7.2. EDSR 05-17-2021 - Laserfiche WebLink

Home Browse Search

Memo To: Colleen Eddy, Economic Development Specialist, City of Elk River Joint Finance Committee Elk River Economic Development Authority City Council of the City of Elk River From: Mikaela Huot, Director Date: May 12, 2021 Subject: F & M Properties, LLC (Die-Concepts, Inc.) Request for Microloan Extension Background The City of Elk River provided a $185,200 microloan to F & M Properties, LLC in May 2016. The company utilized the funds to aid in the relocation to and acquisition and renovation of an existing building for their new corporate headquarters for Die Concepts, Inc. The project was completed as proposed following award of the microloan. The company met the job creation goals of relocating or creating at least 12 full-time equivalent jobs at an hourly rate of at least $15.00 per hour or 150% of state or federal minimum wage as required pursuant to the City’s business subsidy policy and terms of the loan agreement. Action Item The City received a request to extend the terms of the loan repayment by 2 years. This request and subsequent consideration for granting, is authorized under the terms of the policy, subject to EDA and City Council approval. The company has been making monthly payments on the loan consistent with the repayment terms of the microloan policy over the past 5 years with a 2% interest rate and 25-year amortization. Based on current terms of the loan, final balloon payment on the loan is to be made June 1, 2021 with an outstanding balance as of that date of $146,253.78 plus interest of $243.81. The company provided a letter from CorTrust Bank dated May 10, 2021 requesting that the EDA consider providing a 2-year extension for repayment of the loan made to F & M Properties, LLC as the bank was unable to match the EDA’s loan terms. The bank indicated a refinancing rate would be closer to 4.25% or greater and would include an origination fee (estimated to be 1%). In addition to the financing terms being less favourable, there would also be added time and expense associated with assembling necessary financial data from the company and underwriting requirements to consider alternate financing options. Lastly, while the company has provided financial statements showing consistent financial performance with positive annual retained earnings for the years 2019 and 2020, and growing assets that include primarily accounts receivable and inventories, it does not currently have sufficient liquid (cash) assets to make a balloon payment, with more time necessary. The bank has indicated the loan would continue to be paid down over the next 2 years, consistent with the past 5 years, at which point the company would either refinance to pay the remaining loan balance or use company assets when the final balloon payment is due. Continued payments on the existing loan structure would provide additional cash flow through reduced interest costs that allow for the owner to continue investing in its employees and company during the extended period. Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651-368-2533 or mikaela.huot@bakertilly.com with any questions or to discuss.