§210-7.5 Loans guaranteed by the department. (a) The department may guarantee up to ninety per cent of the principal balance of a loan made to a qualified small business concern by a private lender who is unable to otherwise lend the applicant sufficient funds at reasonable rates; provided that at no time shall the aggregate amount of the State's liability, contingent or otherwise, on loans guaranteed under this section exceed $10,000,000 based on a reserve level established at twenty-five per cent of the loan guarantee amount, with the reserve amount to be funded being calculated by determining the difference between the capital loan revolving fund balance at the beginning of each fiscal year and its annual authorization ceiling, excluding capital loan balances allocated to underground storage tank projects.
(b) Loans guaranteed under this section shall be limited by section 210-6, except that through regulation, the department may specify:
(1) That loan guarantees are to be limited to businesses in industries identified by rule as offering significant potential contributions to the growth or diversification of the State's economic base;
(2) The conditions under which the State may become a co-guarantor or a subordinate guarantor to a loan guarantee offered by a federal government program; and
(3) The specific types of loans that may be guaranteed under this program, consistent with paragraph (1), including product export financing, contract order-based loans, and processing plant or factory loans.
(c) Interest charged on a guaranteed loan made under this section shall be determined by the department based on the market rate of interest charged by the private lender for a similar type of loan unless waived by the director.
(d) When the application for a guaranteed loan has been approved by the department, the department shall issue to the lender a guaranty for that percentage of the loan on which it guarantees payment of principal and interest. The lender shall collect all payments from the borrower and otherwise service the loan.
(e) In return for the department's guaranty, the lender shall remit a one-time fee of two per cent on the principal amount of the guaranteed portion of the loan, at the time the loan is booked, except for the following:
(1) On loans of $75,000 or less with a maturity exceeding twelve months, a reduced fee of one per cent; and
(2) On loans with a maturity of twelve months or less, a reduced fee of one per cent shall be paid.
This fee may be paid by the borrower as a cost for the loan.
(f) When any installment of principal and interest has been due for sixty days and has not been paid by the borrower, the department shall issue, on request of the lender, a check for the percentage of the overdue payment guaranteed, thereby acquiring a division of interest in the collateral pledged by the borrower in proportion to the amount of the payment. The department shall be reimbursed for any amounts so paid plus the applicable interest rate, where payment is collected from the borrower.
(g) Under conditions specified in rules adopted by the department, the lender may request that a portion or all of the guaranteed percentage of the principal balance of the loan be converted to a participating share held by the department.
(h) Should the lender deem that foreclosure proceedings are necessary to collect moneys due from the borrower, it shall so notify the department. Within thirty days of the notification, the department may elect to request an assignment of the loan on payment in full to the lender of the principal balance and interest due. Foreclosure proceedings shall be held in abeyance in the interim.
(i) The lender may reduce the percentage of the principal balance guaranteed under this section at any time. [L 1998, c 104, §2]
Note
The capital loan revolving fund referred to in subsection (a) is repealed.