Fiberglass manufacturer to receive $90K revolving loan
The Park Rapids Economic Development Authority recommended, and the city council later approved, extending the loan to Founders Fiberglass.
The Park Rapids City Council, meeting March 22 as the city’s Economic Development Authority (EDA), supported making a revolving loan of $90,600 to Founders Fiberglass LLC.
Meeting as the EDA were Mayor Ryan Leckner and city council members Erika Randall, Tom Conway and Bob Wills.
According to City Administrator Angel Weasner, the owner of Founders Fiberglass recently bought the former Derhaag Fiberglass facility in the city’s industrial park.
Weasner said the committee for the city’s Revolving Loan Fund (RLF) met the prior week and recommended approving the loan at 2.25% interest with a five year term and 10 year amortization, with a 1% origination fee and closing costs, payments of $844, and a requirement to provide annual financial statements and job information. Collateral would include a second on the real estate and equipment and a personal guarantee.
Mary Thompson, executive director of the Heartland Lakes Development Commission (HLDC), said owner Chad Christenson bought the business to provide materials needed for another business he owns, Forester Pontoons of Hill City.
“They will, at this location, be able to make the consoles and tables that are used in the manufacture of their pontoons,” said Thompson. “They are having shortages, just like everywhere else, so they’re hoping this will provide some additional benefit. They have discontinued some of the lines of product that they did have in order to add some additional product lines.”
She said the company plans right away to have a net increase of two employees.
Christenson plans to use the loan to install an insulated, overhead door with an automatic opener, replacing the existing, poorly insulated and deteriorated door, Thompson said.
Documents supporting the request also discuss using some of the funds to update, repair and replace equipment, do energy efficiency work and as working capital.
To explain the five-year loan term vs. 10-year amortization, Thompson said the loan is structured to be paid off in 10 years in order to get a lower payment, but with an opportunity to extend, refinance or pay it off after five years. “That matches the bank financing that they have in place,” she said.
She said Christenson purchased the business with bank financing, stressing that the revolving loan is for equipment.
“Because of that, this business also qualifies for the Main Street Revitalization Program,” she said. “So he’s going to end up with a 30% grant, with this being the match that he’s required to bring for that program.”
Thompson acknowledged that it’s a relatively risky loan but it meets the RLF’s criteria for an appropriate loan.
“There’s three bankers on our committee,” Randall added, “and I can’t tell you what they would do if this gentleman went to their bank for a loan, but they all recommended that we approve this. … It truly fits what we’re trying to do with this Revolving Loan Fund.”
Status of the RLF
Thompson told the board that the RLF currently had a balance of about $607,000 ready to lend, including $177,000 in Urban Development Action Grant (UDAG) funds.
She also reported that the RLF’s current portfolio includes two $3,333 special COVID loans, to Kathryn’s on Main and Beagle & Wolf Books; a $45,570 regular revolving loan to Wine Not? and a $36,810 UDAG loan to KFI LLC.
Thompson said Founders Fiberglass was a test case of a recent policy change requiring borrowers to make a presentation to the RLF committee. “I think that was really beneficial for both the borrower and the loan committee,” she said, “so that they could really have that opportunity to talk through things and just hear what the borrower had in mind.”
Randall said the committee made that change after a previous experience in which they kept having to send Thompson back to ask a borrower additional questions. “This just saves a lot of time,” she said.
The EDA board formed a consensus to recommend approval of the loan to the city council. Later that night, the city council (also including Liz Stone) passed a motion by Randall to approve the loan.
In an update on the city council’s Feb. 22 workshop on potentially acquiring property for a new industrial park, Weasner reported that discussions are ongoing, but not on a timetable that will allow the city to make use of an 80-100% grant program currently offered through the U.S. Department of Commerce’s Economic Development Administration.
According to the council’s previous discussion, applications for that federal grant are due March 31. However, the council could apply later for the program’s regular, 75% grant. Thompson called it “more important to find the right thing” than to rush the process.
Thompson also reminded the EDA board that a residential subdivision is being considered for the east side of the city. She said funding from a U.S. Department of Agriculture program, combined with a match from the USDA’s Rural Community Development Initiative, could fund the pre-development planning costs.
The application for the USDA grant is April 25, she said, and she plans to discuss it with the HLDC board.