8.0. EDSR 01-14-2002 ITEM 8.
•
City of
Elk -�-�
River
MEMORANDUM
TO: Economic Development Authority
FROM: Catherine Mehelich, Director of Economic Development
DATE: January 14, 2002
SUBJECT: Consider Sportech Micro Loan Extension
Issue
In November of 1998 a $45,000 Micro Loan at 8.5%interest and a three-year balloon
payment was awarded to Chris and Debra Carlson (Sportech, Inc.). The Carlsons have
requested the EDA's consideration of refinancing the balance of the loan for a two-year
• extension per the Micro Loan Policy guidelines.
Background
In November 2000 the EDA subordinated its second real estate mortgage to a new
mortgage issued to the Carlsons from The Bank of Elk River to allow for the company's
expansion. At the same time the EDA required that a personal guarantee be executed as
additional security on the loan.
Per the loan agreement, a balloon payment is currently due in January 2002 for the balance
of the company's micro loan in the amount of$42,366.71. The Micro Loan Fund Policy
allows for a 2-year extension with refinancing at a market rate of interest. Staff discussions
with local lenders indicate a current market rate between 7.25% and 7.5%.
During the three-year loan period the Carlsons have been very timely in their loan payments
to the City. During this time their micro loan carried one of the highest fixed interest rates
within the EDA's micro loan portfolio,while many of the micro loans carrying variable
interest rates have been able to take advantage of rates as low as 6%.
Action Requested
Staff recommends the EDA consider authorizing a two-year extension of the micro loan to
Chris &Debra Carlson (Sportech, Inc.) at a market rate of 7.25%.