Rule 110-38-1-.04 - Terms and ConditionsThe following are the general terms and conditions of the five programs for the Georgia State Small Business Credit Initiative.
(1) Georgia Loan Participation Program (GA LPP)(a) A Master Loan Participation Agreement is executed between an approved participating lender and GHFA EDFI.(b) The approved participating lender originates the loan. DCA/GHFA EDFI through GA LPP may purchase up to 25% on loans up to $5 million and may purchase up to 30% on loans from a CDFI depository lending institution and minority depository institutions (MDIs) up to $5 million. There is a concentration limit of $5 million to any one borrower.(c) Underwriting is performed by the primary lender and shared with DCA to streamline the approval process of the purchased participation.(d) A written commitment letter is executed between the primary lender and GHFA EDFI.(e) The lender closes the loan and sells the position to DCA/GHFA EDFI.(f) The lender keeps all its standard fees.(g) Loan servicing is performed by the primary lender, which shares proportional debt payments with DCA/GHFA EDFI.(h) DCA/GHFA EDFI will be in a subordinate lien position, and the primary lender will have first claim to all recoveries until its losses are covered.(i) Rates, fees, and terms are determined by the primary lender. There are no additional fees to use the GA LPP.(j) DCA/GHFA EDFI may provide a lower interest rate than the primary lender for a limited period of time in order to improve the borrower's debt coverage ratio.(k) The primary lender has the unconditional right to repurchase the participation sold in the original loan to DCA/GHFA EDFI at any time.(l) GA LPP will target businesses with an average borrower size of 500 employees or less, but credit cannot be extended to businesses with more than 750 employees. Average projected loan size is between $100,000 and $5,000,000.(2) Georgia Small Business Credit Guarantee (SBCG) Program(a) A Lender Program Participation Agreement is executed between an approved participating lender and GHFA EDFI.(b) The SBCG Program will provide a 50% loan guarantee on a lender's loan. Each loan covered under the SBCG Program will stand alone with a maximum guarantee of 50%.(c) Underwriting is performed by the primary lender and shared with DCA to streamline the approval process.(d) Lenders will pay a processing fee as determined by DCA for all loans submitted for enrollment.(e) The SBCG Program will charge a flat fee of 1% upfront of the guarantee amount on lines of credit with a two-year term and a flat fee of 2% of the guarantee amount on term loans with a maturity of five years. For all loans, the fee will be paid at the time of the loan closing. The fee structure may be modified in response to program sustainability or market conditions.(f) The maximum individual loan amount eligible for the SBCG guarantee is $1,000,000 with a 50% maximum guarantee of $500,000. DCA/GHFA EDFI may consider loans greater than the $1,000,000 maximum; however, the maximum amount of the guarantee will remain at $500,000.(g) Lender Concentration Limit - The maximum guarantees that may be set aside at any time with respect to a single borrower is $5,000,000.(h) The maximum term for SBCG guarantee on lines of credit will generally be 24 months.(i) The maximum term for SBCG guarantee on amortizing loans will generally be 60 months.(j) The SBCG is a deficiency guarantee; lenders must first liquidate collateral before claiming the guarantee.(k) SBCG will target businesses with an average borrower size of 500 employees or less, but credit cannot be extended to businesses with more than 750 employees.(3) Georgia CDFI Program (GA CDFI) (a) Qualified non-profit, non-depository CDFIs will be able to participate in the GA CDFI Program.(b) Each CDFI approved to participate as a lender will enter into a performance-based contract arrangement with DCA/GHFA EDFI.(c) The CDFI will receive and review eligible loan requests, then forward appropriate paperwork to DCA for final review and approval.(d) Funds will be advanced to the CDFIs on a loan-by-loan basis, and the CDFI, in turn, will then make the loan to the eligible business. The CDFI will be deemed the lender and holder of the loans for purposes of its books and records. All principal and other payments from the loan may be retained by the CDFI to be used for additional eligible loans under the GA CDFI Program. Interest earned may be used to pay for SSBCI- related expenses in accordance with Treasury Guidelines.(e) Loans may be for working capital, equipment, real estate, and other eligible activities under Treasury Guidelines.(f) CDFIs are encouraged to offer lower interest rates than those of their participating lending institutions. There are no fees to the CDFIs or the borrowers from DCA for the of the GA CDFI Program.