Overview
These guidelines are designed to provide gap financing to non-primary sector businesses in North Dakota. The program offers loans to complement primary lender financing, facilitating projects that might not proceed without this support.
Eligibility Criteria
To be eligible, the applicant must not be eligible for primary sector certification and must be in a rural community.
- Business Type: For-profit businesses that are not eligible for primary sector certification, specific non-profits (including economic development organizations and chambers of commerce), and political subdivisions.
- Location (Rural): Projects must be in a city with a population of less than 10,000 or more than 5 miles outside of city limits.
- Size: Businesses with fewer than 100 employees.
- Exclusions: Non-profit organizations
Application Process
- Lead Lender Involvement: Applicants must partner with a lead lender that will provide at least 60% of total project financing.
- Submission: The business submits the application, including:
- Credit Analysis – from the lead lender.
- Personal financial statements of principals and guarantors.
- Terms of the primary financing.
- Letter of support: Applications must include a letter of support from the community’s economic development organization, local government, or regional planning entity, confirming that the project is not expected to negatively impact existing local businesses and is aligned with local development priorities.
- Review: The North Dakota Department of Commerce reviews applications for completeness and eligibility and provides the application to the Bank of North Dakota for underwriting. The North Dakota Development Fund Board reviews the application for a final funding decision.
Loan Terms
- Amount: $25,000 to $1,000,000, not exceeding 40% of total project costs.
- Interest rate: Fixed at 2%.
- Term: Up to 5 years, with amortization aligned to the useful life of the asset, not exceeding 20 years.
- Equity Requirement: Minimum of 10% equity injection by the borrower.
- Origination Fee: 1% of the loan amount.
- Collateral: Shared first position on assets financed, matching the collateral of the primary lender. Exceptions may be made to take a subordinate position on assets financed.
Eligible Uses of Funds
- Working capital
- Purchase of equipment
- Real estate acquisition (excluding passive investments)
- Interim construction financing
Ineligible Uses
- Refinancing existing debt
- Payment of delinquent taxes
- Passive real estate investments
- Loan proceeds shall not be used to establish or expand a business that offers substantially similar products or services as an existing business located within the same community or market area, unless a demonstrated unmet need is verified.
Administration
- Program Oversight: North Dakota Development Fund
- Loan Servicing: North Dakota Development Fund
- Monitoring: Regular reporting by borrowers and lead lenders to ensure compliance
Applications and supporting documents should be submitted via email to brlopp@nd.gov
Applications are reviewed on a first-come, first-serve basis.