Chapter 18. Maryland Economic Adjustment Fund
Regulation .01 Purpose.LinkCopy Citation
These regulations describe the policies, procedures, and authorizations for making:
A.
Loans to individuals and business entities in the State to enable them to modernize manufacturing operations, develop commercial applications for technology, or explore and enter new markets; and
B.
Grants to local or regional Maryland governmental or nonprofit revolving loan funds.
Regulation .02 Definitions.LinkCopy Citation
A.
In this chapter, the following terms have the meanings indicated.
B.
Terms Defined.
(1)
“Act” means Economic Development Article, Title 5, Subtitle 2, Annotated Code of Maryland.
(2)
“Applicant” means a business entity seeking a loan from the Department.
(3)
“Business entity” means an individual, partnership, corporation, limited liability company, or other form of entity doing business in Maryland.
(4)
“Defense contractor” means a business entity that has over the 5 years before the date of its application for a loan derived a substantial amount of revenue from defense contracts.
(5)
“Department” means the Department of Commerce.
(6)
“Economic Development Administration (EDA)” means the Economic Development Administration of the U. S. Department of Commerce.
(7)
“Fund” means the Maryland Economic Adjustment Loan Fund, which is administered by the Department.
(8)
“Loan” means a loan made from the Fund by the Department under the Program.
(9)
“Maryland Economic Adjustment Financing Committee” means the Committee described in Economic Development Article, §5-202, Annotated Code of Maryland.
(10)
“Program” means the Maryland Economic Adjustment Program, as authorized by the Act.
(11)
“Restricted funds” means EDA funds and required matching funds from State or other sources.
(12)
“Secretary” means the Secretary of Commerce, or the Secretary's designee.
(13)
Working Capital.
(a)
“Working capital” means funds to be used for current operations of a business.
(b)
“Working capital” includes funds for supplies, materials, labor, equipment, rent, software, marketing, insurance, and fees for professional services.
Regulation .03 Eligible Applicants.LinkCopy Citation
To qualify for a loan, an applicant shall:
A.
Be a new or existing business entity in good standing and qualified to do business in Maryland;
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 Department;
D.
Meet any additional requirements imposed by any source of the funds to be loaned; and
E.
In the reasonable determination of the Department, be unable to obtain the financing necessary for the activities described in the applicant's strategic business plan on affordable terms through normal lending channels.
Regulation .04 Priority.LinkCopy Citation
In making loans, the Department shall give priority to:
A.
Defense contractors; and
B.
Companies started by former defense workers who lost their jobs with defense contractors or agencies.
Regulation .05 Use of Loan Proceeds.LinkCopy Citation
A.
Loan proceeds may be used for working capital, equipment, furnishings, fixtures, and the construction, rehabilitation, or purchase of real property to:
(1)
Modernize manufacturing operations;
(2)
Develop commercial applications for technology; or
(3)
Enter into and compete in new economic markets.
B.
Loan proceeds consisting of restricted funds may not be used to:
(1)
Acquire an equity position in a private business;
(2)
Subsidize interest payments on existing debt;
(3)
Provide the equity contribution required of borrowers under other federal loan programs;
(4)
Acquire an interest in a business, either through the purchase of stock or through the acquisition of assets, unless the need for a loan is sufficiently justified and documented in the loan application;
(5)
Refinance existing debt unless:
(a)
There is sound economic justification, and
(b)
In the loan application the applicant sufficiently documents that the program is not replacing private capital solely for the purpose of reducing the risk of loss to an existing lender, or lenders, or to lower the cost of financing to the applicant; or
(6)
Invest in interest-bearing accounts, certificates of deposit, or other investments not related to the objectives of the program.
Regulation .06 Loan Terms and Requirements.LinkCopy Citation
A.
Loans shall meet the following requirements in §§B—F of this regulation.
B.
Interest Rate. The minimum interest rate to be paid on loans shall be a fixed rate of 4 percent per annum.
C.
