Ga. Comp. R. & Regs. R. 110-31-.03 - Eligible Applicants and Activities

Georgia requires that each lender obtain an assurance from each borrower stating that the loan proceeds will not be used for an impermissible purpose under the SSBCI Program.

Lenders are prohibited from refinancing any existing outstanding balance or previously made loan, line of credit, extension of credit or other debt owed by a small business borrower already on the books of the same lender (or an affiliate) into a SSBCI-supported program.

Each lender must obtain an assurance from the borrower affirming:

(1) The loan proceeds must be used for a "business purpose." A business purpose includes, but is not limited to, start-up costs, working capital, business procurement, franchise fees, equipment, inventory, as well as the purchase, construction, renovation or tenant improvements of an eligible place of business that is not for passive real estate investment purposes. The definition of business purpose excludes activities that relate to acquiring or holding passive investments such as commercial real estate ownership, the purchase of securities; and lobbying activities as defined in Section 3 (7) of the Lobbying Disclosure Act of 1995, P.L. 104-65, as amended.
(2) The loan proceeds will not be used to:
a. repay delinquent federal or state income taxes unless the borrower has a payment plan in place with the relevant taxing authority; or
b. repay taxes held in trust or escrow, e.g. payroll or sales taxes; or
c. reimburse funds owed to any owner, including any equity injection or injection of capital for the business' continuance; or
d. purchase any portion of the ownership interest of any owner of the business.
(3) The borrower is not:
a. an executive officer, director, or principal shareholder of the financial institution lender; or
b. a member of the immediate family of an executive officer, director, or principal shareholder of the financial institution lenders; or
c. a related interest of such an executive officer, director, principal shareholder, or member of the immediate family.
d. For the purposes of these three borrower restrictions, the terms "executive officer","director","principal shareholder","immediate family", and "related interest" refer to the same relationship to a lender as the relationship described in part 215 of title 12 of the Code of Federal Regulations, or any successor to such part.
e. The borrower is not:
1. a business engaged in speculative activities that develop profits from fluctuations in price rather than through normal course of trade, such as wildcatting for oil and dealing in commodities futures, unless those activities are incidental to the regular activities of the business and part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business; or
2. 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 certified as a Community Development Financial Institution; or
3. a business engaged in pyramid sales, where a participant's primary incentive is based on the sales made by an ever-increasing number of participants; or
4. a business engaged in activities that are prohibited by federal or state law or applicable law in the jurisdiction where the business is located or conducted. (Included in these activities is the production, servicing, or distribution of otherwise legal products that are to be used in connection with an illegal activity, such as selling drug paraphernalia or operating a motel that knowingly permits illegal prostitution); or
5. a business engaged in gambling enterprises, unless the business earns less than 33% of its annual net revenue from state lottery sales.
(4) No principal of the borrowing entity 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). For the purposes of this certification,"principal" is defined as "if a sole proprietorship, the proprietor; if a partnership, each managing partner and each partner who is a natural person and holds a 20% or more ownership interest in the partnership; and if a corporation, limited liability company, association or a development company, each director, each of the five most highly compensated executives or officers of the entity, and each natural person who is a direct or indirect holder of 20% or more of the ownership stock or stock equivalent of the entity."

Notes

Ga. Comp. R. & Regs. R. 110-31-.03
O.C.G.A. ยงยง 50-8-3, 50-8-8.
Rule entitled "Eligible Applicants and Activities" adopted. F. Feb. 9, 2012; eff. Feb. 29, 2012. Amended: F. Jul. 29, 2013; eff. Aug. 18, 2013. Amended: F. June 21, 2017; eff. June 1, 2017, as specified by the Agency.

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