Community Dividend

Minneapolis launches Alternative Financing Program

Published May 1, 2007  | May 2007 issue

In partnership with local community development organizations, the City of Minneapolis has launched a business financing program built on a profit-based model, not an interest-based one. The city’s new Alternative Financing Program (AFP) is designed to meet the needs of Muslims and other groups whose religions prohibit the payment or collection of interest. However, the program will be open to all business owners. Several community development organizations in the Twin Cities have been providing profit-based financing for some time, but the AFP greatly increases the amount of funds available for this form of lending.

According to the City of Minneapolis, the rate of return on AFP loans is “based on an up-front profit payment that is … amortized over the life of the financing.” The city and a private lending partner each provide half the financing, up to $50,000 apiece. Local nonprofit organizations that are already engaged in alternative and small business financing, such as the African Development Center, Neighborhood Development Center and Minneapolis Consortium of Community Developers, will serve as the city’s main lending partners.

AFP funds can be used for building improvements and equipment purchases. All light industrial, neighborhood retail or service businesses in Minneapolis are eligible for the program. Applicants must be creditworthy and in compliance with Minneapolis zoning ordinances, among other requirements. In the case of heavy demand for program funds, priority will be given to applicants who are unable to obtain financing elsewhere. For more information, visit