HF 3847

as introduced - 93rd Legislature (2023 - 2024) Posted on 02/22/2024 04:33pm

A bill for an act
relating to economic development; making technical changes to the small business
assistance partnerships grant program, Minnesota expanding opportunity fund
program, Minnesota emerging entrepreneur program, and community
wealth-building grant program pilot project; amending Minnesota Statutes 2022,
section 116M.18; Minnesota Statutes 2023 Supplement, sections 116J.682,
subdivisions 1, 3; 116J.8733; Laws 2023, chapter 53, article 15, section 33,
subdivisions 4, 5.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2023 Supplement, section 116J.682, subdivision 1, is
amended to read:

Subdivision 1.

Definitions.

(a) For the purposes of this section, the terms in this
subdivision have the meanings given.

(b) "Commissioner" means the commissioner of employment and economic development.

(c) "Partner organizations" or "partners" means:

(1) nonprofit organizations or public entities, including higher education institutions,
engaged in business development or economic development;

(2) community development financial institutions; deleted text begin or
deleted text end

(3) community development corporations new text begin ; and
new text end

new text begin (4) Tribes new text end .

(d) "Small business" has the meaning given in section 3 of the Small Business Act,
United States Code, title 15, section 632.

(e) "Underserved populations and geographies" means individuals who are Black,
Indigenous, people of color, veterans, people with disabilities, people who are LGBTQ+,
and low-income individuals and includes people from rural Minnesota.

Sec. 2.

Minnesota Statutes 2023 Supplement, section 116J.682, subdivision 3, is amended
to read:

Subd. 3.

Small business assistance partnerships grants.

(a) The commissioner shall
make small business assistance partnerships grants to local and regional community-based
organizations to provide small business development and technical assistance services to
entrepreneurs and small business owners. The commissioner must prioritize applications
that provide services to underserved populations and geographies.

(b) Grantees shall use the grant funds to provide high-quality, free deleted text begin or low-cost deleted text end
professional business development and technical assistance services that support the start-up,
growth, and success of Minnesota's entrepreneurs and small business owners.

new text begin (c) Grantees may use up to 15 percent of grant funds for expenses incurred while
administering the grant, including but not limited to expenses related to technology, utilities,
legal services, training, accounting, insurance, financial management, benefits, reporting,
servicing of loans, and audits.
new text end

Sec. 3.

Minnesota Statutes 2023 Supplement, section 116J.8733, is amended to read:

116J.8733 MINNESOTA EXPANDING OPPORTUNITY FUND PROGRAM.

Subdivision 1.

Establishment.

The Minnesota Expanding Opportunity Fund Program
is established to capitalize Minnesota nonprofit corporations new text begin , Tribes, and community
development financial institutions new text end to increase lending activities with Minnesota small
businesses.

Subd. 2.

Long-term loans.

The department may make long-term loans of ten to 12 years
at 0.5 percent or lower interest rates to nonprofit corporations new text begin , Tribes, and community
development financial institutions new text end to enable nonprofit corporations new text begin , Tribes, and community
development financial institutions new text end to make more loans to Minnesota small businesses. The
department may use the interest received to offset the cost of administering small business
lending programs.

Subd. 3.

Loan eligibility deleted text begin ; nonprofit corporation deleted text end .

(a) The eligible nonprofit corporation new text begin ,
Tribe, or community development financial institution new text end must not meet the definition of
recipient under section 116J.993, subdivision 6.

(b) The commissioner may enter into loan agreements with Minnesota nonprofit
corporations new text begin , Tribes, and community development financial institutions new text end that apply to
participate in the Minnesota Expanding Opportunity Fund Program. The commissioner shall
evaluate applications from applicant nonprofit corporations new text begin , Tribes, and community
development financial institutions new text end . In evaluating applications, the department must consider,
among other things, whether the nonprofit corporation new text begin , Tribe, or community development
financial institution new text end :

(1) meets the statutory definition of a community development financial institution as
defined in section 103 of the Riegle Community Development and Regulatory Improvement
Act of 1994, United States Code, title 12, section 4702;

(2) has a board of directors or loan or credit committee that includes citizens experienced
in small business services and community development;

(3) has the technical skills to analyze small business loan requests;

(4) is familiar with other available public and private funding sources and economic
development programs;

(5) is enrolled in one or more eligible federally funded state programs; and

(6) has the administrative capacity to manage a loan portfolio.

Subd. 4.

Revolving loan fund.

