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 Any b~mk that says that Reg B is not an issue most likely has not been audited by the OCC recently. 10. In defining guidelines for projects I have only a few notes: a. CPA audits would be ideal but, realistically, tax returns, compilations and reviews will be available. In addition to net income we place a large emphasis on cash flow and leverage (the ratio of total debt to equity in the business). b. 10% in a project is very thin but it compares to similar Small Business ~ Administration loans such as the 504 program. e. ~ If the participating bank's portion of the loan exceeds $100,000, the bank is legally , obligated to order an acceptable appraisal of the real estate. 11. ff the banks are acting as agent for the EDA, I would take the time to understand the banks you are getting involved with. I would verify their underwriting and documentation standmds in order to protect the City's investment. 12. I would prepare a list of participating accountants and educational assistance programs to assist the applicants in preparing business plans, projections, etc. 13. Your loan policy mandates credit files, comments and supporting information which I assume will be located at the bank as with any loan. 14. I would propose that we would underwrite each credit under our normal operating procedures which are somewhat similar to those which you outline of RLF page 3 of 7. In adclifi4~n to the requirements which you propose, we would generally ask for five years of complete financial statements (ff there is that much history with the company), as well as a minimum of three years corporate tax rems,signed and dated, and three years of personal tax m/xmas, signed and dated. We would also do UCC Lien Searches, Federal/State Tax Lien Searches and would require copies of the .corporate By-laws or Partnership Agreements. 15. I am confused by one matter that you review on EDA page 5 of 7. You indicate that machinery, fixtures and equipment must be fixed assets. Generally speaking, fLxtures woul~ be considered fixed assets or part of the real estate, but most often machinery and equipment are considered to be personal property and not part of the real estate. Therefore, in a bSnlcmptcy or an uncontested remission, we could have access to our collateral much faster ~an if it were to be considered part of the real estate. 16. Also, RI.I~ page 6 of 7, item no. 8, refers to all f'zxed assets which will be amortized over a five year period. Do you really mean this to be personal property or do you mean real propeety? I am assuming you mean personal property. Please advise. City Staff ha~s contacted other communities that currently have revolving loan programs to determine theiamount of capitalization that the City program should receive. Listed below are the results of that survey: City Amount Elk River $250-500,000 Blaine: $250,000 Coon Rapids $200-300,000 Anoka $135,000 Columbia Heights $45,000