TITLE
Recommendation to authorize City Manager, or designee, to execute all related documents to implement a fully amortized loan in the amount of $300,000, at a fixed interest rate of 5 percent per annum and a term of 15 years, to Sararee Corporation, dba Blue Haven Thai Cuisine, located at 740 East Broadway. (District 2)
DISCUSSION
In 1987, the City Council authorized the establishment of the Commercial and Industrial Revolving Loan Fund Program. The Program was originally capitalized by the U.S. Department of Commerce, Economic Development Administration (EDA), Community Development Block Grant (CDBG) and former Redevelopment Agency (RDA) tax increment funding. The purpose of the Program is to provide access to capital to retain, attract, expand and create businesses in Long Beach. Financing under the Program supplements, but does not replace, private lending. Since its inception, more than 300 loans have been funded, totaling more than $32 million. Oversight responsibility for the Program was given to the Economic Development Commission (EDC), which established guidelines for the Program and delegated detailed loan review to its Business Loan Committee (Committee). Based upon the Committee’s recommendation, the EDC acts on the loan application and, if approved, recommends them to the City Manager for approval and processing. Loans in the Program exceeding $100,000 require authorization by the City Council.
The proposed loan will be in the amount of $300,000 at a fixed interest rate of 5 percent per annum and a term of 15 years, to Sararee Corporation, dba Haven Thai Cuisine. The loan will augment a $535,000 Small Business Administration (SBA) guaranteed loan funded by the Grow America Fund (GAF), which was approved by the GAF loan committee on May 3, 2016. The GAF loan allows for nine months of interest-only payments followed by principal and interest payments starting on the tenth month.
The City loan will be secured by the borrower’s personal guaranty, a first lien position on all equipment purchased with the loan proceeds and a second lien position on all other business assets, subordinate to the GAF loan. Additional collateral includes a third position deed of trust lien on borrower’s residential property located at 4433 Greenbrier Road, Long Beach.
After successfully operating Panvimarn Thai Cuisine since 2009, the owner, Paknavin (Joseph) Khemsap, is opening a second location in downtown Long Beach at 740 E. Broadway. The existing restaurant, Panvimarn Thai Cuisine, is located at 4101 North Bellflower Boulevard. The purpose of the loan is to provide funding for the purchase of new furniture, fixtures and equipment, and working capital.
The following is a summary of sources and uses of funding:
|
Sources: |
|
|
|
|
|
|
City Loan |
GAF Loan |
Equity |
Total Project |
|
|
$300,000 |
$535,000 |
$250,000 |
$1,085,000 |
|
Uses: |
|
|
|
|
|
Leasehold Improvements |
$0 |
$500,000 |
$100,000 |
$600,000 |
|
Furniture, Fixtures & Equipment |
$180,000 |
$0 |
$0 |
$180,000 |
|
Working Capital |
$114,000 |
$0 |
$150,000 |
$264,000 |
|
Loan Fees |
$6,000 |
$35,000 |
$0 |
$41,000 |
|
Total: |
$300,000 |
$535,000 |
$250,000 |
$1,085,000 |
The Business Loan Committee of the Economic Development Commission reviewed and approved this loan on May 13, 2016.
This matter was reviewed by Deputy City Attorney Richard F. Anthony on May 3, 2016 and by Budget Management Officer Victoria Bell on May 5, 2016.
TIMING CONSIDERATIONS
City Council action on this matter is requested on May 24, 2016, to expedite build out of the restaurant.
FISCAL IMPACT
The City’s loan amount of $300,000 is comprised of $250,000 from the federal EDA Revolving Loan Fund Program, and $50,000 in CDBG matching funds designated for the Loan Program. Sufficient funding for the Loan Program is budgeted in the Business Assistance Fund (SR 149) in the Development Services Department (DV). Similar to the GAF loan, the borrower will be allowed to make interest-only payments of $1,250 for the first nine months, increasing to $2,456.89 for principal and interest for the remainder of the 15-year loan term. A minimum of ten full-time jobs will be created as the result of this loan
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
MICHAEL P. CONWAY
DIRECTOR OF ECONOMIC & PROPERTY DEVELOPMENT
APPROVED:
PATRICK H. WEST
CITY MANAGER