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<br />26 <br />4859-6924-4449\6 <br />Advances <br />As noted earlier in this handbook, there is independent authority for an EDA to make a loan. An <br />EDA may advance (loan) its general fund money or credit without interest. The advances must be <br />repaid from the sale or lease of land. If the money advanced for the development or redevelopment <br />project was obtained from the sale of the EDAs general obligation bonds, then the interest rate on <br />the advances must not be lower than the average annual interest rate on the EDAs general <br />obligation bonds that are outstanding at the time the advances are made. Advances made to acquire <br />land and to construct facilities for recreational purposes do not need to be reimbursed. (Minn. Stat. <br />§ 469.106). <br />Secondary Market <br />An EDA “may sell, at private or public sale, at the price or prices determined by the authority, any <br />note, mortgage, lease, sublease, lease purchase, or other instrument or obligation evidencing or <br />securing a loan made for the purpose of economic development, job creation, redevelopment, or <br />community revitalization by a public agency to a business, for-profit or nonprofit organization, or <br />an individual.” (Minn. Stat. § 469.101, Subd. 22). An EDA operating a revolving loan fund may <br />choose to sell a loan on the secondary market if it needs to recapitalize the loan fund in order to <br />finance additional projects. <br />Borrowing in Anticipation of Bonds <br />After authorizing a bond issue, an EDA may borrow funds to provide money immediately required <br />for the project, but the loan must not exceed the amount of the bonds. The EDA must approve a <br />resolution stating the terms of the loan. The due date for the loan may not be for more than <br />12 months from the date of the loan origination and may be repaid with interest from the proceeds <br />of the bonds when the bonds are issued and delivered to the bond purchasers. The loan must not <br />be obtained from any Commissioner of the EDA or from any corporation, association, or other <br />institution of which a Commissioner is a stockholder or officer. (Minn. Stat. § 469.101, Subd. 19). <br />Revolving Loan Funds <br />Small business growth provides the greatest opportunity for new investment and job development <br />in most communities. However, due to constraints on capital markets, financial institutions may <br />be unable or unwilling to provide a complete financing package, and many good companies end <br />up with marginal long-term financing. <br />Businesses and financial institutions invest dollars in projects to make a profit and to earn a return <br />on that investment. Unless the project offers the promise of a positive return, it is difficult to sell <br />a prospective investor on locating or expanding a business. Stimulating investment requires <br />impacting a business and a bank’s spending decisions. An EDA can impact business spending <br />decisions by providing an opportunity where rates of return on investment are attractive and <br />competitive. Many EDAs do this by operating a local Revolving Loan Fund (RLF) designed to <br />facilitate small business investment. <br />The typical goal of a local RLF is to leverage private sector investment by filling the capital market <br />gap for financing long-term assets.