Loan Program

(1) In General. The Program will loan funds at no cost to selected Qualified Organizations. Qualified Organizations shall be responsible for originating and servicing loans, and for coordinating with the Program Administrator for needed Program Services to Qualifying Businesses receiving loans from such organizations. Selected Qualified Organizations may retain the interest rate earnings to finance their cost for operations and to earn a profit. In making a determination of the number of Qualified Organizations to be selected, primary consideration will be given to assure that geographic coverage is sufficient to service the Program. Qualified Organizations shall be competitively selected, with no more than two (2) organizations selected for each grand division of the State. The Tennessee State Treasurer may waive in whole or in part the grand division SMALL AND MINORITY-OWNED BUSINESS ASSISTANCE PROGRAM CHAPTER 1700-6-1 Rule 1700-6-1-.09, continued restriction where it is determined to the Treasurer’s satisfaction that the restriction would hinder the adequate distribution of Program Assistance from a geographic and service standpoint. (2) As principal and interest is repaid to a Qualified Organization, the principal amount may be retained by the Qualified Organization to be used for new loans to other Qualifying Businesses, provided the Qualified Organization adheres to Program requirements. (3) Loan Conditions of Program to Qualified Organizations. (a) Interest Rate. The Program shall lend Program Funds to selected Qualified Organizations at no interest cost. (b) Loan Amount. The maximum amount available to be loaned to a Qualified Organization for the purpose of being loaned to Qualifying Businesses shall be established in the contract between the Department and the Qualified Organization. (c) Term. Loans to Qualified Organizations shall be for a term of ten (10) years and shall be renewable for additional five (5) year terms, at the option of the Treasurer. (d) Funds Drawdown. Selected Qualified Organizations may initially draw down $300,000 for making loans to Qualifying Businesses. After the initial draw down, a Qualified Organization may draw down blocks of $100,000 or more to replenish loans made to Qualifying Businesses until the maximum amount available pursuant to the contract is received. Replenishment shall be net of loans made to Qualifying Businesses and the receipt of repayment of loan principal by Qualifying Businesses. (e) Repayment of Loans to Program Fund. The repayment of loan principal may be deferred until the end of the loan term. In the event of a loan default by a Qualifying Business, upon presentation of proof by the Qualified Organization of diligent attempts for collection to the Program Administrator, the Qualified Organization may be released from repayment of the loan to the Program. Efforts shall include attempts to collect collateral and assets acquired by Program Funds. (f) Loan Review. Loans made with Program Funds are subject to quality assurance reviews by the persons designated by the Department. Qualified Organizations shall cooperate with such reviews. (4) In furtherance of the legislative intent that the Program serve businesses in Tennessee that do not have reasonable access to capital markets and traditional commercial lending facilities, it is acknowledged that loan losses will occur. It is expected that the loan losses will exceed industry standards.