Loading (50 kb)...'

(continued)
(u) "Facility" means the same thing as "child care and development facility."
(v) "Family child care home" means a facility which is a residence at which child care and development services are provided for more than six (6) children.
(w) "Guaranty" means a written agreement between a lender and another entity whereby the entity agrees to pay the lender a percentage of a loan if the borrower for that loan fails to perform. Every guaranty shall be either a "collection guaranty" or a "loan guaranty."
(x) "Guarantied loan" means a loan made by a lender to a borrower for which a guaranty has been issued pursuant to this subchapter.
(y) "Improvement" means a physical change to real property which increases its utility to the owner for the provision of child care and development services.
(z) "Intermediary" means an entity selected by the department to receive a loan from the Microenterprise Set Aside and which awards microenterprise assistance to ultimate recipients and monitors and services that assistance.
(aa) "Intermediary loan" means a loan from the department from the Microenterprise Set Aside to an Intermediary to operate a micrenterprise relending program.
(bb) "Lender" means a banking organization, including banks and trust companies and state chartered commercial banks, savings and loan associations, credit unions, state insurance companies, mutual insurance companies, retirement and insurance companies, and other lending entities authorized to conduct business in California, and includes the department or its contractor for direct loans made pursuant to this Subchapter.
(cc) "Lender certification" means a written statement by a lender certifying that: (1) the loan being guarantied would not be made without the guaranty; and (2) the lender will not charge loan fees or charges other than those charged for similar loans.
(dd) "License" means the license required by Health and Safety Code section 1596.80 to operate a child day care facility (as defined by Health and Safety Code section 1596.750) and issued by the Community Care Licensing Division of the State Department of Social Services, or its contractor.
(ee) "Licensed child care and development facility" means a facility operating under a valid license.
(ff) "Loan" means a direct loan made to a borrower by the department or its contractor, a microenterprise assistance loan made to a borrower by an intermediary, or a loan made to a borrower by a lender and guarantied by the department or its contractor, and which loan has been made or guarantied pursuant to this subchapter.
(gg) "Loan Agreement" means an agreement for a loan entered into between a lender and a borrower.
(hh) "Loan Guaranty" means a guaranty of a specified percentage of loan principal and up to one hundred twenty (120) days interest at the same percentage as specified in the underlying guaranty.
(ii) "Loan Guaranty Fund" means the Child Care and Development Facilities Loan Guaranty Fund established by subdivision (b) of section 8277.5 of the Education Code.
(jj) "Guaranty program" collectively refers to those provisions in the statutes and this subchapter relating to the making of guaranties backed by funds from the Loan Guaranty Fund.
(kk) "Lower Income" means the same thing as "income eligible" as set forth in Section 8263.1 of the California Education Code.
( ll ) "Microenterprise business" means a business with five or fewer employees, including the owner.
(mm) "Microenterprise assistance loan" means a loan of not more than $24,999 and made by an intermediary to an ultimate recipient.
(nn) "Microenterprise Assistance program" means the program set forth in Article 5 of this subchapter.
(oo) "Microenterprise Assistance Set Aside" means the funds set aside by the department from the Direct Loan Fund for the purpose of the Microenterprise Assistance program.
(pp) "Note" or "promissory note" means a promise in writing and executed by a borrower to pay a specified amount during a limited time or on demand.
(qq) "Program assistance" means a direct loan, a guarantied loan, or assistance provided through the Microenterprise Assistance Program to an ultimate recipient.
(rr) "Project" means the activity for which the loan is being requested.
(ss) "Rural area" or "rural community" means any area or community located in a county with fewer than 400 residents per square mile as determined from the most recent decennial census.
(tt) "Security" means the same thing as "collateral."
(uu) "Statutes" means Education Code sections 8277.5 and 8277.6.
(vv) "Surplus Money Investment Fund" means the Surplus Money Investment Fund referenced in Government Code section 14671.
"(ww)" Ultimate recipient" means a family child care home provider serving more than six children and which has received assistance through an intermediary from the Microenterprise Assistance Program.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8208(g), 8208(i), 8277.5 and 8277.6, Education Code.








s 8252. Eligible Applicant.
Eligible applicants for program assistance shall include, but are not limited to, sole proprietorships, partnerships, proprietary or nonprofit corporations, or local public agencies, that are responsible for contracting with or providing licensed child care and development services.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(d)(1), 8277.5(e)(1) and 8277.6(c), Education Code.








