Category: Business Finance Options
Loan Criteria and Definitions
Eligible businesses may be either start-ups or expansion projects. The type of businesses include, but are not limited to, those engaged in:
- Technologically innovative industries
- Value added manufacturing
- Information industries
- Agricultural marketing
Loan funds are NOT available for the following following activities or businesses:
- Agricultural production (crop or livestock)
- Companies relocating within Minnesota
- Loans to city or governmental units
- Development Corporations
- Projects for which market rate financing is available from other sources
- Projects that cannot demonstrate a reasonable chance of success
- 2. Loan Interest and Terms:
- Interest rate will be fixed at 7%
- Maximum SWMF IRP loan is $150,000
- SWMF loans cannot exceed 50% of the total project cost. (Refer to Private Investment requirement for additional information.)
- The loan may have up to a 15 year term, depending on collateral. The payments may be amortized up to 15 years depending on the use of the funds and analysis of repayment capability.
- The SWMF IRP Program prefers to have a shared 1~ position interest on collateral.
3. Grassroots Support:
A business applying for a loan must show community support by obtaining a resolution of support from its local governmental unit. This resolution need not be obtained for the submission of the enclosed preliminary application. Obtaining such a resolution is generally an easy process; please call the SWMF if you have questions about the process. Applicants strengthen their request whenever other evidence of local community support is provided.
4. Eligible Uses of Loan Funds:
All costs demonstrated as essential for the project, including working capital, machinery and equipment, and land and building acquisition and renovation are eligible for a loan. Generally, funds for refinancing existing debts are ineligible.
5. Private Investment:
An approved loan from the SWMF must be matched by at least an equal or greater amount of new private funds invested or loaned to the company. To serve as a bonafide match, these private funds cannot be existing debt or equity dollars from prior financing. These dollars generally include equity or private lender financing.
6. Job Creation:
As a general requirement, the SWMF prefers that one job be created for every $15,000 of its loan proceeds. The jobs should principally benefit low-income people by providing full time employment for them. Generally, businesses that have applied to the SWMF, and that fit the other eligibility requirements, have easily met these job creation requirements.
7. Financing Gap:
Loans can only be made to businesses that can substantiate a financing need due to the following condition:
- Inadequate private lender financing
- Inadequate equity by the owners of the business
- Inability to pay market interest rates or term requirements
8. Business Planning:
A business must have some expertise in or should have assistance with product development, marketing, and management If assistance is needed, applicants can find support from available business development professionals such as the state's business finance specialist, regional development commission staff, community development personnel, or small business development consultants. Contact the SWMF it you are unsure about how to access these resources.