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Oregon Bulletin

August 1, 2013

Oregon Business Development Department, Chapter 123

Rule Caption: The rules relating to the Oregon Business Development Fund have been amended or repealed.

Adm. Order No.: OBDD 6-2013

Filed with Sec. of State: 7-1-2013

Certified to be Effective: 7-1-13

Notice Publication Date: 6-1-2013

Rules Amended: 123-017-0015, 123-017-0030, 123-017-0035, 123-017-0055

Rules Repealed: 123-017-0060, 123-017-0070, 123-017-0080

Subject: The Oregon Business Development Fund rules are amended to include new language for eligibility. The condition for approval that states applicants have not entered into a contract or contracts exceeding $700,000 has been amended to $1,000,000. The maximum loan contract amount has been amended from $700,000 to $1,000,000. Payment schedule language has been amended.

   The Building Opportunities for Oregon Small Business Today (BOOST) program is statutorily mandated to expire on June 30, 2013. The BOOST rules have been repealed.

Rules Coordinator: Mindee Sublette—(503) 986-0036

123-017-0015

Eligibility

(1) Eligible projects are business development projects as defined in OAR 123-017-0010(2). If the Department is unable to obtain a sufficient number of approvable applications to meet the requirements of ORS 285B.059(5), it may, notwithstanding the limitations imposed by 285B.050(2)(g)(B), make loans to service and retail businesses operated by emerging small businesses which are located in or draw their workforces from within distressed areas as determined by the Department, when such projects provide compelling economic development benefits. The amount of loans the Department may make to service and retail businesses under (1) of this section shall be limited to the amount calculated under the method described in 285B.059(5).

(2) Eligible purposes are the financing of land, buildings, fixture, equipment and machinery, research and development, and the provision of working capital.

(3) Eligible applicants are defined in OAR 123-017-0010(1).

(4) The relocation of a facility from one labor market area to another, if not accompanied by an expansion of the applicant’s business or employment, is an eligible activity if:

(a) The relocation is caused by forces beyond the control of the applicant; or

(b) The relocation is necessary for the continued operation of the business; or

(c) There is no resulting loss of employment at the former site of the business.

(5) Relending of funds shall not be an eligible activity, except that the funds may be used for the local injection share of an SBA 503 or 504 Certified Development Company transaction.

(6) In cases where an otherwise eligible company or project has an insignificant (less than 25 percent) ineligible portion, the entire project may be determined eligible for a loan from the fund.

(7) Other than as specified in section (6) and (10) of this rule, Fund financing will be limited to 40 percent of the amount of the eligible costs, except that Fund financing may equal up to 50 percent of eligible costs when the application is submitted through or referral for financing is made to the Department by a Financial Institution.

(8) Tourist facilities shall not be eligible unless:

(a) The project can be qualified as a convention center; or

(b) The project can be qualified as a destination attraction with significant regional economic impact.

(9) Refinancing of existing debt, including existing trade payables and delinquent taxes, shall not be eligible unless the applicant demonstrates to the satisfaction of the Finance Committee that:

(a) The applicant contributes significantly to a target population or to a geographical area targeted by the Oregon Business Development Fund;

(b) The applicant requires refinancing to remain viable. Assessment of viability will be made at the sole discretion of the Finance Committee;

(c) Lenders agree to extend due dates, provide additional financing or provide other favorable terms to the applicant; and

(d) The applicant meets all other requirements set forth in statute and administrative rule, including demonstrating to the satisfaction of the Finance Committee that the project is feasible and a reasonable risk, has a reasonable prospect of repayment and can provide good and sufficient collateral.

(10) Except for the Oregon Targeted Development Account, Fund financing may exceed 50 percent of the amount of the eligible project costs and/or may be approved without a commitment from a commercial or private lender, or a local development group, to participate in the financing of the project, if

(a) Two or more Financial Institutions have denied a financing request for the project by the borrower. Such denied financing request must:

(A) Be for a loan for an eligible Fund loan purpose; and

(B) Be evidenced by a written denial from the Financial Institution specifying the reason(s) for the denial. Denial for reasons such as an incomplete application, failure to provide requested information, or the requested loan is for a purpose for which or on terms under which the Financial Institution does not make loans is not acceptable as a denial of financing; and

(b) The applicant certifies that there is no other available financing for the project with documentation as required by the Finance Committee.

