Chapter 04. Maryland Industrial Development Financing Authority Conventional Loan Program
Regulation .01 Purpose.LinkCopy Citation
These regulations prescribe the policies, procedures, and authorizations for insuring loans or other financial obligations made by financial institutions to businesses to encourage economic development.
Regulation .02 Objective.LinkCopy Citation
The basic objective of the Program is to provide financial assistance in order to increase and expand financing opportunities for businesses, to encourage economic development, and to encourage the growth of exports through financial assistance.
Regulation .03 Definitions.LinkCopy Citation
A.
The terms appearing in these regulations have the meanings defined in the Act and, in addition, the meanings defined here.
B.
Terms Defined.
(1)
“Act” means Economic Development Article, Title 5, Subtitle 4, inclusive, Annotated Code of Maryland, as amended.
(2)
“Applicant” means a corporation, partnership, sole proprietor, joint venture, or individual applying for financial assistance under the Program.
(3)
"Authority" means the Maryland Industrial Development Financing Authority.
(4)
“County” means any county or Baltimore City.
(5)
“Department” means the Department of Commerce, a principal department of the State.
(6)
“Director” means the Executive Director or Associate Director of the Authority.
(7)
“Financial institution” means any financial institution as that term is defined in Financial Institutions Article, §1-101(h), Annotated Code of Maryland, as well as any other lender approved by the Authority.
(8)
“Insurance” means insurance of a loan by the Authority in accordance with the Act.
(9)
“Insurance agreement” means the insurance agreement between the lender and the Authority providing for the terms of the Authority's insurance under the Program.
(10)
“Lender” means a financial institution that makes a loan that is insured by the Authority under the Program.
(11)
“Loan” means any type of financial obligation insured under the Program, including bonds or notes, or other instruments, certificates, or other evidences of obligation issued, offered for sale, or delivered by any person or public body for any purpose found and determined by the Authority to accomplish the purposes of the Act.
(12)
“Program” means the Conventional Loan Program, as authorized by the Act.
(13)
“Retail establishment” means any establishment selling goods or services to the ultimate user of those goods or services, not for the purpose of resale, but for that user's or consumer's personal rather than business use.
(14)
“Secretary” means the Secretary of the Department of Commerce.
(15)
“Working capital” means funds used to pay for the current operations of a business, including, without limitation, supplies, materials, labor, or equipment.
Regulation .04 Eligible Borrowers.LinkCopy Citation
Applicants shall meet the following requirements to qualify for loan insurance:
A.
Be in good standing and qualified to do business in Maryland, if a corporation, partnership, or other similar entity;
B.
Have the legal capacity and all necessary legal authorization to incur the obligations of the loan;
C.
Demonstrate creditworthiness and repayment capability acceptable to the Authority.
Regulation .05 Eligible Uses.LinkCopy Citation
The proceeds of the loan may be used for any purposes approved by the Authority and permitted by the Act, including:
A.
Working capital;
B.
Acquisition of real property and the construction of new buildings or renovation of existing buildings;
C.
Acquisition and installation of machinery and equipment;
D.
The obtaining of additional credit enhancements such as a letter of credit; and
E.
Acquisition of stock.
Regulation .06 Loan Terms and Requirements.LinkCopy Citation
Loans shall meet the following requirements:
A.
Maximum Insurance. The maximum insurance with respect to any one transaction may not exceed the lesser of:
(1)
$1,000,000; or
(2)
80 percent of the total of the principal of, redemption or prepayment premiums or penalties on, and interest on, the loan, and the payment or insurance of the payment of any fees or premiums necessary to obtain insurance, guarantees, or other credit support in connection with insurance provided by the Authority under the Act.
B.
Term and Interest Rate. The term and interest rate of a loan shall be as negotiated between the applicant and the lender and approved by the Authority.
C.
Determination of Insurance Amount. The Authority may consider the following factors when considering the amount of insurance for a loan:
(1)
The amount of the loan;
(2)
The amount and type of collateral securing the loan;
(3)
The request of the lender;
(4)
The economic impact of the loan; and
(5)
Any other factor that the Authority considers relevant.
D.
Security. A loan shall be secured by liens on real property and equipment or other assets purchased with loan proceeds, the personal guarantees of the principals of the applicant and any other collateral approved by the lender and the Authority which may include, but are not limited to, liens on the business assets of the applicant, guarantees of related entities, and indemnity deeds of trust on real property owned by the principals of the applicant.
E.
