HAR §15-2-7. Consideration and review of applications

(a) Applications for loans shall be considered only when there is evidence that the loan is not available on reasonable terms from other sources. The loan applied for shall be deemed to be otherwise available on reasonable terms, unless the applicant provides proof of refusal of all or a part of the required loan from the applicant's financial institution principally dealt with. The department shall require proof of refusal from more than one financial institution if the loan is considered likely to be available in whole or in part from other financial institutions. Proof of refusal shall contain the date of application, amount, and terms requested, and the financial institution's reasons for not granting the desired loan. The financial institution's refusal to advance credit shall not be considered the full test of unavailability of credit, and where there is reason to believe that credit is otherwise available on reasonable terms from sources other than such financial institution, the loan applied for may not be granted not withstanding the receipt of a written refusal from such financial institution. (b) The department need not consider an application for a loan if the amount of loan required is obtainable: (1) On reasonable terms through the public offering or private placing of securities of the applicant; or (2) Through the disposal at fair price of assets not required by the applicant in the conduct of its Existing business or not reasonably necessary to its potential healthy growth; or (3) Without undue hardship through utilization of the personal credit or resources of the owner, partners, management or principal shareholders of the applicant; or (4) Through other appropriate government financing. (c) The department shall not approve a loan unless the applicant provides reasonable assurance that the loan can and will be repaid pursuant to its terms. Reasonable assurance of repayment shall be based upon consideration of the applicant's record of past earnings or projections of future earnings which indicate that the applicant will be able to repay the loan from the income of the business. (d) The department may disapprove the loan for any of the following reasons: (1) The purpose of the loan is to accomplish an expansion which is unwarranted in the light of the applicant’s past experience and management ability; (2) The effect of making the loan is to subsidize inefficient management; (4) The applicant cannot meet certain practical credit requirements established by the department; (5) The applicant fails to meet other basic criteria deemed necessary in justifying or granting a loan. (e) Applications meeting the requirements enumerated above and in the foregoing sections of this chapter shall be reviewed by the staff of the economic development division and referred to the loan advisory committee for its advice and recommendation before final approval or disapproval by the director. (f) An applicant shall not be required to pay any fees in connection with filing an application, but shall be required to pay for such costs as appraisals, title searches, documentation of mortgages, and any other work required in processing the loan which is not performed by the department. When deemed necessary by the department, an applicant shall be responsible for hiring independent appraisers to determine the value of capital assets or to assess the economic feasibility of a business operation. [Eff. JUL 6 1981; am and comp DEC 21 1989] (Auth: HRS §210-4, §210-5) (Imp: HRS §210-5, §210-6)