Small Business Emergency Loan Program
On March 23, 2020, Emergency Executive Order 20-15 was released by Governor Walz establishing a “Small Business Emergency Loan Program”. The executive order will go into effect immediately upon approval of the Executive Council.
This executive order creates a loan program to be administered by the Department of Employment and Economic Development (DEED) to which funds will be made available to DEEDs existing network of nonprofit corporation lenders participating in the loan program. The main features of the loans will be as follows:
- The loans will be made to small businesses regardless of a borrower’s organizational form (i.e. independent contractor, sole proprietorship, limited liability company, etc.). Governor Walz released $30 million of funds from special revenue funds to finance the loans. The businesses seeking the loan must demonstrate to the lender that it was directly and adversely affective by the COVID-19 emergency.
- The loans will be at 0% percent during the period of the COVID-19 emergency.
- The loans will be a minimum of $2,500 and a maximum of $35,000.
- No matching contribution is required, however, 10% of the loan amount will be payable to the nonprofit lender to cover its expenses.
- If a borrower receives funds or insurance proceeds for which the loans were used, the principal must be repaid to the extent of the other funding.
- The loan must not be used to refinance existing debt. Up to 50% of the loan may be forgiven if the business remains operating in the community at substantially the same levels for two years following the loan disbursement.
Various Minnesota statutes were waived to allow these funds to be made available to nonprofit lenders for immediate lending to distressed businesses. This program is completely outside of and in addition to the SBA Emergency Disaster Loan Program approved over the weekend.
For more information concerning this program, go to the DEED website at https://mn.gov/deed/. Loan applications should be available on the DEED website later this week.
Read Governor Tim Walz's Emergency Executive Order 20-15 here.
The Corporate and Finance team at Larkin Hoffman is available to help. Please reach out to any of our attorneys for additional guidance.