Most Minnesota business loan programs and grants from cities, counties and the state are not meant to fund a project on their own. They fill a gap next to a bank loan, lower the rate on part of it, or pay back part of the cost after the work is done. That is good news for a business owner, because it means one conversation with a lender can open several doors at once. I wrote this guide to show where those programs live in the communities we serve, how they fit together, and where to find the current details.
How Minnesota business loan programs work alongside a bank loan
Public and nonprofit lenders come in three common shapes. A revolving loan fund lends money, gets repaid, and lends it again. Cities, counties and regional development commissions run them, usually to cover part of a project a bank will not finance by itself, often in second position behind the bank. A participation or matching loan puts public money into the same deal as the bank at a lower rate, so the blended cost comes down. A grant pays part of the cost, usually with a match from the owner, and often by reimbursement after the invoices are paid.
Here is an illustrative example. A Glencoe manufacturer needs $300,000 of new equipment. The bank lends $180,000, which is 60 percent. A regional revolving loan fund covers $90,000, which is 30 percent, behind the bank. The owner puts in $30,000, which is 10 percent. The project gets done with less cash out of the business than a single loan would have required, and each lender takes a share of the risk it is built to carry. Actual shares depend on the program, the project and credit approval.
The pattern holds across the state. Isanti's revolving loan fund says it plainly: it "cannot be used alone, must be used with a bank loan." McLeod County's business development policy asks for a letter of commitment from the lender. Sibley County's fund asks the applicant to review the package with a private lender first. In practice, the bank conversation usually starts the process.
Minneapolis and St. Paul programs
The Minneapolis Two Percent Loan Program is one of the most useful tools in the state, and we have closed a lot of them. The city makes a two percent loan for building improvements and equipment, and the bank lends at least the same amount alongside it. The city sets higher limits in its Great Streets and cultural district areas, and its page lists the current amounts and the contractor and permit rules. You do not need a branch on your corner to use it with us.
St. Paul's Neighborhood STAR program is now grants only, for capital improvements in St. Paul neighborhoods. Larger grants require a match from outside sources, which can include a bank loan. It runs one application round a year, so check the city's page for the next window.
Small business grants and revolving loan funds in our communities
We have branches in 18 Minnesota communities, and many of them run their own programs. The city page is the source of record for amounts, rates and deadlines, so each program below links to it.
McLeod and Sibley counties
Glencoe offers an awning and sign grant and has a long record of tax abatement and tax increment financing projects. Winsted's economic development authority lists a revolving loan fund and a downtown forgivable loan; call the city for the terms. In Brownton and Plato, start with McLeod County's economic development office, which handles county loans, subsidies and abatements. Across McLeod County, the Mid-Minnesota Development Commission runs a regional revolving loan fund that works with traditional lenders. In New Auburn, the Sibley County revolving loan fund fills gaps next to a participating bank for businesses other than farm production, and the Southern Minnesota Initiative Foundation lends in Sibley County in partnership with local lenders.
Carver County
Waconia has the deepest set: a revolving loan fund, the Waconia Works loan fund for smaller projects, a facade improvement grant and a start up grant for new downtown retail and food businesses, all on its grant and loan programs page. Chaska runs a downtown building improvement program with grants and partly forgivable loans, plus tax abatement and tax increment financing for site work. Mayer's economic development authority offers a local business improvement grant in an annual round. In Cologne, Hamburg and New Germany, the county is the place to start: the Carver County CDA's Open to Business advisers help package loans and gap financing.
West metro
Minnetonka offers a commercial code compliance loan and an emergency business loan. Eden Prairie and Wayzata point businesses to Hennepin County, whose Elevate Hennepin small business loans are made in participation with banks and other community lenders.
Cambridge, Isanti, Ramsey and North Oaks
Cambridge has a downtown revolving loan fund, a downtown facade grant and an interest rate subsidy grant, all on its business incentives page. The subsidy pays part of the interest on a commercial real estate loan for a downtown building, made through a participating financial institution, and Security Bank & Trust is one of them. Applications are reviewed quarterly. Isanti's economic development authority runs the revolving loan fund quoted above for buildings and equipment. Both cities are also served by the East Central Regional Development Commission and the Initiative Foundation, which makes gap loans with a lead lender. Ramsey offers a revolving loan fund for gap financing, and Anoka County adds its own. In North Oaks, start with Ramsey County's Open to Business program.
Have a project and a city program in mind? Bring the quote and the program page. A lender can tell you how the pieces fit and what the city will want to see from the bank. Talk with a business banker
State programs and SBA loans
The Minnesota Department of Employment and Economic Development keeps the statewide list on its Financing a Business page. The best known is the Minnesota Investment Fund, which lends to industrial, manufacturing and technology projects that add or keep jobs. The state awards the money to a city or county, which makes the loan, and at least half the project has to be privately financed through owner equity and other lenders.