Economic Impact. The economic impact of the loan shall be substantial. To determine the economic impact of a project, the Authority may consider:
(1)
The amount of the insurance;
(2)
The terms of the loan to be insured;
(3)
The number of new jobs that will be created or existing jobs that will be retained because of the loan;
(4)
The addition to the tax base of a county and the State;
(5)
The development of small and medium businesses and minority-owned businesses;
(6)
The promotion of tourism in the State;
(7)
The retention of existing industry and commerce and the attraction of new industry and commerce in the State and a balanced economy in the State through, among other things, port development and the control, reduction, or abatement of pollution of the environment, and the utilization and disposal of wastes;
(8)
The protection of natural resources and the encouragement of resource recovery;
(9)
The general promotion of the health, welfare, and safety of the residents of each of the counties and municipalities of the State; and
(10)
Any other factor that the Authority considers relevant.
F.
Removal or Abandonment.
(1)
The Authority shall determine that the transaction will not result in the removal of the business operations of any person benefiting from the transaction, from one county to another county, or the abandonment of the business operations of any person benefiting from the transaction in the State.
(2)
If the transaction will result in the occurrence of either of the events in §F(1) of this regulation, the Authority shall determine that the transaction will discourage the business from leaving the State or will preserve the competitive position of the business in its industry.
G.
Retail Establishment. The insurance may not be used in connection with a retail establishment unless the Authority determines, in its sole and absolute discretion, that the insurance will accomplish the purposes of the Act.
H.
Operation on Default. The Authority shall determine that the Authority will not be required, except on default, to operate, service, or maintain any business.
I.
Title Insurance. If the loan is to be secured by real property, the Authority may require the:
(1)
Applicant to provide an American Land Title Association Loan Policy, as amended, issued by a title insurance company acceptable to the Authority for an amount equal to the maximum principal amount of the loan, naming the Authority as an insured, evidencing that title to property offered as collateral on the date of closing is vested in the applicant, and containing only standard exceptions and encumbrances approved by the Authority.
(2)
Title insurance policy to be accompanied by a survey, certified in the manner required by the Authority and the title company issuing the title insurance, showing that there are no easements or encroachments upon or other matters pertaining to the property, except those acceptable to the Authority. The title insurance policy may not contain any survey exceptions.
J.
Appraisals. The Authority may require an appraisal showing the value of real property or used equipment which is offered as collateral for the loan.
K.
Insurance. Before providing insurance, the Authority may require the applicant or the principals of the applicant and key managers to obtain and assign to the Authority life insurance up to the amount of the loan. The Authority may also require public liability insurance, business interruption insurance, hazard and casualty insurance, flood insurance, homeowner's insurance, and other appropriate forms of insurance.
L.
Financial Statements. The Authority shall require audited financial statements examined by an independent accountant acceptable to the Authority.
M.
Balloon Payments. The Authority may not insure the balloon payment due when the amortization of the loan is longer than the term of the loan, without an event of default occurring before maturity.
N.
Equity. The Authority will require an equity investment of the borrower for a loan used to purchase real estate of at least 10 percent of the total cost of the real estate and for a loan used to purchase equipment of at least 20 percent of the total cost of the equipment.
Regulation .07 Loan Insurance Application and Processing Procedures.LinkCopy Citation
A.
Loan Insurance Application. Loan insurance applications shall be made upon standard forms prescribed by the Authority. Each application shall include the following documentation:
(1)
A fully completed and properly executed application;
(2)
A copy of the articles of incorporation, bylaws, partnership agreement, or other organizational documents;
(3)
A detailed description of the proposed use or uses of the proceeds of the loan including projected cash flow analyses, marketing plans, or descriptions and appraisals;
(4)
Information that relates to the financial status of the applicant, including:
(a)
Annual financial statements prepared in accordance with generally accepted accounting principles for 3—5 of the most recent years,
(b)
A current balance sheet,
(c)
A recent profit and loss statement,
(d)
Financial projections for the next 3 years,
(e)
Credit references,
(f)
Personal financial statements of any individual applicants and personal guarantors, and
(g)
The status of outstanding indebtedness;
(5)
A detailed description of the applicant's experience in the trade or business for which the loan and insurance are sought;
(6)
Information that relates to the economic impact to be created by the loan; and
(7)
Any other relevant information that the Authority requests.
B.
Processing of Application.
(1)
After execution of the application, the applicant shall submit it to the Authority along with a copy of an executed commitment letter from the lender to provide financing which, at the minimum, shall state the amount, rate, and terms of the financing or a letter of intent from the lender on a form prescribed by the Authority.
(2)
Each application shall be subject to an initial review to make a preliminary determination of the eligibility of the applicant and the project in accordance with these regulations.
(3)
Each application shall be submitted to the Authority for review by its staff at least 14 business days before any Authority meeting date.
C.
Approval. Approval of insurance shall be evidenced by a signed resolution of the Authority. The Authority is not obligated to take further action after approval of a resolution until an applicant executes and returns a copy of the lender's commitment letter.
Regulation .08 Insurance Premium.LinkCopy Citation
A.
