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Lake City EDA
P: 651.345.6808
F: 651.345.3208
esparks@lakecityeda.com
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100 WASHINGTON St S
Lake City, MN
$500,000
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The Lake City Economic Development Authority (EDA) strives to foster economic development and assist businesses create and retain jobs. The EDA has a number of financial resources available to accomplish this. This page provides you with a summary of the financial incentives available through the Lake City EDA including program requirements, eligibility criteria, rates, and terms. For additional information on any of our financial incentives, access the full policy and program application by clicking the link following the description, or contact us at 651-345-6808.
Financing Economic Development Projects
The first rule of economic development finance is: There is no free money.
Economic development projects are funded primarily through owner equity and private bank financing with economic development funds available for gap financing.
Many times, owner equity and conventional bank financing do not provide all the required funding. This may occur because of bank lending limits, inadequate equity, insufficient collateral, or the business cannot afford market interest rates or term requirements. Economic development financial tools can provide funding needed to fill this gap.
Owner Equity – Owner equity must be present. At least 10% of the total project cost or more may be required. Typically, more owner equity injected into a project reflects a stronger application.
Bank or Private Loan – This provides 40 - 90% of the project’s funding.
Gap Financing – When needed, gap financing provides the remaining amount necessary to make the deal work. Gap financing can come from multiple sources and supply up to 50% of a project’s funding.
Resources
Lake City Economic Development Authority
Minnesota Community Capital Fund
Southern Minnesota Initiative Foundation (SMIF)
Southeastern Minnesota Development Corporation (SEMDC)
Minnesota Department of Employment and Economic Development (DEED)
City of Lake City / Lake City Economic Development Authority
Revolving Loan Fund
The Lake City Revolving Loan Fund (RFL) is a public source of money from which low-interest, deferred payment loans are made for business development projects. This program provides gap financing and may not be used as the primary source of financing for a project. RFL loans range from $5,000 – $25,000.
Eligibility
- Businesses must be located, or be willing to relocate, within the city limits of Lake City.
- Land and building acquisition, land improvements, new building construction, building renovation, machinery, furniture, fixtures, and equipment are all eligible uses of the RFL.
Requirements
- The RLF loan cannot exceed 50% of the total project costs.
- All construction and renovation must comply with city codes and policies.
- The applicant must establish and maintain the business within the Lake City municipal limits.
Rates/Terms
- The term is determined by the RLF Committee and is fixed at 5 years or fewer.
- The minimum loan fixed interest-rate is 5%.
- The applicant pays 1 point (1%) to cover legal, recording, and other fees.
- The City will typically subordinate to other financing sources when needed.
Download the Lake City Revolving Loan Fund Application packet.
- RLF Application
- Lake City RLF Program Guidelines
Contact
Contact the Lake City EDA at 651-345-6808, or email esparks@lakecityeda.com for a loan application or additional information.
Tax Increment Financing
Tax incremented financing (TIF) refers to the difference between a property’s original property taxes at the time of certification and the property taxes due after the property has been improved (tax increment) that are then captured and used to help finance the project. The difference in assessed valuation and tax revenues is used to pay the development costs.
For economic development purposes, two types of TIF districts are available: Economic Development TIF districts for new developments and Redevelopment TIF districts to help with the costs of renovating or replacing substandard buildings.
- Economic Development TIF District – A 9-year district that can provide funds for land acquisition, infrastructure (such as street, water and sewer, and parking), grading and excavating, and site improvements. This type of TIF district is primarily for industrial-type projects.
- Redevelopment TIF District - A district that can go up to 25 years and provides funds for the removal of blighting conditions on a lot (for example, sub-standard buildings or site clean-up).
Eligibility
- The City Council of Lake City, following a public hearing on the proposed project, must approve all TIF districts.
- The project must meet one or more of the adopted TIF goals of the City EDA, as outlined in the City of Lake City and Lake City EDA TIF Policy.
- The project must comply with the Comprehensive Plan and Zoning Ordinances.
- As long as necessary requirements are met, any type of project (commercial, retail, housing or industrial) is eligible.
Requirements
- All tax increment financing proposals should optimize the private development potential of a site.
