Current through Register Vol. 49, No. 2, February 2024
I.
Introduction
Overview
Pursuant to authority granted under § 15-4-306 of the Minority
Business Economic Development Act and § 19-5-1240, which established the
Minority Business Loan Mobilization Revolving Fund, the Small and Minority
Business Division of the Arkansas Economic Development Commission (AEDC) has
established a Minority Business Loan Mobilization Program that may guarantee
loans that:
1. Are made by a lender to
a borrower who:
A. Meets the definitions of
"minority" and "minority business enterprise" as defined in §
15-4-303;
B. Has been certified by
the Small and Minority Business Division of the AEDC as a minority business
enterprise in accordance with § 15-4-314 and rules developed pursuant to
§ 15-4-314(a); and
C. Has done
or is currently doing business with a Federal, state, or local Arkansas
governmental entity;
2.
Are made for purposes consistent with § 19-5-1240(d), which identifies
three goals of the Minority Business Loan Mobilization Revolving Fund:
A. Promote the development of minority
business enterprises in the state;
B. Increase the ability of minority business
enterprises to compete for state contracts; and
C. Sustain the economic growth of minority
business enterprises in the state;
3. Are made by an approved lender to a
borrower for an amount, purpose and term approved in a written loan guaranty
authorization (authorization) signed by the AEDC Executive Director and the
Director of the Small and Minority Business Division of the AEDC;
and,
4. Are made with respect to
lender compliance with the terms and conditions of an executed Loan Guaranty
Lender Participation Agreement (agreement).
II.
Definitions
1. "Lender" means:
A. A Federally-chartered bank;
B. A State-chartered bank;
C. A savings and loan association;
D. A credit union;
E. An Arkansas Planning and Development or
Economic Development District; or
F. Any other form of financial institution
regulated by the State of Arkansas or the Federal government;
2. "Minority" means a lawful
permanent resident of this state who is:
A.
African American;
B. Hispanic
American;
C. American
Indian;
D. Asian
American;
E. Pacific Islander
American; or
F. A service-disabled
veteran as designated by the United States Department of Veterans
Affairs;
3. "Minority
business enterprise" means a business that is at least fifty-one percent (51%)
owned by one (1) or more minority persons as defined in this section;
4. "Small and Minority Business Division of
the Arkansas Economic Development Commission" means the division of the
Arkansas Economic Development Commission responsible for administering the
Minority Business Loan Mobilization Program.
III.
Lender Requirements and
Responsibilities
1. To be eligible to
serve as a lender for a loan that is guaranteed by the Small and Minority
Business Division of the AEDC, the lender shall be one of the following
financial institutions:
A. A
Federally-chartered bank;
B. A
State-chartered bank;
C. A savings
and loan association;
D. A credit
union;
E. An Arkansas Planning and
Development or Economic Development District; or
F. Any other form of financial institution
regulated by the State of Arkansas or the Federal government.
2. The lender will only approve
deals that are consistent with prudent lending practices through review of
personal and business financial statements and other documents; the credit
standing, repayment capacity, existence of title to and value of collateral
pledged to the loan (if any); earnings prospects; and business acumen of the
borrower requesting a loan guaranty through the Minority Business Loan
Mobilization Program.
3. Upon and
after closing the loan and disbursing the loan proceeds, the lender shall cause
to be executed, delivered, and, where necessary, filed or recorded with the
proper authorities, a note, mortgage or trust deed, security agreement,
financing statement, continuation statement, and such other instruments,
documents and agreements as may be applicable. The lender shall take such other
actions as required to assure that the borrower and any guarantor(s) are
obligated to repay the loan.
4. The
lender shall have valid and enforceable security interest in any collateral and
insure that the collateral is adequately maintained and insured and that the
interest of the lender and AEDC are fully protected, consistent with prudent
lending practices.
5. The lender
shall cause all loan documents, including any guaranty agreements, to be
properly authorized and executed as required in the authorization. The lender
shall take any further action necessary to assure that all guarantor(s) have a
binding and enforceable obligation to repay the loan.
6. The lender shall exercise supervision over
any collateral and ensure that any collateral is disposed of in a commercially
reasonable sale.
7. Services of an
escrow agent may be required at the request of AEDC to discuss issues regarding
use of proceeds for authorized purposes.
8. Upon request, the lender shall provide to
the Small and Minority Business Division of the AEDC all documents executed in
connection with the loan, loan disbursements and loan records.
9. The lender will impose no charges on the
borrower of a loan guaranteed hereunder that would not normally be imposed had
the loan not been guaranteed.
10.
The lender will provide the Small and Minority Business Division of the AEDC
with such financial information on guaranteed loans as the Small and Minority
Business Division of the AEDC may reasonably require.
IV.
Loan Guaranty Application
Process
1. To apply for a loan
guaranty under the Minority Business Loan Mobilization Program, a minority
business enterprise shall submit an application and any supporting
documentation required to the Small and Minority Business Division of the
AEDC.
2. The Small and Minority
Business Division of the AEDC shall:
A.
