FAQs

Do I need to invest my own money in the business?
Yes. If you are starting or purchasing a business, you will need to make an investment of cash from your
own resources in addition to any loans you qualify for. The investment of cash may be from personal
savings, equity in real estate or other assets or a gift from a relative. By using your own cash to invest in
your business, you are sending the message to lenders and other investors that you believe in your ability
to make the business a success and are willing to risk your own equity. The amount to invest will vary based
on the situation, but generally a minimum of 10% of the total cost of the project is required to come from the
business owner.

Do I need to personally guarantee the business loan?
Yes, owners of the business are asked to personally guarantee the loan for the business. It tells the
lender that the business owner is serious about their business and about repaying their debts. A business
owner should understand that he or she may even be responsible for the loan after the business has been
dissolved. When you issue a personal guarantee, you are acting as a cosigner on the loan.

What if I have a poor credit history?
A poor credit history will negatively impact your ability to qualify for a business loan. A Lender will pull
your credit history to see if you have paid other lenders in a timely manner. If you have not, the Lender
will reasonably assume you will not pay a new business loan on time. Sometimes there are extenuating
circumstances for delinquent credit and a written explanation describing why the payments were late or not
paid should be provided to the Lender.

Do I need to provide collateral for a business loan? If so, what is acceptable?
Collateral is required for a business loan from Northern Initiatives. Although cash flow from the business
is the primary source of repayment for the loan, Lenders consider collateral to be the secondary source of
repayment and extremely important. Your loan officer will work with you to determine what is appropriate for
the type of business loan requested. Collateral may include the assets of the business such as equipment,
inventory and accounts receivable. Or it may be commercial real estate, residential real estate or titled
vehicles.

Are there any grants available for starting or expanding a business?
Northern Initiatives does not receive funding to provide free money for business capital. However, business
owners may research grant opportunities by visiting www.grants.gov.

How is Northern Initiatives different from a Bank?
Northern Initiatives (NI) is a non-profit Community Development Financial Institution. A CDFI has a primary
mission of community development, serves a target market, is a financing entity, provides development
services, remains accountable to its community, and is a non-government entity. NI offers business loans,
technical assistance and business consulting services. NI does not offer traditional banking products such
as deposit accounts or home mortgages. NI is able to devote more time and attention to helping a small
business owner succeed in his or her community.

What is a CDFI?
A community development financial institution (CDFI) is a financial institution that provides credit and
financial services to underserved markets and populations.

CDFIs are certified by the Community Development Financial Institutions Fund (CDFI Fund) at the U.S.
Department of the Treasury, which provides funds to CDFIs through a variety of programs. Broadly
speaking, a CDFI is defined as a financial institution that: has a primary mission of community development,
serves a target market, is a financing entity, provides development services, remains accountable to its
community, and is a non-governmental entity.

What interest rate and fees can I expect to pay on a loan from Northern Initiatives?
The interest rate will depend on the type of loan and risk associated with the loan. NI generally will charge a
higher interest rate than a traditional bank (but less than financing with a credit card) because NI is providing
a business loan that a traditional bank was unable to approve. Borrowers are encouraged to apply with their
own traditional bank first. If their bank is not able to provide all or a portion of the financing required for the
business, NI may be able to help. Fees include 2% of the amount borrowed plus closing costs such as fees
for credit reports, appraisals, collateral filings, etc. Your Lender will provide you with an estimate of fees and
closing costs based on your loan request.

How long will it take before I know if I qualify for a business loan?
The process of approving a business loan is something that cannot and should not be rushed. Once
you have submitted a complete application package that includes the loan application and the financial
and other documents required by your lender, the approval process takes about two weeks. Lenders
review the application carefully with your future success in mind. Documentation and disbursement of
the loan proceeds will take another two to four weeks depending on the loan terms, collateral and other
requirements.