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The Elk River Vision <br />A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community <br />engagement that encourages and inspires prosperity <br /> <br /> <br />Request for Action <br /> <br />To <br />Economic Development Authority <br />Item Number <br />6.1 <br /> <br />Meeting Date <br />June 17, 2024 <br />Prepared By <br />Brent O'Neil, Economic Development Director <br /> <br />Item Description <br />Microloan for Heritage Millwork, Inc. <br />Reviewed by <br />Cal Portner <br /> <br />Action Requested <br />Following the public hearing, approve by motion, a resolution authorizing a loan of $200,000 to Heritage <br />Millwork, Inc. <br /> <br />Background/Discussion <br />The EDA has received an application for an EDA microloan to fund equipment at a new manufacturing facility <br />to be constructed in Elk River. The loan request of $200,000 has been reviewed by the Joint Finance <br />Committee, which recommended approval. This loan funds a portion of an approximate $5 million equipment <br />purchase for Heritage Millwork's new Elk River facility and is a component of Heritage's overall investment in <br />the project of more than $20 million. <br /> <br />As structured, the loan would be amortized over 10 years at 3% interest. The loan would mature on the fifth <br />anniversary as a balloon payment. These are prevailing terms of the microloan program. The EDA would have <br />a third-position security interest, behind First Bank Elk River and the Small Business Administration. The loan <br />is further secured through the personal guaranties of the principal shareholders of Heritage. <br /> <br />Because total city subsidies for this project exceed $150,000, the project is required to comply with the city <br />business subsidy policy. In this case, Heritage is required to create 10 jobs per $20,000 in loan funds; 10 <br />positions are required to be created as part of this loan award and are in addition to jobs required to be <br />created from other city incentive programs. <br /> <br />Financial Impact <br />This is an outlay from the microloan fund of $200,000 which is expected to be repaid to the fund, in full, plus <br />3% annual interest. <br /> <br />Mission/Policy/Goal <br />Support commercial and industrial development. <br /> <br />Attachments <br />1. Resolution - Heritage Microloan <br />2. Heritage Loan Agreement <br />3. Heritage Promissory Note <br />Page 12 of 104