MISSISSIPPI DEVELOPMENT AUTHORITY SMALL BUSINESS LOAN GUARANTY PROGRAM GUIDELINES

Transcription

1 MISSISSIPPI DEVELOPMENT AUTHORITY SMALL BUSINESS LOAN GUARANTY PROGRAM GUIDELINES 1

2 The Mississippi Small Business Loan Guaranty Program (SBLGP), administered by the Mississippi Development Authority ("MDA"), is designed for the purpose of making guaranties to enable small businesses to obtain term loans or lines of credits. ELIGIBILITY Qualified Participants: Small Businesses Mississippi for-profit commercial enterprises with less than: 250 full time employees; $7,000,000 (Seven Million dollars) in gross revenues; or One million in profit after taxes. Financial Institutions - An eligible Financial Institution is any commercial bank, savings bank, federal land bank, farm credit bank, agricultural credit association or other farm credit agency, Mississippi Planning and Development Districts, Community Development Corporations, Small Business Investment Corp., or other appropriate entities which is domiciled or qualified to do business in the State. All Financial Institutions have to be preapproved by MDA before participating in the SBLGP. 2

3 PARTICIPATION REQUIREMENTS Lender qualification requirements An eligible Financial Institution must be approved for participation by MDA by submitting an Application for Participation in the Mississippi Development Authority Small Business Loan Guaranty Program, attached as Exhibit A. An MDA-approved Financial Institution will enter into the Small Business Loan Guaranty Program Agreement, attached as Exhibit B. Loan application requirements The Financial Institution must originate the SBLGP loan application for an eligible business on the form attached hereto as Exhibit C; along with a cover letter (Exhibit D). The Financial Institution must provide MDA with a Servicing Agreement Letter, attached as Exhibit E. The Financial Institution must provide, in writing, all required information for the preparation of SBLGP Loan closing documents. Loan administration requirements All closing documents must be properly executed and returned to MDA immediately. All exhibits to the closing documents must be filed and copies sent to MDA no later than thirty (30) days from the date of closing. The Financial Institution may charge the business a servicing fee, which may not exceed one percent (1%) of the SBLGP loan guaranty amount. The fee will be a one-time charge collected when the SBLGP Loan is closed. The fee may be paid directly by the business, deducted from the SBLGP Loan proceeds, or financed as part of the Financial Institution s loan. The Financial Institution shall be responsible for underwriting and servicing the SBLGP Loan. The Financial Institution will also enforce the terms and conditions of all closing documents executed for the SBLGP Loan. The Financial Institution will submit quarterly and annual reports to MDA in the format to be provided by MDA. 3

4 RESTRICTIONS The use of loan proceeds is restricted under the program as follows: Refinancing of existing debt; Providing or freeing up funds for speculation; Financing the acquisition, construction, improvement or operation of real property, which is to be held primarily for sale or investment (investment includes property for rent or lease, i.e. apartments, shopping centers, commercial buildings, etc.); Providing or replenishing funds to owners (does not apply to ordinary compensation); Financing any business engaged in lending, directly or indirectly; Providing funds to any form of media (i.e. newspapers, magazines, radio or television broadcasting companies or similar enterprises through which editorial opinions are expressed.); Repaying delinquent state or federal withholding taxes; Financing a non-business purpose; An executive officer, director, or principal shareholder of the Financial Institution cannot participate; Immediate relatives of any current staff or board members of a Financial Institution are not eligible to apply for assistance under this program. Immediate relative is defined as spouse, parent, child or sibling of the applicant; Used in conjunction with other federal loans or guaranties. All applicants must be credit worthy and demonstrate the ability to repay the loan, must be in compliance with all state and federal regulatory agencies, and must not be in default on any previous debt or obligation with the state or federal government. 4

