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

Current through Register Vol. 54, No. 28, July 13, 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.