s 8253. Eligible Facilities.
Facilities eligible for program assistance shall include full-day and part-day child care and development facilities, and family child care homes serving more than six (6) children.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Section 8277.6(c), Education Code.










s 8254. Eligible Project and Program Priorities.
(a) To be eligible to receive program assistance, the proposed project shall create new child care and development capacity, or preserve capacity that would otherwise be lost without the program assistance.
(b) To be eligible to receive program assistance, the proposed project or applicant must also meet one of the following program priorities:
(1) More than fifty percent (50%) of the capacity being created or preserved shall be for any combination of:
(A) Infant care for children from birth to three (3) years of age;
(B) After school care for children from five (5) to fourteen (14) years of age;
(C) Non-traditional operating hours care (e.g. during evenings and weekends);
(D) Serve special needs children. "Special needs" means children with professionally diagnosed disabilities which may include physical, mental, and/or medical impairments; or
(2) The applicant currently operates a facility on or adjacent to a public school, the facility has lost capacity at the school as a result of the class size reduction program, and the proposed project will replace the lost capacity; or
(3) The applicant is currently under contract with the California Department of Education to administer state and federally-funded child care and development programs; or

(4) More than fifty percent (50%) of the capacity that will be created or preserved by the proposed project will serve children from "Welfare-to-Work" families or other lower income families.
(c) Thirty percent (30%) of the funds made available from the Loan Guaranty Fund for purposes of guarantying loans, and thirty-percent (30%) of the funds made available from the Direct Loan Fund for purposes of making direct loans shall be reserved and made available only for projects located in rural areas (respectively, the "Loan Guaranty Rural Set Aside" and the "Direct Loan Rural Set Aside"). On or after June 30 of each year, commencing with the year 2001, the department shall assess the amount of qualified applications for eligible projects located in rural areas receiving funds from each of the Loan Guaranty Rural Set Aside and Direct Loan Rural Set Aside (individually, a "rural set aside"). If the amount of qualified applications from rural providers is insufficient to utilize all of the available funds in a rural set aside, the department may make the excess funds in that set aside available to other qualified applications for eligible projects located in either rural or urban areas.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(d)(1), (e)(1), 8277.6(c), (e), (f) and (g), Education Code.








s 8255. Eligible Use of Funds.
(a) Program assistance shall only be used for the following purposes: purchase, development, construction, expansion, acquisition or improvement of child care and development facilities that are, or will be, licensed; related equipment and fixtures; and may be used to refinance existing loans as provided in subsection (b).
(1) Loan proceeds used for improvements shall only be used to fund improvements necessary for any of the following purposes:

(A) to obtain, maintain, renew, expand, or revise a child care license;
(B) to make necessary health and safety improvements;
(C) to make seismic improvements;
(D) to provide access for disabled children.
(E) to expand or preserve existing child care operations
(2) Loan proceeds to a family child care home serving more than six (6) children shall not be used to purchase a home or any real property.
(b) The amount of program assistance used to refinance existing loans shall not exceed fifty percent (50%) of the total amount of the guarantied loan, direct loan, or microenterprise assistance. Repayment of an existing loan made for the purpose of purchasing, developing, constructing, expanding, acquiring, or improving a child care and development facility shall not be considered refinancing if the term of the existing loan does not exceed 24 months.
(c) Program assistance shall not be used for working capital, supplies, or inventory.
(d) Program assistance may be used to pay loan fees and points, other than an application fee.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(d)(1), (d)(2), (e)(1), (e)(2) and 8277.6(d), Education Code.








s 8256. Additional Conditions.
As a condition of receiving a guaranty or direct loan, a successful applicant shall agree in writing to:
(a) provide licensed child care and development services in the facility being assisted with the guaranty or direct loan for a period of twenty (20) years, or the term of the guaranty or direct loan, whichever is shorter; and
(b) waive any claims against, and to indemnify and hold harmless, the State of California, including the department and its contractors from and against any and all claims, costs, and expenses stemming from operation and maintenance of the facility being assisted with program assistance, or the environmental degradation of the site upon which the facility is located.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(d)(4), (d)(5), (e)(3) and 8277.6(h) Education Code.