(11) Fund financing may be approved without a commitment from a commercial or private lender or a local development group to participate in the financing of the project if the applicant is a county or municipality, or if there are required forms of payments other than scheduled principal and interest.

Stat. Auth.: ORS 285A.075

Stats. Implemented: ORS 285B.059, 285B.080(3) & 285B.092

Hist.: EDD 2-1983(Temp), f. & ef. 5-25-83; EDD 1-1984, f. & ef. 1-5-84; EDD 10-1988, f. & cert. ef. 3-18-88; EDD 37-1988, f. & cert. ef. 12-15-88; EDD 9-1989(Temp), f. & cert. ef. 11-3-89; EDD 5-1990, f. & cert. ef. 3-5-90; EDD 25-1990 (Temp), f. & cert. ef. 9-13-90; EDD 29-1990, f. & cert. ef. 12-12-90; EDD 6-1991(Temp), f. & cert. ef. 6-18-91; EDD 8-1996(Temp), f. & cert. ef. 8-13-96; EDD 4-1997, f. & cert. ef. 3-25-97; EDD 9-1997(Temp), f. & cert. ef. 10-7-97; EDD 8-1998, f. & cert. ef. 5-22-98; EDD 11-1999, f. & cert. ef. 10-11-99; EDD 6-2001, f. & cert. ef. 10-9-01; EDD 6-2007(Temp), f & cert. ef. 8-29-07 thru 2-23-08; EDD 3-2008(Temp), f. & cert. ef. 2-26-08 thru 8-1-08; EDD 21-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 22-2009, f. 11-30-09, cert. ef. 12-1-09; OBDD 9-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 20-2010(Temp), f. & cert. ef. 5-28-10 thru 10-9-10; OBDD 33-2010, f. & cert. ef. 10-1-10; OBDD 6-2013, f. & cert. ef. 7-1-13

123-017-0030

Loan Conditions

(1) The Director (for loan requests of $250,000 or less) or the Finance Committee may approve a loan request if it finds that:

(a) Fund participation in any financing shall not exceed 40 percent of the total amount of the eligible project costs, except that Fund financing may be up to 50 percent when an application is submitted through a Financial institution or Fund financing may exceed 40 percent when two or more Financial Institutions have denied financing as outlined in OAR 123-017-0015(10).

(b) The proposed business development project is feasible and a reasonable risk from practical and economic standpoints, and the loan has reasonable prospect of repayment.

(c) The applicant can provide good and sufficient collateral for the loan, as determined by the Commission. The Commission’s security interest may be subordinated to the security interest of other lenders participating in the project. The security interest of loans from the Oregon Targeted Development Account will not be subordinated to the security interest of other lenders, unless the Finance Committee or the Director finds there is an abundance of collateral and/or company or guarantor financial strength. The Business Development Commission may make loans in distressed areas, as defined by the Department, without regard to the requirements for security and collateral under ORS 285B.059 and 285B.062 that are otherwise applicable. Collateral value of out-of-state real property will be significantly discounted from nominal assessed or appraised value.

(d) Monies in the Oregon Business Development Fund are or will be available for the proposed business development project.

(e) There is a need for the proposed business development project.

(f) The applicant’s financial resources are adequate to ensure success of the project.

(g) The applicant has not received or entered into a contract or contracts exceeding $1,000,000 with the Commission, under authority of ORS 285B.050–285B.098, for the previous 365 days.

(2) The Finance Committee may, in its sole discretion, permit the assumption of an outstanding Oregon Business Development Fund Loan, if the assuming obligor satisfies the Finance Committee or the Director as to its willingness and ability to perform all obligations of the original borrower related to the loan, including but not limited to the obligation to repay the loan in accordance with its terms, and if the State’s collateral position is not diminished. Oregon Business Development Fund loans are not, however, necessarily or automatically assumable. A complete application, application fee and supporting documentation are required to initiate review of the request.

