-
DISTRICT OF COLUMBIA
DEPARTMENT OF INSURANCE, SECURITIES AND BANKING
NOTICE OF FINAL RULEMAKING
The Acting Commissioner of the Department of Insurance, Securities and Banking (“DISB”), pursuant to the authority set forth in 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.)), hereby gives notice of his intent to adopt the following amendment to add a new Chapter 29, entitled “The State Small Business Credit Initiative” (“SSBCI”), to Subtitle C (Banking and Financial Institutions) of Title 26 (Insurance, Securities and Banking) of the District of Columbia Municipal Regulations (“DCMR”).
These rules are necessary to implement two (2) new programs, the District of Columbia Loan Participation Program (“Loan Participation Program”) and the District of Columbia Innovation Finance Program (“Innovation Finance Program”), and combine the programs’ regulations in one place with the District of Columbia Collateral Support Program’s (“Collateral Support Program”) regulations. The Collateral Support Program’s regulations are currently in 27 DCMR § 851. All of these regulations will now be in Title 26 of the DCMR.
The emergency and proposed rulemaking was originally published on July 11, 2014 in the D.C. Register at 61 DCR 007063, by the Acting Commissioner and became effective on that date. The comment period ended on August 11, 2014. No public comments were received. In order to clarify that only federal money will be used in the District SSBCI Programs, DISB added subsection 2900.5. In all other respects no changes were made and this Final Rulemaking is identical to the Emergency and Proposed Rulemaking. This rule was adopted as final on August 22, 2014 and will take effect immediately upon publication of this notice in the D.C. Register.
A new Chapter 29 is added to Subtitle C (Banking and Financial Institutions) of Title 26 (Insurance, Securities and Banking) of the DCMR to read as follows:
CHAPTER 29 STATE SMALL BUSINESS CREDIT INITIATIVE
2900 SCOPE
2900.1 Unless specified otherwise, these regulations shall apply to the Collateral Support Program, the Loan Participation Program, and the Innovation Finance Program, which are implemented pursuant to Section 105(a)(2), (3) and (12) 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 (a)(2), (a)(3) and (a)(12)).
2900.2 The Department of Insurance, Securities and Banking may, in its discretion, outsource the loan underwriting process to a qualified non-profit organization or financial institution.
2900.3 The Commissioner of the Department of Insurance, Securities and Banking may waive provisions of these rules upon good cause shown, provided the waiver is consistent with the State Small Business Credit Initiative (“SSBCI”) requirements from the United States Department of the Treasury.
2900.4 All forms prescribed or authorized by this chapter can be found on the Department website at http://disb.dc.gov/page/small-business-lending-state-small-business-credit-initiative-ssbci.
2900.5 The Collateral Support Program, the Loan Participation Program, and the Innovation Finance Program, collectively known as the District SSBCI Programs, will implement the federal SSBCI program and will only use federal monies in their implementation.[S1]
2901 COLLATERAL SUPPORT PROGRAM
2901.1 The Collateral Support Program shall provide a cash collateral deposit to an Eligible Lender in order to enhance the collateral coverage of an Eligible Recipient that is otherwise qualified but unable to meet the Eligible Lender’s security requirements. The cash collateral deposit will then be pledged as collateral on behalf of the Eligible Recipient.
2901.2 The Department of Insurance, Securities and Banking (“DISB”) may deposit cash assets of up to fifty percent (50%) of the loan amount but no more than one million dollars ($1,000,000). The maximum term of an Enrolled Loan shall not exceed seven (7) years.
2902 ELIGIBLE LENDERS – COLLATERAL SUPPORT PROGRAM
2902.1 An Eligible Lender for the Collateral Support Program shall be:
(a) A federally insured commercial lender;
(b) A federally insured credit union; or
(c) A Community Development Financial Institution.
2902.2 An Eligible Lender shall enroll in the Collateral Support Program by providing to DISB:
(a) A signed SSBCI Participation Agreement with DISB;
(b) A certification that it is in compliance with the requirements of 31 C.F.R. § 1020.220;
(c) A certification that, consistent with OMB Circular A-129, it has at least twenty percent (20%) of its own capital at risk in any loan enrolled in the District SSBCI Programs, unless a waiver is granted;
(d) A certification that no principal of the lender has been convicted of a sex offense against a minor as such term is defined in Section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. § 16911); and
(e) Any other document necessary for the administration of the District SSBCI Programs or for compliance with the U.S. Treasury’s SSBCI.
2903 ELIGIBLE RECIPIENTS – COLLATERAL SUPPORT PROGRAM
2903.1 An Eligible Recipient under the Collateral Support Program shall:
(a) Be a non-public company that is registered in the District and is subject to tax under the laws of the District;
(b) Have, or sign an agreement pledging that it will have within six (6) months after funding:
(1) Its principal offices within the District, demonstrated by a lease or a deed; and
(2) At least seventy-five percent (75%) of its employees, including those of its affiliates and subsidiaries, working in the District;
(c) Have less than seven hundred and fifty (750) existing employees, including those of its affiliates and subsidiaries; and
(d) Provide, or sign an agreement pledging that it will provide, within six (6) months after funding, at least twenty-five percent (25%) of its W-2 employee positions to District residents.
2903.2 If the funding from the District of Columbia is three hundred thousand dollars ($300,000) or more, the requirement stated in § 2903.1(d) shall be met by an executed First Source Agreement.
2903.3 The provisions in § 2903.1 may be waived, and the deadlines extended, in whole or in part, by the Commissioner if the Eligible Recipient demonstrates a reasonable need for waiver and if a waiver will not violate the SSBCI Guidelines of the U.S. Department of the Treasury.
