Md. Code Regs. 24.05.04.06

Current through Register Vol. 51, No. 24, December 2, 2024

Section 24.05.04.06 - Loan Terms and Requirements

Loans shall meet the following requirements:

A. Maximum Insurance. The maximum insurance with respect to any one transaction may not exceed the lesser of:

(1) $1,000,000; or

(2) 80 percent of the total of the principal of, redemption or prepayment premiums or penalties on, and interest on, the loan, and the payment or insurance of the payment of any fees or premiums necessary to obtain insurance, guarantees, or other credit support in connection with insurance provided by the Authority under the Act.

B. Term and Interest Rate. The term and interest rate of a loan shall be as negotiated between the applicant and the lender and approved by the Authority.

C. Determination of Insurance Amount. The Authority may consider the following factors when considering the amount of insurance for a loan:

(1) The amount of the loan;

(2) The amount and type of collateral securing the loan;

(3) The request of the lender;

(4) The economic impact of the loan; and

(5) Any other factor that the Authority considers relevant.

D. Security. A loan shall be secured by liens on real property and equipment or other assets purchased with loan proceeds, the personal guarantees of the principals of the applicant and any other collateral approved by the lender and the Authority which may include, but are not limited to, liens on the business assets of the applicant, guarantees of related entities, and indemnity deeds of trust on real property owned by the principals of the applicant.

E. Economic Impact. The economic impact of the loan shall be substantial. To determine the economic impact of a project, the Authority may consider:

(1) The amount of the insurance;

(2) The terms of the loan to be insured;

(3) The number of new jobs that will be created or existing jobs that will be retained because of the loan;

(4) The addition to the tax base of a county and the State;

(5) The development of small and medium businesses and minority-owned businesses;

(6) The promotion of tourism in the State;

(7) The retention of existing industry and commerce and the attraction of new industry and commerce in the State and a balanced economy in the State through, among other things, port development and the control, reduction, or abatement of pollution of the environment, and the utilization and disposal of wastes;

(8) The protection of natural resources and the encouragement of resource recovery;

(9) The general promotion of the health, welfare, and safety of the residents of each of the counties and municipalities of the State; and

(10) Any other factor that the Authority considers relevant.

F. Removal or Abandonment.

(1) The Authority shall determine that the transaction will not result in the removal of the business operations of any person benefiting from the transaction, from one county to another county, or the abandonment of the business operations of any person benefiting from the transaction in the State.

(2) If the transaction will result in the occurrence of either of the events in §F(1) of this regulation, the Authority shall determine that the transaction will discourage the business from leaving the State or will preserve the competitive position of the business in its industry.

G. Retail Establishment. The insurance may not be used in connection with a retail establishment unless the Authority determines, in its sole and absolute discretion, that the insurance will accomplish the purposes of the Act.

H. Operation on Default. The Authority shall determine that the Authority will not be required, except on default, to operate, service, or maintain any business.

I. Title Insurance. If the loan is to be secured by real property, the Authority may require the:

(1) Applicant to provide an American Land Title Association Loan Policy, as amended, issued by a title insurance company acceptable to the Authority for an amount equal to the maximum principal amount of the loan, naming the Authority as an insured, evidencing that title to property offered as collateral on the date of closing is vested in the applicant, and containing only standard exceptions and encumbrances approved by the Authority.

(2) Title insurance policy to be accompanied by a survey, certified in the manner required by the Authority and the title company issuing the title insurance, showing that there are no easements or encroachments upon or other matters pertaining to the property, except those acceptable to the Authority. The title insurance policy may not contain any survey exceptions.

J. Appraisals. The Authority may require an appraisal showing the value of real property or used equipment which is offered as collateral for the loan.

K. Insurance. Before providing insurance, the Authority may require the applicant or the principals of the applicant and key managers to obtain and assign to the Authority life insurance up to the amount of the loan. The Authority may also require public liability insurance, business interruption insurance, hazard and casualty insurance, flood insurance, homeowner's insurance, and other appropriate forms of insurance.

L. Financial Statements. The Authority shall require audited financial statements examined by an independent accountant acceptable to the Authority.

M. Balloon Payments. The Authority may not insure the balloon payment due when the amortization of the loan is longer than the term of the loan, without an event of default occurring before maturity.

N. Equity. The Authority will require an equity investment of the borrower for a loan used to purchase real estate of at least 10 percent of the total cost of the real estate and for a loan used to purchase equipment of at least 20 percent of the total cost of the equipment.

Md. Code Regs. 24.05.04.06