Louisiana Administrative Code › Title 19 - CORPORATION AND BUSINESS › Part VII - Louisiana Economic Development Corporation › Subpart 1 - Small Business Loan Guaranty Program › Chapter 3 - Loan and Guaranty Policies for the State Small Business Credit Initiative (SSBCI) Program › Section VII-305 - Application Process

Current through Register Vol. 50, No. 6, June 20, 2024
A.
				  Except as may be hereinafter provided, all of the provisions contained in
				  §105 of Chapter 1 of the Small Business
				  Loan and Guaranty Program shall also apply to this Chapter 3 program (except
				  that loan participations will not be utilized in this Chapter 3
				  program).
B. Loan Purpose
				  Requirements and Prohibitions. In addition to the application process
				  provisions provided in the Section mentioned in the above Subsection A, in
				  connection with each loan to be enrolled under this Chapter 3 program the
				  financial institution lender shall also be responsible for obtaining and
				  providing to LEDC with the lender's application an assurance from each borrower
				  stating that the loan proceeds shall not be used for any impermissible purpose
				  under the SSBCI Program. And additionally, each financial institution lender
				  must also obtain and provide to LEDC with its application under this Chapter 3
				  program an assurance from the borrower affirming:
1. the loan proceeds must be used for a
				  business purpose. A
business purpose
includes, but is not
				  limited to, start up costs, working capital, business procurement, franchise
				  fees, equipment, inventory, as well as the purchase, construction renovation or
				  tenant improvements of an eligible place of business that is not for passive
				  real estate investment purposes. The definition of
business
				  purpose
excludes activities that relate to acquiring or holding
				  passive investments such as commercial real estate ownership, the purchase of
				  securities; and lobbying activities as defined in section 3(7) of the Lobbying
				  Disclosure Act of 1995, P.L. 104-65, as
				  amended;
2. the loan proceeds will
				  not be used to:
a. repay a delinquent federal
				  or state income taxes unless the borrower has a payment plan in place with the
				  relevant taxing authority; or
b.
				  repay taxes held in trust or escrow, e.g. payroll or sales taxes; or
c. reimburse funds owed to any owner,
				  including any equity injection or injection of capital for the business'
				  continuance; or
d. purchase any
				  portion of the ownership interest of any owner of the business;
3. the borrower is not:
a. an executive officer, director, or
				  principal shareholder of the financial institution lender; or
b. a member of the immediate family of an
				  executive officer, director, or principal shareholder of the financial
				  institution lenders; or
c. a
				  related interest of an such executive officer, director, principal shareholder,
				  or member of the immediate family;
i. for the
				  purposes of these three borrower restrictions, the terms
executive
				  officer
,
director
,
principal
				  shareholder
,
immediate family
, and
related
				  interest
refer to the same relationship to a financial institution
				  lender as the relationship described in part 215 of title 12 of the
Code of Federal Regulations
, or any successor to such
				  part;
4. the
				  borrower is not:
a. a business engaged in
				  speculative activities that develop profits from fluctuations in price rather
				  than through normal course of trade, such as wildcatting for oil and dealing in
				  commodities futures, unless those activities are incidental to the regular
				  activities of the business and part of a legitimate risk management strategy to
				  guard against price fluctuations related to the regular activities of the
				  business;
NOTE: Permissible borrowers include state-designated
					 charitable, religious, or other non-profit or eleemosynary institutions,
					 government-owned corporations, consumer and marketing cooperatives, and
					 faith-based organizations provided the loan is for a "business purpose" as
					 defined above.
b. a
				  business that earns more than half of its annual net revenue from lending
				  activities; unless the business is a non-bank or non-bank holding company
				  certified as a community development financial institution; or
c. a business engaged in pyramid sales, where
				  a participant's primary incentive is based on the sales made by an
				  ever-increasing number of participants; or
d. a business engaged in activities that are
				  prohibited by federal law or applicable law in the jurisdiction where the
				  business is located or conducted (Included in these activities is the
				  production, servicing, or distribution of otherwise legal products that are to
				  be used in connection with an illegal activity, such as selling drug
				  paraphernalia or operating a motel that knowingly permits illegal
				  prostitution.); or
e. a business
				  engaged in gambling enterprises, unless the business earns less than 33 percent
				  of its annual net revenue from lottery sales;
5. no principal of the borrowing entity has
				  been convicted of a sex offense against a minor [as such terms are defined in
				  section
				  111 of the Sex Offender
				  Registration and Notification Act (42
				  U.S.C. 16911) ]. For the purposes of this
				  certification,
principal
is defined as if a sole
				  proprietorship, the proprietor; if a partnership, each managing partner and
				  each partner who is a natural person and holds a 20 percent or more ownership
				  interest in the partnership; and if a corporation, limited liability company,
				  association or a development company, each director, each of the five most
				  highly compensated executives or officers of the entity, and each natural
				  person who is a direct or indirect holder of 20 percent or more of the
				  ownership stock or stock equivalent of the entity.