Officials, community lenders report hurdles and fixes as Minnesota Promise Act rolls into second round

Neighborhood Development Center and community lenders told the Senate Committee on Jobs and Economic Development on March 5 that the Minnesota Promise Act has delivered emergency support to hundreds of small businesses but exposed operational and eligibility problems that must be fixed before a larger second round.

NDC President and CEO Renee Dossman said NDC and partner lenders distributed $7,340,000 in the program’s first round to 487 businesses, with an average grant of about $15,000. The program, established in 2021, originally authorized $72,000,000 in state grant funds targeted to businesses in North Minneapolis, South Minneapolis and St. Paul.

The Promise Act aimed to help businesses with operating costs such as payroll, rent, utilities and equipment. "Seventy-four percent of the entrepreneurs said it definitely helped them with access to capital," Dossman said, citing voluntary post‑award responses. She described common uses as equipment, payroll and rent and read a testimony from a grantee: "This grant helped her to fly and to dream and to do," attributing the line to Shontae Holmes, owner of All Washed Up in North Minneapolis.

Why it matters: committee members pressed presenters on whether the remaining roughly $65 million in appropriated Promise Act funds will reach intended recipients, and on safeguards against fraud and waste. Lawmakers and program partners said improvements to outreach, technical assistance and verification are required to reach businesses that lacked the digital, tax‑filing or financial literacy capacity to apply or verify eligibility in round one.

What presenters told the committee

- NDC’s delivery: Dossman described an NDC-built application portal and a five‑stage verification workflow supported by a team that checked street addresses, zoning and tax records. NDC paused distribution for legislative‑intent clarification and additional attestations, she said, and noted a third‑party financial audit is under way. NDC reported running more than 50 informational sessions, building a technology platform from scratch and producing roughly 1,700 hours of technical assistance. Dossman said about 80% of applicants needed substantial support.

- Program scale and attrition: NDC reported roughly 6,000 initial inquiries, which fell to 3,000 because many applicants did not meet statutory geography or business‑start date requirements; that pool narrowed to about 1,300 applicants that met further criteria and ultimately 487 awards were made in the first round.

- Fraud mitigation and verification: Dossman said the program faced a tension between reducing applicant burden and ensuring verification. NDC added identity verification tools, expanded its five‑stage review and said DEED staff also review applications.

- Suggested legislative changes: NDC proposed changing eligibility from a single 2021 tax‑year requirement to allowing the prior two years of tax returns as acceptable; adding a preference point for businesses that were operating in 2021; and awarding an extra 0.5 percentage point for brick‑and‑mortar businesses to align interpretation with legislative intent.

- META/MIDA lending and loan pipeline: Adrian Ruddock, vice president of lending at MIDA (presenting for the META partner role), said META received more than 1,800 applications and moved a subset into underwriting. He described business and real‑estate loans that enabled restaurant expansions, acquisition of properties and retention or creation of jobs. META reported a near‑term pipeline of roughly $13.9 million in potential deals and asked the committee to consider raising the program’s revenue cap so slightly larger small businesses could qualify.

- Minnesota Initiative Foundations (six regional presenters): representatives from the Initiative Foundations described grant and loan deployment in Greater Minnesota. Collectively the foundations reported distributing roughly $1.1–$1.2 million each in grants in their regions, making several small loans (examples cited include a dental arts studio owner using a $90,000 loan to buy a building and a rural manufacturing business kept open after a bank liquidation threat), and urged statutory tweaks: allow Promise Act loan repayments, when revolved, to reenter general small‑business lending pools rather than remain constrained to 2021‑based eligibility forever; increase single‑loan caps (several presenters recommended $2,000,000); broaden the statute’s definition of allowable fixed assets to include equipment and facility improvements; and permit amortizations longer than 10 years for real‑estate loans (foundations suggested 20 years) to improve borrower cash flow.

Questions from lawmakers and responses

Senator Nelson asked whether grantees had reported outcomes beyond how they used funds. Dossman said reporting was voluntary under current law and that NDC collected voluntary data showing approximately 30% of respondents used grants for payroll, 20% for rent/mortgage, 8% for utilities, 28% for equipment and 13% for other expenses. She said NDC and partners can require or provide stronger reporting if the Legislature changes statutory requirements.

Senator Mohammed and others focused on process and equity: officials said outreach included in‑language support (Spanish, Hmong, Somali), community partners to reach trusted neighborhood organizations, SMS status updates for applicants, and expanded in‑person technical assistance planned for round two. Dossman said NDC reached predominantly entrepreneurs of color in the targeted neighborhoods and had hired staff from those communities to do outreach.

Operational and policy decisions requested or directed

- NDC said it will expand into Uptown in spring 2025 and the broader metro in fall 2025 and shift community partners’ roles toward earlier technical assistance. - Presenters requested legislative clarification or changes for eligibility (allow prior two years of tax returns), reporting requirements and other statutory tweaks described above.

Limits of the record

Presenters repeatedly said the law did not require grantees to submit receipts or mandatory post‑award reporting in round one; most outcome data reported to the committee was voluntary and sample‑based. Committee members asked whether the grantors (NDC, META, initiative foundations) could impose reporting requirements; presenters said they could if supported by the Legislature and if administrative requirements did not slow payments.

Ending note

Program partners asked the committee to preserve and refine the Promise Act’s intent while easing barriers that prevented otherwise eligible businesses from receiving funds in round one. "We have learned and we know what we need to do going forward," Dossman said, asking lawmakers to trust the delivery partners to distribute the remaining funding in waves rather than opening a single large round.