(3) The applicant agrees to abide by all laws and regulations applicable to the applicant’s project.

Stat. Auth.: ORS 285A.075

Stats. Implemented: ORS 285B.059 & 285B.092

Hist.: EDD 2-1983(Temp), f. & ef. 5-25-83; EDD 1-1984, f. & ef. 1-5-84; EDD 10-1988, f. & cert. ef. 3-18-88; EDD 37-1988, f. & cert. ef. 12-15-88; EDD 9-1989(Temp), f. & cert. ef. 11-3-89; EDD 5-1990, f. & cert. ef. 3-5-90; EDD 8-1996(Temp), f. & cert. ef. 8-13-96; EDD 4-1997, f. & cert. ef. 3-25-97; EDD 9-1997(Temp), f. & cert. ef. 10-7-97; EDD 8-1998, f. & cert. ef. 5-22-98; EDD 11-1999, f. & cert. ef. 10-11-99; EDD 6-2001, f. & cert. ef. 10-9-01; EDD 5-2005, f. & cert. ef. 5-11-05; EDD 6-2007(Temp), f & cert. ef. 8-29-07 thru 2-23-08; EDD 3-2008(Temp), f. & cert. ef. 2-26-08 thru 8-1-08; EDD 21-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 22-2009, f. 11-30-09, cert. ef. 12-1-09; OBDD 9-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 20-2010(Temp), f. & cert. ef. 5-28-10 thru 10-9-10; OBDD 33-2010, f. & cert. ef. 10-1-10; OBDD 6-2013, f. & cert. ef. 7-1-13

123-017-0035

Loan Agreement

If the Finance Committee approves the business development project, the Finance Committee or the Director, on behalf of the state, and the borrower may enter into a loan contract of not more than $1,000,000, secured by good and sufficient collateral (except as noted in OAR 123-017-0030(1)(c)), as determined by the Finance Committee, that shall set forth, among other matters:

(1) A plan for repayment by the borrower to the Oregon Business Development Fund moneys borrowed from the Fund used for the business development project with interest charged on those moneys at the fixed rate of one percentage point more than the prevailing interest rate on United States Treasury bills, notes or bonds of a comparable maturity. Loans made from the Oregon Targeted Development Account shall be made at a fixed interest rate of four percentage points less than the prevailing prime rate. Loans made under the conditions of OAR 123-0017-0015(10) shall be made at a fixed interest rate of not less than five percentage points over the prevailing prime rate. The rate shall not be less than four percent. For the purposes of this section, the prevailing interest rate shall be the weekly average interest rate as set forth in the most recent Federal Reserve Statistical Release H.15(519) that the Department has received at the time the loan is approved. The repayment plan, among other matters:

(a) Shall provide for commencement of repayment by the applicant of moneys used for the business development project and interest thereon no later than one year after the date of the loan contract or at such other time as the Finance Committee may provide;

(b) May provide for reasonable extension of the time for making any repayment in emergency or hardship circumstances if approved by the Finance Committee or the Director;

(c) Shall provide for such evidence of debt assurance of, and security for, repayment of the loan as is considered necessary by the Finance Committee;

(d) Shall set forth a schedule of payments and the period of loan which shall not exceed the usable life of the contracted project or 25 years from the date of the contract, whichever is less. The payment schedule shall include repayment of interest that accrues during any period of delay in repayment authorized by subsection (a) of this section, and the payment schedule may require payments of varying amounts for collection of accrued interest. The term of the Fund loan will normally be matched to, and not exceed twice that of, the commercial or private lender participating in the project, if applicable. Loans from the Oregon Targeted Development Account shall be for a maximum term of 5 years, with a maximum amortization of 15 years. Loans made under the terms of OAR 123-017-0015(10) shall be for a maximum term of 5 years, with a maximum amortization of 20 years.

