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OREGON BUSINESS DEVELOPMENT DEPARTMENT

 

DIVISION 19

OPERATION OF OREGON ENTREPRENEURIAL DEVELOPMENT LOAN FUND

123-019-0000

Purpose

The purpose of these rules is to provide procedures, standards and criteria for the making of loans from the Oregon Entrepreneurial Development Loan Fund for applications received by the Business Development Department.

Stat. Auth.: ORS 285A.075, 285B.740-285B.758, Ch. 765, OL 1993
Stats. Implemented: ORS 285B.740 - 285B.758, Ch. 765, OL 1993
Hist.: EDD 16-1991(Temp), f. & cert. ef. 11-8-91; EDD 12-1992, f. & cert. ef. 8-26-92; EDD 7-1993(Temp), f. & cert. ef. 9-17-93; EDD 3-1994, f. 2-4-94, cert. ef. 2-7-94; OBDD 10-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 34-2010, f. & cert. ef. 10-1-10

123-019-0010

Definitions

For the purposes of these rules additional definitions may be found in Procedural Rules, OAR 123-001. For purposes of this division of administrative rules, unless the context demands otherwise:

(1) "Applicant" means any individual, association of individuals, joint venture, partnership or corporation, person or any combination of persons applying for a loan from the Oregon Entrepreneurial Development Fund.

(2) "Certified Entity" means any entity certified by the Director of the Business Development Department under OAR 123-019-0100.

(3) "Equity" means cash, real and personal property owned or controlled by an applicant and committed to use in the project for which a loan from the fund is being sought. Property other than cash will be conservatively valued by the department.

(4) "Fund" or "EDLF" means the Oregon Entrepreneurial Development Fund as defined and set forth in Section 13, Chapter 688, Oregon Laws 1991.

(5) "Loan Committee" means any loan committee selected by the Director from the Finance Committee or otherwise appointed by the Director. The Loan Committee shall consist of at least three members, and the Director shall select one of its members to be chair. The Loan Committee shall meet at the call of the chair. Two members of the Loan Committee shall constitute a quorum to transact the business of the Loan Committee.

(6) "Project" means the acquisition, improvement, rehabilitation, construction, operation or maintenance of any property, real or personal, that is or will be used or is suitable for use by an economic enterprise, but not including:

(a) A loan for the construction of residential housing;

(b) A loan for the purchase of property that will not be used for the business operation of the applicant;

(c) A loan for the refinancing of an existing loan.

(7) "Severely Disabled Individuals" means individuals certified as severely disabled by the Vocational Rehabilitation Division of the Department of Human Resources or the Commission for the Blind.

(8) "Small Business Development Center" or "SBDC" means any small business development center described in the Small Business Training Assistance Act of 1983.

(9) "Small Business Management Program" means any of the following:

(a) A going into business class;

(b) A Small Business Management Program offered by an Oregon SBDC;

(c) Any series of classes/seminars/workshops/counseling sessions that meet the approval of a Small Business Development Center or Certified Entity Director.

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285B.740-285B.758, Ch. 688, OL 1991, Ch. 765, OL 1993
Hist.: EDD 16-1991(Temp), f. & cert. ef. 11-8-91; EDD 12-1992, f. & cert. ef. 8-26-92; EDD 7-1993(Temp), f. & cert. ef. 9-17-93; EDD 3-1994, f. 2-4-94, cert. ef. 2-7-94; EDD 8-1995, f. & cert. ef. 10-26-95; EDD 23-2008, f. 7-31-08, cert. ef. 8-1-08; OBDD 10-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 34-2010, f. & cert. ef. 10-1-10; OBDD 35-2010, f. 10-14-10, cert. ef. 10-15-10

123-019-0020

Eligibility

(1) To be eligible for a loan from the fund, each applicant must meet at least one of the criteria in this section:

(a) The applicant must have had total revenues of $500,000 or less in the 12 calendar months immediately preceding the date application is made to the Fund;

(b) At least 50 percent of the applicant business or proposed business must be owned by an individual or individuals classified as Severely Disabled.

(2) The applicant may not be effectively owned or controlled by another business entity or other person that, either by itself or when combined with the applicant, is not eligible for a loan under this rule. Ownership of 50 percent or more of the applicant would constitute, or a subsidiary which sells a majority of its goods or services to the parent may constitute, effective ownership or control. The Director may, however, make this determination based on the facts of an individual case.

