Agenda - Economic Development Authority - 09/30/1993

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I I I I I '1 ,I I I I I I I I I I I I I RAMSEY ECONOMIC DEVELOPMENT AUTHORITY REVOLVING LOAN FUND POLICY The Ramsoyr Economic Development Authority and its Board of Commissioners (hereinafter referred to as!the "Board") believe that a revolving loan fund is desirable and, over the long term, a profitable means of employing funds available for investment. They also recognize that the lending of money necessarily includes some reasonable business risks and therefore, establishes this loan policy to pro, de guidance and direction to assist the Board and the City of Ramsey in fulfilling their lending ~bjeetives and responsibilities. LOAN POLICY OBJECTIVES All lo~s wLll be mode in full compliance with all applicable federal and state laws. The IiDA will consider loan requests subject to sound lending practices. These loans will serve ihe City of Ram.~ey in its goals of economic development. All information regarding a credit applicant, borrower or guarantor obtained by the EDA shall be held in strictest confidence. A loan file will be made for each loan request. Ail credit information and loan doeun0entation will be updated annually, or more often, as the loan agreement requires to keep all files current. o Each loan advance will be detailed by purpose, collateral and most specifically, source of repay~n, ent Financial statement analysis, visitations and general observations by the EDA will be documented on a timely basis· The credit file will contain enough information to allow'~any EDA member, unfamiliar with the project, to obtain sufficient knowledge · wathoUt undue burden. On ex~sting credit lines, annual balance sheets and income statements are required of all borrowers. In addition to the annual statements, fries will contain any other annual or periodic documentation required by a regulatory or supporting agency (Anoka County, SBA, ~etc.) All loan files will contain a "loan comment sheet". This comment sheet will contain a statement regarding the loan purpose, the specified source of repayment, the term of the loan, a collateral description, and a collateral valuation. The comment sheet should also detail ~any other requirements which need to be monitored to comply with the terms of the loan agreement. LoanSifor the purposes of acquiring fixed assets will generally not be amortized more than five (5) year~. These types of loans should be msde commensurate with the functional life of the ~xxed asset as well as the borrowers equity position. Profitable operations are key to the continued viability of a business and to the repayment of an J~morfized loan. Therefore, the EDA should only lend to businesses which have positive working capital positions. In general, the working capital position as measured by the current and quick ratios should be comparable to industry averages as measured by Robert Morris Associates (RMA) statistics. 10. Loans ~may not be approved for a borrower with successive years of operating losses and a poor ehpit~l position or for a borrower with a recent history of sustained losses. RLF Page 6 of 7