(e) A request to renew any loan from the Fund that has reached its scheduled maturity and has not been repaid in full may be approved by the Finance Committee (or Director if the principal balance does not exceed $250,000), with any additional terms and conditions, including interest rate, that it may determine. A new application, including an application fee and supporting documentation, are required to initiate review of the request.

(f) Shall set forth a procedure for formal declaration of delinquency or default of payment by the Department. Loans shall be declared delinquent when any payment is more than ten days late. Borrower shall be notified in writing of declaration of delinquency, and shall have 31 days from the original payment date to bring the loan current. If the loan is not brought current, or arrangements satisfactory to the Department for bringing the loan current have not been made, the Department may declare the loan in default, declare the entire outstanding indebtedness to be forthwith due and payable and assign the loan to the Attorney General for collection; The Finance Committee or the Director or their designee is authorized to approve any modification of terms on a loan that is delinquent or in default as deemed necessary or prudent to most likely effect repayment of the loan to the Fund.

(g) May allow for forms of payment on loans other than scheduled principal and interest payments, as determined by the Finance Committee, or Director in the case of loans of $250,000 or less.

(2) Provisions satisfactory to the Department for field engineering and inspection, the Department to be the final judge of completion of the contract.

(3) That the liability of the state under the contract is contingent upon the availability of moneys in the Oregon Business Development Fund for use in the business development project.

(4) Such further provisions as the Finance Committee considers necessary to ensure expenditure of the funds for the purposes set forth in the approved application.

(5) That the borrower is responsible for payment of:

(a) All of the expenses of the operation and maintenance of the project, including adequate insurance;

(b) All taxes and special assessments levied with respect to the leased premises and payable during the term of the lease;

(c) Insurance premiums and providing insurance in amount and coverage acceptable to the Finance Committee. Such insurance shall include but shall not be limited to: fire and hazard insurance, liability insurance and flood insurance (if applicable); and

(d) Out-of-pocket costs associated with the loan closing which may include but are not limited to filing and recording fees, title insurance and appraisals, and attorney fees.

(6) That the borrower will provide to the Department on an annual basis, within 120 days of the end of its fiscal year, the same type of financial statements as required by the participating bank. The Finance Committee or the Department may require additional financial information.

(7) The Finance Committee, or Director for loans under $250,000, may require an assignment of life insurance on active principals in borrower.

(8) The Department, at its sole discretion, may require the execution of a Commitment Letter and receipt of a non-refundable Commitment Fee to secure resources necessary to fund the loan. The Commitment Fee will be applied at closing to the loan fee. If the loan does not close, the Commitment Fee will not be refunded.

(9) In the case of loans of more than $100,000 that are funded by proceeds from the Oregon Lottery, that the borrower shall make a good faith effort to hire and retain low-income individuals who have received job training assistance from publicly funded job training providers and enter into a first-source hiring agreement with a publicly funded job training provider.

(10) If the loan will result in the construction, expansion, rehabilitation or remodeling of a facility to which the public has access, adequate access for handicapped persons must be provided. This provision applies only to firms that deal directly with the general public in the normal and usual course of their business, and to facilities in which business is customarily transacted by and with members of the general public.

(11) If a project involves building construction, expansion, rehabilitation or modification, a loan from the fund shall be permanent and not interim financing.

Stat. Auth.: ORS 285A.075

Stats. Implemented: ORS 285B.062 & 285B.092

Hist.: EDD 2-1983(Temp), f. & ef. 5-25-83; EDD 1-1984, f. & ef. 1-5-84; EDD 10-1988, f. & cert. ef. 3-18-88; EDD 37-1988, f. & cert. ef. 12-15-88; EDD 9-1989(Temp), f. & cert. ef. 11-3-89; EDD 5-1990, f. & cert. ef. 3-5-90; EDD 25-1990 (Temp), f. & cert. ef. 9-13-90; EDD 29-1990, f. & cert. ef. 12-12-90; EDD 8-1996(Temp), f. & cert. ef. 8-13-96; EDD 4-1997, f. & cert. ef. 3-25-97; EDD 9-1997(Temp), f. & cert. ef. 10-7-97; EDD 8-1998, f. & cert. ef. 5-22-98; EDD 11-1999, f. & cert. ef. 10-11-99; EDD 6-2001, f. & cert. ef. 10-9-01; EDD 5-2005, f. & cert. ef. 5-11-05; EDD 6-2007(Temp), f & cert. ef. 8-29-07 thru 2-23-08; EDD 3-2008(Temp), f. & cert. ef. 2-26-08 thru 8-1-08; EDD 21-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 22-2009, f. 11-30-09, cert. ef. 12-1-09; OBDD 9-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 20-2010(Temp), f. & cert. ef. 5-28-10 thru 10-9-10; OBDD 33-2010, f. & cert. ef. 10-1-10; OBDD 6-2013, f. & cert. ef. 7-1-13