- All tax increment financing proposals should obtain the highest possible private-to-public financial investment ratio.
- All tax increment financing proposals should create the highest number of new jobs on the site. Housing and retail/commercial projects are reviewed on an individual project basis.
- A deposit of $5,000 is required to investigate the feasibility of TIF assistance for the project.
Rates/Terms
Tax increment financing in Lake City can be provided in two different forms, pay as you go and up front payment.
Pay as you go - Annual payments are based on increment generated from the project and issued to the applicant after payment of property taxes by the applicant.
Up front payment - The City issues revenue or general obligation bonds. The increment generated from the applicant's project is then used for repayment of bonds.
Download the Lake City Tax Increment Finance Policy and Application.
Contact
Contact the Lake City EDA at 651-345-6808, or email esparks@lakecityeda.com for an application or additional information.
Job Opportunity Building Zone
Job Opportunity Building Zone (JOBZ) is designed to stimulate economic activity within certain geographical areas by providing a number of state and local tax exemptions for qualified businesses.
Tax exemptions are provided for:
- Corporate franchise tax
- State income tax for operators or investors, including capital gains tax
- Sales tax on goods and services used in the zone
- Property tax on commercial and industrial improvements (but no exemption on land)
Additionally: An employment tax credit is provided for high-paying jobs.
Eligibility
- Eligible businesses include those starting-up or expanding within a designated zone, businesses relocating from other states, and business relocations within Minnesota, provided certain job creation requirements are met.
- Businesses must locate within a designated JOBZ zone.
- Retail businesses are not eligible.
Requirements
- Jobs created must pay at least 110% of the federal poverty level for a family of four (including benefits not mandated by law).
- Businesses relocating within Minnesota must increase their total employment by at least 5 jobs or 20% of their workforce, whichever is greater. These new jobs must be maintained for the duration of the JOBZ zone.
- Businesses locating in a JOBZ zone must sign a development agreement with the city.
Download the Lake City Business Subsidy Policy and Application.
Contact
Contact the Lake City EDA at 651-345-6808, or email esparks@lakecityeda.com for an application or additional information.
Tax Abatement
With tax abatement, the city rebates its portion of property taxes back to the property owner who then uses it to help offset development or redevelopment costs. Tax abatement is simpler and less restrictive than tax increment financing and is quite useful for smaller projects.
However, the availability of tax abatement is limited. In any given year, for all economic development projects taking place, the city can abate an amount equaling no more than 10% of its current net tax capacity.
The Lake City, City Council must approve all tax abatements.
Eligibility
Tax abatements can be provided for any type of property.
Requirements
The project must provide one or more of the following public benefits:
- Increase or preserve tax base
- Result in job creation or retention
- Redevelop blighted areas
- Provide services not currently available to the residents of Lake City.
Rates/Terms
Taxes can be abated for up to 15 years (in some instances 20 years). Download the Lake City Tax Abatement Policy and Application.
Contact
Contact the Lake City EDA at 651-345-6808, or email esparks@lakecityeda.com for an application or additional information.
Minnesota Community Capital Fund
The Minnesota Community Capital Fund (MCCF) is a statewide revolving loan fund that makes use of underutilized local Revolving Loan Fund (RLF) capital. By pooling local RLF dollars, the MCCF provides participants with greater lending flexibility, the capability of offering much larger loans than would otherwise be possible, and professional fund management services.
The Lake City EDA has contributed $25,000 to the MCCF and, consequently, can leverage up to ten times that amount ($250,000) for local economic development projects.
Eligibility
Virtually any type of business is eligible.
Requirements
- A private lender must be involved in the project.
- Start-up businesses are not eligible
- Funds may be used for real estate, machinery and equipment, and working capital.
- At least 10% of the project must be funded by owner equity.
- The project’s loan-to-value ratio cannot surpass 100%
- Personal guarantees are required for all owners of 20% or more of the project.
Rates/Terms
- Loan amounts of $50,000 to $250,000 are available.
- Interest rates are determined on a case-by-case basis.
- Up to 20-year terms are available for real estate.
- Terms up to 10 years are available for machinery and equipment.
- There is a 1.75% loan origination fee and a 0.5% loan underwriting fee.
