Governor Tim Walz’s executive orders have shut down small businesses across Minnesota to protect citizens and our health care system from the effects of community spread of COVID-19. The orders have forced small businesses closed, leaving them without options for creating adequate revenue to meet their financial obligations and to pay their work force. The United States Small Business Administration (“SBA”) and the Minnesota Department of Employment and Economic Development (“DEED”) offer options for Minnesota small businesses affected by this public health crisis.

1. SBA Economic Injury Disaster Loan Program

a) Is my business eligible?
Minnesota small businesses and private non-profit organizations that have been directly affected by the economic effects of COVID-19 can apply for a loan under the SBA Economic Injury Disaster Program.

b) How much money can I borrow, and does the loan have spending restrictions?
The SBA Economic Injury Disaster Program offers low interest loans of up to $2,000,000. If approved and accepted, the funds may be spent on fixed debt payments, payroll, accounts payable, and other bills that could have been paid if not for the economic injury caused by COVID-19.

c) What are the interest rates and when would I have to pay back the loan?
Currently, small businesses would pay 3.75% interest, and non-profits would pay 2.75% interest on the loaned funds. The terms for repayment are determined on a case by case basis. Repayment terms can provide for up to 30 years to repay.

d) What do I need to do before I apply?
The application process requires submission of several accompanying documents that should be completed prior to starting the application process. The documents provide the SBA with personal and business financial information. Applying businesses need to ensure that they have up to date business filings, financial information, and financial projections.

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2. Minnesota Department of Employment and Economic Development Small Business Emergency Loans

a) Is my business eligible?
Minnesota DEED is offering emergency loans to small business that were directly and adversely affected by conditions caused by COVID-19 and the resulting executive orders from Governor Tim Walz’s administration. Even if your business was directly and adversely affected, to qualify the business must have been current on all financial obligations as of March 1, 2020. Additionally, the small business must have been operating long enough to show financial viability and must be willing to provide collateral or a personal guarantee to secure at least 20% of the loan. The Minnesota DEED emergency loan is for businesses that are unable to qualify for financing through a private lending organization.

b) How much money can I borrow, and does the loan have spending restrictions?
The loans are offered between $2,500 and $35,000. The small business emergency loans from Minnesota DEED lenders may not be used to pay or refinance past debt. The funds may be used for rent or mortgage payments, payroll, and working capital.

c) What are interest rates and when would I have to pay back the loan?
The small business emergency loans are interest free. The money must be paid back over five years through monthly payments. The first payment is not due for six months from issuance.

d) What do I need to do before I apply?
Any application for a small business emergency loan through Minnesota DEED lenders will require current and past financial information. The lenders will also require financial projections. Additionally, personal financial statements are required for all business owners owning more than 20% of the applying entity.

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Although these loans are a form of government assistance, these programs are still loans that will enforce collections whether your business is successful or not. Any loan application should be made with caution. This article is not legal advice. If your business would like help applying for an emergency loan, or help preparing documents for applying for an emergency loan, our office is here to help. Please reach out to us with questions or for assistance at clerk@mpkennedylaw.com or call Tina M. Johnson, RP® of Kennedy Law Office at 651-262-2080.

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