s 8257. Availability of Loan Guaranties and Direct Loans.
(a) Loan guaranties shall be funded with funds from the Loan Guaranty Fund. Direct loans and microenterprise assistance shall be funded with funds from the Direct Loan Fund. The aggregate amount of all outstanding loan guaranties shall not exceed four (4) times the balance of the Loan Guaranty Fund, and the aggregate amount of all outstanding direct loans and microenterprise assistance shall not exceed the amount in the Direct Loan Fund.
(b) Each application for a guaranty or a direct loan shall be date stamped upon receipt by the department or its contractor. Loan guaranties and direct loans shall be made available to eligible applicants with complete applications by the department or its contractor using an "over-the-counter" process whereby applications will be accepted, processed and evaluated on an on-going basis in the order they are received so long as funds remain available.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(d) and (e), 8277.6(b) and (g), Education Code.








s 8258. Guaranty Application Procedure.
An applicant shall apply for a guaranty to the department or its contractor by providing the department or its contractor with the same information provided to the lender that will be the beneficiary of the guaranty and by providing all of the information set forth in subsections (a) and (r) of section 8269 of this subchapter. The applicant shall also include a lender certification with the application and a statement made under penalty of perjury that the information submitted is true and correct to the best of the applicant's knowledge.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.6(b) and (g), Education Code.








s 8259. Guaranty Application Processing.
The department or its contractor shall review and process a guaranty application in accordance with the following procedures:
(a) Within thirty (30) working days of receipt of an application for a guaranty, the department or its contractor shall review the application and provide the applicant with written notice as to whether the applicant and proposed project are eligible to receive a guaranty, and whether the application is sufficiently complete to allow further processing. If the applicant or project is ineligible, or if the application is incomplete, the notice shall specify the steps, if any, the applicant may take to correct the identified deficiencies.
(b) Within sixty (60) days of the mailing of notification that an application is eligible for further processing, the department or its contractor shall notify the applicant in writing of the department's or contractor's approval or denial of the guaranty request. If the decision is to approve the application, the applicant shall be notified of any conditions placed on the approval, and the department or its contractor shall issue a commitment to guaranty, and an executed guaranty to the lender. If the decision is to deny the application, the applicant shall be informed of the reasons for the denial.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.6(b) and (g), Education Code.








s 8260. General Terms and Conditions of Guaranties.
In addition to the terms and conditions set forth in Article 2 of this subchapter, loan guaranties shall also be subject to all of the following terms and conditions:
(a) A single guaranty shall not exceed eighty percent (80%) of the principal and interest due and owing on a loan for eligible project costs, and the total amount of all outstanding loan guaranties for any one borrower shall not exceed two million dollars ($2,000,000).
(b) The term of the guaranty shall be the lesser of twenty (20) years or the term of the loan, and shall be subject to termination conditions described in subsection 8263.
(c) The guaranty shall contain a requirement that the maximum amount of interest to be paid is one hundred twenty (120) days at the guarantied percentage, after the lender receives the notice defined in section 8263(d).
(d) The guaranty shall contain a statement that the lender send to the department, or its contractor executing the guaranty, a copy of all delinquency notices tendered to the borrower.
(e) The guaranty shall contain a description of the procedures and the responsibilities of the lender and the department or its contractor subsequent to default, including information on whether the guaranty is a loan guaranty or a collection guaranty.
(f) The guaranty shall contain section 8261 demand procedures.
(g) The guaranty shall contain an acknowledgment by the lender that in the event of a demand, the lender will allow a representative of the Department of Financial Institutions, or other auditor selected by the department or its contractor, to examine the lender's loan files.
(h) The guaranty shall contain an agreement to abide by binding arbitration by the American Arbitration Association in the event that the department or its contractor denies the requested demand pursuant to section 8261 or 8262, or the amount paid to the lender is less than the amount contained in the demand letter.
(i) The guaranty shall acknowledge that the full faith and credit of the State of California is not, and shall not be, pledged to the Loan Guaranty Fund; and the State of California is not, and shall not be, liable for loan defaults that exceed the balance of funds on deposit in the Loan Guaranty Fund.
(j) If the department utilizes a contractor to administer the guaranty, the guaranty authorizes the contractor to charge a guaranty applicant an application fee not to exceed two hundred fifty dollars ($250.00) and a guaranty fee not to exceed two percent (2%) of the principal amount guarantied.
(k) The department or its contractor shall approve a guaranty application and issue a guaranty if it finds that all of the following conditions have been met:
(1) The aggregate amount of all outstanding guaranties, plus the amount of the requested guaranty, will not exceed four (4) times the current balance in the Loan Guaranty Fund;
(2) The applicant is eligible pursuant to this subchapter;
(3) The use of the proceeds of the loan being guarantied is eligible pursuant to this subchapter;
(4) The project is in accordance with the threshold and priority criteria set forth in section 8254;
(5) Not more than fifty percent (50%) of the loan proceeds shall be used to refinance existing loans;
(6) Repayment of the loan is secured by reasonably available collateral which may include, but shall not be limited to, a deed of trust on the property assisted with the guarantied loan and the personal guaranties of any shareholders or partners;