2903.4 The Eligible Recipient and any owner of the Eligible Recipient owning at least a twenty percent (20%) interest in the Eligible Recipient shall execute covenants pledging to continue to comply with Program requirements of maintaining its principal offices within the District and providing at least twenty-five percent (25%) of its W-2 employee positions to District residents.
2903.5 An Eligible Recipient shall not be:
(a) An executive officer, director, or principal shareholder of the financial institution or qualified non-profit organizations enrolling the loan;
(b) A member of the immediate family of an executive officer, director, or principal shareholder of the financial institution or qualified non-profit organization enrolling the loan;
(c) A related interest of such an executive officer, director, principal shareholder, or member of the immediate family;
(d) A business engaged in speculative activities that develop profits from fluctuations in price rather than through normal course of trade, such as wildcatting for oil or dealing in commodities futures, unless those activities are incidental to the regular activities of the business and part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business;
(e) A business that earns more than half of its annual net revenue from lending activities, unless the business is a non-bank or non-bank holding company or Community Development Financial Institution;
(f) A business engaged in pyramid sales, where a participant's primary incentive is based on the sales made by an ever-increasing number of participants; or
(g) A business engaged in activities that are prohibited by federal or District of Columbia law.
2903.6 For the purpose of these Eligible Recipient restrictions, as described in § 2903.5 (a), (b) and (c) above, the terms “executive officer,” “director,” “principal shareholder,” “immediate family,” and “related interest” refer to the same relationship to a financial institution lender or qualified non-profit organization as the relationship described in 12 C.F.R. part 215, or any successor to such part.
2903.7 An Eligible Recipient under the Collateral Support Program shall certify that no principal of the Eligible Recipient has been convicted of a sex offense against a minor as such term is defined in Section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. § 16911).
2903.8 For the purposes of the certifications required under § 2902.2(d) and § 2903.7, “principal” is defined as:
(a) If a sole proprietorship, the proprietor;
(b) If a partnership, each managing partner and each partner who holds twenty percent (20%) or more ownership interest in the partnership; and
(c) If a corporation, limited liability company, association or a development company, each director, each of the five (5) most highly compensated executives, officers, or employees of the entity, and each direct or indirect holder of twenty percent (20%) or more of the ownership stock or stock equivalent of the entity.
2904 LOAN REQUIREMENTS – COLLATERAL SUPPORT PROGRAM
2904.1 Loans or investments facilitated by the Collateral Support Program shall be used for a business purpose, including working capital, inventory, expansion, renovations, start-up costs, and refinancing. The entire proceeds of the loan or investment shall be used within the District.
2904.2 The loan proceeds from the Collateral Support Program shall not be used:
(a) To repay delinquent federal or District of Columbia income taxes unless the Eligible Recipient has a payment plan in place with the relevant taxing authority;
(b) To repay taxes held in trust or escrow, for example, payroll or sales taxes;
(c) To reimburse funds owed to any owner, including any equity injection or injection of capital for the business’s continuance;
(d) To purchase any portion of the ownership interest of any owner of the business;
(e) To acquire or hold passive investments;
(f) For refinancing of existing debt, other than a refinancing permitted by
§ 2904.10;
(g) For legal or illegal gambling; or
(h) For evangelizing, proselytizing, or lobbying.
2904.3 Personal guarantees must be given by any individual holding twenty percent (20%) or more ownership interest in the Eligible Recipient.
2904.4 An Eligible Lender shall file a loan for enrollment in the Collateral Support Program by:
(a) Delivering to DISB, within five (5) business days before the Eligible Lender closes the loan, a copy of the District SSBCI Program Enrollment Form executed by an authorized officer of the Eligible Lender;
(b) Providing DISB with any other documentation and information related to the loan that DISB requires; and
(c) Complying with any other enrollment procedures that DISB may reasonably require in writing.
2904.5 The filing of a loan for enrollment shall be considered to occur on the date on which the Eligible Lender submits to DISB the documentation requested by DISB in § 2904.4.
2904.6 DISB shall review the loan and related transaction documents that memorialize the terms and conditions of the loan, and DISB shall issue a final approval if the loan, Eligible Lender, Eligible Recipient, and other aspects of the transaction are determined to comply and satisfy all applicable requirements.
2904.7 If DISB issues a final approval of the loan, the Eligible Lender and Eligible Recipient shall execute all documentation requested by DISB to memorialize the terms and conditions of the loan to be enrolled in the Collateral Support Program.
2904.8 The Eligible Lender, Eligible Recipient, and all other parties to the transaction shall execute all of the documents required to close or settle the transaction. The terms, conditions, and material language of the executed documents shall be consistent with those upon which DISB issued a final approval.
2904.9 The loan shall be considered enrolled in the Collateral Support Program when DISB receives copies of all executed transaction documents that it previously approved and submits a funding request to Office of the Chief Financial Officer.
2904.10 A loan or line of credit refinanced from a different lender may be enrolled in the Collateral Support Program. Loans or lines of credit with the same lender or its affiliate may be refinanced and enrolled in the Collateral Support 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 Collateral Support 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 are only 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 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.
2904.11 If the outstanding balance of a loan that is not a line of credit is reduced to zero (0), that loan shall no longer be considered an Enrolled Loan in the Collateral Support Program.
2904.12 If a loan that is a line of credit has an outstanding balance of zero (0) for twelve (12) consecutive months, it will no longer be considered an Enrolled Loan in the Collateral Support 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.
2904.13 To renew an enrolled line of credit or extend the maturity date of an enrolled line of credit:
(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; and
(c) DISB shall receive a new enrollment form.
2904.14 If an enrolled line of credit is not renewed or extended, it shall no longer be considered enrolled in the Collateral Support Program after its maturity date has passed.
2904.15 If an enrolled line of credit has an outstanding balance of zero (0) for twelve (12) consecutive months, it shall no longer be enrolled in the Collateral Support 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 shall remain open and the Eligible Recipient has acknowledged that reaffirmation in writing to the Eligible Lender and DISB.
