6. EDSR 08-11-2008ITEM # 6.
REQUEST FO R ACTIO N
ver
To Item Number
Economic Development Authority
Agenda Section Meeting Date Prepared by
August 11, 2008 Catherine Mehelich, Director of
Economic Develo ment
Item Description Reviewed by
Consider EDA Micro Loan Applications
- Pomeroy Tool, Inc. Reviewed by
- Ethanol Technology of Minnesota, LLC
Action Requested
The EDA is asked to consider the EDA Finance Committee's recommendation for approval with
conditions on the following Micro Loan applications:
1) $100,000 Micro Loan to Pomeroy Tool, Inc. (Long &Quyen, Inc.)
2) $74,000 Micro Loan to Ethanol Technology of Minnesota, LLC
Background/Discussion
The attached staff reports to the EDA Finance Committee and August 6, 2008 committee meeting
minutes provide background regarding the two separate Micro Loan requests. A representative from
each of the applicants is anticipated to be at the EDA meeting to respond to any questions about the
proposed projects.
Financial Impact
The Micro Loan Fund has a current cash balance of approximately $970,360 (including $100,000 Micro
Loan committed for issuance to Sportech, Inc.).
The Finance Committee is recommending EDA approval of the following Micro Loans and terms:
Applicant: Ethanol Technology of Minnesota, LLC
Loan Terms: $74,000 at 3% interest, 10-year amortization; 5-year balloon payrrlent
Purpose: Purchase equipment and complete remodeling for expanded business venture
Security: 2°d position lien on equipment, inventory, accounts receivable, real estate
& personal guarantee
Job/Wage Goals: Create 7 full-time positions at wages not less than $15/hour within 2-years
Applicant: Pomeroy Tool, Inc. (Long &Quyen, Inc.)
Loan Terms: $100,000 at 3% interest, 10-year amortization 5-year balloon payment
Purpose: Purchase existing precision machining business and continue operations in Elk River
Security: Priority position on accounts receivable, personal guarantee and life insurance
Job/Wage Goals: Retain 4 full-time positions and create 2 full-time positions at wages not less than
$15/hour within 2-pears.
S:\EDA\Micro Loan Fund\Finance Committee\2008\8.11.08 EDA Action Requested.doc
~.
Attachments
• EDA Finance Committee Meeting Minutes dated August 6, 2008.
• EDA Micro Loan Fund Policy and Guidelines
• Staff report to EDA Finance Committee re: Pomeroy Tool, Inc. Micro Loan Application, August 6,
2008.
• Staff report to EDA Finance Committee re: Pomeroy Tool, Inc. Micro Loan Application, August 6,
2008.
ACtlon Motion by Second by Vote
Follow Up
S:\EDA\Micro Loan Fund\Finance Committee\2008\8.11.08 EDA Action Requested.doc
MEETING OF THE EDA FINANCE COMMITTEE
HELD AT THE ELK RIVER CITY HALL
WEDNESDAY, AUGUST 6, 2008
Members Present: Cliff Lundberg, Paul Motin, Tom McNair, Larry Toth, Dave Rymanowski, Dan
Tveite and Chris Carlson
Members Absent: None
Staff Present: Director of Economic Development Catherine Mehclicll; Economic Development
Assistant Annie Deckext, Finance Director Tim Sinic~rl
1. Accept EDA Finance Committee Minutes
The Apxi18, 2008 and April 14, 2008 EDA Finance Committee Minutes ~yere distributed for
review and accepted as presented.