Payment of Premium. The Authority shall receive from the lender the first year's insurance premium at closing and after that on each anniversary of the closing date in advance. The Authority may also require the lender or the applicant to reimburse the Authority for expenses it incurs in processing and closing the loan, such as credit reports and appraisals.
B.
Computation of Premium. Except as provided in §C of this regulation, the insurance premium shall be calculated as the greater of:
(1)
1/2 of 1 percent of the outstanding insured principal balance for a term loan, and 1/2 of 1 percent of the maximum insured amount for a line of credit; or
(2)
$500.
C.
Determination of Rate. In accordance with the Act, the insurance premium need not be uniform among transactions, and in determining the rate of the insurance premium, the Authority may consider the following factors:
(1)
Any other fees charged by the Authority or the lender;
(2)
The amount of the loan or the amount of the insurance;
(3)
The economic impact caused by the loan; and
(4)
Any other factor that the Authority considers relevant.
D.
Waiver of Insurance Premiums. The Authority may not charge any premium for insurance if the Authority determines that, at the time of approval of insurance, the facility or business with respect to which insurance is provided is located in a county where the average unemployment rate is at least 1 percent greater than the average unemployment rate for the United States.
E.
Standards for Unemployment Rates. Average unemployment rates shall be established by the Department or any other agency or department responsible for establishing the rates. Average unemployment rates for the United States shall be those established by the United States Department of Labor or any other agency or department responsible for establishing the rates.
F.
Review of Rates. The Authority shall annually review the rates based on statistics covering the preceding calendar year and shall only consider annual unemployment rates established not more than 12 months before the date of the Authority's review. The imposition or waiver of the insurance premium shall remain in effect as long as the Authority's insurance is in force.
Regulation .09 Fees.LinkCopy Citation
The Authority may charge an application or commitment fee reasonably related to the expenses it incurs in processing an application.
Regulation .10 Insurance of $50,000 or Less.LinkCopy Citation
The Authority may authorize the Executive Director of the Authority to approve, on behalf of the Authority, any insurance to be provided from the Authorized Purpose Insurance Fund which does not exceed, with respect to any one transaction, the total aggregate amount of $50,000. Any approval by the Executive Director shall:
A.
Be subject to the concurrence of the Secretary or the Chairman of the Authority;
B.
Comply with the requirements of the Act; and
C.
Be binding upon the Authority.
Regulation .11 Nondiscrimination.LinkCopy Citation
Each applicant shall comply with all applicable federal, State, and local laws, Executive Orders and Departmental policies regarding discrimination and equal opportunity in employment, housing, and credit practices including Title VII of the Civil Rights Act of 1964, the provisions of the Governor's Code of Fair Employment Practices, as amended, and the Department's Minority Business Enterprise Program, as amended.
Regulation .12 Program Administration.LinkCopy Citation
A.
The Authority may establish from time to time detailed Program guidelines containing underwriting standards, loan processing requirements, and other requirements or matters relating to the extension of insurance or to the Program. Copies of these guidelines shall be available for examination at the Authority's office. The Authority, upon request, will make copies available to the public.
B.
Any action or decision required or permitted to be taken or made by the Department pursuant to the Act or these regulations may be taken by the Authority, the Secretary or the Secretary's designee, or, to the extent set forth in the Act or properly delegated by the Authority or the Secretary, the Director of the Authority.
C.
The Secretary may delegate to the Director of the Authority or to any other official or employee of the Department the authority to review and execute any Program documents or loan documents.
Regulation .13 False Statements or Reports.LinkCopy Citation
A.
A person may not knowingly make or cause any false statement or report to be made:
(1)
In any application or in any document furnished to the Authority;
(2)
For the purpose of influencing the action of the Authority on an application for financial assistance or for the purpose of influencing any action of the Authority affecting financial assistance whether or not the assistance may have been already extended.
B.
A person, or that person's aiders and abettors, who violates or attempts to violate any provision of §A of this regulation is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $50,000, or imprisonment not exceeding 5 years, or both.
Regulation .14 Waiver.LinkCopy Citation
The Authority may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act if:
A.
Conformance to the requirements of any federal, State, or local programs in connection with a loan or insurance necessitates waiver or variance of a regulation; or
B.
In the determination of the Authority, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act.
Regulation .15 Severability.LinkCopy Citation
The provisions of these regulations are severable. A judgment by any court of competent jurisdiction finding or declaring that any provision of these regulations or the application of any provision to any person or circumstance is invalid does not affect the validity of the remaining provisions of the regulations or any other application of these regulations, and the remaining regulations shall have full force and effect as if no judgment had been entered.
Chapter annotations
Authority: Economic Development Article, §2-108 and Title 5, Subtitle 4, Annotated Code of Maryland
History: Effective date: April 3, 1989 (16:6 Md. R. 730)