Pennsylvania Code
Title 12 - COMMERCE, TRADE AND LOCAL GOVERNMENT
Part III - Business Financing
Subpart D - Minority Lending
Chapter 81 - MINORITY BUSINESS DEVELOPMENT AUTHORITY
Subchapter B - LOAN PROGRAM ADMINISTRATION
APPLICATION PROCEDURE
Section 81.125 - Additional conditions for certain loans

Universal Citation: 12 PA Code ยง 81.125

Current through Register Vol. 54, No. 44, November 2, 2024

(a) Additional conditions. In addition to the other requirements in this chapter, an applicant for a loan in excess of the amounts specified in § 81.131(a)(1) and (2) (relating to amount and terms of loans) shall meet the following additional conditions:

(1) Individuals or entities with an ownership interest in the business of 10% or more shall serve as guarantors for the loan and shall submit personal financial statements to the Authority as part of the loan application. Personal financial statements submitted to the Authority shall state assets and direct liabilities, and include appropriate footnotes concerning the existence of contingent liabilities, or, in the alternative, specifically indicate that none exist to the best of the preparer's knowledge.

(2) The loan application shall include financial statements of the business for the latest 3 years of operations, prepared by an independent certified public accountant. Complete financial statements shall include the independent accountant's report and the notes to the financial statements.

(3) As requested by the Authority, the applicant shall include additional financial information necessary to support business or personal financial statements furnished with an application. Representatives of the Authority and its financial consultant will meet with the applicant and guarantors to discuss the financial statements, management background experience and other project details. Failure to cooperate with the Authority or its representatives in this regard shall result in disapproval of the loan application.

(4) The loan application shall include pro forma balance sheets and projected income statements and cash flows of the business for at least the first 3 full years of proposed operations prepared by an independent certified public accountant. These projections shall include footnotes which disclose, among other things, the methods of accounting to be used, proposed sources of financing-both debt and equity-interest rates and terms of proposed financing, and significant assumptions regarding projected income and expenses, including projected quantities, prices, customers and market areas, number of employes, labor rates, pension and fringe benefits and administrative and other operating expenses.

(5) If the Authority determines that the collateral offered in the loan application is insufficient, the applicant will be required to provide additional security. Acceptable kinds of additional security include:
(i) A participating first lien mortgage on the proposed project, but in no case less than a second lien mortgage on the proposed project.

(ii) Subordination of debt of the applicant or other business owners or investors to the repayment of the Authority loan.

(iii) Assignments of agreements of lease, sublease or installment sale.

(iv) Additional collateral liens on other real estate owned by the applicant.

(v) An irrevocable letter of credit.

(vi) Limitations on the purchase of treasury stock, payment of dividends and payment of salaries of the applicant.

(vii) Additional equity participation in the proposed project.

(viii) Assignment of contracts.

(ix) A reduction in the size and scope of the project which will reduce the total amount of the debt incurred by the applicant and also reduce the amount of the Authority loan requested.

(6) For loans which involve a regional or National franchise, the Authority may require franchiser participation in the project. Priority lending will be given to multiple unit franchises that create or retain a minimum of 35 jobs.

(7) For business acquisitions, the targeted business enterprise shall meet the following:
(i) Have been profitable for the previous 2 years and have been in existence for at least 5 years.

(ii) Have the capacity for growth in long-term markets.

(iii) Have its principal place of business in this Commonwealth or have the capacity to relocate to this Commonwealth.

(iv) Possess a continuity of management.

(v) Have a strong customer base.

(8) For business acquisitions, the applicant shall have:
(i) Minimum net worth between $75,000 and $150,000 depending on the size of the acquisition.

(ii) Three to five years demonstrated experience in the industry of the targeted business enterprise.

(iii) A cash equity investment in the project of not less than 10% of the total project cost.

(b) Costs. Costs incurred by the applicant in meeting the requirements of this section may be treated as eligible costs of the project. With the concurrence of the Authority, these costs may be used as match for loan funds advanced or may be reimbursed with loan funds advanced.

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