(7) There is no probability that the loan being guarantied would be made by the lender under reasonable terms or conditions without the guaranty, and the applicant has demonstrated a reasonable prospect of repayment of the guarantied loan;
(8) The application includes a lender certification;
(9) The lender's loan documents contain an agreement by the borrower to maintain a current, valid child care license for the facility during the term of the guarantied loan;
(10) The lender's loan documents contain an agreement by the borrower to provide child care and development services at the facility for which the loan was made, for the lesser of twenty (20) years or the term of the guarantied loan, unless the borrower is a family child care provider temporarily ceasing providing child care and development services and complying with section 8260(k)(11);
(11) The lender's loan documents require that the borrower shall notify the lender and the department or its contractor within fourteen (14) calendar days of the cessation of child care and development services in the facility for which the guarantied loan was made ( "cessation notice");
(12) In the case of a family child care provider borrower that ceases to provide services but retains its license and intends to resume services, the cessation notice shall also include: (i) the reasons for the interruption in services; and (ii) a date for resuming services. The borrower may amend the resumption of services date declared in the cessation notice by submitting an amended cessation notice to the lender and the department or its contractor. The lender's loan documents shall also contain a requirement that any cessation of services exceeding three years from the date of the initial cessation notice shall constitute a default of the loan;
(13) The lender's loan documents contain a provision that, with the exception of a family child care provider temporarily ceasing to provide services in compliance with section 8260(k)(11), failure by the borrower to continue operation of the licensed facility assisted with the guaranty for child care and development shall constitute a default or breach under the lender's loan documents;
(14) The lender has complied with all material conditions contained in the guaranty, including perfecting its security interest in all collateral, and the lender has not engaged, and will not engage, in fraudulent or grossly negligent practices in connection with the borrower, guaranty, the loan or the loan agreement; and
(15) The department's contractor, if any, is also not the lender.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(d), 8277.6(b) and (g), Education Code.








s 8261. Demand Procedures for Guarantees.
(a) The lender may make a demand upon the department or its contractor for repayment of the unpaid loan principal and interest pursuant to the terms of the guaranty by delivering a demand letter requesting immediate payment of the guarantied portion of loan interest and principal to the department or its contractor. The demand letter shall include proof that the borrower is in default and that the lender has delivered to both the borrower and the department or its contractor the following written notices:

(1) In the case of a monetary default, a minimum of two (2) notices subsequent to the delinquency upon which the default is based, at least thirty (30) days apart, explaining the consequences of failure to remedy the delinquency; or
(2) In the case of a non-monetary breach of the loan documents, a minimum of two (2) notices of the breach, at least thirty (30) days apart, explaining the consequences of failure to remedy the breach; and
(3) Notwithstanding the above provisions of this subsection, the lender shall not be required to deliver any notice of a monetary default or non-monetary breach subsequent to a borrower's filing for bankruptcy.
(b) Within five (5) working days of receipt of a demand letter, the department or its contractor shall contract with the Department of Financial Institutions or an independent auditor to conduct an investigation to determine whether the lender has complied with the terms of the guaranty, and to issue a report to the department and its contractor, if any. The investigation shall address each of the following questions or topics:
(1) Is the loan agreement between the borrower and the lender consistent with the terms and conditions of the guaranty?

