Finance Programs

The MATCH program is designed to encourage and attract financially strong companies to North Dakota. Through this program, BND will participate in loans to financially strong companies and provide some of the nation’s lowest interest rates.

Businesses that create new wealth for North Dakota and provide new jobs outside of the retail sector, especially in manufacturing, processing and value-added industries, are primary candidates. These companies shall provide evidence of considerable financial strength as demonstrated by a long-term investment grade rating. If a company does not have an adequate rating, it has three options to meet this requirement:

• Credit enhancement by a financial institution. The bank or credit union can provide a letter of credit acceptable to BND or pledge Fed Book entry securities.
• Guarantee from a federal guaranty agency or another company with an investment grade rating
• Pledge a certificate of deposit or marketable securities of a quality and level satisfactory to BND

Loan funds may be used to finance real estate, machinery and equipment and for the purchase or leasing of equipment.

The PACE Fund is designed to assist North Dakota communities in expanding their economic base by providing for new job development. The program has two major elements: (1) the participation by BND with a local lender in a community based loan and (2) the participation by BND with the community, in the form of the Growth Initiative Fund, in reducing the borrower’s overall interest rate.

To participate in the PACE program, a primary sector business must first apply, and qualify, for a bank loan. The Bank of North Dakota then matches the loan amount with a loan of its own. The total loan may be used for the purchase of real property, equipment and certain working capital needs.

The second element of the PACE loan combines the resources of the local community and BND in buying down the interest rate on the loan. BND provides 65 percent of the buy-down, up to $500,000.  The buy-down amount is calculated through a combination of a scoring based on either job creation or total project capital investment, as well as the amount required to buy down the interest up to 5 percent below yield rate, with a floor of 1 percent. The BND portion is a grant that does not require repayment. The community, in the form of a revolving loan fund called the Growth Initiative Fund (GIF), supplies the other 35 percent of the buy-down in the form of a loan that does not accrue interest or begin repayment while the buy-down period is in effect.

The Flex PACE program operates under the same structure as the PACE program, but has no job creation or specific capital investment tiers requirements. BND buy-down is up to $200,000 for Flex PACE. Flex PACE applications in Cass County, through the Growth Initiative Fund, are limited to primary sector companies.

The New Venture Capital Fund provides flexible financing through debt and equity investments for a variety of pre-revenue; mid-stage and late stage startup companies.  The fund is managed by the North Dakota Development Fund, a division of the North Dakota Department of Commerce.

This fund offers a variety of financing options in the form of traditional or convertible debt and equity investment. The structure of the investment is negotiated on a case-by-case basis. The business must be innovative, have a unique market aspect or customer base, be scalable and have the potential to return a significant benefit to the state of North Dakota.

According to the Bank of North Dakota (BND), the Beginning Entrepreneur Loan Guarantee Program assists with business startup financing by providing financial institutions with guaranty of a loan not to exceed $500,000. It may be used in conjunction with other BND programs.

The Business Development Loan Program is designed to assist new and existing businesses in obtaining loans that would have a higher degree of risk than would normally be acceptable to a lending institution.  The lead lender participates with Bank of North Dakota, each sharing a portion of the loan exposure.

The borrower must be a North Dakota business in an industry that reflects a higher degree of credit risk than would normally be acceptable by a lending institution.

Loan proceeds may be used to establish or purchase a new or existing business, finance the acquisition of real property, remodel or expand an existing business, purchase or lease equipment, provide working capital or refinance an existing loan.

The Accelerated Growth Loan Program assists North Dakota-based companies entering or anticipating a period of dynamic growth. These companies have a record of proven operations, experienced management and the ability to generate cash flow but have limited assets for traditional bank financing. The lead lender participates with Bank of North Dakota, each sharing a portion of the loan exposure.

The borrower can be any person or entity who owns a North Dakota-based company that anticipates a minimum growth in sales of 15 percent over three years with existing sales of $1.5 million to $10 million annually.

Loan proceeds may be used to finance the acquisition of real property, remodel or expand an existing business, purchase equipment, provide working capital or refinance an existing loan with a maximum amount not to exceed 30% of the new loan.

