La. Admin. Code tit. 19 § VII-7605

Current through Register Vol. 50, No. 8, August 20, 2024

Section VII-7605 - Application Process

A. Applicant is required to first contact a participating community development financial lending institution (CDFI), or other participating lender, under the Louisiana Economic Development (LED) SSBCI Micro Lending Program that is willing to entertain, originate, process and service such a loan or line of credit; and confirms the loan request is an SSBCI eligible loan before completing the program enrollment application process with LEDC. The participating Lender will then contact LEDC for qualification and shall submit a complete Micro Lending Program Enrollment Application to LEDC for its review and acceptance as an enrolled loan, or enrolled line of credit, under the Program. The Lender shall also submit to LEDC the Lender's assurances, certifications, representations and warranties, and shall be responsible for obtaining and submitting to LEDC assurances of eligibility, including certifications, representations and warranties from each borrower, all as required by the American Rescue Plan Act of 2021.

B. Information submitted to LEDC with the enrollment application representing the applicant's business plan, financial position, financial projections, personal financial statements and background checks will be kept confidential to the extent allowed under the Public Records Law, R.S. 44:1 et seq. Confidential information in the files of LEDC and its accounts acquired in the course of duty will be used solely by and for LEDC.

C. In order to enroll a loan under the SSBCI Micro Lending Program, the lender shall

1. file the loan for enrollment by delivering or causing to be delivered to LEDC a copy of the program enrollment application packet as may be specified by LEDC, bearing an execution signature of an authorized officer of the lender;

2. submit such additional documentation required for Lender to review and underwrite the loan request;

3. executed lender and borrower assurances, certifications and information reasonably required by the corporation and related to the loan to be enrolled. The loan shall be deemed enrolled in the SSBCI Micro Lending Program at such time as the program enrollment application is accepted, in writing, by LEDC.

D. Businesses applying for consideration as a SEDI owned business will have to self-certify under conditions in Paragraphs a - c as noted above in §7503 under SEDI-Owned Business definition.

E. The following micro lending program submission and review policies shall be followed.

1. A completed Louisiana Economic Development Corporation Micro Lending Program enrollment application form along with information identified by LEDC as appropriate must be submitted to LEDC prior to any loan closing.

2. The participating lender is expected to use its best efforts to provide small Louisiana businesses, SEDI, with maximum practicable opportunity to participate in the micro lending program.

3. The borrower's completed micro lending program enrollment application packet must be submitted by the Lender to LEDC and include:

4. Borrower's completed LED micro lending program enrollment application and related information and materials.

5. The participating lender shall submit to LEDC its complete analysis and evaluation, proposed loan structure, and commitment letter to the borrower. LEDC staff may do its own review and evaluation of the enrollment application packet. The participating lender shall submit to LEDC the same pertinent data that it submitted to the lending institution's loan committee, whatever pertinent data the lending institution can legally supply.

6. Businesses applying for consideration as a SEDI owned business will have to self-certify under conditions in Paragraphs a - c as noted above in §7503 under SEDI-owned business definition.

7. Lender and borrower signed assurances and certifications as required by Treasury at the time of application for enrollment.

8. LEDC staff will review the enrollment application for completeness and compliance requirements as required by treasury under the SSBCI program and then approve and accept as an enrolled loan or disapprove and reject the enrollment application, if the dollar amount of the loan is within its board approved authority, or make recommendations to the board committees and to the board for approval and acceptance as an enrolled loan or disapproval and rejection under the micro lending program.

9. The LEDC's board screening committee, the board's other designated committee, or the board itself, may review only the completed enrollment applications and related materials submitted by LEDC staff and may approve and accept as an enrolled loan or disapprove and deny applications for enrollment under the program within the committee's authority as established by the LEDC board, or board committees will make recommendation to the LEDC board for its decision.

10. The applicant/borrower or their designated representative(s), and the loan officer or a representative of the lender may be required to attend the LEDC's board of directors meeting wherein the program enrollment application will be considered by the board.

11. LEDC's board of directors, the board screening committee, or the board's other designated committee that has considered the enrollment application within its authority has for such enrollment applications; except for those loans which shall be within the staff's authority to approve and accept for enrollment or disapprove, as established by the LEDC board, the staff shall the final approval of acceptance as an enrolled loan under the program or disapproval and denial authority, unless the board overrules the staff's decision.

12. The LEDC staff will report to the board monthly those loans accepted for enrollment under the program, as well as those loans not approved by the lender under the program.

13. Loans originated by participating community development financial institutions (CDFIs), or other participating lenders, under the micro lending program must qualify under the SSBCI treasury guidance. Lenders interested in participating under the program must first gain approval by LEDC. CDFIs, and other participating lenders, will reference their internal credit policies to underwrite the loan for acceptable terms and structure. The lender is responsible for all loan closing documentation.

14. LEDC staff will email the Lender within 3 business days of the loan closing written notice that the enrollment application has been approved and accepted as an enrolled loan under the micro lending program.