(g) There is not a minimum loan amount for the GA CDFI Program. The maximum loan amount is $1,250,000 with a loan term no longer than 10 years.(h) DCA will set aside initial reserves in increments of $2 million for each approved CDFI for lending purposes. CDFIs will request funding for their loans from their reserves and may request additional reserves upon deployment of their initial respective $2 million in reserve.(4) Georgia Venture Capital (GA VC) Program (a) The GA VC Program is a multi-fund program administered by Invest Georgia as a Contracted Entity.(b) Invest Georgia will invest capital in multiple funds as a limited partner, and each separate fund will manage the full processes of investing in high-potential Georgia- based small businesses.(c) Invest Georgia will target "seed" and "early stage" venture capital funds.(d) Invest Georgia, along with LCG Associates (investment consultant), will perform due diligence and select venture capital funds to invest and will monitor investment.(e) SSBCI capital will be legally obligated to venture capital funds as a limited partner through contractual agreements (subscription agreements) prior to these funds expending capital with investments in small businesses.(f) The minimum investment amount will be $1,000,000 with a maximum investment amount of $3 million in private venture capital funds. At the discretion of DCA and Invest Georgia, investment amounts may be raised to no more than $5 million to invest in larger venture capital funds or special opportunities.(g) SSBCI venture capital program investments may be used for most business purposes unless prohibited under Treasury Guidelines.(h) Invest Georgia will take a seat on the Limited Partner Advisory Committee of each venture capital fund receiving a SSBCI investment.(i) SSBCI capital investments will generally be limited to 10% of a venture capital fund.(j) The GA VC Program will require a minimum of 1:1 capital match at the fund level.(k) Invest Georgia and DCA will identify funds with SEDI characteristics to participate in the GA VC Program.(5) Georgia Equity Direct Program (a) The Georgia Equity Direct Program will be a direct co-investment program administered by Invest Georgia as a Contracted Entity.(b) A special emphasis will be placed on reaching SEDI businesses.(c) SSBCI funds will flow from DCA/GHFA EDFI to Invest Georgia to a limited liability company (LLC) to be created by Invest Georgia. The LLC will act as the equity owner in eligible businesses.(d) Invest Georgia will oversee due diligence, and under the direction of a Direct Investment Advisory Committee will select the co-investment opportunities. This Advisory Committee will be formed by Invest Georgia to help manage the full process of due diligence, selection, and investment into high-potential Georgia-based businesses.(e) The minimum investment amount will be $250,000 with a maximum investment amount of $1 million alongside angel investors, non-profit seed funds, emerging funds, SEDI or rural funds and other investors.(f) SSBCI venture capital program investments may be used for most business purposes unless prohibited under Treasury Guidelines.(g) The Georgia Equity Direct Program will require a minimum of 1:1 capital match at the company level.(h) SEDI-owned businesses will be targeted for investments in the Georgia Equity Direct Program.(i) Direct investments through the Georgia Equity Direct Program are intended to incentivize ("cause") additional investment into promising young Georgia-based companies.(6) Other Terms and Conditions applicable to Georgia SSBCI Programs(a) Each of the five Georgia SSBCI Programs will cause and result in $1 of new private credit. It is anticipated the private leverage ratio will exceed 10:1 over a 10-year period when all of Georgia's five SSBCI Programs are measured together.(b) The Georgia SSBCI Programs are required (1) to target an average borrower or investee size of 500 employees or less, (2) not to extend credit or investment support to borrowers or investees that have more than 750 employees, (3) to target support towards loans or investments with an average principal or investment amount of $5 million or less, and (4) not to provide credit or investment support if a given transaction exceeds $20 million.(c) The SSBCI Capital Program Policy Guidelines require certifications in various circumstances from lenders, investors, and small business borrowers and investees participating in SSBCI capital programs. Certifications include Borrower/Investee Use of Proceeds and Conflict of Interest Certification, Lender/Investor Use of Proceeds and Conflict of Interest Certification, Sex Offender Lender/Borrower Certification, Sex Offender Investor/Investee Certification, Borrower/Investee Certification Related to Business Enterprises Owned and Controlled by Socially and Economically Disadvantaged Individuals and Certification Regarding Venture Capital Fund Services to Portfolio Companies.