It paid off this week for Rushford business owners who have known since Commissioner Dan McElroy of the Department of Employment and Economic Development on Sept. 14 told business people in Rushford the state would require repayment of two-thirds of the "loan." The remaining one-third would be forgiven with conditions.

Local lenders, businesses and financial planners proclaimed it unworkable, and with the help of legislators, particularly Sen. Sharon Ropes and Rep. Ken Tschumper, kept the issue alive by challenging DEED's interpretation of the appropriation in the special legislative session Sept. 11. DEED yielded to a 50/50 repayment schedule with 25 percent returned to the state and 25 percent to the city's revolving loan fund.

It was still an unworkable plan to businesses with low equity or existing debt. Last Wednesday the senate economic development committee conducted a hearing on the process in St. Paul and eight people from Rushford participated in the four-hour session telling their personal stories and reason for challenging and rejecting the DEED-proposed formula.

By Thursday it worked. People from DEED and Rushford negotiated a new plan that adopted a 75/25 forgiveness/payback plan and eliminated a cumbersome requirement that each loan include some amount of Small Business Administration participation. SBA also required flood insurance.

The new plan was evaluated and endorsed Monday afternoon by a gathering of business owners. It discussed and commended to the city council at a special 5:30 meeting of the Economic Development Authority. At city council meeting an hour later member Laura Deering asked loudly of no one in particular, "Are we happy with this?" Rich Bjorlo, instrumental in negotiations, answered "there were no objections to the resolution at the business meeting." City Administrator Windy Block referred to the loosened qualifications saying "It will not lessen the strictness of the audits that are sure to follow. It will be incumbent on the city to assure those people we hire to administer this are responsible or the city will be held accountable." It was unanimously approved by the full council which then recinded the resolution forwarded to DEED two weeks ago. It was an action for which the businesses formally petitioned 10 days ago. It now goes to DEED which consultant Chuck Pettipiece expects will accept it.

Features of the new resolution:

Businesses with flood loss and damage are eligible.

Refinancing of earlier debt is not accepted.

The loan can be subordinate to other lenders.

The application is brief and financial records are minimized.

Business must reopen; losses and damages must be documented.

Loan review/grantors are local but may encourage other consultants.

The 25% repayable is to the city revolving loan fund which may issue 15% back to the borrower as a rebate. This, explains Pettipiece, allows the state to say the formula is 25/75, but for the business the effective rate is 90/10, the long-sought goal of the businesses.

The forgivable loan term is 10 years with the first $100,000 forgiven after five years and remaining balances declining 10 % per year.

The maximum loan is normally $750,000; exceptions will be negotiated.

No SBA participation is required.

Loans considered individually for assumability.

Real estate loans will be considered up to 20 years.

First payment deferral on all loans is three years at two percent interest.

Security agreements are required on all loans; the personal guarantee is limited to 10% of the disaster loan received.

The objective is to restart a business and to retain jobs. Annual reports are required to state jobs retained.