ECONOMIC DEVELOPMENT AUTHORITY- Erik J. Thorvig, Economic Development Coordinator
Title
APPROVING CONTRACT WITH CENTRAL MINNESOTA DEVELOPMENT COMPANY FOR SMALL BUSINESS LOAN PROGRAM
Background
At the November 15th, 2018 EDA meeting a resolution was adopted establishing a small business loan program. Staff is proposing to have the Central Minnesota Development Company (CMDC) provide underwriting and loan servicing. CMDC is local company based in Andover and specializes in Small Business Administration (SBA) lending. They provide loan services to several other cities including Coon Rapids and Maple Grove. Under the proposal CMDC would provide the following services:
Loan Underwriting
The loan program outlines that when loans are over $20,000, they will have a full underwriting review by a 3rd party. Underwriting generally includes a thorough analysis of business financials, credit and collateral along with background and personal finance checks of company officers. CMDC will provide a credit memo and recommendation to the EDA regarding loan approval. The underwriting fee is $1,500 and this is passed onto the loan applicant.
Loan Servicing
Loan servicing includes the following:
1.) CMDC obtains and reviews borrower’s financial statements annually.
2.) CMDC documents that the borrower has made timely payment of taxes.
3.) CMDC monitors other financing liens senior to the EDA loan to ensure they are being paid.
4.) CMDC makes field visits as necessary to review business operations.
5.) CMDC provides annual reports to the EDA on any default or any other adverse trend, condition or information about the borrower that it is able to discover.
Loan servicing fees are equal to 2.5% of the overall loan portfolio paid monthly on a pro-rata basis. For example, if the outstanding loan portfolio balance is $100,000, CMDC will be paid $208.33 per month. The services normally result in no cost to the EDA as the costs for service are generally passed onto borrowers in the form of interest expenses.
Recommendation
Approve the attached Resolution entering into a loan servicing agreement with CMDC.
Body
WHEREAS, on November 20, 2018 the Blaine Economic Development Authority approved a small business loan program; and
WHEREAS, the Central Minnesota Development Company provides loan services to various cities in the Twin Cities Metropolitan area; and
WHEREAS, the Central Minnesota Development Company has provided the Blaine EDA a proposal for loan underwriting and servicing and wishes to enter into a contract with the Blaine EDA for said services; and
NOW, THEREFORE, BE IT RESOLVED, that the Blaine Economic Development Authority hereby approves entering into a contract with CMDC for loan services and authorizes the Executive Director and President to execute any documents related to the contract.
PASSED by the Blaine Economic Development Authority this 20th day of December, 2018.