Evaluate each application and any supporting documentation to determine whether
the minority business enterprise is eligible for a loan guaranty in accordance
with the requirements of § 15-4-301 et seq. (Minority Business Economic
Development Act) and § 19-5-1240(d) (Minority Business Loan Mobilization
Revolving Fund).
B. Recommend
approval of the minority business enterprise meeting eligibility requirements
to the AEDC Executive Director.
C.
Notify the minority business enterprise of approval or denial of the
application within seven (7) business days of receipt of the application by the
Small and Minority Business Division of the AEDC.
3. Upon notification of approval by the Small
and Minority Business Division of the AEDC, the approved minority business
enterprise will be informed about the next steps including selection of a
lender to begin the lender's loan application process.
4. The lender selected by the approved
minority business enterprise shall:
A. Notify
the minority business enterprise of the lender's determination to approve or
deny the minority business enterprise's loan application.
B. Send written notification of the lender's
determination to approve or deny the loan application to the Small and Minority
Business Division of the AEDC within seven (7) business days after making the
determination.
5. The
Small and Minority Business Division of the AEDC will review the approved
lender application package and execute a written loan guaranty authorization
between the lender and the AEDC.
6.
After a loan application has been approved by a lender, the minority business
enterprise shall close the loan.
7.
The Small and Minority Business Division of the AEDC will retain a copy of the
loan package and monitor the project for compliance with program requirements.
V.
Administration
and Servicing of Loans
The lender shall maintain the loan instruments, receive all payments,
including but not limited to principal and interest, and take other such action
as may be required or advisable to administer and service the loan consistent
with prudent lending practices. The lender shall not, without prior written
consent of the AEDC, engage in any of the following:
1. Make or consent to any transfer or
assignment of any note or interest therein or any material alteration in the
terms of any loan instrument;
2.
Make or consent to any release, conveyance, lease, substitution or exchange of
any collateral;
3. Extend or
postpone any repayment terms except those authorized in the executed loan
guaranty lender participation agreement; and
4. Waive or release any claim against the
borrower, surety, guarantor, or other obligor, or any other creditor of trustee
in bankruptcy, arising out of any loan instrument.
The Small and Minority Business Division of the AEDC will respond to
written requests regarding administration and servicing of loans from lenders
within fifteen (15) days of receipt or such requests will be deemed not to
require the written consent of the Small and Minority Business Division of the
AEDC.
VI.
Default and Notice of Default
The lender agrees to notify the Small and Minority Business Division of
the AEDC, in writing, within fifteen (15) business days of notice of actual
default. Within fifteen (15) business days after receipt of notice of actual
default, the Small and Minority Business Division of the AEDC will notify the
lender, in writing, which of the following options the AEDC elects:
1.
LIQUIDATION: The Small and
Minority Business Division of the AEDC may direct the lender to accelerate the
maturity of the loan and proceed to enforce all loan documents to liquidate any
security for the loan including proceeding against any guarantor(s), in a
commercially reasonable, expeditious manner and in accordance with prudent
lending practices. In such an event, the AEDC shall pay the lesser of ninety
percent (90%) of the remaining unpaid loan balance, or the guaranty percentage
specified in the loan authorization agreement, with a maximum payment not to
exceed $100,000.
2.
PAYMENT: The Small and Minority Business Division of the AEDC
shall pay the lesser of ninety percent (90%) of the remaining unpaid loan
balance, or the guaranty percentage specified in the loan authorization
agreement, with a maximum payment not to exceed $100,000, in payments of equal
value, but for the acceleration, on the due dates defined in loan documents and
may direct the lender to assign all loan documents and rights to the AEDC.
The Small and Minority Business Division of the AEDC and lender may
take such other action, upon default, as they may agree to in writing. At any
time after electing to direct the lender to liquidate, the AEDC may elect the
above payment option VI. 2.
All proceeds of any collateral or guaranties of any nature (other than
guaranties received pursuant to the AEDC guaranty agreement), including,
without limitation, right of setoff and counter claim, shall be used to repay
and secure the interests of the lender and the AEDC.
VII.
Requests for Payment
of Guaranty
In the event that the Small and Minority Business Division of the AEDC
has directed the lender to liquidate any collateral, the lender's request for
the payment of guaranty shall be accompanied by the lender's written
certification:
1. That the lender has
liquidated any collateral and all guaranties for the loan and has diligently
pursued and exhausted all sources of repayment, unless by mutual consent such
pursuit has not been deemed cost-effective; and
2. That the lender has allocated repayments,
proceeds of any collateral and any guarantees to the respective interest of the
parties, as required by these rules or a specific authorization agreed to by
both parties, including the remaining unpaid principal and interest.
VIII.
Source of
Funds
Any guaranties by the Small and Minority Business Division of the AEDC
have been entered into under the provisions of Act 1428 of 2009, Sections 10
and 11, and are subject to all terms, restrictions and commitments contained
therein. Neither the full faith nor credit of the State of Arkansas or any of
its revenues is pledged to meet the obligations of the AEDC under any guaranty
agreement. The obligations of the AEDC under Minority Business Loan
Mobilization Program guaranty agreements are limited to the funds available in
the Minority Business Loan Mobilization Revolving Fund as provided for in Act
1428 of 2009, and any subsequent appropriation for similar
purposes.
