5. EDSR 11-08-2010REQUEST FOR ACTION
To Item Number
Economic Development Authority 5 ,
Agenda Section Meeting Date Prepared by
November 8, 2010 Catherine Mehelich, Director of
Economic Develo ment
Item Description Reviewed by
Consider EDA Micro Loan Application
- Promo Products, LLC Reviewed by
Action Requested
The EDA is asked to consider the EDA Finance Committee's recommendation for approval with
conditions.
• $25,000 Micro Loan to Promo Products, LLC
Background/Discussion
The attached staff report to the EDA Finance Committee and November 4, 2010 committee meeting
minutes provide background regarding the Micro Loan request. The applicant is anticipated to be at the
EDA meeting to respond to any questions about the proposed project.
Financial Impact
The Micro Loan Fund has a current cash balance of approximately $1,042,254.
The Finance Committee is recommending EDA approval of the following Micro Loan and term:
Applicant: Promo Products, LLC (Andy Isle, President and Duane Hass, Director)
Structure: Participation loan with First National Bank of Elk River
Loan Terms: $25,000 at 3% interest, up to 20-year amortization/5-year balloon
Purpose: Assist in financing building improvements and fixtures including HVAC, lights,
flooring and office remodel
Security: 3rd position mortgage on real estate at 19228 Industrial Blvd, Elk River; and
personal guarantee from owners
Attachments
• EDA Finance Committee Meeting Minutes dated November 4, 2010.
• EDA Micro Loan Fund Policy and Guidelines
• Staff report to EDA Finance Committee re: Promo Products, LLC, November 4, 2010.
Action Motion by Second by Vote
Follow Up
N:\Departments\Community Development\Economic Development\Micro Loan Fund\LOANS\Promo Products\11.8.10 EDA Action
Requested.doc
MEETING OF THE EDA FINANCE COMMITTEE
HELD AT THE ELK RIVER CITY HALL
THURSDAY, NOVEBMER 4, 2010
Members Present: Chris Carlson, Cliff Lundberg, Paul Motin, Nate Ovall, Dan Tveite, Larry Toth and Chad
Vitzthum (proposed member)
Members Absent: none
Staff Present: Economic Development Assistant Annie Deckert, Director of Economic Development
Catherine Mehelich, Accountant Lori Stich
Consider Micro Loan Request- Promo Products. LLC
Ms. Mehelich summarized the Micro Loan application from Promo Products, LLC. She indicated the
applicants, Duane Hass, Director of the company, and Andy Isle, President c>f the company, were
applying for an EDA Industrial Incentive Micro Loan in th~~ amount of $2~1,~)Ul)-X25,000 to assist in
financing interior remodeling, including an HVAC unit, Iibhting and flooring. "l he loan is proposed to be
structured as a participation loan with First National Bank of Elk River and the Ll ).1 ~c~ould obtain a 3~`
mortgage lien position on the real estate, in addition t~. ~ c>htaining personal guarantees from the company
owners.
Promo Products, LLC provide custom Pad printing, silk sere°c~nin~;, hot stamping, multi-color heat
transfers and packaging for industrial, medical and promotional products. In operation since 2000, and
currently located in Ramsey, the compan} is interested in purch;isin~ a ~-acant 10,000 square feet building
located at 19228 Industrial Park Blvd (former L & (_) "1`001 building). "1'hC company currently has eight
employees and plans on creating two jobs within the nett tiro ac,lrs.
The applicants were in attendance at the meetult; a.nd presented an overview of their company and
remodeling plans. They indicated they have met with Elk River Municipal Utilities to discuss rebate
options and plan on closing in late. December, with an anticipated move-in date of late February. Their
existing lease in Ramscti- is up 'March 15, 2011.
Mr. Haas and '~lr. lsl.e were excused fi~~>>n the ~~eeting following this discussion.
The finance committee discussed the application and loan terms.
MOVED BY TVIETE AND SECONDED BY MOTIN, THE FINANCE COMMITTEE
RECOM)<TENDS THAT THE EDA CONSIDER APPROVING THE MICRO LOAN
REQUEST FOR PRO1~10 PRODUCTS, LLC, IN THE AMOUNT UP TO $25,000) AT A 3%
FIXED INTEREST RATE; GIVING STAFF THE FLEXIBILITY TO NEGOTIATE THE
LOAN TERM UP TO 20 YEARS (10 YEAR IS PREFERRED) WITH 5 YEAR BALLON
WITH THE EDA TAHING A THIRD MORTGAGE LIEN POSITION ON THE REAL
ESTATE IN ADDITION TO OBTAINING PERSONAL GUARANTEES FROM THE
COMPANY OWNERS. THE MOTION CARRIED 6-0.
