Agenda - Economic Development Authority - 09/30/1993

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I ! I I I I I I I I I I I I I I I I CASE FUNDING PROPOSED REVOLVING LOAN PROGRAM By: Ryan Schroeder, City Administrator Background: City Staff has provided the draft documents to area banks to receive their input and suggestions as to how the program should be structured and possible changes to the draft documents. The following list has been complied fi'om the comments received: From a lending institution standpoint, we would be less interested in land development and street improvement uses for the proceeds. In terms of collateral, we prefer owner occupied real 6, state and equipment financing. I concur that job creation and tax expansion should be a primary goal. I would add that women and minority owned businesses should also be given high priority in the process. o 4 I agree that private lender funds need to be a minimum match dollar for dollar to City funds. The City will need to give the community an estimate of total funds available before you ~an determine maximum loans per applicant. I have typically seen $50M - $100M as the maximum but you may want flexibility, given a good oppommity. TypiCally, as ineligible assets, we include any intangible assets such as goodwill, software, etc. You may want to be fiexible in disallowing existing debt (e.g., if a company currently has lfigh yield debt and could accomplish a refinance and expansion loan that would add jobs, etc.). The Small Business Administration recently allowed this type of loan purpose for the very same reason. .. I woald agree that non real estate purpose loans should not exceed a full pay-out sixty month amortization. Item number 15; you need to legally define "Prime" rate in that every bank has a different definition, You may want to state "Prime Rate as published in the Wall Street Journal". It is Unclear to me ff you are limiting the participating lender's ability to price the loan. By the nature that the banks would typically not enter into these loans without the assistance of the dty w, ould indicate higher than average risk. It would be reasonable to charge Base +2% Or higher. The City may charge whatever rate it feels is needed. 0 I am assuming that the bank would share in the 1% fee or is a higher origination fee neede ? Regulation B, which is Federal law, mandates that all federally chartered banking orga~zations must respond to loan requests within 30 days after receipt of a completed appliqation. The law pertains to any company with less than SIM in annual revenue. My conc{~l'n is turnaround time on approval. For example, upon the bank's review of the appliOation and our approval, subject to City approval, we are legally bound to respond to the applicant within 30 days from the application date. The timing of the EDA Board meefi~tg may potentially cause us to exceed this 30 day time frame. We can probably manage this with the OCC and agree that we are acting in good faith to provide credit but it is a lX~tential problem. I