(a) Application.--A small business may submit an application and any applicable application fee to a certified economic development organization requesting a loan or line of credit for certain costs of a capital development project under 64 Pa.C.S. § 1121 (relating to common application process). The application shall be on the form required by the authority and shall include or demonstrate all of the following, in addition to the contents required under 64 Pa.C.S. § 1121(b):

(1) The name and address of the applicant.

(2) A statement of the type and amount of assistance sought.

(3) A statement of the capital development project, including a detailed statement of the cost of the project.

(4) A financial commitment from a responsible source for any cost of the capital development project in excess of the amount requested.

(5) Any other information required by the authority.

(b) Certified economic development organization review.--

(1) Upon receipt of a completed application, a certified economic development organization shall investigate and determine all of the following:

(i) If the applicant is a small business.

(ii) If the project is a capital development project.

(iii) If, when the applicant is a small business, the capital development project demonstrates a substantial likelihood of creating or preserving employment activities in this Commonwealth or if, when the applicant is an agricultural producer, the project demonstrates a substantial likelihood of enhancing and growing normal agriculture operations.

(iv) The ability of the applicant to meet and satisfy the debt service as it becomes due and payable.

(v) The existence and sufficiency of collateral for the loan.

(vi) Relevant criminal and credit history and ratings of the applicant as determined from outside credit reporting services and other sources.

(vii) The number of employment opportunities to be created or preserved by the proposed capital development project.

(viii) If the applicant complied with all other criteria established by the authority.

(2) Upon being satisfied that all requirements have been met, the certified economic development organizations shall recommend the applicant to the authority and forward the application with all supporting documentation to the authority for its review and approval.

(c) Authority review.--

(1) Within 30 days of receiving a recommendation and a completed application, the authority shall review the application. If the authority is satisfied that all requirements have been met, the authority may approve the loan request in accordance with the following:

(i) A loan for land, buildings and machinery and equipment may not exceed $400,000 or 50% of the total capital development project costs, whichever is less. For the purposes of this subparagraph, capital development project costs incurred during the 12-month period prior to the date of submission of the application to the authority shall be considered part of the total capital development project costs.

(ii) A loan or line of credit for working capital may not exceed $100,000.

(iii) Except for loans to agricultural producers, a loan must create or preserve one job for every $25,000 loaned. The authority may, by submitting notice to the Legislative Reference Bureau for publication in the Pennsylvania Bulletin, periodically update the amount under this subparagraph, based on changes in unemployment statistics, inflation, the authority's cash flow and the need to keep this Commonwealth and the businesses of this Commonwealth competitive.

(2) The authority shall notify the certified economic development organization and applicant of its decision.

(d) Approvals.--For applications which are approved, the authority shall draw an advance equal to the principal amount of the loan from the fund. The advance shall be forwarded to the certified economic development organization and, upon receipt by the certified economic development organization, shall become an obligation of the certified economic development organization. Prior to providing loan funds to the applicant, the certified economic development organization shall require the applicant to execute a note and to enter into a loan agreement. In addition to the requirements of subsection (e), the loan agreement shall include a provision requiring the recipient to use the loan proceeds to pay the costs of the capital development project. The authority may require the certified economic development organization to impose other terms and conditions on the recipient if the authority determines that they are in the best interests of this Commonwealth, including a provision requiring collateral for any penalty imposed under subsection (g).

(e) Loan terms.--A loan agreement entered into in accordance with subsection (c) shall do all of the following:

(1) State the collateral securing the loan. All loans shall be secured by lien positions on collateral at the highest level of priority as may be determined by the certified economic development organization with the approval of the authority.

(2) State the repayment period in accordance with the following:

(i) A loan for real property shall have a repayment period of up to 15 years.

(ii) A loan for machinery and equipment shall have a repayment period of up to ten years.

(iii) A loan or line of credit for working capital shall have a repayment period of up to three years. A line of credit may be renewed for an additional three-year period at the discretion of the authority.

(iv) If, in a capital development project, there are two or more uses planned, the loan terms may be blended.

(3) State the interest rate in accordance with the following:

(i) Except as provided in subparagraph (ii), loans shall be made at an interest rate not to exceed 5% for the term of the loan.

(ii) A loan to a small business which is an agricultural producer shall be made at an interest rate of not less than 2% for the term of the loan if all of the following apply:

(A) A declaration under 35 Pa.C.S. § 7301(c) (relating to general authority of Governor) is in effect for at least ten days prior to the date of application.

(B) The application is made within nine months of termination of the declaration.

(C) The agricultural producer is in the area which has been declared to be a natural disaster area.

(f) Loan administration.--A loan made under this section shall be administered in accordance with authority policies and procedures by the certified economic development organization which made the loan. Each certified economic development organization shall submit an annual report on the form required by the authority and which includes or demonstrates all of the following:

(1) Each outstanding loan.

(2) The date approved.

(3) The original principal amount.

(4) The current principal balance.

(5) The interest rate.

(6) The purpose for which the loan was made.

(7) An enumeration of any problems or issues which have arisen with regard to each loan.

(8) A statement regarding the progress of the small business in creating or preserving its requisite number of employment opportunities.

(9) Any other information or documentation required by the authority.

(g) Penalty.--

(1) Except as provided in paragraph (2), the authority shall impose a penalty upon a recipient if the recipient fails to create or preserve the number of employment opportunities specified in its approved application.

(2) The authority may waive the penalty required by paragraph (1) if the authority determines that the failure was due to circumstances outside the control of the recipient.

(3) The amount of the penalty imposed under paragraph (1) shall be equal to an increase in the interest rate to 2% greater than the current prime interest rate for the remainder of the loan.

(h) Defaults.--The authority may by foreclosure take title to a capital development project which it financed if acquisition is necessary to protect a loan made under this section. The authority shall pay all costs arising out of the foreclosure and acquisition from moneys held in the fund. The authority may, in order to minimize financial losses and sustain employment, lease the capital development project. The authority may withdraw moneys from the fund to purchase first mortgages and to make payments on first mortgages on any capital development project which it financed where purchase or payment is necessary to protect a loan made under this section. The authority may sell, transfer, convey and assign the first mortgages and shall deposit any moneys derived from the sale of any first mortgages in the fund.

(Oct. 22, 2014, P.L.2569, No.161, eff. Nov. 1, 2014)

2014 Amendment. Act 161 amended subsecs. (a), (b) heading, (1) intro. par. and (viii) and (2), (c), (d), (e)(1) and (2)(iii), (f) intro. par. and (9), (g)(1) and (2) and (h).

Cross References. Section 2306 is referred to in sections 2305, 2310.1 of this title.