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285B.740 – 285B.758
Hist.: EDD 16-1991(Temp), f. & cert. ef. 11-8-91; EDD 12-1992, f. & cert. ef. 8-26-92; EDD 7-1993(Temp), f. & cert. ef. 9-17-93; EDD 3-1994, f. 2-4-94, cert. ef. 2-7-94; EDD 11-1997(Temp), f. & cert. ef. 10-7-97; EDD 10-1998, f. & cert. ef. 5-22-98; EDD 5-2007(Temp), f & cert. ef. 8-28-07 thru 2-22-08; EDD 4-2008(Temp), f. & cert. ef. 2-26-08 thru 8-1-08; EDD 23-2008, f. 7-31-08, cert. ef. 8-1-08; OBDD 10-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 34-2010, f. & cert. ef. 10-1-10

123-019-0030

Application Procedure

(1) Each Applicant shall certify to SBDC or other Certified Entity and the Department that it is an eligible Applicant for the Fund under OAR 123-019-0020(1) and shall specify which of the criteria outlined in 123-019-0020(1) it meets.

(2) The SBDC or Certified Entity may enroll the Applicant in an appropriate Small Business Management Program. Each Applicant shall have completed a Small Business Management Program or shall be enrolled in a Small business management program operated by an SBDC or Certified Entity prior to Department action on such Applicant's loan request. Each Applicant shall certify to the Department they are enrolled in a Small Business Management Program.

(3) Each Applicant must complete a business plan prior to applying for a loan from the Fund. Such business plan shall use the standard format set forth in Your Business Plan by Dennis J. Sargent or other such format as may be acceptable to the SBDC or Certified Entity and the Department.

(4) The business plan must be reviewed by the Director of the SBDC or Certified Entity, or their designee, where the Applicant is enrolled in a Small Business Management Program or where the Applicant is receiving assistance with the preparation of the business plan. Review of the business plan by the SBDC or Certified Entity does not imply any judgment by the SBDC or Certified Entity as to the accuracy or validity of the plan.

(5) Upon completion and review of the business plan as provided in sections (3) and (4) of this rule, the business plan, together with a credit application on the form provided by the Department, shall be forwarded to the Department for consideration. The credit application shall contain a detailed list of the proposed uses of the proceeds of the loan being sought from the Fund.

(6) The Department may require such additional information from an Applicant as the Department determines is necessary for a thorough review and analysis of the application.

(7) Upon completion of its review the Department shall forward the application to the Director, with a recommendation for action. The Department may submit the application to the Loan Committee for its recommendation. The Director may:

(a) Approve the application; or

(b) Deny the application; or

(c) Return the application to the Applicant for further information.

(8) If a loan request is approved, the department shall prepare such documents as are necessary to close the loan transaction. Such documents shall reflect all terms and conditions upon which the Director may have conditioned his or her approval of the loan.

(9) A Borrower may apply for and the Director may approve subsequent loans from the Fund. No borrower may receive more than an aggregate amount of $70,000 in loan proceeds from the fund. Applicants for subsequent loans must meet the eligibility requirements outlined n 123-019-0020.

(10) The Department may notify the SBDC or Certified Entity if any Borrower with which the SBDC or Certified Entity has worked becomes delinquent in its payment or otherwise acts in such a manner as to jeopardize the repayment of the loan.

[Publications: Publications referenced are available from the agency.]

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285B.240 -285B.758, Ch. 688, OL 1991, Ch. 765, OL 1993
Hist.: EDD 16-1991(Temp), f. & cert. ef. 11-8-91; EDD 12-1992, f. & cert. ef. 8-26-92; EDD 7-1993(Temp), f. & cert. ef. 9-17-93; EDD 3-1994, f. 2-4-94, cert. ef. 2-7-94; EDD 8-1995, f. & cert. ef. 10-26-95; EDD 11-1997(Temp), f. & cert. ef. 10-7-97; EDD 10-1998, f. & cert. ef. 5-22-98; OBDD 10-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 34-2010, f. & cert. ef. 10-1-10; OBDD 35-2010, f. 10-14-10, cert. ef. 10-15-10

123-019-0040

Loan Conditions

The Director may approve a loan request if the Director finds that:

(1) The applicant and the project are eligible for a loan from the fund according to the criteria for a loan from the fund according to the criteria set forth in OAR 123-019-0020 and 123-019-0030.