5 LOAN CRITERIA SBLGP Loan proceeds for Small Businesses may be used for buildings, acquisition of machinery and equipment, provide working capital, or other business purposes. The amount of a loan guaranty shall not exceed fifty percent (50%) of the total cost of the project or $500,000, whichever is less. The minimum amount for an SBLGP loan will not be less than $50,000. The SBLGP guaranty will reimburse the financial institution for its loss, up to the percentage of the SBLGP guaranty. Interest shall be charged on the SBLGP loan guaranty and payment terms are negotiated between the lender and the borrower. The term of the SBLGP Loan shall match the term of the Financial Institution s loan, up to the maximum maturity of seven (7) years (amortization may exceed loan term). SBLGP Loans are subject to an agreement, providing that any and all outstanding obligations may be accelerated and payments called for if, during the term of the loan, any change of ownership or control of the business concern occurs without the prior written consent of MDA, or if any adverse change occurs without notification to MDA. PREPAYMENT AND LOAN DEFAULT The Financial Institution shall notify MDA in writing of any prepayments of the Financial Institution s loan. The Financial Institution s Loan and Note is prohibited from being sold assigned, conveyed, sub participated, subdivided, encumbered or otherwise transferred. MDA will consider any loan that has become delinquent, in amount equal to the required payment, to be in default. 5

6 The Financial Institution shall notify the MDA in writing within 30 days of any uncured default by the Small Business in making payment when due of any installment of principal or interest on the loan. In the event a Guaranty Loan defaults and the Financial Institution has to charge off the obligation, the Financial Institution will submit a Request For Payment (Exhibit F) and MDA will authorize the withdraw from the Guaranty Reserve Account. Only nonrecoverable losses, plus reasonable and customary expenses, may be collected. The Financial Institution must provide to MDA a copy of any judgment or decree obtained against the Small Business where the Guaranty Reserve Account has been used to cover losses. The MDA shall be entitled at any time to examine and obtain copies of all notes, security agreements, instruments of hypothecation, all other agreements and documents (herein collectively called "Loan Instruments"), and the loan repayment history held by the Lender which relates to the loan made pursuant to the SBLGP. AUDIT Guaranties made under the SBLGP loan program are subject to audit by the State Department of Audit. WAIVER These guidelines may be amended by MDA at any time. MDA, in its discretion, may temporarily waive any requirement of the guidelines to the extent that the result of such waiver is to promote the public purpose of the Act and is not prohibited by State Law. 6

7 EXHIBIT A APPLICATION FOR PARTICIPATION IN THE MISSISSIPPI DEVELOPMENT AUTHORITY SMALL BUSINESS LOAN GUARANTY PROGRAM I. APPLICATION INFORMATION Lender: Address: Telephone: Contact Person: Title: II. TYPE OF LENDER APPLICATION Planning and Development District Community Development Corp. CDC Commercial Bank Savings Bank Federal Land Bank, Farm Credit Bank Other, Explain Lender must be domiciled or qualified to do business in the State of Mississippi. 7

8 III. REQUIRED ATTACHMENTS A. DESCRIPTION OF ORGANIZATION 1. History 2. Mission Statement 3. Current Services B. PROCEDURE FOR ESTABLISHMENT AND ADMINISTRATION OF THE SMALL BUSINESS LOAN GUARANTY PROGRAM (SBLGP) (see attached) C. EVIDENCE OF AGENCY CERTIFICATION AS 501(C)(3) ORGANI- ZANTION (if applicable) (see attached) D. MOST RECENT FISCAL YEAR END FINANCIAL STATEMENT Signature of Authorized Representative Date of Application 8

