Pennsylvania Code › Title 12 - COMMERCE, TRADE AND LOCAL GOVERNMENT › Part III - Business Financing › Subpart C - Loans › Chapter 73 - PENNSYLVANIA INDUSTRIAL DEVELOPMENT AUTHORITY › Subchapter B - STATEMENT OF POLICY › FINANCIAL CONSIDERATIONS › Section 73.131 - Industrial development projects

Current through Register Vol. 54, No. 28, July 13, 2024
(a)
						The act requires that an industrial development project be sold or leased to a
						responsible buyer or responsible tenant. The PIDA interprets this statutory
						requirement to mean not only the financial ability to repay the PIDA's loan,
						but also the financial ability to repay all working capital and equipment
						financing necessary for the establishment and operation of a complete project.
						The analysis described in this section would be the same whether the
						responsible buyer is a beneficial owner related to the industrial occupant or
						an unrelated investor-developer.
(b) The application for an industrial
						development project must include financial statements of the proposed
						responsible buyer or tenant, parent company and proposed guarantors, if any,
						for the latest 3 years of operations, prepared by an independent certified
						public accountant. Complete financial statements include the independent
						accountants' report and all notes to the financial statements. When required by
						PIDA, personal financial statements of investor-stockholders may be prepared by
						a certified public accountant or by the individuals themselves on bank forms
						acceptable to PIDA and signed and dated. The personal financial statements must
						state all assets and direct liabilities on the face thereof, and include
						appropriate footnotes concerning the existence of contingent liabilities, or,
						in the alternative, specifically indicate that none exists to the best of the
						preparer's knowledge. PIDA may request additional financial information it
						deems appropriate in support of financial statements furnished with an
						application. A conference at the PIDA office in Harrisburg may be requested to
						develop adequate information for a complete presentation of pertinent aspects
						of the financial situation of a responsible buyer or tenant to PIDA. Generally,
						representatives of PIDA and its independent financial consultant will meet with
						representatives of the industrial development agency and management of the
						responsible buyer or tenant to discuss the financial statements of the
						responsible buyer or tenant, management background and experience, industrial
						products, operations and other project details.
(c) The establishment of a new entity as the
						responsible buyer or tenant will necessitate the submission of other financial
						information. In this event, PIDA may require the personal financial statements
						of the major investors. PIDA will require pro forma balance sheets and
						projected income statements and cash flows of the new entity for at least the
						first 3 full years of proposed operations, ideally prepared by an independent
						certified public accountant, although plain paper statements are also
						acceptable. These projections must include footnotes which disclose, among
						other things, the methods of accounting to be used, proposed sources of
						financing-both debt and equity-interest rate and terms of proposed financing,
						and all significant assumptions regarding projected income and expenses,
						including projected quantities, prices, customers and market areas, number of
						employees, labor rates, pension and fringe benefits and administrative and
						other operating expenses.
(d) The
						requirements in subsection (c) for projected financial statements may not be
						necessary in the case of a new entity being formed by a parent company whose
						acceptable, historical financial statements are submitted to PIDA and whose
						guaranty is to be relied on for repayment of the PIDA loan.
(e) The financial analysis which PIDA causes
						to be made to assist it in its determination as to whether there is a
						responsible buyer or tenant is a broad based analysis of the complete
						operations of the entity, including the proposed financing of the project. Each
						application is analyzed on a case by case basis. In determining whether there
						is a responsible buyer or tenant, PIDA will consider the following financial
						aspects:
(1) Form and content of financial
						statements, whether audited, reviewed or compiled.
(2) Equity of the responsible buyer or tenant
						and guarantors, if any, in relation to the total project cost.
(3) Income in relation to the total project
						cost.
(4) Extraordinary items of
						income and expenses reflected in the statements of income.
(5) Cash flow in relation to project debt
						service.
(6) Current working
						capital ratio.
(7) Total debt to
						equity ratio.
(8) Trends of sales
						and net income.
(9) Contingent
						liabilities.
(10) Financial ability
						to adequately finance the working capital and equipment requirements of the
						industrial development project.
(11) Industry factors relevant to a
						particular industrial development project.