06-16-2025 EDA Packet - Laserfiche WebLink

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The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity Request for Action To Economic Development Authority Item Number 9.1 Meeting Date June 16, 2025 Prepared By Brent O'Neil, Economic Development Director Item Description Microloan Program Updates Reviewed by Cal Portner Action Requested This item is presented for information and discussion purposes. Background/Discussion The EDA Microloan program is made up of four sub-programs: Industrial Incentive, Downtown Revitalization, Energy Efficiency Improvement, and Microbrewery. We recently met with the Joint Finance Committee (JFC) to discuss possible changes and expansion of the loan fund. Below is a summary of points of potential changes to the program(s). With feedback from the board, we'd anticipate presenting marked-up changes for approval at an upcoming EDA meeting. The loan scoring criteria is obsolete (see page 20 of the program application) as some of the metrics are dated, and the final score does not play a large factor in determining a loan award. It is possible that the scoring criteria could be removed or scaled back to be a more effective tool in loan determinations. Interest rates for all sub-programs are fixed at 3%. In the present rate environment, 3% is a considerable discount from the market, yet also serves as an inventive rate to those who utilize it. The JFC discussed indexing the rate to a national standard, whether prime or other measure, and adjusting periodically as the index changes. It was recommended to also consider the investment rate on EDA funds and ensure the lending rate is at or above that level. It is also possible that the EDA would wish to consider different rates for different sub-programs. The current loan application fee is $500 for all programs. This is intended to cover the hard costs of the EDA in executing loan documents and any other loan review expenses. Applicants are responsible for costs that exceed that amount and are invoiced for those costs. The JFC discussed rolling those costs into the loan either on the back end of the payment schedule or by reducing the net proceeds in the loan disbursement. The sub-programs are generally set up for longer-term amortizations with a balloon payment structure so that loans mature at the 60th month. While there is a case to be made for the balloon structure in the case of equipment purchases or to replenish the fund more quickly, there may also be a benefit to setting some loans up on level repayment over a longer period than five years. It is common for existing borrowers to request extensions as the five-year period approaches. The committee suggested developing criteria for allowing loans of an elevated quality or desirability to go Page 12 of 34