2. Consider Micro Loan APplication• Ethanol Technology of i~~linnesota, LLC
Ms. Mehelich summarized the $74,000 EDA ~'licro Loan application from Ethanol Technology of
Minnesota, LLC (ETom) as described in the staff report. IVTi . Bart Wells, CEO of ETom,
provided an overview of the business expansion project. ~Tr: Wells has developed a technology for
a "plug and play" ethanol conversion system for vehicles. He indicated that with the lunited
marketing of the product thus fax, he has over 300 orders and the ability to only assemble 4 per
day. The expansion requires hiring 7 full time employees to ketl> up with the growing demand for
the new product. Mx. Wells responded t~ duesti~ZS o£ the Corrunittee regarding outsourcing,
patent protection, warranty issues, tie in with "Ene>:g~T Cit}-", .~~ ,~ilability of real estate for collateral,
and future growth plans, Mr. Wells was excused from the meeting following this discussion.
MOVED BY DAN TVEITE AND SECONDED BY CHRIS CARLSON, THE
FINANCE COMMITTEE RECOMMENDS. THAT THE EDA CONSIDER
APPROVING THE $74,000 :LOAN REQUESTTO ETHANOL TECHNOLOGY OF
MINNESOTA, LLC WITH THE FOLLOWING TERMS:
RATE 3% FIXED
TERM 16 Y"EAR AMORT./5 YEAR BALLOON
PAYMENT
SECURITY 2°~ POSITION LIEN ON EQUIPMENT,
INVENTORY, ACCOUNTS RECEIVABLE,
REAL ESTATE AND PERSONAL
GUARANTEE
STRUCTURE PARTICIPATION LOAN WITH FIRST
NATIONAL BANK OF ELK RIVER
JOB/WAGE GOALS CREATE 7 FULL-TIME POSITIONS AT
$15+/HR WITHIN 2 YEARS
THE MOTION CARRIED G-0-1. (DAVE RYMANOWSKI ABSTAINED)
3. Consider Revised Micro Loan Application: Pomeroy Tool, Inc.
Ms. Mehelich summarized the revised $100,000 EDA Micro Loan application from Pomeroy Tool,
Inc. as described in the staff report. She reported that the applicant, Mr. Long Do, was not
EDA Finance Committee Minutes
August 6, 2008
Page2of2
Page 2
available to attend the meeting due to a family funeral out of country. The Committee discussed
questions for clarification from the applicant included the form of business entity proposed (S-
core owned by C-core?), availability of collateral fox the EDA loan portion, and structure as
participation loan with Alliance Bank.
MOVED BY DAN TVEITE AND SECONDED BY TOM MCNAIR, THE FINANCE
COMMITTEE RECOMMENDS THAT THE EDA CONSIDER APPROVING THE
$100,000 LOAN REQUEST TO POMEROY TOOL, INC. (LONG & QUYEN,-INC.)
WITH THE FOLLOWING TERMS:
RATE 3% FIXED
TERM 10 YEAR AMORT./5 YEAR BALLOON
PAYMENT
SECURITY PRIORITY POSITION ACCOUNTS
RECEIVABLE, A PERSONAL
GUARANTEE AND OWNERS LIFE
INSURANCE
STRUCTURE PARTICIPATION LOAN ~ ITH
ALLIANCE BANK
JOB/WAGE GOALS RETAIN 4 EXISTING FULL-TIME
POSITIONS AND CREATE 2 FULL-TIME
POSITIONS AT $15+/HR WITHIN 2
YEARS
THE MOTION CARRIED 7-0.
4. Other Business-
Director of Economic De~relopment Catherine 1~2ehelich distributed a copy of the Micro Loan
Fund Balance Sheet and Loan Summary_Report. She reported that the fund has an unaudited cash
balancein the amount of ~~~-(i, ~60.9i !and there axe currently nine micro loans that remain active
and receivable.
5. ...Closing
The EDA Finance Cor7unittee meeting ended at 8:00 a.m.
Respectfully submitted by,
Catherine Mehelich
Director of Economic Development
S:\EDA\Micro Loan Fund\Finance Committee\2008\8.6.08 minutes.doc
City of
El:
The Light Industrial Hub ofthe 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 maybe 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
map 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-pears. Loans may be
amortized up to the following limits:
20-years on real estate uses;
10-pears 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
map be extended up to two additional pears 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
f. 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 partiCipatfOn 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 maybe 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
unprovements.