2905 CASH COLLATERAL ACCOUNTS
2905.1 All Collateral Support Program funds transferred to a cash collateral account shall be the property of, and solely controlled by, DISB. Interest or income earned on the funds shall be credited to the cash collateral account.
2905.2 DISB may withdraw at any time from a cash collateral account all interest or income that has been credited to the cash collateral account. DISB may use interest or income withdrawals for any purpose in connection with the SSBCI Programs.
2905.3 The cash collateral account shall be reduced proportionately with the principal reduction of the loan, on an annual basis or sooner if the loan is paid off.
2905.4 Each cash collateral account for a participating Eligible Lender shall be established in the name of DISB and maintained at that Eligible Lender or at another designated insured depository financial institution in a segregated account. This account shall be identified as “DISB SSBCI Fund - Collateral Support Program” or other name that DISB determines.
2905.5 The cash collateral accounts shall be interest bearing. Participating Eligible Lenders shall not charge DISB any fees related to the Collateral Support Program transactions, for the maintenance of a cash collateral account, or any other related fees.
2905.6 After an Eligible Lender charges off all or part of a loan enrolled in the Collateral Support Program, and after making other efforts to collect upon the Enrolled Loan, including but not limited to seeking judgment and levying against collateral, the Eligible Lender may file a claim with DISB.
2905.7 The Eligible Lender may file the claim by submitting a completed claim form, executed by an authorized officer of the Eligible Lender, along with any additional information that DISB requires.
2905.8 The Eligible Lender’s claim may include:
(a) The amount of the enrolled principal left unpaid by Eligible Lender’s collection efforts;
(b) Up to ninety (90) days of accrued interest; and
(c) Fifty percent (50%) of the reasonable, documented out-of-pocket expenses incurred by the Eligible Lender, but not paid by the Eligible Recipient, in pursuing collection efforts, including the preservation of collateral.
2905.9 The total amount of the Eligible Lender’s claim may not exceed the amount of funds in the cash collateral account for that particular loan.
2905.10 Upon receipt and acceptance by DISB of a claim filed by the Eligible Lender, DISB shall promptly pay the claim as submitted solely from funds in the cash collateral account for that particular loan.
2905.11 If after DISB pays the claim, the Eligible Lender recovers from an Eligible Recipient any amount for which payment of the claim was made, the Eligible Lender shall promptly pay to DISB the amount recovered, less its reasonable, documented out-of-pocket expenses.
2905.12 The Eligible Lender shall retain documentation in its files of its out-of-pocket expenses. The Eligible Lender shall only be required to pay to DISB amounts in excess of the amount needed to fully cover the Eligible Lender’s loss on a loan under the Collateral Support Program.
2905.13 DISB may charge a closing fee of up to four percent (4%) of the balance of the cash collateral account at closing and an annual fee of up to four percent (4%) of the annual balance of the cash collateral account.
2905.14 If a participating Eligible Lender discontinues using the Collateral Support Program and no additional loans are being made under the Collateral Support Program, DISB shall make withdrawals against each cash collateral account proportionately to the outstanding balance of the loan until each loan has been repaid. At that time, DISB shall withdraw all remaining funds in the account.
2906 REPORTING REQUIREMENTS – COLLATERAL SUPPORT PROGRAM
2906.1 Each Eligible Lender and Eligible Recipient shall make the following reports:
(a) If an Enrolled Loan account becomes delinquent and falls sixty (60) days past due, the Eligible Lender shall notify DISB in writing within ten (10) business days of the delinquency.
(b) The Eligible Lender shall submit to DISB annually, within thirty (30) days after the year-end, a report listing borrowers and outstanding balances of all Enrolled Loans as of the end of that preceding year.
(1) In computing the aggregate outstanding balances of all Enrolled Loans, the balance of any loan shall be no greater than the covered amount of the loan as enrolled.
(2) For lines of credit, the outstanding balance shall be the enrolled line of credit amount.
(3) The report shall include the following information, in addition to any other information DISB reasonably requests:
(A) Name of Eligible Recipient;
(B) Amount of loan;
(C) Amount of Enrolled Loan;
(D) Type of loan (Term or Line);
(E) Outstanding balance of loan;
(F) If a term loan, the lesser of the outstanding balance or the Enrolled Loan amount and the enrollment date;
(G) If a line of credit, the enrolled line of credit amount and the maturity date;
(H) Payment history related to Enrolled Loan; and
(I) Lender’s most recently completed internal loan review and quality rating for an Eligible Recipient.
(c) Each Eligible Recipient shall submit the following information to DISB within sixty (60) days after the year-end and at any other time reasonably requested by DISB:
(1) The Eligible Recipient’s annual revenues in the prior fiscal year;
(2) The number of the Eligible Recipient’s full-time and part-time equivalent employees, including those who are District residents by ward, and number of jobs created and retained as a result of the loan for the Eligible Recipient; and
(3) Any additional documentation and information DISB reasonably requires.
2906.2 Failure to file a complete annual report or comply with any required covenants under § 2901 through § 2906 of this chapter may result in a fine of twenty-five dollars ($25.00) per day for each violation. This fine shall not exceed one percent (1%) of the Enrolled Loan for each violation. It shall be payable by the Eligible Recipient and any owner of the Eligible Recipient who owns at least twenty percent (20%) interest in the Eligible Recipient.
2906.3 DISB may, in its sole discretion, terminate its obligation to enroll loans under the Collateral Support Program by issuing a notice of termination to an Eligible Lender. The termination shall apply on the effective date specified in the notice of termination, except that the termination shall not apply to any Enrolled Loan that is made on or before the date on which the Eligible Lender receives the notice of termination.
