Rule 110-38-1-.02 - General Scope and Purpose(1) The American Rescue Plan Act of 2021 (ARPA) reauthorized and amended the Small Business Jobs Act of 2010, codified at 12 U.S.C. § 5701 et seq., to provide $10 billion to fund the State Small Business Credit Initiative (SSBCI) as a response to the economic effects of the COVID-19 pandemic. SSBCI is a federal program administered by the Department of Treasury (Treasury) that was created to strengthen capital programs that support private financing to small businesses. Pursuant to ARPA, Treasury allocated a potential funding amount of $199,616,860 to the State of Georgia for SSBCI 2.0. (a) On November 4, 2022, Treasury approved the State's application with an executed SSBCI Allocation Agreement (Allocation Agreement), which included proposals for five programs. The Georgia Department of Community Affairs (DCA) through the Georgia Housing and Finance Authority's (GHFA) economic development powers and GHFA Economic Development Financing, Inc. (GHFA EDFI) plan to use the $199,616,860 in SSBCI funds (the Allocated Funds) in five state administered SSBCI Programs. Treasury approved the Georgia Loan Participation Program (GA LPP) for $70,000,000, the Georgia Small Business Credit Guarantee Program (SBCG) for $19,616,860, the Georgia CDFI Program (GA CDFI) for $60,000,000, the Georgia Venture Capital Program for $30,000,000 and the Georgia Equity Direct Program for $20,000,000.(b) Operation of the five programs under the Georgia State Small Business Credit Initiative is subject to the U.S. Treasury SSBCI Capital Program Policy Guidelines, SSBCI Capital Program National Compliance Standards, SSBCI Capital Program Reporting Guidance, the Treasury- approved Georgia SSBCI application, and the Allocation Agreement between Treasury and Georgia. The last annual reporting date with Treasury is March 31, 2028, which may be extended by Treasury. The Secretary of Treasury shall complete all disbursements and remaining obligations before September 30, 2023, according to the SSBCI 2.0 statute under ARPA.(c) DCA, as the lead SSBCI-designated implementing entity authorized pursuant to the Allocation Agreement, shall be responsible for overseeing the five approved programs and ensuring compliance of the programs with all Treasury requirements. The approved Contracted Entities under the Allocation Agreement are Georgia Housing and Finance Authority, GHFA Economic Development Financing, Inc. and IG Fund, LLC (Invest Georgia). Invest Georgia will operate under a memorandum of agreement with DCA and GHFA EDFI to administer the two venture capital programs - the Georgia Venture Capital Program and the Georgia Equity Direct Program.(d) Pursuant to 12 U.S.C. § 5702(c)(1), each state that is approved for participation in the SSBCI will receive its allocation of main capital funds in three disbursements (tranches) as follows: 33 percent, 33 percent, and 34 percent. The transfer of the first 33 percent occurs promptly following the receipt of the fully signed Allocation Agreement. As a precondition to receipt of the second and third disbursements, each state must, among other things, certify to Treasury that the state has expended, transferred, or obligated 80 percent or more of the prior disbursement of allocated funds to or for the account of one or more approved programs that have delivered loans or investments to eligible businesses.(e) SSBCI is expected to, in conjunction with new small business financing, create billions of dollars in lending and investments to small businesses that are not getting the support they need to expand and create jobs. ARPA provided for a $6.5 billion main capital allocation, $1.5 billion allocation for business enterprises owned and controlled by socially and economically disadvantaged individuals (SEDI-owned businesses), $1.0 billion incentive allocation for SEDI- owned businesses, $500 million allocation for very small businesses (VSBs), and $500 million allocation for technical assistance funding. The $199,616,860 funding allocated to Georgia included $109,140,449 from the main capital allocation, $8,678,471 from the VSBs allocation, $53,346,483 from the SEDI allocation and $28,451,457 from the incentive allocation for SEDI-owned businesses. Each state's SEDI allocation must be expended for SEDI-owned businesses. Georgia was not required to create a separate program for SEDI-owned businesses. However, Georgia must maintain records of the total amounts of its SSBCI funds that are expended for SEDI-owned businesses for loans, investments, or other credit support. States that demonstrate "robust support" for SEDI-owned businesses will be able to access their incentive allocation for SEDI-owned businesses in the second and third tranches. Each state should aspire to expend a certain percentage (the SEDI Objective) of its SSBCI funds for meeting the needs of the SEDI-owned businesses within its jurisdiction. Georgia's SEDI Objective is 53.48%.