The Minnesota Department of Employment and Economic Development (DEED) on Monday rolled out a $25 million small business loan participation program.
It is the sixth and final funding stream the state has launched as part of its $97 million State Small Business Credit Initiative. The state is using federal stimulus dollars included in the American Rescue Plan to fund the initiative.
In the newest program, DEED says it will purchase 25% to 30% of loan participations made by community development financial institutions (CDFis) and nonprofit lenders. Participations are when an entity such as a bank shares a percentage of the risk of a loan.
Lenders must apply to be part of the program, with participants to be selected in the coming months. Small businesses can then apply for loans directly from the lenders enrolled in the program, which are responsible for all of the credit decisions and loan terms.
Those loan participations will range from $10,000 to $250,000.
“CDFis and nonprofit lenders provide critical financial lifelines to businesses operated by Minnesotans facing historical financial disadvantages, including people of color, women, veterans, and those in greater Minnesota,” DEED Commissioner Steve Grove said in a statement. “Through this program, DEED will help make loans to these businesses go even further, ensuring underserved entrepreneurs have the chance to build the next big thing in our state.”
To be eligible for the loan, businesses need to be based in Minnesota and have fewer than 500 employees.
The other new small-business funding streams that are part of the State Small Business Credit Initiative announced in recent weeks include programs for automation, startups, venture capital and lenders.