Security. The Department may require that a loan be secured by:
(1)
Liens and security interests in real and personal property;
(2)
Personal guarantees;
(3)
Any other collateral required by the Department; or
(4)
A combination of the items in this section.
D.
Repayment Terms. The loan documents shall include provisions for repayment of the loan, provided that the provisions for repayment may be based on a flexible repayment schedule.
E.
Late Charges. Late charges, as permitted by law, may be imposed.
F.
Additional Documentation. The Department may require the applicant to provide title insurance, surveys, insurance, appraisals, and any other documentation that the Department determines is necessary or advisable.
Regulation .07 Additional Requirements for Loans Made with Restricted Funds.LinkCopy Citation
A.
Federal Requirements. When loans are made from EDA funds made available under Title IX of the Public Works and Economic Development Act of 1965, P. L. 89-136, as amended (42 U.S.C. §3121 et seq.), or matching funds, the requirements set forth in the EDA regulations, including those set forth in this regulation, also apply.
B.
Loan Amount. The maximum loan amount may not exceed the limit set by the regulations of the Economic Development Administration.
C.
Eligible Areas.
(1)
Restricted funds shall be used to make loans only to applicants located in those areas of the State designated as eligible areas for EDA Title IX defense economic adjustment activities.
(2)
When restricted funds are loaned, the loan documents shall include a provision to call the loans if the economic activity financed is moved outside the eligible lending area.
D.
Relocation.
(1)
Restricted funds may not be used to relocate jobs from one commuting area to another.
(2)
When restricted funds are loaned, the loan documents shall include a provision to call the loans if the Department determines that:
(a)
The applicant used the restricted funds to relocate jobs from another commuting area; or
(b)
The economic activity financed is moved to another commuting area to the detriment of local workers.
E.
Civil Rights. When restricted funds are loaned, the applicant shall agree in the loan documents not to discriminate against employees, applicants for employment, or providers of goods and services.
F.
Flood Hazard Insurance. Where applicable, the applicant shall obtain flood hazard insurance pursuant to the Flood Disaster Protection Act of 1973, P. L. 93-234, as amended (42 U.S.C. §4002 et seq.)
G.
Contract Work Hours and Safety Standards Act and Anti-Kickback Act. Applicants borrowing restricted funds shall comply, where applicable, with the Contract Work Hours and Safety Standards Act, as amended (40 U.S.C. §§327—333) and with the Anti-Kickback Act, as amended (40 U.S.C. §276(c), 18 U.S.C. §874).
H.
Conflict of Interest. Applicants with a conflict of interest, as defined by EDA, may not receive restricted funds.
I.
Federal Debarment. Applicants who are debarred or suspended may not receive restricted funds.
J.
Restrictions on Lobbying. Applicants shall comply with federal restrictions on lobbying.
K.
Private Leveraging. Applicants shall be required to provide evidence acceptable to the Department of other financing from private sources.
Regulation .08 Application and Processing Procedures.LinkCopy Citation
A.
Loan Application.
(1)
Loan applications shall be made on standard forms required by the Department.
(2)
Each application shall include:
(a)
A detailed strategic business plan for achieving a goal of technology commercialization or manufacturing modernization for long-term growth;
(b)
The total amount of funds required for the activities described in the strategic business plan;
(c)
The amount and type of funds available to the applicant without financial assistance from the Department;
(d)
The amount of financial assistance sought from the Department and a description of the applicant's proposed use of proceeds;
(e)
Information concerning where in the State the activities to be financed with the defense adjustment loan will take place and what economic and environmental impact the activities are expected to have on that area;
(f)
Evidence of the inability of the applicant to obtain the financing necessary for the activities described in the strategic business plan on affordable terms through normal lending channels;
(g)
Information that relates to the financial status of the applicant, including, if applicable:
(i)
A current balance sheet,
(ii)
A recent profit and loss statement,
(iii)
Credit references, including a recent credit report, and
(iv)
Income tax returns;
(h)
Information that relates to potential security for the loan; and
(i)
Any other relevant information the Department requests.