(f) Under Georgia's three SSBCI loan programs, credit facilities are extended to eligible small businesses in Georgia by lenders (banks, credit unions and CDFIs). Lenders will undergo a review process to ensure adequate commercial lending experience, financial and managerial capacity, and operational skills.(2)Scope and Purpose of the Georgia Loan Participation (GA LPP) Program. The Georgia Loan Participation Program is designed to increase lending to eligible small businesses by lenders to diversify their risk through shared exposure with the State. Lenders approved for participation in GA LPP will sign a Master Loan Participation Agreement with GHFA Economic Development Financing, Inc. GHFA EDFI is a wholly owned subsidiary of GHFA and dedicated to economic development. (a) GA LPP will utilize SSBCI funds to purchase up to 25% of a loan originated by a participating lender to an eligible small business borrower. Underwriting is performed by the primary lender, then shared with the Department of Community Affairs (DCA) to streamline the approval process of the purchased participation. The GA LPP can purchase up to 30% of a loan originated by a CDFI depository lending institution or a minority depository institution (MDI). A written commitment letter is executed between the primary lender and GHFA EDFI; the lender closes the loan and sells the position to GHFA/DCA. The primary lender performs debt servicing and shares proportional debt payments with DCA. Interest rates, maturity, collateral, and other loan terms are negotiated with the borrower and determined by the lender. GHFA/DCA will be in a subordinate lien position, and the primary lender will have first claim to all recoveries until its losses are covered.(3)Scope and Purpose of the Small Business Credit Guarantee (SBCG) Program. Under the SBCG Program, credit facilities are extended to eligible small businesses by lenders that have entered into a Lender Program Participation Agreement (PPA) with GHFA EDFI. The PPA provides that qualifying lenders may enroll a qualified credit to an eligible small business in the credit guarantee program for eligible business purposes that meet the eligibility criteria described in 110-31-03. The SBCG Program will reimburse from SSBCI funds 50% of losses incurred on an enrolled credit by a lender that is not in material default of the PPA. Guarantee funds will generally be available to lenders on a first-come, first-served basis.(4)Scope and Purpose of the Georgia CDFI Program (GA CDFI). The GA CDFI Program is a companion loan program among the non-depository Community Development Financial Institutions (CDFIs) and the private lending institutions. The program is designed to provide access to capital to small businesses in order to create job opportunities in low- to moderate-income, minority and other underserved communities. CDFIs will provide access to capital to the borrowers, gap financing for the banks, low interest rates and attractive terms. Georgia businesses will be able to receive significant incentive to start projects, expand operations, improve facilities, purchase equipment or access working capital. CDFIs are encouraged to participate in projects with a private leverage of 10:1, with no less than a private leverage of 1:1.(a) Invest Georgia will administer the two venture capital programs as a Contracted Entity under a Memorandum of Agreement with DCA and GHFA EDFI. Invest Georgia is an instrumentality of the State of Georgia and has authority under O.C.G.A. § 10-10-10 to operate venture capital programs intended to increase the amount of private investment capital available for Georgia- based businesses.(5)Scope and Purpose of the Georgia Venture Capital Program (GA VC Program). The GA VC Program will help grow venture capital for small businesses at the earliest stages of development, which Invest Georgia will operate as a multi-fund program. The Memorandum of Agreement with Invest Georgia will highlight the objectives of the GA VC Program including improving regional entrepreneurial and investment ecosystems that support economic growth, innovation development and job creation.(6)Scope and Purpose of the Georgia Equity Direct Program. The Georgia Equity Direct Program will provide an attractive source of capital for investments in startups and eligible businesses. Investments will be made alongside diverse venture funds, non- profit seed funds, angel funds and other investors that present a compelling economic development case. Invest Georgia will manage the co-investment program, which will provide flexibility for supporting a diverse portfolio of small businesses.Ga. Comp. R. & Regs. R. 110-38-1-.02
O.C.G.A. §§ 50-8-3, 50-8-8.
Original Rule entitled "General Scope and Purpose" adopted. F. Mar. 20, 2023; eff. Apr. 9, 2023.