01-001-32 Me. Code R. § III

Current through 2024-51, December 18, 2024

Section 001-32-III - Loan Program

A.Description and Purpose

The Loan Program is designed to help finance eligible projects, to be undertaken by applicants engaged in an agricultural enterprise.

B.Eligible Uses of Loan Proceeds

1. Proceeds may be used for the design, construction or improvement of commodity and storage buildings and packing and marketing facilities; or for the purchase, construction, or renovation if buildings, equipment, docks, wharves, piers, or vessels, located in the State of Maine and used in connection with an agricultural enterprise; or for the purchase of land (a) in connection with development of new cranberry acreage; (b) for irrigation reservoirs or to provide direct access to water for irrigation; (c) necessary for the start-up of a new agricultural enterprise; or, (d) for the expansion of an existing agricultural enterprise when the land acquisition is necessary to comply with land use regulations); or for improvements to pastureland including seeding and actions to promote rotational grazing.

2. Proceeds of loans may be used to pay or reimburse the cost of developing a business plan when related to an AMLF Loan Application, and the following conditions as well as the conditions of Section III(E)(9) are met:

a. The project is eligible for a loan under the provisions of 7 MRSA, section434, et seq. and 10 MRSA, section1023-J;

b. The application does not include a business plan for the project or the business plan is deemed inadequate by the commissioner; and,

c. The commissioner determines that the project as described in the application has merit.

C.Ineligible Uses of Loan Proceeds

Proceeds may not be used for working capital, or to finance or refinance projects commenced, costs incurred, or expenses paid prior to the date of the submission of a completed application (and such costs and expenses shall not be considered eligible project costs for determining the matching financing or private funds requirements of Sections III(E)(3) & (4) However, such requirement may be waived for good cause, as determined by the Commissioner in his or her discretion, upon written request for a waiver made at the time of the submission of a letter requesting eligibility determination. Any waiver, to be effective, must be in writing. If a waiver is granted, the Commissioner, in his or her discretion, shall determine which costs incurred or expenses paid prior to the written request for the waiver may be reimbursable to the owner from loan proceeds for costs incurred or expenses paid prior to the written request for the waiver and if any such costs and expenses may be considered eligible project costs for determining the matching financing or private funds requirements of Sections III(E)(3) & (4). Further, proceeds may not be used for projects, or for the refinancing or acquisition of projects, for which a loan from the Potato Marketing Improvement Fund (PMIF) was obtained, regardless of whether such PMIF loan was made to the applicant or a previous owner of the project, and regardless of whether or not the PMIF loan remains outstanding.

D.Special Provisions Applicable to Loans for Construction, Renovation, Additions and Remodeling

1. Costs of construction may be an eligible use of loan proceeds, as set forth in Section III(B) above, and proceeds of AMLF loans may be used for interim financing during the construction of projects. However, for AMLF loans involving construction, where any disbursement is made prior to project completion, the Borrower must comply with the then current construction lending procedures developed by the Department, which may include requirements for preconstruction budgets, interim invoices and lien waivers, project inspections, limits on numbers or amounts of disbursements, and other relevant terms and conditions.

2. The project shall be considered complete when the Commissioner receives all invoices and waivers of mechanics' and materialmen's liens from all project contractors and suppliers. The Commissioner may require inspection, certification and/or other evidence showing to his or her satisfaction that the project was completed in accordance with the plans and specifications approved with the application, prior to disbursing loan proceeds.

3. The provisions of Sections III(D)(1) & (2) will not apply to construction of projects involving agricultural enterprises which are engaged in commercial cranberry operations, provided, however, the Department may require interim lien waivers, inspection, verification or other evidence that the costs to be paid or reimbursed with loan proceeds have been incurred, are reasonable, and that the value of the Department's collateral is sufficient to support the interim disbursements.

E.Loan Rates, Terms, Amounts, and Fees

1. The interest rate charged shall be a fixed rate of 5%.

2. The loan term shall not exceed 30 years and shall reflect the useful life of the assets being financed.

3. AMLF loan proceeds may be used to fund not more than 75% of total project costs, where the total project cost exceeds $100,000, and may be used to fund no more than 90% of total project costs where the total project cost is $100,000 or less. Notwithstanding the foregoing, AMLF loan proceeds may not be used to fund more than 45% of the total project costs for potato storage, potato packing shed, potato packing equipment, or potato handling equipment projects.

4. No AMLF loan may be approved unless the applicant has demonstrated a commitment of private funds of at least 5% of the total eligible project costs, except that, in the case of cooperative projects by two or more agricultural enterprises, such demonstrated commitment of private funds shall total at least 5% of the total project cost.