2907-2909 RESERVED
2910 LOAN PARTICIPATION PROGRAM
2910.1 The Loan Participation Program shall purchase participation interests in loans, including principal and interest, made by an Eligible Lender to certain Eligible Recipients that exhibit short-term cash flow deficiencies or lack equity or sufficient collateral resources.
2910.2 DISB may purchase up to fifty percent (50%) of the loan amount but no more than one million dollars ($1,000,000). The maximum term of an Enrolled Loan shall not exceed seven (7) years. DISB may purchase participation interests at subsidized interest rates or may assume a subordinated lien position in the event of default.
2911 ELIGIBLE LENDERS – LOAN PARTICIPATION PROGRAM
2911.1 An Eligible Lender for the Loan Participation Program shall be:
(a) A federally insured commercial lender;
(b) A federally insured credit union; or
(c) A Community Development Financial Institution.
2911.2 An Eligible Lender shall enroll in the Loan Participation Program by providing to DISB:
(a) A signed State Small Business Credit Initiative Participation Agreement with DISB;
(b) A certification that it is in compliance with the requirements of 31 C.F.R. § 1020.220;
(c) A certification that, consistent with OMB Circular A-129, it has at least twenty percent (20%) of its own capital at risk in any loan enrolled in the District SSBCI Programs, unless a waiver is granted;
(d) A certification that no principal of the lender has been convicted of a sex offense against a minor as such term is defined in Section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. § 16911); and
(e) Any other document necessary for the administration of the District SSBCI Programs or for compliance with the U.S. Treasury’s SSBCI.
2912 ELIGIBLE RECIPIENTS – LOAN PARTICIPATION PROGRAM
2912.1 An Eligible Recipient under the Loan Participation Program shall:
(a) Be a non-public company that is registered in the District and is subject to tax under the laws of the District;
(b) Have, or sign an agreement pledging that it will have within six (6) months after funding:
(1) Its principal offices within the District, demonstrated by a lease or a deed; and
(2) At least seventy-five percent (75%) of its employees, including those of its affiliates and subsidiaries, working in the District;
(c) Have less than seven hundred and fifty (750) existing employees, including those of its affiliates and subsidiaries; and
(d) Provide, or sign an agreement pledging that it will provide, within six (6) months after funding, at least twenty-five percent (25%) of its W-2 employee positions to District residents.
2912.2 If the funding from the District of Columbia is three hundred thousand dollars ($300,000) or more, the requirement stated in § 2912.1(d) shall be met by an executed First Source Agreement.
2912.3 The provisions of §§ 2911.1 – 2912.2 may be waived, and the deadlines extended, in whole or in part, by the Commissioner if the Eligible Recipient demonstrates a reasonable need for waiver and if such waiver will not violate the SSBCI Guidelines of the U.S. Department of the Treasury.
2912.4 The Eligible Recipient and any owner of the Eligible Recipient owning at least twenty percent (20%) interest in the Eligible Recipient shall execute covenants, pledging to continue to comply with the Program requirements of maintaining its principal offices within the District and providing at least twenty-five percent (25%) of its W-2 employee positions to District residents.
2912.5 An Eligible Recipient shall not be:
(a) An executive officer, director, or principal shareholder of the financial institution or qualified non-profit organization enrolling the loan;
(b) A member of the immediate family of an executive officer, director, or principal shareholder of the financial institution or qualified non-profit organization enrolling the loan;
(c) A related interest of such an executive officer, director, principal shareholder, or member of the immediate family;
(d) A business engaged in speculative activities that develop profits from fluctuations in price rather than through normal course of trade, such as wildcatting for oil or dealing in commodities futures, unless those activities are incidental to the regular activities of the business and part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business;
(e) A business that earns more than half of its annual net revenue from lending activities, unless the business is a non-bank or non-bank holding company or Community Development Financial Institution;
(f) A business engaged in pyramid sales, where a participant's primary incentive is based on the sales made by an ever-increasing number of participants; or
(g) A business engaged in activities that are prohibited by federal or District of Columbia law.
2912.6 For the purpose of these Eligible Recipient restrictions, as described in § 2912.5 (a), (b) and (c) above, the terms “executive officer,” “director,” “principal shareholder,” “immediate family,” and “related interest” refer to the same relationship to a financial institution lender or qualified non-profit organization as the relationship described in 12 C.F.R. part 215, or any successor to such part.
2912.7 Eligible Recipients under the Loan Participation Program shall certify that no principal of the Eligible Recipient has been convicted of a sex offense against a minor as such term is defined in Section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. § 16911).
2912.8 For the purposes of the certification required in § 2911.2(d) and § 2912.7, “principal” is defined as:
(a) If a sole proprietorship, the proprietor;
(b) If a partnership, each managing partner and each partner who holds twenty percent (20%) or more ownership interest in the partnership; or
(c) If a corporation, limited liability company, association or a development company, each director, each of the five (5) most highly compensated executives, officers, or employees of the entity, and each direct or indirect holder of twenty percent (20%) or more of the ownership stock or stock equivalent of the entity.
2913 LOAN REQUIREMENTS – LOAN PARTICIPATION PROGRAM
2913.1 Loans facilitated by the Loan Participation Program shall be used for a business purpose, including working capital, inventory, expansion, renovations, start-up costs, and refinancing. The entire proceeds of the loan or investment shall be used within the District.
2913.2 The loan proceeds from the Loan Participation Program shall not be used:
(a) To repay delinquent federal or District of Columbia income taxes unless the Eligible Recipient has a payment plan in place with the relevant taxing authority;
(b) To repay taxes held in trust or escrow, for example, payroll or sales taxes;
(c) To reimburse funds owed to any owner, including any equity injection or injection of capital for the business’s continuance;
(d) To purchase any portion of the ownership interest of any owner of the business;
(e) To acquire or hold passive investments;
(f) For refinancing of existing debt, other than a refinancing permitted by § 2914.13;
(g) For legal or illegal gambling; or
(h) For evangelizing, proselytizing, or lobbying.