(2) Has a security interest in all collateral for the loan and guaranty been perfected and maintained? Is all collateral available for assignment to the department or its contractor in the event that payment is made upon the demand? Is any collateral not available as a result of lender's negligence, breach of contract, foreclosure or other cause? Fully describe the circumstances and reasons that any collateral is unavailable due to any of these causes.
(3) If the guaranty is a collection guaranty, has the lender complied with the collection requirements for collection guaranties set forth in section 8262?
(4) What is the borrower's current outstanding principal balance and accrued interest?
(5) Has the lender complied with the procedures for making a demand set forth in this section?
(6) In a section entitled "Loan Information," the report shall include the following information obtained solely from a review of lender files: a description of the borrower's business, a description of the collateral for the loan, and a discussion as to whether the lender files contain any reference to matters material to borrower's compliance with any child care laws or regulations.
(7) In a section entitled "Loan History," the report shall include a summary of the borrower's loan history, including the lender receipt of notice date as referenced in section 8263(d), and the dates of the notices to the borrower referenced in section 8261(a).
(c) Within fifteen (15) calendar days from the date the department or its contractor receives a complete report from the Department of Financial Institutions or an independent auditor, the department or its contractor shall do one of the following:
(1) Deliver or cause to be delivered to the lender a check in an amount not to exceed the amount contained in the demand letter, made payable to the lender; or
(2) Deliver or cause to be delivered to the lender a denial of the request for payment based upon fraud or gross negligence on the part of the lender known to the department or its contractor.
(d) The amount paid to the lender pursuant to a demand letter shall be less than the amount contained in the demand letter only under the following circumstances:
(1) The demand contains an incorrect calculation of the amount owing; or
(2) The amount owing on the loan has been reduced by subsequent payments from the borrower or lender; or
(3) The lender has engaged in fraudulent activities pertaining to the loan.
(e) Prior to or simultaneously with the delivery of a check to a lender, the department or its contractor shall obtain an assignment by the lender of the lender's interest in the loan. The assignment shall include the loan promissory note, loan agreement (if any), and all collateral, except as provided in the Collection Requirements for Collection Guaranties section (section 8262).
(f) Demand must be made upon the department or its contractor no later than noon on the thirty-first (31st) calendar day following the date on which the guaranty terminates; provided, however, that if the thirty-first (31st) day is not a day upon which the department or its contractor is open for business, the last day for making a demand shall occur on the next succeeding day upon which the department or its contractor is open for business.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(d), 8277.6(b) and (g), Education Code.








s 8262. Collection Requirements for Collection Guaranties.
(a) A lender shall not be authorized to file a demand for a collection guaranty unless it has complied with this section, and demand procedures contained in section 8261.
(b) The lender must liquidate all collateral, but shall not be required to file a lawsuit against any borrower or guarantor. "Liquidate" as used in this subsection (b) means that the lender has exhausted all collateral by one or more of the following methods:

(1) Converted the collateral to cash; or
(2) Demonstrated, to the satisfaction of the department or its contractor that the collateral is without sufficient value to convert to cash; or
(3) Demonstrated that the borrower has filed for bankruptcy.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(d), 8277.6(b) and (g), Education Code.








s 8263. Termination of Guaranty.
(a) A guaranty shall terminate upon full repayment of the guarantied loan.
(b) Except for a guaranty of a loan made to a family child care provider who has submitted a cessation notice declaring the intent to resume child care and development services in accordance with section 8260(k)(11), a guaranty shall terminate one hundred twenty (120) days from the lender's receipt of notice that the borrower has either ceased making payments or providing child care and development services in the facility for which the guarantied loan was made, or both, unless the lender has served the borrower with a written notice of default prior to the end of the one hundred twenty (120) day period.
(c) In the event a family child care provider has ceased to provide child care and development services but has retained its license and has notified the lender and department or its contractor of its intent to resume providing child care and development services in accordance with section 8260(k)(11), the guaranty shall terminate one hundred twenty (120) days from the resumption of services date declared in the cessation notice, or any amended resumption of services date declared in an amended cessation notice unless: (1) the lender receives a written statement from the provider made under penalty of perjury stating that the provider has a current license and has resumed providing child care and development services; or (2) the lender has served the borrower with a written notice of default prior to the end of the hundred twenty (120) day period after the resumption of services date, or any amended resumption of services date.
(d) "Receipt of notice" for purposes of this section means: (1) the lender has actual or constructive notice through its own internal records; (2) the lender has received notice from the borrower, or (3) the lender has received written notice from the department or its contractor.
(e) The lender shall use all reasonable means to insure that the borrower actually receives the notice of default, including but not limited to use of certified mail return receipt requested, or personal delivery.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(d), 8277.6(b) and (g), Education Code.








