Direct Loans
With direct loan financing, MnCIFA is providing capital directly to a discrete project, rather than providing a loan to an intermediary lender that may relend MnCIFA's capital.
MnCIFA’s direct loan provides low-cost financing and flexibility through a range of options, such as:
- Low-interest loans - offering competitive interest rates, often below current market rates.
- Flexibility - terms and conditions tailored to support successful project execution.
- Bridge loans – short-term financing to help cover upfront costs for clean energy project construction.
- Term loans - longer-term financing (up to 10 years) for capital and/or operating expenditures.
- Loan participations - purchasing and participating in an already existing third-party loan to a project to improve loan terms for the benefit of the borrower.
- Portfolio loan - with an intermediary borrower to finance smaller projects that, in the aggregate, are $250,000 or more.
Application process
Our application process begins with a preliminary review of your project for financing through a pre-application form with a few basic questions about your clean energy project and financing needs.
- The pre-application form will help MnCIFA staff understand your proposed project and the extent MnCIFA financing could support the project.
- After our preliminary review, we may invite you to submit a full application.
- Projects that move forward with a full application move through a process similar to a commercial loan from a traditional bank, with due diligence and detailed financials. Learn more: MnCIFA’s application and lending process.
Pre-application form: Direct Loan
Underwriting considerations and terms
Loan Size
- MnCIFA direct loans have, to date, ranged from $250,000 to $5 million. There are opportunities for loan amounts that are larger, depending on the project.
- MnCIFA can work with co-lenders to bring sufficient resources to larger projects and to increase the development impact of the transaction.
- While state law requires MnCIFA to loan a single entity at least $250,000, we can provide financing via an intermediary borrower for a portfolio of smaller projects that, in the aggregate, exceed the $250,000 minimum
Tenor (loan term)
The loan tenor is typically between 2 and 7 years, depending on the type of project and debt servicing capability. However, each transaction will be evaluated on a case-by-case basis. MnCIFA has issued loans for terms of up to 10 years.
Costs
MnCIFA can offer flexible loan terms, under state law. Interest and fees will vary depending on the project. Included as costs for MnCIFA financing:
- Interest rates: The rate of interest is a risk-adjusted spread over the base cost of funds (U.S. Treasuries). MnCIFA’s spread is based on our assessment of risk and notching factors, including job creation, benefits to environmental justice communities, and geographic diversity.
- Origination fee: A one-time fee to be paid at the time of first disbursement, 1.0% on loan amounts up to $2 million, plus 0.5% on any amount exceeding $2 million.
Leveraging other financing sources
MnCIFA financing is required, by state law, to “leverage private investment in qualified projects, with the aim of achieving a high ratio of private to public money invested through funding mechanisms that support, enhance, and complement private lending and investment.” To meet that statutory requirement, MnCIFA seeks to finance projects in which non-MnCIFA project funding sources comprise at least 50% of project costs and include, but are not limited to equity, debt, grants, and utility rebates. In most cases, MnCIFA would not fund a project as sole financier.
Questions?
For questions about MnCIFA Direct Loans, contact Arpita Bhattacharyya, MnCIFA Chief Investment Officer:
Arpita.Bhattacharyya@state.mn.us.
Any other questions? Send us an email: info.mncifa@state.mn.us.