(a) The commissioner shall establish a revolving loan
fund to make loans to nonprofit corporations new text begin , Tribes, and community development financial
institutions new text end for the purpose of increasing nonprofit corporation new text begin , Tribe, and community
development financial institution new text end capital and lending activities with Minnesota small
businesses.

(b) Nonprofit corporations new text begin , Tribes, and community development financial institutions new text end
that receive loans from the commissioner under the program must establish appropriate
accounting practices for the purpose of tracking eligible loans.

Subd. 5.

Loan portfolio administration.

(a) The new text begin fee or new text end interest rate charged by a
nonprofit corporation new text begin , Tribe, or community development financial institution new text end for a loan
under this subdivision must not exceed the Wall Street Journal prime rate plus two percent new text begin ,
with a maximum rate of ten percent new text end . A nonprofit corporation new text begin , Tribe, or community
development financial institution new text end participating in the Minnesota Expanding Opportunity
Fund Program may charge a loan closing fee equal to or less than deleted text begin two deleted text end new text begin one new text end percent of the
loan value.

(b) The nonprofit corporation new text begin , Tribe, or community development financial institution new text end
may retain all earnings from fees and interest from loans to small businesses.

new text begin (c) The department must provide the nonprofit corporation, Tribe, or community
development financial institution making the loan with a fee equal to one percent of the
loan value for every loan closed to offset related expenses for loan processing, loan servicing,
legal filings, and reporting.
new text end

Subd. 6.

Cooperation.

A nonprofit corporation new text begin , Tribe, or community development
financial institution new text end that receives a program loan shall cooperate with other organizations,
including but not limited to community development corporations, community action
agencies, and the Minnesota small business development centers.

Subd. 7.

Reporting requirements.

(a) A nonprofit corporation new text begin , Tribe, or community
development financial institution new text end that receives a program loan must submit an annual report
to the commissioner by February 15 of each year that includes:

(1) the number of businesses to which a loan was made;

(2) a description of businesses supported by the program;

(3) demographic information, as specified by the commissioner, regarding each borrower;

(4) an account of loans made during the calendar year;

(5) the program's impact on job creation and retention;

(6) the source and amount of money collected and distributed by the program;

(7) the program's assets and liabilities; and

(8) an explanation of administrative expenses.

(b) A nonprofit corporation new text begin , Tribe, or community development financial institution new text end that
receives a program loan must provide for an independent annual audit to be performed in
accordance with generally accepted accounting practices and auditing standards and submit
a copy of each annual audit report to the commissioner.

Sec. 4.

Minnesota Statutes 2022, section 116M.18, is amended to read:

116M.18 MINNESOTA EMERGING ENTREPRENEUR PROGRAM.

Subdivision 1.

Establishment.

The Minnesota emerging entrepreneur program is
established to award grants to nonprofit corporations new text begin , Tribes, and community development
financial institutions new text end to fund loans to businesses owned by minority or low-income persons,
women, veterans, or people with disabilities.

Subd. 1a.

Statewide loans.

To the extent there is sufficient eligible demand, loans shall
be made so that an approximately equal dollar amount of loans are made to businesses in
the metropolitan area as in the nonmetropolitan area. After March 31 of each fiscal year,
the department may allow loans to be made anywhere in the state without regard to
geographic area.

Subd. 1b.

Grants.

The department shall make grants to nonprofit corporations new text begin , Tribes,
and community development financial institutions new text end to fund loans to businesses owned by
minority or low-income persons, women, veterans, or people with disabilities to encourage
private investment, to provide jobs for minority and low-income persons, to create and
strengthen minority business enterprises, and to promote economic development in a
low-income area.

Subd. 2.

Grant eligibility deleted text begin ; nonprofit corporation deleted text end .

(a) The department may enter into
agreements with nonprofit corporations new text begin , Tribes, and community development financial
institutions new text end to fund loans the nonprofit corporation new text begin , Tribe, or community development
financial institution new text end makes to businesses owned by minority or low-income persons, women,
veterans, or people with disabilities. The department shall evaluate applications from
nonprofit corporations new text begin , Tribes, and community development financial institutions new text end . In
evaluating applications, the department must consider, among other things, whether the
nonprofit corporation new text begin , Tribe, or community development financial institution new text end :

(1) has a board of directors that includes citizens experienced in business and community
development, minority business enterprises, addressing racial income disparities, and creating
jobs for low-income and minority persons;

(2) has the technical skills to analyze projects;

(3) is familiar with other available public and private funding sources and economic
development programs;

(4) can initiate and implement economic development projects;

(5) can establish and administer a revolving loan account or has operated a revolving
loan account;

(6) can work with job referral networks which assist minority and low-income persons;
and

(7) has established relationships with minority communities.