- Borrowers are responsible for all legal and other loan closing costs.
Contact
Contact the Lake City EDA at 651-345-6808, or email esparks@lakecityeda.com for additional information or:
Bob Palmquist
Senior Loan Officer
221 West First Street
Duluth, MN 55802
Phone: (218) 529-7562
E-Mail: bpalmquist@mncommunitycapitalfund.org
Southern Minnesota Initiative Foundation
The Southern Minnesota Initiative Foundation (SMIF) is established by the McKnight Foundation. The SMIF works to build a prosperous region and foster economic growth in the 20 Minnesota counties it serves. To accomplish this, the SMIF has a variety of loan options to help businesses, local governments, and nonprofit organizations.
Applicants are encouraged to call or visit the SMIF early in the process of developing their business to complete a needs assessment. This will help determine the level of assistance needed and the overall feasibility of the project.
Revolving Loan Fund
Eligibility
Priority is given to businesses that innovate, particularly ventures that develop high-tech products and services. Preference is given to bio-businesses and minority entrepreneurs.
Requirements
- The applicant must have demonstrated management skills, industry experience, financial aptitude, a sound business plan with financial projections, adequate cash flow, and collateral.
- The ability of the business to create living wage jobs and to contribute to the region’s economic competitiveness is essential.
Rates/Terms
- Loans of up to $200,000 may be used for building acquisition, expansion, machinery/equipment, inventory, or working capital.
- The loan may not exceed 50 % of the project’s cost.
Contact
Contact the Lake City EDA at 651-345-6808, or email esparks@lakecityeda.com for additional information. Or call Diane Lewis, 507.455.3215, or e-mail dianel@smifoundation.org.
Micro-Enterprise Loan Program
These loans are available to start or expand a manufacturing, retail, or service business within the 20-county region.
Eligibility
- Manufacturing, retail, or service businesses within the 20-county region are eligible.
- The loan may be used for inventory, supplies, machinery/equipment, or working capital.
Requirements
- Need and the ability to repay must be demonstrated by a sound business plan and cash flow projection.
- The project may not be in competition with an existing business in the trade area.
- Good character, commitment to the business plan, and the inability to obtain financing from a traditional lender must be demonstrated.
Rates/Terms
Loans of up to $35,000 are available.
Contact
Contact the Lake City EDA at 651-345-6808, or email esparks@lakecityeda.com for additional information. Or call Marcia Haley, 507.455.3215, or e-mail marciah@smifoundation.org.
BIO SEED FUND
This fund supports seed and start-up stage bio-businesses that need capital, business expertise, and networking opportunities.
Eligibility
- Funding is provided on a one-time-only basis to bio-medical, bio-agricultural, and renewable energy start-ups.
- The fund may be used for inventory, supplies, machinery/equipment, or working capital.
Requirements
- Product market potential
- Product uniqueness and protection
- Profit potential
- Quality job creation potential
- Applicant’s business experience/background
- Applicant’s financial and personal commitment
Rates/Terms
- Loans of up to $25,000 are available
- Funding requires a minimum of one-to-one equity or cash match
Bio-Seed Fund investment
- First 12 months of no repayment
- Repayment options include:
- Repayment through stock ownership
- Repayment through promissory note
- Repayment through loan with warrants
Contact
Contact the Lake City EDA at 651-345-6808, or email esparks@lakecityeda.com for additional information. Or call Diane Lewis, 507.455.3215, or e-mail dianel@smifoundation.org.
Southeastern Minnesota Development Corporation
The Southeastern Minnesota Development Corporation (SEMDC) is a private nonprofit agency that has been providing professional business, community and economic development consulting services to counties and communities across Southeast Minnesota for over 20 years. The SEMDC currently provides support to 20 communities and counties throughout the region.
Micro-Enterprise Revolving Loan Fund
Microenterprise Fund (MEF) microloans are designed for startup, newly established, or growing businesses. Funds are available to qualifying entrepreneurs based on established loan funding procedures.
Eligibility
- The business must demonstrate a need for financing through a realistic business plan.
- The business must be unable to obtain financing from a traditional lender.
