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| Montana Administrative Register Notice 8-99-90 | No. 9 05/12/2011 | |
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BEFORE THE DEPARTMENT OF COMMERCE OF THE STATE OF
TO: All Concerned Persons 1. On June 13, 2011, the Department of Commerce proposes to amend the above-stated rules. 2. The Department of Commerce will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice. If you require an accommodation, contact Department of Commerce no later than 5:00 p.m. on June 1, 2011, to advise us of the nature of the accommodation that you need. Please contact Janice Wannebo, Business Resources Division, Department of Commerce, 3. The rules as proposed to be amended provide as follows, new matter underlined, deleted matter interlined: 8.99.504 DEVELOPMENT LOAN - TERMS (1) through (6) remain the same. (7) On a quarterly basis, all MBDCs shall report, in writing, the total revolving loan fund microbusiness loan receivables and the resulting loan out rate to the department. If the reported loan out rate falls below the 60 percent loan out rate standard for a 12 month period, the MBDC shall return the excess funds to the department, except for any MBDC that has an outstanding development loan principal balance that is less than $250,000. The dollar amount of development loan funds equivalent to the difference between the actual percentage of development loan funds loaned out and the 60 percent loan out rate standard is referred to as "excess funds''. If excess funds are returned by the MBDC to the department, a certified MBDC may apply for additional development loan funds in the future, provided that the certified MBDC meets the requirements established in ARM 8.99.502. (8) remains the same. (9) The portion of the revolving loan fund that consists of development loan funds shall only be used for making direct loans by the certified MBDC to microbusinesses or guaranteeing loans made directly by banks to microbusinesses in accordance with the provisions of 17-6-401, MCA, et seq. The portion of the revolving loan fund that consists of MBDC matching loan funds shall only be used for securing the development loan and/or making direct loans by the certified MBDC to microbusinesses or guaranteeing loans made directly by banks to microbusinesses in accordance with the provisions of 17-6-401, MCA, et seq. The portion of the revolving loan fund that includes revolving loan fund income may be used for development loan debt service, reasonable revolving loan fund administrative costs
(11) remains the same, but is renumbered (10). (a) the MBDC shall maintain a separate accounting ledger for the revolving loan fund; and (b) each MBDC shall provide the department with a copy of an annual organization wide audit that is prepared by an independent certified public accountant that is licensed by the state of
(12) through (12)(d) remain the same, but are renumbered (11) through (11)(d). (e) all revolving loan fund expenses (13) and (14) remain the same, but are renumbered (12) and (13). AUTH: 17-6-406, MCA IMP: 17-6-407, MCA REASON: Based on past experiences, the department believes that the following changes are necessary: The proposed amendment of ARM 8.99.504(7) clarifies that the 60% loan out rate for development loans under $250,000 would not leave the MBDC with enough funds to adequately provide a loan to a microbusiness if an approved loan is $100,000, which is the maximum loan amount provided for under state law. The proposed amendment of ARM 8.99.504(9) eliminates the requirement that the department approve a MBDC's RLF administrative costs. The proposed repeal of 8.99.504(10) eliminates the requirement that the department approve the MBDC's RLF bank withdrawals. The RLF income used to create and maintain a funded loan loss reserve is allowed in ARM 8.99.504(9); therefore, it does not need to be repeated in this section. The proposed repeal of 8.99.504(11)(c) eliminates the requirement that the department procure the services and direct a Certified Public Accountant to prepare an audit since the MBDCs already provide audited financial statements. The verification of compliance with requirements specific to the microbusiness finance program is conducted by the program through annual loan file reviews and quarterly reports submitted by the MBDCs. The proposed amendment of ARM 8.99.504(12)(e) eliminates the requirement that the department approve a MBDC's RLF expenses. 8.99.505 DEVELOPMENT LOAN – MATCHING CONTRIBUTIONS (1) through (6) remain the same. (7) The sum of the outstanding principal balance of the department development loan and the MBDC's matching loan funds is referred to as the "revolving loan fund base". The sum of the revolving loan fund bank account balance and investment bank account balance is referred to as the "revolving loan fund cash balance". The sum of the outstanding principal balance of all performing and delinquent microbusiness loans held by the MBDC in the revolving loan fund is referred to as the "eligible loan receivables balance". Restructured loans will be considered, on a case-by-case basis, in the calculation of the revolving loan fund base. All MBDCs shall report and document the revolving loan fund cash balance and the eligible loan receivables balance. The sum of the revolving loan fund cash balance and the