3. Micro Loan Status Updates
Updates were provided on Roma Tool, Waterfall and Ethanol Tech Micro Loan applications. Staff will
continue to work with the state, attorney and primary lender on these applications. Mr. Ovall suggested
staff take a more aggressive stance on loans in default, by attaching judgments to the guarantees or
negotiating a forbearance. Staff will discuss these options with City attorneys.
EDA Finance Committee Minutes
November, 4, 2010
Page 2 of 2
Page 2
4. Discuss Amendments to the Micro Loan Programs and Policies
Ms. Mehelich presented potential amendments to the Micro Loan Programs and Policies including;
expanding the boundaries of the Downtown Rehabilitation Loan program to include businesses north of
HWY 10, increasing the fee for direct loans (not participation loans), include loan review by the Small
Business Development Center and consider a new program to provide low cost-financing assistance for
energy efficiency improvements in commercial and industrial buildings. Staff also suggested including
leasehold improvements on The Bluffs and Jackson square commercial space.
The Committee suggested including a guideline and threshold to loan amount at which life insurance
would be requested. Mr. Motin stated that because of the HWY 10 improvement study, he was not in
favor of expanding the boundaries of the downtown program at this time, however because of the recent
City visioning session, it may be appropriate to look at expanding into other areas after the downtown
filled up to help achieve the City's visioning goal of beautifying the City's m<lin c~,rridors. The committee
would have the option to approve or deny applications based on future road ilnpr_o~ ements.
It was the Committees consensus to work with tl~ic'''SBDC to renew future loan applications and that the
written comments provided by the SBDC were sufficient in eu of SBDC staff being present at the
committee meeting. Mr. Vitzthum suggested the applicants pro~ride responses to the SBDC comments.
The committee discussed expanding the downtown program to include the Bluffs and Jackson Place
commercial space and indicated their interest to consider applic.~ri~ nls ~~ hich requested funds for
leasehold improvements and equipment purchases but in a smaller loan amount to mitigate risk.
Ms. Mehelich discussed looking into various esi~ti,.ig cnergy`efhcient improvement programs and
indicated staff would c~~n~c hack m the commit~ec with proposed amendments to the policy and
guidelines. She asked nc~ c~~mnurtee to submit additional comments to her via email on any other
proposed amendments.
4. Closing
The P.DA Finance Committee t~~cctin~ ended at 8:16 a.m.
Respectfully submitted by,
Annie Deckert
Economic Development Assistant
N:\Departments\Community Development\Economic Development\Micro Loan Fund\Finance Committee\2010\Minutes\11.4.10.doc
fiver
MEMORANDUM
TO: EDA Finance Committee
Lori Stich, Accountant City Finance Dept
FROM: Catherine Mehelich, Director of Economic Development
DATE: November 4, 2010
SUBJECT: Consider Micro Loan Application -Promo Products, LLC
Issue
A meeting of the EDA Finance Committee will be held at City Hall on Thursday,
November 4, 2010 at 7:00 am to review a Micro Loan application from Promo Products
LLC.
Background
Attached is the Micro Loan application submitted by Duane Hass, Director and Andy Isle,
President of Promo Products, LLC. Promo Products LLC provides custom pad printing,
silk screening, hot stamping, multi-color heat transfers and packaging for industrial, medical
and promotional products. The company is currently located in approximately 6,800-SF of
leased space in Ramsey, MN and has been in operation since 2000. The company has a total
of 8 employees and proposes to create 2 additional jobs within two-years of completing the
project.
The owners axe interested in purchasing a vacant 10,000-SF manufacturing building located
at 19228 Industrial Blvd in Elk River (the former E&O Tool building) and remodeling the
building for the company's relocated and expanded operations. The proposed
improvements include HVAC, lights, flooring and office remodeling. In order to
supplement conventional and SBA504 financing, the company is requesting $24,000 from
the Economic Development Micro Loan "Industrial Incentive Program". The loan is
proposed to be structured as a participation loan with First National Bank of Elk River, in
which the EDA would obtain a 3Ld mortgage lien position on the real estate. In addition the
EDA would obtain personal guarantees from the company owners. Depending on the
appraised value of the real estate, the EDA may wish to identify additional sources of
collateral fox security.
