EDA Meeting Date: October 27, 2025
To: Members of the Economic Development Authority
From: Emery John, Community Development Program Associate
Title
Micro loan Program Discussion
Body
Action Requested:
Discussion of the proposed draft, including highlighted policy questions.
Summary Report:
Micro loans are a common tool that EDAs deploy to foster business development. They provide capital at low interest rates with favorable terms and are often accompanied by business development resources. They also help new businesses build credit, which has compounding benefits over time.
Economic development finance best practice advises offering loans over grants. Loans tend to be more sustainable and effective at helping businesses build credit and access financing without depleting EDA resources.
Many of these loan programs are partnerships with local banks, who provide underwriting and monitoring services for a fee. Sometimes the fee is a flat rate ($12/month/loan, in one case - 1% of the loan in another.) The EDA typically handles the program’s marketing and applications, offering technical support and final approval.
Our recent Connecting Business and Community survey program’s results demonstrated a notable dissatisfaction with business’ ability to secure loans -- over a third of the participants noted how difficult it is in Northfield to secure affordable loans.
Furthermore, Northfields 2045 Comprehensive Plan specifically outlines access to capital as a challenge for small businesses.
“Small business owners reported challenges in accessing capital. Around 50% of participants cited access to funding as their biggest hurdle. Businesses expressed a need for micro-grants, loans, and alternative financing, particularly for physical improvements and operational expenses like marketing.” (Sustainable Economic Future: Analysis)
A city-led micro loan partnership closely adheres to the comprehensive plan’s Sustainable Economic Future, Strategy 3: Small Business Development. This strategy calls for “partner[ing] with existing local business support organizations and evaluat[ing] other support opportunities to establish public and private local funding resources for small businesses.”
Staff researched several Minnesota micro loan programs in developing this program draft, including those of Mankato, Owatonna, Brooklyn Park, and Duluth. This draft was primarily developed by Nate Carlson and Emery John, with research support from interns Mia Anzalone and Elijah Allen.
Alternative Options:
N/A
Financial Impacts:
The EDA board has budgeted $30,000 for a micro-loan program in the adopted 2026 EDA Budget.
Tentative Timelines:
August 2025: Approve budget, including micro loan program
October 2025: Discuss draft policy
November 2025: Loan Subcommittee Discussion
Q1 2026: Work with banks and partners to establish loan criteria, underwriting
Q2 2026: Adopt final program draft
Q2 2026: Establish marketing plan for micro loan program
Q3 2026: Fully roll out program