Community and Culture, Housing and Community Development

Rule R199-12

State Small Business Credit Initiative Program Fund

Notice of Proposed Rule

(New Rule)

DAR File No.: 35886
Filed: 02/17/2012 09:43:15 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this rule is to identify procedures the Division will utilize in the administration and issuance of loans and loan guarantees from the State Small Business Credit Initiative Program Fund.

Summary of the rule or change:

The rule identifies the process and procedures on how the Division will issue loan and loan guarantees to small businesses; establishes a loan loss reserve fund and a credit advisory committee; and notifies the public how the funds will be administered.

State statutory or constitutional authorization for this rule:

• Section 9-4-1601
• Section 9-4-1603
• Section 9-4-1602

Anticipated cost or savings to:

the state budget:

There is no anticipated cost or savings by this rule implementation. The rule requires no additional staffing or other cost structures not already contemplated by statute other than the formation of the credit advisory committee which is entirely voluntary and does not require even per diem expenses.

local governments:

No anticipated cost or savings to local government through this rule. The rule will not affect local governments as they are not an eligible entity for participation.

small businesses:

This program should improve the availability of credit to the small business community by providing credit enhancements to enable more issuance of credit to eligible small businesses that otherwise would not be available. Over the next six years, the program is projected to leverage the initial $13,000,000 federal award into $290,000,000 in credit to small businesses. Small businesses in most cases will still need to work with their local financial institution prior to being able to access the fund. This should not negatively affect them as this is a new process designed to enhance their viability and does not impede any existing avenue for small business to obtain credit.

persons other than small businesses, businesses, or local governmental entities:

Not affected--The program is entirely structured to work with small business in partnership with financial institutions as described in prior responses.

Compliance costs for affected persons:

There are no anticipated additional costs to affected persons as the program will dovetail with financial institution reporting requirements when loans and loan guarantees are in place. In addition, these requirements are set forth in statute rather than rule and no additional rules regarding compliance are in place.

Comments by the department head on the fiscal impact the rule may have on businesses:

No fiscal impact to businesses--The rule requires no additional burden to be placed on businesses, but rather creates a unique program to enhance the viability of business.

Julie Fisher, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Community and Culture
Housing and Community DevelopmentRoom 500
324 S STATE ST
SALT LAKE CITY, UT 84111-2388

Direct questions regarding this rule to:

• Jonathan Hardy at the above address, by phone at 801-538-8650, by FAX at 801-538-8888, or by Internet E-mail at jhardy@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

04/16/2012

This rule may become effective on:

04/23/2012

Authorized by:

Gordon Walker, Director

R199. Community and Culture, Housing and Community Development.

R199-12. State Small Business Credit Initiative Program Fund.

R199-12-1. Authority.

Pursuant to Section 9-4-1601 et seq., Utah Code, the Division of Housing Community Development is the administrator of the State Small Business Credit Initiative Program Fund.

 

R199-12-2. Purpose.

The State Small Business Credit Initiative Program Fund provides loans and loan guarantees to encourage lending from financial institutions to eligible small businesses within the state as defined by the funding sources contributing to the Fund.

 

R199-12-3. Definitions.

"Annual Receipts" to the fund include grants made by the federal government and state legislative appropriations if any, but does not include program income.

"Program Income" is defined as fees and interest income generated by participation in the program.

 

R199-12-4. Credit Advisory Committee.

The Division will establish a Credit Advisory Committee. Utah lending institutions shall submit an application of a small business borrower for private funding to the Committee. The Committee will evaluate the application provided by the lending institutions and make recommendations to the Division on the size, scope, and loan or loan loss reserve participation amount suitable for the applicant.

Additionally, the Committee will advise on application processes, underwriting criteria and other procedural elements of the Fund to ensure that program objectives are met.

 

R199-12-5. Eligibility.

Only those applications for funding assistance which are submitted by an eligible applicant for an eligible project shall be considered by the Division.

Eligible applicants include Small Businesses (defined as having no more than 750 employees), which:

A. applied for a credit product and were denied by a financial institution; and

B. the financial institution sponsors the application to the Fund as described in the Application Procedures; or

C. directly respond to a specific Request for Applications (RFA) published by the Division.

 

R199-12-6. Application Requirements.

A. Applications shall be submitted on forms published, and in accordance with the procedures outlined by the Division with the advice of the Committee. Completed applications which have been accepted for processing will be placed on the next available Committee agenda for review and recommendation.

B. The primary process for submitting proposals to the fund is as follows:

1. An Eligible Small Business must apply for a credit product at a financial institution which has a signed a State Small Business Credit Initiative Program Fund Participation Agreement with the Division.

2. The small business applicant must be denied for current banking products offered by the financial institution.

3. The participating financial institution will submit a sponsorship application form, in addition to the relevant documentation and underwriting criteria, to the Division and specify the type, amount and reason for a loan participation or loan guarantee on the transaction.

4. The Committee at its discretion may interview parties involved in the transaction to further clarify any information as part of the application review prior to issuing a recommendation to the Director.

C. An applicant may respond to a specific Request for Applications issued by the Division on forms prescribed by the Division.

 

R199-12-7. Application Review Procedures.

A. The Committee will review applications and make recommendations on whether to fund a loan or loan guarantee at regularly scheduled review meetings as published on the Division's website.

B. The process for review of new applications for loans and loan guarantees shall be as follows:

1. Submission of an application, on or before the applicable deadline to the Division program staff for technical review and analysis.

2. Incomplete applications will be held by the staff pending submission of required information.

3. Complete applications accepted for processing will be placed on the next available review agenda.

4. At the review the Committee may either recommend:

a. denial of the application;

b. the issuance of the requested loan or loan guarantee

c. a modified issuance of a loan or loan guarantee

d. further analysis of the viability of the project through further collection of documentation prior to issuing a decision on the funding request.

5. Final recommendations of the Committee on issuance or denial of applications will be forwarded to the Director.

6. The Director may issue loans or loan guarantees after reviewing the recommendation of the Committee.

 

R199-12-8. Loan Loss Reserve Fund.

There is created a loan loss reserve fund to be used to secure the loan guarantees issued by the Division. The Division may issue guarantees in an amount up to a ten to one ratio of balances within the loan loss reserve fund. Neither the State nor the Division are liable for guarantees issued beyond the balance of the reserve fund. Each participating financial institution shall be informed of this stipulation via a participation agreement with the Division prior to participating in the loan guarantee program.

 

R199-12-9. Procedures for Electronic Meetings.

A. These provisions govern any meeting at which one or more members of the Committee or one or more applicants appear telephonically or electronically pursuant to Section 52-4-207.

B. If one or more members of the Committee or one or more applicants or sponsors can not attend a regularly scheduled Committee meeting in person, that member, applicant or sponsor may participate in the meeting electronically or telephonically.

 

KEY: small business loans, loan guarantees

Date of Enactment or Last Substantive Amendment: 2012

Authorizing, and Implemented or Interpreted Law: 9-4-1601; 9-4-1602; 9-4-1603