2012 Pennsylvania Consolidated Statutes
Title 12 - COMMERCE AND TRADE
Chapter 23 - Small Business First
Section 2306 - Capital development loans

     § 2306.  Capital development loans.
        (a)  Application.--A small business may submit an application
     and any applicable application fee to its area loan organization
     requesting a loan for certain costs of a capital development
     project. The application shall be on the form required by the
     department and shall include or demonstrate all of the
     following:
            (1)  The name and address of the applicant.
            (2)  A statement of the amount of loan 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 department.
        (b)  Area loan organization review.--
            (1)  Upon receipt of a completed application, an area
        loan 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 department.
            (2)  Upon being satisfied that all requirements have been
        met, the area loan organizations shall recommend the
        applicant to the department and forward the application with
        all supporting documentation to the department for its review
        and approval.
        (c)  Department review.--
            (1)  Within 30 days of receiving a recommendation and a
        completed application, the department shall review the
        application. If the department is satisfied that all
        requirements have been met, the department may approve the
        loan request in accordance with the following:
                (i)  A loan for land, buildings and machinery and
            equipment may not exceed $200,000 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
            department shall be considered part of the total capital
            development project costs.
                (ii)  A loan for working capital may not exceed
            $100,000 or 50% of the total capital development project
            costs, whichever is less.
                (iii)  Except for loans to agricultural producers, a
            loan must create or preserve one job for every $25,000
            loaned.
            (2)  The department shall notify the area loan
        organization and applicant of its decision.
        (d)  Approvals.--For applications which are approved, the
     department shall draw an advance equal to the principal amount
     of the loan from the fund. The advance shall be forwarded to the
     area loan organization and, upon receipt by the area loan
     organization, shall become an obligation of the area loan
     organization. Prior to providing loan funds to the applicant,
     the area loan 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 department may require the area loan organization to impose
     other terms and conditions on the recipient if the department
     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 area
        loan organization with the approval of the department.
            (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 for working capital shall have a
            repayment period of up to three years.
                (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 departmental policies
     and procedures by the area loan organization which made the
     loan. Each area loan organization shall submit an annual report
     on the form required by the department 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 department.
        (g)  Penalty.--
            (1)  Except as provided in paragraph (2), the department
        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 department may waive the penalty required by
        paragraph (1) if the department 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 department 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 department shall pay all costs arising out of the
     foreclosure and acquisition from moneys held in the fund. The
     department may, in order to minimize financial losses and
     sustain employment, lease the capital development project. The
     department 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
     department 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.