s 8264. Loan Limits.
In addition to the terms and conditions set forth in Article 2 of this subchapter, direct loans shall also be subject to all of the following conditions:
(a) A direct loan shall not be made in an amount less than twenty-five thousand dollars ($25,000.00), and the total outstanding balance of direct loans to any one borrower, including principal and interest, shall not exceed two million dollars ($2,000,000).
(b) The total amount of a direct loan shall not exceed fifty percent (50%) of the applicant's total investment in the project.
(1) "Investment" means the total cost paid or incurred by the applicant in constructing, renovating, or acquiring a facility, and for related equipment and fixtures
(2) If the applicant is also receiving a guaranty provided pursuant to this subchapter for the same project, the direct loan amount shall not exceed twenty percent (20%) of the investment.
(c) Not more than fifty percent (50%) of the total amount of the direct loan allowed in subsection (b) may be used to refinance existing debt. Refinancing shall only be permitted if it will enhance the applicant's creditworthiness by enhancing security for repayment of the loan, and/or by enhancing the applicant's cash flow.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(e)(2), 8277.6(b) and (g), Education Code.










s 8265. Loan Term.
The term of a direct loan shall be commensurate with the type of asset being financed and the borrower's ability to repay, and shall not exceed twenty (20) years.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(e)(3), 8277.6(b) and (g), Education Code.










s 8266. Interest Rates.
The interest rate for a direct loan shall be set at the time of application, shall be fixed for the term of the loan, and shall be set at a rate equivalent to the Surplus Money Investment Fund rate in effect on December 31 of the preceding calendar year.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(e)(3), 8277.6(b) and (g), Education Code.








s 8267. Repayment.
A direct loan shall be amortized to be fully repaid by the end of the loan term, except that principal and/or interest payments may be deferred during construction and initial project start up period so long as the deferral or reduced payment does not result in a balloon payment at the end of the loan term. Late charges on principal and interest payments may be charged as permitted by law.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(e)(3), 8277.6(b) and (g), Education Code.








s 8268. Security/Collateral.
Repayment of a direct loan shall be secured by reasonably available collateral which may include, but shall not be limited to, a deed of trust or personal guaranties of any shareholders or partners.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(e)(3), 8277.6(b) and (g), Education Code.










s 8269. Application Procedure.
An applicant shall apply for a direct loan to the department or its contractor by providing the department or its contractor with all of the information set forth in this section. Said information shall be submitted in a format acceptable to the department or its contractor and shall be submitted with a certification under penalty of perjury that the information provided is true and correct to the best knowledge of the applicant. Information submitted in support of a direct loan request shall be accepted on an "over-the-counter" basis as long as funds remain available. In order for a request for a direct loan to be considered for further processing, the applicant shall submit the following information:
(a) A description of the project, including: number of child care spaces to be created or preserved by the proposed project; number of proposed jobs to be created by the project; identification of whether the project is located in an urban or rural area; and identification of which priorities set forth in section 8254, subdivisions (a) and (b) shall be met by the project.
(b) Applicant business information including: name of business, mailing address, telephone numbers, contact person, federal tax identification number, date business was established, and form of business organization.
(c) Loan information including: requested loan amount and term, requested use of funds, and a description of collateral offered to secure repayment of the loan.
(d) Facility information including: name of facility, address of facility, number of years at that location, and ownership/rental data for facility.
(e) Name, address, telephone number, title and percent of ownership, as applicable, for principals of the business.
(f) Business banking and financial contact information.
(g) Credit history for the business and principals of the business regarding bankruptcies, judgments, liens, foreclosures, repossessions, criminal penalties, and potential financial liabilities that could become due and payable during the loan term, as applicable.
(h) Description of all sources and uses of funding for the project.
(i) Completed environmental survey. After review of the survey, the department or its contractor may request additional information concerning the project if it appears that hazardous materials may be present in, on, under, or around the project or project site.
(j) A signed and dated copy of business financial statements, including all schedules, for the last three (3) operating years and signed and dated current business financial statements, including all schedules, dated within ninety (90) days of the date the loan application is filed.
(k) Signed and dated complete copies of business federal tax returns for the last three (3) years, including all schedules.
( l ) A copy of the most recent business formation documents (articles and by-laws for corporations, and partnership agreement for partnerships).
(m) A corporate or governing body resolution granting authority to apply for direct loan funds.
(n) A signed and dated current personal financial statement and signed and dated complete copy of the most recent federal tax return, including all schedules, for each owner that owns twenty percent (20%) or more of the business, and for each guarantor.
(o) Signed and dated two (2) years of financial projections for the applicant's business.
(p) Evidence that the applicant has site control where the project will be undertaken. Evidence of control shall be demonstrated by submittal of one of the following:
(1) In the case of fee ownership, a certified copy of a recorded grant deed showing ownership in the name of the applicant;
(2) In the case of an option to purchase, a certified copy of an option agreement granting an option to purchase the facility to the applicant; or
(3) In the case of a lease, a copy of the lease agreement between the applicant and the owner with a term, including any permitted extensions or renewals, at least equal to the term of the requested loan plus one year, and containing a provision permitting the applicant to make physical changes to the property and improvements as contemplated by the project.
(q) If the applicant will be pledging any other real property as security for repayment of the direct loan, a certified copy of the grant deed for that property.
(r) A copy of the current child care license, application for a license, or amendment to a license, and any other business licenses related to the operation of the facility, including a fictitious name filing, if applicable.
Upon receipt and review of the information submitted in support of a direct loan request, the department or its contractor may require the applicant to submit additional information to determine the applicant's creditworthiness and the eligibility of all project costs.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(e), 8277.6(b) and (g), Education Code.








