[§210-7.5]  Loans guaranteed by thedepartment.  (a)  The department may guarantee up to ninety per cent of theprincipal balance of a loan made to a qualified small business concern by aprivate lender who is unable to otherwise lend the applicant sufficient fundsat reasonable rates; provided that at no time shall the aggregate amount of theState's liability, contingent or otherwise, on loans guaranteed under thissection exceed $10,000,000 based on a reserve level established at twenty-fiveper cent of the loan guarantee amount, with the reserve amount to be fundedbeing calculated by determining the difference between the capital loanrevolving fund balance at the beginning of each fiscal year and its annualauthorization ceiling, excluding capital loan balances allocated to undergroundstorage tank projects.

(b)  Loans guaranteed under this section shallbe limited by section 210-6, except that through regulation, the department mayspecify:

(1)  That loan guarantees are to be limited tobusinesses in industries identified by rule as offering significant potentialcontributions to the growth or diversification of the State's economic base;

(2)  The conditions under which the State may become aco- guarantor or a subordinate guarantor to a loan guarantee offered by afederal government program; and

(3)  The specific types of loans that may beguaranteed under this program, consistent with paragraph (1), including productexport financing, contract order- based loans, and processing plant or factoryloans.

(c)  Interest charged on a guaranteed loan madeunder this section shall be determined by the department based on the marketrate of interest charged by the private lender for a similar type of loanunless waived by the director.

(d)  When the application for a guaranteed loanhas been approved by the department, the department shall issue to the lender aguaranty for that percentage of the loan on which it guarantees payment ofprincipal and interest.  The lender shall collect all payments from the borrowerand otherwise service the loan.

(e)  In return for the department's guaranty,the lender shall remit a one-time fee of two per cent on the principal amountof the guaranteed portion of the loan, at the time the loan is booked, exceptfor the following:

(1)  On loans of $75,000 or less with a maturityexceeding twelve months, a reduced fee of one per cent; and

(2)  On loans with a maturity of twelve months orless, a reduced fee of one per cent shall be paid.

This fee may be paid by the borrower as a cost forthe loan.

(f)  When any installment of principal andinterest has been due for sixty days and has not been paid by the borrower, thedepartment shall issue, on request of the lender, a check for the percentage ofthe overdue payment guaranteed, thereby acquiring a division of interest in thecollateral pledged by the borrower in proportion to the amount of the payment.The department shall be reimbursed for any amounts so paid plus the applicableinterest rate, where payment is collected from the borrower.

(g)  Under conditions specified in rulesadopted by the department, the lender may request that a portion or all of theguaranteed percentage of the principal balance of the loan be converted to aparticipating share held by the department.

(h)  Should the lender deem that foreclosureproceedings are necessary to collect moneys due from the borrower, it shall sonotify the department.  Within thirty days of the notification, the departmentmay elect to request an assignment of the loan on payment in full to the lenderof the principal balance and interest due.  Foreclosure proceedings shall beheld in abeyance in the interim.

(i)  The lender may reduce the percentage ofthe principal balance guaranteed under this section at any time. [L1998, c 104, §2]