LEDC assists with business loans to individuals or to business owners. We do so by using LEDC's own funds or by presenting a loan package to other lenders. Traditionally, the maximum amount lent to business is $25,000 through other non-profit organizations (with a minimum of $2,000 or less depending on the case). If a loan is requested to a bank for the maximum amount, the loan to a business might be higher than $25,000. It is important to work with a business consultant to help the business define how much is needed and where to go to apply for a business loan.
Traditionally loan terms are in between one and six years and interest rates are between 8% and 11%. All business loans require the applicant to pay closing costs, which include 1% or 2% of origination costs and any fees from liens’ filing. Paying closing costs also guarantees filing.
An individual or a business owner applying for a business loan should expect to wait between three and six weeks to receive an answer. That time may be reduced depending on how well the “loan package” is prepared. LEDC helps prepare loan packages. We assist with the basic documentation needed, such as: financial statements, projections, business plan, business registration, business licensing, leasing process, etc.
Missions and VisionsLEDC's Mission: “To transform our community by
creating economic opportunities for Latinos.”
LEDC's Vision: “A thriving multicultural community,
enriched by Latino leadership, culture and economic influence.”
LEDC’s Loan Program Mission and
VisionMission: “To create economic opportunity by eliminating barriers to entry such as access to capital, enabling potential entrepreneurs or existing ones to start a business or expand.”
Vision: “Economically self-sufficient Latino businesses in Minnesota Rural, Metropolitan and Urban areas.”
Criteria for Lending:
Loan assistance is available to small and medium-sized businesses located in the state of Minnesota. The money for the loan fund will initially come from different sources; some of those sources limit where, geographically, the funds can be used. LEDC is working on getting funds that can be accessed by individuals within the greater Minnesota area, including:
- Rural areas, especially places where LEDC has partnerships
- Twin Cities Metropolitan area
- Urban areas
How an applicant may or may not use
- Leasehold Improvements
- Business insurance
- Working capital
- Equipment purchase
- Business or Building purchase
- Might be used to pay existing debt if such debt is directly related with the business; receipts of purchases required. We will not fund personal expenses.
- Might be used to pay existing debt if such debt’s interest is higher.
- Might be used to pay existing debt if such debt came from predatory lending.
- Cannot be used to pay existing debt of family member especially if family member is husband or wife.
- Cannot be used to pay existing debt unless it is to pay a business partner that is leaving the partnership and the business success is jeopardized by that. Very close consideration from loan officer/business consultant and “loan fund manager” before presenting to loan committee.
- Cannot be used to pay for educational training unless it is to be used by the owner of an existing business and it is proven that training will potentially increase business income. Very close consideration is required from loan officer/business consultant and “loan fund manager” before presenting to loan committee.
How much can be borrowed? What are
the loan terms, loan fees and interest rate?
- From $3,000 to $25,000 ($35,000 perhaps? If LEDC applies for SBA funds or any other federal money). Less than $3,000 depending on usage, business plan/needs, and projections.
- Loan terms from 1 to 5 years depending how funds are used; no penalty for paying before end of term.
- 1% origination fee to LEDC (LEDC might assign part of the origination fee to the sister organization that presented the loan) all fees regarding placing liens and filing documents with the Secretary of State office and other institutions/business depending on the collateral offered. Payment of these fees is negotiable: they can be paid at loan closing of being incorporated in the amount of the loan; borrower in charge of these fees.
- Interest rate might also depend of where the funds are taken from, generally it will be 10% or prime plus 4.
Documentation needed from clients,
and other requirements:
- Application form (will include client profile, authorization to verify information provided and pulling out credit report).
- Personal Financial Statement. Close consideration if applicant owes taxes but not excluded because of it.
- Written business plan, if business exists include business history.
- Two-year projections.
- Description of the business environment.
- Marketing plan.
- Operational and management plan.
- Financial Statements if existing business, at least two years or form beginning up to date.
- Two years of tax returns (a minimum of one year, close consideration from loan officer/business consultant and loan fund manager).
- List of personal/household income vs. expenses, especially if personal/household expenses are higher than what tax returns show as income.
- Registration with the Secretary of State office: Certification of Assumed name, Certification of corporate good standing (At least at loan closing for start-ups).
- Operational agreement if this is in partnership with another person other than spouse.
- Proof of business insurance if existing business; if start-up then proof of business insurance/binder is required at loan closing.
- Copy of business lease contract.
- LEDC will pull credit report with both Social Security Number and with ITIN if client has both (client pays for both reports).
- Credit references if nothing is shown on credit report.
- If no credit history, copy of the last 3 to 6 months of bills such as home phone, cell phone, electricity, gas, cable, among others.
- Take minimum LEDC’s administrative systems and cash flow’s modules before loan is taken to loan committee for approval (subject to revision if applicant come from another sister organization and if loan officer/business consultant is not form LEDC) unless loan if for an existing business with accounting or bookkeeping in place and/or experience is proven.
- Become a member of LEDC (subject to revision if applicant come from another sister organization and if loan officer/business consultant is not form LEDC).