Md. Code Regs. 24.05.10.04

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

Section 24.05.10.04 - Eligible Applicants

A. The Authority shall be satisfied that the following requirements to qualify for equity participation financing have been met by applicants who are sole proprietors (and by the owners of at least 70 percent of enterprises that are not sole proprietorships):

(1) The applicant is of good moral character;

(2) As determined from creditors, employers, and other individuals who have personal knowledge of the applicant, the applicant has a reputation for financial responsibility;

(3) The applicant shall be a resident of Maryland or the applicant's principal place of business shall be in Maryland;

(4) The applicant is unable to obtain adequate business financing on reasonable terms through normal lending channels because the applicant:

(a) Belongs to a group that historically has been deprived of access to normal economic or financial resources because of race, color, creed, sex, religion, or national origin;

(b) Has an identifiable physical handicap that severely limits the ability of the applicant to obtain financial assistance, but does not limit the ability of the applicant to perform the activity for which the applicant would be receiving financial assistance;

(c) Has any other social or economic impediment that is beyond the personal control of the applicant, such as lack of formal education or financial capacity or geographical or regional economic distress but that does not limit the ability of the applicant to perform the activity for which the applicant would be receiving financial assistance; or

(d) Does not meet the established credit criteria of at least one financial institution;

(5) The applicant or owners of the applicant who qualify as socially or economically disadvantaged under §A(4) of this regulation shall actually control as well as own at least 70 percent of the enterprise.

B. Establishing Eligibility.

(1) The applicant's owner may establish the economic impediment of lack of formal education under §A(4)(c) of this regulation by demonstrating that the applicant's owner has not achieved the type or level of academic or vocational training that in the Authority's determination is typical of business owners in the industry in which the applicant is operating.

(2) The applicant or owners of the applicant may establish the economic impediment of lack of financial capacity under §A(4)(c) of this regulation by demonstrating that the applicant or owners of the applicant do not have the collateral, working capital, positive credit history, or financial experience, training, or expertise that in the Authority's determination is typical of businesses that are able to obtain financing through normal channels.

(3) The applicant may establish the economic impediment of regional economic distress under §A(4)(c) of this regulation by demonstrating that the applicant is located or operates in areas defined as economically distressed by the State or federal government, or a local government, including:

(a) Designated Neighborhoods, as designated by the Department of Housing and Community Development pursuant to Housing and Community Development Article, § 6-305, Annotated Code of Maryland;

(b) Enterprise Zones, as designated by the Secretary pursuant to Economic Development Article, § 5-704, Annotated Code of Maryland; and

(c) Empowerment Zones, as designated by the federal government pursuant to 26 U.S.C. § 1391.

(4) To qualify as economically disadvantaged under §A(4)(c) of this regulation, each applicant or owner shall have a net worth of $500,000 or less. Net worth is calculated deducting any interest in the business receiving financial assistance from the Authority, and any equity in real estate, including the applicant's or owner's primary personal residence, that is being used for collateral for the financial assistance from the Authority.

C. Applicants shall also meet the following requirements to qualify for financial assistance:

(1) Be in good standing and qualified to do business in Maryland;

(2) Have the legal capacity and all necessary legal authorization to incur the obligations of the equity participation financing;

(3) Demonstrate creditworthiness and repayment capability acceptable to the Authority;

(4) Demonstrate sufficient experience and the capacity to manage the enterprise; and

(5) If the applicant is requesting a guaranty of a loan, the applicant shall have applied for and been denied a loan in the same amount and on similar terms by a financial institution.

D. In addition to meeting the requirements of §§A and B of this regulation at the time of application by the enterprise to the Authority to obtain financing to acquire an existing business, the following minimum qualifications shall be met:

(1) The enterprise or its principals shall have a minimum net worth of $75,000 pledged to the Authority as security;

(2) The enterprise or its principals shall have exhibited at least 3 years of successful experience with demonstrated achievements and management responsibilities;

(3) The enterprise does not own a controlling interest in the existing business, but, after the acquisition, will own a controlling interest;

(4) The existing business shall have been in existence for at least 5 years;

(5) The existing business shall have been profitable for at least 2 of the previous 3 years;

(6) The existing business shall have sufficient cash flow to service the debt and ensure an adequate return on the Authority's investment;

(7) The existing business shall have the capacity for growth and job creation;

(8) The existing business shall have its principal place of business in Maryland; and

(9) The existing business shall have a strong customer base.

Md. Code Regs. 24.05.10.04

Regulation .04 amended effective February 18, 2002 (29:3 Md. R. 223)
Regulation .04A amended effective December 7, 1992 (19:24 Md. R. 2128)
Regulation .04C adopted effective April 16, 1990 (17:7 Md. R. 853)