Current through Register Vol. 49, No. 2, February 2024
I.
Introduction
Overview
The Minority Business Loan Mobilization Program was created by the
Arkansas Economic Development Commission (AEDC) 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.
Act 1080 of 2017, amended the Minority Business Economic Development
Act by expanding eligibility regarding programs and services under the Act to
include women- owned business enterprises.
Expanding the Minority Business Loan Mobilization Program, renamed the
Minority Business Enterprise and Women-Owned Business Enterprise Loan
Mobilization Program, by extending eligibility and funding for loan guarantees
to women-owned businesses, will help further effectuate the objectives of Act
1080 of 2017.
The Minority Business Enterprise and Women-Owned Business Enterprise
Loan Mobilization Program may guarantee loans that:
1. Are made by a lender to a borrower who:
A. Meets the definitions of § 15-4-303
as a:
i. "Minority" and "minority business
enterprise" or
ii. "Women-owned
business enterprise".
B.
Has been certified by the Minority and Women-Owned Business Enterprise Division
of the AEDC as a minority business enterprise or women-owned 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) or purposes
consistent with other funding source criteria whenever loans are not guaranteed
by the Minority Business Loan Mobilization Revolving Fund, or its successor
fund or other designated fund accounts;
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 Minority and Women- Owned Business Enterprise 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
and Women-Owned Business Enterprise Division of the Arkansas Economic
Development Commission" means the division of the Arkansas Economic Development
Commission responsible for administering the Minority Business Enterprise and
Women-Owned Business Enterprise Loan Mobilization Program;
4. "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; and
5. "Women-owned business enterprise" means a
business that is at least fifty-one percent (51%) owned by one (1) or more
women who are lawful permanent residents of this state.
III.
Lender Requirements and
Responsibilities
1. To be eligible to
serve as a lender for a loan that is guaranteed by the Minority and Women-Owned
Business Enterprise 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 Enterprise
and Women-Owned Business Enterprise 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 interests 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 Minority and Women-Owned Business
Enterprise 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 Minority and Women-Owned Business Enterprise
Division of the AEDC with such financial information on guaranteed loans as the
Minority and Women-Owned Business Enterprise Division of the AEDC may
reasonably require.
IV.
Loan Guaranty Application Process
1. To apply for a loan guaranty under the
Minority Business Enterprise and Women-Owned Business Enterprise Loan
Mobilization Program, a minority business enterprise or women-owned business
enterprise shall submit an application and any supporting documentation
required to the Minority and Women-Owned Business Enterprise Division of the
AEDC.
2. The Minority and
Women-Owned Business Enterprise Division of the AEDC shall:
A. Evaluate each application and any
supporting documentation to determine whether the minority business enterprise
or women-owned business enterprise is eligible for a loan guaranty in
accordance with the requirements of § 15-4-301 et seq. (Minority and
Women-Owned Business Economic Development Act) and § 19-5-1240(d)
(Minority Business Loan Mobilization Revolving Fund), or its successor fund or
fund accounts.
B. Recommend
approval of the minority business enterprise or women-owned business enterprise
meeting eligibility requirements to the AEDC Executive Director.
C. Notify the minority business enterprise or
women-owned business enterprise of approval or denial of the application within
seven (7) business days of receipt of the application by the Minority and
Women-Owned Business Enterprise Division of the AEDC.
3. Upon notification of approval by the
Minority and Women-Owned Business Enterprise Division of the AEDC, the approved
minority business enterprise or women-owned 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 or women- owned business enterprise shall:
A. Notify the minority business enterprise or
women-owned business enterprise of the lender's determination to approve or
deny the minority business enterprise's or women-owned business enterprise's
loan application.
B. Send written
notification of the lender's determination to approve or deny the loan with
application documents to the Minority and Women-Owned Business Enterprise
Division of the AEDC within seven (7) business days after making the
determination.
5. If the
lender approves the loan application, the Minority and Women-Owned Business
Enterprise Division of the AEDC will review the approved lender application
documents 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 or
women-owned business enterprise shall close the loan.
7. The Minority and Women-Owned Business
Enterprise 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 Minority and Women-Owned Business Enterprise 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 Minority and Women-Owned
Business Enterprise Division of the AEDC.
VI.
Default and Notice of
Default
The lender agrees to notify the Minority and Women-Owned Business
Enterprise 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 Minority and Women-Owned Business Enterprise
Division of the AEDC will notify the lender, in writing, which of the following
options the AEDC elects:
1.
LIQUIDATION: The Minority and Women-Owned Business Enterprise
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 Minority and Women-Owned Business Enterprise 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 Minority and Women-Owned Business Enterprise 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 counterclaim, 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 Minority and Women-Owned Business Enterprise
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.
Sources of
Funds
Any guaranties by the Minority and Women-Owned Business Enterprise
Division of the AEDC have been entered into under the provisions of Act 1428 of
2009, Sections 10 and 11, codified at § 19-5-1240, or all provisions
stipulated by funding sources other than the Minority Business Loan
Mobilization Revolving Fund, or its successor fund or other designated fund
accounts, for loan guarantees not secured under § 19-5-1240, 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 Enterprise and Women-Owned
Business Enterprise Loan Mobilization Program guaranty agreements are limited
to the funds available in the Minority Business Loan Mobilization Revolving
Fund, or its successor fund or other designated fund accounts, as provided for
in Act 1428 of 2009, and any other appropriation for similar
purposes.