s 8270. Application Processing and Evaluation.
(a) Within ten (10) working days of receipt of an application for a direct loan, the department or its contractor shall provide the applicant with written notice as to whether the applicant and proposed project are eligible to receive a direct loan, and whether the application is sufficiently complete to allow further processing. If the applicant or project is ineligible, or if the application is incomplete, the notice shall specify the steps, if any, the applicant may take to correct the identified deficiencies
(b) Within sixty (60) working days of notifying an applicant that an application is complete and has been accepted for further processing, the department or its contractor shall render a written decision on the application.
(c) The department or its contractor shall approve a direct loan application when it finds that all of the following requirements have been met:
(1) The applicant and the project are eligible;
(2) All costs to be funded with direct loan proceeds are eligible costs;
(3) The project is in accordance with the threshold and priority criteria set forth in section 8254;
(4) The business to be assisted using direct loan funds is creditworthy;
(5) Repayment of the loan is secured by reasonably available collateral which may include, but shall not be limited to, a deed of trust on the property assisted with the direct loan and the personal guaranties of any shareholders or partners;

(6) The total of all funds available to the project are sufficient to accomplish the project; and
(7) Sufficient funds remain available in the Direct Loan Fund to fully fund the loan.
(d) As part of its approval, the department or its contractor may place conditions on a loan to insure that the requirements of this subchapter are met.
(e) If the written decision required by subsection (a) above is to deny the application, the written decision shall include an explanation of the reason for denial.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(e), 8277.6(b) and (g), Education Code.








s 8271. Legal Documents.
(a) As a condition of receiving a direct loan, a successful applicant shall be required to enter into a loan agreement with the department or its contractor. The loan agreement shall require the applicant to execute a promissory note in favor of the department or its contractor in the principal amount of the direct loan, and to provide the loan security documents specified in the loan agreement for the benefit of the department or its contractor. The promissory note shall provide that a default under the loan agreement shall be a default under the promissory note.
(b) The loan agreement shall contain the following terms and conditions:
(1) Interest rate of the loan;
(2) Term of the loan;
(3) Amortization schedule;
(4) Description of the project and a time frame for completion, and a provision that if the work is not completed by the completion date set forth in the construction contract, the loan will be in default unless an extension of time is given in writing by the department or its contractor;
(5) Description of security for the loan;
(6) Description of the documents to be provided by the applicant to secure repayment of the loan (e.g., promissory note, deed of trust, security agreement, fixture filing, UCC-1);
(7) A borrower covenant to require the borrower to maintain a current, valid child care license for the facility during the term of the direct loan;
(8) A borrower covenant that the borrower shall provide child care and development services of the priority type identified in the borrower's application at the facility for which the loan was made, unless the department has approved, in writing, provision of child care and development services of a different type, for the lesser of twenty (20) years or the term of the direct loan, unless the borrower is a family child care provider temporarily ceasing providing child are and development services and complying with section 8271(b)(10);
(9) A borrower covenant that the borrower shall notify the department or its contractor within fourteen (14) calendar days of the cessation of child care and development services in the facility for which the direct loan was made ( "cessation notice");
(10) A borrower covenant for family child care provider borrowers only, that in the event the borrower: (i) ceases to provide services; (ii) retains its license; and (iii) intends to resume child care and development services, the cessation notice shall include: (i) the reasons for the interruption in services; and (ii) a date for resuming services. The borrower may amend the resumption of services date declared in the cessation notice by submitting an amended cessation notice to the lender and the department or its contractor. The covenant shall also include that any cessation of services exceeding three years from the date of the initial cessation notice shall constitute a default of the loan;
(11) A requirement that the borrower maintain appropriate insurance on the facility during the term of the direct loan naming the department or its contractor as an additional loss payee and in an amount sufficient to repay the direct loan;
(12) A list of the acts and omissions that shall constitute a default or breach under the loan agreement, and the department's or contractor's remedies in the event of default or breach. The submittal of information in support of an application for a direct loan which was or has become untrue, shall constitute a default or breach under the loan agreement and promissory note;
(13) A borrower covenant providing that, with the exception of a family child care provider temporarily ceasing to provide services in compliance with section 8271(b)(10), failure by the borrower to continue operation of the licensed facility assisted with the direct loan for child care and development shall constitute a default or breach under the loan agreement; and
(14) Any other terms or conditions required by the department or its contractor which are reasonably necessary to insure compliance of the particular facility and applicant with the requirements of this subchapter and to protect the interests of the State.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(e), 8277.6(b) and (g), Education Code.








