Compilation of Rules and Regulations of the State of Georgia › Department 110 - RULES OF GEORGIA DEPARTMENT OF COMMUNITY AFFAIRS › Chapter 110-31 - GEORGIA STATE SMALL BUSINESS CREDIT INITIATIVE LOAN PROGRAM DESCRIPTION › Rule 110-31-.02 - General Scope and Purpose

Current through Rules and Regulations filed through June 27, 2024
The Small Business Jobs Act of 2010 (Act), designed to help
				increase credit availability for small businesses, created the State Small
				Business Credit Initiative (SSBCI) and appropriated $1.5 billion to be used by
				the United States Department of the Treasury (U.S. Treasury) to provide direct
				support for states for use in assisting private lenders to increase access to
				credit for small businesses. Pursuant to the Act, Treasury initially allocated
				$47,808,507 to the State of Georgia for the initiative. Treasury allocated an
				additional $216,241 in December of 2016, bringing the total allocation to
				$48,024,748 for the State of Georgia.
On November 29, 2011, Treasury approved the State's
				application, which included proposals for the Georgia Capital Access Program,
				the Small Business Credit Guarantee, and the Georgia Funding for Community
				Development Financial Institutions. On June 6, 2013, Treasury approved a
				modification request to add a fourth sub-program to the Georgia State Small
				Business Credit Initiative, the Georgia Loan Participation Program.
				Consequently, the Georgia Department of Community Affairs (DCA) through the
				Georgia Housing and Finance Authority's (GHFA)1 economic development powers
				planned to utilize its $47,808,507 in SSBCI funds (the Allocated Funds) in four
				state-administered SSBCI programs as originally approved by U.S. Treasury: the
				Georgia Capital Access Program (GCAP), to which $2 million was directed; the
				Georgia Small Business Credit Guarantee Program (SBCG), to which $17,808,507
				was directed; the Georgia Funding for Community Development Financial
				Institutions, (GA Funding for CDFIs), to which $20 million was directed; and,
				the Georgia Loan Participation Program (GA LPP), to which $8 million was
				directed. The allocation amounts to the four programs were adjusted throughout
				the life of the program depending on usage, which were approved by
				Treasury.
Operation of the four programs under the Georgia State Small
				Business Credit Initiative was subject to the U.S. Treasury Guidelines for
				SSBCI, the Treasury-approved Georgia SSBCI application, and the SSBCI
				Allocation Agreement.
Upon termination of the Allocation Agreement with Treasury on
				March 31, 2017, Georgia will initially allocate the post-Treasury recycled
				SSBCI funds between two programs: the Georgia Small Business Credit Guarantee,
				to which $10.8 million will be directed, and the Georgia Loan Participation
				Program, to which $17.2 million will be directed. Actual amounts in the two
				programs will be reduced by administrative costs and losses incurred. The
				allocation amount between the two programs may be adjusted throughout the life
				of the program depending on usage if approved by DCA.
Under the SSBCI Program, credit facilities are extended to
				eligible small businesses in Georgia by lenders (banks, credit unions, CDFIs,
				and private lenders). Lenders will undergo a review process to ensure adequate
				commercial lending experience, financial and managerial capacity, and
				operational skills.
(1) Scope and
			 Purpose of Small Business Credit Guarantee (SBCG) Program
Under the SBCG Program, credit facilities are extended to
				eligible small businesses by lenders that have entered into a Lender Program
				Participation Agreement (PPA) with GHFA EDFI.[2] The PPA provides that
				qualifying lenders may enroll a qualified credit to an eligible small business
				in the credit guarantee program for eligible business purposes that meet the
				eligibility criteria described in 110-31-03. The State will reimburse from
				SSBCI funds 50% of losses incurred on an enrolled credit by a lender that is
				not in material default of the PPA. Guarantee funds will generally be available
				to lenders on a first-come, first-served basis. The State will charge an
				initial guarantee fee in an amount equal to 2% of the guarantee amount, along
				with an annual fee in an amount of 0.5% of the outstanding guarantee for each
				subsequent year. The fee structure may be modified in response to program
				sustainability or market conditions.
(2) Scope and Purpose of the Georgia Loan
			 Participation (GA LPP) Program
The Georgia Loan Participation Program is designed to increase
				lending to eligible small businesses by lenders to diversify their risk through
				shared exposure with the State. Lenders approved for participation in GA LPP
				will sign a Master Loan Participation Agreement with the Georgia Housing &
				Finance Authority Economic Development Financing, Inc.
GA LPP will utilize SSBCI funds to purchase up to 25% of a loan
				originated by a participating lender to an eligible small business borrower.
				Underwriting is performed by the primary lender, then shared with the
				Department of Community Affairs (DCA) to streamline the approval process of the
				purchased participation. A written commitment letter is executed between the
				primary lender and GHFA EDFI; the lender closes the loan and sells the position
				to GHFA/DCA. The primary lender performs debt servicing and shares proportional
				debt payments with DCA. Interest rates, maturity, collateral and other loan
				terms are negotiated with the borrower and determined by the lender. GHFA/DCA
				will be in a subordinate lien position, and the primary lender will have first
				claim to all recoveries until its losses are covered. Primary lender has the
				unconditional right to repurchase the participation sold in the original loan
				to DCA at any time.
2GHFA Economic Development
				Financing, Inc. (GHFA EDFI) is a wholly owned subsidiary of GHFA dedicated to
				economic development.
O.C.G.A. §§
									50-8-3,
				50-8-8.
The Department of Community Affairs (DCA) was created as a
				  department of the executive branch of state government. The Georgia Housing and
				  Finance Authority is an instrumentality of the State of Georgia and a public
				  corporation performing an essential governmental function. The GHFA is assigned
				  to DCA, and all operations are performed by the personnel of DCA. DCA is
				  required to make all funds it administers on behalf of GHFA to be made
				  available for the use of GHFA. GHFA is listed as the Contracting Entity on the
				  Georgia SSBCI Application.