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 are generally not eligible expenditures.
No building construction should commence until the required City permits are
secured.
Micro Loan Fund Policy & GuidelinE:s 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.
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 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.
5. 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.
Micro Loan Fund Policy & Guidelines Page 6 of 14
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.
e. 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.
Micro Loan Fund Polity & Guidelines Page 7 of 14
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
MEMORANDUM
TO: EDA Finance Committee
Tim Simon, Finance Director
FROM: Catherine Mehelich, Director of Economic Development
DATE: August 6, 2008
SUBJECT: Consider Micro Loan Application
-Ethanol Technology of Minnesota, LLC (ETom)
Attachment
~ EToM Micro Loan Application and related attachments dated July 18, 2008.
Attached is the Micro Loan application submitted by Mr. Bart Wells, CEO of Ethanol
Technology of Minnesota, LLC (EToM). ETom is a recently established Elk River company
that specializes in the manufacturing of ethanol conversion kits. Mr. Wells also owns and
operates Hi Tech Motorsport, Inc. located in the former Furniture & Things (or business
incubator) building on East Highway 10 in Elk River.
The application includes background information about the owner and EToM business. In
short, Mr. Wells has developed a technology fora "plug and play" system that allows ethanol
vehicles to be converted. Mr. Wells will be in attendance at the Committee meeting to
further describe the project and financing request.
EToM is requesting an EDA Industrial Incentive Micro Loan of $74,000 to assist in
financing equipment, remodeling and inventory necessary for the business expansion
project. The EDA would obtain a 2nd position lien behind the primary lender, First National
Bank of Elk River, on the equipment, inventory and accounts receivable (in addition to real
estate, if necessary).
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:
Consider EDA Micro Loan Application -Ethanol Technology of Minnesota
August 6, 2008 EDA Finance Committee Meeting
Page 2 of 2
Micro Loan Criteria
• Max. Loan Amount: $100,000
• interest rate: fixed, 2 below prime
• Equity: 10% of project
• Private Financing: 50% of project
• 1 job created per $20,000 loaned
• Minimum wage of $15 per hour
Ethanol Technology of Minnesota, LLC
• Amount requested: $74,000
• Rate requested: fixed, 2 below prime
• Equity proposed: 60% of project
• Private Financing: 20% of project
• 7 jobs proposed to be created within 2-years at $15+/hr wage
Action Requested
The EDA Finance Committee is asked to provide a recommendation to the EDA for approval
of the micro loan with the following terms and conditions:
Participation Loan: First National Bank of Elk River
Loan Amount: $74,000
Interest Rate: fixed, 2 points below prime
Term: 10-year amortization; 5-year balloon
Security: 2"d position lien equipment, inventory, A/R (real estate)
Business Subsidy: Execution of a Business Subsidy Agreement for the creation of
7 full-time employment positions at wages not less than $15.00 per hour
within 2-years of the loan closing.
The EDA will consider the Finance Committee's recommendation at its August 11, 2008
meeting.
S:~EDAV~Iicro Loan Fund~Finance Committee~2008~Ethanol Technology of MN~8.06.08 Finance Comm.doc
1
ELK RIVER ECONOMIC DEVELOPMENT
MICRO LOAN FUND APPLICATION
(. CONTACT INFORMATION
Legal Name of Business: Ethanol Technology OfMrnnesota, LLC (ETOM)
Address: 1G820 Hwy 10 N. W
City /State /Zip Elk River, Mn 55330
Contact Person(s) Barton (Bart) C. Wells (CEO)
Business Phone 763-633-9810 Fax 763-712-9087
612-710-9644 -Cell
Home Phone NIA Email www.etechmn.com
Check One: Proprietor X Cor~ioration Partnership
(Limited Liability Corporation)
Social Security No.
Federal ID # 262521084 State ID # 2772616-2
II. NATURE OF LOAN REQUEST
Which Micro-Loan Program are you applying for?