2913.3 Personal guarantees are required from any individual holding twenty percent (20%) or more ownership interest in the Eligible Recipient.
2913.4 An Eligible Lender shall file a loan for enrollment in the Loan Participation Program by:
(a) Delivering to DISB, within five (5) business days before the Eligible Lender closes the loan, a copy of the District SSBCI Program Enrollment executed by an authorized officer of the Eligible Lender;
(b) Providing DISB with any other documentation or information related to the loan that DISB requires; and
(c) Complying with any other enrollment procedures that DISB may reasonably require in writing.
2913.5 The filing of a loan for enrollment shall be considered to occur on the date on which the Eligible Lender submits to DISB the documentation requested by DISB in § 2913.4.
2913.6 DISB shall review the loan and related transaction documents that memorialize the terms and conditions of the loan, and DISB shall issue a final approval if the loan, Eligible Lender, Eligible Recipient, and other aspects of the transaction are determined to comply and satisfy all applicable requirements.
2913.7 If DISB issues a final approval of the loan, the Eligible Lender and Eligible Recipient shall execute all documentation requested by DISB to memorialize the terms and conditions of the loan to be enrolled in the Loan Participation Program.
2913.8 The Eligible Lender, Eligible Recipient, and all other parties to the transaction shall execute all of the documents required to close or settle the transaction. The terms, conditions, and material language of the executed documents shall be consistent with those upon which DISB issued a final approval.
2913.9 The loan shall be considered enrolled in the Loan Participation Program when DISB receives copies of all executed transaction documents that it previously approved and submits a funding request to Office of the Chief Financial Officer.
2914 PARTICIPATION REQUIREMENTS – LOAN PARTICIPATION PROGRAM
2914.1 To 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.
2914.2 Under 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.
2914.3 If 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.
2914.4 To qualify for a Standard Loan Participation category, an Eligible Recipient need not meet any of the five (5) additional enrollment criteria described in § 2914.11.
2914.5 Under the Interest Subsidy Loan Participation category, 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 equal to half of the percentage per annum charged by the Eligible Lender on the Enrolled Loan to the Eligible Recipient.
2914.6 If 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 Interest Subsidy 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.
2914.7 To qualify for an Interest Subsidy Loan Participation category, an Eligible Recipient shall meet at least one (1), but not more than four (4), of the five (5) additional enrollment criteria described in § 2914.11.
2914.8 Under the Interest Subsidy Subordinated Loan Participation category, 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 equal to half of the percentage per annum charged by the Eligible Lender on the Enrolled Loan to the Eligible Recipient.
2914.9 If 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 Interest Subsidy Subordinated Loan Participation, the amounts owed by the Eligible Recipient to DISB with respect to a loan participation shall be subordinated to amounts owed by the Eligible Recipient to the Eligible Lender.
2914.10 To qualify for an Interest Subsidy Subordinated Loan Participation, an Eligible Recipient shall meet at least two (2) and up to five (5) of the additional enrollment criteria described in § 2914.11. Qualification under this category may be subject to additional criteria, as determined by the Commissioner, to 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 sixty (660) or higher (lower credit scores may be allowed with a reasonable explanation).
2914.11 Additional enrollment criteria for qualification under the enrollment categories described in §§ 2914.1 – 2914.10 above are as follows:
(a) Employment of District residents:
(1) An Eligible Recipient shall employ District residents in at least forty percent (40%) of the Eligible Recipient’s total full-time equivalent positions.
(2) In lieu of the employment required in paragraph (1) of this subsection, the Eligible Recipient shall sign an agreement pledging that the Eligible Recipient will hire District residents in at least forty percent (40%) of the Eligible Recipient’s total full-time equivalent positions within six (6) months after funding.
(3) An Eligible Recipient shall maintain forty percent (40%) full-time equivalent District employees for the duration of the Enrolled Loan.
(4) The six (6) month period for compliance may be extended at the discretion of the Commissioner if the Eligible Recipient demonstrates a reasonable need for extension.
(b) 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.
(c) An Eligible Recipient shall:
(1) Be a certified business enterprise, as identified under D.C. Official Code §§ 2-218 et seq. or pledge to become a certified business enterprise within six (6) months of funding; or
(2) Have more than fifty percent (50%) of its business enterprise minority-owned or woman-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.
2914.12 The Eligible Recipient and any owner of the Eligible Recipient owning at least twenty percent (20%) interest in the Eligible Recipient shall execute covenants, pledging to continue to comply with each additional enrollment criteria as described under § 2914.11 for the enrollment option chosen by the Eligible Recipient.
2914.13 A loan or line of credit refinanced from a different lender may be enrolled in the Loan Participation Program. 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.
2914.14 If 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.
2914.15 To renew an enrolled line of credit or extend the maturity date of an enrolled line of credit:
(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; and
(c) DISB shall receive a new enrollment form.
2914.16 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.
2914.17 If 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.
2914.18 DISB 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.
2914.19 The 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.
2914.20 DISB 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.
2914.21 For 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.
2914.22 The 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.
2914.23 The 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.
2914.24 The 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.
2915 REPORTING REQUIREMENTS – LOAN PARTICIPATION PROGRAM
2915.1 Each Eligible Lender and Eligible Recipient shall make the following reports:
(a) If an Enrolled Loan account becomes delinquent and falls sixty (60) days past its due date, the Eligible Lender shall notify DISB in writing within ten (10) business days of the delinquency.
(b) The Eligible Lender shall submit to DISB annually, within thirty (30) days after the year-end, a report listing borrowers and outstanding balances of all Enrolled Loans as of the end of that preceding year.
