Consider Request from Ramsey Business for use of EDA Revolving Loan Fund (RLF).  $100,000 EDA loan amount, 4.24% of total project costs ($2.36M total costs), 15-year term, 3% interest, with land/building as collateral.  The applicant is Stone Brook Children's Academy and Childcare Center (MK Johnson Properties LLC).

 

The intent of the EDA RLF program is to provide gap financing in situations in which conventional/ normal financing is not available for small/ medium sized businesses, to make good projects "GO."  Please see attached EDA RLF guidelines for details. 

APPLICANT/ BUSINESS
The business considering the EDA RLF is Stone Brook Children's Academy.  The are proposing the construction of a new 9,500 square foot children's academy/ childcare center in The COR, on roughly 1-acre of city-owned land.  Stone Brook is currently near the finish line with the "entitlement process" (site plan and plat).  Stone Brook is expected to close on the purchase of the property in the next 45 days, and begin construction shortly thereafter.  Please see emailed CMDC MEMO for details.


THE REQUEST
The financing for this project is includes the a private Bank (50%), the SBA/CMDC (35%), the City of Ramsey (4.24%), and owner equity (10.76%).  The owner is interested in utilizing the City's revolving loan program to ensure enough working capital (i.e. owner equity) remains available to sustain the business for the first several years.  The City's loan will be made against the property (land/ building).

 

 

 

Credit analysis/ underwriting was completed by Mike Mulrooney of the Central Minnesota Development Corporation (CMDC).  Please see emailed CMDC MEMO for a detailed analysis.  Below is a summary.  If EDA/ Council have specific questions/ concerns regarding the credit analysis, please email staff before the meeting (we would like to avoid discussing personal financial information in an open meeting as much as possible).  Also, if you would like to personally review detailed financials, please contact staff--we will arrange for you to meet with CMDC before the EDA meeting.  NOTE: staff does not possess detailed financial statements in-house (intentionally).

EDA Loan Summary:

(1) Amount: $100,000
(2) Total Project Costs: $2.36M
(3) Loan to Total Costs: 4.24%
(4) Term: 15 years
(5) Interest Rate: 3%
(6) Payments: $690.58 per month
(7) Total Interest to be Paid: $24,304

(8) Collateral: land/ building

Land/ Building need to be appraised.  If enough value doesn't exist, a lien will be placed on personal property.  Additionally, like all EDA loans, a personal guarantee will be required.
 

(9) Policy Goals: job creation occurring at 15-20 jobs, and tax base creation at estimated $1.75M (estimated $37K per year in total annual property taxes).  This project doesn't need to establish job wage goals ($150,000 loan is the threshold). 

(10) Personal Credit History: appears to be good
(11) Personal Assets: appear to be good
(12) Debt Coverage: appears to be good (1.9 yr 1, and 2.2 yr 2), plus owners will retain full time jobs to begin.
(13) Owner Equity: sufficient (greater than 10%)