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ITEM 8. <br /> • <br /> City of <br /> Elk -�-� <br /> River <br /> MEMORANDUM <br /> TO: Economic Development Authority <br /> FROM: Catherine Mehelich, Director of Economic Development <br /> DATE: January 14, 2002 <br /> SUBJECT: Consider Sportech Micro Loan Extension <br /> Issue <br /> In November of 1998 a $45,000 Micro Loan at 8.5%interest and a three-year balloon <br /> payment was awarded to Chris and Debra Carlson (Sportech, Inc.). The Carlsons have <br /> requested the EDA's consideration of refinancing the balance of the loan for a two-year <br /> • extension per the Micro Loan Policy guidelines. <br /> Background <br /> In November 2000 the EDA subordinated its second real estate mortgage to a new <br /> mortgage issued to the Carlsons from The Bank of Elk River to allow for the company's <br /> expansion. At the same time the EDA required that a personal guarantee be executed as <br /> additional security on the loan. <br /> Per the loan agreement, a balloon payment is currently due in January 2002 for the balance <br /> of the company's micro loan in the amount of$42,366.71. The Micro Loan Fund Policy <br /> allows for a 2-year extension with refinancing at a market rate of interest. Staff discussions <br /> with local lenders indicate a current market rate between 7.25% and 7.5%. <br /> During the three-year loan period the Carlsons have been very timely in their loan payments <br /> to the City. During this time their micro loan carried one of the highest fixed interest rates <br /> within the EDA's micro loan portfolio,while many of the micro loans carrying variable <br /> interest rates have been able to take advantage of rates as low as 6%. <br /> Action Requested <br /> Staff recommends the EDA consider authorizing a two-year extension of the micro loan to <br /> Chris &Debra Carlson (Sportech, Inc.) at a market rate of 7.25%. <br />