(1) In computing the aggregate outstanding balances of all Enrolled Loans, the balance of any loan shall be no greater than the covered amount of the loan as enrolled.
(2) For lines of credit, the outstanding balance shall be the enrolled line of credit amount.
(3) The report shall include the following information, in addition to any other information DISB reasonably requests:
(A) Name of Eligible Recipient;
(B) Amount of loan;
(C) Amount of Enrolled Loan;
(D) Type of loan (Term or Line);
(E) Outstanding balance of loan;
(F) If a term loan, the enrollment date and the lesser of the outstanding balance or the Enrolled Loan amount;
(G) If a line of credit, the enrolled line of credit amount and the maturity date;
(H) Payment history related to Enrolled Loan; and
(I) Lender’s most recently completed internal loan review and quality rating for an Eligible Recipient.
(c) Each Eligible Recipient shall submit the following information to DISB within sixty (60) days after the year-end and at any other time DISB reasonably requests:
(1) The Eligible Recipient’s annual revenues in the prior fiscal year;
(2) The number of the Eligible Recipient’s full-time and part-time equivalent employees, including those who are District residents by ward, and number of jobs created and retained as a result of the loan for the Eligible Recipient; and
(3) Any additional documentation and information DISB reasonably requires.
2915.2 Failure to file a complete annual report or comply with any required covenants under §§ 2910 – 2915 of this chapter may result in a fine of twenty-five dollars ($25.00) per day for each violation. This fine shall not exceed one percent (1%) of the Enrolled Loan for each violation. It shall be payable by the Eligible Recipient and any owner of the Eligible Recipient who owns at least twenty percent (20%) interest in the Eligible Recipient.
2915.3 DISB may terminate its obligation to enroll loans under the Loan Participation Program. The termination shall apply on the effective date specified in the notice of termination, except that the termination shall not apply to any Enrolled Loan that is made on or before the date on which the Eligible Lender receives the notice of termination.
2916-2919 RESERVED
2920 INNOVATION FINANCE PROGRAM
2920.1 The Innovation Finance Program shall provide capital to Innovation Finance Companies, which shall be co-invested into Eligible Recipients seeking innovative financing alternatives to traditional commercial financing.
2920.2 DISB may provide capital of up to fifty percent (50%) of the investment but no more than five hundred thousand dollars ($500,000). Where applicable, principal and interest repayments on an investment may be deferred until the occurrence of a liquidity event, as described in §§ 2920.3 – 2920.5.
2920.3 A liquidity event shall occur in any transaction in which the Innovation Finance Company receives: cash or equity securities having a “readily determinable fair value,” as defined by the Financial Accounting Standards Board Accounting Standards Codification, as amended (“marketable securities”), in exchange for securities of the Eligible Recipient (or any securities into which such securities are converted or for which such securities are exchanged).
2920.4 Any payment to an Innovation Finance Company, including dividends and payments of principal or interest, shall be considered a liquidity event.
2920.5 Share exchanges and other similar transactions shall not be considered liquidity events to the extent that DISB’s interest in the Eligible Recipient is not tendered for cash or a marketable security. The liquidity horizon shall not exceed ten (10) years.
2920.6 An Innovation Finance Company’s failure to liquidate its investment in an Eligible Recipient and to pay the District its pro-rata share of the initial investment and return on investment shall be included in the loan documents or limited partnership agreement between DISB and the Innovation Finance Company as an event of default.
2921 INNOVATION FINANCE COMPANY - INNOVATION FINANCE PROGRAM
2921.1 An Innovation Finance Company shall demonstrate to the Commissioner that it has a track record of positive return on investment and be an entity in one of the following categories:
(a) Certified by the U.S. Treasury Department’s CDFI Fund as a Community Development Financial Institution;
(b) Registered as a Business Development Company, as defined under the Investment Company Act of 1940;
(c) Certified by the U.S. Small Business Administration as a Small Business Investment Company (SBIC), New Market Venture Capital Company, or Rural Business Investment Company; or
(d) Any other entity that has at least five million ($5,000,000) of assets under management and demonstrates to the Commissioner that it has qualified management and staff.
2921.2 An Innovation Finance Company shall enroll in the Innovation Finance Program by providing to DISB:
(a) An application for enrollment;
(b) A signed Innovation Finance Program Participation Agreement with DISB;
(c) A certification that it is in compliance with the requirements of the District of Columbia and federal securities laws;
(d) A certification that, consistent with OMB Circular A-129, it has at least twenty percent (20%) of its own capital at risk in any investment enrolled in the Innovation Finance Program, unless a waiver is granted;
(e) A certification that no principal of the Innovation Finance Company has been convicted of a sex offense against a minor as such term is defined in Section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. § 16911); and
(f) Any other document DISB determines is necessary for the administration of the District SSBCI Programs or for compliance with the U.S. Treasury’s SSBCI.
2922 ELIGIBLE RECIPIENTS AND INVESTMENT
REQUIREMENTS – INNOVATION FINANCE PROGRAM
2922.1 If an Innovation Finance Company files an investment for enrollment in the Innovation Finance Program, the Innovation Finance Company shall elect which category of enrollment it qualifies for and shall submit written evidence demonstrating that the investment qualifies under the category.
2922.2 Enrollment Category 1: Standard Co-Investment. To qualify for a Standard Co-Investment, an Eligible Recipient shall:
(a) Be a non-public company that is registered in the District and is subject to tax under the laws of the District;
(b) Have, or sign an agreement pledging that it will have within six (6) months after funding:
(1) Its principal offices within the District, demonstrated by a lease or a deed; and
(2) At least seventy-five percent (75%) of its employees, including those of its affiliates and subsidiaries, working in the District;
(c) Have less than seven hundred and fifty (750) existing employees, including those of its affiliates and subsidiaries; and
(d) Provide, or sign an agreement pledging that it will provide, within six (6) months after funding, at least twenty-five percent (25%) of its W-2 employee positions to District residents.