- The projected income must be sufficient to repay interest and principal within a timely period.
Requirements
- Small business loans are to be used for: seed capital, working capital, purchases of inventory and equipment, real estate, building renovation, and expansion capital.
- Loan origination fee plus cost of searches, credit reports, filling, and legal costs.
Rates/Terms
- The maximum loan amount is $35,000.
- The value of all collateral is determined as well as the quality and secondary markets that exist.
- Collateral can consist of real estate, accounts receivable, equipment, and other tangible and intangible assets of value.
- The fund policy regarding loan interest rates is established by using the prime rate published in the Wall Street Journal.
- Consideration regarding the size and risk of the loan will be influential in setting the interest rate.
Contact
Contact the Lake City EDA at 651-345-6808, or email esparks@lakecityeda.com for additional information. Or Ron Zeigler at 507-867-3164, or ron.zeigler@semdc.com.
Minnesota Department of Employment and Economic Development (DEED)
Minnesota Investment Fund
The Minnesota Investment Fund (MIF) was created to facilitate the creation and retention of high-quality jobs on a statewide basis, increase both the local and state tax base, and improve the economic vitality of the state. The focus of the program is on industrial, manufacturing, and technology related businesses.
Eligibility
- Cities, counties, and townships can apply for funding on behalf of an expanding business.
- Grants are awarded to local governments who, in turn, make loans to qualified businesses.
- Funds cannot be used for retail businesses, industrial park development, or working capital.
Requirements
- Funds must be used for land, buildings, equipment, or training costs.
- Funds may also be used for infrastructure improvements to support businesses.
- MIF participation is limited to 50% of total project costs (most projects selected for funding have at least 70% of their financing coming from other sources).
- Jobs created must pay at least $10.25/hour cash wages and $11.21/hour including benefits (defined as life, health, dental insurance plus profit sharing and retirement contributions).
- 51% of created jobs must go to people with low-to-moderate incomes.
- Job creation requirements also exist based upon the amount of assistance provided (generally 1 job per $5,000 in assistance).
Rates/Terms
- Up to $500,000 is available.
- Interest rates are negotiated.
- The term is up to 20 years for real estate and 10 years for machinery and equipment.
Contact
Contact the Lake City EDA at 651-345-6808, or email esparks@lakecityeda.com for additional information.
Small Business Development Loan Program
The Minnesota Agricultural and Economic Development Board (MAEDB) administers this loan program to promote the creation of jobs and assist business expansions in the state. The MAEDB issues industrial development bonds backed by a state-funded reserve of 25% and uses the proceeds to provide loans to businesses.
Eligibility
- Manufacturing and industrial businesses located or intending to locate in the state are eligible.
- The company must meet the Small Business Administration (SBA) definition of a small business to be eligible under this program. Generally, firms with fewer than 500 employees meet this criterion.
Requirements
- The project must create a significant number of new jobs.
- Funds can be used for land, buildings, machinery and equipment, and project administration costs.
- Working capital and debt refinancing are not eligible.
- At least 20% of project costs must be privately financed through equity (25% is required for equipment).
- First position on real estate or equipment is required along with the personal guarantees of the owners. Other security may be required.
- Bond issuance costs of 4% are capitalized with the loan principle. 10% of the bond issue must be escrowed.
Rates/Terms
- Amounts from $500,000 to $6,000,000 are available.
- Rates are fixed and are determined by the market rate for similar securities at the time the bonds are sold.
- Term is up to 20 years for real estate and 10 years for equipment, not to exceed 80% of its useful life.
Contact
Contact the Lake City EDA at 651-345-6808, or email esparks@lakecityeda.com for additional information.
504 Corporation
The 504 Corporation is a nonprofit organization certified by the U.S. Small Business Administration (SBA) to provide financial assistance to small businesses. As an SBA certified development company, the 504 Corporation works with the SBA and lenders to deliver the 504 Loan Program to small businesses. The staff also assists businesses with local, state, and federal financing programs and provides general business assistance.
Through the SBA 504 Loan Program, the 504 Corporation provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.
