Prairieland EDC Direct Loans

Prairieland EDC Direct Loans

Prairieland EDC created a revolving loan fund designed to benefit small businesses with non-traditional financing originally sources through USDA Rural Development Intermediary Relending Program.

Prairieland Direct Loans are designed to provide a rate and term gap for the small business in rural areas of Minnesota, southeast South Dakota and northwest Iowa.  Generally, not designed to provide a collateral gap.

Flexible Structuring

Prairieland EDC's portion can be 50% of a project up to a $250,000 maximum.

Long-Term Financing

Proceeds can be used for real estate acquisition and/or construction, purchase of machinery and equipment, and working capital.   The term of the loan is dependent on the asset being financed, generally as few as 3 years and a maximum of 15 years.

Low, Fixed Interest Rates

Rate and term is dependent upon risk.  Generally, between 4% – 7%.


Must be for small businesses.  The project must have private funding source of at least 50% of the project.

Collateral and security

All loans to borrowers must be adequately secured with the adequacy of collateral being determined on a case by case basis.  Personal guaranties are required by all owners over 20%.

504 Loan Program

What is the SBA 504 Loan Program?

The SBA 504 Loan program is an economic development tool that provides eligible small businesses long-term, fixed rate financing while promoting business growth and job creation / retention. 

Loans through the 504 Program can finance up to 90 percent (504 loan plus third party lender loan) of a project’s cost for qualifying businesses, preserving cash flow during a longer repayment term.  It also reduces the risk to lenders through a shared financing structure.

Typical SBA 504 Loan Structure

  • Between 10% - 20% down payment requirement depending if the business is start-up / existing or if the use of the property is single purpose / mult-purpose
  • Lending financial institution (bank or credit union) loans 50% of the amount borrowed
  • PEDC contributes between 30% - 40% of the financing guaranteed by the SBA
  • PEDC works with a financial institution to coordinate financing
  • The borrower has two separate loans- one with PEDC/SBA and one with the lending financial institution

Please note:  Equity can be in the form of cash that is not borrowed, cash that is borrowed under limited circumstances, land equity (if owned 2+ years) and standby debt. 

Borrower Benefits

  • As little as 10% down
  • Below – market, fixed interest rates
  • 20-year or 25-year repayment terms on real estate & buildings
  • 10-year repayment terms on machinery & equipment

Eligible Purposes

  • Purchase of land, buildings, machinery and equipment
  • Land improvements
  • Renovation or addition to an existing building
  • Construction of a new building
  • Leasehold improvements
  • Refinancing eligible debt
  • Interest on interim financing
  • Professional fees directly attributable and essential to the project such as surveying, engineering, architectural or legal.


Existing Business and Multi-use Property

New Business and Special Use Property Graph

New Business and Special Use Property Graph

SBA 504 Refinance Program with Expansion

SBA 504 Refinance Program with Expansion

504 Projects may include a limited amount of debt refinancing with expansion.  This program is ideal for companies putting on an addition or buying a new piece of machinery or equipment.  We often find that there is an opportunity to use existing building equity as a down payment as well.

Any amount of existing indebtedness that does not exceed 50% of the cost of the expansion may be refinanced. The debt being refinanced will be added to the expansion cost to establish the total project costs, if all the conditions discussed below are met. “Expansion” includes any Project that involves the acquisition, construction or improvement of land, building or equipment for use by the borrower.


  • Existing general manufacturer is looking at constructing an addition to their facility in the amount of $700,000.
  • Existing real estate appraised market value is $800,000
  • Existing debt on real estate is $300,000

Use of Funds

  • Total Hard Project Costs of $1.0 million
  • Existing RE Equity – minimum needed is $111,111
    • ($1,000,000 / 90% = $1,111,111 - $1,000,000 = $111,111)
  • Existing business and multi-purpose property: eligible for 50/40/10 structure
  • Project structure is determined by “as is” and “as complete” appraised market value


  • Third Party Lender - $555,556 (50%)
  • SBA 504/PEDC - $444,444 (40%)
  • Existing real estate equity - $111,111 (10%)

UsesAmount SourceAmount%
Construction $700,000 Third Party Lender $555,556 50%
Debt Refinance amount $300,000 Prairieland EDC / SBA 504 $444,444 40%
Equity from real estate $111,111 Borrower Injection $111,111 10%
Total Project Costs $1,111,111 Total $1,111,111

SBA 504 Refinance Program without Expansion

SBA 504 Refinance Program without Expansion

Refinancing existing commercial real estate and equipment debt is now a permanent feature of the SBA 504 loan program and can help small businesses take advantage of below market, fixed interest rates.

Below are some of the program highlights followed by some examples.

Eligibility Guidelines:

  • No expansion
  • The loan to be refinanced must be at least 24 months old and in good standing for the last 12 months;
  • Business must be operating for 2 or more years prior to the date of application;
  • No full or partial ownership changes 2 years prior to date of application;
  • Project is defined by appraisal in which cannot be more than 12 months old;
  • Business must be at 51% occupancy at the time of application submission.
  • The Refinancing Project must include “Qualified Debt”
    • Qualified Debt means a commercial loan where substantially all (85% or more) of the proceeds were used to acquire a 504 Eligible Fixed Asset (land, building and/or equipment).
  • The Refinancing Project may also include “Eligible Business Expense”.
    • “Eligible Business Expenses” are expenses other than Qualified Debt including salaries, rent, utilities, inventory or other obligations of the business that were incurred but not paid prior to the date of application or that will become due for payment within 18 months after the date of application (must be specifically described and itemized.)


  • 90% loan to value (LTV) – Loans that include only “Qualified Debt”.
  • 85% loan to value (LTV) – Loans that include “Eligible Business Expense”.
    • The Eligible Business Expenses portion of the Project may not exceed 20% of the appraised value

Example 1

Refinance $500,000 existing mortgage plus $400,000 2nd mortgage borrowered 5 years ago for other business purposes. Property appraised at $1 million.

Example 2

Refinance $700,000 Qualified Debt, plus $100,000 for future operating expenses. Property appraised at $1 million.

Your access to these programs has never been easier!