8.0. EDSR 12-10-2001 Item. 8.
•
iik
-,--,
River
MEMORANDUM
TO: Economic Development Authority
FROM: Catherine Mehelich, Director of Economic Development
DATE: December 10, 2001
SUBJECT: Consider Micro Loan Application — MN Fabrication & Machine
Issue
On December 3, 2001 the Finance Committee, after reviewing the application,unanimously
recommended to award Minnesota Fabrication &Machine, Inc. (MF&M) a $50,000
Supplemental Micro Loan. The loan will be used to purchase machinery and equipment
• necessary for MF&F (formerly Industrial Hardfacing) to maintain an operation in Elk River.
Don DeVoe, Management Consultant for MF&M,will be available to discuss the proposed
project and answer questions on behalf of MF&M.
Action Requested
Staff requests that the EDA consider approval of the application for Minnesota Fabrication
and Machine, Inc. for a $50,000 Supplemental Micro Loan per the recommendation of the
Finance Committee.
Attachments
• Finance Committee Meeting Minutes—December 3, 2001
• Staff Memos to Finance Committee dated November 2, 2001 &November 29, 2001
• Micro Loan Application—MN Fabrication&Machine, Inc.
• Micro Loan Policy& Guidelines
•
• EDA Finance Committee Meeting Minutes
Monday, December 3, 2001, 4:00 PM
Elk River City Hall
Minnesota Fabrication & Machine, Inc.
Present:
Don Millslage, President, MN Fabrication &Machine, Inc.
Tom Berry, CFO, MN Fabrication&Machine, Inc.
Don DeVoe, MF&M Management Consultant, Spit Rock Management Company
Committee Members/Staff
x Cliff Lundberg Jim Simpson x Dan Tveite
x Chris Carlson x Jeff Gongoll _Tom McNair
x Paul Motin x Catherine Mehelich-Staff
Background
Don DeVoe presented MN Fabrication &Machine's business plan. Minnesota Fabrication
&Machine, Inc. (MF&M) is a newly formed corporation by the owners of Industrial
Hardfacing, Inc.(IHI). Industrial Hardfacing has had a long presence in Elk River rebuilding
and manufacturing new parts for mechanical pressing,grinding, extruding and expanding
equipment of the rendering and packing industries. IHI owns a 21,000 square foot facility in
Elk River, and also has facilities in Lamoni, Iowa.
• Recently, IHI has made a strategic decision to relocate and consolidate the Elk River
corporate office &much of their operations to its Iowa facility in order to be closer to their
major markets. Minnesota Fabrication &Machine, Inc. (MF&M) has been formed to allow
IHI to retain a presence in Elk River. MF&M will continue to build components for IHI
and will also develop contract machining and fabrication for specialty customers. Don
Millslage stated the biggest asset to keeping the operations in Elk River is the presently
trained workforce.
The loan will be used to purchase machinery and equipment necessary for MF&F (formerly
Industrial Hardfacing) to maintain an operation in Elk River. The new operation will retain
15 employees from the former Industrial Hardfacing. Within 2-years the applicant proposes
to create 9 machinist positions with an average wage of$10.00/hour.
In addition to the financial criteria that must be considered, the committee considered to
what degree the applicant satisfies the criteria set forth in the Micro Loan Fund policies.
Micro Loan Criteria MN Fabrication &Machine
* Max. Loan Amount: $50,000 *Amount requested: $50,000
* Interest Rate: 1 below prime * Rate requested: 1 below prime
* Equity to EDA Loan ratio of 1:1 * Equity to EDA Loan ratio of 10:1
* 1 job created per $20,000 loaned * 1 job created per $5555 loaned
* Min. average wage of$8 per hour *Average wage of$10 per hour
EDA Finance Committee Meeting
December 3,2001
Page 2of 2
•
Recommendation
The Finance Committee noted that MN Fabrication&Machine, Inc. meets or exceeds the
criteria set forth by the Loan Fund guidelines. Subsequently the committee unanimously
recommended that the EDA approve a $50,000 Supplemental Financing Loan to MN
Fabrication &Machine, Inc. to be secured by a 2nd lien position on the real estate and a 2nd
lien position on the machinery and equipment. The loan is proposed to be structured as a
participation loan with First National Bank of Elk River.