(2) The applicant has available, and has irrevocably committed to the project, Equity funds in the form of cash or property in an amount equal to or greater than 20 percent of the amount of the loan from the fund.

(3) The proposed project is feasible and a reasonable risk from practical and economic standpoints, and the loan has a reasonable prospect of repayment from cash flow and collateral.

(4) The applicant will provide good and sufficient collateral for the loan. The collateral coverage ratio for the loan should be at least 1:1 ratio applying the following advance rates:

(a) Real property will generally be valued for collateral purposes at 80 percent of the tax assessed value or 90 percent of appraised value;

(b) New construction will generally be valued for collateral purposes at 90 percent of cost;

(c) Existing machinery will generally be valued for collateral purposes at 60 percent of depreciated book value;

(d) Newly acquired machinery will generally be valued for collateral purposes at 60 percent of acquisition cost for new equipment and 75% of acquisition cost for used equipment.

(5) Applicants should be aware that the collateral value of out-of-state real property will be significantly discounted from nominal assessed or appraised value. The department may, in its sole discretion, assign a value of more or less than the above percentages.

(6) Monies in the fund are or will be available for the proposed project.

(7) The applicant's financial resources and management capability appear adequate to assure success of the project.

(8) The initial amount borrowed from the fund by any borrower does not exceed $50,000 and the total amount borrowed does not exceed $70,000.

(9) The Director may, in his or her sole discretion, permit the assumption of an outstanding EDLF loan, if the assuming obligor satisfies the Director as to its willingness and ability to service the loan, and if the State's collateral position is not diminished. The Director may require the obligor to meet all eligibility requirements set out in OAR 123-019-0020 and 123-019-0030. EDLF loans are not necessarily or automatically assumable.

(10) The applicant agrees to abide by all laws and regulations applicable to the applicant's project and will receive all applicable federal, state and local permits and licenses before the disbursement of any proceeds from the fund.

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285B.740 - 285B.758
Hist.: EDD 16-1991(Temp), f. & cert. ef. 11-8-91; EDD 12-1992, f. & cert. ef. 8-26-92; EDD 11-1997(Temp), f. & cert. ef. 10-7-97; EDD 10-1998, f. & cert. ef. 5-22-98; EDD 5-2007(Temp), f & cert. ef. 8-28-07 thru 2-22-08; EDD 4-2008(Temp), f. & cert. ef. 2-26-08 thru 8-1-08; EDD 23-2008, f. 7-31-08, cert. ef. 8-1-08; OBDD 10-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 34-2010, f. & cert. ef. 10-1-10; OBDD 35-2010, f. 10-14-10, cert. ef. 10-15-10

123-019-0050

Loan Agreement

If the Director approves the loan, the Director, on behalf of the state, and the borrower may enter into a loan contract of not more than $70,000, secured by Collateral, which shall set forth, among other matters:

(1) A plan for repayment by the Borrower to the Fund of monies borrowed from the Fund used for the Project with interest charged on those monies at a fixed rate of two percentage points (2%) more than the prevailing bank prime interest rate. For the purposes of this section, the prevailing bank prime interest rate shall be the rate set forth in the most recent Federal Reserve Statistical Release H.15(519) which the Department has received at the time the loan is approved. Notwithstanding the foregoing, the interest shall not exceed 18 percent per annum. The repayment plan, among other matters:

(a) Shall provide for commencement of repayment by the Applicant of monies used for the Project and interest thereon no later than six months after the date of the loan contract or at such other time as the Director may provide;

(b) May provide for reasonable extension of the time for making any repayment, not to exceed six months, in emergency or hardship circumstances if approved by 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 Director;

(d) Shall set forth a schedule of payments and the period of the loan which shall not exceed the usable life of the Project or five years from the date of the contract, whichever is less. The payment schedule shall include payment of interest which accrues during any period of delay in repayment authorized by subsection (b) of this section, and the payment schedule may require payments of varying amounts for collection of accrued interest;

(e) 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, may declare the entire outstanding indebtedness to be forthwith due and payable and may assign the loan to the Attorney General for collection. The Department shall inform the borrower of each default and action taken in connection therewith. The Director may in his or her sole discretion waive or delay such assignment.