9 EXHIBIT B MISSISSIPPI DEVELOPMENT AUTHORITY SMALL BUSINESS LOAN GUARANTY PROGRAM AGREEMENT The Mississippi Development Authority (MDA) under the authority of Section , Mississippi Code of 1972 as amended, has established the Mississippi Small Business Loan Guaranty Program (SBLGP) and has adopted Rules and Regulations as necessary to operate such program. (Financial Institution) has made application to the SBLGP and has been found by MDA to qualify as a participating financial institution. In order to participate in this program, the Financial Institution acknowledges that it is familiar with the requirements of the program and agrees to abide by all conditions set by MDA and to conform its procedures to the rules and regulations adopted by MDA for this program. The Financial Institution further declares that in making and servicing loans enrolled in the SBLGP that it will at all times exercise prudent lending practices. As the Financial Institution has agreed to be bound by the conditions and rules and regulations as adopted, or as may be adopted in the future by MDA, MDA agrees to fairly consider each application submitted requesting that a loan be enrolled in the SBLGP and, upon approval, to commit the necessary funds, as available, to the reserve account established by the Financial Institution for that purpose. The Financial Institution agrees to use prudent lending practices in making and servicing loans enrolled in the SBLGP and to exhaust all reasonable means of collecting all principal and interest from the borrower. No obligation arises for any payment under the Guaranty until all attempts by the legal means available to Lender at collection from Borrower have been exhausted and have failed. This is intended to include, but not necessarily be limited to, seizure and sale of collateral, if any, obtaining a judgment against Borrower and pursuit of a claim in bankruptcy court. In return, MDA agrees that it will fairly and within a reasonable time period respond to a request from the Financial Institution that the reserve account for an enrolled loan be used to reimburse the Financial Institution. 9

10 The Financial Institution shall not assign any loan enrolled in the SBLGP without written approval from MDA. The Financial Institution is entitled to a service fee not to exceed one percent (1%) of the SBLGP loan guarantee amount, to be collected at closing. The Financial Institution shall file with MDA, quarterly report as well as by January 15 of each year, a status report for the previous calendar year. (Forms will be provided by MDA.) The Financial Institution shall comply with all the terms and provisions of the MDA SBLGP Guidelines. MDA and the Financial Institution may alter or amend the terms of this agreement by mutual consent in writing. This Agreement shall be binding upon all parties hereto and their respective heirs, executors, administrators, successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed or caused to be executed by their duly authorized officials, this Agreement on the date indicated below. MISSISSIPPI DEVELOPMENT AUTHORITY BY: NAME: TITLE: ATTEST: FINANCIAL INSTITUTION: BY: NAME: TITLE: BY: NAME: TITLE: 10

11 CORPORATE CERTIFICATE I,, certify that I am the secretary of the Corporation named as Financial Institution in the foregoing Agreement; that, who signed said Agreement on behalf of the Financial Institution was then of said Financial Institution; that said Agreement was duly signed for and on behalf of said Corporation after being duly authorized to do so. Secretary 11

12 EXHIBIT C MISSISSIPPI DEVELOPMENT AUTHORITY SMALL BUSINESS LOAN GUARANTY PROGRAM APPLICATION 12

13 MISSISSIPPI DEVELOPMENT AUTHORITY APPLICATION FOR SMALL BUSINESS LOAN GUARANTY PROGRAM INSTRUCTIONS TO LENDER: LOAN APPLICANT WILL COMPLETE PART A. LENDER WILL COMPLETE PART B. PART A- LOAN APPLICANT INFORMATION 1. Applicant s Name 2. Co-Applicant s Name 3. Applicant s Telephone No. 4. Applicant s Address 5. Applicant s 9 Digit SSN or TAX ID No. 6. Applicant s Birth Date 7. Co-Applicant s Birth Date 8. Co-Applicant s 9 Digit SSN 9. Number of Employees: 10. Type of Individual Partnership Trust Joint Operation Operation Corporation Cooperative L.L.C. O Other (Explain) 11. Acres Owned 12. Acres Rented 13. Marital Status: Married Separated Unmarried (Including Single, Divorced, and Widowed) 14. Will applicant obtain and maintain required insurance coverage for outstanding balance as required by lender? Yes No 15. Has applicant satisfied underwriting criteria established by the lender related to loans? 16. Have you or any member of the entity ever been in receivership, been discharged in bankruptcy, or filed a petition for bankruptcy? 17. If Yes to Item 16 provide details: 18. Are you or any member of the entity delinquent on any debt to the State of MS or the Federal Government? 19. Are you (or members holding a majority interest if an entity applicant) a United States citizen? 20. APPLICANT S SIGNATURE 21. DATE 22. CO-APPLICANT S SIGNATURE 23. DATE 13