MF &M will be required to execute the following paperwork,which is standard procedure
for all EDA Micro Loans:
• Security Agreement
• Promissory Note
• Personal Guarantees
• Job Performance Agreement (per Business Subsidy Law)
• UCC-1 Financing Agreement
•
•
• City of
Elk
River
MEMORANDUM
TO: EDA Finance Committee Members
CC: Lori Johnson, Finance Director
FROM: Catherine Mehelich, Director of Economic Developmen'
DATE: November 2, 2001
SUBJECT: Micro Loan Application: MN Fabrication & Machine, Inc.
The EDA Finance Committee will meet Monday,November 5, 2001 at 4:00 PM at Elk
River City Hall to discuss the following:
Issue
• Staff has received a request by Don Millslagle,President of MN Fabrication&Machine, Inc.
for a Supplemental Micro Loan in the amount of$50,000 to be used for equipment purchase
and remodeling of the former Industrial Hardfacing, Inc. building located on Twin Lakes
Road. The loan is proposed to be structured as a participation loan with the First National
Bank of Elk River.
Background
Minnesota Fabrication &Machine, Inc. (MF&M) is a newly formed corporation by the
owners of Industrial Hardfacing, Inc.(IHI). Industrial Hardfacing has had a long presence in
Elk River rebuilding and manufacturing new parts for mechanical pressing, grinding,
extruding and expanding equipment of the rendering and packing industries. IHI owns a
21,000 square foot facility in Elk River, and also has facilities in Lamoni, Iowa.
Recently, IHI has made a strategic decision to relocate and consolidate the Elk River
corporate office &much of their operations to its Iowa facility in order to be closer to their
major markets. Minnesota Fabrication&Machine, Inc. (MF&M) has been formed to allow
IHI to retain a presence in Elk River. MF&M will continue to build components for IHI
and will also develop contract manufacturing and specialty customers.
The applicant proposes to use the micro loan funds to remodel the Elk River facility for
providing approximately 8500sf of lease space, and to assist in the purchase of capital
equipment.
In a 1999 Business Retention &Expansion visit, IHI employed 28 full-time with an average
wage of$12.50/hour. With the move of some operations to Iowa,MF&M has retained 15
MN Fabrication&Machine,Inc.Micro Loan Fund Application
Finance Committee—Nov.5,2001
Page 2 of 2
employees. Within 2-years the applicant proposes to create 9 machinist positions with an
• average wage of$10.00/hour.
The project is being financed through the First National Bank of Elk River according to the
attached terms. The sources of funds are as follows:
First National Bank $500,000
EDA Loan $ 50,000
Total $550,000
The applicant has proposed that the EDA take a second position on the real estate
mortgage,which has a recent appraised value of$550,000.
In addition to the financial criteria that must be considered, the committee must also
consider to what degree the applicant satisfies the criteria set forth in the attached Micro
Loan Fund policies.
Micro Loan Criteria MN Fabrication&Machine
* Max. Loan Amount: $50,000 *Amount requested: $50,000
* Interest Rate: 1 below prime * Rate requested: 1 below prime
* Equity to EDA Loan ratio of 1:1 * Equity to EDA Loan ratio of 10:1
* 1 job created per $20,000 loaned * 1 job created per$5555 loaned
* Min. average wage of$8 per hour *Average wage of$10 per hour
• Per the Micro Loan Fund policy, all buildings which receive public funds for construction or
renovation require the building be brought into conformance with city codes and policies.
Staff recommends that the micro loan be contingent on the following items:
• Outline and estimate of remodeling costs
• An approved building permit including code related improvements
• Copy of invoices and/or sworn construction statement upon completion of the
work
• Require to hookup to City services in Twin Lakes Road
As in past Micro Loan meetings, the applicant will be given an opportunity to present the
project and application. Following the presentation the Finance Committee may ask
questions of the applicant. The applicant will then be excused from the meeting, allowing
the committee to discuss the application and determine a recommendation for EDA Board
consideration.
Attachments
• City of Elk River Micro Loan Fund Policy
• Application—MN Fabrication &Machine, Inc.
• Business Plan—HMP Corporation (holding company of IHI, MF&M, and ProCom)
• 1999 &2000 Financial Statements (Industrial Hardfacing)
• Current Financial Statements (IHI, HMP, ProCom)
• • 2002 &2003 Projections (HMP, IHI, MF&M, ProCom)
• Letter of Commitment from First National Bank of Elk River
• 1999 Corporate Tax Return (IHI)
City of
Elk*�
River
MEMORANDUM
TO: EDA Finance Committee Members
CC: Lori Johnson, Finance Director
FROM: Catherine Mehelich, Director of Economic Development
DATE: November 29, 2001
SUBJECT: Micro Loan Application: MN Fabrication & Machine, Inc.