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

(3) That the liability of the state under the contract is contingent upon the availability of monies in the Fund for use in the Project;

(4) Such further provisions as the Director considers necessary to insure expenditure of the funds for the purposes set forth in the approved application;

(5) That the Department may institute appropriate action or suit to prevent use of the facilities of a Project financed by the Fund if the Borrower is delinquent in the repayment of any monies due the Fund;

(6) 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 business or the Project;

(c) Insurance premiums and providing insurance in amount and coverage acceptable to the Department. Such insurance shall include but shall not be limited to: Fire and hazard insurance, liability insurance, and flood insurance if applicable at the sole discretion of the department; and

(d) All out-of-pocket costs associated with the loan closing including but not limited to filing recording fees, title insurance and appraisals.

(7) That the Borrower will provide to the Department on an annual basis, within 120 days of the end of each fiscal year, financial statements prepared in accordance with generally accepted accounting principles. In addition, copies of federal tax returns may be required to be submitted annually. The Department may require additional financial information or more frequent financial statements;

(8) In the case of a loan made to an association, corporation or partnership, each partner and each owner of 20 percent or more of the corporation or association will provide a personal guaranty for the payment of all interest and repayment of principal amount of the loan unless the Director in his or her sole discretion, expressly waives such requirement;

(9) The Department may, in its sole discretion, disburse the proceeds of an approved loan in such amounts and at such times as the Department feels necessary to ensure that loan proceeds are used for the stated purposes and to preserve the integrity of the Fund. If the Department in its sole discretion determines that the financial condition of the Borrower has deteriorated since the eligibility and application process was commenced, the Department shall be under no obligation to disburse any loan fund.

[Publications: Publications referenced are available from the agency.]

Stat. Auth.: ORS285A.075, 285B.740 - 285B.758
Stats. Implemented: ORS 285B.740 - 285B.758
Hist.: EDD 16-1991(Temp), f. & cert. ef. 11-8-91; EDD 12-1992, f. & cert. ef. 8-26-92; EDD 11-1997(Temp), f. & cert. ef. 10-7-97; EDD 10-1998, f. & cert. ef. 5-22-98; OBDD 10-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 34-2010, f. & cert. ef. 10-1-10; OBDD 35-2010, f. 10-14-10, cert. ef. 10-15-10

123-019-0060

Appeals, Monitoring, Amendments and Modifications

(1) If the Director denies a loan request, the Director shall inform the Applicant in writing of the reasons for such denial.

(2) A denied Applicant has the right to appeal in writing the Director's denial, whereupon the Department shall schedule an appeal hearing in front of the Director, the Director's designee or the Loan Committee, as the Department may decide. The Applicant may appear in person at the appeal hearing, and may introduce whatever books, documents and data it regards as necessary to support the appeal.

(3) An Applicant whose appeal has been denied must submit a new credit application to be eligible for consideration of a new loan request. This requirement may be waived by the Director, in his or her sole discretion.

(4) All loans shall be monitored by, and all loan repayments shall be made to, the Department or its assignee.

(5) It is the responsibility of the borrower to ensure that its payment arrives in the Department by the due date.

(6) Any request for modification or amendment to any loan condition shall be made in writing to the Department and approved by the Director. The Director may refer a request for modification or amendment to the Loan Committee for recommendation.

(7) If the Director consents to any requested modification or amendment, the borrower shall be responsible for all costs of modifying or amending any loan documents, filings, recordings or financing statements.

Stat. Auth.: ORS 285A.075, 285B.740 - 285B.758
Stats. Implemented: ORS 285A.075, 285B.740 - 285B.758, Ch. 765, OL 1993
Hist.: EDD 16-1991(Temp), f. & cert. ef. 11-8-91; EDD 12-1992, f. & cert. ef. 8-26-92; OBDD 10-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 34-2010, f. & cert. ef. 10-1-10

123-019-0070

Confidential Records

(1) Upon written request and within a reasonable time, the Director or his designee shall provide nonexempt loan program records for inspection in accordance with ORS Chapter 192.

(2) The person requesting inspection of the records may be charged in advance the Department's cost for locating, compiling, copying, and mailing the records. Such costs shall include but not be limited to costs incurred in locating records, separating exempt and nonexempt records, having a custodian present during the inspection, preparing lists of data, making photocopies, and telefaxing materials. Fees to be collected shall be set forth in the Department's schedule of fees and may be amended from time to time as the Department in its sole discretion may determine.