5. The maximum principal amount of any one AMLF loan to any applicant may not exceed $250,000, except as follows:

(a) AMLF loans for the purpose of land acquisition for the start-up of a new agricultural enterprise shall not exceed $100,000; and,

(b) AMLF loans to agricultural enterprises primarily engaged in direct marketing and being funded from the amounts reserved under Section III(K)(5) are limited to $100,000.

6. One percent of the AMLF loan amount shall be paid to the Department at closing as an administrative fee on any loan exceeding $100,000.

7. The applicant is responsible for all legal expenses and any other out-of-pocket expenses of the Department related to the Borrower's project, and the AMLF loan.

8. Notwithstanding anything to the contrary in this Section III(E)), an AMLF loan for developing a business plan under Section III(B)(3) may not exceed 50% of the cost of developing said plan, up to 5% of the amount of the related project or $1,000, whichever is less. The Commissioner may advance funds for this purpose to an AMLF loan applicant if the conditions of Sections III(B)(3) and this Paragraph are met prior to the approval or rejection of a loan application. If funds are advanced for this purpose, the applicant shall provide the commissioner with a copy of the completed business plan no more than six (6) months from the date funding for the plan was received. At that time, the commissioner shall review the business plan and other application materials and make a final determination on the application. If the applicant receives a loan under this program, the amount of money received from the fund for the business plan becomes part of the total loan amount and is paid back to the Agricultural Marketing Loan Fund. If the applicant does not receive a loan under this program, the applicant is not required to pay back funds received for a business plan under this Paragraph.

F.Eligible Applicants

Any individual or organization engaged in an agricultural enterprise.

G.Required Contents (Loan Applications)

1. For loans for tractor or field equipment purchases only, regardless of size, loan applications shall contain the following:

a. identification of the proposed amount of the loan, repayment term and description of the collateral;

b. if applicable, copies of letters of commitment to the applicant from other sources of financing;

c. information detailing the nature of the applicant's business, and the exact uses of all funds used for the project;

d. historical business financial statements for the previous year, for the applicant and any and all guarantors, including balance sheets and profit and loss statements. Income tax returns may be substituted for profit and loss statements. The balance sheet must list current balances, rates, payments, maturities and security of all business debts;

e. production history for the previous year and a business or marketing plan for at least the year in which application is made;

2. For loans (other than for tractors or field equipment purchases) under $50,000, loan applications shall contain the following:

a. identification of the proposed amount of the loan, repayment term and description of the collateral;

b. if applicable, copies of letters of commitment to the applicant from other sources of financing;

c. information detailing the nature of the applicant's business, and the exact uses of all funds used for the project;

e. pro forma profit and loss statement for the first year after loan closing;

f. production history for the previous year and a business or marketing plan for at least the year in which application is made;

3. For loans (other than for tractors or field equipment purchases) over $50,000, loan applications shall contain the following:

a. identification of the proposed amount of the loan, repayment term and description of the collateral;

b. if applicable, copies of letters of commitment to the applicant from other sources of financing;

c. information detailing the nature of the applicant's business, and the exact uses of all funds used for the project;

d. historical business financial statements for the previous three years, for the applicant and any and all guarantors, including balance sheets and profit and loss statements. Income tax returns may be substituted for profit and loss statements. The balance sheet must list current balances, rates, payments, maturities and security of all business debts;

e. pro forma profit and loss statement for the first year after loan closing;

f. production history for the previous three years and a business or marketing plan for at least the year in which application is made;

g. preliminary plans and specifications, and estimates of project costs from contractors and suppliers.

H.Supplemental Information or Materials

The Commissioner may require appraisals of collateral, credit reports, copies of leases or purchase agreements, or any other information or certifications, including reports from experts, from the borrower, other lender or other party deemed to be necessary for thorough review of the application.

I.Criteria and Considerations (Loan Applications)

1. No application will be approved unless the Commissioner determines that the application is complete and that information sufficient to make an informed decision on the application has been received.

2. A loan application will not be approved unless the Commissioner determines that there is a reasonable prospect that the applicant will repay the loan according to its terms.

3. In reviewing loan applications, the Commissioner will consider the following:

a. the economic feasibility of the business as evidenced by the applicant's present and past financial position and the reasonableness of the proposal and financial projections for the future;

b. whether the applicant and guarantors have satisfactory credit histories and adequate and relevant management experience;

c. whether the applicant has sufficient capital and other resources to conduct business as planned;

d. the adequacy of the security offered for the loan;

e. the extent to which the risk of financial loss is shared by others;

f. the technical feasibility of the project.

