La. Admin. Code tit. 19 § VII-6109

Current through Register Vol. 50, No. 11, November 20, 2024

Section VII-6109 - General Loan Provisions

A. Only one contract loan will be allowed for any one borrower at any one time. A borrower may apply for additional contract loans only after the full repayment of any previous contract loan is complete.

B. The Louisiana Economic Development Corporation will be guided by the following general principles in making loans.

1. Funding requests will only be considered for supporting contracts for goods and services provided to federal, state, or local entities.

2. Proceeds of the loan shall not be used for any of the following purposes:

a. repayment of debt to or the cashing out of any stockholder or principal of the business;

b. repayment of any personal debt;

c. funding for the principal purpose of refinancing existing debt in excess of 10 percent of the total requested loan amount.

3. The corporation shall not knowingly approve any loan guaranty/participation if the applicant has presently pending, or outstanding, any claim or liability relating to failure or inability to pay promissory notes or other evidence of indebtedness including state or federal taxes, or bankruptcy proceeding; nor shall the corporation approve any loan guarantee/participation if the applicant has presently pending, at the federal, state, or local level, any proceeding concerning denial or revocation of a necessary license or permit.

4. The terms or conditions imposed and made part of any loan guaranty/participation authorized by vote of the corporation board shall not be amended or altered by any member of the board or employee of the Department of Economic Development except by subsequent vote of approval by the board at the next meeting of the board in open session with full explanation for such action.

5. The corporation shall not subordinate its position.

C. Interest Rates. On all loan participations/guarantees the interest rate is to be negotiated between the borrower and the bank but may not exceed four percentage points above New York prime, as published in the Wall Street Journal, at either a fixed or variable rate.

D. Collateral

1. Collateral-to-loan ratio will be no less than one-to-one (1:1).

2. Collateral position shall be negotiated but will be no less than a sole second position.

3. Collateral value determination:

a. the appraiser must be certified by recognized organization in area of collateral;

b. the appraisal cannot be over 90 days old;

c. the percentage of value considered shall be consistent with the underwriting criteria established by the LEDC Board from time-to-time.

4. Acceptable collateral may include, but not be limited to the following:

a. fixed assets: real estate, buildings, fixtures;

b. equipment, machinery: used in support of the contract at cost supported by invoice or no more than 75 percent of cost for existing equipment or machinery;

c. inventory: used in support of the contract at cost supported by invoice or no more than 50 percent of cost for existing inventory;

d. personal guarantees are required; however, no value will be assessed towards collateral value. A signed and dated personal financial statement is also required;

e. 85 percent of accounts receivable considered collectable with supporting aging schedule;

f. contract with federal, state, or local entity shall be assigned to lender; however, no value will be assessed towards collateral value.

5. Unacceptable collateral may include, but not be limited to the following:

a. stock in applicant company and/or related companies;

b. personal items.

E. Equity

1. Will be no less than 10 percent of the loan amount for a start-up operation, an acquisition, or an expansion.

2. Equity is defined to be:

a. cash;

b. paid in capital;

c. paid in surplus and retained earnings;

d. partnership capital and retained earnings;

e. unfunded portion of inventory and receivables.

3. No research, development expense, nor intangibles or contributed assets, other than cash of any kind, will be considered equity.

F. Amount

1. For small businesses the corporation's participation shall be no greater than 50 percent of a loan, but in no case shall it exceed $500,000.

2. For certified minority-owned, women-owned, or owned by disabled persons, the corporation's participation shall be no greater than 60 percent of a loan, but in no case shall it exceed $500,000.

3. For either a small business or a certified minority-owned, woman-owned, or disabled-owned business the corporation's guarantee shall be no greater than 50 percent of the lending institution's portion of the amount of the first draw of the contract. The first draw cannot exceed 50 percent of the total loan amount.

G. Terms. The term may be no longer than 180 days past the completion date of the contract but in no case any greater than one and one half years.

H. Use of Funds. To support a contract for goods and services for a federal, state, or local entity. All proceeds of the contract will be assigned and collected by the lending institution.

La. Admin. Code tit. 19, § VII-6109

Promulgated by the Department of Economic Development, Economic Development Corporation, LR 21:673 (July 1995).

AUTHORITY NOTE: Promulgated in accordance with R.S. 51: 2312(A)(7), (B)(1) and (B)(3).