Laserfiche WebLink
<br />City of Arden Hills <br />Economic Development Commission June 4, 2014 <br /> <br />Page 3 of 5 <br /> <br /> Applicants must provide valid bids for the work or equipment proposed. <br /> Loan funds cannot be used to finance any work started prior to the issuance of the loan. <br /> Projects financed through the RLF program are subject to the requirements contained in <br />the Arden Hills Business Subsidy Criteria and City Public Financing Guidelines. <br />Revolving loan applications will not be evaluated using the Public Financing Proposal <br />Grading and Report Card. <br /> The EDA will prioritize those projects that can demonstrate job retention or creation as a <br />result of the public financing. <br /> <br /> <br />Loan Servicing <br /> <br />Following the EDA meeting in April, staff met with the Central Minnesota Development <br />Company (CMDC) and SPEDCO, both of which are non-profit certified development companies <br />authorized to originate and service SBA loans. CMDC currently manages revolving loan funds <br />for the cities of Coon Rapids, Blaine, and Brooklyn Park. This includes completing the <br />underwriting, servicing the loans, and marketing the programs. SPEDCO has explored offering <br />similar services to cities but is not working with any localities at this time. Staff met with these <br />companies to determine whether either could assist in the management of the City’s RLF. <br /> <br />While CMDC manages three municipal revolving loan funds, the size of these funds and the <br />scale of the types of projects being financed are significantly greater as compared to Arden Hills. <br />As a result, their services would likely not be a good fit for the City’s RLF program. SPEDCO <br />suggested that revolving loan funds could be used to help cover the 10 percent borrower equity <br />contribution required for SBA 504 financing. This would place the City’s financing in a tertiary <br />position behind a private bank loan and an SBA loan. Staff believes this option could expose the <br />City to unnecessary risk and that the EDA would not be supportive of such an arrangement. <br /> <br />CMDC and SPEDCO recommended that the City use a third party financial advisor to verify the <br />underwriting work completed by a participating bank. Both companies have staff that could <br />complete this review within one to two hours. The cost associated with the service would be <br />covered by a loan application fee. The third party recommendation along with the staff review of <br />the project’s eligibility and code compliance would provide the EDA with sufficient information <br />to take action on a loan application. <br /> <br />Based on its discussions with the EDA and EDC, and the feedback received from CMDC and <br />SPEDCO, staff is recommending the following general outline for loan servicing: <br /> <br />The City of Arden Hills would be responsible for: <br /> Determining eligibility based on eligibility of improvements, compliance with relevant <br />City Codes and Ordinances, and consistency with design standards. <br /> Obtaining a third party review of underwriting completed by participating bank. <br /> Participation agreements with local financial institutions.