9.0. EDSR 03-08-1993 ITEM 9
ECONOMIC DEVELOPMENT REVOLVING LOAN FUND
. ELK RIVER, MINNESOTA
POLICY GUIDELINES
1. PURPOSE
It is the purpose of this document to establish a Revolving Loan
Fund for Economic Development in the City of Elk River.
2 . POLICY STATEMENT
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 . It is also the intent of the loan program to provide
affordable loans for expansion and/or rehabilitation of
commercial and retail buildings in order to maintain the
economic viability of Elk River's business districts .
An EDA loan is intended primarily when other conventional loans
NIEN and equity have been maximized, and therefore, the project may
otsivupt(k not occur without an EDA loan supplementing the financing. Such
a loan is not intended to give an unfair competitive advantage
over similar businesses in the community.
• 3. USES
Permitted Fund Uses :
a. Building construction
b. Land acquisition
c. Machinery
d. Equipment
e. Fixtures
f. Industrial Raw Material (Inventory)
g. Working capital
h. Renovation and modernization of buildings
i. Exterior renovation of retail, commercial and industrial
buildings
j . Public infrastructure needed for economic development
expansions
Any project meeting the above criteria, and located or proposed
to be located within the City limits of Elk River, may be
eligible for an Economic Development Revolving Loan.
Ineligible Fund Uses:
a. Expenditures for the construction and/or renovation of
O residential units
b. Greater than 25% of total working capital needs
c. Refinancing of existing debt
d. Retail Inventory
Revolving Loan Fund Policy Guildelines Page 2
4 . PRIORITY OF PROJECTS
Businesses requesting an Economic Development Revolving Loan
must be:
- A for-profit corporation, partnership, or sole
rAA1 proprietorship
A "small business" as defined by the Small Business
Administration (SBA)
Priority for EDA loans shall be given as follows :
First priority - manufacturing or industrial
Second priority - research, development, technology
Third priority - retail, service, and other types of uses .
5. LOAN AMOUNT
Minimum loan amount will be $5,000.00, and the maximum amount
will be 40% of the total project cost, or $50,000. 00 . whichever
is less .
• Total loans cannot exceed 90% of the estimated market value of
the property upon completion of the project.
The interest rate for all loans will be tied to the lower of the
prime rate of First Bank Minneapolis or Norwest Bank the day
the loan is closed.
Financing terms will not exceed 20 years for land and buildings;
ten years for machinery, equipment and fixtures, and five years
for working capital .
6 . REGULATION FOR NEW CONSTRUCTION AND IMPROVEMENTS
All building construction or renovation is 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.
7 . LOAN SECURITY AND GUARANTEES
Applicant must be able to secure the loan with at least a junior
mortgage upon the building and/or assets involved for other
• approved collateral .
Applicant must demonstrate the financial means to repay the
loans, as determined by the Economic Development Authority.
Revolving Loan Fund Policy Guildelines Page 3
8 . TIMING OF PROJECT EXPENSES
No project may 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 not eligible
expenditures .
No building construction may commence until the required City
permits are secured.
The applicant will be responsible for all legal, recording and
other fees required for protecting a security interest in the
loan.
9 . PROCEDURAL GUIDELINES FOR APPLICATION AND APPROVAL
A. Application and Review
A loan applicant will meet with the City's Economic
Development Coordinator to obtain information about the
Economic Development Revolving Loan Fund, discuss the
proposed project and obtain application forms .
A completed application form, together with a
nonrefundable processing fee of 1% of the loan request,
• must be submitted to the Elk River Economic Development
Authority prior to review and consideration. The fee is
used to cover City expenses for processing the application.
The applicant must obtain a commitment for primary
AOI5C/90. financing from a bank or other common guaranteed lending
institution before initiating a request for an EDA loan.
�jUO�(��G The commitment for primary financing must be evidenced by a
LAN letter stating that conventional financing has been
maximized and the project may not be undertaken without
supplemental financing from the EDA.
The application is reviewed by the City staff to determine
if it conforms to all city policies and ordinances and to
consider the following:
1. The availability and applicability of other
governmental grants and/or loan programs .
2 . Whether the proposed project will result in conformance
with building and zoning codes.
B. Project Review:
1. The EDA Finance Committee and EDA Commissioners will
• review each application in terms of its consistency
with the goals of the Growth Management Plan and in
relation to the project's overall impact on the
community's economy.
Revolving Loan Fund Policy Guildelines Page 4
. 2 . The Finance Committee and EDA Commissioners 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.
1. Ratio of private funds to Economic
Development Revolving Loan Funds (minimum
threshold: $2 .00 private funds, $1.00
Economic Development Revolving Loan Funds) .
2 . Sufficient cash flow to cover proposed debt
service as demonstrated by financial
statements and projections .
3. Business must show a positive net worth.
4 . Letter of Commitment from applicant pledging
to complete the project during proposed
• project duration, if the loan application is
approved.
5 . Letter of Commitment from other financing
sources stating terms and conditions of their
participation in the project if applicable.
6 . 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.
e. Program Objectives - The applicant must meet all
Revolving Loan Fund criteria and demonstrate how
the proposed activities will meet at least one of
the following objectives:
1. Job creation and/or retention.
2 . Meet City approved economic and/or
redevelopment plans.
3 . Prevention or elimination of slums and blight.
4 . Increasing local tax base.
Revolving Loan Fund Policy Guildelines Page 5
• 5. Required compliance with an existing building
code violation.
3. The EDA Finance Committee will recommend approval,
deny, or ask for a resubmission. A recommendation
from the Finance Committee will be forwarded to the EDA
for action.
10. The above criteria will be reviewed on an annual basis.
11. The Elk River Economic Development Authority may deny any
project at any time that it deems inappropriate according to the
guidelines established in this document.
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