrow money from the Minnesota Expanding Opportunity Fund Program.

All applications will be evaluated by DEED staff members and recommendations will be forwarded to the commissioner of DEED who will make the final decision to approve applicants and amounts. Once the loans are approved, DEED and applicant will execute a Loan Agreement and Promissory Note. An applicant may request additional funding once initial funds have been exhausted, if more funds are available, and the applicant is approved for additional funds, there will be an Amendment to the Loan Agreement and Promissory Note.

Purpose of this Funding Opportunity

The Minnesota Expanding Opportunity Fund Program was established through Minnesota Session Laws 2023, Chap. 53, Sec. 116J.8733 to capitalize Minnesota nonprofit corporations to increase lending activities with Minnesota small businesses.

Eligibility

Any Minnesota nonprofit corporation currently enrolled and actively participating in one or more eligible federally funded state programs are eligible. The eligible nonprofit corporation cannot employ more than 100 full-time equivalent positions. It must not meet the definition of a Recipient under Minn. Stat. Sec. 116J.993 subd. 6. Applicants must meet the statutory definition of a community development financial institution as defined in section 103 of the Riegle Community Development and Regulatory Improvement Act of 1994, U.S. Code Title 12, Sec. 4702.

Available Funds

The total appropriation for this loan program is $10,000,000. This is a one-time appropriation and is available until June 30, 2025 or until all funds have been exhausted, whichever comes first. All loan requests must be made during this period to be eligible.

Program Requirements

Approval of this request does not guarantee a loan will be made. All loans are subject to the following provisions which must be satisfied prior to loan issuance:

1. Loan Amount: The loan amount can be requested in increments of $100,000 up to $600,000. After the received funds have been exhausted, the applicant may apply for additional loans in increments of $100,000 for an amount of up to $600,000.
2. Terms: Loan terms are 0.5% annual interest for 12 years. Interest payments will be due annually and will coincide with reporting. Principal payments are deferred until year 10. Starting in year 10, principal and interest are due such that 3 annual payments will be made to repay the principal balance in full by the maturity date.
3. Loan portfolio administration: The interest rate charged by a nonprofit corporation for a loan must not exceed the Wall Street Journal prime rate plus two percent. A nonprofit corporation participating in the Minnesota Expanding Opportunity Fund Program may charge a loan closing fee equal to or less than two percent of the loan value. The nonprofit corporation may retain all earnings from fees and interest from loans to small businesses.
4. Cooperation: A nonprofit corporation that receives a program loan shall cooperate with other organizations, including but not limited to community development corporations, community action agencies, and the Minnesota small business development centers.

Monitoring & Reporting Requirements

1. Submission of an annual report to the commissioner is due by February 15 of each year that includes:
2. The number of businesses to which a loan was made.
3. A description of businesses supported by the program.
4. Demographic information, as specified by the commissioner, regarding each borrower.
5. An account of loans made during the calendar year.
6. The program's impact on job creation and retention.
7. The source and amount of money collected and distributed by the program.
8. The program's assets and liabilities.
9. An explanation of administrative expenses.
10. Provide an independent annual audit to be performed in accordance with generally accepted accounting practices and auditing standards and submit a copy of each annual audit report to the commissioner.

Frequently Asked Questions

Who qualifies to receive a loan from the program?

Any Minnesota nonprofit organization that is currently and actively enrolled in federally funded state programs and qualifies as a CDFI as defined in the Riegle Act.

What are the minimum and maximum loan amounts?

The minimum loan amount is $100,000 and the maximum is $600,000. If the applicant exhausts their initial allocation, and funds are still available, the applicant may apply for additional loan funds increments of $100,000 up to $600,000.

What is the interest rate of loans under the program?

The nonprofit lender will set the terms of the loan, including the interest rate. The rate for loans under the program may not exceed the Wall Street prime rate plus two-percent 2% and the maximum closing/origination fee is two-percent (2%) of the loan amount.

Does each lender have unique criteria for deciding whether to make a loan through the program?

Yes. Each nonprofit lender will have its own criteria and guidelines for considering and approving a loan that is funded by the program.

What counts as a small business?

A Small Business is an organized, for-profit business with 500 or fewer employees.

How long does it take to receive the funds once an application is submitted?

Generally, the entire process from application to the disbursement of the loan may take up to six weeks.

What are the reporting requirements?

An annual report to the commissioner is due by February 15 of each year that includes:

1. The number of businesses to which a loan was made;
2. A description of businesses supported by the program, at a minimum the legal entity;
3. Demographic information, as specified by the commissioner, regarding each borrower;
4. An account of loans made during the calendar year;
5. The program's impact on job creation and retention;
6. The source and amount of money collected and distributed by the program;
7. The program's assets and liabilities;
8. An explanation of administrative expenses; and
9. An independent annual audit to be performed in accordance with generally accepted accounting practices and auditing standard