[§210-7.5]  Loans guaranteed by the
department.  (a)  The department may guarantee up to ninety per cent of the
principal balance of a loan made to a qualified small business concern by a
private lender who is unable to otherwise lend the applicant sufficient funds
at reasonable rates; provided that at no time shall the aggregate amount of the
State's liability, contingent or otherwise, on loans guaranteed under this
section exceed $10,000,000 based on a reserve level established at twenty-five
per cent of the loan guarantee amount, with the reserve amount to be funded
being calculated by determining the difference between the capital loan
revolving fund balance at the beginning of each fiscal year and its annual
authorization ceiling, excluding capital loan balances allocated to underground
storage tank projects.



(b)  Loans guaranteed under this section shall
be limited by section 210-6, except that through regulation, the department may
specify:



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



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



(3)  The specific types of loans that may be
guaranteed under this program, consistent with paragraph (1), including product
export financing, contract order- based loans, and processing plant or factory
loans.



(c)  Interest charged on a guaranteed loan made
under this section shall be determined by the department based on the market
rate of interest charged by the private lender for a similar type of loan
unless waived by the director.



(d)  When the application for a guaranteed loan
has been approved by the department, the department shall issue to the lender a
guaranty for that percentage of the loan on which it guarantees payment of
principal and interest.  The lender shall collect all payments from the borrower
and 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 amount
of the guaranteed portion of the loan, at the time the loan is booked, except
for the following:



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



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



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



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



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



(h)  Should the lender deem that foreclosure
proceedings are necessary to collect moneys due from the borrower, it shall so
notify the department.  Within thirty days of the notification, the department
may elect to request an assignment of the loan on payment in full to the lender
of the principal balance and interest due.  Foreclosure proceedings shall be
held in abeyance in the interim.



(i)  The lender may reduce the percentage of
the principal balance guaranteed under this section at any time. [L
1998, c 104, §2]