PULASKI -- Pulaski will make a $250,000 five-year loan to Magnox Acquisition Inc. and Nanochemonics Holdings LLC to help the companies with operational costs.

The money will come from the town's Urban Development Action Grant Fund. One condition of the loan is that the Pulaski County Industrial Development Corp. make an additional loan with similar conditions to those of the town.

In their loan resolution, town officials said it is meant to encourage an existing business to stay in Pulaski.

The fund came from grant money secured by Pulaski years ago for an industrial loan. When the loan was repaid, the town was allowed to keep the money and designated it for economic development.

The town was prepared to make this loan about a year ago when Tim Hopkins, Magnox president, purchased the company that makes oxides for video and audio cassettes and other applications and is now developing nanotechnology products.

Instead, the town used the money as part of a financing guarantee worked out with SunTrust Bank, which approved a $2 million term loan last year. Now that SunTrust is restructuring that financing, the money has been freed and Magnox requested an outright loan.

Pulaski Town Council unanimously approved the loan Tuesday night following a 45-minute closed session.

Nanotechnology is the science of building and engineering small devices such as electronic circuits from single atoms and molecules. Pulaski has been looking into the feasibility of developing a nano-business park around the Magnox initiative.

Magnox has spun off its Nanochemonics corporation to make nano-size oxide particles for use in pharmaceutical, environmental, cosmetics, coatings and other applications.

Magnox has been working with nanoparticles for several years before developing specific applications for them. What makes these particles different is that some are organic, occurring naturally rather than being artificially constructed, so they are not toxic and can be made in large quantities.

The loan will be at 6 percent interest, and only interest payments are required during its first two years. The town will get a third priority deed of trust on the real estate and other company assets.

Magnox started in Pulaski in 1986, as a spin-off from Hercules Powder at the Radford Army Ammunition Plant. When Hercules was phasing out its oxides work, several Hercules employees bought the production facility that became Magnox. Since then, it has gone through a variety of owners and expansions ending with Hopkins' purchase of it last year.