2922.3 If the funding from the District of Columbia is three hundred thousand dollars ($300,000) or more, the requirement stated in § 2922.2(d) shall be met by an executed First Source Agreement.
2922.4 The provisions of § 2922.2 may be waived, and the deadlines extended, in whole or in part, by the Commissioner if the Eligible Recipient demonstrates a reasonable need for waiver and if the waiver will not violate the SSBCI Guidelines of the U.S. Department of the Treasury.
2922.5 The Eligible Recipient and any owner of the Eligible Recipient owning at least a twenty percent (20%) interest in the Eligible Recipient shall execute covenants, pledging to continue to comply with the Program requirements of maintaining its principal offices within the District and to providing at least twenty-five percent (25%) of its W-2 employee positions to District residents.
2922.6 In addition to its own pro rata share in the total return on investment (ROI) on a performing investment, the Innovation Finance Company shall receive a maximum of twenty-five percent (25%) of DISB’s pro rata share of the total ROI.
2922.7 Enrollment Category 2: Enhanced Co-Investment. To qualify for Enhanced Co-Investment, an Eligible Recipient shall:
(a) Be a non-public company that is registered in the District and is subject to tax under the laws of the District;
(b) Have, or sign an agreement pledging that it will have within six (6) months after funding:
(1) Its principal offices within the District, demonstrated by a lease or a deed; and
(2) At least seventy-five percent (75%) of its employees, including those of its affiliates and subsidiaries, working in the District;
(c) Have less than seven hundred and fifty (750) existing employees, including those of its affiliates and subsidiaries; and
(d) Provide, or sign an agreement pledging that it will provide within six (6) months after funding, at least twenty-five percent (25%) of its W-2 employee positions to District residents.
2922.8 If the funding from the District of Columbia is three hundred thousand dollars ($300,000) or more, the requirement stated in § 2922.7(d) shall be met by an executed First Source Agreement.
2922.9 The provisions under § 2922.7 may be waived, and the deadlines extended, in whole or in part, by the Commissioner if the Eligible Recipient demonstrates a reasonable need for waiver and if such waiver will not violate the SSBCI Guidelines of the U.S. Department of the Treasury.
2922.10 An Eligible Recipient of Enhanced Co-Investment shall also sign an agreement to comply with at least one (1), but not more than three (3), of the following additional enrollment criteria for which an enhanced co-investment return of five percent (5%) shall be provided for each:
(a) Employment of District residents.
(1) The Eligible Recipient shall employ District residents in at least forty percent (40%) of the Eligible Recipient’s total full-time equivalent positions or sign an agreement pledging that the Eligible Recipient will hire District residents in at least forty percent (40%) of the Eligible Recipient’s total full-time equivalent positions within six (6) months after funding; and
(2) The Eligible Recipient shall maintain forty percent (40%) full-time equivalent District employees for the duration of the Enrolled Loan;
(b) The 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 Act, 26 U.S.C. § 51(d). The agreement shall endure for the duration of the Enrolled Investment;
(c) The Eligible Recipient shall meet at least one (1) of the following:
(1) Be a certified business enterprise, as identified under D.C. Official Code §§ 2-218 et seq., or pledge to become a certified business enterprise within six (6) months of funding; or
(2) Has more than fifty percent (50%) of the business enterprise of the Eligible Recipient minority-owned or woman-owned;
(d) The Eligible Recipient shall have its principal office located in a census tract where the poverty rate exceeds twenty percent (20%); and
(e) The Eligible Recipient shall have its principal office located on retail priority areas as identified under D.C. Official Code § 2-1217.73.
2922.11 The Eligible Recipient of Enhanced Co-Investment, and any owner of the Eligible Recipient owning at least twenty percent (20%) interest in the Eligible Recipient shall execute covenants pledging to continue to comply with the additional enrollment criteria as described under § 2922.10 for the enrollment category chosen by the Eligible Recipient.
2922.12 In addition to its own pro rata share in the total ROI on a performing investment, the Innovation Finance Company shall receive the minimum twenty-five percent (25%) share of DISB’s pro rata share of the total ROI and shall receive an additional five percent (5%), up to a total of forty percent (40%) of DISB’s pro rata share of the total ROI, for each of the economic development goals stated in
§ 2922
1.10 that are met.2922.13 In both categories of enrollment, DISB shall receive the proportional benefit of all amounts received from the Eligible Recipient or realized from the Eligible Recipient’s collateral following default or loss.
2922.14 An Enrolled Investment may be used to refinance a loan or line of credit from a different lender under the Innovation Finance Program.
2922.15 An Eligible Recipient shall not be:
(a) An executive officer, director, or principal shareholder of the Innovation Finance Company enrolling the investment;
(b) A member of the immediate family of an executive officer, director, or principal shareholder of the Innovation Finance Company enrolling the investment;
(c) A related interest of an executive officer, director, principal shareholder, or member of the immediate family;
(d) A business engaged in speculative activities that develop profits from fluctuations in price rather than through the normal course of trade, such as wildcatting for oil or dealing in commodities futures, unless those activities are incidental to the regular activities of the business and part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business;
(e) A business that earns more than half of its annual net revenue from lending activities, unless the business is a non-bank or non-bank holding company or community development financial institution;
(f) A business engaged in pyramid sales, where a participant's primary incentive is based on the sales made by an ever-increasing number of participants; or
(g) A business engaged in activities that are prohibited by federal or District of Columbia law.