F. Loan Purpose Requirements and Prohibitions. In addition to the application process provisions provided in the Section mentioned in the above subparagraph A, in connection with each loan to be enrolled under this Chapter the lender shall also be responsible for obtaining and providing to LEDC with the lender's enrollment application an assurance from each borrower stating that the loan proceeds shall not be used for any impermissible purpose under the SSBCI Program. And additionally, each lender must also obtain and provide to LEDC with its enrollment application under this Chapter an assurance from the borrower affirming:

1. The loan proceeds must be used for a business purpose. A business purpose includes, but is not limited to, start-up costs, working capital, business procurement, franchise fees, equipment, inventory, as well as the purchase, construction renovation or tenant improvements of an eligible place of business that is not for passive real estate investment purposes. The definition of business purpose excludes activities that relate to acquiring or holding passive investments such as commercial real estate ownership, the purchase of securities; and lobbying activities as defined in Section 3 (7) of the Lobbying Disclosure Act of 1995, P.L. 104-65, as amended.

2. The loan proceeds will not be used to:

a. repay a delinquent federal or state income taxes unless the borrower has a payment plan in place with the relevant taxing authority; or

b. repay taxes held in trust or escrow, e.g. payroll or sales taxes; or

c. reimburse funds owed to any owner, including any equity injection or injection of capital for the business' continuance; or

d. purchase any portion of the ownership interest of any owner of the business.

3. The borrower is not:

a. an executive officer, director, or principal shareholder of the financial institution lender; or

b. a member of the immediate family of an executive officer, director, or principal shareholder of the financial institution lenders; or

c. a related interest of such executive officer, director, principal shareholder, or member of the immediate family.

NOTE: For the purposes of these three borrower restrictions, the terms executive officer, director, principal shareholder, immediate family, and related interest refer to the same relationship to a financial institution lender as the relationship described in part 215 of title 12 of the Code of Federal Regulations, or any successor to such part.)

4. The borrower is not:

a. a business engaged in speculative activities that develop profits from fluctuations in price rather than through normal course of trade, such as wildcatting for oil, investments in stock market and dealing in commodities futures, unless those activities are incidental to the regular activities of the business and part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business; (Note: Permissible borrowers include state-designated charitable, religious, or other non-profit or eleemosynary institutions, government-owned corporations, consumer and marketing cooperatives, and faith-based organizations provided the loan is for a business purpose as defined above.) or

b. a business that earns more than half of its annual net revenue from lending activities; unless the business is a non-bank or non-bank holding company certified as a community development financial institution; or

c. a business engaged in pyramid sales, where a participant's primary incentive is based on the sales made by an ever-increasing number of participants; or

d. a business engaged in activities that are prohibited by federal law or applicable law in the jurisdiction where the business is located or conducted. (Included in these activities is the production, servicing, or distribution of otherwise legal products that are to be used in connection with an illegal activity, such as selling drug paraphernalia or operating a motel that knowingly permits illegal prostitution); this category of business includes direct and indirect marijuana businesses, as defined in SBA Standard Operating Procedures 50 10 6; or

e. a business engaged in gambling enterprises, unless the business earns less than 33 percent of its annual net revenue from lottery sales.

f. The corporation shall not knowingly accept any enrollment applications under the Micro Lending Program if the applicant/borrower has presently pending, at the federal, state, or local level, any proceeding concerning denial or revocation of a necessary license or permit or any legal proceeding involving a criminal violation other than misdemeanor traffic violations. Nor should they accept any enrollment applications under the micro lending program if the applicant/borrower or his/her/its principle management has a criminal record showing convictions for any criminal violations other than misdemeanor traffic violations in which the applicant has not been reinstated into society.

5. No principal of the borrowing entity has been convicted of a sex offense against a minor (as such terms are defined in section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. 16911)). 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 a 20 percent or more ownership interest in the partnership; and if a corporation, limited liability company, association or a development company, 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 20 percent or more of the ownership stock or stock equivalent of the entity."

G. The lender must also provide to LEDC with its enrollment application, in connection with each loan to be enrolled under this Chapter, an assurance affirming:

1. The loan has not been made in order to place under the protection of the approved state Capital Access Program (CAP) prior debt that is not covered under the approved state CAP and that is or was owed by the borrower to the lender or to an affiliate of the lender.

2. The loan is not a refinancing or a loan previously made to that borrower by the lender or an affiliate of the lender.

3. No principal of the lender has been convicted of a sex offense against a minor (as such terms are defined in section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. 16911)). 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 or a development company, 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.

4. The corporation shall not knowingly accept any enrollment applications under the Micro Lending Program if the applicant/borrower has presently pending, at the federal, state, or local level, any proceeding concerning denial or revocation of a necessary license or permit or any legal proceeding involving a criminal violation other than misdemeanor traffic violations. Nor should they accept enrollment applications under the Micro Lending Program if the applicant/borrower or his/her/its principle management has a criminal record showing convictions for any criminal violations other than misdemeanor traffic violations in which the applicant has not been reinstated into society.

5. The borrower business structure is a for-profit corporation, partnership, limited liability company, limited liability partnership, joint venture, cooperative, non-profit entity with an eligible business purpose as defined above or other entity which is registered and authorized to conduct business in the state of Louisiana that maintain an office in Louisiana. The borrower business structure is a sole proprietor qualified to do business in Louisiana that maintains an office in Louisiana.

La. Admin. Code tit. 19, § VII-7605

Promulgated by the Department of Economic Development, Office of Business Development and the Louisiana Economic Development Corporation, LR 481481 (6/1/2022), Amended LR 481922 (7/1/2022).

AUTHORITY NOTE: Promulgated in accordance with R.S. 36:104, 36:108 and 51:2312