B.
Initial Review. The Department shall subject each application to an initial review for a preliminary determination of the applicant's eligibility in accordance with these regulations.
C.
Loan Approval. Each loan shall be approved by the Secretary or by the Defense Adjustment Financing Committee.
D.
Loan Documents.
(1)
The Department shall prepare and provide the applicant with copies of relevant standard form loan documents.
(2)
Loan documents shall include:
(a)
The rate of interest on the loan;
(b)
The amount of the loan;
(c)
Provisions for repayment of the loan;
(d)
Other provisions the Department determines are necessary to secure the loan, including, if applicable, the taking of liens and security interests in real and personal property; and
(e)
For loans made with restricted funds, the provisions required by EDA and set forth in Regulation .07 of this chapter.
(3)
Loan documents may include:
(a)
A promissory note;
(b)
A loan agreement;
(c)
A security agreement;
(d)
A deed of trust or mortgage;
(e)
An agreement of prior lien holder;
(f)
Personal and corporate guarantees; and
(g)
Other documents the Department may require, including the applicant's insurance information and articles of incorporation filed with the state of incorporation, bylaws, partnership agreement, or other organizational documents, and certificates of good standing as appropriate.
E.
Fees.
(1)
The applicant shall pay the following fees:
(a)
Upon application for the loan, a nonrefundable application fee of $100; and
(b)
At the loan closing, a commitment fee of 1 percent of the loan amount.
(2)
The Department may also require the applicant to pay for expenses incurred in processing and closing the loan, such as fees for appraisals and credit reports.
(3)
The Department may instruct the borrower to pay the application fee and 1/2 of the commitment fee directly to a designated local economic development agency, if the agency:
(a)
Has entered into a written agreement with the Department; and
(b)
Originated the loan.
F.
Violations. If an applicant violates any provision of the loan documents or ceases to meet the requirements of the Act, on reasonable notice to the applicant, the Department may:
(1)
Withhold from the applicant further advances of loan proceeds until the applicant complies with the agreement or requirements; and
(2)
Exercise any other remedy for which the loan documents provide.
G.
Fund Limitations. The faith and credit of the State are not pledged to the Fund.
Regulation .09 Grants.LinkCopy Citation
The Department may make a grant from the Fund to a local or regional Maryland governmental or nonprofit revolving loan fund. In making the grant, the Department shall consider the:
A.
Purposes of the Fund; and
B.
Issues set forth in the Department's strategic economic development plan.
Regulation .10 Drug-Free and Alcohol-Free WorkplaceLinkCopy Citation
The applicant shall comply with the State's policy concerning drug-free and alcohol-free workplaces, as set forth in COMAR 01.01.1989.18, and shall make a good-faith effort to eliminate illegal drug use and alcohol and drug abuse from places where work is performed in accordance with a loan.
Regulation .11 False Statements.LinkCopy Citation
A.
A person may not knowingly make or cause any false statement or report to be made:
(1)
In any application or document furnished to the Department;
(2)
For the purpose of influencing the action of the Department:
(a)
On an application for financial assistance, or
(b)
Affecting financial assistance whether or not assistance may have already been extended.
B.
A person or any aider or abettor who violates any provision of the Act 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.
C.
In addition, any applicant who knowingly makes or causes to be made any material misstatement of fact, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action in any statement or report in or regarding an application for a loan or affecting a loan already made, shall be subject to immediate acceleration of the loan.
Regulation .12 Waiver.LinkCopy Citation
The Secretary, or the Secretary's designee, 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 requirement of any federal, State, or local program in connection with a loan necessitates waiver or variance of a regulation; or
B.
In the determination of the Secretary, 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.
Chapter annotations
Authority: Economic Development Article, §§2-108 and 5-204, Annotated Code of Maryland
History: Effective date: December 18, 1995 (22:25 Md. R. 1965)
History: Chapter revised effective March 6, 2000 (27:4 Md. R. 455)