CHAPTER 29. CAPITAL ACCESS PROGRAM
IC 5-28-29
Chapter 29. Capital Access Program
IC 5-28-29-1
"Agreement"
Sec. 1. As used in this chapter, "agreement" means an agreementbetween a lender and the corporation under which a lender mayparticipate in the program.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-2
"Amount"; "proceeds"
Sec. 2. As used in this chapter in connection with a loan,"amount" and "proceeds" refer only to the amount covered under anagreement, unless the context clearly requires otherwise.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-3
"Borrower"
Sec. 3. As used in this chapter, "borrower" means the recipient ofa loan that is, has been, or will be filed by the lender for enrollmentunder the program and meets the following requirements:
(1) The borrower is a corporation, limited liability company,partnership, joint venture, sole proprietorship, cooperative, orother entity, whether profit or nonprofit, that is authorized toconduct business in Indiana.
(2) The borrower is not an executive officer, a director, or aprincipal shareholder of the lender, a member of the immediatefamily of an executive officer, a director, or a principalshareholder of the lender, or an entity controlled by anexecutive officer, a director, a principal shareholder, or amember of the immediate family.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-4
"Capital access account"
Sec. 4. As used in this chapter, "capital access account" means anaccount created by the corporation for the purposes of the capitalaccess program.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-5
"Claim"
Sec. 5. As used in this chapter, "claim" means a claim filed by thelender under section 29 of this chapter.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-6
"Early loan"
Sec. 6. As used in this chapter, "early loan" means an enrolled
loan when at the time of its enrollment the total amount of previouslyenrolled loans made by the lender under the program was less thanfive million dollars ($5,000,000).
As added by P.L.162-2007, SEC.24.
IC 5-28-29-7
"Eligible loan"
Sec. 7. As used in this chapter, "eligible loan" means a loan madeby the lender to a borrower that meets the requirements of sections17 and 18 of this chapter.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-8
"Enrolled loan"
Sec. 8. As used in this chapter, "enrolled loan" means a loanenrolled by the corporation under the terms of section 19 of thischapter.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-9
"Lender"
Sec. 9. As used in this chapter, "lender" means a financialinstitution (as defined in IC 5-13-4-10) that has entered into anagreement with the corporation to participate in the program.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-10
"Passive real estate ownership"
Sec. 10. As used in this chapter, "passive real estate ownership"means ownership of real estate for the purpose of deriving incomefrom speculation, trade, or rentals, except that the term does notinclude the following:
(1) Ownership of that part of real estate being used or intendedto be used for the operation of the business of the owner of thereal estate.
(2) Ownership of real estate for the purpose of construction orrenovation until the completion of the construction orrenovation phase.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-11
"Program"
Sec. 11. As used in this chapter, "program" refers to the capitalaccess program created by this chapter.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-12
"Reserve fund"
Sec. 12. As used in this chapter, "reserve fund" means an accountestablished by the corporation with funds accumulated under this
chapter and to cover claims made by the lender under this chapter.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-13
Establishment; purpose
Sec. 13. The capital access program is established. The purposeof the program is to provide capital to businesses, particularly smalland medium-sized businesses, to foster economic development inIndiana. Loans made under the program must be slightly riskier thanconventional loans, but still offer a high degree of soundness inconnection with the program.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-14
Duties
Sec. 14. The corporation shall do the following:
(1) Administer the program.
(2) Market the program to businesses and other persons inIndiana in cooperation with financial institutions and statewideassociations representing financial institutions.
(3) If the reserve funds are not maintained in an account withthe lender, upon execution of an agreement between the lenderand the corporation, the corporation shall establish a reservefund account at the corporation for the lender for the purpose ofreceiving all required premium charges to be paid by the lenderand the borrower and transfers made by the corporation underthis chapter. If the reserve funds are maintained in an accountwith the lender, upon execution of an agreement between thelender and the corporation, the corporation shall establish areserve fund account with the lender in the name of thecorporation for the purpose of receiving all required premiumcharges to be paid by the lender and the borrower and transfersmade by the corporation under this chapter.
(4) Develop the program, in cooperation with financialinstitutions and statewide associations representing financialinstitutions, so that the degree of flexibility for the corporationand the participating lenders is maximized, the state oversightof individual loans is minimized, and the fiscal integrity of theprogram is maintained.
(5) Enter into any contracts necessary to carry out the program.