The EDA Finance Committee will meet Monday, December 3, 2001 at 4:00 PM at Elk
River City Hall to discuss the revised application from MN Fabrication&Machine, Inc.
Please refer and bring the Micro Loan Application materials that were sent for the earlier
November 5th meeting. If you need another copy of the materials,please contact me at
• 441-4905 and I will have delivered or faxed to you.
Background
Attached is the revised application from MN Fabrication&Machine, Inc., as well as
correspondence in regard to the earlier requested postponement and revised application.
MF&M's earlier micro loan request included remodeling costs to allow for leasing out a
portion of the building. According to the City's Micro Loan policy, the publicly financed
remodeling would have required the company to bring the former Industrial Hardfacing
building into conformance with city code, including upgrading the mechanical systems,
installing sprinkler system, and connecting to city services. The company has found that
such an expense is not feasible and not within the company's long-term plan for the
property, as stated in the letter from Donald DeVoe,November 5, 2001.
Rather the company has revised their micro loan application to delete the remodeling from
the project and requests the City's Micro Loan for machinery&equipment purchase.
As in past Micro Loan meetings, the applicant will be given an opportunity to present the
project and application. Following the presentation the Finance Committee may ask
questions of the applicant. The applicant will then be excused from the meeting, allowing
the committee to discuss the application and determine a recommendation for EDA Board
consideration.
Attachments
•
• Correspondence from Donald DeVoe,Management Consultant,November 5,2001
• Revised Application &Cover Letter—MN Fabrication &Machine, Inc.
11/27/2001 13:32 6417846923 IHI PAGE 02
INC.
November 26, 2001
Catherine Mehelich, Director
Department of Economic Development
City of Elk River
13065 Orono Parkway, Box 490
Elk River, MN 55330
Mrs. Mehellch,
Enclosed please find a Micro Loan Fund Application to enable Minnesota Fabrication &
Machine to purchase certain machinery and equipment so it can remain in Elk River. It is
our understanding that the loan is for 3 years, amortized over 15 years, with a balloon
payment. It is our intention to repay this loan within the required time period.
410 We understand that a properly executed Bill of Sale is required at the document signing
meeting. The schedule, as we understand it, is as follows:
December 3: Micro Loan Committee Meeting
December 10: Economic Development Authority Meeting
Week of December 17: Document signing, funds transfer
I plan to be present at the December 3 meeting to supply any information or assistance.
desired so you can reach a prompt decision.
Thank you for your assistance in this matter. If we can help further, please contact me.
Sincerely,
Donald E. Mllislagie, Jr., President V _
End.
•
218 EAST MAIN STREET • LAMONI, IOWA 50140
IHI Phone: 641-784-6921 • MFM Phone: 763-441-2733 • PC Phone: 641-784-8841
05 01 11 : 34a Donald R. DeVoe 952-941 -5972 p. 1
■ ■ ■
■ ■
■ ■ ■
■ ■
NM IINMI
II II
s
6515 Ridgeview Circle
Edina, Minnesota 55439
Donald R. DeVoe (952) 941-5972
dondevoe@yahoo.com
November 5, 2001
Catherine Mehelich, Director
Department of Economic Development
City of Elk River
13065 Orono Parkway
Elk River, MN 55330
Dear Catherine,
Minnesota Fabrication & Machine would like to request a one month delay on their
application for a$50,000 Economic Development Micro Loan, until Monday,December 3.
When MF&M originally applied for a loan they indicated 2 uses:
• 1. To assist in purchasing capital equipment from HMP Corp. so MF&M could
remain in Elk River.
2. To assist in remodeling their plant so they could lease out unneeded space.
However, MF&M feels the best long term use of their plant and real estate is as
redevelopment property, not as a continuing manufacturing facility. They feel that within 5-
10 years they will raze the plant and redevelop the property into 4 sites. For this reason they
are not interested in upgrading the present facility to qualify for a remodeling loan under the
present guidelines.
MF&M is interested in resubmitting their Micro Loan Application to request assistance in
purchasing manufacturing equipment necessary to keep MF&M in Elk River. They will be
submitting a new application within the next 2 weeks.
