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<br />Case #1: <br /> <br />Financing for Martin EDM <br /> <br />Economic Development Coordinator Sullivan reviewed that Martin EDM has approached the <br />City for assistance with its precision machining company. This business is currently located on <br />the old Bakestar site on Azurite Street. Martin EDM will need $395,400 to purchase some <br />machinery for the business. There is a $25,000 gap in the financing and Martin EDM is <br />requesting a loan from the City of Ramsey's Revolving Loan Fund. The financial analysis of <br />this deal is being done by CMDC as they are a part of this financing package. Staffs <br />recommendation is to authorize a loan to Martin EDM in the amount of$25,000 at a rate equal to <br />the SBA rate. This market rate loan would not be considered a business subsidy and therefore <br />there are no required hearings. <br /> <br />Chairperson Riley inquired if it is a general rule with the Revolving Loan Fund that a public <br />hearing is not required. Economic Development Coordinator Sullivan responded in the <br />affirmative. He explained $75,000 is a benchmark; any time an individual is given something <br />they cannot normally get anywhere else it is considered a subsidy. This is required to be <br />reported, with a requirement for tax base creation or job creation. <br /> <br />Member Elvig asked if this financing will be considered the equity in the project. Economic <br />Development Consultant Mulrooney replied it is considered a portion of the equity. This loan is <br />strictly for equipment; the building is up and in place and the company is operating. The <br />financing provided on the building was with an SBA 504 loan. In that case the site costs that <br />were underwent by the City was part of the equity that went into the overall structure of the <br />building. Mr. Martin came back to the City later and said he was in need of a crucial piece of <br />equipment to meet the demands of his customers for new orders. Staff found through their <br />investigations that Mr. Martin is approximately 12 weeks behind on orders, so he is doing quite <br />well. Mr. Mulrooney advised the overall structure of this deal would be an approximate <br />$197,000 bank loan for the equipment, a $158,000 loan from the SBA 504 Loan Program, <br />$25,000 from the City of Ramsey Revolving Loan Fund, and Mr. Martin would need to provide <br />equity for the additional $14,000 to round out the project cost. Mr. Martin was originally <br />approved for financing that is much larger than the amount being discussed, which he has <br />downsized to this level. This loan has been approved by the lender and also by CMDC; it is <br />awaiting submission to the SBA for approval pending approval by the EDA for the additional <br />$25,000. Mr. Mulrooney advised it is wise to try to have a borrower/company that is using the <br />working capital being generated to operate the business. While this loan is at a market rate, the <br />fact that the City is able to provide financing is a significant benefit to the company at this <br />juncture in their life cycle. At this level of $395,000 with the financing as proposed, the business <br />does cash flow to debt going forward with adequate debt service coverage. Staff recommends <br />approval of the $25,000 loan from the Revolving Loan Fund. <br /> <br />Chairperson Riley inquired about the term of the loan. Economic Development Consultant <br />Mulrooney replied the loan would be for a ten year term, which is the term offered through the <br />SBA loan. <br /> <br />Member Kiefer inquired about the City's security position on the loan. Economic Development <br />Consultant Mulrooney replied the City would be in the third secured position. Due to the equity <br /> <br />Economic Development Authority/May 18,2006 <br />Page 4 of 10 <br />