The North Dakota Development Fund is a secondary source of financing for new or expanding primary sector businesses located in North Dakota. The Fund provides gap-financing through loans and equity investments not available from most conventional lenders. The Fund administers two revolving loan pools, the Development Fund and the Regional Rural Revolving Loan Fund. In order to be eligible for the latter, a business must be located in a city with fewer than 8,000 residents that is located more than 5 miles away from a city with a population greater than 8,000.

The Development Fund invests up to $1,000,000 per borrower, based on the project and job requirements. Generally not to exceed $40,000 (urban) or $50,000 (rural) per job created or retained.

Loans may be structured as a direct loan, a participation loan with a local financial institution, or as subordinated debt. For loans, the interest rate varies and terms vary according to the uses of funding. Examples of eligible funding uses include purchasing real estate or equipment, providing working capital or purchasing inventory. Equity investments are typically held for a maximum of five years. The purpose is the provide the proper risk/return consideration in keeping with the legislative intent of the Fund.

The Development Fund considers projects that are feasible and have a reasonable chance of succeeding. The Fund coordinates efforts between different sources of financing, the community and the primary sector business borrower.

The CDBG program provides financial assistance to eligible units of local Governments in the form of grants and loans for Public Facilities, Housing Rehabilitation, and Economic Development projects. Funding may be provided to support the installation of infrastructure, facilities and equipment for a qualified primary sector company that is establishing a location in North Dakota and creating jobs for very low and low income individuals.

The North Dakota Agricultural Products Utilization Commission (APUC) program provides financial assistance, in the form of grants, to support the development of business ventures that will result in the development of new and expanded uses of North Dakota agricultural products and resources. There are six categories of grants that may be available through APUC:

• Basic & Applied Research Grants
• Marketing & Utilization Grants
• Farm Diversification Grants
• Technology & Prototype
• Technical Assistance
• Nature-Based Agritourism

A maximum of 15 qualifying applicants present funding proposals on a quarterly basis. Proposals are not limited to a specific dollar amount, but some grant categories have funding caps. Applicant must commit a minimum match dollar investment of 25% of the total amount requested.

The 504 program provides growing small and medium-sized businesses with long-term, fixed-rate financing for long-term assets such as real estate and equipment.

A complete 504 financing package is a combination of at least three sources: the regional development corporation, borrower equity and a local lender. Through the chosen CDC the SBA may guarantee up to 40 percent of the total project cost, or from $50,000 to $5.0 million (up to $5.5 million in certain cases and for manufacturing). The borrower must inject at least 10 percent of the total funds for any project (up to 20 percent for startup & special purpose). The remaining 50 percent is usually provided by a local financial institution, although other SBA-qualified lenders may also provide the 50 percent. The 504 Program offers terms of 10 years for loans that finance machinery and equipment, and 20 years for real estate loans. Interest rates vary.

To be eligible for a 504 loan, the business and its affiliates must have a net worth lower than $7 million, and an average net income after taxes of lower than $2.5 million per year for two years.

The purpose of the Microloan program is to assist start-up, newly established, and all other small businesses obtain short-term, fixed rate financing. Eligible small businesses typically employ ten or fewer employees.

Loan proceeds may be used for working capital, inventory, and equipment needs. Loans amounts vary from $1,000 to $35,000, and loan terms vary from one month to three years, depending on use of capital. Typically the applicant is required to inject at least 10 percent of the necessary equity.

The B&I Guaranteed Loan Program helps create jobs and stimulates rural economies by providing financial backing for rural businesses. This program guarantees loans up to a maximum of 80 percent of loss resulting from borrower default. A 10 percent equity injection is required for existing businesses; 20 percent equity injection is required for start-ups. Assistance under the B&I Guaranteed Loan Program is available to virtually any legally organized entity located in a rural community, defined as a town with fewer than 50,000 residents.

Loan funds can be used for machinery, equipment, buildings, real estate, working capital and certain types of debt financing. Interest rates are negotiable and loan terms vary according to the use of funds. The maximum aggregate B&I Guaranteed Loan amount that can be offered to any one borrower under this program is $25 million.

The Rural Energy for America Program (REAP), a component of the 2008 Farm Bill, provides financial assistance to help rural small businesses purchase renewable energy systems and make energy efficiency improvements. Financial assistance is in the form of grants and guaranteed loans.

