The Minnesota Department of Employment and Economic Development recently launched the Automation Loan Participation Program as part of the $97 million State Small Business Credit Initiative.
And Security Bank & Trust Co. has the scoop on everything you need to know.
Find out what financing DEED has to offer Minnesota small business owners and if you are eligible for the favorable loan terms.
What is the NEW Automation Loan Participation Program?
The Minnesota Department of Employment and Economic Development (DEED) launched this program to cover financing gaps and expand financing opportunities for businesses purchasing machinery, equipment, or software to increase productivity and automation.
What are the Loan Terms?
Regardless of the terms of other private financing, the ALPP loan will have the following terms:
- Loan amount up to $500,000
- 1% interest rate
- The term will be 5 to 7 years based on the life of the asset per the Internal Revenue Service MACRs tables.
- Payments may be deferred 6 to 12 months
- Needs to be made in conjunction with private financing
- If requested by lead lender, DEED can take a subordinate position on collateral
For questions on Security Bank's equipment loan terms, contact one of our experienced lenders.
Who is Eligible?
Eligible borrowers include manufacturing, distribution, technology and warehousing businesses located in Minnesota with fewer than 500 employees. The business must be using the funds to purchase machinery, equipment, or software to increase productivity and automation. That machinery, equipment, or software must be used in a facility in Minnesota.
How do you Apply?
Head to Minnesota Department of Employment and Economic Development's online application and fill it out completely. This program is here until funds last, so do not procrastinate on applying.
FAQs
Does owner equity meet the 1:1 private financing requirement?
No. The 1:1 private financing match should be made in the form of a term loan from a qualified financial institution.
Are there additional restrictions for these funds?
Yes. The loan proceeds cannot be used to:
- Refinance existing or new debt.
- Repay delinquent federal or state income taxes unless the eligible business has a payment plan in place with the relevant taxing authority.
- Repay taxes held in trust or escrow.
- Reimburse funds owed to any owner for any startup or continuance costs.
- Purchase any portion of the ownership interest, except for the purchase of an interest in an employee stock ownership plan qualifying under Section 401 of Internal Revenue Code, worker cooperative, or related vehicle, provided that the transaction results in the employee stock ownership plan or other employee-owned entity holding a majority interest (on a fully diluted basis) in the business.
How is automation defined?
Automation technology is a process or procedure performed with minimal human assistance and intervention. Adoption, implementation and utilization of any one of three types of automation — fixed, programmable, and flexible — in production are acceptable for consideration of this loan program. These are further defined as:
- Fixed Automation - or "hard automation," refers to a system where the automated production processes and assembly are preset to produce a single product, usually at high volumes. The machines' cams, gears, wiring, and other hardware cannot change easily making the product style pretty inflexible once built. This form of automation is characterized by high initial investment and high production rates.
Examples of fixed automation:- Automated assembly machines
- Web Handling and converting systems
- Chemical manufacturing processes
- Material conveyor systems
- Machining transfer lines
- Paint and coating automation processes
- Programmable Automation - is a form of automation for producing products in batches. The products are made in batch quantities ranging from several dozen to several thousand units at a time. For each new batch, the production equipment must be reprogrammed and changed over to accommodate the new product style. This reprogramming and changeover take time to accomplish, and there is a period of nonproductive time followed by a production run for each new batch.
Examples of programmable automation:- Numerically controlled (NC) machine tools
- Programmable logic controllers
- Industrial robots
- Flexible Automation - is an extension of programmable automation. In flexible automation, the variety of products is sufficiently limited so that the changeover of the equipment can be done very quickly and automatically. The reprogramming of the equipment in flexible automation is done off-line at a computer terminal rather than using the production equipment itself.
Examples of flexible automation:- Robotics
- Assembly systems
- Material handling systems
More Funding Opportunities for Minnesota Small Businesses
The Automation Loan Participation Program is the fifth of six programs so far announced as part of the new SSBCI initiative. Other programs include:
- The Growth Loan Fund, providing direct loans to innovative seed- and early-stage technology businesses
- The Minnesota Loan Guarantee Program, providing 80% loan guarantees for qualified loans made by enrolled institutions
- Commercial or residential loan with a private financial institution
Security Bank & Trust Co. is able to offer equipment financing to small businesses who are eligible for this program and need to still meet the private financing requirement. Check out our Guide to Business Loans or talk with one of our lenders today about your rate and payback options.
