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27 4859-6924-4449\6 Most RLFs provide a cost advantage to businesses to lessen their financial constraints and meet the community’s goal of increasing productivity and creating new, permanent jobs. The RLF can provide lower interest payments, more flexible equity requirements, longer terms, deferred principle payments and a subordinate collateral position to the bank. The type of businesses that are eligible for loan funds will depend on the loan guidelines established by the particular EDA. An RLF can be structured in several different ways. The most common type of RLFs structure is the direct loan to the business. Direct loans are made to the business with a separate set of loan documents and collateral to secure the loan. These loans are typically made to fill the gap in a development project. The second type of funding structure is a loan guarantee. The EDA provides a partial guarantee to the private lender to ensure repayment of the loan and to limit the risk to the private lender. This type of activity provides several advantages to the EDA—notably, smaller capitalization requirements, increased leverage of funds, and limited administrative activity A third type of RLF is a linked deposit program. With a linked deposit program, the EDA works with other government agencies and large non-profit institutions to place a certificate of deposit with the lending institution at below the market rate. This allows the bank to increase its liquidity of funds, gain a higher return on a riskier project, and improve collateral coverage. The most fundamental issue in the development of a revolving loan program is the development of policies and procedures for operating, marketing, financing, and dealing with delinquencies and defaults. It is important to consider working with development counsel and/or financial advisor to discuss the intricacies and mechanics of a RLF program. The source of capitalization for local loan funds varies by community. Communities are utilizing general fund or municipal utility reserves, Tax Increment Financing reserves, and partnerships with banks or utilities to capitalize local revolving loan funds. Limitation of Powers The City Council may place limits on the activities of the EDA in the enabling resolution. These restrictions may limit the power to issue general obligation or revenue bonds, the power to grant or loan EDA funds, the power to enter into limited partnerships, or other specific powers over which the governing body wishes to exercise control. The following is a list of specific areas where the governing body may exercise control (Minn. Stat. § 469.092, Subd. 1): 1. that the EDA may not exercise any specified power contained in Minn. Stat. §§ 469.001 to 469.047, 469.090 to 469.108, and 469.124 to 469.133 or that the EDA must not exercise any powers without the prior approval of the City Council (Minn. Stat. § 469.092, Subd. 1); 2. that, except when previously pledged by the EDA, the City Council may by resolution require the EDA to transfer any portion of the reserves generated by activities of the EDA that the City Council determines is not necessary for the successful operation of the