X ~ndustrrallncentrve Program
Rehabilitation Financing Program
Downtown Business Revitalization Loan Program
Amount Requested: $ 74,000 (20%) Total Project Cost: $ 372,175.00
Type of project:
New construction for a start up business.
New construction for an existing business.
x On site expansion
X Equipment purchase
X Remodeling: (circle one) Commercial /Retail /Industrial
Refinancing existing debt
Other
Micro Loan Fund :application
emended No~rember 2006
Page 9 of 14
Please give a brief summary of your business and its products or service:
Manufacturing of Ethonal Conversion Kits
Please give a brief summary of the project:
We have developed and patented a simple plug and play system that allows non-
ehtanolvehicles to be converted. Our system is inexpensive, easy to install and gives fuel
economy on ethanol similar to gasoline.
Please describe how this loan will impact your project:
The loan will allow us to hire 1 sales person, 1 extra assembler and
pay for accelerated advertising. As the sales increase we will be able to
purchase components at a less expensive price by volume discounts. We
will also be able to hire secretarial and extra assemblers.
III. FINANCING
Project Costs $ 372,175
Land $ N/A
Site improvements $
Buildings (attach plans & costs) $ N/A
Equipment/Machinery/Fixtures
(attach list and estimated costs) $ 51,300
Remodeling $ 65,000
Industrial Inventory/Working Capital $ 33, 700
Owner Equity $ 222,175
Total Costs $ 372,175
Comments:
11licro Loan Fund Application Page 10 of 14
Amended November 2006
Proposed Sources of Financing
SOURCE NAME
Bank Loan: First National Bank
Other Private Funds
Applicant Contribution
Other
Fed Grant/Loan
State Grant/Loan
EDA Micro Loan _
Tax Increment Financing
Tax Abatement __
Total Financing
Collateral Assignments
TERMS AMOUNT
$76,000
$222,175
$
74 000
$ 372,175
Lien
Description of Collateral Position
To Bank 1 A/R , Inventory; Equipment * First Position
To Bank 2 N/A
To Private Sources N/A
To Other Sources N/A
To Federal Govt N /A
To State N/A
To EDA Micro Loan : A/R, Inventory, Equipment 2nd Position
*COLLATERAL PLEDGE WILL BE OBTAINED FROM
BC WELLS COMPANY,(owner of equipment)
*Real Estate is available if needed.
l~ficro Loan Fund Application Page 11 of 14
Amended November 2006
Value of Collateral
Book Value Cost Existing Liens
Land $ 500 $ 300 $ 300
Buildings $ 1.39mm $ 800m $ I.lmm
Machinery & Equip. $ 600 $ 725m $ 300m
Other $ $ $
Other $ $ $
• RE owned by Bart C. Wells, LLC
• Equipment is owned by BC Wells, Company (Sub S Corp)
Both 100% owned by Barton C. Wells
IV. JOB & WAGE GOALS
Present # of Employees 1 Total Payroll $4m per month
Jobs To Be Created*
PIPacP nrnvirle the fnllnwinv infnrmati~n nn iobs you extiect to create Within 2-years.
job Title
Number
of Jobs Average
Hourly
Wage
Annual
Salary Are the Jobs
Permanent or
Temporary? Expected
Hiring
Date
Sales 2 $40m Permanent 8-1-8
Assembly 4 $15+ Permanent 8-1-8
Secretarial 1 $15+ Permanent 8-1-8
*If loan is for job retention only, please explain m business flan.
Program Objectives
(Check all that apply)
_X_ 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.
X_ The project increases the local tax base.
The project brings a structure into compliance with an existing building code
violation.
tilicro Loan Fund l~pplication Page 12 of 14
emended November 2006
f
IV. PROJECT CONTACTS
Attorney
Name
Address
Phone
Accountant
Name
Address
Financing Sources ~lenders,~artners, etc...)