14 PART B ASSISTANCE REQUESTED 24. Interest Rate % Fixed Variable 26. Subsequent Loan In Same Operating Cycle 27. Repayment Terms 25. Repayment Period (Years) YES FUNDS PURPOSE NO 28. PURPOSES FOR WHICH FUNDS WILL BE USED 29. AMOUNT $ $ $ $ $ $ PROPOSED SECURITY 30. ITEM DESCRIPTION 31. LIEN POSITION 32. ESTIMATED VALUE 33. AMOUNT OF PRIOR LIEN 34. COLLATERAL VALUE $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ LENDER INFORMATION AND CERTIFICATION 35. Lending Institution Name And Address TOTALS: $ $ $ 36. Lender 9 Digit Tax ID No./Employer ID No. 37. Regulatory Agency Telephone No.: 14

15 38. LENDER CERTIFIES THAT: a. Lender would not make the loan without the guarantee. b. The cash flow projection demonstrates that the loan is sound and within the applicant s repayment ability. c. The collateral securing the loan is considered adequate. d. In connection with existing loans made the loan applicant is in compliance with all loan agreements and all applicable certifications made are still valid. e. Lender has approved this loan. Subject to SBLGP being approved by MDA. 39. ADDITIONAL INFORMATION AND ITEMS TO BE SUBMITTED WITH APPLICATION: Narrative and completed loan package that has been approved by lender Most recent financial statement Cash flow budget Description of the location of land improvement and equipment if applicable Borrower information (name, address, social security or tax identification number, percent ownership, balance sheet for each member) Credit report Plan for servicing borrower Proposed loan agreement Verification of all debts greater than $1,000 Verification of income 3 year financial history (income, expenses, balance sheets) SBLGP settlement sheet, executed by lender, with copy fully executed SBLGP settlement statement to be furnished to MDA upon closing of SBLGP along with copies of all executed closing documents. Additional loans as a result of this guaranty Attachments A, B and C to this application 40. NAME OF LENDER S REPRESENTATIVE 41. TITLE OF LENDER S REPRESENTATIVE 42. AUTHORIZED LENDER REPRESENTATIVE S SIGNATURE 43. DATE 15

16 ATTACHMENT A BORROWER CERTIFICATION FOR USE OF LOAN PROCEEDS Legal Name of Small Business Loan Recipient: ( Borrower ) The Borrower hereby certifies to the [financial institution lender] the following: 1. The loan proceeds will be used for a business purpose. Business purpose includes, but is limited to, startup 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 and the purchase of securities; and lobbying activities, as defined in Section 3(7) of the Lobbying Disclosure Act of 1995, P.L , 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. to 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 an such executive officer, director, principal shareholder, or member of the immediate family. 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. 16

17 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 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; 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 Community Development Financial Institutions; 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); or e. a business engaged in gambling enterprises, unless the business earns less than 33% of its annual net revenue from lottery sales. 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 )). For the purposes of this certification, principals 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% 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% or more of the ownership stock or stock equivalent of the entity. Legal Name: By: Authorized Signatory Name: Title: Date: 17

18 ATTACHMENT B LENDER CERTIFICATION FOR USE OF LOAN PROCEEDS Legal Name of Financial Institution Lender: ( Lender ) The Lender hereby certifies to the Participating State the following: 1. The loan has not been made in order to place under the protection of the approved state program prior debt that is not covered under the approved state program and that is or was owed by the borrower to the financial institution lender or to an affiliate of the financial institution lender. 2. The loan is not a refinancing of a loan previously made to that borrower by the financial institution lender or an affiliate of the financial institution lender. 3. No principal of the financial institution 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 )). For the purposes of this certification, principals 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% or more of the ownership stock or stock equivalent of the entity Legal Name: By: Authorized Signatory Name: Title: Date: 18