(6) Take any action reasonably necessary to ensure compliancewith the program.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-15
Lender eligibility
Sec. 15. A lender is eligible to participate in the program uponentering into an agreement with the corporation governing the dutiesof the corporation and the lender under the program. The lender shallprovide the corporation with information regarding the lender's
participation in the program that the corporation reasonably requires.Upon notice to the lender, the corporation may inspect the files of thelender relating to any loans enrolled under the program duringnormal business hours of the lender.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-16
Corporation has no legal or equitable interest; consent ofcorporation unnecessary to amend documents
Sec. 16. Except upon the exercise of the corporation's right ofsubrogation under section 32 of this chapter, the corporation has nolegal or equitable interest in any collateral, security, or other right ofrecovery in connection with any loan enrolled in the program, andthe corporation's consent is not necessary for any amendment to thelender's loan documents.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-17
Eligible loans
Sec. 17. (a) The following types of loans are eligible loans underthe program:
(1) Loans for industrial or commercial purposes.
(2) Loans to refinance loans made for the purposes insubdivision (1).
(3) Loans for line of credit agreements established between thelender and borrower that are used for the purposes insubdivision (1).
(b) Eligible loans must meet the following criteria:
(1) The lender has not made the loan to enroll in the programprior debt that is not covered under the program and that is orwas owed by the borrower to the lender.
(2) The proceeds of the loan will not be used for that part of aproject or development devoted to housing.
(3) The proceeds of the loan will not be used to finance passivereal estate ownership.
(4) The proceeds of the loan will be used to finance a project orenterprise that is located in Indiana and that will fostereconomic development in Indiana.
(c) An eligible loan may provide for an interest rate, fees, andother terms and conditions agreed to by the lender and borrower. Ifthe loan amount to be borrowed is determined by a commitmentagreement that establishes a line of credit, the amount of the loan isthe maximum amount available to the borrower under the agreement.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-18
Loan enrollment; lender actions
Sec. 18. (a) To enroll a loan under the program, the lender mustfile a completed loan enrollment form with the corporation. Thelender must also certify the following to the corporation as part of the
filing:
(1) The lender has no substantial reason to believe that the loanis being made to a borrower who does not meet therequirements of section 3 of this chapter.
(2) The lender has received from the borrower a writtenrepresentation, warranty, pledge, and waiver stating that theborrower has no legal, beneficial, or equitable interest in thenonrefundable premium charges or any other funds credited tothe reserve fund established to cover losses sustained by thelender on enrolled loans.
(3) The loan being filed for enrollment is an eligible loan undersection 17 of this chapter.
(4) Premium charges required of the borrower and lender underthis chapter have been deposited in the reserve fund.
(b) The lender shall file the loan enrollment form within ten (10)business days after the lender makes the loan. The date on which thelender makes a loan is the earlier of the date on which the lender firstdisburses proceeds of the loan to the borrower or the date on whichthe loan documents have been executed and the lender has obligateditself to disburse proceeds of the loan. The filing date of a loanenrollment form is the date on which the lender does any of thefollowing:
(1) Delivers the required documentation to the corporation.
(2) Delivers the document to a professional courier service fordelivery to the corporation.
(3) Mails the document to the corporation by certified mail.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-19
Loan enrollment; corporation actions
Sec. 19. When the corporation receives a loan enrollment form,the corporation shall enroll the loan if the information providedunder section 18 of this chapter indicates that the loan is an eligibleloan. Within five (5) business days after receipt of a loan enrollmentform for an eligible loan, the corporation shall deliver to the lenderan acknowledgment of enrollment signed by the corporation or thecorporation's designee, including documentation of the amount beingtransferred by the corporation into the reserve fund under thischapter.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-20
Loan enrollment; partial coverage under the program
Sec. 20. When filing a loan enrollment form, the lender mayspecify an amount to be covered under the program. The amount maybe less than the total amount of the loan.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-21
Refinancing Sec. 21. (a) In the case of a loan to refinance a loan previouslymade to the borrower by the lender that was not enrolled under theprogram, the lender may obtain coverage under the program for anamount not exceeding the amount of additional financing.
(b) If an enrolled loan is refinanced and the total amount to becovered under the program does not exceed the covered amount ofthe loan as previously enrolled, the refinanced loan may continue asan enrolled loan without payment of additional premium charges ortransfers by the corporation to the reserve fund.
(c) If an enrolled loan is refinanced in an amount exceeding theamount of the loan as previously enrolled, the lender may obtaincoverage of the amount of the refinanced loan that exceeds theamount covered when the loan was previously enrolled by refilingthe loan for enrollment under section 18 of this chapter.