The federal side is the SBA. The SBA loans we make are conventional bank loans with a partial federal guaranty, which can make room for a longer term or a smaller equity contribution than a conventional loan. Which program fits depends on what you are buying, and our post on which SBA program fits which purchase walks through it.
Farm loan programs and grants in Minnesota
City pages rarely cover farms. The farm programs sit with the state. The Minnesota Department of Agriculture lists every open farm grant and loan on its funding page, and its Rural Finance Authority works through local banks.
The Beginning Farmer Loan is a participation: the authority buys part of the bank's loan at a lower rate, and the farmer makes one payment to the bank. The Agricultural Improvement Loan works the same way for equipment, buildings and land improvements, with the local lender submitting a joint application. The Aggie Bond program gives the lender a tax exemption in exchange for a lower rate to an eligible beginning farmer. Each has a net worth limit and other rules on the state's page.
Most grants for farms come through the state's AGRI program and are paid by reimbursement, so the farm pays the full cost first and gets part of it back. That is a cash flow question worth raising before you buy, and our post on farm operating line renewal covers how a line is sized. Our farm loans and ag lending page lists what we finance directly.
Open each fall for specialty crop growers. The state's Preparing for Extreme Weather grant helps fruit, vegetable, flower and nursery growers pay for irrigation, wells, hail netting and similar projects. It requires a cash match and pays by reimbursement after a contract starts in spring. Applications open each fall, and the grant page carries the current deadline.
Free help putting the package together
The Small Business Development Centers offer free consulting on business plans and on finding the capital to start or grow, through nine regional centers. The Minnesota Initiative Foundations add loans and training outside the Twin Cities. We have worked with the Initiative Foundations on projects in our communities over the years.
How to use these programs well
Start early. Many programs require board or council approval, and some run annual or quarterly rounds. A loan fund that meets monthly can add weeks. Grants often count only the costs incurred after the agreement is signed, and some loan programs will not cover a bank loan that closed before the program approved it, so buying or closing first can cost you the help.
Line up the bank piece. Expect the program to ask for a commitment letter or term sheet from your lender. Our guide on how to get a business loan in Minnesota and our commercial loan application checklist cover what to bring. If two similar businesses have ever gotten different answers, our post on business loan criteria in Minnesota explains why.
Read the strings. Public money can come with job goals, wage floors, local contractor rules or a public hearing for larger amounts. None of that is a reason to skip a program. It is a reason to know the terms before you plan around the money.
Plan the cash. A reimbursement grant or a slow draw on a public loan means the business carries the cost for a while. Talk with your banker about small business loans and lines of credit that bridge the timing.
Questions owners ask about Minnesota business loan programs and grants
Are there small business grants in Minnesota?
Yes, but most are small and targeted, such as city facade, sign and start up grants and state farm grants through the Minnesota Department of Agriculture. Most public money for businesses comes as loans that work beside a bank loan.
What is a revolving loan fund?
A revolving loan fund is a pool of money run by a city, county or regional commission that lends, gets repaid and lends again. It usually covers a gap in a project next to a bank loan, often in second position behind the bank.
Should I talk to the city or the bank first?
Talk to both early. Many city and county programs ask for a commitment letter or term sheet from your lender, so the bank conversation often comes first.
How does the Minneapolis Two Percent loan work?
The City of Minneapolis makes a two percent loan for building improvements and equipment, and a participating lender makes a loan of at least the same amount alongside it. The city lists the current limits by area on its program page.
What loan programs help beginning farmers in Minnesota?
The Rural Finance Authority's Beginning Farmer Loan and Aggie Bond program both work through a local lender, and the Farm Service Agency has its own beginning farmer loans. Each has eligibility rules listed on the agency's page.
The next step
Find your city on the list above, open its page and note the program that fits your project. Then bring that page, a quote for the work and your last two years of financial statements to a banker. We work with these programs in our own communities and across the metro, and we can tell you quickly which pieces fit and what each one will ask of you.
One conversation, every piece of the package. Tell us the project and the program, and we will lay out how the bank loan and the public money fit together. Talk with a business banker
Keep reading: which SBA program fits which purchase, and farm loans and ag lending at Security Bank & Trust Co.
Growing, together.
Programs are run by the cities, counties, commissions and agencies named, which set their own terms, limits and deadlines and can change or close them. Check each program's page for current details. The dollar amounts and shares in the example are illustrative, not quotes or offers. Every loan is subject to credit approval. Nothing here is tax, legal or investment advice. Page last reviewed November 2026.
