NEW ULM – The New Ulm Economic Development Authority (EDA) held the first in a series of work sessions to review its loan and grant programs Tuesday.

The board first discussed revisions to the Commercial Property Rehab Loan program. Details on that discussion were published in the Thursday, Feb. 12 edition of The Journal. The EDA Board also discussed changes to the Small Business Loan program.

The Small Business Loan program is one of the newer EDA programs. City Manager Chris Dalton said it was originally called the Limited Loan Program, but saw limited use and was changed to the Small Business Loan program in 2020 during the COVID pandemic. The program was a method of providing small businesses with financial assistance.

Currently, the programs award loans between $2,000 to $10,000 at 1% interest over a five-year term. The business is required to be open and have a storefront. The business is considered a small business if it has 20 or less full-time employees.

Dalton said the program worked as a micro-loan for businesses that need a small investment quickly that a bank was unlikely to provide.

The small business loan is connected to the Commercial Property Rehab Loan through its funding source. Dalton recommended breaking the small business loan off into a separate revolving loan fund.

“Of all our programs, the small business loan is probably the one that will touch all our businesses,” Dalton said. “What we here the most is that we don’t do enough to serves the businesses that are currently up and running.”

EDA board member Lindsay Henn said the small business loan was a good opportunity to provide gap financing, but she felt the loan amount was too small.

“Ten thousand does not get you very far,” she said. “My suggestion would be to raise that to at least $20,000.”

EDA Director Heather Bregel said since she took it over the loan has been used by local businesses to replace coolers at restaurants and florist shops. A chiropractic office used the loan to purchase equipment. Other businesses have used it cover payroll after tariff costs spiked.

“Those are all existing businesses–not start ups–that have been in our community for many years that had a need and we were able to help them out,” Bregel said.

She also recommended small business loan have a separate funding source from the commercial rehab loan to prevent the fund from being quickly depleted.

Bregel suggested a credit score also be required for approving the loans if the maximum amount is increased.

The board discussed how long a businesses needs to be open before it can apply for the loan. As written, a business could apply for this loan the moment its doors open.

Dalton recommended requiring a business be open one year to be eligible. After a year the chances of the businesses continuing are better.

Board member Mike Lieb agreed with the year. He also suggested the interest rate be 2% to be consistent with other EDA loan programs. He was hesitant to raise the loan amount beyond $10,000 because then the government was competing with area banks.

Board member Andrea Boettger agreed the loan should remain capped at around $10,000 because it is for small business, it should be a small loan.

Henn was concerned the $10,000 loan was worth the effort to apply.

“Its very minor the amount of relief you get from at $10,000 loan,” she said. “Is it worth it?”

Bregel argued the loan could help a business stay open in an emergency. The low interest rate also made it easier for a business to repay the loan. She said for the larger need, the business would likely need a bank.

Mayor Kathleen Backer said we have seen inflation in the last few years so increasing the loan to $15,000 might be more realistic.

Board member David Christian was OK with increasing the maximum loan amount. He believed this loan was about making sure a business stayed open in an emergency.

Henn argued the $10,000 still only served as a temporary band-aid. Even with the quick help, the business could still close after six months.

Lieb said he did not feel the small business loan was enough to serve as gap financing or as emergency funding and represented the greatest risk to the EDA.

Dalton agreed, the small business loan was riskiest EDA program. That is why he recommended keeping the maximum loan low. He recommended not exceeding $15,000.

Dalton further suggested businesses not be allowed to use the loan to pay rent or utilities because if a business cannot pay those, the loan would not save the business and the loan was too risky.

“It really is to help those businesses that just need that little extra,” he said. “It’s not there to keep them afloat for 30 days.”

Henn was not convinced the small business loan could make a major impact of business retention and believed the funds could have broader impact in different program.

“Is the goal of the program a quick fix, or do we want a longterm fix to make things more sustainable?” she said.

Dalton said the EDA needs to have short term and long term impact on the local economy. He believed a short term program could eventually have long term impact.

“What a program like this does is show the business community that we care about their business regardless of size or who they are,” he said.

Dalton said there are some people who say New Ulm is not a business friendly community, but this program is a way of showing businesses the city will support them.

Bregel said staff does receive comments from businesses owners saying the city only wants to help start-ups. The small business loan is an example of them supporting existing businesses instead of focusing on new businesses.

As this was a work session, no official change to the small business loan program.

Dalton said staff would work on a draft based on the boards feedback and bring it to the March EDA meeting for formal approval, along with a draft for the new commercial rehab loan program.

The tentative plan for the new small business loan is to set the maximum loan at $15,000 with a 2% interest rate. Businesses would need to be open for one year to be eligible and the loan cannot be used for rent or utilities.