123-017-0055

Fees and Charges

(1) The Department shall charge and collect a loan fee of $200 at the time the application is filed.

(2) In addition, the applicant, immediately upon receiving the loan proceeds, shall pay to the Department one and one-half percent of the principal amount of the loan.

(3) The Department may charge and collect a Commitment Fee, payable to the Department, in an amount up to three quarters of one percent of the principal amount of the loan to be applied to the fee specified in section (2) of this rule at closing of the loan. If the loan does not close, the Commitment Fee will not be refunded.

(4) The Department may charge and collect an Assumption Fee, payable to the Department, in an amount up to one half of one percent of the remaining principal balance of the loan. The individual or entity assuming the obligation will also be responsible for closing costs associated with the transfer of debt including but not limited to document preparation, review of documentation for legal sufficiency, title, escrow, recording or filing fees.

(5) The Department may charge and collect a Loan Modification Fee, payable to the Department, of $50 at the time of the modification request. A loan modification may include, but, is not limited to, modification to terms of repayment, subordination requests or collateral swaps. The individual or entity requesting the modification will also be responsible for costs associated with the modification including, but, not limited to, document preparation, review of documentation for legal sufficiency, title, escrow, recording or filing fees.

(6) Monies referred to in (1), (2), (3), (4) and (5) of this section shall be paid into the Fund.

(7) The Department may, in its sole discretion, use some or all of the money collected under section (2) of this rule, plus a maximum of an additional one and one-half percent, as payment to a contracted local development group for referring projects for financing, packaging the loans, processing applications, investigating proposed business development projects and servicing outstanding loans. In no case shall the Department make any payment of more than $10,000 for any one project. In no case shall the Department make any payment to any third party until the loan has been closed and the Department has collected the fee specified in section (2) of this rule.

Stat. Auth.: ORS 285A.075

Stats. Implemented: ORS 285B.056, 285B.068 & 285B.092

Hist.: EDD 2-1983(Temp), f. & ef. 5-25-83; EDD 1-1984, f. & ef. 1-5-84; EDD 10-1988, f. & cert. ef. 3-13-88; EDD 37-1988, f. & cert. ef. 12-15-88; EDD 5-1990, f. & cert. ef. 3-5-90; EDD 11-1999, f. & cert. ef. 10-11-99; EDD 6-2001, f. & cert. ef. 10-9-01; EDD 6-2007(Temp), f & cert. ef. 8-29-07 thru 2-23-08; EDD 3-2008(Temp), f. & cert. ef. 2-26-08 thru 8-1-08; EDD 21-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 22-2009, f. 11-30-09, cert. ef. 12-1-09; OBDD 20-2010(Temp), f. & cert. ef. 5-28-10 thru 10-9-10; OBDD 33-2010, f. & cert. ef. 10-1-10; OBDD 6-2013, f. & cert. ef. 7-1-13

Notes
1.) This online version of the OREGON BULLETIN is provided for convenience of reference and enhanced access. The official, record copy of this publication is contained in the original Administrative Orders and Rulemaking Notices filed with the Secretary of State, Archives Division. Discrepancies, if any, are satisfied in favor of the original versions. Use the OAR Revision Cumulative Index found in the Oregon Bulletin to access a numerical list of rulemaking actions after November 15, 2012.

2.) Copyright 2013 Oregon Secretary of State: Terms and Conditions of Use

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