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RAMSEY ECONOMIC DEVELOPMENT AUTHORITY REVOLVING LOAN FUND POLICY The Ramsey 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 provide guidance and direction to assist the Board and the City of Ramsey in fulfilling their lending objectives and responsibilities. LOAN POLICY OBJECTIVES 1. All loans will be made in full compliance with all applicable federal and state laws. The EDA will consider loan requests subject to sound lending practices. These loans will serve the City of Ramsey in its goals of economic development. o 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. All credit information and loan documentation will be updated annually, or more often, as the loan agreement requires to keep all files current. Each loan advance will be detailed by purpose, collateral and most specifically, source of repayment. 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 without undue burden. On existing credit lines, annual balance sheets and income statements are required of all borrowers. In addition to the annual statements, files 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. Loans for the purposes of acquiring fixed assets will generally not be amortized more than five (5) years. These types of loans should be made commensurate with the functional life of the fixed asset as well as the borrower's equity position. o Profitable operations are key to the continued viability of a business and to the repayment of an amortized 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. I0. Loans may not be approved for a borrower with successive years of operating losses and a poor capital position or for a borrower with a recent history of sustained losses. RLF Page 6 of 7 It./