Laserfiche WebLink
the EDA recommended approval and he hopes the City Council will heed what that citizen group <br />advised. <br />Councilmember McGlone stated this is a business with an outlandish failure rate being backed <br />with valueless equipment. He thinks it is a bad deal. <br />Management Analyst Brama stated if this request is not supported by the Council, it should be <br />pulled from tonight's Consent Agenda. <br />City Administrator Ulrich noted the loan agreement has been changed from ten years to seven <br />years. <br />Councilmember Tossey stated the policy of the EDA loan fund is for only a seven -year term; <br />however, the paperwork said it is a ten -year term, which does not fit into the guidelines. He <br />agreed this application is not to the degree of monetary value of Flaherty & Collins, but <br />principally it is similar. Councilmember Tossey stated he is concerned whether or not due <br />diligence was completed to assure this application meets EDA policy since the term had to be <br />changed from ten years to seven years. <br />Mayor Ramsey stated the application is to loan $34,500 for a business that has no value. <br />Councilmember Elvig felt Mr. Mulrooney has a lot of "horsepower" behind his research, knows <br />the applicants, and the strength of their financials. In addition, Mr. Mulrooney is the President <br />and CEO of a financial company that is highly successful in its analysis. Councilmember Elvig <br />stated he found this application to be a reasonable deal. <br />Mayor Ramsey stated it was not his intent to discredit the person making the request, but he does <br />not support this loan. <br />Councilmember Tossey asked why one partner is not footing more of the bill. <br />Mr. Mulrooney stated the partners want to preserve capital for working purposes rather than <br />putting all into assets, which is fairly typical in these types of loan structures. He explained you <br />have to look at this as an unsecured transaction since the City would be in a subordinate position. <br />In order to obtain any dollars back in the event of liquidation, the first lien holder would have to <br />be paid off. Mr. Mulrooney advised if there was not a guarantor behind the deal, he may think <br />differently since this is a start up business with a higher failure rate. However, the principal is a <br />very strong guarantor, has a vast amount of experience in business, and had sold his company to <br />a larger firm a few years ago. This guarantor is someone who has the "horsepower" to see this <br />through and assure all of the lenders will be repaid in event there is a default. <br />Councilmember Tossey asked whether the applicants were notified that the term of the loan had <br />to be reduced to seven years. <br />Mr. Mulrooney answered in the affirmative. <br />City Council Work Session / November 13, 2012 <br />Page 9 of 10 <br />