Grants can fund up to 25 percent of a project’s total eligible costs, and can range from $2,500 to $500,000 for renewable energy projects and from $1,500 to $250,000 for energy efficiency improvements. Guaranteed loans can fund up to 50 percent of a project’s total cost, ranging from $5,000 minimum loan to a $25 million maximum loan.

Eligible renewable energy projects include those for which energy is derived from wind, solar, biomass or geothermal sources, or for which hydrogen is derived from biomass or water using one of the previously stated energy sources. Eligible energy efficiency projects include retrofitting lighting or insulation, or purchasing or replacing equipment with more efficient units.

For all projects, the system must be located in a rural area, be technically feasible, meet environmental requirements, and be owned by the applicant.

The Rural Business Enterprise Grant (RBEG) Program makes grants to public bodies, private nonprofit corporations, and Federally-recognized Indian Tribal groups to finance and facilitate development of small and emerging private business enterprises located in any municipality with a population of fewer than 50,000 inhabitants. The grantees then pass along these grants to provide needed infrastructure, fund technical assistance needs and/or develop revolving loan funds to assist small and emerging business, defined as those businesses with fewer than 50 employees and less than $1 million in gross annual revenues.

Examples of eligible uses of funds include, but are not limited to, the following:

• Land acquisition and development
• Loans for start up operating costs and working capital
• Technical assistance for private businesses.
• Establishment of revolving loan funds

Preference is given to projects that are:

• Located in a community where the unemployment rates exceeds the state rate
• located in a community that has a median household income that is less than the state’s total median household income, as determined by the 2000 census
• include a commitment of funds from non-federal sources
• include a firm commitment from a business to locate or expand in the community, thereby creating jobs

Through the Rural Economic Development Loan Program, USDA Rural Development provides a zero-interest loan to a Rural Utility Service electric or telephone utility provider. The utility is then required to re-lend the loan proceeds to eligible third-party recipients for the purposes of economic development and job creation in rural North Dakota.

Loans to third-party recipients can cover up to 80 percent of the total project costs to start or expand a business, including the cost of buildings, machinery, land and working capital, or to fund a business incubator. Loans can run anywhere between $10,000 and $740,000 and have a maximum repayment period of ten years (with an option to defer payments for up to two years).

Through the Rural Economic Development Grant Program, USDA Rural Development provides a grant to a Rural Utility Service electric or telephone utility provider. The utility is then required to create a Revolving Loan Fund to lend the grant proceeds to eligible third-party recipients for the purposes of economic development and job creation in rural North Dakota.

Loans to third-party recipients can cover up to 80 percent of the total project costs for business incubators to assist in developing emerging companies, community development projects, community facilities and services, and educational and medical facilities. Loans can run anywhere between $10,000 and $300,000 and have a maximum repayment period of ten years (with the option to defer payments for up to two years.)

Through the Intermediary Relending Program, the USDA provides loans to private non-profit organizations, public entities and other intermediaries to finance business facilities and community development projects in rural communities with a population of fewer than 25,000 people. Locally, the Dakota Certified Development Corporation (Dakota CDC) and the Lake Agassiz Regional Development Corporation (LARDC) are authorized by the USDA to serve as intermediaries in the lending process.

Fixed-rate loans cover up to 75 percent of eligible project costs, with a maximum of $150,000. The applicant is required to supply at least 10 percent equity. Eligible uses of loan proceeds include real estate, fixed assets, working capital and/or inventory. Repayment terms are based on the use of the loan proceeds or the life of the assets being financed. Generally the term is 7 years or less.

Tax increment financing (TIF) allows municipalities to create special districts and issue bonds to make improvements within these districts which will benefit and/or encourage private development. The property tax base in the TIF district is frozen at the pre-development level for a certain period of time. During this period, the increase in property values, and therefore property tax (the “increment”), created by private development is used to pay off the bonds that funded the improvements.

The taxing authorities that gave up their right to the increment during this period will enjoy an increased tax base when the district expires.

The Industrial Development Bond (IDB) program allows qualified manufacturers the opportunity to finance fixed assets, such as buildings and equipment, with tax-exempt, long-term fixed interest rates. Through the program, the North Dakota Public Finance Authority makes loans to manufacturers that qualify as small issue manufacturers. A small issue manufacturer is defined by the Internal Revenue Code as “Any facility which is used in the manufacturing or production of tangible personal property including the process resulting in a change in the condition of such property.” Qualifying organizations must also meet a capital spending requirement. The Public Finance Authority is limited to $2,000,000 per project and $20,000,000 cumulative for the IDB program.