(d) Fluctuations in the outstanding balance of a line of credit,without increasing the enrolled amount under the program, are not arefinancing of the loan.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-22
Effect of zero balances; effect of recovery under the bankruptcylaws
Sec. 22. (a) If the outstanding balance of an enrolled loan that isnot a line of credit is reduced to zero (0), the loan is no longer anenrolled loan. If an enrolled loan that is a line of credit has anoutstanding balance of zero (0) for a twelve (12) month period, theline of credit is no longer an enrolled loan, unless, before theexpiration of the twelve (12) month period, the lender reaffirms inwriting to the borrower that the line of credit will remain open andthe borrower acknowledges the reaffirmation in writing.
(b) Notwithstanding subsection (a), any amount recovered froma lender by a trustee in bankruptcy (or a similar representative ofcreditors) as a preference under 11 U.S.C. 547 remains an enrolledloan for the purpose of filing a claim against the reserve fund.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-23
Creation of reserve fund accounts
Sec. 23. Upon execution of an agreement between the lender andthe corporation, the corporation shall establish a reserve fundaccount with the lender in the name of the corporation for thepurpose of receiving all required premium charges to be paid by thelender and the borrower and transfers made by the corporation underthis chapter.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-24
Sufficient funds required
Sec. 24. The corporation may not accept loans for enrollment inthe program if the corporation does not have sufficient funds to make
the necessary transfer from the corporation to the reserve fund undersection 25 of this chapter.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-25
Premium charges
Sec. 25. The lender shall determine the premium charges payableto the reserve fund by the lender and the borrower in connection witha loan filed for enrollment. The premium paid by the borrower maynot be less than one and one-half percent (1.5%) or greater than threeand one-half percent (3.5%) of the amount of the loan. The premiumpaid by the lender must be equal to the amount of the premium paidby the borrower. The lender may recover the cost of the lender'spremium payment from the borrower in any manner on which thelender and borrower agree. When enrolling a loan, the corporationmust transfer into the reserve fund from the account premiumamounts determined as follows:
(1) If the amount of a loan, plus the amount of loans previouslyenrolled by the lender, is less than two million dollars($2,000,000), the premium amount transferred must be equal toone hundred fifty percent (150%) of the combined premiumspaid into the reserve fund by the borrower and the lender foreach enrolled loan.
(2) If, before the enrollment of the loan, the amount of loanspreviously enrolled by the lender is equal to or greater than twomillion dollars ($2,000,000), the premium amount transferredmust be equal to the combined premiums paid into the reservefund by the borrower and the lender for each enrolled loan.
(3) If the total amount of all loans previously enrolled by thelender is less than two million dollars ($2,000,000), but theenrollment of a loan will cause the total amount of all enrolledloans made by the lender to exceed two million dollars($2,000,000), the corporation shall transfer into the reserve fundan amount equal to a percentage of the combined premiumspaid into the reserve fund by the lender and the borrower. Thepercentage is determined as follows:
STEP ONE: Multiply by one hundred fifty (150) that part ofthe loan that when added to the total amount of all loanspreviously enrolled by the lender totals two million dollars($2,000,000).
STEP TWO: Multiply the remaining balance of the loan byone hundred (100).
STEP THREE: Add the STEP ONE product to the STEPTWO product.
STEP FOUR: Divide the STEP THREE sum by the totalamount of the loan.
The corporation may transfer two (2) times the amount determinedunder this section to the reserve fund if the borrower is adisadvantaged business enterprise (as defined in IC 5-16-6.5-1). Thecorporation may transfer three (3) times the amount determined
under this section to the reserve fund if the borrower is a high growthcompany with high skilled jobs (as defined in IC 5-28-30-4). Thecorporation may transfer to the reserve fund three (3) times theamount determined under this section if the borrower is a child carefacility. Unless money is paid out of the reserve fund according tothe specific terms of this chapter, all money paid into the reserveaccount by the lender must remain in that account.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-26
Reserve fund; corporation control
Sec. 26. (a) All money credited to the reserve fund is under theexclusive control of the corporation. The corporation may notwithdraw money from the reserve fund, except as specificallyprovided in this chapter.
(b) If money in the reserve fund is not deposited by thecorporation in an account with the lender, the money must beinvested or reinvested by the corporation in one (1) of the following:
(1) Direct obligations of the United States, the principal andinterest of which are unconditionally guaranteed by the UnitedStates.
(2) A deposit account at a depository institution whose depositsare insured by the Federal Deposit Insurance Corporation orNational Credit Union Administration.
(c) All interest earned in a reserve fund account shall be creditedto that account. Fifty percent (50%) of the interest earned may bewithdrawn by the corporation from that account and used for anypurpose.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-27
Reserve fund; corporation pledges
Sec. 27. The corporation shall pledge the following to the lender:
(1) The money in the reserve fund will be available to payclaims under section 29 of this chapter.