2922.16 For the purpose of these Eligible Recipient restrictions, as described in § 2922.1
35(a), (b), and (c) above, the terms “executive officer,” “director,” “principal shareholder,” “immediate family,” and “related interest” refer to the same relationship to an Innovation Finance Company as the relationship described in 12 C.F. R. part 215 or any successor to such part.2922.17 An Eligible Recipient
sunder the Innovation Finance Program shall certify that no principal of the Eligible Recipient has been convicted of a sex offense against a minor as such term is defined in Section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. § 16911).2922.18 For the purposes of the certification required under § 2921.2(e) and § 2922.17, “principal” is defined as:
(a) If a sole proprietorship, the proprietor;
(b) If a partnership, each managing partner and each partner who holds twenty percent (20%) or more ownership interest in the partnership; or
(c) If a corporation, limited liability company, association or a development company, each director, each of the five (5) most highly compensated executives, officers, or employees of the entity, and each direct or indirect holder of twenty percent (20%) or more of the ownership stock or stock equivalent of the entity.
2922.19 An Eligible Recipient shall use the investments facilitated by the Innovation Finance Program for a business purpose, including working capital, inventory, expansion, renovations, start-up costs, and refinancing. The entire proceeds of the investment shall be used within the District.
2922.20 The investment from the Innovation Finance Program shall not be used:
(a) To repay delinquent federal or District of Columbia income taxes unless the Eligible Recipient has a payment plan in place with the relevant taxing authority;
(b) To repay taxes held in trust or escrow, for example, payroll or sales taxes;
(c) To reimburse funds owed to any owner, including any equity injection or injection of capital for the business’s continuance;
(d) To purchase any portion of the ownership interest of any owner of the business;
(e) To acquire or hold passive investments;
(f) For legal or illegal gambling; or
(g) For evangelizing, proselytizing, or lobbying.
2922.21 An Innovation Finance Company shall file an investment for enrollment in the Innovation Finance Program by:
(a) Delivering to DISB, within thirty (30) business days before funding, a copy of the District SSBCI Program Enrollment Form executed by an authorized officer of the Innovation Finance Company;
(b) Providing DISB with any other documentation and information related to the investment that DISB requires; and
(c) Complying with any other enrollment procedures that DISB may reasonably require in writing.
2922.22 The filing of an investment for enrollment shall be considered to occur on the date on which the Innovation Finance Company submits to DISB the documentation requested by DISB in § 2922.21.
2922.23 DISB shall review the investment and related transaction documents that memorialize the terms and conditions of the investment, and DISB shall issue a final approval if the investment, Innovation Finance Company, Eligible Recipient, and other aspects of the transaction are determined to comply and satisfy all applicable requirements.
2922.24 The Innovation Finance Company and Eligible Recipient shall execute all documentation requested by DISB to memorialize the terms and conditions of the investment to be enrolled in the Innovation Finance Program.
2922.25 The Innovation Finance Company, Eligible Recipient, and all other parties to the transaction shall execute all of the documents required to close or settle the transaction. The terms, conditions, and material language of the executed documents shall be consistent with those upon which DISB issued a final approval.
2922.26 The investment shall be considered enrolled in the Finance Innovation Program when DISB receives copies of all executed transaction documents that it previously approved and submits a funding request to Office of the Chief Financial Officer.
2922.27 DISB shall not commit capital from SSBCI Program Funds to an Innovation Finance Company until the Innovation Finance Company receives from other investors a matching commitment of at least the same amount to be invested by the District. Draws against SSBCI Program Fund commitments shall not exceed the Program Fund’s pro rata share of the aggregate commitments to the Innovation Finance Program funds from all investors.
2923 REPORTING REQUIREMENTS – INNOVATION FINANCE PROGRAM
2923.1 Each Eligible Recipient under the Innovation Finance Program shall annually submit the following information to DISB within sixty (60) days after the year-end and at any other time DISB reasonably requests:
(a) The Eligible Recipient’s annual revenues, if any, in the prior fiscal year;
(b) The number of the Eligible Recipient’s full-time and part-time equivalent employees, including those who are District residents by ward, and the number of jobs created and retained as a result of the investment for the Eligible Recipient; and
(c) Any additional documentation and information DISB reasonably requires.
2923.2 Failure to file a complete annual report or comply with any required covenants under § 2920 through § 2923 of this chapter shall result in a fine of twenty-five dollars ($25.00) per day for each violation. This fine shall not exceed one percent (1%) of the Enrolled Investment for each violation. It shall be payable by the Eligible Recipient and any owner of the Eligible Recipient, owning at least twenty percent (20%) interest in the Eligible Recipient.
2923.3 DISB may terminate its obligation to enroll investments under the Innovation Finance Program by issuing a notice of termination to an Innovation Finance Company. The termination shall apply on the effective date specified in the notice of termination, except that the termination shall not apply to any Enrolled Loan or Enrolled Investment that is made on or before the date on which the notice of termination is received by the Innovation Finance Company.
2924-2998 RESERVED
2999 DEFINITIONS
Capital: A loan, line of credit, any credit facility, or investment made in exchange for an interest in the ownership of the entity receiving the investment.
Community Development Financial Institution: A financial institution certified by the U.S. Department of the Treasury as a Community Development Financial Institution.
Eligible Lender: Any federally insured commercial lender, federally insured credit union, or Community Development Financial Institution.
Enrolled Investment: An investment enrolled in one (1) or more SSBCI Programs.
Enrolled Loan: A loan, line of credit, or other facility enrolled in one (1) or more SSBCI Programs.
Full-Time Equivalent: Employee count based on a two thousand (2000)
-hour year. This count includes seasonal and part-time employees based on the proportion of a two thousand (2000)-hour year worked.Innovation Finance Company: Any Community Development Financial Institution, Business Development Company, Small Business Investment Company, New Market Venture Capital Company, Rural Business Investment Company, or any entity that has five million dollars ($5,000,000) of assets under management and can demonstrate qualified management and staff.
Liquidity Horizon: The time required to exit the investment.
[S1]New, not in the NEPRM. See preamble for explanation.