Consider EDA Micro Loan Application -Promo Products, LLC
November 4, 2010 EDA Finance Committee Meeting
Page 2 of 2
With permission from the owners, a copy of the company's Micro Loan application and
business plan has been provided to the Small Business Development Center (SBDC) for
review and comment. A representative from Promo Products LLC will be present at the
Finance Committee meeting to discuss the project in further detail.
In addition to the financial criteria that must be considered, the Finance Committee must
also consider to what degree the applicant satisfies the criteria set forth in the Micro Loan
Fund policies outlined below:
Micro Loan Criteria
• Max. Loan Amount: $100,000
• Interest Rate: fixed, 2 pts below prime or 3% floor
• Equity: 10% of project
• Private Financing: 50% of project
• 1 job created per $20,000 loaned
• Minimum wage of $10 per hour
Promo Products, LLC Application
• Amount Requested: $24,000
• Interest Rate: fixed, 3%
• Equity Proposed: 5% of project
o (Applicant proposes to utilize Micro Loan to supplement
10% equity required for SBA financing).
• Private Financing: 90% of project
• 1 job to be created per $12,000 loaned (2 new jobs total)
• Proposed wage of $11 per hour
Requested Action
The EDA Finance Committee is asked to provide a recommendation to the EDA for action on
of the Micro Loan Application with the following terms and conditions:
Participation Loan:
Loan Amount:
Interest Rate:
Term:
Security:
Attachments
First National Bank of Elk River
$24,000
fixed, 3%
20-year amortization; 5-year balloon
3rd position lien on real estate
• Micro Loan Fund Policy & Guidelines
• Promo Products, LLC Micro Loan Fund Application and related attachments
N:\Departments\Community Development\Economic Development\Micro Loan Fund\LOANS\Promo Products\11.4.10 Finance
Comm.doc
ELK RIVER ECONOMIC DEVELOPMENT
MICRO LOAN FUND APPLICATION
I. CONTACT INFORIVIATI®N
('(~uM~ ~R~ (~~c!`S ALL
Legal Name of Business: r
.-~dclress: 7 iv ( n
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Contact Person(s) 1•_) V ~ ,~.'~ /--~/t S j ~ r ~2 ~Z ~% 02~~ N 1/ ~ TS ~-~' ~_11' 2 ~ .$ , ~)v~,~-7)
Business Phone ~ ~' .~3 ~ j ~ G -- ~/G' ~j O Fax 1 ~ ~ ~ ri 7 ~ •--- `~`7~~7' ~~
L ,iLL !~ /
1Phone 7~ ~ ~,~ 1 ~-~ 4~~ 5^~ ]~mail_-~l ~~ S S c~ ~v~ ~ ~vS' S ~~ ~-y~, GC/j-t
Checl; One: nr~,,,-ier~r ,X _ __Corporation Partnership
Social Security No.
---~~
~ % ,~ ~ ~ ~ / State ID # ~J of ~r j yC ~ s
IT. NATURE OF LOAN REQUEST
~`Vhich 1\4icro-I..oan Program are you applying for?
~`~ Industrial Incentive Program
Rehabi.Liation T'i~ancing Program
Downtown Busiiess Revitalization Loan Program
Amount Requested: ~ ~ ~~ Ga ~ Total Project Cost: $~~/ b'~~'•- ~~~ C,oo
Type of project:
New construction for a start up business.
New construction for an existing business,
On site expansion
I~quipmcnt purchase
_~ Remodeling: (circle u~~eJ Commercial /Retail / Industrial
Refinancing existing debt
Other
~4icro Loan Fund .\pplirition ~ Payc 9 of 14
;lmcnded Not~cmber 2006
Please give a brief summary of your business and its products or service:
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Please give a brief summary of the project.