19 ATTACHMENT C MISSISSIPPI DEVELOPMENT AUTHORITY SMALL BUSINESS LOAN GUARANTY PROGRAM SETTLEMENT SHEET Please complete this form and have the borrower to sign at closing. Please return to the Mississippi Development Authority, Financial Resources Division, Post Office Box 849, Jackson, Mississippi Project Name: Loan Number: Qualified Lender: SOURCES OF FUNDING: Lender Total Project Cost: $ SBGLP LOAN FEES: Origination $ Attorney $ Small Business Loan $ Other $ Guaranty Fee 1% Other $ TOTAL $ JOB IMPACT: Existing Jobs Jobs Created Total Jobs Business Owner: Majority Ethnic Minority Female Signature of Qualified Lender Director DATE: Signature of Borrower DATE: 19

20 EXHIBIT D SHOULD BE ON FINANCIAL INSTITUTION STATIONARY Mississippi Development Authority Post Office Box 849 Jackson, Mississippi Re: Name of Financial Institution Customer Name Gentlemen: Enclosed is an application for Customer s Name to apply for an MDA Small Business Loan Guaranty Program SBLGP Guarantee. The loan request of $ then explain the terms of the loan and purpose of the loan. Collateral listed for the loan. The following documents are enclosed for you review. 1. SBLGP Loan Application 2. Original Servicing Agreement Letter 3. Required attachments to the application Should you have any questions or need additional information, please give me a call at contact number. Sincerely, Loan Officer Enclosures 20

21 Mississippi Development Authority Post Office Box 849 Jackson, Mississippi EXHIBIT E SHOULD BE ON FINANCIAL INSTITUTION STATIONARY SERVICING AGREEMENT LETTER RE: Small Business Loan Guaranty Program (SBLGP) (business enterprise) Gentlemen: In connection with the Small Business Loan Guaranty Program (SBLGP) extended to (business enterprise) by the Mississippi Development Authority (MDA), the (Financial Institution) hereby agrees to act as the collection and service agent for said loan and agrees to the following terms and conditions: (1) The Financial Institution is entitled to a service fee not to exceed one percent (1%) of the guarantee portion of the SBLGP loan to be collected at closing. (2) The Financial Institution shall file with MDA a quarterly report as well as, by January 15 of each year, a status report for the previous calendar year. (Forms will be provided by MDA.) (3) The SBLGP Loan is subject to audit by the State Auditor, and the Financial Institution agrees to cooperate with the State Auditor in the event of an audit. (4) MDA will consider any loan that has become delinquent, in amount equal to the required periodic payment, to be in default. (5) The Financial Institution shall comply with all the terms and provisions of the MDA Small Business Loan Guaranty Program Guidelines. (6) MDA and the Financial Institution may alter or amend the terms of this agreement by mutual consent in writing. ATTEST: (NAME OF FINANCIAL INSTITUTION) (Signature) By (Signature) (Title) 21

22 EXHIBIT F SHOULD BE ON FINANCIAL INSTITUTION STATIONARY MISSISSIPPI DEVELOPMENT AUTHORITY SMALL BUSINESS LOAN GUARANTY PROGRAM REQUEST FOR PAYMENT Mississippi Development Authority Attention: Financial Resources Division Post Office Box 849 Jackson, Mississippi Gentlemen: The undersigned representative of (Lender) hereby request payment on the guarantee portion from Small Business Loan Guaranty Program (SBLGP) Loan established for, Loan number SBGLP, In the amount of $. Disbursement made payable to the following (Obligation): NAME: ADDRESS: (Lender) 22

23 The undersigned hereby certify that the Obligation has been properly incurred, is a proper Charge against the SBLGP loan guaranty and has not been the basis of any previous claim. In addition, the undersigned certify that the following conditions have been met: a. The representation and warranties of the Small Business contained in the SBLGP Application are true and correct on and as of the date of this request with the same effect as if made on such date. b. The Lender has complied with all terms and conditions set forth in the Servicing Agreement Letter and any other documents or agreements executed or delivered in connection therewith. Insofar at the Obligation for which the foregoing payment is requested was incurred for materials or supplies in connection with the construction and/or equipping of the Small Business project, the undersigned further certify that such work was actually performed in general compliance with the SBLGP loan application. Date Lender Title 23