(3) Except as otherwise provided in ORS Chapter 192, records exempt from disclosure include but are not limited to:

(a) Reports and analyses of reports obtained in confidence from creditors, employers, customers, suppliers, and others which bear on the Applicant's character, finances, management ability, and reliability and which were obtained from persons or firms not required by law to submit them;

(b) Financial statements, tax returns, business records, employment history and other personal data submitted by or for Applicants, or analysis of such data;

(c) Interdepartmental advisory memoranda prior to a loan decision;

(d) Formulas, plans, designs and related information which constitute trade secrets under ORS Chapter 192;

(e) Personal financial statements;

(f) Financial statements of Applicants;

(g) Customer lists;

(h) Information of an Applicant pertaining to litigation to which the Applicant is a party if the complaint has been filed, or if the complaint has not been filed, if the Applicant shows that such litigation is reasonably likely to occur. This exemption does not apply to litigation which has been concluded and nothing in this section shall limit any right or opportunity granted by discovery or deposition statutes to a party to litigation or potential litigation;

(i) Production, sales or cost data; and

(j) Marketing strategy information that relates to an Applicant's plan to address specific markets and Applicant's strategy regarding specific competitors.

Stat. Auth.: ORS.192.410-192.505, ORS 285A.075
Stats. Implemented: ORS.192.410 -192.505, 285A.075, Ch.765, OL 1993
Hist.: EDD 16-1991(Temp), f. & cert. ef. 11-8-91; EDD 12-1992, f. & cert. ef. 8-26-92; OBDD 10-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 10-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 34-2010, f. & cert. ef. 10-1-10

123-019-0080

Restrictions

(1) If the loan will result in the construction, expansion, rehabilitation or remodeling of a facility to which the public has access, access for handicapped persons must be provided in accordance with ORS 447.210 to 447.280. This provision applies only to firms which 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.

(2) Borrowers receiving assistance from the EDLF are required to make a good faith effort to hire low income people who are trained by publicly-funded job training providers. Borrowers may also be required to enter into a First Source Hiring Agreement as defined in OAR 123-070-0300 through 123-070-0370.

Stat. Auth.: ORS.285A.075, 447.210-447.280
Stats. Implemented: ORS 285A.075, 447.210 - 447.280, Ch.765, OL 1993
Hist.: EDD 16-1991(Temp), f. & cert. ef. 11-8-91; EDD 12-1992, f. & cert. ef. 8-26-92; OBDD 10-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 34-2010, f. & cert. ef. 10-1-10

123-019-0090

Payment of Monies for Project

(1) The Director shall be the sole judge of the suitability and eligibility of a Project for financing from the Fund, and approval of such financing shall be in the sole discretion of the Director.

(2) If the Director approves a loan for a Project, the Department shall pay monies for the Project from the Fund, in accordance with the terms of the loan contract as prescribed by the Director.

(3) If the Director determines that a loan should be made, the Director shall also determine the amount of the loan and authorize the disbursement of the funds. The Director may authorize the Department to disburse the funds and execute such documents as may be necessary to conclude the transaction.

Stat. Auth.: ORS.285A.075
Stats. Implemented: ORS 285A.075, .285B.740 - 285B.758, Ch. 765, OL 1993
Hist.: EDD 16-1991(Temp), f. & cert. ef. 11-8-91; EDD 12-1992, f. & cert. ef. 8-26-92; OBDD 10-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 34-2010, f. & cert. ef. 10-1-10

123-019-0100

Certification of Entities for Business Plan Review

(1) In addition to SBDCs, the Director may certify an entity for the review of business plans and for providing a Small Business Management Program if the Director finds in his or her sole discretion that the entity possesses:

(a) Sufficient experience in providing financial counseling to businesses;

(b) Sufficient experience in providing a Small Business Management Program; and

(c) Sufficient experience in reviewing business plans.

(2) The Director may establish time periods for certification and review in his or her sole discretion.

(3) The SBDCs and certified entities will continue to provide small business management services and counseling to the applicant after the loan has been provided to the applicant.

Stat. Auth.: ORS 285A.075, 285B.740 -.285B.758
Stats. Implemented: ORS.285B.740 - 285B.758, Ch. 688, OL 1991 & Ch. 765, OL 1993
Hist.: EDD 8-1995, f. & cert. ef. 10-26-95; OBDD 10-2010(Temp), f. & cert. ef. 4-12-10 thru 10-9-10; OBDD 34-2010, f. & cert. ef. 10-1-10; OBDD 35-2010, f. 10-14-10, cert. ef. 10-15-10

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