HF1114

1. Purpose

2. Create the GroundBreak Capital Access and Innovation Fund to expand access to capital for Minnesota startups, commercial real estate development, and homeownership. The fund brings together philanthropic, private, and civic partners to improve access to flexible capital and traditional bank loans.

3. Key Provisions at a Glance

4. GroundBreak framework: Establishes a coalition (GroundBreak) and a GroundBreak loan pool to provide low-cost, long-term loans through partner organizations.

5. Originating partners: Community development financial institutions (CDFIs) or nonprofit groups that help with business and economic development will participate in delivering loans and support.

6. GroundBreak funding: An initial appropriation to support forgivable loans, equity enhancements, and down payment assistance, with ongoing funding planned in specific years.

7. Minneapolis Foundation role: The Foundation receives the funds and provides capital to originating partners to deliver the various loan programs.

8. Funding Details

9. Initial appropriation: $50,000,000 in fiscal year 2026 to support the program.

10. Ongoing base funding: $25,000,000 in fiscal year 2028 and $25,000,000 in fiscal year 2029; $0 in fiscal year 2030.

11. Purpose of funds: To improve access to capital for entrepreneurship (startups), commercial real estate development, and homeownership through three types of forgivable or partially forgivable loans.

12. Eligibility and Use of Funds

13. Forgivable startup loans (Subd. 3):

    • Up to $50,000 per loan.
    • Forgiven 100% after three years if funds are used for approved purposes (e.g., inventory, payroll, rent, technology, equipment, marketing, etc.).
    • Eligibility criteria: business must be a startup with state operations, lack access to traditional startup capital, submit a business plan, and complete a technical assistance program or obtain a recommendation from an originating partner.
    • Preference for job growth: priority given to businesses that hire at least one W-2 employee.

14. Commercial real estate equity enhancements (Subd. 4):

    • Projects with total costs under $10,000,000.
    • Equity enhancements provide capital to support real estate developments.
    • Financing structure preference: at least 60% senior debt from a traditional financial institution; up to 35% of junior debt through an originating partner and GroundBreak loan pool.
    • Maximum grant/loan amount per project: up to $250,000.

15. Forgivable down payment assistance loans (Subd. 5):

    • Tied to the Advancing Black Homeownership Community Fund Special Purpose Credit Program or similar program.
    • Eligibility: resident of the seven-county metropolitan area; no prior ownership in a principal residence in the previous three years; income at or below the Start Up Income Limits for small households.
    • Loan amount: up to $25,000; forgiveness over five years (20% per year).
    • Conditions: forgiveness can be affected if property changes to non-owner occupancy, is refinanced ineligible, title transfers, or foreclosure occurs; hardship recapture can be waived with approval; can be combined with other down payment programs.

16. Administration and support (Subd. 6):

    • The Minneapolis Foundation will set up accounting for tracking loans and enhancements.
    • Administrative allowances: up to 5% of forgivable startup loans and equity enhancements for admin/monitoring; up to 3% for technical assistance (language, culture, technology); up to 10% for administration of the down payment loans.
    • Uncommitted funds: any money not committed by June 30, 2029 must be returned to the commissioner and canceled back to the general fund.

17. Administration and Oversight

18. Role of the Minneapolis Foundation: Manage the program, allocate funds to originating partners, and oversee loan issuance and reporting.

19. Use of funds for administration: Defined caps for administrative and technical assistance activities.

20. Public accountability: Foundation must maintain a public website reporting on fund use and performance measures; an independent audit is required.

21. Reporting and Accountability

22. Legislative reporting: By February 15, 2027 and annually through February 15, 2030, the Foundation must report to the relevant legislators on fund use, program outcomes, and impacts, including:

    • The number of businesses, commercial real estate projects, and homeowners funded.
    • Descriptions of supported projects and recipients.
    • Aggregated demographic information and program impact on job creation.

23. Public transparency: The Foundation must maintain a public website with fund-use and performance data.

24. Administrative and audit requirements: Up to 4% of funds may be used for administration/monitoring; an independent audit of fund use is due by February 15, 2027.

25. Significant Changes from Current Law

26. Creates a new, multi-faceted fund (GroundBreak) and a formal loan pool to expand access to flexible capital for startups, commercial real estate, and homeownership.

27. Establishes forgivable and partially forgivable loan products with specific eligibility criteria, repayment terms, and performance-based forgiveness timelines.

28. Ties down payment assistance to an SPCP (Special Purpose Credit Program) and sets income/residency criteria for eligible borrowers.

29. Defines a structured funding timetable and reporting/oversight requirements that shape how the program is run and evaluated.

Relevant Terms - GroundBreak - GroundBreak loan pool - Originating partner - Forgivable startup loan - Equity enhancements - Commercial real estate equity enhancements - Forgivable down payment assistance loan - Special Purpose Credit Program (SPCP) - Advancing Black Homeownership Community Fund - Minneapolis Foundation - Seven-county metropolitan area - Traditional financial institution - W-2 employee - Startup (seed funding) - Forgivable loan - Recapture (forfeiture/repayment scenarios) - Technical assistance (language, culture, technology) - Public reporting website - Independent audit - Economic development funding - Forgivable down payment loan forgiveness schedule (20% per year)