Agenda - Council - 10/25/1983 - Laserfiche WebLink

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The CDC uses the proceeds from the sale of these debentures to furnish long- term financing to eligible small businesses. Typically, a commercial bank will finance 50 percent of the project with a first mortgage, 40 percent will be financed with an SBA 503 guaranteed loan and the business will-furnish the remaining 10 percent° The 503 program can be used to finance plant construction, conversion or expansion including land acquisition, existing buildings and leasehold improvements by a small business for its own use° Plant construction may include acquisition of machinery and equipment. The program cannot be used for working capital. The business receiving the 503 loan must be a for~profit corporation, partnership or proprietorship. The maximum SBA 503 loan is $500,000, which cannot exceed 40 percent of the total project costs. Typical projects funded using 503 range from a minimum of $100,000 to a maximum of $1,250,000 plus (total project cost). The 503 program can be used in larger projects, but as project costs get larger, the percent of 503 participation and its resulting leverage get smaller. It is possible to combine 503 with other federal programs, such as Urban Development Action Grants, provided the total federally sponsored contribution does not exceed 40 percent of the total project costs. The Council proposes to establish a 503 certified development nonprofit corporation for the seven-county Metropolitan Area that municipalities could use on a voluntary basis. SBA requires that a CDC be established as an independent company incorporated in the state of Minnesota. Therefore, the CDC would be a separate entity from the Metropolitan Council. The regional nonprofit CDC would allow municipalities and businesses within those cities to take advantage of the program without having to establish a local development corporation. Essentially, then, this regional corporation would operate like the Metropolitan Housing and Rehabilitation Authority. This would be particularly advantageous for cities with limited staff or with limited potential for commercial and industrial development projects. If the Council were to establish this regional development corporation, cities would first request to participate in the program. At that point, corporation staff would work directly with interested businesses and their bankers to package a project. REGIONAL 503 PROGRAM GUIDELINES The following guidelines will govern the implementation of the 503 program. Local Community Consent The 503 CDC would operate only in communities that have approved such operation by a resolution of the governing body. Consistency with Laws and Ordinances Eligible projects will be consistent with state and federal laws and the charter, ordinances and resolutions of the municipality in which the project is located. 2O m m m m m m m m m m ! I i m m m m m m