Typically, a private lender provides 50% of the project financing, and 40% is funded by a debenture guaranteed by the SBA. The remaining 10% is equity provided by the borrower. The extent of the SBA’s participation is usually $1,000,000, although $1.3 million may be available under certain circumstance.
SBA 504 Loan Program
Eligibility
To be eligible, the business must be operated for-profit, have a tangible net worth of less than $7 million, and have an average net income that is less than $2.5 million after taxes for the preceding two years.
Requirements
- Loans must be used for fixed asset projects such as purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping; construction of new facilities or modernizing, renovating, or converting existing facilities; or purchasing long-term machinery and equipment.
- Funds cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.
- One job must be created for every $35,000 received.
Rates/Terms
- Interest rates are pegged to an increment above the current market rate for 5-year and 10-year U.S. Treasury issues.
- Terms of 10 or 20 years are available.
- Fees typically total 3% of the debenture.
Contact
Contact the Lake City EDA at 651-345-6808, or email esparks@lakecityeda.com for additional information.
Dwayne Lee
Director of Business Development
Rochester Office
220 South Broadway, Suite 100
Rochester, MN 55904
Phone: 507.288.6442
Fax: 507.282.8960
Small Business Administration
SBA 7(a) Loan Program
The 7(a) Loan Guaranty Program is one of the primary lending programs of the SBA. It provides loans to small businesses that are unable to secure financing on reasonable terms through normal lending channels. The program operates through private-sector lenders, which provide loans that the SBA guarantees. The SBA has no funds for direct lending or grants.
Eligibility
- Most types of businesses are eligible as long as they are for-profit and operate in the United States.
- The firm must meet the SBA’s definition of a small business, which varies depending upon the type of business it is. The vast majority of businesses meet this definition.
Requirements
Funds can be used for real estate, machinery and equipment, inventory, and working capital.
Rates/Terms
- $2 million is the maximum loan available under the 7(a) program, although $1 million is the maximum exposure of the SBA under a guarantee.
- For loans of $150,000 or less, the SBA guarantees 85% of the loan.
- For loans greater than $150,000, the SBA guarantee is 75%.
- Interest rates may be fixed or variable and are negotiated between the lender and borrower subject to SBA guidelines, loan size, and the term of the loan.
- Maximum terms are 25 years for real estate and equipment (limited to the economic life of the asset) and 7 years for working capital (although under certain circumstance this can be extended to 10 years).
- Guarantee fees apply based upon the size of the loan ranging from 1% - 3.5%.
- All loans are subject to a 25 basis-point annualized servicing fee on the outstanding balance of the guaranteed portion of the loan.
- Finally, there are penalties for pre-payment
Contact
All 7(a) loans are provided by lenders, so interested applicants should contact their local bank for further information and assistance in the SBA loan application process.
SBA Express Loan Program
The SBA Express loan program is a simplified loan guarantee program that is essentially the same as its 7(a) loan program. The Express program is typically much faster and easier than the 7(a), however loan amounts cannot exceed $350,000. The SBA guarantees 50% of the loan and credit decisions are typically made within 36 hours.
Eligibility
- Most types of businesses are eligible as long as they are for-profit and operate in the United States.
- The firm must meet the SBA’s definition of a small business, which varies depending upon the type of business it is. The vast majority of businesses meet this definition.
Requirements
- Funds can be used for real estate, facility expansion or conversion, machinery and equipment, inventory and supplies, purchase an existing business, and refinance existing business debt that is not already structured with reasonable terms and conditions.
- Loan proceeds cannot be used to effect a partial change of business ownership, reimburse funds owned to an owner, pay delinquent taxes, or for any unsound business purpose.
Rates/Terms
- The maximum loan amount is $350,000.
- Interest rates are negotiated between the borrower and lender, may be fixed or variable, depend upon the size of the loan, and are tied to the prime rate.
- There is a 2% guaranty fee for loans up to $150,000 and a 3% guaranty fee for loans over that amount.
- Maximum terms are 25 years for real estate and equipment (limited to the economic life of the asset) and 7 years for working capital (although under certain circumstances this can be increased to 10 years).
- Collateral might not be required for loans up to $25,000. The bank making the actual loan makes this determination.
Contact
SBA Express loans are arranged through your local lender.
