Frequently-Asked Questions

Throughout the MCCF development stage, interested organizations raised a number of questions concerning the workings of the Fund. While answers to many of these questions were not available at that time, these issues have since been addressed. The following FAQ’s are intended to help prospective new members better understand the structure and operations of MCCF:

How large must our organization or community be in order to become a MCCF member?

There is no minimum size eligibility requirement for organizations or communities to become members of the MCCF. In fact, the Fund is designed for and encourages the participation of communities of all sizes, as well as multi-community and regional economic development organizations that want to increase their development financing capacity.

The funds we have available locally to join MCCF were originally received from the Minnesota Department of Employment and Economic Development (DEED) under the Minnesota Investment Fund grant program. These funds were loaned to a local business and the repayments are being used to capitalize our local revolving loan fund (RLF). Can I use this money to join MCCF?

Yes. The State Legislature enacted an amendment to Minn. Statute 116J.8731, subd.2 in 2002 that specifically authorizes local government units to do so.

How about using city general fund dollars for this purpose?

Yes, again. Minn. Statutes 469.191 authorizes cities and towns to appropriate not more than $50,000 annually out of their general revenue fund for organizations like the Minnesota Community Capital Fund.

Once we’re a member of the MCCF, can we increase our initial contribution level in order to be able to originate larger loans from the Fund?

Absolutely. MCCF members will be able to increase their stake in the Fund at any time in order to meet their changing needs and to make the most of this new financing resource.

If we are a member of the MCCF and later decide to terminate our membership, how and when will the funds that we deposited with the Fund be returned to us?

Membership in the fund is subject to a Participation Agreement, which requires members to make a minimum three-year commitment to the MCCF. Members can withdraw their membership deposits anytime after three years from the date of the deposit of their funds, without interest, upon written request of the member. Our escrow agent is obligated to return all funds within 30 days from the date of receiving such written request.

As a member of the MCCF, do we have the right to appoint a representative to the Board of Directors?

No, but a representative of your organization is eligible for election to the nine-member Board that governs MCCF. Six of the nine board members are elected by the membership at the organization’s annual meeting to serve three-year terms. Since the corporation has three classes of membership (based upon the member’s contribution level) each class of members elects two directors. The six elected directors are responsible for filling the three at-large director seats.

Who manages the Fund?

MCCF contracts with the Northland Institute, a Minnesota nonprofit corporation, to provide all necessary fund management services. Since MCCF has no full-time staff, most expenses are related directly the level of Fund loan activity.

Who pays for the cost of fund management?

Two primary revenue sources pay for the cost of managing the Fund: (1) the interest earnings on the pooled funds deposited by MCCF members; and (2) loan origination fees charged to borrowers. Members do not pay directly for services provided by the fund manager that pertain to the structuring of MCCF loans. However, any technical assistance provided to members that is not directly related to a MCCF loan transaction is subject to a reasonable service fee to be paid by the benefiting member.

How is the Fund recapitalized?

MCCF is a self-sustaining development resource, with the ongoing recapitalization of the Fund through the sale of pre-approved loans to a specialized secondary capital market. Most MCCF loans are priced at par, with the sale proceeds from our loans going directly back into the Fund. If a Member wants to buy-down the interest rate on specific MCCF loan, the loan is sold at a discount, so the sponsoring Member is required to make-up the difference between the loan’s par value and it’s sale price. Through this approach, the MCCF loan pool is continually recapitalized and funds will be readily available to make new loans to businesses in the communities we serve.

What drives the price paid for a loan?

The institutional investors who purchase our economic development loans seek a market rate of return. Accordingly, loans that are priced at market rates receive par value. Those priced above the market earn a premium, while those priced below the prevailing market are bought at a discount.

How flexible are the Fund’s lending policies?

The MCCF is designed to provide a great deal of flexibility in terms of borrower eligibility, interest rates, loan terms and conditions, equity requirements, etc. The Fund’s lending focus is on business and community economic development financing activities that support new job creation and job preservation, along with expansion of the local tax base. MCCF members are encouraged to work closely with the fund manager in structuring loan packages that are responsive to their needs.

Is there a limit on the number of loans that a MCCF member can originate?

No. The only limit is on the size of each loan that may be originated by a member from the Fund. Members are able to originate loans of up to 10 times the amount they have on deposit with the Fund. Because the MCCF works closely with the secondary market, there is no limit on the number of loans any of our members can sponsor individually, nor is there a limit on the total number of loans the Fund can originate during any given year. MCCF always has money to lend!