Section 26-C2914. PARTICIPATION REQUIREMENTS – LOAN PARTICIPATION PROGRAM

 

2914.1To enroll a loan in the Loan Participation Program, the Eligible Lender shall elect on the prescribed District SSBCI Enrollment Form, or such other form required by DISB, the applicable Loan Participation Program category.

 

2914.2Under the Standard Loan Participation category, DISB acquires a percentage participation of the Enrolled Loan from the Eligible Lender to an Eligible Recipient in consideration for DISB receiving interest accruing at a rate equal to the rate at which an Eligible Recipient pays an Eligible Lender pursuant to the terms of the Loan Participation Program documents.

 

2914.3If the Eligible Recipient defaults in payment to the Eligible Lender, or to DISB pursuant to the terms of the Loan Participation Program documents for a Standard Loan Participation, DISB shall receive the proportional benefit of all amounts received from the Eligible Recipient or realized from the Eligible Recipient’s collateral following the default.

 

2914.4To qualify for a Standard Loan Participation category, an Eligible Recipient need not meet any of the five (5) additional enrollment criteria described in § 2914.8.

 

2914.5A loan may also be enrolled under the Enhanced Loan Participation category, whereby DISB acquires a percentage participation of the Enrolled Loan from an Eligible Lender to an Eligible Recipient in consideration for DISB receiving interest accruing at a rate not to exceed half of the percentage per annum charged by the Eligible Lender on the Enrolled Loan to the Eligible Recipient. 

 

2914.6If the Eligible Recipient defaults in payment to the Eligible Lender, or to DISB pursuant to the terms of the Loan Participation Program documents for an Enhanced Loan Participation, the amounts owed by the Eligible Recipient to DISB with respect to a loan participation may be subordinated to amounts owed by the Eligible Recipient to the Eligible Lender. 

 

2914.7To qualify for an Enhanced Loan Participation, an Eligible Recipient shall meet at least two (2) and up to five (5) of the additional enrollment criteria described in  § 2914.8.  Qualification under this category may be subject to additional criteria, as determined by the Commissioner, and may include:

 

(a) A minimum equity contribution of ten percent (10%), which may not be borrowed;

 

(b)A debt service coverage ratio of one and two-tenths (1.2) (a lower minimum debt service coverage ratio may be allowed with reasonable explanation);

 

(c) Financial statements for the three (3) immediately preceding fiscal years, demonstrating at least one (1) year of profitability; and

 

(d)A credit score of six hundred and forty (640) or higher (lower credit scores may be allowed with a reasonable explanation).

 

2914.8Additional enrollment criteria for qualification under the enrollment categories described in §§ 2914.1 – 2914.7 above are as follows:

 

(a) An Eligible Recipient shall sign an agreement to allocate at least ten percent (10%) of all new and future hires to be targeted new hires as defined by the Federal Work Opportunities Tax Credit, 26 U.S.C. § 51(d).  The agreement shall endure for the duration of the Enrolled Loan.

 

(b) An Eligible Recipient shall be a Certified Business Enterprise or pledge to become a Certified Business Enterprise within six (6) months of funding; 

 

(c) An Eligible Recipient shall be a business enterprise that is more than 50% woman or minority owned. 

 

(d) An Eligible Recipient shall have its principal office located in a census tract where the poverty rate exceeds twenty percent (20%).

 

(e) A loan will be made to an Eligible Recipient that has its principal office located in a retail priority area as identified under D.C. Official Code § 2-1217.73.

 

2914.9The Eligible Recipient and any owner of the Eligible Recipient that has at least a twenty percent (20%) interest in the Eligible Recipient shall execute covenants, pledging to continue to comply with each additional enrollment criteria as described under § 2914.8 for the enrollment option chosen by the Eligible Recipient. 

