2012 Pennsylvania Consolidated Statutes
Title 12 - COMMERCE AND TRADE
Chapter 23 - Small Business First
Section 2308 - Loans in distressed communities

     § 2308.  Loans in distressed communities.
        (a)  Application.--A small business located in a distressed
     community may submit an application and any applicable
     application fee to a community development institution
     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 that the small business is engaged in
        business-to-public service or in the mercantile, commercial
        or point-of-sale retail business sectors.
            (3)  A statement of the amount of loan assistance sought.
            (4)  A statement of the capital development project,
        including a detailed statement of the cost of the project.
            (5)  A financial commitment from a responsible source for
        the cost of the capital development project in excess of the
        amount requested.
            (6)  Any other information required by the department.
        (b)  Community development institution review.--
            (1)  Upon receipt of a completed application, a community
        development institution shall investigate and determine all
        of the following:
                (i)  If the applicant is a small business which is
            engaged in business-to-public service or in the
            mercantile, commercial or point-of-sale retail business
            sectors in accordance with conditions or criteria
            established by the department.
                (ii)  If the project is a capital development
            project.
                (iii)  If the applicant has demonstrated a direct
            impact on the community in which the capital development
            project is or will be located, on residents of that
            community or on the local and/or regional economy. The
            department shall establish criteria that will assist in
            making this demonstration.
                (iv)  Number of employment opportunities to be
            created or preserved by the proposed capital development
            project.
                (v)  If the applicant complied with all other
            criteria established by the department.
            (2)  Upon being satisfied that all requirements have been
        met, the community development institution 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)  Upon receipt of a recommendation and a completed
        application, the department shall investigate and determine
        all of the following:
                (i)  The ability of the applicant to meet and satisfy
            the debt service as it becomes due and payable. In
            reviewing repayment obligations, loans shall not be
            approved on the basis of direct financial return on
            investment and shall not be held to the loan loss
            standards of private commercial lenders. Loans shall be
            reviewed for the purpose of establishing a strong
            economic base and promoting entrepreneurial activity
            within the distressed community.
                (ii)  The existence and sufficiency of collateral for
            the loan.
                (iii)  Relevant criminal and credit history and
            ratings of the applicant as determined from outside
            credit reporting services and other sources.
            (2)  If the department is satisfied that all requirements
        have been met, the department may approve the loan request in
        an amount not to exceed $200,000 or 50% of the total capital
        development project costs, whichever is less. For the purpose
        of this paragraph, capital development project costs, except
        the costs related to working capital, 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.
            (3)  The department shall notify the community
        development institution 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 and, prior to providing loan funds to
     the applicant, the department 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 impose other terms and conditions on the
     recipient if the department determines 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 (d) shall do all of the following:
            (1)  State any collateral securing the loan. The
        department may use its best judgment to identify and secure
        collateral.
            (2)  State the repayment period which may be flexible.
            (3)  State the interest rate which may not be less than
        2% nor more than 5% for the term of the loan.
            (4)  State that the recipient agrees to maintain, at a
        minimum, the number of jobs in existence as of the date of
        loan application.
        (f)  Loan administration.--A loan made under this section
     shall be administered in accordance with departmental policies
     and procedures.
        (g)  Penalty.--
            (1)  Except as provided in paragraph (2), the department
        shall impose a penalty upon a recipient if the recipient
        fails to 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 any 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 take title by foreclosure
     to a capital development project which it financed where
     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 money 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 money from the fund to purchase first
     mortgages and to make payments on first mortgages on any capital
     development project which it financed if 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 in the fund money derived from the
     sale of any first mortgages.

        Cross References.  Section 2308 is referred to in section
     2302 of this title.