The state of Minnesota announced a new $12.5 million Growth Loan Fund program Tuesday from which it will provide loans of between $100,000 and $400,000 to start-ups and early-stage businesses that are focused on technological innovation.
It's the second of six programs to be rolled out so far under the state's recently launched $97 million initiative to support small businesses through the State Small Business Credit Initiative. The funds, which are coming from the U.S. Department of Treasury, were allocated as part of the 2021 federal stimulus package.
Steve Grove, commissioner of the Minnesota Department of Employment and Economic Development (DEED), said Tuesday that the startup ecosystem in the state has been growing quickly. But starting a business — and finding capital — can nonetheless still be challenging, he said.
"We want Minnesota to be the place where startups grow and can thrive and have the resources to do it," he said. "This Growth Loan Fund is a part of this broader $97 million and is our state government's way of putting a flag out and saying, 'Build your company here.'"
The startup loans will have a seven-year term, with 1% interest in the first four years and a balloon payment due at the end, according to DEED officials.
Applicants must be seeking equity investments in a funding round in order to qualify. The business must complete at least 70% of the proposed equity raise to remain eligible for the loan. DEED is already accepting applications.
An informational webinar for businesses interested in applying will be held at 1 p.m. Friday.
"One of the benefits of a loan is we're not taking a stake in your company," Grove said. "It's your company. We're just helping you get started. You pay that back and you're done with us and you move on."
In addition to this loan program, DEED also offers Launch Minnesota innovation grants to startups, having awarded about $6 million to startups to date through that program.
DEED plans to roll out four more programs under the small business initiative by the end of this year. The other programs will include automation loans and purchased loan participations as well as a partnership with the University of Minnesota for direct investment venture capital and venture capital fund investments.
The first program, which recently launched, is the Minnesota Loan Guarantee Program. It will provide lenders with up to 80% of the principal on loans to small businesses. The state hopes to enroll 20 banks into the program.
DEED has set a goal of directing half of the small business funding to businesses owned by women, people of color, veterans, or those who live in rural areas.
