12 USC 5704 - Approving State capital access programs

U.S Code last checked for updates: Apr 27, 2024

§ 5704.

Approving State capital access programs

(a)

Application

(b)

Approval

The Secretary shall approve such State capital access program as eligible for Federal contributions to the reserve fund if—

(1)

within 60 days after March 11, 2021, the State has filed with the Secretary a notice of intent to apply for approval by the Secretary of a State capital access program;

(2)

within 9 months after March 11, 2021, the State has filed with the Secretary a complete application for approval by the Secretary of a capital access program;

(3)

the State satisfies the requirements of subsections (a) and (b) of section 5703 of this title; and

(4)

the State capital access program meets the eligibility criteria in subsection (c).

(c)

Eligibility criteria for State capital access programs

For a State capital access program to be approved under this section, that program shall be required to be a program of the State that—

(1)

provides portfolio insurance for business loans based on a separate loan-loss reserve fund for each financial institution;

(2)

requires insurance premiums to be paid by the financial institution lenders and by the business borrowers to the reserve fund to have their loans enrolled in the reserve fund;

(3)

provides for contributions to be made by the State to the reserve fund in amounts at least equal to the sum of the amount of the insurance premium charges paid by the borrower and the financial institution to the reserve fund for any newly enrolled loan; and

(4)

provides its portfolio insurance solely for loans that meet both the following requirements:

(A)

The borrower has 500 employees or less at the time that the loan is enrolled in the Program.

(B)

The loan amount does not exceed $5,000,000.

(d)

Federal contributions to approved State capital access programs

(e)

Minimum program requirements for State capital access programs

The Secretary shall, by regulation or other guidance, prescribe Program requirements that meet the following minimum requirements:

(1)

Experience and capacity

(2)

Investment authority

(3)

Loan terms and conditions to be determined by agreement

(4)

Lender capital at-risk

(5)

Premium charges minimum and maximum amounts

(6)

State contributions

(7)

Loan purpose

(A)

Particular loan purpose requirements and prohibitions

In connection with the filing of a loan for enrollment in an approved State capital access program, the financial institution lender—

(i)

shall obtain an assurance from each borrower that—

(I)

the proceeds of the loan will be used for a business purpose;

(II)

the loan will not be used to finance such business activities as the Secretary, by regulation, may proscribe as prohibited loan purposes for enrollment in an approved State capital access program; and

(III)

the borrower is not—

(aa)

an executive officer, director, or principal shareholder of the financial institution lender;

(bb)

a member of the immediate family of an executive officer, director, or principal shareholder of the financial institution lender; or

(cc)

a related interest of any such executive officer, director, principal shareholder, or member of the immediate family;

(ii)

shall provide assurances to the participating State that the loan has not been made in order to place under the protection of the approved State capital access program prior debt that is not covered under the approved State capital access program and that is or was owed by the borrower to the financial institution lender or to an affiliate of the financial institution lender;

(iii)

shall not allow the enrollment of a loan to a borrower that is a refinancing of a loan previously made to that borrower by the financial institution lender or an affiliate of the financial institution lender; and

(iv)

may include additional restrictions on the eligibility of loans or borrowers that are not inconsistent with the provisions and purposes of this chapter, including compliance with all applicable Federal and State laws, regulations, ordinances, and Executive orders.

(B)

Definitions

(8)

Capital access for small businesses in underserved communities

(Pub. L. 111–240, title III, § 3005, Sept. 27, 2010, 124 Stat. 2574; Pub. L. 117–2, title III, § 3301(a)(1)(C), Mar. 11, 2021, 135 Stat. 69.)

cite as: 12 USC 5704