I apologize for the delay, but I feel it in the best interests of all parties involved. If you have
any questions or if I can offer any additional assistance, please call.
Sincerely,
Donald R. DeVoe
• cc: Donald E. Millslagle, President
11/27/2001 13: 32 6417846923 IHI PAGE 03
• ELK RIVER ECONOMIC DEVELOPMENT
MICRO LOAN FUND APPLICATION
I. CONTACT INFORMATION
Company: Minnesota 1abriratinn. and Mar'h
Address: 18489 Twin Lake Road
City / State / Zip Elk River, MN 55330-1970
Contact Person(s) Ken M i l i s l a g l e
Business Phone 763-441-2733 Fax 763-441-4050
Home Phone 763-441-3840 F.mad
Check One: _ Proprietor X Corporation Partnership
Social Security No.
• Federal ID # 41-2nlAS61 - State ID # arrliad
II. NATURE OF LOAN REQUEST
Which Micro-Loan Program are you applying for?
x Supplemental Financing Program
Redevelopment Financing Program
Industrial Incentive Program
Amount Requested;$ 50, 000 .00 Total Project Cost:$ 5 5 0.0 00 _ o 0
Type of project
New construction for a start up business.
New construction for an existing business.
On site expansion
Equipment purchase /R e t e n t i on
Remodeling. (dude owe)Commercial / Retail/Industrial
Other
Please give a brief summary of your business and its products or service:
MF&M produces parts for Industrial Hardfacing, Inc. , a
sister company, while simultaneously developing new markets
to grow the business.
Elk River Economic Developmr_ur Authority
Micro Loan Fund Application Page 2 of 8
11/27/2001 13: 32 6417846923 IHI PAGE 04
•
a brief summary ofthe project
o ect
Please give
HMP Corp. is a newly formed holding company that owns
Industrial Hardfacing, Inc. (IHI) , ProCom, Inc. (PCI) and
Minnesota Fabrication & Machine (MF&M) . The HMP Business
Plan moves current IHI welding, grinding and parts of the
machine shop to Iowa to move closer to their markets , improve
efficiency and to consolidate operations . MF&M will continue
to produce parts for IHI and will develop new ,markets and
customers independent of IHI . Elk River management will retain
the existing facilities and grow the business in new markets.
please describe how this loan will impactyour project:
The EDA Micro Loan will provide financing to assist MF&M in
purchasing, from HMP Corp. , the machinery and equipment
necessary to maintain an operation in Elk River. This
machinery & equipment has a certified appraisal of $258 , 150
and will cost MF&M $78 ,454.
III. FINANCING
Project Costs
• Land •
$
Site improvements $
Buildings (attach plans&costs) $ 171 , 000
Equipment/Machinery/Fixtures
(attach list and estimated costs) $ 7 A .4 S 4
Remodeling $
Industrial Inventory/Working Capital $ 300 ,546
Other(attach tion $
description)
Total Costs $ 550,000
Comments:
S
Elk River Economic Development Authority
Micro Loan Fund Application Page 3 of 8
11/27/2001 13:32 6417846923 IHI PAGE 05
Proposed Sources of Financing
SOURCE NAME TERMS AMOUNT
Bank Loan 1st National Bank LOC $50.000
Bank Loan let National Bank Real Estate$450,000
Mortgage
Other Private Funds $
Applicant Contribution $
Other $
Fed Grant/Loan $
State Grant/Loan _ $
EDA Micro Loan $ 50,000
Total Financing $a-5.0.#11110—
Comments:
Camel Assignt cnia
Lien
Description of Collateral Position
To Banka Machinery & Equipment, Inventory
ToBank2 Real Estate 1st
To Private Sources
To Other Sources
To Federal Govt
To State
To EDA Micro Loan Machinery S. Equipment 2nd
411/
Comments:
Elk River Economic Development Authority
Micro Loan Fund Application page 4 of 8
11/27/2001 13: 32 6417846923 IHI PAGE 06
IIValue of CoIbnizal
Existing Certified
nook Value Lt Licaa Appraisal
Land $29 ,428 $29,428 $450.a0n $550,000
Buildings $11 ,002 $323 ,201 $
Machinery&Equip. $78 ,454 $405,206 $ 258 , 150
Other Office Equip. $ $ 29,1n7 $
Other $ $ $
Comments:
IV. JOB & WAGE GOALS
Present#of Employees Total Payroll,
0 Jobs To Be Created*
Please provide the following information on jobs you expect to create.