Name First National Bank of Elk River
Address 729 Main Street -Elk River, MN 55330
Name
Address
Parent CompanX
Name Ethanol Technology of Minnesota
Address 16820 Hwy 10 N W. -Elk River MN 55330
Phone 763-633-9810
Others
Name Bart WeIls CEO ETOM
Address 4000 Stratford Ridge Rd -Excelsior MN 55331
Phone 612-710-9644
Name
Address
-licro Loan Fund Application Page 13 of 14
Amended I~TOVember 2006
1
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 y B) Financial Statements for Past Two Years T7i ~~c~ ~' `~~~~
U
C) Financial Projections for Two Years
x ~) Resume of Owner/Management
_x ~E) Personal Financial Statements of Proprietor, Partners,
Guarantors
F) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
x ~) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in
Project
_x ~I-~ Fee (1 % of amount of loan request).
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 financial and other information. I / We agree to provide any
additional information as may be re uq ested by the City and the Fina~n,~ce Committee.
APPLICANT SIGNA
BY ~_~1(~ /
DATE v
Micro Loan Fund llpplication
:°lmended I~TOVember 2006
Page 14 of 14
t
ver
MEMORANDUM
TO: EDA Finance Committee
Tim Simon, Finance Director
FROM: Catherine Mehelich, Director of Economic Development
DATE: August 6, 2008
SUBJECT: Consider Micro Loan Application -Pomeroy Tool, Inc.
Attachments
• Staff report to EDA Finance Committee dated April 14, 2008 re: Pomeroy Tool
Application.
• Revised Pomeroy Tool, Inc. Micro Loan Fund Application dated July 3, 2008
• Micro Loan Fund Policy & Guidelines
Background
At its April 14, 2008 meeting the EDA Finance Committee considered an application
submitted by Mr. Long Do who is proposing to purchase and continue to operate the
Pomeroy Tool, Inc. business in Elk River. The attached staff report to the committee
provides additional background about the initial application and proposed project.
Following the Finance Committee's review, the Committee recommended denial of the loan
request due to concerns on the feasibility of the proposed project and encouraged the
applicant to come back with a revised proposal. At its April 14`'' meeting the EDA accepted
the Finance Committee's recommendation.
Mr. Long Do has recently submitted the attached revised Micro Loan application for
consideration. The loan request is the same in the amount of $100,000 for the purchase of
existing equipment.
Following are a few notable changes from the initial application:
• Restructured project financing with Alliance Bank (St. Paul, MIS and SBA Guaranty
• Owner cash equity contribution up to $65,000 for working capital
• Seller loan (line of credit) up to $100,000
• Revised Pomeroy Tool, Inc. Business Plan dated May 15, 2008
t
7
Consider EDA Micro Loan Application -Pomeroy Tool, Inc.
August 6, 2008 EDA Finance Committee Meeting
Page 2 of 2
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 attached Micro
Loan Fund Policy.
Action Requested
The EDA Finance Committee is asked to provide a recommendation to the EDA for approval
of the micro loan with the following terms and conditions:
Participation Loan: Alliance Bank
Loan Amount: $100,000
Interest Rate: fixed, 2 points below prime
Term: 10-year amortization; 5-year balloon
Security: Options to be discussed by Finance Committee
Business Subsidy: Execution of a Business Subsidy Agreement fox the retention of
4 full-time employment positions and the creation of 2 full-time positions
at wages not less than $15.00 per hour within 2-years of the loan closing;
in addition to a requirement to continue operations in Elk River for 5-
years.
The EDA will consider the Finance Committee's recommendation at its August 11, 2008
meeting.