(d) No principal of the investor has been convicted of a sex offense against a minor (as such terms are defined in 34 U.S.C. § 20911). For the purposes of this certification, "principal" is defined as if a sole proprietorship, the proprietor; if a partnership, each managing partner and each partner who is a natural person and holds 50 percent or more ownership interest of any class of the partnership interests; if a corporation, limited liability company, association, development company, or other entity, each director, each of the five most highly compensated executives or officers of the entity, and each natural person who is a direct or indirect holder of 50 percent or more of any class of equity interest in the entity; and if a partnership where the managing partner is a corporation, limited liability company, association, development company, or other entity, each director and each of the five most highly compensated executives or officers of the entity.(e) For a SSBCI-supported venture capital or equity investment, the investment complies with the venture capital program conflict of interest standards as set forth in Section VIII.f of the SSBCI Capital Program Policy Guidelines.(f) The State must obtain an assurance from the lender affirming:(i) The SSBCI-supported loan is not being made in order to place under the protection of the approved program prior debt that is not covered under the approved program and that is or was owed by the borrower to the financial institution lender or to an affiliate of the financial institution lender.(ii) If the SSBCI-supported loan is a refinancing, it complies with all applicable SSBCI restrictions and requirements in Sections VIII.f and VIII.f of the SSBCI Capital Program Policy Guidelines regarding refinancing and new extensions of credit, including that the SSBCI-supported loan is not a refinancing of a loan previously made to the borrower by the lender or an affiliate of the lender.(iii) No principal of the lender has been convicted of a sex offense against a minor (as such terms are defined in 34 U.S.C. § 20911). For the purposes of this certification, "principal" is defined as if a sole proprietorship, the proprietor; if a partnership, each partner; if a corporation, limited liability company, association, development company, or other entity, each director, each of the five most highly compensated executives, officers, or employees of the entity, and each direct or indirect holder of 20 percent or more of the ownership stock or stock equivalent of the entity.(iv) The private entity receiving SSBCI funds and financial institution lender will make available to the Treasury Inspector General and the Government Accountability Office all books and records related to the use of the SSBCI funds, subject to applicable privacy laws, including but not limited to 12 U.S.C. § 3401et seq., including detailed loan and investment records, as applicable.(v) The financial institution lender is in compliance with the requirements of 31 C.F.R. § 1020.220, regarding customer identification programs.(g) Monthly and Quarterly Reporting Requirements: All lenders in the Georgia SSBCI program are required to submit monthly and quarterly reports to DCA. Details on the deadlines and format of these reports are available from DCA directly. The reporting requirements of the two venture capital programs are detailed in the Memorandum of Agreement between DCA/GHFA EDFI and Invest Georgia.(h) Lender Approval Criteria: Each lender seeking participation in the State of Georgia's SSBCI Programs will undergo a thorough review process by the State to ensure that the lender has the adequate commercial lending experience, financial and managerial capacity, and operational skills. Regulated financial institutions must meet certain criteria established by their regulators to maintain their charters. DCA will work with the Georgia Department of Banking and Finance on the selection process for participating financial institutions including banks and credit unions. Principal evaluation factors of lenders will include capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk.(i) Georgia's SSBCI Programs may not enroll the unguaranteed portions of SBA- guaranteed loans. This prohibition also applies to the unguaranteed portion of other federally generated loans.(j) Underserved Markets. Georgia's SSBCI Programs will strive to reach underserved markets including women- and minority-owned businesses as well as small businesses in low- and moderate-income communities, in minority communities, and in other underserved communities.Ga. Comp. R. & Regs. R. 110-38-1-.04
O.C.G.A. §§ 50-8-3, 50-8-8.
Original Rule entitled "Terms and Conditions" adopted. F. Mar. 20, 2023; eff. Apr. 9, 2023.