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Pl
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ase descr
ibe how
this loan will unpact your Project:
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III. FIfVANCING
.. Project Costs
1.~and
Site: improvements $
/ ~
Buildings (attach plans & costs) ~ "~ ~- 5
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I/gtupment/Machinery/Pictures
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(attach List and estimated costs) ~
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Industrial Inventory/Working Capital
Ocher (attach description)
"Total Costs ~ ~ ~ 5 a ~ d
Comments:
n{ecru Loan Fund Applical'ion Page 10 of 1-t
r\m~nded No~~ember 2000
Prouosed Sources of Finaneinr_>
SOURCI~ NAMT~ p
~lut(
~ 1 TI/RMS AMOUNT
>
iSi N.~Y~cN~
T3ank Loan C ~ ~t 1-( I\ i .J f f. ` ~~ ;L `'j~ ~ -:~ c~ ~ c, o n
Bank Loan ~ n) /`~' `-{, 5 `~ ~~' Y2 ~ (' % ,;2~ o c ~
Other Private T'unds
l~- ni~ .Y ~~ S L a'
Applicant Contribution ~~ ~ ~ ~' 1~ f -(,n ~ 5 ~ ~~ ~''~ ~'
Other
Red Grant/Loan
State Cirant/Loan
BDA Micro Loan ~~ /~ ~ ~ v ~ ~ ~ ~ ~ ~° s y2 ~ ~ I o d ~~
"1'ax Tncrement l,inancing f$
~l,ax Abatement $$
Total Financing ~ ~~ ~~' `
Collateral Assi~mments
Lien
Description of Collateral Position
ToIJanl.1 ~~~~ ~~~N3 ~%! IT ~}y~~~
,~ .
°1'o I3anlt 2 ~ S l5 /~-~ I' 02. ..
1'o Private Sourc
To Other Source
1'0 l,ederal Govt
"!,o State
"I'o L-?DA Micro Loan 1 `~ ~~' ~'~ 7' ~i ~~ ~~ ~ , ."'~' 3
1\licro loan Fund ilppliai[ion P.~be 11 of 1<}
amendecl November 2006
Value of Collateral
Book Value Cost
land ~ ~ .qI ° ~~ O o a
Buildings ~ ~ J ~' ~ v ~'
1\'fachinery & Lcluip.
Other
Other
1/xisting Liens
i(/ ~ i/ ~
IV. JOB & WAGE GOALS
c ~ ~ D ~l
Present # of )/mployees 0 Total Payroll ~~ ~ '~ 5^~ ~ / ~
<~~/y,2)
Jobs To Be Created*
Please t~rovide the following? information on robs you expect to create Within 2-years.
Job "hide
Number
of Jobs Average
1-Iourly
Wage
Annual
Salary Are the Jobs
Permanent or
Temporary? )/xpectecl
Hiruig
Date
-;~iNll/! ,~ ''~/( ~,2~ ~~J 2 ft-Nr N/ 1/12c /-l,~'1_c~ ~l
~'~It loan is for job retention only, please explain in Business Plan.
Program Objectives
(Chcclc all that apply)
"hhe project contributes to the fulfillment of the city's approved and adopted
econonuc development and/or redevelopment plans.
The project prevents or eliminates slums and blight.
/ The project increases the local tax base.
"1"he project brings a structure into compliance with an existing building code
V101aClOn.
Micro Loan Rund i\hpl.icau°n Page 12 of l~l
.Amcnclyd Novcm~cr 20oG
TV. PI~UJ~CT COIVT'AC7S
Attorney
Name C(-~/~ ~ /~ _ 2 ~% L G r M,i N
Address ~~ (-~ :,~.~•Tf' ~~h/V~~~ S ~~1/O S'T CL~•~D i1~1 ~,
] hone
Accountants
Name V 11 c ~ ;1 S•
Address _2c~ ~ - / y ~ ~.•~ ,~ ~~ ,N w ST ~ (',~~, ; r .~ ,~
Phonc
Financing Sources (lenders, partners, etc.,.
