6.3. SR 06-21-2004 - Laserfiche WebLink

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Consider Financing Assistance for Badger Ventures, LLC (Gradient Technology) Project June 21, 2004 City Council Meeting Page 2 of 3 Recommendations Consider Approval of Micro Loan Amendments In the past the City Council has also adopted any amendments to the Micro Loan Pohcy. The EDA has approved the following Finance Committee recommended amendments: · Eliminate the Supplemental Micro Loan Program · All Micro Loans be consummated via a bank participation loan · Add to the bank participation loan agreement and the Business Subsidy Agreement o "If Borrower defaults on the loan, the City will collect based on a pro-rata basis with the participating bank" o "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" · Amend the following Industrial Incentive Program Criteria: o Amount: Eliminate "Up to $100,000 of secondary financing not to exceed 40% of the project cost" and change to "up to $100,000 of secondary fmancing not to exceed 20% of the project cost" o Rate: Eliminate "4 points below the lowest prime rate pubhshed..."and change to "2 points below the lowest prime rate published in the Wall Street Journal the day the loan is closed, or 3 % whichever is greater" o Term: Add "Balloon payment must not be longer than balloon payment of the participating bank" o Criteria: Eliminate "Borrower must locate in the West Business Park" Staff recommends that the Council approve the proposed amendments, but remove the following items: "If Borrower defaults on the loan, the City will collect based on a pro-rata basis with the participating bank." The proposed amendment limits the city's ability to provide the loan funds in a subordinate collateral position behind the participating bank, which is often the case in any gap- lending program (i.e. SBA, MN Community Capital Fund, Initiative Foundation). "If Borrower does not meet the job and wage goals specified in the Subsidy Agreement, then 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." The proposed amendment is a provision that exceeds the minimum obligations for failure to meet goals as specified in the MN Business Subsidy Law. The statute requires as a minimum that the recipient pay back the assistance plus interest (at a rate specified in the statute), but may be prorated to reflect partial fulfillment of goals. After a public hearing the city may extend up to one year the period for meeting the goals. In addition the company becomes ineligible to receive a business subsidy from any grantor for 5-years.