(1)In order for a loan to a Qualified business to be eligible for insurance, the project must be expected to result in a substantial benefit that is realized primarily in Oregon and the project must meet one or more of the following purposes: the acquisition, improvement, or rehabilitation of real or personal property; or working capital for operations, export transactions, maintenance and other business costs and expenses which are used for purposes other than acquiring real or personal property. Eligible purposes do not include:
(a)Any personal, family, or household expenses of the Qualified business or any owner or guarantor;
(b)Construction financing; however, permanent term financing after completion of construction of real property for business use may be insured;
(c)Purchase or construction of residential housing;
(d)A loan made primarily to pay off or refinance an existing debt to a creditor whose loan is inadequately secured or who is in danger of sustaining a loss;
(e)Repayment of delinquent federal or state income taxes unless the Qualified Business has a payment plan in place with the relevant taxing authority;
(f)Repayment of taxes held in trust or escrow;
(g)Finance lobbying activities (as defined in Section 3(7) of the Lobbying Disclosure Act of 1995, P.L. 104-65, as amended); or,
(h)Acquiring or holding passive investments such as commercial real estate for future use or the purchase of securities; this does not include acquisitions of businesses through 100% stock transfer.
(i)Reimbursement or payment of funds to any owner or borrower, including any equity injection or injection of business capital for the business’ continuance, or the purchase of assets from any owner;
(j)(For loans insured by SSBCI Funds) Purchase of any portion of the ownership interest of any owner of the business;
(k)Purchase an existing Qualified business, except for:
(A)Expansions where the majority of loan proceeds are used to support expansion improvements;
(B)Purchase of all or substantially all of the assets of a Qualified business,
(C)(For loans not insured by SSBCI Funds) Purchase of 100% of the stock of a Qualified business, including stock held by employee stock ownership plans, where jobs will be created or retained; provided that the Department’s liability for any loss resulting from a loan made for such purchase shall not exceed $500,000.
(2)The Department will consider, on a case by case basis, requests to insure loans where proceeds are used to pay down or pay off an existing debt of the Qualified business. In evaluating such requests, the Department will consider the financial benefits to the borrower, the prospects for success, the expected resulting public benefit, the extent to which financial institutions agree to extend terms or provide other favorable financing to a borrower, and the extent to which collateral securing an insured loan is improved. The Department’s maximum liability for any loss resulting from an insured loan used to refinance debt will be limited to no more than $500,000 and no more than 75% of the authorized loan amount. Unless specifically waived by the Department, all business and personal assets securing a refinance may require an appraisal or other third party valuation to determine liquidation values at the time of application. The Department reserves the right to set the enrollment terms at the time of approval for loan insurance, including but not limited to the Department’s maximum liability or the insured percentage and in its sole discretion may, when setting the Department’s maximum liability or the insured percentage or both, consider whether a loan is less than fully secured, as determined by the estimated liquidation value of the collateral.
(3)Eligible borrowers are Qualified businesses as defined in OAR 123-021-0015 (Qualified Business).
(4)Eligible financial institutions are financial institutions as defined by ORS 706.008 (Additional definitions for Bank Act).
(5)Any loans insured by SSBCI Funds will be required to meet additional U.S. Treasury requirements including, but not limited to:
(a)The loan has not been made in order to place under the protection of the CEF Program prior debt that is not covered by the CEF Program and that is or was owed by the borrower to the financial institution or to an affiliate of the financial institution.
(b)The insured loan is not used to refinance a loan previously made to that borrower by the financial institution or an affiliate of the financial institution making the loan to be insured, unless the prior loan has matured and new funds are being added to the loan.
(c)No Principal of the borrower or the financial institution has been convicted of a sex offense against a minor as such terms are defined in section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. 16911).
(d)The borrower, or any principal of the borrower, is not:
(A)an executive officer, director, or principal shareholder of the financial institution, or
(B)a member of the immediate family of an executive officer, director or principal shareholder of the financial institution; or
(C)a related interest of any such executive officer, director, principal shareholder or member of the immediate family. For the purposes of this OAR 123-021-0020 (Eligibility)(6)(d), the terms “executive officer”, “director”, “principal shareholder”, “immediate family”, and “related interest” refer to the same relationship to the financial institution as the relationship described in 12 C.F.R. Part 215.2 (1990), whether or not the financial institution is a member bank of the Federal Reserve System.
(e)The activities of the borrower are not activities currently prohibited by U.S. Treasury, such as, but not limited to:
(A)The borrower is a business engaged in speculative activities that develop profits from fluctuations in price rather than through normal course of trade unless those activities are incidental to the regular activities of the business and are part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business;
(B)The borrower is a business that earns more than half of its annual net revenue from lending activities unless the business is a non-bank or non-bank holding company community development financial institution;
(C)The borrower is a business engaged in pyramid sales, or engaged in activities that are prohibited by federal law or applicable law in the jurisdiction where the business is located or conducted; or,
(D)The borrower is a business engaged in gambling enterprises, unless the business earns less than 33% of its annual net revenue from lottery sales and gambling activities.
(f)The financial institution is in compliance with requirements of 31 C.F.R. § 103.121.
(g)At the time of approval the borrower does not employ more than 750 employees in the United States.
(h)Total financing for the project is $20,000,000 or less.
(i)No Principal of the borrower is a current member or delegate to the United States Congress or resident U.S. Commissioner.
Rule 123-021-0020 — Eligibility,