Name ~, ~ S r' N ~1-?r ~ ~-., ~ `'>:q .~ ~ ~ 60•,x, 11217 /,_~. r[ > >4'S' < L~
Adclress / 1~ / / 5~ 'fi A ~'1 h j ~' n S ~ ~~=% U ~s'u Gl~ s ~~ /y
Phone 7` ~ ~~~1.~-•- ~ %`~~ 5 S~~`~
Name
I~ddrf:SS
Pho
Parent Compan
Name ~1~ (<~/~-~e {~ feu ().,x,7.5 ~-L C
Address l / y I - ~`~~ l: ~ ~y ~ /U W ST ~ /\~1 M 5~ ~ y ~~~S~" ,~
Phone ) ~ .~ ,~ ~ 7 ~ •- `7 ~ ~ J
Others
Name
Address
Phone
Name
1lddress
Phone
Micro Lo.ui I^und ~\pplicati°n Page 13 of 1.1
.lmended Novcmher 2006
V. ATTACHMENTS CHECK LIST
Please attach the following:
A) Written Business Plan:
1. Description of Business
2. Ownership
3. Management
4. Date Established
5. Products/Services
6. Future Plans
~ B) Financial Statements for Past Two Years
X C) Financial Projections for "hwo Years
!~ D) Resume of Owner/Management
X E) Personal Financial Statements of Proprietor, Partners,
Guarantors
%ti~ Letter of Commitment Erom Applicant Pledging to Complete
During the Proposed Project Duration
~G) Letter of Commitment from the Other Sources of Financuzg,
Stating Terms and Conditions of their Participation in
Project
c~
~ yv _ H) Fee (1% of amount of loan request). ( ~ y;~. ,~~ ~ ~'v
~~ ~ LI~ ~~va'~ ~ ~/J
C,~`y
VI. AGREEMENT
I / We certify that all information provided in this application is true and correct to the best
of my/our knowledge. I / We authorize the City of Elk River and the Finance Committee
to check credit references and verify Fulat~cial and other information. I / We agree to
provide any additional information as may be requested by the City and the Finance
Committee.
APPLICANT SI NATURE /~~~~ ' \ ~~~~
~Y v~~~
DATE /~ ~ ~ I ~
'~ ~ 5 S
~~~~
tllicro I.,o:tn Fund Application Page 1~# of 1-t
Amended November 2000
aty of
El:
The Lightlndustrial Hub of the Northwest Metro
Economic Development
Micro Loan Fund Policy & Guidelines
And Application
Amended: November 2006
Amended: May 2006
Amended: June 2004
Adopted: September 1999
Ciry of Elk River
Economic Development Division
13065 Orono Parkway
Elk River, MN 55330
763.635.1040
ELK RIVER ECONOMIC DEVELOPMENT
MICRO LOAN FUND POLICY & GUIDELINES
I. PURPOSE
The Economic Development Authority for the City of Elk River (EDA) recognizes
the need to stimulate private sector investment into manufacturing facilities and
equipment in order to create new jobs, boost productivity and retain existing jobs for
local residents. Additionally, the need exists to encourage investment in the
expansion and/or rehabilitation of commercial and retail buildings in order to
maintain the economic viability of Elk River's Downtown District . Subsequently,
the purpose of this program is to provide low interest, long-term (i.e. greater than
one year) loans as incentives for industrial development within the City of Elk River
and to encourage commercial and retail business owners in the Downtown District
to rehabilitate their existing buildings.
II. LOAN PROGRAMS
In order to meet the economic and community development objectives of the EDA,
two distinct loan programs exist within the Micro Loan Fund to promote business
growth in Elk River.
Industrial Incentive Program
Purpose: The purpose of the Industrial Incentive Program is to encourage
industrial and high technology business development that supports
the tax base and brings quality jobs to the city.
Amount: Up to $100,000 of secondary financing not to exceed 20% of the
project cost.
Equity: Must have private-sector commitments for 50% of the project cost.
Borrower must provide 10% or more of project financing.
Rate: Fixed; 2 points below the lowest prime rate published in
the Wall Street Journal the day the loan is closed, or 3%, whichever is
greater.
Term: Financing with a balloon payment in 5-years. The balloon payment
must not be longer than the balloon payment of the participating
bank. Loans may be amortized up to the following limits:
20-years on real estate uses;
10-years on equipment uses.
Extension: In the event that the Borrower is unable to obtain conventional
financing to replace the Micro Loan at the end of five years, the loan
may be extended up to two additional years at a market rate of
interest.
Micro Loan Fund Policy & Guidelines Page 2 of 14
Amended November 2006
Criteria: 1. Borrower must be an industrial or high technology firm and create
one new full-time job for each $20,000 loaned within 2 years. Said jobs
must pay a minimum wage of $10.00 per hour excluding benefits
required by law. Loans in excess of $75,000 shall meet the attached
City of Elk River Business Subsidy Policy for the creation of new jobs
at a minimum wage of $15.00 per hour excluding benefits required by
law, as well as a 5-year location requirement.
In the case where the multiple sources of public financing are requested
(e.g. Micro Loan and Tax Increment Financing) job creation goals shall
not be double-counted.
2. Borrower must comply with the provisions of the city's Industrial
and Business Park zoning ordinances as applicable.