The qualifying manufacturer pays interest rates at a market rate that is set through a competitive bid process when the Authority issues and sells its program bonds to fund the loan.

Communities may participate in an economic or industrial development project by lending their name to sell Municipal Industrial Revenue Bonds (IRBs) to finance a project. Qualifying projects include the purchase of real property, buildings, equipment and personal property; improvements to real property or buildings; and working capital.

There are two types available:

1. Tax-exempt IRBs, which are issued to finance land and depreciable property for manufacturing facilities. Because the interest earned is exempt from federal income tax, the bonds are sold at a lower interest rate, which in turn lowers the cost of capital to finance the project. The maximum bond amount is $10,000,000.
2. Taxable IRB’s, which typically have higher interest rates than tax-exempt bonds. There are no restrictions on the use or issued amount on taxable IRBs.

The Minnesota Military Reservist Economic Injury Loan Program provides loans to eligible small businesses which 1) have an essential employee or employees about to deploy or deployed in the military reserves for 180 days or longer, and 2) are likely to sustain or are sustaining economic harm. An essential employee is defined as one that meets the following criteria: 1) a military reservist, 2) an owner or employee of an eligible business, and 3) has managerial or technical expertise critical to the day-to-day operation of the business. Eligible small businesses are those that employee 20 or fewer full time employees or have less than $1 million in revenue in the previous fiscal year ($2.5 million if engaged in a technical or professional service business.)

The 4 ½ year, onetime loans are interest-free and are available in amounts from $5,000 to $20,000. No repayment is required for the first 18 months of the loan; monthly repayments are made over the remaining three years of the loan term. The revolving loan fund totals $400,000. Applications will be accepted and loans made until all funds are committed.

The Minnesota Investment Fund provides grants that create and retain high-quality jobs in Minnesota, with a focus on industrial, manufacturing, and technology-related industries, to increase the local and state tax base and improve the economic vitality of all Minnesota citizens.Grants are awarded to local units of government who provide loans to assist expanding businesses. Cities, counties, townships, and recognized Indian tribal governments are eligible.Loans for land, buildings, infrastructure improvement, equipment, and training to support businesses located or intending to locate in Minnesota are eligible. Working capital, retail business, and industrial park development projects are ineligible. All projects must meet minimum criteria for private investment, number of jobs created or retained, and wages paid. There is a maximum of $500,000 per grant. Only one grant per state fiscal year can be awarded to a government unit. At least 50 percent of total project costs must be privately financed through owner equity and other lending sources (most applications selected for funding have at least 70 percent private financing). Grant terms are a maximum 20 years for real estate and 10 years for machinery and equipment. Interest rates are negotiated.

The Minnesota Cup is an annual competition that identifies and rewards aspiring entrepreneurs with breakthrough ideas in Minnesota. Entrepreneurs from all industries and all corners of the state are invited to participate. Up to $40,000 and valuable professional services are presented to the overall winner as well as winners in the categories of biosciences, clean technology and renewable energy, high tech, social entrepreneurship, general and student.

This annual competition runs from spring to fall, with three rounds of judging and the awards announced in September. To learn more or enter, please visit Minnesota Cup.

The Moorhead Community Loan Program is a gap financing mechanism that provides a qualified business with a loan up to $50,000 to support the purchase of land, buildings, machinery, equipment and/or working capital.

Terms of the loan are typically no longer than seven years with interest rates that vary from 4% to 8%.

The Small Business Innovation Research (SBIR) program is a highly competitive federal award program that encourages small businesses to explore their technological potential and provides the incentive to profit from its commercialization. Eleven agencies of the federal government are required to set aside a certain portion of their research and development funding for these awards, including the Departments of Agriculture, Defense and Energy, and the Environmental Protection Agency.

Proposals are judged according to small business qualification, degree of innovation, technical merit and future market potential. Funding is awarded in three phases:

• Phase One, start-up phase. Awards of up to $100,000 for approximately 6 months support exploration of the technical merit or feasibility of an idea or technology.

• Phase Two awards up to $750,000 for up to two years, for the purpose of expanding Phase One results. During this time, the R&D work is performed and the developer evaluates commercialization potential. Only Phase I award winners are eligible.

