34:1B-75. Development loans to micro-business development corporations
6. a. The authority shall use the moneys in the assistance fund established pursuant to section 5 of this act to make development loans to micro-business development corporations certified by the authority to participate in the program. Moneys received from micro-business development corporations in repayment of a development loan shall be deposited in the assistance fund. The authority may make development loans from the assistance fund in amounts not to exceed $250,000 per loan to a certified micro-business development corporation.
b. In determining the criteria for making development loans, the authority shall , in addition to applying its customary underwriting criteria, also consider:
(1) the plan for providing services to qualified micro-businesses;
(2) the scope of services to be provided by the certified micro-business development corporation;
(3) the geographic representation of all regions of the State, including both urban and rural municipalities;
(4) the plan for providing service to minorities, women and low-income persons;
(5) the ability of the corporation to provide business training and technical assistance to qualified micro-business clients;
(6) the ability of the corporation, with its plan, to monitor and provide financial oversight of recipients of micro-business loans, to administer a revolving loan fund, and to investigate and qualify financing proposals and to service credit accounts;
(7) sources and sufficiency of operating funds for the certified micro-business development corporations; and
(8) the intent of the corporation, with its plan and written indications of local institutional support, to provide services to the service region within which it is located.
c. Development loan funds may be used by a certified micro-business development corporation to:
(1) satisfy matching requirements for other State, federal, or private funding only if funding is intended and used for the purpose of providing or enhancing the certified micro-business development corporation's ability to provide and administer loans, technical assistance, or management-training to qualified micro-businesses;
(2) establish a revolving loan fund from which the certified micro-business development corporation may make loans to qualified micro-businesses, provided that a single loan does not exceed $50,000 and the outstanding balance of all loans to a qualified micro-business or a project participated in by more than one qualified micro-business or to two or more qualified micro-businesses in which any one person holds more than a 20% equity share does not exceed $50,000; and
(3) establish a guarantee fund from which the certified micro-business development corporation may guarantee loans made by financial institutions to qualified micro-businesses. However, a single guarantee may not exceed $50,000, and the aggregate of all guarantees to a qualified micro-business or a project participated in by more than one qualified micro-business or to two or more qualified micro-businesses in which any one person holds more than a 20% equity share may not exceed $50,000.
d. Development loan funds may not be:
(1) loaned for relending or investment in stocks, bonds, or other securities or for property not intended for use in production by the recipient of the loan; or
(2) used to refinance a nonperforming loan held by a financial institution or to pay the operating costs of a certified micro-business development corporation. However, interest income earned from the proceeds of a development loan may be used to pay operating expenses.
e. Certified micro-business development corporations are required to contribute cash from other sources to leverage and secure development loans from the program. Contributions provided by the corporation must be in a ratio of at least $1 from other sources for each $3 from the program. These contributions may come from a public or private source other than the program and may be in the form of equity capital, loans, or grants.
f. Development loans shall be made pursuant to a development loan agreement and may be amortization or term loans, bear interest at less than the market rate, be renewable, be callable, and contain other terms and conditions considered appropriate by the authority that are consistent with the purposes of this act and with rules and regulations promulgated by the authority to implement this act.
g. (1) Unless subject to federal law, rule or regulation, each certified micro-business development corporation that receives a development loan under this act shall undergo an audit, at its own expense, at least once every two years. The authority shall designate an auditor to conduct the audit.
(2) If an audit is performed under a requirement of federal law, rule or regulation, the department shall waive the audit required in this subsection with respect to all issues addressed by the federal audit report. However, the authority may require an audit of matters that are not, in the authority's judgment, addressed by the federal report including, but not limited to, verification of compliance with requirements specific to the program, such as job-generation standards and reporting.
h. A certified micro-business development corporation that is in default for nonperformance under rules and regulations established by the authority may be required to refund the outstanding balance of development loans awarded prior to the default declaration. A development loan is secured by a first lien on the receivables of the corporation receiving the loan.
L.1995,c.206,s.6.