Section 1980.412 - Ineligible loan purposesLoans may not be made or guaranteed if the funds are used:
(a) To pay off a creditor in excess of the value of the collateral.(b) For distribution or payment to the owner, partners, shareholders or beneficiaries of the applicant or members of their families when such persons will retain any portion of their equity in the business.(c) For projects in which such assistance exceeds $1 million and when direct employment increases more than 50 employees which is calculated to or is likely to result in the transfer from one area to another of any employment or business activity provided by the operations of the applicant. This limitation will not prohibit assistance for the expansion of an existing business entity through the establishment of a new branch, affiliate or subsidiary of such entity if the expansion will not result in an increase in the unemployment in the area of original location or in any other area where such entity conducts business operations unless there is reason to believe that such explanation is being established with the intention of closing down the operations of the existing business entity in the area of its original location or in any other area where it conducts such operations.(d) For projects in which such assistance exceeds $1 million and when direct employment increased more than 50 employees which is calculated to or likely to result in an increase in the production of goods, materials or commodities, or the availability of services or facilities in the area when there is not sufficient demand for such goods, materials, commodities, services or facilities to employ the efficient capacity of existing competitive commercial or industrial enterprises, unless such financial or other assistance will not have an adverse effect upon existing competitive enterprises in the area.(e) For agricultural production which means the cultivation, production (growing), and harvesting, either directly or through integrated operations, of agricultural products (crops, animals, birds, and marine life, either for fiber or food for human consumption), and disposal or marketing thereof, the raising, housing, feeding (including commercial custom feedlots), breeding, hatching, control, and/or management of farm and domestic animals. Exceptions to this definition are: (1) Aquaculture as identified under eligible purposes.(2) Commercial nurseries primarily engaged in the production of ornamental plants and trees and other nursery products such as bulbs, florists' greens, flowers, shrubbery, flower and vegetable seeds, sod, and the growing of vegetables from seed to the transplant stage.(3) Forestry which includes establishments primarily engaged in the operation of timber tracts, tree farms, forest nurseries, and related activities such as reforestation.(4) Loans for livestock and poultry processing as identified under eligible purposes.(5) The growing of mushrooms or hydroponics.(f) For the transfer of ownership of a business unless the loan will keep the business from closing, or prevent the loss of employment opportunities in the area, or provide expanded job opportunities.(g) For financing community antenna television services or facilities.(h) Charitable and educational institutions, churches, organizations affiliated with or sponsored by churches, and fraternal organizations.(i) For lending and investment institutions and insurance companies.(j) For assistance to government employees and military personnel who are directors, officers or have a major ownership of 20 percent or more in the business.(k) For any legitimate business activity when more than 10 percent of the annual gross revenue is derived from legalized gambling activity.(l) For any illegal business activity.(m) For hotels, motels, tourist homes, or convention centers.(n) For any tourist, recreation or amusement facility.(o) For any line of credit. Administrative
Par (c) and (d). The State Director will review the criteria in § 1980.412(c) and (d) and make a written determination with supporting data and reasons as to the determinations. Such review must be independent of the Department of Labor certification. The State Director will make sure the loan file contains these determinations as part of the loan analysis prior to the issuance of the Conditional Commitment for Guarantee.
52 FR 6501, Mar. 4, 1987, as amended at 53 FR 45258, Nov. 9, 1988