• Phase III is the commercialization of the technology developed during Phase II. No SBIR funds support this phase. The small business must find funding in the private sector or other non-SBIR federal agency funding.

The State of Minnesota’s Director of the Office of Science and Technology, Betsy Lulfs, is a great resource to help your company compete for SBIR funding. The Office helps its clients target the appropriate federal agency, develop strategies, put together a quality research team, find scientific and technical resources and develop and review Phase I and Phase II proposals and budgets.

For more information on the Office’s SBIR services, please visit www.deed.state.mn.us/scitech or contact Betsy Lulfs at 651-259-7441 or betsy.lulfs@state.mn.us. For more information on SBIR, please visit www.sbir.gov.

The Small Business Administration (SBA) is an independent agency of the federal government that helps Americans start, build and grow businesses. The SBA provides financing opportunities to small businesses in Minnesota, including the SBA 504 Loan. In Clay County, this financing can be tapped by working with a local certified development corporation such as Dakota CDC or the Minnesota Business Finance Corporation.

SBA 504 Loans

The 504 program provides growing small and medium-sized businesses with long-term, fixed-rate financing for long-term assets such as real estate and equipment.

A complete 504 financing package is a combination of at least three sources: the regional development corporation, borrower equity and a local lender. Through the chosen CDC the SBA may guarantee up to 40 percent of the total project cost, or from $50,000 to $5.0 million (up to $5.5 million in certain cases and for manufacturing). The borrower must inject at least 10 percent of the total funds for any project (up to 20 percent for startup & special purpose). The remaining 50 percent is usually provided by a local financial institution, although other SBA-qualified lenders may also provide the 50 percent. The 504 Program offers terms of 10 years for loans that finance machinery and equipment, and 20 years for real estate loans. Interest rates vary.

To be eligible for a 504 loan, the business and its affiliates must have a net worth lower than $7 million, and an average net income after taxes of lower than $2.5 million per year for two years.

The purpose of the Small Business Development Loan Program is to create jobs and provide loans for business expansions.  Small business loans are made by the Minnesota Agricultural and Economic Development Board (MAEDB) through the issuance of industrial development bonds backed by a state-funded reserve of 25 percent.Those eligible for loans through the Small Business Development Loan Program include manufacturing and industrial businesses located or intending to locate in Minnesota, as defined by Small Business Administration size and eligibility standards (generally, those with 500 employees or fewer).  Loans up to a maximum of $5 million may be made for any one business. Generally, 20 percent of the project costs must be privately financed through equity or other sources. Interest rate is the market rate of interest for similar securities at the time bonds are sold; rates are fixed for the term of the loan. Real estate loans are for a maximum of 20 years; equipment is 10 years. Collateral requirements include the first mortgage on real property or equipment financed by MAEDB and personal guarantees of owners; in some cases, additional security in the form of other liens or guarantees may be required by MAEDB. There is no MAEDB fee, but bond issuance costs of 4 percent are capitalized with the loan principal; ten percent of bond issue must be escrowed. Funds are disbursed upon execution of the required loan documents and sale of the bonds.Applications, using the Business and Community Development Application, are accepted on a year-round basis, but must be received by the first of each month to be considered at that month’s MAEDB meeting.

The State Small Business Credit Initiative (SSBCI) uses federal funding to stimulate private-sector lending and improve access to capital for small businesses that are creditworthy but not getting loans they need to expand and create jobs.

Minnesota’s initiative allocates up to $15.4 million into four programs:

• Capital Access Program
• Emerging Entrepreneurs Fund
• Small Business Loan Guarantees
• Early Stage Fund

The Capital Access Program (CAP) encourages banks, credit unions and community development finance institutions to make loans that fall just outside the lenders’ normal underwriting standards. CAP funds may be used for start-up costs, working capital, business acquisitions and expansions, construction, and the purchase of equipment or inventory. Tha maximum loan amount is $5 million.

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. Funds may be used for start-ups costs, working capital, the purchase of equipment or inventory, and the purchase, construction, renovation or tenant improvements of an eligible place of businesses. Up to $150,000 is available per loan, which must be matched on at least a one-to-one basis by the participating lender.

