N.Y. Comp. Codes R. & Regs. tit. 21, § 4251.4 – Program operations.

(a) A participating financial institution shall:
1. (1) provide to the corporation or the agent, as the case may be, a plan for the marketing of the program to eligible small businesses, including small businesses in highly distressed areas and minority-owned business enterprises and women-owned businesses enterprises, with appropriate lending objectives identified by the participating financial institution for such areas and businesses;
2. (2) make program loans to eligible small businesses only for the purposes of expansion, facility or technology upgrading, start-up or working capital purposes;
3. (3) not make any program loan in a principal amount greater than $500,000;
4. (4) with respect to each program loan, deliver for deposit in the loan loss reserve fund an amount, specified or agreed to in writing by the corporation or its third party agent, from both the participating financial institution and the eligible small business borrower, in aggregate neither less than three percent nor more than seven percent of the principal amount of the program loan, whereby the amount contributed by the eligible small business is not greater than 50 percent of such aggregate; and
5. (5) with respect to each program loan, certify to the corporation or the third party agent in such a fashion and with such supporting information as the corporation or the third party agent shall prescribe, that the participating financial institution has made such loan and delivered the aggregate loan loss reserve fund contribution with respect to such loan.
(b) With respect to each program loan, the corporation or its third party agent, after satisfactory certification pursuant to paragraph (a)(5) of this section, shall transfer to the loan loss reserve fund account an amount, as determined by the corporation or the third party agent, that is:
1. (1) not less than the aggregate contribution of the participating financial institution and the small business with respect to such loan; and
2. (2) not greater than 150 percent of such aggregate contributions as determined by the corporation or its third party agent.
(c) In the event the participating financial institution suffers a loss on its portfolio of program loans, the participating financial institution may in its discretion draw upon the funds in such loan loss reserve fund to cover such loss in whole or in part.
(d) With respect to a participating financial institution, if there are insufficient funds in the loan loss reserve fund account to cover losses on such institution's program loans, the corporation or its agent may authorize the participating financial institution to withdraw an amount equal to the current balance in the loan loss reserve fund account, which payment shall be deemed to satisfy fully the claim(s) on the loan loss reserve fund with respect to such losses, and the participating financial institution shall have no right to receive any further amount from the loan loss reserve fund account with respect to such claim(s).