1999-04-29 Request for Revolving Loan Funds
MEMORANDUM
TO:
ALBERTVILLE CITY COUNCIL MEMBERS
FROM:
LINDA GOEB, CITY ADMINISTRATOR, MIKE COURI, CITY
ATTORNEY
SUBJECT: GEM DEVELOPMENT COMPANY, LLC REQUEST FOR
REVOLVING LOAN FUNDS.
DATE:
APRIL 29, 1999
Mr. Eric Dudley, Vice President of Gem Development Company, LLC ("Gem")
has requested that the City loan Gem $75,000 from the City's revolving loan fund for 20
years at 2% interest. Gem is developing the land and building a building which Land of
Lakes Stone Company ("Land of Lakes") will lease from. Gem for the operation of a
granite countertop business. Land of Lakes is a new company and will create six jobs in
Albertville within the first two years of operation. These jobs will pay at least $13.00 per
hour, well above the minimum required by state standards for a revolving loan fund. The
company also will offer a benefit program to its employees. The City has approximately
$77,000 in its revolving loan fund at this time. Gem is the first company to request
revolving loan funds since the establishment of the fund in 1991-92.
We have considered the request and make the following recommendation to the
City Council:
Security:
$75,000, with annual payments of $7,500 in principal plus accrued
interest.
10 years.
0% for the first two years, 3% for the next tItee years, 5% for the
last five years.
Secured by a subordinated mortgage in the land and a subordinated
DCC statement in the equipment. Also, guaranteed by the same
person or persons who guarantee the Small Business Administration
Loan which Gem has applied for.
Amount of loan:
Term of loan:
Interest rate:
We believe that a ten year loan is a sufficiently long period to be a real benefit to Gem,
but short enough that the money will be returned to the City while the City will still have
vacant industrial land left and can assist one or more other businesses in locating to the
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City. The staggered interest rate is set up so that Gem does not have a heavy interest
payment in the startup years when cash is generally scarce. The low interest rate is set up
not to provide the City the highest return, but to assist a business locating in Albertville
while at the same time providing some return to build additional revolving loan funds for
the next recipient. The equipment lien and mortgage would be subordinate to bank, SBA
and CMIF fmancing and any other institutional lender involved in the transaction. This
recommendation is similar to the structure of the Fraser Steel Loan from DTED, which
provided the funds for our revolving loan fund.
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