(a) Application.--A small business located in a distressed community may submit an application and any applicable application fee to a certified economic development organization requesting a loan or line of credit for certain costs of a capital development project under 64 Pa.C.S. § 1121(a) (relating to common application process). The application shall be on the form required by the authority and shall include or demonstrate all of the following, in addition to the contents required under 64 Pa.C.S. § 1121(b):
(1) The name and address of the applicant.
(2) A statement that the small business is engaged in business-to-public service or in the mercantile, commercial or point-of-sale retail business sectors.
(3) A statement of the type and amount of assistance sought.
(4) A statement of the capital development project, including a detailed statement of the cost of the project.
(5) A financial commitment from a responsible source for the cost of the capital development project in excess of the amount requested.
(6) Any other information required by the authority.
(b) Certified economic development organization review.--
(1) Upon receipt of a completed application, a certified economic development organization shall investigate and determine all of the following:
(i) If the applicant is a small business which is engaged in business-to-public service or in the mercantile, commercial or point-of-sale retail business sectors in accordance with conditions or criteria established by the authority.
(ii) If the project is a capital development project.
(iii) If the applicant has demonstrated a direct impact on the community in which the capital development project is or will be located, on residents of that community or on the local and/or regional economy. The authority shall establish criteria that will assist in making this demonstration.
(iv) Number of employment opportunities to be created or preserved by the proposed capital development project.
(v) If the applicant complied with all other criteria established by the authority.
(2) Upon being satisfied that all requirements have been met, the certified economic development organization shall recommend the applicant to the authority and forward the application with all supporting documentation to the authority for its review and approval.
(c) Authority review.--
(1) Upon receipt of a recommendation and a completed application, the authority shall investigate and determine all of the following:
(i) The ability of the applicant to meet and satisfy the debt service as it becomes due and payable. In reviewing repayment obligations, loans shall not be approved on the basis of direct financial return on investment and shall not be held to the loan loss standards of private commercial lenders. Loans shall be reviewed for the purpose of establishing a strong economic base and promoting entrepreneurial activity within the distressed community.
(ii) The existence and sufficiency of collateral for the loan.
(iii) Relevant criminal and credit history and ratings of the applicant as determined from outside credit reporting services and other sources.
(2) If the authority is satisfied that all requirements have been met, the authority may approve the loan or line of credit request in an amount not to exceed $200,000 or 50% of the total capital development project costs, whichever is less. For the purpose of this paragraph, capital development project costs, except the costs related to working capital, incurred during the 12-month period prior to the date of submission of the application to the authority shall be considered part of the total capital development project costs.
(3) The authority shall notify the certified economic development organization and applicant of its decision.
(d) Approvals.--For applications which are approved, the authority shall draw an advance equal to the principal amount of the loan from the fund and, prior to providing loan funds to the applicant, the authority shall require the applicant to execute a note and to enter into a loan agreement. In addition to the requirements of subsection (e), the loan agreement shall include a provision requiring the recipient to use the loan proceeds to pay the costs of the capital development project. The authority may impose other terms and conditions on the recipient if the authority determines they are in the best interests of this Commonwealth, including a provision requiring collateral for any penalty imposed under subsection (g).
(e) Loan terms.--A loan agreement entered into in accordance with subsection (d) shall do all of the following:
(1) State any collateral securing the loan. The authority may use its best judgment to identify and secure collateral.
(2) State the repayment period which may be flexible, except that a line of credit may not have a term of more than three years. A line of credit may be renewed for an additional three-year period at the discretion of the authority.
(3) State the interest rate which may not be less than 2% nor more than 5% for the term of the loan.
(4) State that the recipient agrees to maintain, at a minimum, the number of jobs in existence as of the date of loan application.
(f) Loan administration.--A loan made under this section shall be administered in accordance with authority policies and procedures.
(g) Penalty.--
(1) Except as provided in paragraph (2), the authority shall impose a penalty upon a recipient if the recipient fails to preserve the number of employment opportunities specified in its approved application.
(2) The authority may waive the penalty required by paragraph (1) if the authority determines that the failure was due to circumstances outside the control of the recipient.
(3) The amount of any penalty imposed under paragraph (1) shall be equal to an increase in the interest rate to 2% greater than the current prime interest rate for the remainder of the loan.
(h) Defaults.--The authority may take title by foreclosure to a capital development project which it financed where acquisition is necessary to protect a loan made under this section. The authority shall pay all costs arising out of the foreclosure and acquisition from money held in the fund. The authority may, in order to minimize financial losses and sustain employment, lease the capital development project. The authority may withdraw money from the fund to purchase first mortgages and to make payments on first mortgages on any capital development project which it financed if purchase or payment is necessary to protect a loan made under this section. The authority may sell, transfer, convey and assign the first mortgages and shall deposit in the fund money derived from the sale of any first mortgages.