 

2914.10A loan or line of credit refinanced from a different lender may be enrolled in the Loan Participation Program provided that the original use of proceeds was for an eligible business purpose. Loans or lines of credit with the same lender or its affiliate may be refinanced and enrolled in the Loan Participation Program if such loans and lines of credit meet the following conditions:

 

(a) The new loan or line of credit includes the advancement of new monies to a small business borrower (excluding closing costs);

 

(b) The new credit supported with Loan Participation Program funding is based on new underwriting of the small business’s ability to repay and a new approval by the Eligible Lender;

 

(c) The proceeds from the new credit is only to be used to satisfy the outstanding balance of a loan or line of credit that has already matured or otherwise termed and the prior debt was used for an eligible business purpose, as defined by above; and

 

(d) The new credit has not been extended for the sole purpose of refinancing existing debt owed to the same financial institution lender.

 

2914.11If the loan is not a line of credit and has no outstanding balance, that loan will no longer be considered an Enrolled Loan in the Loan Participation Program.

 

2914.12To renew an enrolled line of credit or extend the maturity date of an enrolled line of credit the following shall occur:

 

(a) An Eligible Lender shall send notice to DISB of the renewal or extension;

 

(b) The Eligible Recipient shall consent to the extension in writing;

 

(c) DISB shall receive a new enrollment form; and

 

(d) DISB shall approve the extension

 

2914.13 If an enrolled line of credit is not renewed or extended it shall no longer be considered enrolled in the Loan Participation Program after its maturity date has passed. 

 

2914.14If an enrolled line of credit has no outstanding balance for twelve (12) consecutive months, it will no longer be enrolled in the Loan Participation Program unless, before the expiration of the twelve (12) month period, the Eligible Lender has reaffirmed in writing to the Eligible Recipient that the line of credit will remain open and the Eligible Recipient has acknowledged that reaffirmation in writing to the Eligible Lender and DISB.  

 

2914.15DISB shall be the legal and equitable owner of the DISB share of a loan enrolled in the Loan Participation Program and all security and documents related to the DISB share of the loan.

 

2914.16The enrollment of a loan by the Eligible Lender in the Loan Participation Program constitutes a sale by the Eligible Lender to DISB of the DISB share in the Enrolled Loan and security and related documents.  This sale is not, however, an extension of credit by DISB to the Eligible Lender. 

 

2914.17DISB shall not disburse monies related to its purchase of a portion of a loan enrolled in the Loan Participation Program at or prior to the closing of the loan by an Eligible Lender and Eligible Recipient. Monies DISB pays to the Eligible Lender shall not be disbursed by the Eligible Lender to an Eligible Recipient without the Eligible Recipient’s full execution of all of the Loan Participation Program documents.

 

2914.18For each Enrolled Loan for which DISB owns a participation share the Eligible Lender shall:  

 

(a) Negotiate, control, manage and service the Enrolled Loan;

 

(b) Enforce or refrain from enforcing the loan documents;

 

(c) Give consents, approvals or waivers in connection with the loan documents;

 

(d) Acquire additional security for the Enrolled Loan; and

 

(e) Take or refrain from taking any action and make any determination provided for in the loan documents.

 

2914.19The Eligible Lender and DISB shall share all principal and interest payments and other collections under any loan enrolled by the Eligible Lender in the Loan Participation Program in proportion to their respective percentage interests in the loan, with appropriate provisions made for any differences in interest rates and payment schedules of the Eligible Lender and DISB. 

 

2914.20The Eligible Lender shall collect all payments made under any loan enrolled by the Eligible Lender in the Loan Participation Program and remit the principal and interest amounts due to DISB within ten (10) business days following the Eligible Lender’s receipt of such payments from the Eligible Recipient. 

 

2914.21The remittance shall be paid by certified check or money order payable by the Eligible Lender to DISB.  The Eligible Lender shall provide all detail reasonably requested by DISB regarding the breakdown of individual payments, including itemization of the principal and interest.

 

 

authority

Section 105(c) of the 21st Century Financial Modernization Act of 2000, effective June 9, 2001 (D.C. Law 13-308; D.C. Official Code § 26-551.05(c) (2012 Repl. and 2016 Supp. )).

source

Final Rulemaking published at 61 DCR 9181 (September 5, 2014); as amended by Final Rulemaking published at 63 DCR 11535 (September 16, 2016).