eligible loan receivables balance must equal or exceed the "revolving loan fund base" at all times. If the sum of the revolving loan fund cash balance and the eligible loan receivables balance is less than the revolving loan fund base, this difference is referred to as the "revolving loan fund base deficiency". If a MBDC incurs a "revolving loan fund base deficiency," the MBDC shall deposit additional funds equal to or greater than the "revolving loan fund base deficiency" in the revolving loan fund bank account. AUTH: 17-6-406, MCA IMP: 17-6-406, MCA REASON: The proposed amendment of ARM 8.99.505 clarifies what type of loans are "eligible loan receivables". As stated in this rule, to be allowed in the calculation of the "eligible loan receivables balance" the only loans allowed are "performing" and "delinquent" microbusiness loans which are loans that the borrower has failed to make three or more timely payments of principal and interest, or whose payments of principal and interest are greater than 90 days past due or has otherwise failed to comply with the terms and conditions of the loan agreement. There are too many variables on restructured loans so these loans will be considered on a case-by-case basis by the department. 8.99.507 DEVELOPMENT LOAN - NONRENEWAL (1) Should the department choose not to renew a development loan, the term of the repayment schedule will (2) remains the same. AUTH: 17-6-406, MCA REASON: The proposed amendment of ARM 8.99.507 clarifies the loan repayment term. In some instances, MBDCs have microbusiness loan terms longer than a reasonable term determined by the department for a MBDC to repay their development loan. The department will determine the Development Loan repayment schedule based on, but not limited to, each MBDC's ability to repay and their loan portfolio characteristics. 8.99.511 MICROBUSINESS LOANS - ELIGIBILITY FOR AND TERMS AND CONDITIONS (1) and (2) remain the same. (3) (4) (5) through (7) remain the same. AUTH: 17-6-406, MCA REASON: The proposed amendment of ARM 8.99.511 clarifies the maximum loan term for a microbusiness loan. The term of a microbusiness loan is generally equal to the useful life of the asset (e.g., equipment) taken as security to collateralize the loan. MCA 31-1-107 section (3) states: "The provisions of this section do not apply to regulated lenders as defined in 31-1-111". In MCA 31-1-111 DEFINITION OF REGULATED LENDER, the term "regulated lender" under section (1) lists development corporation; therefore, MicroBusiness Development Corporations (MBDCs) are not considered regulated lenders and section (4) is not applicable except for the last sentence which is not "struck out" will remain in section (4). 4. Concerned persons may submit their data, views, or arguments concerning the proposed actions in writing to: Janice Wannebo, Business Resources Division, Department of Commerce, 301 South Park Avenue, PO Box 200505, Helena, Montana, 59620-0505; telephone (406) 841-2751; fax (406) 841-2731; or e-mail jwannebo@mt.gov, and must be received no later than 5:00 p.m., June 9, 2011. 5. If persons who are directly affected by the proposed actions wish to express their data, views, or arguments orally or in writing at a public hearing, they must make written request for a hearing and submit this request along with any written comments to Janice Wannebo at the above address no later than 5:00 p.m., June 9, 2011. 6. If the agency receives requests for a public hearing on the proposed action from either 10 percent or 25, whichever is less, of the persons directly affected by the proposed action; from the appropriate administrative rule review committee of the Legislature; from a governmental subdivision or agency; or from an association having not less than 25 members who will be directly affected, a hearing will be held at a later date. Notice of the hearing will be published in the Montana Administrative Register. Ten percent of those directly affected has been determined to be 25 persons based upon the five MBDCs and the number of active Certified Public Accountants licensed in 7. The department maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request that includes the name, e-mail, and mailing address of the person to receive notices and specifies for which program the person wishes to receive notices. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to the contact person in 4 above or may be made by completing a request form at any rules hearing held by the department. 8. An electronic copy of this proposal notice is available through the Secretary of State's web site at http://sos.mt.gov/ARM/Register. The Secretary of State strives to make the electronic copy of this notice conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered. In addition, although the Secretary of State works to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems. 9. The bill sponsor contact requirements of 2-4-302, MCA, do not apply. /s/ G. MARTIN TUTTLE /s/ DORE SCHWINDEN G. MARTIN TUTTLE DORE SCHWINDEN Rule Reviewer Director Department of Commerce Certified to the Secretary of State May 2, 2011.
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A directory of state agencies is available online at http://www.mt.gov/govt/agencylisting.asp.
For questions about the organization of the ARM or this web site, contact sosarm@mt.gov.