(2) The lender will have a first security interest in the money inthe reserve fund to pay the claims.
(3) The corporation will not encumber or pledge the money toany other party.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-28
Reserve fund; transaction reports; records
Sec. 28. (a) If the reserve fund is not maintained with the lender,the corporation shall provide to the lender quarterly transactionreports indicating the following:
(1) The balance in the reserve fund.
(2) Payments and transfers into the reserve fund.
(3) Withdrawals from the reserve fund.
(4) Interest or income earned on money credited to the reserve
fund.
(b) The records of the corporation with respect to all:
(1) payments and transfers into the reserve fund;
(2) withdrawals from the reserve fund; and
(3) interest or income earned on the money credited to thereserve fund;
are available to the lender at the offices of the corporation duringnormal business hours.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-29
Claims; filing
Sec. 29. (a) If the lender charges off all or part of an enrolled loan,the lender may file a claim with the corporation. The claim must befiled contemporaneously with the charge-off.
(b) The lender's claim may include, in addition to the amount ofprincipal charged off plus accrued interest, one-half (1/2) of thereasonable documented out-of-pocket expenses incurred in pursuingcollection efforts, including preservation of collateral. The amountof principal included in the claim may not exceed the principalamount covered under the program. The amount of accrued interestincluded in the claim may not exceed the accrued interest attributableto the covered principal amount.
(c) The lender shall determine when and how much to charge offon an enrolled loan in a manner consistent with the lender's normalmethod for making these determinations on similar loans that are notenrolled loans.
(d) If the lender files two (2) or more claims contemporaneouslyand there are insufficient funds in the reserve fund at that time tocover the entire amount of the claims, the lender may designate theorder of priority in which the corporation shall pay the claims.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-30
Claims; processing
Sec. 30. (a) Upon receipt by the corporation of a claim filed by thelender, the corporation shall, within ten (10) business days, pay orauthorize the lender to withdraw from the reserve fund the amountof the claim as submitted, unless the corporation reasonablydetermines that:
(1) the information provided by the lender to the corporationunder this chapter was known by the lender to be false; or
(2) the lender is not otherwise in substantial compliance withthis chapter or the agreement with the corporation.
(b) If there is insufficient money in the reserve fund to cover theentire amount of the lender's claim, the corporation shall pay to thelender or authorize the lender to withdraw an amount equal to thecurrent balance in the reserve fund, and the following apply:
(1) If the enrolled loan for which the claim has been filed is notan early loan, the payment fully satisfies the claim, and the
lender has no right to receive any further amount from thereserve fund with respect to that claim.
(2) If the enrolled loan for which the claim has been filed is anearly loan, the corporation, upon request of the lender, shall, outof any future funds that are transferred into the reserve fund onsubsequently enrolled loans, pay the remaining balance of theclaim upon finding that:
(A) the partial payment has not satisfied the lender's claim;and
(B) the remaining balance of the claim is not greater thanseventy-five percent (75%) of the balance in the reserve fundat the time the request for payment by the lender is receivedby the corporation.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-31
Claims; subsequent lender recovery
Sec. 31. If, after payment of a claim by the corporation, the lenderrecovers from a borrower any amount for which payment of theclaim was made, the following apply:
(1) If the recovered amount, when added to the claim previouslypaid by the corporation in connection with an enrolled loan,exceeds the lender's loss on that enrolled loan, the lender shallpromptly pay to the corporation for deposit in the reserve fundthe amount of the excess.
(2) For purposes of this section and section 32 of this chapter,the lender's loss on an enrolled loan shall be the amount ofprincipal charged off by the lender plus accrued interest plusone-half (1/2) of the reasonable and documented out-of-pocketexpenses incurred by the lender in pursuing collection efforts.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-32
Claims; subrogation
Sec. 32. (a) If the payment of a claim has fully covered thelender's loss on an enrolled loan or if the payment of a claim whencombined with any recovery from the borrower has fully covered thelender's loss, the corporation, upon request, is subrogated to therights of the lender with respect to any collateral, security, or otherright of recovery in connection with the loan that has not beenrealized by the lender. The lender thereafter shall assign to thecorporation any right, title, or interest to any collateral, security, orother right of recovery in connection with the loan.
(b) If an assignment has been made under subsection (a), thecorporation is not required to undertake the obligations of the lenderunder the lender's loan documents, except for obligations directlyrelated to the corporation's assigned rights of recovery in connectionwith the loan. The lender shall fulfill any other obligations the lenderhas under the loan documents in the same manner and to the samedegree as would be required if the assignment had not been made.