Downtown Rehabilitation Financing Program
Purpose: The Downtown Rehabilitation Financing Program is available to
business and property owners in the Downtown District (DD) for the
rehabilitation and restoration of their buildings.
Amount: Up to $75,000 of secondary financing (not to exceed 40% of the
project cost.
Equity: Must have private-sector commitments for 50% of the project cost.
Borrower must provide 10% or more of project financing.
Rate: Fixed at 2%.
Term: Financing with a balloon payment in up to 5-years. Loans may be
amortized up to the following limits:
20-years on real estate uses;
10-years on equipment uses.
Extension: In the event that the Borrower is unable to obtain conventional
financing to replace the Micro Loan at the end of five years, the loan
may be extended up to two additional years at a market rate of
interest.
Criteria: 1. At a minimum, 20% of Micro Loan dollars must be used for the
improvement of the building facades.
2. Rehabilitation loans in the Downtown District are exempt from
job creation and wage goals since the loan amount does not exceed
$75,000 and does not qualify as a business subsidy by state law.
3. Borrower must be located in the Downtown District (DD)
(see attached map).
Micro Loan Fund Policy & Guidelines Page 3 of 14
Amended November 2006
III. USES
1. Permitted Fund Uses:
a. Building construction
b. Land acquisition
c. Machinery
d. Furniture, fixtures, and equipment (FF&E)
e. Renovation and modernization of buildings
£ Exterior renovation of retail, commercial and industrial buildings
g. Public infrastructure needed for economic development expansions
h. Investment real estate with a minimum of 50% of the space pre-leased
2. Ineligible Fund Uses:
a. Expenditures for the construction and/or renovation of residential units
b. Working capital
c. Refinancing of existing debt
d. Inventory
IV. BUSINESSES ELIGIBILITY
Any project meeting the above criteria, and located or proposed to be located within
the city limits of Elk River as defined by this program, may be eligible for an
Economic Development Micro Loan as further defined herein:
• Business must be afor-profit corporation, partnership, or sole
proprietorship.
• Business must be a small business as defined by the Small Business
Administration (SBA).
• Business must have a positive net worth.
• Religious, political, and pornographic enterprises are not eligible to use
the Economic Development Micro Loan Fund.
V. MICRO LOAN FUND TERMS & CONDITIONS
1. Loan Structure
All Economic Development Micro Loans will be structured as participation loans
and will be serviced by the project's primary lending institution. Such an arrangement
allows for the central distribution and collection of funds and simplifies the financing
process for all parties involved. A participation agreement will be signed by the
borrower, primary lender and the EDA. The agreement will include the following
provisions, among others:
If Borrower does not meet the job and wage goals specified in the Subsidy
Agreement, the interest rate will change to 2 points above the participating
bank's rate, effective from the two year anniversary of the loan closing.
Upon subsequent achievement of the jobs and wage goals, the interest rate
will revert back to the rate when the loan was originated, effective from the
date of attainment of the job and wage goals.
Micro Loan Fund Policy & Guidelines Page 4 of 14
Amended November 2006
• If Borrower defaults on the loan, the EDA will collect all further payments
during the default based on a pro-rata basis with the participating bank
excluding the distribution of proceeds resulting from the foreclosure on
collateral.
The EDA may require additional agreements to be signed by the borrower (i.e.
security agreement, personal guarantees, subsidy agreement).
2. Simultaneous Micro Loans
The simultaneous use of different Micro Loan Fund Programs by any one borrower
or for any one project is prohibited.
3. Call of Loan
A loan shall become due and payable in full if a business relocates outside of the city
of Elk River prior to the maturity date of the loan.
4. Late Payment Charge
A late payment charge of 8% of the installment amount may be enforced.
VI. REGULATION FOR NEW CONSTRUCTION AND IMPROVEMENTS
All buildings which public funds will be used for construction or renovation are to
be brought into conformance with city ordinances and state building codes. Repairs
may include the following systems and portions of real property:
a. Mechanical heating, plumbing, and electrical
b. Structural; including the facade of the structure and energy related
improvements.
c. Hook-up to city services (i.e. water, sewer)
d. ADA (Americans with Disabilities Act) improvements
VII. LOAN SECURITY AND GUARANTEES
Applicant must be able to secure the loan by providing the EDA with a minimum of
a subordinate mortgage upon the building and/or assets or other approved collateral.