The Small Business Loan Guarantee (SBLG) and Qualified Economic Development Loan Guarantee(QED) programs guarantee up to 70 percent of a loan made by non-traditional lenders like certified development corporations (CDCs), community development financial institutions (CDFIs) and other non-profit lenders. Banks and credit unions will benefit by a reduction in overall financing risk. Funds may be used for construction, remodeling or renovation; leasehold improvements; the purchase of land, buildings, machinery or equipment; maintenance and repair; expenses related to moving into or within Minnesota; and working capital. The entire financing package may not exceed $20 million.

The Early Stage Fund, which will launch in early 2012, is expected to channel $1 million to stimulate investment in innovative businesses by extending capital to community-based equity funds.

For additional information on these programs, including interest rates, terms and application processes, please visit the Minnesota Department of Employment and Economic Development.

The Green Enterprise Assistance program (GEA) is a collaboration of state government agencies formed to help recruit, retain and expand green technology businesses in Minnesota. Assistance is available for companies engaged in creating or developing technologies that do one of the following: increase the production of energy from renewable sources, reduce energy consumption, reduce greenhouse gases, protect or conserve water, or increase biofuel production. Companies at all stages of development — from early concept stage to mature — are eligible for assistance in areas such as permitting and licensing, financial assistance, or site selection.

More information can be found online.

The GEA is facilitated by the Department of Employment and Economic Development (DEED) and includes representatives from the Department of Commerce’s Office of Energy Security, the Department of Natural Resources, the Department of Transportation, the Minnesota Pollution Control Agency, the Department of Agriculture and Iron Range Resources.

Business and Industry Loan Guarantee (B&I)

The B&I Guaranteed Loan Program helps create jobs and stimulates rural economies by providing financial backing for rural businesses. This program guarantees loans make by lenders up to a maximum of 80 percent of loss resulting from borrower default. Eligible lenders include federal or state chartered banks, savings and loans, credit unions and Farm Credit Banks. Assistance under the B&I Guaranteed Loan Program is available to virtually any legally organized entity.

Loan funds can be used for machinery, equipment, buildings, real estate, working capital and certain types of debt financing. The maximum aggregate B&I Guaranteed Loan(s) amount that can be offered to any one borrower under this program is $25 million.

Rural Energy for America Program (REAP)

The Rural Energy for America Program (REAP), a component of the 2008 Farm Bill, provides financial assistance to help rural small businesses purchase renewable energy systems and make energy efficiency improvements. Financial assistance is in the form of grants and guaranteed loans.

Grants can fund up to 25 percent of a project’s total eligible costs, and can range from $2,500 to $500,000 for renewable energy projects and from $1,500 to $250,000 for energy efficiency improvements. Guaranteed loans can fund up to 50 percent of a project’s total cost, ranging from $5,000 minimum loan to a $25 million maximum loan.

Eligible renewable energy projects include those for which energy is derived from wind, solar, biomass or geothermal sources, or for which hydrogen is derived from biomass or water using one of the previously stated energy sources. Eligible energy efficiency projects include retrofitting lighting or insulation, or purchasing or replacing equipment with more efficient units.

For all projects, the system must be located in a rural area, be technically feasible, meet environmental requirements, and be owned by the applicant.

Rural Business Enterprise Grants

The Rural Business Enterprise Grant (RBEG) Program makes grants to public bodies, private nonprofit corporations, and Federally-recognized Indian Tribal groups to finance and facilitate development of small and emerging private business enterprises located in any municipality with a population of fewer than 50,000 inhabitants. The grantees then pass along these grants to provide needed infrastructure, fund technical assistance needs and/or develop revolving loan funds to assist small and emerging business, defined as those businesses with fewer than 50 employees and less than $1 million in gross annual revenues.

Examples of eligible uses of funds include, but are not limited to, the following:

• Land acquisition and development
• Loans for start up operating costs and working capital
• Technical assistance for private businesses.
• Establishment of revolving loan funds

Preference is given to projects that are:

• Located in a community where the unemployment rates exceeds the state rate
• located in a community that has a median household income that is less than the state’s total median household income, as determined by the 2000 census
• include a commitment of funds from non-federal sources
• include a firm commitment from a business to locate or expand in the community, thereby creating jobs

There is no minimum or maximum grant award.

