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Minnesota Legislature

Office of the Revisor of Statutes

116M.18 URBAN CHALLENGE GRANTS PROGRAM.
    Subdivision 1. Eligibility rules. The board shall make urban challenge grants for use in
low-income areas to nonprofit corporations to encourage private investment, to provide jobs for
minority persons and others in low-income areas, to create and strengthen minority business
enterprises, and to promote economic development in a low-income area. The board shall adopt
rules to establish criteria for determining loan eligibility.
    Subd. 2. Challenge grant eligibility; nonprofit corporation. The board may enter into
agreements with nonprofit corporations to fund and guarantee loans the nonprofit corporation
makes in low-income areas under subdivision 4. A corporation must demonstrate that:
(1) its board of directors includes citizens experienced in development, minority business
enterprises, and creating jobs in low-income areas;
(2) it has the technical skills to analyze projects;
(3) it is familiar with other available public and private funding sources and economic
development programs;
(4) it can initiate and implement economic development projects;
(5) it can establish and administer a revolving loan account; and
(6) it can work with job referral networks which assist minority and other persons in
low-income areas.
    Subd. 3. Revolving loan fund. (a) The board shall establish a revolving loan fund to make
grants to nonprofit corporations for the purpose of making loans and loan guarantees to new and
expanding businesses in a low-income area to promote minority business enterprises and job
creation for minority and other persons in low-income areas.
(b) Eligible business enterprises include, but are not limited to, technologically innovative
industries, value-added manufacturing, and information industries. Loan applications given
preliminary approval by the nonprofit corporation must be forwarded to the board for approval.
The commissioner must give final approval for each loan or loan guarantee made by the nonprofit
corporation. The amount of the state funds contributed to any loan or loan guarantee may not
exceed 50 percent of each loan.
    Subd. 4. Business loan criteria. (a) The criteria in this subdivision apply to loans made or
guaranteed by nonprofit corporations under the urban challenge grant program.
(b) Loans or guarantees must be made to businesses that are not likely to undertake a project
for which loans are sought without assistance from the urban challenge grant program.
(c) A loan or guarantee must be used for a project designed to benefit persons in low-income
areas through the creation of job or business opportunities for them. Priority must be given for
loans to the lowest income areas.
(d) The minimum state contribution to a loan or guarantee 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
applicants from low-income areas.
    Subd. 4a. Microenterprise loan. Urban challenge 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 $1,000 and a maximum of $25,000; and
(3) they do not require a match.
    Subd. 5. Revolving fund administration; rules. (a) The board shall establish a minimum
interest rate for loans or guarantees to ensure that necessary loan administration costs are covered.
(b) Loan repayment amounts equal to one-half of the principal and interest must be deposited
in a revolving fund created by the board for challenge grants. The remaining amount of the
loan repayment may be deposited in a revolving loan fund created by the nonprofit corporation
originating the loan being repaid for further distribution, consistent with the loan criteria specified
in subdivision 4.
(c) Administrative expenses of the board and nonprofit corporations with whom the
board enters into agreements under subdivision 2, including expenses incurred by a nonprofit
corporation 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 board.
    Subd. 6. Rules. The board shall adopt rules to implement this section.
    Subd. 6a. Nonprofit corporation loans. The board may make loans to a nonprofit
corporation with which it has entered into an agreement under subdivision 1. These loans must be
used to support a new or expanding business. This support may include such forms of financing as
the sale of goods to the business on installment or deferred payments, lease purchase agreements,
or royalty investments in the business. The interest rate charged by a nonprofit corporation for a
loan under this subdivision must not exceed the Wall Street Journal prime rate plus four percent.
For a loan under this subdivision, the nonprofit corporation may charge a loan origination fee
equal to or less than one percent of the loan value. The nonprofit corporation may retain the
amount of the origination fee. The nonprofit corporation must provide at least an equal match to
the loan received by the board. The maximum loan available to the nonprofit corporation under
this subdivision is $50,000. Loans made to the nonprofit corporation under this subdivision may
be made without interest. Repayments made by the nonprofit corporation must be deposited in the
revolving fund created for urban initiative grants.
    Subd. 7. Cooperation. A nonprofit corporation that receives an urban challenge 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 that receives a challenge grant
shall:
(1) submit an annual report to the board by September 30 of each year that includes a
description of projects supported by the urban challenge 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 persons in low-income areas, the source and amount of money collected
and distributed by the urban challenge grant 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 board.
History: 1993 c 369 s 58; 1995 c 224 s 60-62; 2002 c 380 art 2 s 8-14; 2007 c 135 art 2 s 17