Average Are the Jobs Expected
Number Hourly Annual Permanent or Hiring
Job Title of Jobs Wage Salary + Temporary? Date
Shop 9 `10.00 187, 200 permane*t
*If loan is for job retention only,please explain in Business Plan.
Job Creation Timetable
Please indicate on the table below when individual jobs will be added to the funs.
Number Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
ob Title of obs 1 2 3 4 5 6 7 8
•;Machinist 9 1 1 , 1 2 , 2 2
S
Elk River Economic Development Authority
Micro Loan Fund Application Page 5 of 8
11/27/2001 13: 32 6417846923 IHI PAGE 07
• IV. PROJECT CONTACTS
8soma
Name
Address
Phone
Accountapr
Name Kaliher & Passolt
Address 10249 Yellow Circle Dr. Minnetonka, MN 55343
Phone 952-933-0433
Financing Soutces(enders.partivps,etc...)
Name First Nat 1 nna 1 Ran]r of F11t Piv,4,r
Address 729 Main Str_ept Elk Rivpr . MN sSap
Phone 763-441-2200
Name
Address
Phone
Name
Address
• Phone
Name
Address
Phone
$artmt Company
Name_ MMP Corporal- nn
Address 218 Eagt -Majrt T,amnni Tk 50140
Phone 641-784-6921
Oihma
Name
Address
Phone
Name
Address
Phone
•
E&Rives Economic Development Authority
Micro loan Fund Application Page 6 of 8
11/27/2001 13: 32 6417846923 IHI PAGE 08
V. ATTACHMENTS CHECK LIST
Please attach the following.
x A) Written Business Plan:
1. Description of Business
2. Ownership
3. Management
4. Date Established
5. Products/Services
6. Future Plans
x B) Financial Statements for Past Two Yeats (New Company)
x C) Financial Projections for Two Years
x D) Resume of Owner/Management
x
E) Personal Financial Statements of Proprietor,Partner,
Guarantors
x Letter of Commitment from Applicant Pledging to Complete in Cover Letter
During the Proposed Project Duration
ix G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in
Project
Other
1) Other
$500 ,J) Fee (1%of amount of loan request)
Elk River Economic Development Authority
Micro Loan Fund Application Page 7 of 8
11/2712001 13: 32 6417846923 IHI PAGE 09
• VL AGREEMENT
I /We certify that all information provided in this application is true and correct to the best
of my/out knowledge. I /We authorize the City of Elk River and the Finance Committee
to check credit references and verify financial and other infonnation. I /We agree to
provide any additional information as may be requested by the City and the Finance
Committee.
DATE November 26, 2001
APPLI NT NAME M n, - -o - _ , • • + - 4, - • • - a
BY / ChifEK Pi#.i1h(Mc. OFiCIC6 't
lk
Elk River Economic Development Authority
Marro Loan Fund Application Page 8 of 8
•
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City of
Elk
RI•
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•
Economic Development
Micro Loan Fund Policy & Guidelines
Revised: September 1999
III
City of Elk River Economic Development Authority
13065 Orono Parkway,P.O.Box 490
Elk River,MN 55330
(763) 441-7420
ELK RIVER ECONOMIC DEVELOPMENT
MICRO LOAN FUND POLICY & GUIDELINES
Revised September 1999
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 central business 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 central
business district to rehabilitate their existing buildings.
II. LOAN PROGRAMS
In order to meet the economic and community development objectives of the EDA,
three distinct loan programs exist within the Micro Loan Fund to promote business
growth in Elk River.
Supplemental Financing Program
Purpose: The Supplemental Financing Program is designed for industrial firms
who have maximized their conventional financing and equity
resources and subsequently would be unable to complete a project
without EDA assistance.
Amount: Up to$50,000
Equity: Must match EDA loan with 1:1 ratio. Total loans not to
exceed 90%of project value.
Rate: Fixed; 1 point below the lowest prime rate published in
the Wall Street Journal the day the loan is closed.
Term: Financing up to 3-years.Loans may be amortized up to
15-years with a balloon payment.
Refinancing: The loan may be refinanced up to 2 additional years at a
market rate of interest.
Criteria: 1. Borrower must create one new full-time job for each$20,000 loaned
within two years. Said jobs must pay a minimum average wage of$8
per hour plus benefits.
