• Matrix View - PDF
• Application Procedure to apply for funding through the Louisiana Economic Development Corporation

Contract Loan Program Rules

Title 19
Corporations and Business
Part XV. Louisiana Economic Development Corporation
Chapter 1. CONTRACT LOAN PROGRAM

• 101. Purpose
  

The Louisiana Economic Development Corporation (LEDC) wishes to stimulate the flow of private capital, long-term loans, and other financial assistance for the sound financing of the development, expansion, and retention of small business concerns in Louisiana as a means of providing high levels of employment, income growth, and expanded economic opportunities, especially to disadvantaged persons and within distressed and rural areas.

This program will be a pilot program for a period of one year upon which the Board of Directors of the Louisiana Economic Development Corporation will consider extending the program. The Corporation will consider sound loans so long as resources permit. The Board of the Corporation recognizes that guaranteeing, participating, or lending money carries certain risks and is willing to undertake reasonable exposure.

AUTHORITY NOTE: R.S. 51 : 2312 (A) (7), (B) (1) and (B) (3)
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Louisiana Economic Development Corporation, LR 19:

• 103. Definitions

A. Disabled person's business enterprise means a small business concern which is at least fifty-one percent owned and controlled by a disabled person as defined by the federal Americans With Disabilities Act of 1990.

B. A minority or woman owned business enterprise must be owned or controlled by a socially or economically disadvantaged person which is defined by the SBA as a person(s), regardless of sex or marital status, who is a member of groups whose disadvantage may arise from cultural, racial, chronic economic circumstances or background as stated in R.S. 51:2347 et seq., and must be certified as a minority business enterprise or women's business enterprise as defined in R.S. 51:2347 B:1-6

C. Small business concerns as defined by SBA for purposes of size eligibility as set forth by 13 CFR 121.

D. Contract is defined as a contract for goods and or services to any federal, state, or local government entity. AUTHORITY NOTE: R.S. 51 : 2312 (A) (7), (B) (1) and (B) (3)
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Louisiana Economic Development Corporation, LR 19:

• 105. Application Process

A. Applicant is required to first contact a financial lending institution that is willing to entertain such a loan with the prospect of additional credit support provided by a LEDC guaranty/participation and complete the application process.

B. Information submitted to LEDC with the application representing the applicant's business plan, financial position, financial projections, personal financial statements and background checks will be kept confidential to the extent allowed under the Public Records Law, La. R.S. 44:1 se seq. Confidential information in the files of LEDC and its accounts acquired in the course of duty will be used solely by and for LEDC.

C. Submission and Review Policy

1. A completed Louisiana Economic Development Corporation application form along with the information identified in Attachment A must be submitted with a $100 application fee. Applications will be processed with decisions confirmed promptly.

2. Minority and Women owned businesses applying for assistance under that provision will have to submit certification from the Minority and Women's Business Enterprise office of the Department of Economic Development along with the request for financial assistance.

3. Businesses applying for consideration under the Disabled Persons provision shall submit adequate information to support the disabled status.

4. LEDC staff will review the applications for completeness and submit only complete packages for analysis. Any applications not receiving approval in the initial analysis process shall be individually reviewed and exceptions to underwriting criteria noted. The LEDC staff will report to the Screening Committee monthly those applications approved, and those not recommended for approval with reasons.

5. Loans guaranteed/participated in by LEDC must qualify under LEDC pre-approved underwriting criteria using standardized LEDC documentation. The originating bank is responsible for all loan closing documentation. Closing will occur only after a site visit by a LEDC staff member or designated representative.

6. Only those applicants and/or their designated representatives asked to be present by the LEDC staff need to be present for the Screening Committee.

7. The Board of Directors will review the results of all applications processed and screened. Loans recommended for approval by the LEDC staff as exceptions to standard underwriting criteria will be presented to the Screening Committee of the Board for approval. Loans for $100,000 or less approved under standard underwriting procedures requiring a LEDC guarantee/participation shall be approved jointly by the LEDC Executive Director and Deputy Director. In the absence of one of those persons, the President of LEDC, or the Secretary/Treasurer, could additionally approve the loan. All completed applications recommended by staff on loans in excess of $100,000 will be approved by the Screening Committee and the Board.

8. The applicant will be notified promptly from date accepted for processing by mail of the outcome of the application.

9. A LEDC commitment letter and standard guaranty or participation agreement will be mailed to the bank promptly after approval by the LEDC staff applying standardized evaluation processes.

AUTHORITY NOTE: R.S. 51 : 2312 (A) (7), (B) (1) and (B) (3)
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Louisiana Economic Development Corporation, LR 19:

• 107. Eligibility

A. Small business concerns as defined by SBA for purposes of size eligibility as set forth by 13 CFR 121.

B. Small businesses whose owner(s) or principal stockholder(s) shall be a resident of Louisiana and the business is domiciled in Louisiana with preference given to certified minority businesses, women owned businesses, or businesses owned by disabled persons.

