7.2. HRSR 04-04-2016 - Laserfiche WebLink

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City of Elk River, Minnesota Die Concepts Inc. March 23,2016 Page 4 7. Loan Security and Guarantee Requirements (Page 8 of Policy) The City's Economic Development Microloan Fund policy states that prior to the City granting a loan to a proposed business,that the proposed project must meet certain loan security requirements. These requirements are: • 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: • Key person life insurance may be required as determined by the EDA Finance Committee based on loan amount and company ownership partners: 8. Timing of Project Expenses (Page 8 of Policy) To be regulated if funding is approved and determined to be used for any improvements of the existing building. 9. Procedural Guidelines for Application and Approval (Page 8 of Policy) To be regulated if funding is approved and determined to be used for any improvements of the existing building. The EDA Finance Committee is asked to evaluate the project application based on the following criteria 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 microloan funds: The full requested loan amount of$200,000 is greater than 20% of the total project cost(approximately 21.6%). To stay within the criteria of the Jobs Incentive Microloan program, the loan amount would have to be reduced to$185,200. The criteria related to equity and private financing are within the appropriate percentages(at least 50%private- sector commitments and 10%owner equity with 58.4%and 11.9%, respectively) • Sufficient cash flow to cover proposed debt service as demonstrated by financial statements and projections:the company has provided cash flow projections for 2016 and 2017 that includes existing operations of the business plus repayment of the loan obligations(bank and City's microloan)that shows positive cash flow and continued positive net income beginning in 2016 and moving forward. This positive net income and cash flow will allow coverage of the proposed debt service.