Criteria For Loans To Qualifying Businesses

(1) When evaluating Applications for Loans, the Qualified Organizations shall follow prudent lending practices. The following additional criteria shall apply: (a) Maximum Loan Amount. The maximum Loan amount shall be one hundred twenty-five thousand dollars ($125,000). (b) Loan Interest Rate. The interest rate that may be charged on Loans made with Program Funds may be a fixed rate or a variable rate, provided that any such variable interest rate shall not exceed the maximum rate. (c) Maximum Loan Interest Rate. The maximum interest rate that may be charged on Loans made with Program Funds is 2% over the “Prime Rate” as published in the Wall Street Journal on the day the Loan is made. (d) Minimum Loan Interest Rate. The minimum interest rate that may be charged on Loans made with Program Funds is 2% below the “Prime Rate” as published in the Wall Street Journal on the day the Loan is made. (e) Fees. Late charges, as permitted by Tennessee law, may be imposed. Other fees, including an Application fee, may be imposed provided such fees are not unreasonable. (f) Term. The recommended repayment periods for Loans are as follows: 1. For equipment, the lesser of five (5) years or useful life; 2. For working capital, supplies, and inventory, three (3) years; and 3. For other business-related activity, the lesser of five (5) years or useful life. (g) Collateral and Security. Both business and personal collateral may be taken as security for a Loan and may include real property, tangible personal property, accounts receivable, certificates of deposit, and other intangibles. However, to the extent possible, assets acquired with Loan proceeds shall be used to secure the Loan. (h) Guaranty Agreement. Personal guarantees from all principal owners shall be obtained. Principal owners are those who have a twenty percent (20%) or more ownership interest in the company. (i) Change of Ownership. If at any time during the term of the Loan the Qualifying Business ceases to be used to provide services, or the Qualifying Business sells, ceases to own, assigns, transfers, or otherwise disposes of all or any part of the Qualifying Business, it is the responsibility of the Qualifying Business to notify the Qualified Organization prior to the change of ownership. The Qualified Organization shall take such action as it deems appropriate in accordance with provisions of the Loan documents. (j) Title Insurance. The Qualified Organization may require the Applicant to provide a Loan Policy of Title Insurance (i) issued by a title insurance company, (ii) for an amount equal to the maximum principal amount of the Loan, (iii) insuring the Program, (iv) evidencing that on the date of closing, interests in the property on or in which the Qualifying Business is located, as well as any properties offered as collateral, are vested in the appropriate party, and (v) containing only standard exceptions and encumbrances approved by the Qualified Organization. The Qualified Organization may require the title insurance policy to be accompanied by a survey and title to the property and showing that there are no easements or SMALL AND MINORITY-OWNED BUSINESS ASSISTANCE PROGRAM CHAPTER 1700-6-1 Rule 1700-6-1-.11, continued encroachments upon or other matters pertaining to the property, except those deemed acceptable to the Qualified Organization. In Applications where the Qualifying Business is to be housed in a leased facility, the Qualified Organization may require the Applicant to provide a fully executed lease agreement. (k) Insurance. The Qualified Organization may require the Applicant, owners, and/or key managers to obtain and assign to the Program life insurance in the amount of the Loan. The Qualified Organization may also require business interruption insurance, hazard and casualty insurance, flood insurance, homeowner’s insurance, and other appropriate forms of insurance. (l) Appraisals. The Qualified Organization may require appraisals by qualified appraisers for each property offered as collateral for the Loan. (m) Other. The Qualified Organization may require environmental audits as well as other documents at its reasonable discretion.