•
S:\EDA\Micro Loan Fund\Finance Committee\2008\Pomeroy Tool\8.06.08 Finance Comm.doc
ELK RIVER ECONOMIC DEVELOPMENT
MICRO LOAN FUND APPLICATION
I. CONTACT INFORMATION L~~1~ G;-~~(:l C~°~i~~~ I1'1 C~ ~~~
Legal-Name of Business: `~c`~ YY~~i~~ ~ ~ ~ O' '- h C,
Address: _1 ~ 03 1 ~ t- t~o~~• ~t,~P, ~ O ~~
City /State /Zip
Contact Person(s)
Business Phone
Home Phone
Check One:
t
~, 1~-~~~~~ ~ ~~ Fax.
_~ Proprietor Corporation Partnership
Social Security No.
Federal ID #-{(~- () i~~-5 J ~ State ID # .~`~ In J~ 0'~2 /
II. NATURE OF LOAN REQUEST
~~hich NLicro-Loan Program are you applying for?
Industrial Incentive Program
Rehabiliation Financing Program
Downtown Business Revitalization Loan Program
Amount Requested: $ O Total Project Cost: $ (~ ~ , ~ ~ t)
Type of project:
New construction for a start up business.
__ Ne~v construction for an existing business.
On site expansion
Equipment purchase
Remodeling. (circle one) Commercial /Retail /Industrial
Refinancing existing debt
_~Other f71~v1.(~L'i ~,i S l l'1~~~11 i Sal > ~ ~~~~~1,~~~.5~
Vlicio Loan Ftmd Application Page 9 of 14
Amended November 2006
Please give a brief summary~of your business and its products or service:
,~
~~~~,1 ~I ~~~5~}~.~5 ~ ~.t~%~n i5 cz..~-~-cL~~~
Please give a brief summary of the project:
Please describe how dzis loan will impact your project:
~.~,e: G,~-1~v~~,c~
IYI. FINANCING
Proyect Costs
Land
Site improvements
Buildings (attach plans & costs)
Equipment/Machinery/Fixtures
(attach list and estimated costs)
.. ~ ~ 5~1~ ~ ~~t~
Remodeling
Industrial Inventory/Working Capital
Other (attach description)
Total Costs
~ ~~~~~~~
T
^F~
Comments:
i t
Micro Loan Ft`md 11~'~ic~aiz'~ h~
1'P J Pab 10 of 14
<Ainended November 2006
t
Proposed Sources of Financing
SOURCE NAME TERMS AMOUNT
i ~
Bank Loan (~~ 11 G~"Y1U.. I~irYl~l?(. ~~i (~ , °% $ Ln . ~(~
Bank Loan I
Other Private Funds ~~~ /~j1~7~ (~ 6(~1~1~}~° I'
-~ U
Applicant Contribution ~i~`~..7~ ~~`~..~
~~ Llt.,•
Other-'~,(~~1 ~''1 Y1GU~~~ ~-~i ~' ~ OYYL~II ~1 ~t $ `~ %C~~
J '
Fed Grant/Loan
State Grant/Loan
EDA Nlicro Loan ~I ~~. L ~1
TaY Increment Financing
Taz Abatement _
Total Financing
Collateral Assignments
$~
~ ~ C~C~
Lien
Description of Collateral Position
To Bank 1 ~l .l ~ (~SS~ .~ ~ ~ L~~G k Q,Lt ~,1'~b.~ ~ S~
~ ~ (n.~ c~i T D
To Bank 2
To Private Sources~'.~~~C(.~-e.'t~~t~C~ /~ll ~(,{,~~,~
' ^ ¢ ,-,
To Other Sources ~ .~ LY i~ ~ J~ ~ '2 ~~.a~ k0 ~ ~~ k ~ { ~ -
To Federal Govt
To State
To EDA Nlicro Loan
Nlicxo Loan Fluid Application Page 11 of 1=4
Amended November ?006
Valve of Collateral
Book Value Cost Existing Liens
Land
Buildings
1Vlachineiy & Equip. ~ ~ ~~
Other~l2 ~ i ~(.~ ~~- ~
Other I hU`{;~d'~I?~ $ ,~ ~- $
0~'~-e,z t-~ F, c,~~ ~ ~ 201c
IV. JOB & WAGE GOALS ~ ~`_~ ,~ ~S
~1,9'~/~.,~i~4~
Present~# of Employees ~ ~ Total Payroll ~i~' ~ ~6~~ v ~C~
~~ ~/mom ~ '~>
Jobs To Be Created*
Please provide the followinginformation on fobs you expect to create Within 2-years.
ob Title
Number
of Jobs Average
Hourly
Wage
Annual
Salary Are the Jobs
Permanent or
Temporaiy? Expected
Hiring
Date
*If loan is for job retention only, please explain in Business Plan.