The lender shall provide the corporation with all reasonableassistance the corporation requests in proceeding with respect to anycollateral, security, or other right of recovery, except that the lenderdoes not need to incur any out-of-pocket expenses.
(c) If the corporation desires to exercise the right of subrogationin connection with an enrolled loan, and would be entitled toexercise that right except that the lender's loss has not been fullycovered, the corporation, at the corporation's option, may pay fromfunds in the reserve fund an amount sufficient to result in the lender'sloss being fully covered. A payment under this subsection may covera principal amount not covered under the program or not included inthe lender's claim. Upon making a payment under this subsection, thecorporation is subrogated to the rights of the lender in accordancewith subsection (a).
(d) Notwithstanding any other provision of this section, thecorporation may not exercise the right of subrogation unless thecorporation determines, in the corporation's discretion, that thelender has not exercised reasonable care and diligence in collectionactivities with respect to the loan, or that there is a reasonable basisfor believing that the lender will not exercise reasonable care anddiligence in the future with respect to those collection activities.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-33
Reporting
Sec. 33. (a) Before July 16, October 16, January 16, and April 16of each year, the lender shall file a quarterly report with thecorporation indicating the number and total outstanding balances ofall enrolled loans for the period of the three (3) preceding calendarmonths. A quarterly report is not required for a quarter that ends witha balance in the reserve fund of zero (0), except that a year-endreport must be filed before July 16 for the preceding twelve (12)calendar months ending June 30. In computing the total outstandingbalance of all enrolled loans, the balance of a loan may not be greaterthan the covered amount of the loan as enrolled.
(b) If a year-end report filed under this section indicates that, forthe immediately preceding twelve (12) calendar month period endingJune 30, the balance in the reserve fund continuously exceeded fiftypercent (50%) of the total outstanding balance of all enrolled loans,including unfunded parts of enrolled loans that are lines of credit, thecorporation may make a withdrawal from the reserve fund. Theamount of the withdrawal may not be greater than the minimumamount of any excess as continuously maintained over theimmediately preceding twelve (12) calendar month period endingJune 30. Withdrawals of excess reserve funds by the corporationunder this section may be used for any purpose.
(c) If a year-end report is not filed within thirty (30) days after theoriginal due date of the report, the corporation may make awithdrawal from the reserve fund based on the corporation'sdetermination from an inspection of the lender's files that, for the
immediately preceding twelve (12) calendar month period endingJune 30, the balance in the reserve fund continuously exceeded fiftypercent (50%) of the aggregate outstanding balance of all enrolledloans, including unfunded parts of enrolled loans that are lines ofcredit. The amount of the withdrawal may not be greater than theminimum amount of any excess as continuously maintained over theimmediately preceding twelve (12) calendar month period endingJune 30. Withdrawals of excess reserve funds by the corporationunder this section may be used for any purpose.
(d) The right of the corporation to make a withdrawal from thereserve fund under subsection (b) or (c) is subject to the followingprovisions:
(1) If a year-end report is filed by July 16 or not more thanthirty (30) days after July 16, the corporation has the right ofwithdrawal for a period of ninety (90) days from the date of thefiling of the report with the corporation.
(2) If a year-end report is not filed by July 16 or not more thanthirty (30) days after July 16, the corporation has the right ofwithdrawal for a period of ninety (90) days from the date thecorporation determines from an inspection of the lender's filesthat the corporation is entitled to make a withdrawal from thereserve fund under this section.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-34
Terminating the obligation to enroll loans
Sec. 34. The corporation may terminate the obligation to a lenderto enroll loans under the program if the corporation determines thatthe lender is not in substantial compliance with the requirements ofthe program or the requirements of section 23 of this chapter. Thetermination takes effect on the date specified in the notice oftermination, except that the termination does not apply to a loanmade on or before the date on which the notice of termination isreceived by the lender. If the corporation is terminating theenrollment of loans for all participating lenders under the program,the corporation shall provide at least ninety (90) days notice to thelender. A termination under this section is prospective only and doesnot apply to a loan previously refinanced. After termination, theamount covered under the program may not be increased beyond thecovered amount as previously enrolled.
As added by P.L.162-2007, SEC.24.
IC 5-28-29-35
Capital access account
Sec. 35. (a) The corporation shall establish a capital accessaccount. The corporation shall use the capital access account to carryout the provisions of the capital access program. The capital accessaccount consists of all money that is:
(1) appropriated by the general assembly;
(2) transferred by the corporation from the industrial
development guaranty fund; or
(3) transferred by the corporation from the general funds of thecorporation.
(b) The expenses of the corporation attributable and allocated bythe corporation to the capital access program shall be paid from thecapital access account.
As added by P.L.162-2007, SEC.24.