Minnesota Law
Minnesota Governmental Law
Governmental Law
Public Financing
Federal Financing
The federal government offers a number of assistance programs primarily through an organization called the Small Business Administration (SBA). Created by Congress in 1953 to help small businesses, the SBA provides financial, procurement, advocacy and management assistance. Every year, the SBA guarantees bank loans totaling over 3 billion dollars for small businesses. Small businesses that qualify for SBA loans can usually receive far more favorable terms than they would otherwise be able to get. Most SBA loans are for a lengthy period of time and qualify for a relatively low interest rate. Despite their advantages, SBA loans are not right for all businesses: the SBA loan process usually takes longer than the conventional loan process, the SBA can require more personal guarantees and collateral, and the SBA sometimes restricts a business's ability to get additional financing as a pre-condition to the SBA loan.
State Financing
In Minnesota there are various public sources of financing under the direction of the Minnesota Department of Trade and Economic Development. One such program is a private/public partnership called Opportunities Minnesota Incorporated (OMNI), whose goal is to help provide financing for businesses that purchase buildings or capital assets that they plan to use for more than 15 years.
OMNI is certified by the SBA as a development company charged with helping to package and process federal loans. The program can be used to finance such things as land, buildings, renovation and machinery purchases. OMNI can lend no more than 40 percent of the cost of a project or $750,000, whichever is less. The remaining money must be provided by the company seeking the financing (10 percent) and a local lending organization (50 percent).
Other sources of public financing from the state include the Economic Development Program, Rural Development Board, Minnesota Public Facilities Authority, Tourism Loan Program, Capital Access Program, Minnesota Technology, Inc., Technology Information Services, Indian Business Loan Program, and Solid Waste Management Financial Assistance Program. Each of these programs has its own standards for determining who qualifies for economic assistance and how much money is available for which ventures. Information on all of them is available from the Minnesota Department of Trade and Economic Development.
Local Financing
Many local government units provide assistance in various forms to new businesses. Some offer technical assistance or financial services, while others offer tax credits or loan packaging assistance. The cities of Minneapolis, St. Paul, Bloomington, and Duluth have the most experience assembling financial packages to encourage businesses to locate within their boundaries, but many other municipalities are amenable to negotiating with potential businesses. A businessperson interested in programs offered in a given area should contact the business services or planning unit of the county or city in which the business is or will be located.
Government Contracts and Technical Assistance
On the federal level, each individual federal agency receives requests for bids from small businesses. To receive copies of various federal agencies' requests for bids, a business files an application with each federal agency that the business wants to do business with. Many of these federal agencies have special programs specifically designed to assist small and minority-owned businesses because regulations require that a certain percentage of all government contracts be reserved for small or minority-owned businesses. The SBA provides assistance to small businesses in this regard by publishing a list called the Small Business Subcontracting Directory. The directory lists the major contractors to the federal government and which are most likely to be in need of subcontracting.
One of the missions the SBA takes most seriously is its goal of management assistance. To this end, the SBA offers a number of different programs that businesses can turn to for advice in such areas as marketing, buying, financial management and administration. Among these programs is the Service Corps of Retired Executives (SCORE), which puts small businesses in touch with retired executive volunteers who offer counseling and advice. There is also the Small Business Institute, a coalition of college business schools and small business people, which offers management training seminars and various other services. The SBA's Office of Procurement Assistance helps businesses get information and develop strategies concerning selling to the federal government. The SBA also lobbies Congress and other federal organizations on behalf of small businesses.
There are several other government agencies that a small business should be aware of. For example, the various branches of the armed services offer assistance to businesses in securing defense-related contracts. Also, the General Services Administration (GSA) helps businesses that want to sell their products directly to the government by providing information on which government agencies wish to purchase products. The U.S. Army maintains an office known as the Defense Logistics Agency to assist small businesses with contracts.
Lobbying
There are laws governing lobbying at both the state and federal level, including requirements for lobbyists to identify the clients on whose behalf they lobby. Lobbyists who lobby the United States Congress are governed by federal lobbyist registration statutes. These laws require lobbyists to maintain and periodically file with the Clerk of the House of Representatives detailed records of major contributors and all expenditures made by the lobbyist or lobbying organization. Lobbyists are also required to register with both the Secretary of the Senate and the Clerk of the House of Representatives.
Lobbyists who lobby the Minnesota State Legislature must register with the Minnesota Ethical Practices Board. They must also inform the Board about themselves and about the party they intend to represent to the Legislature, and must provide the Board with quarterly reports thereafter. The initial registration form provides the Board with information about the lobbyists and the parties they intend to represent. Quarterly reports must be filed thereafter detailing how much money was spent in efforts to persuade elected officials, how that money was raised, and exactly how the money was spent. Supervision and enforcement of these regulations has become tighter in recent years.
Many law firms have attorneys who specialize in lobbying. In addition, there are non-legal political consulting firms available to perform lobbying services. Their employees are often experts at influencing government.