C. An assignable contract for goods or services with a federal, state, or local entity.

AUTHORITY NOTE: R.S. 51 : 2312 (A) (7), (B) (1) and (B) (3)
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Louisiana Economic Development Corporation, LR 19:

• 109. General Loan Provisions

A. Only one contract loan will be allowed for any one borrower at any one time. A borrower may apply for additional contract loans only after the full repayment of any previous contract loan is complete.

B. The Louisiana Economic Development Corporation will be guided by the following general principles in making loans:

1. Funding requests will only be considered for supporting contracts for goods and services provided to federal, state, or local entities.

2. Proceeds of the loan shall not be used for any of the following purposes:
a. Repayment of debt to or the cashing out of any stockholder or principal of the business.
b. Repayment of any personal debt.
c. Funding for the principal purpose of refinancing existing debt in excess of ten percent (10%) of the total requested loan amount.

3. The Corporation shall not knowingly approve any loan guaranty/participation if the applicant has presently pending, or outstanding, any claim or liability relating to failure or inability to pay promissory notes or other evidence of indebtedness including state or federal taxes, or bankruptcy proceeding; nor shall the Corporation approve any loan guarantee/participation if the applicant has presently pending, at the federal, state, or local level, any proceeding concerning denial or revocation of a necessary license or permit.

4. The terms or conditions imposed and made part of any loan guaranty/participation authorized by vote of the Corporation Board shall not be amended or altered by any member of the Board or employee of the Department of Economic Development except by subsequent vote of approval by the Board at the next meeting of the Board in open session with full explanation for such action.

5. The Corporation shall not subordinate its position.

C. Interest Rates

1. On all loan participations/guarantees the interest rate is to be negotiated between the borrower and the bank but may not exceed four (4) percentage points above New York prime as published in the Wall Street Journal at either a fixed or variable rate.

D. Collateral

1. Collateral to loan ratio will be no less than one to one (1 : 1).

2. Collateral position shall be negotiated but will be no less than a sole second position.

3. Collateral value determination.
a. The appraiser must be certified by recognized organization in area of collateral.
b. The appraisal cannot be over 90 days old.
c. The percentage of value considered shall be consistent with the underwriting criteria established by the LEDC Board from time to time.


4. Acceptable Collateral may include, but not be limited to, the following:
a. Fixed assets - real estate, buildings, fixtures
b. Equipment, machinery - Used in support of the contract at cost supported by invoice or no more than 75% of cost for existing equipment or machinery.
c. Inventory - Used in support of the contract at cost supported by invoice or no more than 50% of cost for existing inventory.
d. Personal guarantees are required, however, no value will be assessed towards collateral value. A signed and dated Personal Financial Statement is also required.
e. 85 % of Accounts Receivable considered collectable with supporting aging schedule.
f. Contract with federal, state, or local entity shall be assigned to lender, however, no value will be assessed towards collateral value.

5. Unacceptable Collateral may include but not be limited to the following:
a. Stock in applicant company and/or related companies.
b. Personal Items E. Equity 1. Will be no less than 10% percent of the loan amount for a start-up operation, an acquisition, or an expansion.

2. Equity is defined to be
a. Cash
b. Paid in capital
c. Paid in surplus and retained earnings
d. Partnership capital and retained earnings
e. Unfunded portion of inventory and receivables

3. No research, development expense, nor intangibles or contributed assets other than cash of any kind, will be considered equity.

F. Amount

1. For Small Businesses the Corporation's participation shall be no greater than 50% of a loan, but in no case shall it exceed $500,000.

2. For certified Minority owned, Women owned, or owned by disabled persons the Corporation's participation shall be no greater than 60% of a loan, but in no case shall it exceed $500,000.

3. For either a Small Business or a certified Minority owned, Women owned, or disabled owned business the Corporation's guarantee shall be no greater than 50% of the lending institution's portion of the amount of the first draw of the contract. The first draw cannot exceed 50% of the total loan amount.

G. Terms

1. The term may be no longer than 180 days past the completion date of the contract but in no case any greater than one and one half years.

H. Use of Funds

1. To support a contract for goods and services for a federal, state, or local entity. All proceeds of the contract will be assigned and collected by the lending institution.

AUTHORITY NOTE: R.S. 51 : 2312 (A) (7), (B) (1) and (B) (3)
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Louisiana Economic Development Corporation, LR 19:

In no case shall the equity position be less than 10%.

2. Equity is defined to be:

A. cash;
b. paid-in capital;
c. paid-in surplus and retained earnings;
d. partnership capital and retained earnings.

3. No research, development expense nor intangibles of any kind will be considered equity.

E. Amount

1. For small businesses, the Corporation's guarantee shall be:

A. no greater than 75 percent of a loan up to $650,000; or
b. no greater than 70 percent of a loan up to $1,100,000; or
c. no greater than 65 percent of a loan up to $2,300,000;
d. if the loan request exceeds $2,300,000 the guaranty shall not exceed $1,500,000.

