Businesses
Businesses interested in a loan may apply with an approved lender. DEED does not make direct loans through the program and is not responsible for lender credit decisions. An interactive directory is located on the Lender Directory tab.
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.
Lenders
All loans enrolled in the program are subject to the lender's master contract with DEED and U.S. Treasury guidelines. 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%. 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. See FAQs for SEDI definitions.
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.
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.
Enrollment Requirements and Limitations on Loan Terms
- 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.
Please review the list of Frequently Asked Questions available under the FAQs tab for answers to common questions about the program.
Lender Directory
Businesses must apply directly with an approved lender. Once the lender approves the loan, they will forward the loan package to DEED for approval under the program.
Approved Lenders
There are a number of approved nonprofit lenders participating in the Small Business Loan Participation Program. These lenders serve different communities and areas of the state. They may have additional limitations, including loan size available and target populations served.
Use the Interactive Lender Directory to find a lender that meets your needs. This page will open in a new tab. (Note: the directory also contains information for lenders participating in the state-funded Emerging Entrepreneur Loan Program.)
Tips on navigating the directory:
- Lenders can be filtered by County, Language or Program using the dropdown menus.
- Lenders can be sorted by City or Focus by clicking on those column headers.
- Use the scroll bar next to the lender contact info to scroll through the complete list of lenders.
For More Information
For questions or a referral to an appropriate certified partner, contact the SSBCI team at LoanParticipation.DEED@state.mn.us.
FAQs
Can a business apply directly to DEED for a loan through this program?
No, the loans are made by enrolled lenders and loans are not available directly from DEED through this program.
What kind of information does 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 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?
The following are not eligible to access SSBCI-supported financing:
- 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.
Does the program set a maximum term for enrolled loans?
Yes. Lines of credit that are enrolled in the program may only be renewed for a period up to three (3) years. Term loans enrolled in the program cannot have a term longer than ten (10) years.
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, certain percentages of the property 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.
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?
Lenders are expected to use a source of private capital to make loans that are enrolled in the program. Lenders should supply information about the source of capital for the loan.
How does SSBCI define Socially and Economically Disadvantaged Individuals (SEDI)?
SEDI-owned businesses include the following:
- business enterprises that certify that they are owned and controlled by individuals who have had their access to credit on reasonable terms diminished as compared to others in comparable economic circumstances, due to their:
- membership of a group that has been subjected to racial or ethnic prejudice or cultural bias within American society;
- gender;
- veteran status;
- limited English proficiency;
- disability;
- long-term residence in an environment isolated from the mainstream of American society;
- membership of a federally or state-recognized Indian Tribe;
- long-term residence in a rural community;
- residence in a U.S. territory;
- residence in a community undergoing economic transitions (including communities impacted by the shift towards a net-zero economy or deindustrialization); or
- membership of an underserved community (see Executive Order 13985, under which "underserved communities" are populations sharing a particular characteristic, as well as geographic communities, that have been systematically denied a full opportunity to participate in aspects of economic, social, and civic life, as exemplified by the list in the definition of "equity," and "equity" is consistent and systematic fair, just, and impartial treatment of all individuals, including individuals who belong to underserved communities that have been denied such treatment, such as Black, Latino, and Indigenous and Native American persons, Asian Americans and Pacific Islanders and other persons of color; members of religious minorities; lesbian, gay, bisexual, transgender, and queer (LGBTQ+) persons; persons with disabilities; persons who live in rural areas; and persons otherwise adversely affected by persistent poverty or inequality);
- business enterprises that certify that they are owned and controlled by individuals whose residences are in CDFI Investment Areas, as defined in 12 CFR 1805.201(b)(3)(ii);
- business enterprises that certify that they will operate a location in a CDFI Investment Area, as defined in 12 CFR 1805.201(b)(3)(ii); or
- business enterprises that are located in CDFI Investment Areas, as defined in 12 CFR 1805.201(b)(3)(ii).