(b) The department shall review existing agreements with nonprofit corporations new text begin , Tribes,
and community development financial institutions new text end every five years and may renew or
terminate the agreement based on the review. In making its review, the department shall
consider, among other criteria, the criteria in paragraph (a). new text begin The department shall open the
program to new applicants every two years.
new text end

Subd. 3.

Revolving loan fund.

(a) The department shall establish a revolving loan fund
to make grants to nonprofit corporations new text begin , Tribes, and community development financial
institutions new text end for the purpose of making loans to businesses owned by minority or low-income
persons, women, veterans, or people with disabilities, and to support minority business
enterprises and job creation for minority and low-income persons.

(b) Nonprofit corporations new text begin , Tribes, and community development financial institutions new text end
that receive grants from the department under the program must establish a
commissioner-certified revolving loan fund for the purpose of making eligible loans.

(c) Eligible business enterprises include, but are not limited to, technologically innovative
industries, value-added manufacturing, and information industries.

(d) Loan applications given preliminary approval by the nonprofit corporation new text begin , Tribe,
or community development financial institution new text end must be forwarded to the department deleted text begin for
approval deleted text end . deleted text begin The commissioner must give final approval for each loan made by the nonprofit
corporation. deleted text end new text begin Nonprofit corporations, Tribes, and community development financial
institutions designated as preferred partners do not need final approval by the commissioner.
All other loans must be approved by the commissioner and the commissioner must make
approval decisions within 20 days of receiving a loan application. new text end The amount of the state
funds contributed to any loan may not exceed 50 percent of each loan. new text begin The commissioner
must develop the criteria necessary to receive loan forgiveness.
new text end

Subd. 4.

Business loan criteria.

(a) The criteria in this subdivision apply to loans made
by nonprofit corporations new text begin , Tribes, and community development financial institutions new text end under
the program.

(b) Loans must be made to businesses that are not likely to undertake a project for which
loans are sought without assistance from the program.

(c) A loan must be used to support a business owned by a minority or a low-income
person, woman, veteran, or a person with disabilities. Priority must be given for loans to
the lowest income areas.

(d) The minimum state contribution to a loan is $5,000 and the maximum is $150,000.

(e) The state contribution must be matched by at least an equal amount of new private
investment.

(f) A loan may not be used for a retail development project.

(g) The business must agree to work with job referral networks that focus on minority
and low-income applicants.

(h) Up to ten percent of a loan's principal amount may be forgiven if deleted text begin the department
approves and deleted text end the borrower has met lender new text begin and agency new text end criteria new text begin , new text end including being current with
all payments new text begin , for at least two years new text end . new text begin The commissioner must develop the criteria for receiving
loan forgiveness.
new text end

Subd. 4a.

Microenterprise loan.

(a) Program grants may be used to make microenterprise
loans to small, beginning businesses, including a sole proprietorship. Microenterprise loans
are subject to this section except that:

(1) they may also be made to qualified retail businesses;

(2) they may be made for a minimum of deleted text begin $5,000 deleted text end new text begin $2,500 new text end and a maximum of deleted text begin $35,000 deleted text end new text begin
$40,000 new text end ;

(3) in a low-income area, they may be made for a minimum of deleted text begin $5,000 deleted text end new text begin $2,500 new text end and a
maximum of deleted text begin $50,000 deleted text end new text begin $55,000 new text end ; and

(4) they do not require a match.

(b) Up to ten percent of a loan's principal amount may be forgiven if deleted text begin the department
approves and deleted text end the borrower has met lender criteria new text begin , new text end including being current with all payments new text begin ,
for at least two years new text end .

Subd. 5.

Revolving fund administration.

(a) The department shall establish a minimum
interest rate new text begin or fee new text end for loans or guarantees to ensure that necessary loan administration costs
are covered. The interest rate charged by a nonprofit corporation new text begin , Tribe, or community
development financial institution new text end for a loan under this subdivision must not exceed the Wall
Street Journal prime rate plus deleted text begin four deleted text end new text begin two new text end percent new text begin , with a maximum rate of ten percent new text end . For a
loan under this subdivision, the nonprofit corporation new text begin , Tribe, or community development
financial institution new text end may charge a loan origination fee equal to or less than one percent of
the loan value. The nonprofit corporation new text begin , Tribe, or community development financial
institution new text end may retain the amount of the origination fee.