2. For certified economically disadvantaged businesses, or disabled person's business enterprises, the Corporation's guarantee shall be:

A. no greater than 90 percent of a loan up to $560,000; or
b. no greater than 85 percent of a loan up to $875,000; or

c. no greater than 75 percent of a loan up to $2,000,000;
d. if the loan request exceeds $2,000,000, the guaranty shall not exceed $1,500,000.

3. For small businesses, the Corporation's participation shall be no greater than 40 percent, but in no case shall it exceed $1,500,000. 4. For certified economically disadvantaged businesses, or disabled person's business enterprises, the Corporation's participation shall be no greater than 50 percent, but in no case shall it exceed $1,000,000.

F. Terms

1. Terms may be negotiated with the bank, but in no case shall the terms exceed 20 years.

G. Fees

1. LEDC will charge a guaranty fee on the guaranteed amount up to a maximum amount of four (4%) percent.

2. LEDC will charge a $100 application fee.

3. LEDC will share in a pro-rata position in any fees assessed by the bank on a participation.

H. Use of Funds

1. Purchase of fixed assets, including buildings that will be occupied by the applicant to the extent of at least 51 percent.


2. Purchase of equipment, machinery, or inventory


3. Line of credit for accounts receivable or inventory.


4. Debt restructure may be considered by LEDC but will not be considered when the debt:
a. exceeds 25 percent of total loan with the following exception:
(1) a maximum of 35% may be considered on a guaranteed loan but the guarantee % will be decreased by 5%; and/or
b. pays off a creditor or creditors who are inadequately secured; and/or
c. provides funds to pay off debt to principals of the business; and/or
d. provides funds to pay off family members.


5. Funds may not be used to buy out stockholders or equity holders of any kind, by any other stockholder or equity holder.


6. Funds may not be used to purchase any speculative investment or real estate development.

AUTHORITY NOTE: R.S. 51:2312
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Economic Development Corporation, LR 15:448 (June 1989), amended LR 22:

• 111. General Agreement Provisions

A. Participation Agreement

1. The lending institution is responsible for administration and monitoring of the loan.

2. The lead lender may not sell any additional participations in the loan.

3. Should liquidation through foreclosure occur, the bank will sell the collateral and handle the legal proceedings.

4. The bank interest rate may not exceed four (4) percentage points above New York prime as published in the Wall Street Journal at either a fixed or variable rate.

5. Delinquency will be defined according to the bank's normal lending policy and all remedies will be outlined. Notification of delinquency will be made to the corporation in writing and verbally in a time satisfactory to the bank and the Corporation.

B. Guaranty Agreement

1. Lending institution is responsible for proper administration and monitoring of loan and proper liquidation of collateral in case of default.

2. If liquidation through foreclosure occurs, the bank sells collateral and handles legal proceedings.

3. The guarantee will commence upon the first draw on the line of credit and will end upon the advance of the second draw on the line of credit.

4. The guarantee will cover the unpaid principal amount owed only.

5. Delinquency will be defined according to the bank's normal lending policy and all remedies will be outlined in the guarantee agreement. Notification of delinquency will be made to the Corporation in writing and verbally in a time satisfactory to the bank and the Corporation as stated in the guarantee agreement.

C. Borrower Agreement

1. At the discretion of LEDC, the borrower will agree to strengthen management skills by participation in a form of continuing education acceptable to LEDC.

AUTHORITY NOTE: R.S. 51 : 2312 (A) (7), (B) (1) and (B) (3)
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Louisiana Economic Development Corporation, LR 19:

• 113. Confidentiality

Confidential information in the files of the Corporation and its accounts acquired in the course of duty is to be used solely for the Corporation . The Corporation is not obliged to give credit rating or confidential information regarding applicant. Also see Attorney General Opinion #82-860.

AUTHORITY NOTE: R.S. 51 : 2312 (A) (7), (B) (1) and (B) (3)
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Louisiana Economic Development Corporation, LR 19:

• 115. Conflict of Interest

No member of the Corporation, employee thereof, employee of the Department of Economic Development, nor members of their immediate families, shall either directly or indirectly be a party to or be in any manner interested in any contract or agreement with the Corporation for any matter, cause, or thing whatsoever by reason whereof any liability or indebtedness shall in any way be created against such Corporation. If any contract or agreement shall be made in violation of the provisions of this Section the same shall be null and void and no action shall be maintained thereon against the Corporation.

AUTHORITY NOTE: R.S. 51 : 2312 (A) (7), (B) (1) and (B) (3)
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Louisiana Economic Development Corporation, LR 19: