Chapter 110-31 GEORGIA STATE SMALL BUSINESS CREDIT INITIATIVE LOAN PROGRAM DESCRIPTION
The name of this program is the Georgia State Small Business Credit Initiative. This program is divided into two sub-programs as follows: the Georgia Small Business Credit Guarantee and the Georgia Loan Participation Program.
The Small Business Jobs Act of 2010 (Act), designed to help increase credit availability for small businesses, created the State Small Business Credit Initiative (SSBCI) and appropriated $1.5 billion to be used by the United States Department of the Treasury (U.S. Treasury) to provide direct support for states for use in assisting private lenders to increase access to credit for small businesses. Pursuant to the Act, Treasury initially allocated $47,808,507 to the State of Georgia for the initiative. Treasury allocated an additional $216,241 in December of 2016, bringing the total allocation to $48,024,748 for the State of Georgia.
On November 29, 2011, Treasury approved the State's application, which included proposals for the Georgia Capital Access Program, the Small Business Credit Guarantee, and the Georgia Funding for Community Development Financial Institutions. On June 6, 2013, Treasury approved a modification request to add a fourth sub-program to the Georgia State Small Business Credit Initiative, the Georgia Loan Participation Program. Consequently, the Georgia Department of Community Affairs (DCA) through the Georgia Housing and Finance Authority's (GHFA) economic development powers planned to utilize its $47,808,507 in SSBCI funds (the Allocated Funds) in four state-administered SSBCI programs as originally approved by U.S. Treasury: the Georgia Capital Access Program (GCAP), to which $2 million was directed; the Georgia Small Business Credit Guarantee Program (SBCG), to which $17,808,507 was directed; the Georgia Funding for Community Development Financial Institutions, (GA Funding for CDFIs), to which $20 million was directed; and, the Georgia Loan Participation Program (GA LPP), to which $8 million was directed. The allocation amounts to the four programs were adjusted throughout the life of the program depending on usage, which were approved by Treasury.
Operation of the four programs under the Georgia State Small Business Credit Initiative was subject to the U.S. Treasury Guidelines for SSBCI, the Treasury-approved Georgia SSBCI application, and the SSBCI Allocation Agreement.
Upon termination of the Allocation Agreement with Treasury on March 31, 2017, Georgia will initially allocate the post-Treasury recycled SSBCI funds between two programs: the Georgia Small Business Credit Guarantee, to which $10.8 million will be directed, and the Georgia Loan Participation Program, to which $17.2 million will be directed. Actual amounts in the two programs will be reduced by administrative costs and losses incurred. The allocation amount between the two programs may be adjusted throughout the life of the program depending on usage if approved by DCA.
Under the SSBCI Program, credit facilities are extended to eligible small businesses in Georgia by lenders (banks, credit unions, CDFIs, and private lenders). Lenders will undergo a review process to ensure adequate commercial lending experience, financial and managerial capacity, and operational skills.
|(1)|| Scope and
Purpose of Small Business Credit Guarantee (SBCG) Program
Under the SBCG Program, credit facilities are extended to eligible small businesses by lenders that have entered into a Lender Program Participation Agreement (PPA) with GHFA EDFI. The PPA provides that qualifying lenders may enroll a qualified credit to an eligible small business in the credit guarantee program for eligible business purposes that meet the eligibility criteria described in 110-31-03. The State will reimburse from SSBCI funds 50% of losses incurred on an enrolled credit by a lender that is not in material default of the PPA. Guarantee funds will generally be available to lenders on a first-come, first-served basis. The State will charge an initial guarantee fee in an amount equal to 2% of the guarantee amount, along with an annual fee in an amount of 0.5% of the outstanding guarantee for each subsequent year. The fee structure may be modified in response to program sustainability or market conditions.
|(2)|| Scope and Purpose of the Georgia Loan
Participation (GA LPP) Program
The Georgia Loan Participation Program is designed to increase lending to eligible small businesses by lenders to diversify their risk through shared exposure with the State. Lenders approved for participation in GA LPP will sign a Master Loan Participation Agreement with the Georgia Housing & Finance Authority Economic Development Financing, Inc.
GA LPP will utilize SSBCI funds to purchase up to 25% of a loan originated by a participating lender to an eligible small business borrower. Underwriting is performed by the primary lender, then shared with the Department of Community Affairs (DCA) to streamline the approval process of the purchased participation. A written commitment letter is executed between the primary lender and GHFA EDFI; the lender closes the loan and sells the position to GHFA/DCA. The primary lender performs debt servicing and shares proportional debt payments with DCA. Interest rates, maturity, collateral and other loan terms are negotiated with the borrower and determined by the lender. GHFA/DCA will be in a subordinate lien position, and the primary lender will have first claim to all recoveries until its losses are covered. Primary lender has the unconditional right to repurchase the participation sold in the original loan to DCA at any time.
2GHFA Economic Development Financing, Inc. (GHFA EDFI) is a wholly owned subsidiary of GHFA dedicated to economic development.
Georgia requires that each lender obtain an assurance from each borrower stating that the loan proceeds will not be used for an impermissible purpose under the SSBCI Program.
Lenders are prohibited from refinancing any existing outstanding balance or previously made loan, line of credit, extension of credit or other debt owed by a small business borrower already on the books of the same lender (or an affiliate) into a SSBCI-supported program.
Each lender must obtain 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:
|(3)|| The borrower is not:
|(4)||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% 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."|
The following are the general terms and conditions of the two programs for the Georgia State Small Business Credit Initiative.
|(1)|| Small Business Credit Guarantee (SBCG)
|(2)|| GA LPP
and Conditions applicable to all Georgia SSBCI Programs