Applicant must demonstrate the financial means to repay the loans, as determined by
the Economic Development Authority.
Whenever possible, personal guarantees will be made part of any loan agreement.
VIII. TIMING OF PROJECT EXPENSES
No project should commence until the Elk River Economic Development Authority
has approved the loan application. Any costs incurred prior to the approval of the
loan application axe generally not eligible expenditures.
No building construction should commence until the required City permits are
secured.
Micro Loan Fund Policy & Guidelines Page 5 of 14
Amended November 2006
The applicant will be responsible for all legal, recording, and other fees required for
protection of a security interest in the loan, payable by anon-refundable 1%
processing fee, which is paid at the time of application.
IX. PROCEDURAL GUIDELINES FOR APPLICATION AND APPROVAL
1. All applicants shall first contact a primary lending institution to determine if
additional equity is needed, and if so, how much.
The applicant and the primary lender shall then meet with City Staff to obtain
information about the Micro Loan program, discuss the project, and obtain
application forms.
The applicant shall complete and submit an application form to the City, along
with a processing fee of 1% of the loan request. (The fee is used to cover
processing expenses and will be returned only if application is denied.) The
applicant must provide evidence of their ability to meet the equity requirements
or provide a letter of commitment for conventional financing from the primary
lending institution.
4. The application will be reviewed by the City staff to determine if it conforms to
all City policies and ordinances and to consider the following:
a. The availability and applicability of other governmental grants and/or
loan programs.
b. Whether the proposed project will result in conformance with building
and zoning codes.
c. Whether it is desirous and in the best interests of the public to provide
funding for the project.
The EDA Finance Committee and EDA Commissioners will review each
application in terms of its consistency with the goals of the City's
Comprehensive Plan and Economic Development Strategic Plan and in relation
to the project's overall impact on the community's economy. Rehabilitation
Loan applications will also be reviewed by an HRA member in conjunction with
the EDA Finance Committee.
They will also evaluate the project application in terms of the following:
a. Project Design -Evaluation of project design will include
review of proposed activities, time lines and a capacity to implement.
b. Financial Feasibility -Availability of funds, private involvement, financial
packaging and cost effectiveness.
• Appropriate ratio of private funds to Micro Loan funds.
• Sufficient cash flow to cover proposed debt service as
demonstrated by financial statements and projections.
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Amended November 2006
• Business must show a positive net worth.
• Letter of Commitment from applicant pledging to complete the
project during proposed project duration, if the loan application
is approved.
• Letter of Commitment from other financing sources stating
terms and conditions of their participation in the project if
applicable.
• Sufficient collateral.
c. All other information as required in the application and/or additional
information as may be requested by the Economic Development
Authority.
d. Project compliance with all city codes and policies.
Program Objectives - In addition to quality job and wage
creation/retention requirements, the applicant must meet all Micro Loan
Fund criteria and demonstrate how the proposed activities will meet at
least one of the following objectives:
• The project contributes to the fulfillment of the city's approved
and adopted economic development and/or redevelopment
plans.
• The project prevents or eliminates slums and blight.
• The project increases the local tax base.
• The project brings a structure into compliance with an existing
building code violation.
6. A written request for an extension shall be accompanied by a copy of current
financial statements and a $500 upfront processing fee. The processing fee is
used to cover processing expenses and will be returned if request is denied. The
application for an extension beyond the original term should include a letter of
denial from a conventional lender. Refinancing will not be allowed solely for the
purpose of reducing the interest rate due to lower market interest rates.
7. The EDA Finance Committee will recommend the approval, denial, or request a
resubmission. A recommendation from the Finance Committee will be
forwarded to the EDA for final action.
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Amended November 2006
X. LOAN POLICY REVIEW
The above criteria will be reviewed on an annual basis to ensure that the policies
reflected in this document are consistent with the economic development goals set
forth by the City.
XI. RIGHT OF REFUSAL
The Elk River Economic Development Authority may deny any project which it
deems inappropriate according to the guidelines established in this document.
XII. COMPLIANCE WITH MN BUSINESS SUBSIDY LAW
Each company receiving assistance in excess of $75,000 from the EDA Micro Loan
Fund shall be subject to the provisions and requirements set forth by Minnesota
State Statute 116J.993 and the attached City of Elk River Business Subsidy Policy.
Micro Loan Fund Policy & Guidelines Page 8 of 14
Amended November 2006