At a special meeting on May 26, committee members agreed to background check First-i, a drone company with office space in the city’s nascent tech accelerator, inside of the downtown Herald building. City staff will also check for any pending litigation against the company, and committee members plan to ask additional questions of company officials about their capital projects, before granting them a loan.
Welcome direct lending! The scrutiny arises from the nature of the Accelerated loan program itself, whose purpose is to provide working capital to newly created technology companies. The program carries more risk for the city, as it is the only entity that grants the loan. Business loans normally granted by the Growth Fund and then again by the Employment Development Authority are often made in conjunction with a commercial lender, who has previously performed due diligence on a business. Other business loans, including the Startup Grand Forks Loans, are low enough in size and are unlikely to pose a significant financial threat to the city, should the business face any hardship.
“If you act like a bank…” said City Attorney Dan Gaustad “Act like a bank,” concluded Meredeth Richards, director of community development.
At Wednesday’s meeting, committee members first met with First-i officials before embarking on a one-hour session, closed to the public, to discuss the company’s financial and proprietary information. Once the background checks are complete, these officials will appear again before the loan review committee to answer questions about the company’s future plans, including cash flow and the ability to repay debt.
First-i is a company that plans to sell drones attached to specific buildings. These drones act as surveillance units in an emergency, then relay that information to first responders, a proverbial eye in the sky for law enforcement, firefighters and emergency response workers. The company decided to launch into North Dakota for a variety of reasons, including the favorable regulatory climate for unmanned aerial systems and UND’s well-established reputation in aviation and engineering.
“You’ve, to your credit, focused on ‘how do we build a pool of expertise in small businesses that will grow into larger businesses that then become self-fulfilling, in terms of becoming a center of excellence?’ ‘Jon Gaster, Managing Member of First-i. “I think you’re already halfway on the UAS side, and certainly now on the aviation side, which attracted us.”
The city signed on to the accelerated loan program earlier in May. The program is capitalized by 10% of JDA’s economic development portfolio, with a soft cap of $ 2 million. The maximum amount that can be loaned to a start-up is $ 250,000, and the note carries a five-year term at 2% interest. No payment is required for the first three years, and a lump sum payment is required for the fifth year for the remaining loan balance.