Minority  |  Ohio Minority Business Direct Loan Program

Minority

Ohio Minority Business Direct Loan Program

Contact Us

Allen McConnell
Manager
Minority Business Development Division
(614) 752-4833

The program provides fixed, low-interest rate loans to certified minority-owned businesses that are purchasing or improving fixed assets resulting in creating new jobs for Ohioans. The Minority Business Direct Loan Program determines the eligibility of a business by:

  • Evaluating the number of jobs created or retained;
  • Participation of the business and a conventional lender in the project and;
  • Demonstrating that the State's assistance is necessary in order for the project to go forward.

In its review of loan applications, the office also evaluates the management capacity of the company, the availability of working capital, and the overall ability of the company to repay its debt. These criteria are designed to provide a more definitive review of the applicant's need and capabilities.

The State's financing is take-out financing. In other words, the business will need to complete its project utilizing interim financing from a conventional lender, and its equity. When the project is completed, the State's funds will be released.

Funds received under the Minority Direct Loan Program may be used for part of the cost of acquisition, renovation or construction of depreciable fixed assets.

This includes the following categories:

  • Acquisition of land and buildings
  • New construction
  • Renovation to existing buildings
  • Acquisition of machinery and equipment

In addition, limited soft costs related directly to the fixed asset expenditure may be included. Examples of eligible soft costs include: architectural/engineering costs; installation costs for machinery; and financing costs for bank loans.

Minority Direct Loan funds may not be used for:

  • Working capital
  • Refinancing
  • Rolling stock
  • Inventory/receivable financing
  • Speculative real estate development
  • Relocation costs
  • Office equipment
  • Small tools
  • Supplies

Eligible borrowers include any operating business certified by the Ohio Department of Administrative Services State Equal Opportunity Coordinator as a Minority Business Enterprise (MBE) and demonstrate that its fixed asset expansion/retention project will create or retain jobs for Ohioans.

The Minority Business Direct Loan Program may lend funds to businesses engaged in commerce, manufacturing, research and development or distribution.

Under Ohio Revised Code Chapter 122.76 (A), other eligible borrowers include Community Improvement Corporations and Ohio Development Corporations.

  • The minimum direct loan under the Minority Business Direct Loan Program is $45,000.
  • The maximum participation by the Minority Business Direct Loan Program is based on financing needs but cannot exceed 75% of eligible project costs.**
  • The actual level of participation will be determined by the Ohio Development Services Agency based upon the criteria described under "Criteria for Loan Application Evaluation."

** Guidelines used by the Minority Business Development Division normally limit the loan amount to $450,000. However, the Director of the Ohio Development Services Agency may authorize a higher loan amount or modified terms which address a unique and demonstrated economic development need.

The interest rate for Minority Direct Loan financing is currently set at a fixed rate of 3 percent.

The term on the Minority Business Direct Loan will be based upon:

  • The useful life of the assets being financed.
  • The term of the bank loan in the project.

The term on a Minority Business Direct Loan cannot:

  • Exceed 15 years for real estate financing, or 10 years for machinery financing.**
  • Exceed the term of the bank loan.

** Guidelines used by the Minority Business Development Division normally limit the loan amount to $450,000. However, the Director of the Ohio Development Services Agency may authorize a higher loan amount or modified terms which address a unique and demonstrated economic development need.

Minority Business Direct Loan Project Structure

Bank 50%
Owner’s Equity 10%
Minority Direct Loan 40%
Total   100%

The State may request any of the following as collateral or security for the financing invested in a project:

  • Personal guarantees from owners.
  • Corporate guarantees from related companies.
  • First mortgage or lien position on the assets financed with State funds (share with bank).
  • Key person life insurance on the principal operating officer(s) of the company.
  • Financial covenants on the operations of the business.
  • Letter of credit.

The Minority Direct Loan Program requires the payment of two fees:

  • A $300 nonrefundable application fee submitted at the time of the filing of the application; and
  • A processing fee of 1.5 percent of the amount of the State loan which covers all legal expenses associated with the State's processing of the loan

Companies receiving assistance under the Minority Direct Loan Program are not required to complete their project utilizing the Ohio Prevailing Wage for construction, renovation and machinery installation.

The following areas will be evaluated by the Ohio Development Services Agency staff in making a determination that the business is eligible to receive Minority Business Direct Loan financing:

  • Ability to Repay
  • Management
  • Working Capital
  • Need
  • Job Creation
  • Job Retention
  • Minimum Assistance Necessary
  • Occupancy
  • Collateral
  • Step 1: Contact Decole Harton, Loan/Bond Officer of the Minority Business Development Division to begin application process.
  • Step 2: File the Financial Assistance Application with nonrefundable $300 application fee.
  • Step 3: Documentation will be reviewed by the Minority Business Development Division for eligibility.
  • Step 4: If eligible, Minority Business Development Division will present to Minority Development Financing Advisory Board (MDFAB).
  • Step 5: If approved by MDFAB, request will be sent to State Controlling Board for approval and disbursal of State funds.
  • Step 6: If approved, Development Services Agency will prepare Commitment Letter between State and borrower which must be signed to begin project.
  • Step 7: When project is complete the State will disburse its funds to interim financing lender.