(b) Loan repayment of principal must be paid to the department for deposit in the
revolving loan fund. Loan interest payments must be deposited in a revolving loan fund
created by the nonprofit corporation new text begin , Tribe, or community development financial institution new text end
originating the loan being repaid for further distribution or use, consistent with the criteria
of this section.

(c) Administrative expenses of the nonprofit corporations new text begin , Tribes, and community
development financial institutions new text end with whom the department enters into agreements,
including expenses incurred by a nonprofit corporation new text begin , Tribe, or community development
financial institution new text end in providing financial, technical, managerial, and marketing assistance
to a business enterprise receiving a loan under subdivision 4, may be paid out of the interest
earned on loans and out of interest earned on money invested by the state Board of Investment
under section 116M.16, subdivision 2, as may be provided by the department.

new text begin (d) The department must provide the nonprofit corporation, Tribe, or community
development financial institution making the loan with a fee equal to one percent of the
loan value for every loan closed to offset related expenses for loan processing, loan servicing,
legal filings, and reporting.
new text end

Subd. 7.

Cooperation.

A nonprofit corporation new text begin , Tribe, or community development
financial institution new text end that receives a program grant shall cooperate with other organizations,
including but not limited to, community development corporations, community action
agencies, and the Minnesota small business development centers.

Subd. 8.

Reporting requirements.

A nonprofit corporation new text begin , Tribe, or community
development financial institution new text end that receives a program grant shall:

(1) submit an annual report to the department by February 15 of each year that includes
a description of businesses supported by the grant program, an account of loans made during
the calendar year, the program's impact on minority business enterprises and job creation
for minority persons and low-income persons, the source and amount of money collected
and distributed by the program, the program's assets and liabilities, and an explanation of
administrative expenses; and

(2) provide for an independent annual audit to be performed in accordance with generally
accepted accounting practices and auditing standards and submit a copy of each annual
audit report to the department.

Subd. 9.

Small business emergency loan account.

The small business emergency loan
account is created as an account in the special revenue fund.

Sec. 5.

Laws 2023, chapter 53, article 15, section 33, subdivision 4, is amended to read:

Subd. 4.

Loans to community businesses.

(a) A partner organization that receives a
grant under subdivision 3 shall establish a plan for making low-interest loans to community
businesses. The plan requires approval by the commissioner.

(b) Under the plan:

(1) the state contribution to each loan shall be no less than $50,000 and no more than
$500,000;

(2) loans shall be made for projects that are unlikely to be undertaken unless a loan is
received under the program;

(3) priority shall be given to loans to businesses in the lowest income areas;

(4) the new text begin fee or new text end interest rate on a loan shall not be higher than the Wall Street Journal prime
rate;

(5) 50 percent of all repayments of principal on a loan under the program shall be used
to fund additional new text begin related new text end lending. The partner organization may retain the remainder of
loan repayments to service loans and provide further technical assistance;

(6) the partner organization may charge a loan origination fee of no more than one
percent of the loan value and may retain that origination fee; deleted text begin and
deleted text end

(7) a partner organization may not make a loan to a project in which it has an ownership
interest deleted text begin . deleted text end new text begin ; and
new text end

new text begin (8) up to 15 percent of a loan's principal amount may be forgiven by the partner
organization if the borrower has met all lending criteria developed by the partner organization
and the commissioner, including creating or retaining jobs and being current with all loan
payments, for at least two years.
new text end

Sec. 6.

Laws 2023, chapter 53, article 15, section 33, subdivision 5, is amended to read:

Subd. 5.

Reports.

(a) The partner organization shall submit a report to the commissioner
by deleted text begin January deleted text end new text begin December new text end 31 of 2024, 2025, and 2026. The report shall include:

(1) an account of all loans made through the program the preceding calendar year and
the impact of those loans on community businesses and job creation for targeted groups;

(2) information on the source and amount of money collected and distributed under the
program, its assets and liabilities, and an explanation of administrative expenses; and

(3) an independent audit of grant funds performed in accordance with generally accepted
accounting practices and auditing standards.

(b) By February 15 of deleted text begin 2024, deleted text end 2025, deleted text begin and deleted text end 2026, new text begin and 2027, new text end the commissioner shall submit
a report to the chairs and ranking minority members of the legislative committees with
jurisdiction over workforce and economic development on program outcomes, including
copies of all reports received under paragraph (a).