No. 36486 (Emergency Rule): Rule R990-12. State Small Business Credit Initiative Program Fund

DAR File No.: 36486
Filed: 07/12/2012 12:41:06 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this rule is to comply with statutory authority to establish the small business credit initiative.

Summary of the rule or change:

The rule identifies processes and procedures on providing loans and loan guarantees to small businesses, establishes a loan loss reserve fund and credit advisory committee, and notifies the public how the funds will be administered. (DAR NOTE: A corresponding proposed new rule is under DAR No. 36487 in this issue, August 1, 2012, of the Bulletin.)

Emergency rule reason and justification:

Regular rulemaking procedures would place the agency in violation of federal or state law.

Justification: This rule was originally filed when the program was under the authority of the Department of Community and Culture. The division was moved to the Department of Workforce Services on 07/01/2012 but the original emergency rule expired. This program provides loans and loan guarantees for small businesses with funding provided by the federal government. It would place the Department in violation of our federal contract requirements to continue to operate this program without this rule.

State statutory or constitutional authorization for this rule:

• Section 35A-8-1202

Anticipated cost or savings to:

the state budget:

There are no anticipated costs or savings to the state budget not already contemplated by the statute.

local governments:

There are no anticipated costs or savings to local government. This program is entirely funded by federal funds. Any costs will be paid from the federal funding. The program is for funding small businesses and will not impact local governments.

small businesses:

There are no anticipated costs or savings to any small business but should improve the availability of credit to small businesses.

persons other than small businesses, businesses, or local governmental entities:

There are no costs or savings to any persons other than small businesses, businesses, or local governmental entities. This program is currently funded entirely by federal funds. Any costs will be paid from the federal funding.

Compliance costs for affected persons:

There are no costs or savings to any affected persons as there are no fees associated with this program as it is federally funded.

Comments by the department head on the fiscal impact the rule may have on businesses:

There are no compliance costs associated with this change. There are no fees associated with this change. There will be no cost to anyone to comply with these changes. There will be no fiscal impact on any business except it may help small businesses. This is a federally funded program to help small businesses.

Kristen Cox, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Workforce Services
Housing and Community Development
140 E BROADWAY
SALT LAKE CITY, UT 84111-2333

Direct questions regarding this rule to:

• Suzan Pixton at the above address, by phone at 801-526-9645, by FAX at 801-526-9211, or by Internet E-mail at [e-mail]

This rule is effective on:

07/12/2012

Authorized by:

Kristen Cox, Executive Director

RULE TEXT

R990. Workforce Services, Housing and Community Development.

R990-12. State Small Business Credit Initiative Program Fund.

R990-12-1. Authority.

(1) Pursuant to Section 35A-8-1201 et seq., the Housing and Community Development Division is the administrator of the State Small Business Credit Initiative Program Fund. The Division may provide these services, in whole or in part, under contract as determined by competitive bid.

(2) The legal authority for these rules is found in Section 35A-8-1202.

 

R990-12-2. Purpose.

The State Small Business Credit Initiative Program Fund provides loans and loan guarantees to encourage lending from financial institutions to eligible small businesses within the state as defined by the funding sources contributing to the Fund.

 

R990-12-3. Definitions.

(1) "Annual Receipts" to the fund include grants made by the federal government and state legislative appropriations if any, but does not include program income.

(2) "Program Income" is defined as fees and interest income generated by participation in the program.

 

R990-12-4. Credit Advisory Committee.

The Division will establish a Credit Advisory Committee. Utah financial institutions may submit an application of a small business borrower for private funding to the Committee. The Committee will evaluate the application and make recommendations to the Division on the size, scope, and loan or loan loss reserve participation amount suitable for the applicant. Additionally, the Committee will advise on application processes, underwriting criteria and procedure of the Fund to ensure that program objectives are met.

 

R990-12-5. Eligibility.

(1) Only those applications for funding assistance which are submitted by an eligible applicant for an eligible project shall be considered by the Division.

(2) Eligible applicants include Small Businesses (defined as having no more than 750 employees), which:

(a) applied for a credit product and were denied by a financial institution; and

(b) the financial institution sponsors the application to the Fund as described in the Application Procedures; or

(c) directly respond to a specific Request for Applications (RFA) published by the Division.

 

R990-12-6. Application Requirements.

(1) Applications shall be submitted on forms published, and in accordance with the procedures outlined by the Division with the advice of the Committee. Completed applications which have been accepted for processing will be placed on the next available Committee agenda for review and recommendation.

(2) The primary process for submitting an application to the fund is as follows:

(a) An Eligible Small Business must apply for a credit product at a financial institution which has a signed a State Small Business Credit Initiative Program Fund Participation Agreement with the Division.

(b) The small business applicant must have been deemed ineligible for current banking products offered by the financial institution.

(c) The participating financial institution will submit an application form, in addition to the relevant documentation and underwriting criteria, to the Division and specify the type, amount and reason for a loan participation or loan guarantee on the transaction.

(d) The Committee at its discretion may interview parties involved in the transaction to further clarify any information as part of the application review prior to issuing a recommendation to the Director.

(3) An applicant may respond to a specific Request for Applications issued by the Division on forms prescribed by the Division.

 

R990-12-7. Application Review Procedures.

(1) The Committee will review applications and make recommendations on whether to fund a loan or loan guarantee at regularly scheduled review meetings as published on the Division's website.

(2) The process for review of new applications for loans and loan guarantees shall be as follows:

(a) Submission of an application, on or before the applicable deadline to the Division program staff for technical review and analysis.

(b) Incomplete applications will be held by the staff pending submission of required information.

(c) Complete applications accepted for processing will be placed on the next available review agenda.

(d) At the review the Committee may either recommend:

(i) denial of the application;

(ii) the issuance of the requested loan or loan guarantee

(iii) a modified issuance of a loan or loan guarantee

(iv) further analysis of the viability of the project through further collection of documentation prior to issuing a decision on the funding request.

(e) Final recommendations of the Committee on issuance or denial of applications will be forwarded to the Director.

(f) The Director may issue loans or loan guarantees after reviewing the recommendation of the Committee.

 

R990-12-8. Loan Loss Reserve Fund.

There is created a loan loss reserve fund to be used to secure the loan guarantees issued by the Division. The Division may issue guarantees in an amount up to a ten to one ratio of balances within the loan loss reserve fund. Neither the State nor the Division are liable for guarantees issued beyond the balance of the reserve fund. Each participating financial institution shall be informed of this stipulation via a participation agreement with the Division prior to participating in the loan guarantee program.

 

R990-12-9. Procedures for Electronic Meetings.

(1) These provisions govern any meeting at which one or more members of the Committee or one or more applicants appear telephonically or electronically pursuant to Section 52-4-207.

(2) If one or more members of the Committee or one or more applicants or sponsors cannot attend a regularly scheduled Committee meeting in person, that member, applicant or sponsor may participate in the meeting electronically or telephonically.

 

KEY: small business loans, loan guarantees

Date of Enactment or Last Substantive Amendment: July 12, 2012

Authorizing, and Implemented or Interpreted Law: 35A-8-1201 et seq.

 

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