1. A. The Louisiana Economic Development Corporation will be guided by the following general principles in approving or accepting loans or lines of credit under this program.

   1. 1. The corporation shall confirm that the financial institution lender has sufficient commercial lending experience and financial and managerial capacity to participate in this program. The corporation may utilize, among other resources, the lender’s most recent call report or audited financial statement showing the percentage of commercial loans in its portfolio.
   2. 2. The corporation shall not knowingly approve any loan (or line of credit loan) if the applicant/borrower has presently pending or outstanding any claim or liability relating to failure or inability to pay promissory notes or other evidence of indebtedness, state or federal taxes, or a bankruptcy proceeding. The corporation may review and determine, on a case-by-case basis, whether the nature, status, or materiality of such indebtedness or liabilities warrants eligibility under the program. Such determination by the corporation shall be final.
   3. 3. The corporation shall not knowingly approve any loan (or line of credit loan) if the applicant/borrower has presently pending, at the federal, state, or local level, any proceeding concerning denial or revocation of a necessary license or permit or any legal proceeding involving a criminal violation other than misdemeanor traffic violations. The corporation may review and determine, on a case-by-case basis, whether the nature, status, or materiality of such indebtedness or liabilities warrants eligibility under the program. Such determination by the corporation shall be final.
   4. 4. Further, the corporation shall not approve any loan if the applicant/borrower or his/her/its principle management has a criminal record showing convictions for any criminal violations other than misdemeanor traffic violations in which the applicant/borrower or his/her/its principle management has not been reinstated into society.
   5. 5. The terms or conditions imposed and made part of any loan (or line of credit) authorized by vote of the corporation’s board, or its designated board committee, or LEDC staff shall not be amended or altered by any member of the board or employee of the LEDC or Louisiana Economic Development except by subsequent vote of approval by the board, or designated board committee at the next meeting of the board or committee in open session with full explanation for such action.
   6. 6. Each lender shall be required to have a meaningful amount of its own capital resources at risk in each small business loan included in this program. Such lenders shall bear at least 20 percent or more of the loss from a small business loan default. The LEDC accepted loan (including line of credit loan) enrolled into this program shall not be sold, assigned to, or participated with other lenders (within lender’s 20 percent risk interest, as described above), or otherwise transferred by lender without the prior written consent of the LEDC board.
   7. 7. The corporation shall not subordinate its position to other creditors.
2. B. Interest Rates. On all loans (or lines of credit), throughout its duration, including default rates, the interest rate is to be negotiated between the borrower and the lender, but shall not exceed the National Credit Union Administration’s (NCUA) interest rate ceiling for loans made by federal credit unions as described in 12 U.S.C. § 1757(5)(A)(vi)(I) and set by the NCUA board. Further, on all loans and lines of credit, the interest rate shall not exceed the lesser interest rate of either: the National Credit Union Administration (NCUA) interest rate ceiling, that established by the Federal Credit Union Act (FCUA), that established by the Office of the Comptroller of the Currency (OCC), or applicable state legislation that may be enacted.

3. C. Borrower’s Collateral

   1. 1. The value of the borrower’s collateral shall be determined according to the lender’s normal lending criteria and policy. The borrower is required to provide collateral to the loan as the intent of the CSP is to enhance loan collateral for qualified small business borrowers exhibiting a shortfall in collateral as required by the lender and who would not otherwise be able to obtain financing on acceptable terms and conditions.
   2. 2. The collateral position may be negotiated, but it shall be no less than a sole second position.

   3. 3. Borrower’s Collateral Value Determination

      1. a. Lender shall be required to verify the collateral value using commonly accepted collateral coverage standards.
      2. b. The appraiser must be certified by a recognized organization in the area of the collateral.
      3. c. The appraisal shall not be more than 90 days old, except in the instance of real estate which shall not be more than six months old.

   4. 4. Acceptable collateral from the borrower may include, but shall not be limited to, the following:

      1. a. fixed assets—business real estate, buildings, fixtures;
      2. b. business equipment, machinery, inventory;
      3. c. accounts receivable with supporting aging schedule; but not to exceed 80 percent of receivable value.