Rural Economic Development Loan Program (REDL)

Through the Rural Economic Development Loan Program, USDA Rural Development provides a zero-interest loan to a Rural Utility Service electric or telephone utility provider. The utility is then required to re-lend the loan proceeds to eligible third-party recipients for the purposes of economic development and job creation in rural Minnesota.

Loans to third-party recipients can cover up to 80 percent of the total project costs to start or expand a business, including the cost of buildings, equipment, machinery, land and working capital, or to fund a business incubator. Loans can run anywhere between $10,000 and $740,000 and have a maximum repayment period of ten years (with the option to defer payments for up to two years).

Rural Economic Development Grant Program (REDG)

Through the Rural Economic Development Grant Program, USDA Rural Development Provides a grant to a Rural Utility Service electric or telephone utility. The utility is then required to create a Revolving Loan Fund to lend the grant proceeds to eligible third party recipients for the purposes of economic development and job creation in rural Minnesota.

Loans to third-party recipients can cover up to 80 percent of the total project costs for business incubators to assist in developing emerging companies, community development projects, community facilities and services, fand educational or medical facilities. Loans can run anywhere from $10,000 to $300,000 and have a maximum repayment period of ten years (with the option to defer payments for up to two years.)

Intermidiary Relending Program (IRP)

Through the Intermediary Relending Program, the USDA provides loans to private non-profit organizations, public entities and other intermediaries to set up revolving loans funds that will finance business facilities and community development projects in rural communities with a population of fewer than 25,000 people. Locally, the Dakota Certified Development Corporation (Dakota CDC), the West Central Initiative Foundation (WCIF) and the Midwest Minnesota Community Development Corporation (MMCDC) are authorized by the USDA to serve as intermediaries in the lending process.

Fixed-rate loans cover up to 75 percent of eligible project costs, with a maximum of $250,000. Eligible uses of loan proceeds include real estate, fixed assets, working capital and/or inventory. Repayment terms are based on the use of the loan proceeds or the life of the assets being financed. Generally the term is 7 years or less.

West Central Initiative assists businesses and communities in west central Minnesota by providing gap financing to eligible new and expanding businesses. West Cenral Initiative’s loan programs typically supplement conventional bank financing, anywhere from 10% to 40% of the total financing for qualified applicants. Eligible projects must be able to prove that a financing gap exists, and the bank is unable to fund the entire project.

Small Enterprise Loan Fund (SELF)

SELF is West Central Initiative’s fund for small loans of between $1,000 to $35,000. It is used to fund fixed assets and working capital for small local businesses, startups and some retail businesses. The retail sector is limited to those businesses that do not compete with others in the immediate trade area or region.

Industrial Loan Fund

The Industrial Loan Fund is West Central Initiative’s program for larger loans of between $20,000 to $300,000. Industrial Loan Fund loans are often provided at a rate that is lower than the market rate. These loans are typically used to fund new construction of a building or the purchase of equipment or existing real estate, and in some cases it may be used for working capital or other intangible uses. The loan must always be collateralized and will require a personal guaranty if the loan is made to a corporation.

A number of Clay County communities offer their own community-based revolving loan funds through the West Central Initiative.

The Barnesville Community Fund provides financial assistance for the start-up, expansion or succession of businesses in the Barnesville area. These funds help bridge financial gaps between businesses and lending institutions. For more information, visit the City of Barnesville website or contact them at (218) 354-2145 or (800) 354-7570.

The Felton Area Community Fund serves to improve the quality of life in and around the community of Felton. For more information, please email Kim Embretson or call (800) 735-2239

The Hawley Area Community Fund serves to improve the quality of life in and around the community of Hawley. For more information, please call Lisa Jetvig at (218) 483-3331.

The Ulen-Hitterdal Community Fund serves to improve the quality of life in and around the communities of Ulen and Hitterdahl. For more information, please email Therese Vogel or call (218) 596-8853.

The Clay County Loan Fund assists businesses located in Clay County, Minn., that demonstrate a financing gap and that most likely would not succeed without the fund’s support. Specific use of loan funds could include machinery or equipment, real estate, working capital, inventory and related expenses and professional fees. The maximum loan amount is $20,000 or ten percent of the net assets of the fund, whichever is greater, and can not surpass 50 percent of the total project cost. The loan term can not exceed seven years. For more information, please contact Dale Umlauf at (800) 735-2239.