Or. Admin. Code § 123-021-2400

Current through Register Vol. 64, No. 1, January 1, 2025

Section 123-021-2400 - Eligibility

(1) Only Qualified Businesses are eligible to be Borrowers under the CEF Program. Further, in order for a loan to a Qualified Business to be eligible for insurance, the project must be expected to result in a Substantial Benefit that is realized primarily in Oregon and the project must meet one or more of the following purposes:

(a) The acquisition, improvement, or rehabilitation of real or personal property; or

(b) Working capital for operations, export transactions, maintenance and other business costs and expenses which are used for purposes other than acquiring real or personal property.

(2) Eligible project purposes do not include:

(a) Any personal, family, or household expenses of the Qualified Business or any Principal or guarantor;

(b) Purchase or construction of residential housing, including mixed-use properties with residential housing;

(c) A loan made primarily to pay off or refinance an existing debt to a creditor whose loan is inadequately secured or who is in danger of sustaining a loss;

(d) A loan made primarily to pay off or refinance an existing term debt to the Financial Institution applying for insurance on the proposed loan;

(e) Repayment of delinquent federal or state income taxes;

(f) Repayment of taxes held in trust or escrow;

(g) Acquiring, constructing, or holding passive investments such as commercial real estate for future use or the purchase of securities;

(h) Reimbursement or payment of funds to any owner or Borrower, including any equity injection or injection of business capital for the business' continuance, or the purchase of assets from any owner except as allowed under 123-021-2400(6); or

(i) Any other activities prohibited under the requirements of the SSBCI Program.

(3) The Department will consider applications to insure loans the proceeds of which are used to pay down or pay off an existing debt to a lender that is an unrelated entity of the Financial Institution applying for insurance. In evaluating such an application, the Department will consider the financial benefits to the Qualified Business, the prospects for success, the expected resulting public benefit, the extent to which the Financial Institution agrees to extend terms or provide other favorable financing to the Qualified Business, and the extent to which collateral securing the insured loan is improved real property. The Department's maximum liability for any loss resulting from an insured loan used to refinance debt will be limited to $6,000,000 and will be subject to the refinancing conditions of the SSBCI Program. The Department may require that some or all of the business and personal assets securing a refinancing be appraised to determine liquidation values.

(4) The Department reserves the right to set the enrollment terms at the time of approval for loan insurance, including, but not limited to, the Department's maximum liability or the insured percentage. When setting its maximum liability or the insured percentage or both, the Department will consider whether a loan is less than fully secured, as determined by the estimated liquidation value of the collateral.

(5) The Department will consider applications to insure loans where loan proceeds are limited to the purchase of the assets of a Qualified Business alone or in addition to the other eligible purposes identified in section (1) of this rule. Economic benefits including, but not limited to, the impacts of the proposed Qualified Business acquisition on retention or creation of jobs in Oregon shall be a major consideration in the Department's review of such applications.

(6) For any Qualified Business and its affiliates, the aggregate maximum exposure for all loans insured through the Program shall not exceed $6 million.

(7) Any loans insured by federal funds received by the Department under the SSBCI Program must meet applicable U.S. Treasury requirements, including, but not limited to:

(a) No Principal of the Borrower or the Financial Institution 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 (34 U.S.C. 20911).

(b) Neither the Borrower nor or any Principal of the Borrower is:

(A) An executive officer, director, or principal shareholder of the Financial Institution;

(B) A member of the immediate family of an executive officer, director or principal shareholder of the Financial Institution; or

(C) A related interest of an executive officer, director, principal shareholder of the Financial Institution or of a member of the immediate family of such executive officer, director or principal shareholder.

(D) For the purposes of OAR 123-021-2400(7)(c)(A) through (C), the terms "executive officer", "director", "principal shareholder", "immediate family", and "related interest" have the definitions ascribed in 12 C.F.R. Part 215.2 (2020), whether or not the Financial Institution is a member bank of the Federal Reserve System.

(c) The activities of the Borrower are not activities otherwise prohibited under SSBCI Program requirements, which activities include, but are not limited to:

(A) The Borrower is a business engaged in speculative activities that develop profits from fluctuations in price rather than through normal course of trade unless those activities are incidental to the regular activities of the business and are part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business;

(B) The Borrower is 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 community development financial institution;

(C) The Borrower is a business engaged in pyramid sales, or engaged in activities that are prohibited by federal law or applicable law in the jurisdiction where the business is located or conducted; or

(D) The Borrower is a business engaged in gambling enterprises unless the business earns less than 33% of its annual net revenue from lottery sales and gambling activities.

(d) The Financial Institution is in compliance with the requirements of the Bank Secrecy Act, 31 USC 5311, et seq., and its implementing regulations.

(e) At the time of approval, the Borrower does not employ more than 750 employees in the United States.

(f) Total project costs are $20,000,000 or less.

(g) No Principal of the Borrower is a current member or delegate to the United States Congress or resident U.S. Commissioner.

(8) Loans funded by federal sources may be subject to additional eligibility requirements. The Department has sole discretion to determine whether a loan is funded by state or federal funding sources.

Or. Admin. Code § 123-021-2400

EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 8-1999, f. & cert. ef. 10-1-99; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-030-09, cert. ef. 11-1-09; OBDD 14-2010, f. 4-30-10, cert. ef. 5-1-10; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12; OBDD 7-2012, f. & cert. ef. 6-1-12; OBDD 7-2016, f. & cert. ef. 6/3/2016; OBDD 7-2016, f. & cert. ef. 6-3-16; OBDD 3-2023, renumbered from 123-021-0020, filed 01/18/2023, effective 1/18/2023; OBDD 4-2023, temporary amend filed 01/25/2023, effective 1/25/2023 through 7/23/2023; OBDD 27-2023, renumbered from 123-021-0300, filed 10/06/2023, effective 10/6/2023; OBDD 28-2023, temporary amend filed 10/13/2023, effective 10/13/2023 through 4/5/2024; OBDD 2-2024, amend filed 03/06/2024, effective 3/8/2024

Statutory/Other Authority: ORS 285A.075 & 285B.200 - 285B.218

Statutes/Other Implemented: ORS 285B.200 - 285B.218