EDA adjusts business incentive grant program
NEW ULM — New Ulm’s small business incentive grant program was tweaked by the New Ulm Economic Development Authority on Tuesday.
The board increased the yearly allocation to the program, but added requirements for those applying.
The small business incentive grant was approved in October 2019 to support new small businesses with start-up expenses during their first year. The grant reimburses business owners for eligible expenses up to $10,000.
The program has been extremely popular. Each year the EDA places $50,000 into the program and each year all funds were allocated within the first few months of the year. In 2022, the city increased the fund to $100,000 and was able to award grants to 10 new businesses. For 2023, another $50,000 was allocated to the program but as of February, all the funds are earmarked, resulting in a waiting list.
In December, the EDA discussed options for expanding the program and/or placing greater requirements on who can receive the funds. The EDA board decided to make no changes during the December meeting as three new board members were joining in 2023. With the new board members in place, the staff brought the issue back for discussion.
Housing Coordinator Heather Bregel said the success rate for the business was high, with 91% of businesses receiving the grant remaining open through their first year. Most of the businesses remain open beyond the year.
City Manager Chris Dalton said the measure of success was seeing a business remain open through the first year. Only one of the businesses receiving the grant closed within the first year.
Bregel said that based on the demand for the funds, staff proposed three changes. The first was a change to the application process. Businesses can submit for the grant before opening, but will not be placed on the waiting list. Businesses that are already opened would be prioritized for the funds. Second, business owners must meet with EDA consultant Wendy Anderson to develop a business plan before they can receive the grant. Third, the grant amount would be $5,000 instead of $10,000 to spread the money through more businesses.
The EDA board agreed that the application process needed to change. No grant money is paid out until a business is open for at least three months, but if a business can apply for the grant before opening, the funds could be earmarked quickly, without any plan for an opening date. There was also a desire to see applicants complete a business plan to insure grants were going to businesses with a credible business model.
EDA Chair Andrea Boettger said she wanted to see a business plan presented because the money was taxpayer funds and the EDA needed to be sure these were appropriate investments.
Boettger believed requiring a business plan would set the businesses up for success by teaching them the basics of running a business.
Board member Michelle Markgraf added she would also like to see the grant recipients come back from the board to communicate how the funds were used.
Board member Les Schultz believed this program fit the EDA’s mission and was willing to increase the allocation to the program.
“This is what is helping fill up our downtown stores,” he said. “We’ve had some great business that has come out of this and some daycares.”
Schultz agreed the grant applicants should present to the board as a requirement for the business.
Board member Char Kalk suggested a business be open at least three months before applying for the grant. The $10,000 should not sway whether a business opens at all.
Board member Tom Berg agreed that early applications were tying up the program. He believed the businesses needed to be open before applying.
Dalton recommended placing a hard cap on the money allocated to the program. He said there needs to be a cap on the year or the program would run out of funds. He believed an $80,000 limit each year for the program was manageable.
Schultz made a motion to allocate an additional $30,000 to the grant program for a total of $80,000. The motion also required an applicant to be open 30 days before applying and require the business owner to meet with the EDA consultant to develop a business plan before receiving the grant. All applicants must present to the EDA how the grant impacted the business within one year of receiving it.
The motion was approved with board member Lindsay Henn abstaining.