J.Assumption

1.Eligibility

AMLF loans may be assumed provided the assuming party demonstrates:

a. that it is an eligible agricultural enterprise under the AMLF program, including but not limited to meeting all applicable credit and review requirements in Sections III(E) through III(M) of this rule, and the business, facility or property being acquired in connection with the assumption will continue to be operated or used for the purpose for which the loan was initially granted, or for other eligible purposes approved, in advance, by the Commissioner; and

b. without the assumption, the assumption applicant would not be able to acquire the business, facility or property; and,

c. the total purchase price for the business, facility, or property does not exceed the fair market value of such business, facility, or property.

2.Procedure

Assumptions will be treated in the same manner as applications for AMLF loans. An assumption applicant must file an application with the Department, with information required in Sections III(E) & (F) hereof, and such additional information as may be required to demonstrate the applicant meets the additional requirements of Paragraph 1 of this Subsection J.

K.Program Participation Limitations

1. In addition to other limitations expressed in this rule, a Borrower's total outstanding participation is limited to 10% of the program's total amount of outstanding loans plus the remaining cash balance of the Fund, at the time of receipt of the applicant's completed application.

2. No one industry, as determined by the Commissioner in his or her discretion, may receive loans totaling more than 33% of the total amount of the initial balance of the AMLF, until such time as 50% of the initial balance of the AMLF has been disbursed;

L.Commitment or Rejection (Loan Applications)

1. Upon approval of an application, the Commissioner will execute a letter of commitment setting forth the terms and conditions upon which the loan will be made.

2. No commitment shall become effective until the applicant has accepted the terms and conditions of the commitment letter.

3. In the event the application is rejected, the Commissioner will notify the applicant promptly of the reasons for the rejection.

M.Collateral

Repayment of a loan shall be secured by the following:

1. a mortgage or security interest in real estate, building and/or personal property of the business, subject only to such other encumbrances, including priority, junior or coordinate liens, as the Commissioner may approve;

2. such other collateral as the Commissioner may require, including without limitation, assignments or pledges of leases, contracts, stock certificates and other instruments, personal or corporate guarantees, insurance, letters of credit and surety bonds;

3. loans may, at the discretion of the Commissioner, be secured by collateral valued at less than the amount of the loan, provided that the applicant, its principals and any guarantors, are of good character and have good credit histories;

4. real estate or stationary machinery or equipment constituting a significant portion of collateral for repayment of a loan shall be located within the State. Mobile machinery or equipment, constituting a significant portion of collateral for repayment of a loan, shall be registered with and taxed by the State or municipal authorities. Other types of collateral constituting a significant portion of collateral for repayment of a loan shall be owned by or provided for the benefit of a person or business association with a place of business in the State.

N.Loan Covenants

The covenants and requirements of loans shall be established by the Commissioner in accordance with prudent lending practices. At minimum, the documents should ordinarily require the applicant to:

1. make periodic payments of principal and interest;

2. make any lease payments;

3. maintain adequate insurance on collateral, and maintain books and records on the business;

4. maintain and repair the collateral;

5. pay any taxes or governmental charges assessed against the collateral and comply with all applicable governmental laws and regulations;

6. keep the collateral free of liens and encumbrances except as may be expressly accepted by the Commissioner;

7. provide periodic financial reports;

8. repay advances necessary to protect the collateral and all expenses of protecting or enforcing the rights of the Department.

The Commissioner may require such additional covenants and requirements as may be necessary, prudent or desirable, including, but not limited to, crop or other applicable insurance, and reasonable environmental covenants. The applicant will be required to sign a loan agreement containing such covenants and adhere to the terms thereof.

O.Loan Documentation

The applicant will be required to sign such documentation as the Commissioner deems necessary to ensure that the applicant and any guarantors have binding, enforceable obligations to repay the loan and that the Department has such valid and enforceable mortgages, security interests and assignments as necessary to protect the interest of the Department.

P.Default

The Loan documentation will outline events and/or conditions, which create a default situation. Upon default, the Department shall request that the Attorney General of the State of Maine or such attorneys approved by the Attorney General of the State of Maine take such action as may be prudent, including repossessing and liquidating or foreclosing on collateral. The Attorney General of the State of Maine may approve specific outside attorneys to represent the Department on a case-by-case basis, after default, or on a permanent basis (until revoked) for any and all existing or future defaults.

01-001 C.M.R. ch. 32, § III