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State of Minnesota Offers COVID-19 Small Business Loan Programs

Due to the current COVID-19 pandemic and the Emergency Executive Orders issued by Governor Walz relating to the pandemic and requiring Minnesotans to “Stay at Home,” the State of Minnesota is offering two loan programs to small businesses negatively affected by the situation. A summary of each of these loan programs is outlined below:

Small Business Emergency Loans

This loan program follows Executive Order 20-15. The Minnesota Department of Employment and Economic Security (“DEED”) has established this loan program to assist small businesses directly and adversely affected and whose industry is named in Executive Order 20-04, including bars, restaurants and other businesses providing public accommodations. The state recognizes that small businesses are a vital part of Minnesota’s economy and this program provides working capital to help businesses sustain operations during this challenging time.

Businesses apply for this program through a certified lender. Non profits are not eligible for this program. The basic terms of the loans provided under this program are, as follows:

  • Loan amounts will range from $2,500.00 to $35,000.00 and will be based on the firm’s economic injury and their financial need.
  • Loans will be interest free.
  • Loans will be paid back monthly over five (5) years and the first payment will be deferred for six (6) months.
  • Partial forgiveness may be available.
  • These loans are only provided to Minnesota-based businesses.

To qualify, the business must:

  • Be current on financial obligations as of March 1, 2020.
  • Be an existing small business, regardless of the form/type of entity.
  • Have been operating in Minnesota long enough to demonstrate financial viability.
  • Be willing to provide collateral or a personal guarantee for at least 20% of the loan.
  • Be unable to qualify for a standard loan through a bank, credit union, or nonprofit lending organization.
  • Payoff the emergency loan if financing is received subsequent to loan approval.

These loans cannot be provided to businesses that:

  • Derive income from passive investments without operational ties to an operating business.
  • Primarily generate income from gambling activities.
  • Generate any part of its income from adult-oriented activities.
  • Have no current or historical financial statements.

For more information about this loan program, please visit the Minnesota Department of Employment and Economic Development at www.mn.gov or contact your business banker.

Small Business Loan Guarantee Program

The Minnesota Department of Employment and Economic Development (DEED) also offers the Minnesota Small Business Loan Guarantee Program. This is a temporary program established in response to the 2020 public health emergency. This program helps Minnesota lenders to provide capital to small businesses in Minnesota affected by COVID-19. These loans can be used for a variety of purposes can be subordinate to other financing. The allowable use must be exclusively in Minnesota and includes machinery or equipment purchases, maintenance, or repair; expenses related to moving into or within Minnesota; and working capital when such capital is secured by fixed assets when possible.

The basic components of this loan program are, as follows:

  • Available to businesses with fewer than the equivalent of 250 employees, including parent companies and all locations.
  • The State of Minnesota provides an 80% guarantee up to a maximum of $200,000.00.
  • A fee of 0.25% of the guaranteed loan principal will be charged on each loan enrolled in the program.
  • All loans are made by lenders enrolled in the program. These loan are not directly from DEED.

For more information about this loan program, please visit the Minnesota Department of Employment and Economic Development at www.mn.gov or contact your business banker.

David G. Hellmuth, Esq. is the head of the Banking Law practice group at Hellmuth & Johnson. For inquiries and questions regarding these State of Minnesota loan programs, Mr. Hellmuth can be contacted through the firm’s website, www.hjlawfirm.com.

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David G. Hellmuth
Phone: 952-746-2107
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