Minnesota will receive nearly $100 million in federal money in the next three years to help small businesses, especially those getting started.
Gov. Tim Walz and Steve Grove, the state Department of Employment and Economic Development (DEED) commissioner, announced the new money on Friday at Flava Café, which was opened less than three months ago in St. Paul's Frogtown neighborhood by Shaunie Grigsby.
"It should not be difficult to get government help when you're a small business, and today it kind of is," Grove said. He directed small business owners and aspirants to the state's new online hub that bills itself as a one-stop shop for "everything you need to know about DEED's resources for small businesses."
On that website, business owners can learn about and sign up for updates about the federally backed Minnesota Loan Guarantee Program. Money for the program comes from the State Small Business Credit Initiative, which provided $10 billion to states and tribal governments as part of the federal stimulus package in 2021.
"This is big. This is exciting," said Damon Jenkins, who stood with Walz, Grove and Grigsby and who leads the Minneapolis branch of First Independence Bank, the first Black-owned bank in the state.
Grove said the first step for the new program is enrolling up to 20 banks. Lenders interested in participating in the Minnesota Loan Guarantee Program can attend a webinar on Oct. 26. By early 2023, small businesses will be able to apply for loans with the approved lenders.
With the federal support, the lenders will secure up to 80% of the principal on loans to eligible businesses. The guarantee mitigates the risk to banks.
Grove said three out of four Minnesotans work at small businesses, making them the heart of the state's economy. But acquiring startup funding can be difficult, especially for people of color who historically have encountered barriers to building wealth.
The federal government requires that a quarter of all funding for the program goes to businesses owned by residents who live in rural areas or are Black, Indigenous or people of color. DEED has a higher goal, aiming to direct 50% of funding to business owners in those categories.
DEED also has targets for businesses with fewer than 10 employees, those owned by women and veterans as well as those opened in under-served areas.
Businesses can use the federally-backed loans for everything from startup costs to equipment, inventory and renovations. The money is not available for passive real estate investments.