Prior to the approval of any direct loan under the RLF, the Loan Administrator must develop and obtain the Commissioner's approval for the following procedures:
(a) Preapplication and loan screening procedures. Some factors to be considered in the loan screening process are:
(1) General eligibility criteria;
(2) Potential economic development criteria;
(3) Indication of business viability;
(4) The need for RLF financing; and
(5) The ability to properly utilize financing.
(b) Application process. The application package includes forms, instructions, and policies and procedures for the loan application. The package must also include instructions for the development of a business and marketing plan and a financing proposal from the applicant.
(c) Loan evaluation criteria and procedures. The loan evaluation must include the following topics:
(1) General and specific business trends;
(2) Potential market for the product or service;
(3) Marketing strategy;
(4) Management skills of the borrower;
(5) Operational plan of the borrower;
(6) Financial controls and accounting systems;
(7) Financial projections; and
(8) Structure of investment and financing package.
(d) Loan decision-making process. Decision-making on a loan application includes the recommendations of the staff, the review by the loan review committee and the decision by the Board.
(e) Loan closing process. The guidelines for the loan closing process include the finalization of loan terms; conditions and covenants; the exercise of reasonable and proper care to ensure adherence of the proposed loan and borrower's operations to legal requirements; and the assurance that any requirement for outside financing or other actions on which disbursement is contingent are met by the borrower.
(f) Loan closing documents. Documents used in the loan closing process include:
(1) Term Sheet: an outline of items to be included in the loan agreement. It should cover the following elements:
(i) Loan terms;
(ii) Security interest;
(iii) Conditions for closing the loan;
(iv) Covenants, including reporting requirements;
(v) Representations and warranties;
(vi) Defaults and remedies; and
(vii) Other provisions as necessary.
(2) Closing Agenda: an outline of the loan documents, the background documents, and the legal and other supporting documents required in connection with the loan.
(g) Loan servicing and monitoring. The servicing of a loan will include collections, monitoring, and maintenance of an up-to-date information system on loan status.
(1) Collections: To include a repayment schedule, invoice for each loan payment, late notices, provisions for late charges.
(2) Loan Monitoring: To include regular reporting requirements, periodic analysis of corporate and industry information, scheduled telephone contact and site visits, regular loan review committee oversight of loan status, and systematic internal reports and files.