Program Objectives
(Check all that apply)
X 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 taz base.
The project brings a structure into compliance with an existing building code
violation.
vlicxo Loazi Fluid Application Page 12 of 1=F
!mended November 2006
IV. PROJECT CONTACTS
Attornev c
Name ~(~~C~_ ~ ~ l~(l~ ~ ~~/ ~' i ~~ C-~%S
1~ddress ~,~ ~ ~ \ ~~ ~S ~~
Phone ~ t.~~l' ~ " ~~~~ I
Accountant
Name
Addre:
Phone ~ ~-~~~ ~~ ~~~
Financing Sources (lenders, partners, etc...
~~
J
Name ' ,!' 1 1
1~ddress ~1 ~-- i~~L~a'" ~1 ~~h ~ - ~ ~ ~ ~ ~~, ~ D ; ~ `y J~ ~~`-~
Phone~(~~' ~~'"l ' ~ ~~~
N acne
Addre;
Phone ~I (~ ~' ~{`~( ~ ~` `~ l~ f' `X 7 ~
~~ ~~~~~
~t,1c,,~ ~ ~-
Others
Name _
~~ddress
.-,~ ~ .
~~ ~~~
A~Iicro Loazz Ftuzd Application Page 13 of 1~
mended Nove2nber 2006
Phone ~ ~ ~ `~' ~~ ~ _' ~~~
Name ~ ) V (~~;V'~('~ l / l ~U >1 ~ I ~f;~.l 1~1t~ L~l n l ~ 7' V ~ ll'GvVI 1,1,5
4
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
C) Financial Projections for Two Years ~j v1 ~(,(,S f Y~ SS
/ D) Resume of Owner/Management
/ E) Personal Financial Statements of Proprietor, Partners,
Guarantors
~~~~
_~~ Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
(Y1 )Letter of Commitment from the Other Sources of Financing,
~ Stating Terms and Conditions of their Participation in
t? Project
I-~ Fee (1% of amount of loan request).
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 financial and other information. I / We agree to
provide any additional information as may be requested by the City and the Finance
Committee. (~ ~J
APPLICANT SIGNA'
BY~P~ ~/~9 V-
DATE
Micro Loan Ftu~d Application Page 14 of 14
Amended November 2006
of
fiver
MEMORANDUM
TO: EDA Finance Committee
Tim Simon, Finance Director
FROM: Catherine Mehelich, Director of Economic Development
DATE: Apri114, 2008
SUBJECT: Consider Micro Loan Application -Pomeroy Tool, Inc.
A meeting of the EDA Finance Committee will be held at City Hall on Monday, Apri114,
2008 at 7:00 am to review a Micro Loan application.
Attached is the Micro Loan application submitted by Mr. Long Do who is proposing to
purchase Pomeroy Tool, Inc.
Pomeroy Tool, Inc. is an established Elk River company that specializes in the
manufacturing of precision machined parts and components for the aerospace, laser
manufacturing, and electrical motor manufacturing industries. An outline of the company's
history in Elk River since establishment in 1986 is included in the application. Founder Dick
Pomeroy has an identified a buyer, Mr. Long Do, who proposes to continue the business
operations in Elk River. Mr. Long Dow will be present to discuss the project with the
committee.
Pomeroy Tool, Inc. is requesting an EDA Industrial Incentive Micro Loan of $100,000
toward the purchase of existing equipment, of which the the EDA would obtain a 2na
position lien. An appraisal of the equipment is included in the application for review. A
lease agreement has been established to continue operations in its current Elk River location.