Dealing with Administrative Agencies
The Limited Role of Administrative Agencies
It is easier to understand the role of administrative agencies if one understands their constitutional limitations. Theoretically, it is Congress that makes all federal laws and the Minnesota State Legislature that makes state laws. Realistically, it would be impossible for either of these two legislative bodies to handle every detail of the laws they create. Legislatures are forced to rely heavily on the advice of numerous administrative agencies in suggesting new laws and implementing existing laws. Frequently, Congress or the state legislature establishes an agency, gives it broad outlines to follow in regulating an industry, then delegates to that agency the power to make rules that industry must follow.
There are limits on how much authority Congress or the state legislature can delegate to administrative agencies. Once they are created, federal agencies must follow the federal Administrative Procedure Act and state agencies must follow the Minnesota Administrative Procedure Act. The statutes creating the agency can sometimes be attacked as an overly broad delegation of legislative power or a particular agency action can be attacked as overstepping the proper bounds of the agency's authority. Thus, an important first step in challenging an agency action is to ask whether the agency has been properly delegated power and whether that power is being properly exercised. The next step in challenging an administrative action is to ask whether the agency has followed the procedures required by the federal or state Administrative Procedure Act.
The Administrative Process
Understanding how agencies work is easier if one understands that all agency actions must fit into one of three broad categories -- rulemaking, adjudication, or informal agency action. Each of these categories has unique rules that apply to it, and each offers affected parties a different degree of input into the agency's decision-making process. Thus, the first step for any business wanting input into a particular agency action is to determine which category the action fits into. The determination of what to call the agency action is rarely simple. The category that the particular action fits into determines how many procedural safeguards the agency must observe. An agency may try to avoid the cumbersome procedure required for one type of action by trying to fit it into another category of administrative action that requires less formal procedure. Many legal disputes over agency action have centered around how to characterize what the agency is doing, rather than the actions themselves.
Rulemaking is usually done quite informally after a period of notice and comment. An agency gives notice that it is considering adopting a proposed rule and gives notice to interested parties that may want to comment on the rule. The agency considers the comments and then can promulgate a final rule. Commenting on a proposed rule is one of the most direct ways in which businesses can have a voice in formulating new rules. Unfortunately, an agency is not required to heed comments received. Because the agency is not required to follow any of the comments received, an affected party will often try to argue that what the agency is doing is not rulemaking at all, but instead is adjudication. In a few instances, a new rule can only be made after the agency follows detailed procedures known as formal rulemaking.
Adjudication is a procedure very much like a civil court trial. Court rules and agency rules are not identical, but agency adjudication allows for direct examination of witnesses, testimony under oath before an administrative law judge and the development of a substantial written record upon which the agency's decision must be based.
Informal agency action is a very broad category in which the procedures vary considerably. Parties to informal agency action often have minimal procedural protection. For example, an agency might merely be required to give the reason for taking a particular action. It need not allow for public comments or other input into the process.
The Role of Courts
Although most administrative decisions are subject to judicial review, few are ever overturned on review. At the federal level, the Supreme Court has sent very strong signals to lower courts that they are not to overturn agency decisions absent very strong evidence that the agency acted erroneously. A business manager would be foolish to treat administrative agencies lightly because he or she assumes that a reviewing court will correct any mistakes the agency might make. The ability of reviewing courts to overturn agency action is so limited that the only sensible strategy is to assume that a case must be won at the agency level or not at all.
Freedom of Information Act
The federal Administrative Procedure Act gives individuals, businesses, and organizations a very powerful tool to use in obtaining information from government agencies -- the Federal Freedom of Information Act (FOIA). The FOIA gives unprecedented access to government information. Under FOIA, an agency must make available to the public:
- Final opinions, including concurring and dissenting opinions, as well as orders made in the adjudication of cases
- Statements of policy and interpretation adopted by the agency but not published in the Federal Register
- Administrative staff manuals and instructions to staff that affect a member of the public
- National security information
- Internal personnel rules and files
- Information specifically exempted by another statute
- Commercial information
- Financial information
- Trade secrets
- Inter- or intra-agency memoranda
- Personnel, medical, or other files, the disclosure of which would violate personal privacy
- Law enforcement and investigation files
- Data about financial institutions
- Geological and geophysical information on oil and natural gas wells
FOIA requests are usually made in writing to the agency. Most agencies process so many FOIA requests that they have designated an officer to process the requests. The Code of Federal Regulations publishes the names and addresses of FOIA contacts in many agencies. Procedures for seeing these documents are very informal and no written request is necessary. The party making the request is obligated to describe the records reasonably well and to pay photocopying and search fees. Frequently requested documents may be made available at established Information Reading Rooms.
Resources
Minnesota Department of Trade and Economic Development, 500 Metro Square, 121 Seventh Place East, St. Paul, MN 55101-2146 (free booklet: Guide to Starting a Small Business in Minnesota).
Charles R. Bevers et al., The Entrepreneur's Guide to Doing Business with the Federal Government: A Source Book for Small and Growing Businesses (Prentice Hall, New York, NY, 1989).
Barry L. McVay, Proposals That Win Federal Contracts: How to Plan, Price, Write, and Negotiate to Get Your Fair Share of Government Business (Panoptic Enterprises, Woodbridge, VA, 1989).