7. EDSR 01-11-2010ITEM # 7.
of
ver
MEMORANDUM
TO: Economic Development Authority
FROM: Catherine Mehelich, Director of Economic Development
DATE: January 11, 2010
SUBJECT: Discuss EDA Micro Loan -Ethanol Technology of MN, LLC
In August 2008 the EDA approved a Micro Loan in the amount of $74,000 for Ethanol
Technology of MN, LLC to assist in the purchase of equipment and complete remodeling
for the expanded business venture. The term of the loan is a 10-year amortization; 5-year
balloon payment. The rate is fixed at 3%. The loan is secured by a 2"`~ position lien on
equipment, inventory, accounts receivable, real estate and personal guarantee. In addition,
the company is required to create 7 fulltime positions at $15/hour wages within 2-years.
The Micro Loan is structured as a participation loan with First National Bank of Elk River.
The bank has advised staff that the borrower is in default on the loan payments and that the
bank intends to pursue legal action for collections on its outstanding loan with the borrower.
The balance due on the EDA loan is $67,376.34. The bank has inquired if the EDA would
like to pursue legal action for collection of the micro loan and to be represented by the
bank's counsel. Staff would like the EDA's authorization before responding to the bank.
An alternative option for the EDA to consider is negotiating a restructure of the loan with
the borrower.