7.0. EDSR 12-09-2002 - Laserfiche WebLink

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• City of Elk -�-1 River MEMORANDUM TO: Economic Development Authority n FROM: Catherine Mehelich, Director of Economic Development(J) DATE: December 9, 2002 SUBJECT: Consider Micro Loan Extension — ProTech Engineering, Inc. Issue In November of 1999, ProTech Engineering, a start up mold manufacturer, received a $50,000 Micro Loan from the EDA to purchase machinery and equipment. The loan was financed at 7.25% and amortized over 15-years with a 3-year balloon payment. Brad Butalla, President of ProTech, has requested the EDA's consideration of refinancing the balance of the loan over a 5-year amortization with a 2-year balloon payment. Background In December 2001, the EDA subordinated its first position on the company's accounts receivable to The Bank of Elk River to allow an expanded line of credit. The EDA continues to hold first position on the company's inventory, documents, fixtures and the like, along with a second position on four pieces of equipment. Per the loan agreement, a balloon payment is currently due in December 2002 for the balance of the company's micro loan in the amount of$44,270.13. The Micro Loan Fund Policy allows for a 2-year extension with refinancing at a market rate of interest. Staff discussions with local lenders indicate a current market rate between 6% and 6.5%. ProTech's loan repayment history has been excellent. During this time their micro loan carried one of the highest fixed interest rates within the EDA's micro loan portfolio,while many of the micro loans carrying variable interest rates have recently been able to take advantage of rates as low as 4.75%. Action Requested Staff recommends that the EDA authorize refinancing the balance of ProTech Engineering's loan over a 5-year amortization at a market rate of 6.25%with a 2-year balloon payment. 110