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 below prime
,_
Consider EDA Micro Loan Application -Pomeroy Tool, Inc.
April 14, 2008 EDA Finance Committee Meeting
Page 2 of 2
• Equity: 10% of project
• Private Financing: 50% of project
• 1 job created per $20,000 loaned
• Minimum wage of $15 per hour
Pomeroy Tool, Inc.
• Amount requested: $100,000
• Rate requested: fixed, 2 below prime
• Equity proposed: 10% of project
• Private Financing: 75% of project
• 1 job retained/created per $16,600 loaned
• Minimum wage of $15 per hour
In accordance with the MN Business Subsidy Law, any loan amount over $75,000 requires a
Business Subsidy Agreement for job and wage goals to be created as a result of the assistance,
and a requirement to continue operations in Elk River for 5-years. In addition, the Subsidy Law
requires approval by the local elected body. Following review and approval by the EDA at its
April 14`" meeting, staff anticipates the City Council's consideration for final approval at its
Apri121, 2008 meeting.
Requested Action
The EDA Finance Committee is asked to provide a recommendation to the EDA and City
Council for approval of the micro loan with the following terms and conditions:
Participation Loan:
Loan Amount:
Interest Rate:
Term:
Security:
Business Subsidy:
Attachments
The Bank of Elk River
$100,000
fixed, 2 points below prime
10-year amortization; 5-year balloon
2nd position lien on related equipment purchase
Execution of a Business Subsidy Agreement for the retention of
4 full-time employment positions, and the creation of 2 full-time
positions at wages not less than $15.00 per hour within 2-years of the
loan closing.
• Micro Loan Fund Policy & Guidelines
• Pomeroy Tool, Inc. Micro Loan Fund Application and related attachments
S:\EDA\Micro Loan Fund\Finance Committee\2008\Pomeroy Tool\4.14.08 Finance Comm.doc
MEETING OF THE EDA FINANCE COMMITTEE
HELD AT THE ELK RIVER CITY HALL
MONDAY, APRIL 14, 2008
Members Present: Chris Carlson, Paul Motin, Tom McNair, Larry Toth, Dave Rymanowski and Dan
Tveite
Members Absent: Cliff Lundberg
Staff Present: Director of Economic Development Catherine Mehelich, Finance Director Tim
Simon
Consider Micro Loan Application: Pomeroy Tool, Inc.
Ms. Mehelich sLUnmarized the $100,000 EDA Micro Loan application from Pomeroy Tool, Inc. as
described in the staff report. The applicant, Mr. Long Do, provided an overview his background
and the proposed project which includes acquiring the existing Pomeroy Tool business in Elk
River from Dick Pomeroy. Mr. Do responded to questions of the Committee regarding sources
for working capital and growing the business. Mr. Do was excused from the meeting following
dus discussion.
The Finance Committee discussed concerns regarding the need for additional working capital fox
technology upgrades and quality-control of the growing business, the applicant's request for
interest only payments on the micro loan for first year, options for additional participation from
the seller, and how a new buyer may affect key customer/supplier relationships without sufficient
investment.
MOVED BY DAVE RYMANOWSKI AND SECONDED BY PAUL MOTIN, THE
FINANCE COMMITTEE RECOMMENDS THAT THE EDA CONSIDER
DECLINING THE LOAN REQUEST AS PRESENTED AND ENCOURAGE THE
APPLICANT TO REFINE AND SUBMIT WITH A DIFFERENT FINANCING
STRUCTURE AND BUSINESS PLAN FOR THE PROJECT.
THE MOTION CARRIED 6-0.
2. Other Business
There was no other business discussed.
3. Closing
The EDA Finance Committee meeting ended at approximately 8:00 a.m.
Respectfully submitted by,
t~~
Catherine Mehelich
Director of Economic Development