   5. 5. Unacceptable borrower collateral may include, but shall not be limited to the following:

      1. a. stock in applicant/borrower company and/or related companies;
      2. b. personal items or borrower’s primary residence;
      3. c. intangibles; including but not limited to, digital currency such as cryptocurrency and non-fungible tokens (NFTs);
      4. d. leasehold improvements.
   6. 6. Personal guarantees may be offered and accepted but will not count toward the value of the collateral; if to be used, signed and dated personal financial statements of the guarantors must also be submitted to LEDC.

4. D. Equity Requirements

   1. 1. Equity requirements shall be determined according to the lender’s normal credit criteria and policy, but in no case shall the equity position be less than 10 percent.

   2. 2. Equity is defined to be:

      1. a. cash;
      2. b. paid-in capital;
      3. c. paid-in surplus and retained earnings; or
      4. d. partnership capital and retained earnings.
   3. 3. No research, development expense nor intangibles of any kind will be considered equity.

5. E. Limit on the Amount of LEDC’s cash collateral deposit. For small business loans or lines of credit under this program, the corporation's loan cash collateral deposit shall be:

   1. 1. no greater than 50 percent, and not to exceed $250,000, of the total principal amount of the loan (or line of credit) for loans or lines of credit amounts equal to or less than $500,000;
   2. 2. no greater than 25 percent, and not to exceed $250,000, of the total principal amount of the loan (or line of credit) for loans or lines of credit amounts greater than $500,000, but not to exceed $1,000,000.

6. F. Terms

   1. 1. Maturity, collateral, and other loan terms shall be negotiated between the borrower and the lender, and the LEDC shall have an opportunity to approve the terms of such loans prior to the closing; but loan term periods with regard to various types of loans shall be limited as follows:

      1. a. for equipment term loans, collateral support term periods may extend for up to and not exceed five years.
      2. b. for Revolving Lines of Credit (RLOC - revolving and non-revolving), collateral support term periods may extend for up to and not exceed three years.
      3. c. for Non-Revolving Lines of Credit (NRLOC), term periods may extend for up to and not exceed three years.
      4. d. for business real estate term loans, collateral support term periods may extend for up to and shall not exceed five years.

7. G. LEDC Program Fees

   1. 1. LEDC may charge an application fee of up to $150, unless the board of directors, the board’s designated committee, or LEDC staff waives the application fee.
   2. 2. LEDC will waive the application fee for SEDI and VSB business type.

8. H. Lender Fees

   1. 1. Lender fees shall be limited to that allowed under the U.S. Treasury’s SSBCI capital program guidance. Lender fees shall be capped at $500 for loans less than $25,000 or may charge a program fee up to 2 percent for loans greater than $25,000.
   2. 2. Lender fees shall not include prepayment penalties nor double dipping fees.

9. I. Use of Loan Funds (including Line of Credit Funds)

   1. 1. Loan funds shall be used for business purposes, including but not limited to the purchase of fixed assets, including buildings that will be owner occupied to the extent of at least 51 percent by the borrower for its own business purposes.
   2. 2. Loan funds may be used for the purchase of business equipment, machinery, or inventory.
   3. 3. Loan funds may be used for a line of credit for business accounts receivable or inventory.
   4. 4. Loan funds may not be used to buy out stockholders or equity holders of any kind, by any other stockholder or equity holder.
   5. 5. Loan funds may not be used to purchase any speculative investment or for real estate development.

Authority Note

AUTHORITY NOTE: Promulgated in accordance with R.S. 36:104, 36:108 and 51:2312

Historical Note

HISTORICAL NOTE: Promulgated by the Department of Economic Development, Office of Business Development and the Louisiana Economic Development Corporation, LR 48:1466 (June 2022), LR 48:1911 (July 2022), amended by Louisiana Economic Development, Office of Economic Development and the Louisiana Economic Development Corporation, LR 52:731 (May 2026).