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Starting late 2024, some small business grant applications will be limited in favor of priority areas. These areas will be determined in discussions over the current year, but childcare and retail are some preliminary favorites.
NEW ULM — Multiple changes to New Ulm’s Small Business Incentive Grant Program were considered at Tuesday’s EDA meeting.
The first was to decrease the grant amount to $7,500 and give out 10 grants instead of five starting in 2025. Since the program’s inception in 2019, five grants of $10,000 were available on a first-come, first-served basis to small businesses looking to cover start-up costs.
Councilman Les Schultz initially voiced disagreement with lowering the grant amount. After talking to several constituents, he believed $7,500 was not enough to aid businesses.
“This money is primarily used for products,” he said. “When they’re gonna open up a business [the money is] going to buy supplies to put them on the shelf and $7,500 is not a lot of money. But on the other hand, I want to help our businesses so it’s a balance.”
Other councilors voiced their support for the change. Newly appointed EDA president Michelle Markgraf said the amount is enough and would do well to keep bringing businesses into New Ulm. She said if a business needs more than $7,500 to stay afloat for a few years, they shouldn’t fund it anyway. City Manager Chris Dalton agreed.
Recipients of city small business grants, like 209 Bar and Grill, will now receive only $7,500 instead of $10,000 to support more businesses. Previously the grant was only intended to give five grants totaling $50,000. Now there will be 10 grants totalling $75,000.
“Let’s say rent’s $1,000,” he said. “They’re getting a little over half a year free rent. That’s what the program is; to help lessen the burden for them to start. It’s not to keep them in business, it’s if they need it. If they are starting a business solely because this grant is out there, that’s not the whole purpose of it.”
To not disadvantage any businesses who applied before these changes were made, all 14 grant submissions for 2024 will be approved. The rule change awarding $75,000 to 10 applicants at $7,500 per business will start in 2025.
The second was to spread out the grant quarterly instead of annually. Due to there being 14 applicants for the grant program, there was a discussion during the Dec. 12 work session about approving a certain amount of grants four times a year.
This potential change was rejected after a quick discussion. Dalton said spreading it out in this way would do more harm than good.
“You’re making the people that have already submitted potentially another 12 months to get paid,” he said. “I think when the money’s available, it gets paid out.”
The third change would use a points system to determine who gets the grants. This was also thrown out. Dalton said they should avoid a situation that would create winners and losers. He suggested a fourth option, prioritizing businesses in certain areas the EDA chooses while limiting others.
“Before it was a lot of hair and nail salons and beauty boutiques,” Dalton said. “Where we as the EDA want to start focusing more on retail, childcare, and restaurants. We can focus the grant on those businesses.”
Dalton said they would talk during the year to determine what is highest on the priority list for applications next year. Councilwoman Andrea Boettger said there were some basic principles the decisions would lean toward.
“Businesses that will benefit the community, we have a need for, and that will do job creation because that is an economic development piece. It’s not selling a product per se,” she said.
Boettger made the motion to approve the change to $7,500 per grant and consider limiting applications from non-priority area applicants in 2025. Schultz seconded.
The EDA then discussed how much funding to put in the program. With 14 applicants, four would have to be denied if only $75,000 were put in. A secondary option was presented to put in $105,000, which would allow approval for each application received.
Housing Coordinator Heather Bregel weighed in first. She said of the 31 grants awarded thus far, 29 made it through their first year and 26 are still in business today. Dalton said before this program the EDA had attempted to promote small businesses with less success.
“We had roughly 50% of the businesses reach their first year and 25% reach their second year. Businesses we give grants to now have a very good success rate. Typically if a business can get through the first year, they have a very good likelihood of having success moving forward.”
Boettger asked where the additional $30,000 would come from, which Finance Director Nicole Jorgenson said would come from EDA funds. Boettger voiced her support for funding all of the applicants.
“You don’t want to allow somebody to apply for something they think they’re going to get and we don’t follow through,” she said. “Then you gotta wait a whole year to start fresh with the application process in November.”
Councilwoman Char Kalk made the motion to set the Small Business Incentive Grant funding at $105,000 to cover all 14 applicants, which Schultz seconded. The EDA also approved closing applications for the grant until near the end of 2024.
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