Kafé 421 owner Jim Sander, his wife and their business partner had raised $200,000 by 2003 to start a restaurant in Dinkytown.

Some minor miscalculations made money tight in the beginning, but when the Sanders’ business partner became ill and pulled out of the venture, the business was in turmoil before it had even begun.

“We were just running out of cash and really needed the help,” Sander said. “No one realizes how much it costs to start a new business.”

The Sanders’ problems compounded when banks turned them away for other loans. Sander said banks are reluctant to lend to new restaurants because the industry’s failure rate is so high.

But when the city of Minneapolis signed on as a guarantor for the Sanders’ $12,500 loan as part of the city’s Small Business Revolving Loan Program, the banks said yes.

“It was one of those things that was life or death at the moment,” Sander said. “We’ve survived and are now an asset to Dinkytown and the University [of Minnesota], in part because we got help when we needed it.”

The City of Minneapolis lent retailers more than $2.4 million in 2013 while also leveraging about $14.6 million from private lenders, according to a city report released last month.

Minneapolis Business Development Manager Kristin Guild said the program provides small businesses with loans below market rate from the city while leveraging millions from private lenders. The combination gives businesses the startup capital they need to get going.

The city established the Small Business Revolving Loan Fund Program in 1986 to keep businesses within city limits and to encourage overall growth. The report said the city expects repayment of the 49 loans issued in 2013 to earn Minneapolis $2.2 million in 2014.

“The city works with business in a lot of different ways to help them start, stay and grow here,” Guild said. “That’s really what we want to see. That’s the mission.”

Multiple small business owners who received financial assistance from the city said they couldn’t have opened shop without the program or may have had to leave the city to do so.

In partnership with the African Development Center of Minnesota, the city provided Layla Mohamud a $20,000 loan so she could open the Cedar-Riverside Child Care Center last August.

Mohamud said she started the day care because the community had a “great need” for child care. She said that she and her team care for 53 children, ages infant to school age.

“[The loan] was everything,” she said. “It was the basic piece I needed to open. It was very helpful, and I am very grateful.”

Guild said among the eight loan programs the city offers, the most popular is the Two Percent Loan Program, which offers up to $75,000 at 2 percent interest. A private bank needs to match the amount and then can issue the loan at its own rate.

Since 1996, the program has issued 1,159 loans for $35.9 million in city dollars and another $130 million from private lenders, Guild said.

Bauhaus Brew Labs co-founder and University alumnus Mike Schwandt plans to open a $1.4 million brewery and taproom in northeast Minneapolis with his brother this summer. Without the Two Percent Loan Program, he said, they probably wouldn’t have had enough money to start the brewery.

The city report said it helped Bauhaus leverage $550,000 from a private bank. The financial incentive gave Bauhaus an additional reason to stay in the city, Schwandt said.

“I wouldn’t say that we were ever going to go anywhere else, but this definitely tipped the scale in Minneapolis’ favor,” he said. “If this wasn’t there, and we found a building in another city, who knows? In the end, we always wanted to stay in Minneapolis.”

Guild said the city benefits in numerous ways when a small business succeeds: Neighborhoods become more appealing, the tax base grows and jobs multiply. The city report estimates that the program created 273 new jobs last year and retained another 339.

The revolving loan program is one of many tools the city uses to help small businesses, Guild said. The city will also help retailers find a location, support business associations, assist in bookkeeping and offer façade grants to provide new signs, awnings and doors to spruce up storefronts.

“Small businesses are essential to the city of Minneapolis,” Guild said. “They’re part of what makes the city a really amazing place to live and