2. Borrower must be an industrial firm and comply with the provisions
of the city's industrial and business park zoning ordinances.
Elk River Economic Development Authority
Micro Loan Fund Policy&Guidelines Page 2 of 8
Redevelopment Financing Program
Purpose: The Redevelopment Financing Program is available to business and
property owners in the central business district (CBD) for the
rehabilitation and restoration of their buildings.
Amount: Up to$50,000
Equity: Must match EDA loan with 1:1 ratio. Total loans not to
exceed 90%of project value.
Rate: Fixed;2 points below the lowest prime rate published in
the Wall Street Journal the day the loan is closed.
Term: Financing up to 3-years. Loans may be amortized up to
15-years with a balloon payment.
Refinancing: The loan may be refinanced up to 2 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's facade.
2. Borrower must be located in the Central Business
• District (see attached map).
Industrial Incentive Program
Purpose: The purpose of the Industrial Incentive Program is to encourage
industrial development that supports the tax base and brings quality
jobs to the city.
Amount: Up to$100,000
Equity: Must match EDA loan with a 3:1 ratio. Total loans not to
exceed 90% of project value.
Rate: Fixed;4 points below the lowest prime rate published in
the Wall Street Journal the day the loan is closed.
Term: Financing up to 5 years. Loans may be amortized up to
15-years with a balloon payment.
Refinancing: The loan may be refinanced up to 2 additional years at a
market rate of interest.
• Criteria: 1. Borrower must be an industrial firm and create one new
full-time job for each$20,000 loaned within 2 years. Said jobs must
pay a minimum average wage of$10 per hour plus benefits.
Elk River Economic Development Authority
Micro Loan Fund Policy&Guidelines Page 3 of 8
2. Borrower must locate in the West Business Park (see attached map)
• and comply with the provisions of the city's industrial and business
park zoning ordinances.
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
f. Exterior renovation of retail, commercial and industrial buildings
g. Public infrastructure needed for economic development expansions
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 a for-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 EDA 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.
2. Simultaneous Micro Loans
The simultaneous use of different Micro Loan Fund Programs by any one borrower
or for any one project is prohibited.
111
Elk River Economic Development Authority
Micro Loan Fund Policy&Guidelines Page 4 of 8
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 EDA loan.
VI. REGULATION FOR NEW CONSTRUCTION AND IMPROVEMENTS
All buildings within which public funds will be used for construction or renovation
are to be brought into conformance with city codes and policies. 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.
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 are generally not eligible expenditures.
No building construction should commence until the required City permits are
secured.
The applicant will be responsible for all legal,recording,and other fees required for
protection of a security interest in the loan.
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.
2. 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.
3. 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 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.
Elk River Economic Development Authority
Micro Loan Fund Policy&Guidelines Page 5 of 8
• 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.
5. The EDA Finance Committee and EDA Commissioners will review each
application in terms of its consistency with the goals of the Growth
Management,Strategic,and Economic Development Plans and in relation to the
project's overall impact on the community's economy. Redevelopment 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.
• 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.
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e. Program Objectives - In addition to job and wage 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. 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.
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. COMPLIANCE WITH STATE STATUTES
Each company receiving assistance in excess of$25,000 from the EDA Micro Loan
Fund shall be subject to the provisions and requirements set forth by Minnesota
State Statute 116J.993 and summarized below.
Progress Reports
The borrower shall file a report annually for two years after the closing of the loan or
until all goals set forth in the application have been meet,which ever is later. Reports
shall be completed using the format drafted by the State of Minnesota and shall be
filed with the City no later than March 1 of each year for the previous year.
Businesses fulfilling job creation requirements must file a report with the city no later
than 30 days after the deadline.
Maintain Facility
The borrower agrees to maintain and operate its facility at the site where the loan is
used for a period of five years after the date the loan is closed.
Goal Attainment
In addition to attaining or exceeding the jobs and wages goals set forth in Section IV
of the Application,the borrower agrees to achieve at least one of the goals for
• community development set forth in Section IX,part 5, subdivision (e) of the Micro
Loan Fund policy.
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Redevelopment loans in the central business district are exempt from job creation and
• wage goals stated in Section IX,part 5, subdivision (e) provided the loan amount does
not exceed 50%of the project cost.
Failure to Comply
Businesses failing to comply with the above provisions will be subject to fines,
repayment requirements,and be deemed ineligible by the State to receive any loans
or grants from public entities for a period of five years.
XII. 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.
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