Mississippi Administrative Code › Title 6 - Economic Development › Part 9 - Economic Development Division › Chapter 5 - Mississippi Community Development Financial Institution (CDFI) Small Business Loan Fund Program › Rule 6-9-5.7 - Ineligible Uses of Funding

Current through June 25, 2024
Under the program, loans used for these purposes are not
				  eligible for SSBCI funds:
* Improve or renovate any portion of rentable property that
				  the small business borrower leases to a third party;
* Acquiring or holding passive investments in real estate;
				  Passive real estate investment includes most real estate development (including
				  construction) in which the developer does not intend to occupy or actively use
				  the resulting real property. A small business borrower can deliver the
				  assurance that the loan is not being used for passive real estate if the small
				  business borrower occupies and uses at least a specific percentage of the
				  building; the percentage varies depending on whether the project involves the
				  construction of a new building or renovation of an existing building;
* Purchase of securities;
* Lobbying activities (as defined in Section 3(7) of the
				  Lobbying Disclosure Act of 1995,
				  P.L.
				  104-65, as amended);
* Repay delinquent federal or jurisdiction income taxes
				  unless the borrower has a payment plan in place with the relevant taxing
				  authority;
* Repay taxes held in trust or escrow (e.g., payroll or sales
				  taxes);
* Reimburse funds owed to any owner, including any equity
				  investment or investment of capital for the business's continuance;
* Purchase any portion of the ownership interest of any owner
				  of the business, except for the purchase of an interest in an employee stock
				  ownership plan qualifying under section 401 of Internal Revenue Code. This
				  prohibition applies to the acquisition of shares of a company or the
				  partnership interest of a partner when the proceeds of the loan directly
				  supported by SSBCI funds will go to any existing owner or partner;
* Refinance existing debt unless the debt is from a
				  non-affiliated lender.
* A lender may refinance a borrower's existing loan, line of
				  credit, extension of credit, or other debt originally made by an unaffiliated
				  lender only if the following conditions are met:
* The amount of the refinanced loan or other debt is at least
				  150 percent of the previous outstanding balance;
* The transaction results in a 30 percent reduction in the
				  fee-adjusted APR contracted for the term of the new debt; and
* Proceeds of the transaction are not used to finance an
				  extraordinary dividend or other distribution.
* Financial institution lenders are generally prohibited from
				  refinancing an existing outstanding balance or previously made loan, line of
				  credit, extension of credit, or other debt owed by a small business borrower
				  already on the books of the same financial institution (or an affiliate).
				  However, a financial institution lender may use SSBCI funds to support a new
				  extension of credit that repays the amount due on a matured loan or other debt
				  that was previously used for an eligible business purpose when all the
				  following conditions are met:
* The amount of the new loan or other debt is at least 150
				  percent of the outstanding amount of the matured loan or other debt;
* The new credit supported with SSBCI funding is based on a
				  new underwriting of the small business's ability to repay the loan and a new
				  approval by the lender;
* The prior loan or other debt has been paid as agreed and
				  the borrower was not in default of any financial covenants under the loan or
				  debt for at least the previous 36 months (or since origination, if shorter);
				  and
* Proceeds of the transaction are not used to finance an
				  extraordinary dividend or other distribution.
Miss. Code
				  Ann. §
										57-10-601;
				  12 USC §
											5701 et
				  seq.