Agenda - Council - 02/14/2017 - Laserfiche WebLink

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The project is about $1.4M total --in which American Print & Digital is seeking financing, with about $600,000 of the total project costs are the new machine. The Bank of Elk River has tentatively indicated they would fund 50%, the SBA (via the development corporation) has tentatively indicated they would fund 40%, and the owner has indicated they would like the EDA RLF to cover 5%, and for owner equity to be 5% (20 year term, Bank lien 1, SBA lien 2, City lien 3). The owner is requesting 5% EDA RLF financing to allow equity dollars to be dedicated to ongoing business working capital needs. The printing industry requires a significant level of working capital to upgrade machines, repair machines, and purchase ever -changing software. It is not uncommon for these unexpected costs related to machines to cost several hundred thousand dollars. American Print & Digital can physically make the deal happen without without the EDA RLF. However, they want to be prudent/ smart about how they are growing their business planning --and they want to make sure they can digest their growth. NOTE: a common pit -fall for quickly growing small businesses is to not have enough money available in working capital, and outstrip their ability to digest their growth (i.e. they don't have enough working capital to pay for short term expenses incurred as a result of their quick growth). This can happen by putting too much equity into the upfront project, and not leaving dollars for working capital. American Print & Digital is attempting to avoid this potential problem via this request to the City. Notification: Observations/Alternatives: Credit analysis/ underwriting was completed by Mike Mulrooney of the Central Minnesota Development Corporation (CMDC) on behalf of the Ramsey EDA. Mr. Mulrooney has supplied the City with a MEMO/ report and that report was provided to the EDA. Mr. Mulrooney review his findings before the EDA and presented his recommendation for approval of this loan. In summary, Mr. Mulrooney was satisfied with the credit -worthiness of American Print & Digital, and he recommended that the EDA attempt to collateralize the loan with equipment (10 year term), or take a second lien on other personal assets of the business owner. Funding Source: EDA RLF: about $300,000 balance prior to this loan. Recommendation: This case was reviewed by the EDA on 02/09. The EDA was in support of approving the attached loan agreement via a 7-0 vote. The EDA made the following general comments: • it is recommended that the borrower pledge personal assets (residence) to secure the loan • that the City's approval is contingent upon approval by the bank and the SBA • that final approval is subject to review and approval by the City Attorney and CMDC Action: Motion to: Approve the attached draft loan agreement with American Print & Digital and approve an EDA RLF loan in an amount up to $72,500 (not to exceed 5% of the project cost); subject to: • the borrower providing a second mortgage on his residence to secure the loan • the borrower receiving approval of the project loan by the bank and the SBA, and . review and approval of the loan agreement by the City Attorney and the CMDC