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Item 6 <br /> City of <br /> Elk <br /> River <br /> MEMORANDUM <br /> TO: Economic Development Authority <br /> FROM: Catherine Mehelich, Director of Economic Developmen( <br /> DATE: January 13, 2003 <br /> SUBJECT: Consider Micro Loan Extension — Charlene R. Barder, Edward J. <br /> Barder and Margo L. Foster (formerly dba Olde Main Eatery) <br /> Issue <br /> The EDA has a Micro Loan with the former owners of Olde Main Eatery restaurant, <br /> Charlene Barder, Edward Barder and Margo Foster (hereinafter collectively called the <br /> Borrower). Upon the loan's balloon payment recently becoming due, the Borrower has <br /> requested the EDA's consideration of an extension of the Micro Loan for an additional <br /> term. <br /> Background <br /> In October of 1997 a $50,000 Micro Loan was awarded to the Borrower who was doing <br /> business as Olde Main Eatery. The terms of the loan include an 8.5%interest rate amortized <br /> over 15-years with a five-year balloon payment. In September 2000 the EDA re-amortized <br /> the loan to adjust monthly payments after the Borrower had fallen behind in payments. In <br /> August 2001 the Borrower sold the restaurant operation but retained ownership in the <br /> building. The loan is secured by a UCC-1 filing on equipment and fixtures related to the <br /> building, assignment of leases and rents, a mortgage filing, and guaranty by all three <br /> individuals. <br /> Per the loan agreement, a balloon payment was due in December 2002 for the balance of the <br /> Micro Loan in the amount of$40,791.43. The Micro Loan Fund Policy allows for a 2-year <br /> extension with refinancing at a market rate of interest. Staff discussions with local lenders <br /> indicate a current market rate between 6% and 6.5%. <br /> Since the restaurant was sold, the Borrower's loan repayment history has been very good. <br /> The Borrower and their primary lender, First National Bank of Elk River, have requested <br /> that the EDA consider extending its Micro Loan for an additional term. <br /> Action Requested <br /> Staff recommends that the EDA authorize refinancing the balance of the Micro Loan with <br /> • Charlene Barder, Edward Barder and Margo Foster over a 7-year amortization at a market <br /> rate of 6.25%with a 2-year balloon payment. <br />