s 8272. Fees.
If the department utilizes a contractor to administer the direct loan program, the department authorizes the contractor to charge the applicant the following fees:
(a) At the time of loan application, a nonrefundable application fee not to exceed two hundred fifty dollar ($250.00).
(b) At the time a direct loan is closed and funded, a loan origination fee not to exceed one percent (1%) of the principal amount of the direct loan.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(e)(3) and 8277.6(g), Education Code.








s 8273. Purpose.
(a) The purpose of the microenterprise assistance program shall be to make child care facility assistance more efficiently and effectively available to family child care homes serving more than six (6) children by using intermediaries experienced in serving microenterprises. A family child care home provider serving more than six (6) children may apply for assistance under the guaranty program, the direct loan program and/or this microenterprise assistance program.
(b) The department shall set aside not more than fifteen percent (15%) from the allocation of funds to the Direct Loan Fund (the "Microenterprise Set Aside") for the purpose of funding the microenterprise assistance program.


Note: Authority cited: Section 8277.6(g), Education Code. Reference: Section 8277.6(h), Education Code.








s 8300. Purpose and Scope.
(a) These regulations provide uniform standards and program rules for multifamily rental housing developments assisted by the Department of Housing and Community Development. When expressly incorporated by reference, some or all of the provisions of this Chapter shall apply to: the Joe Serna Junior Farmworker Grant (JSJFWHG) Program (Chapter 7, subchapter 3, commencing with Section 7200); the Multifamily Housing Program (MHP) (Chapter 7, subchapter 4, commencing with Section 7300); and the HOME Investment Partnerships (HOME) Program (Chapter 7, subchapter 17, commencing with Section 8200). These regulations interpret and make specific the following Health and Safety Code Division 31, Part 2 statutes applicable to these programs: Chapter 2 (commencing with Section 50517.5); Chapter 16 (commencing with Section 50896), and Chapter 6.7 (commencing with Section 50675).
(b) These regulations establish terms, conditions and procedures for funds awarded after the effective date of these regulations.


Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(2), 50675.1(c), 50675.11 and 50896.3(b), Health and Safety Code. Reference: 50517.5, 50675, 50896, 50896.1 and 50896.3, Health and Safety Code; and 24 CFR part 92.








s 8301. Definitions.
The following definitions govern this subchapter.
(a) "Assisted Unit" means a Unit that is subject to the Program's rent and/or occupancy restrictions as a result of the financial assistance provided by the Program, as specified in the Regulatory Agreement.
(b) "CalHFA" means the California Housing Finance Agency.
(c) "Commercial Space" means any nonresidential space located in or on the property of a Rental Housing Development that is, or is proposed to be, rented or leased by the owner of the Project, the income from which shall be included in Operating Income.
(d) "CPI" means the Consumer Price Index for All Urban Consumers, West Region, All Items, as published by the Bureau of Labor Statistics, United States Department of Labor.
(e) "Debt Service Coverage Ratio" means the ratio of (1) Operating Income less the sum of Operating Expenses and required reserves to (2) debt service payments, excluding voluntary prepayments and non-mandatory debt service. In calculating Debt Service Coverage Ratio, the Department may include all Operating Income, and may exclude Operating Income that cannot be reasonably underwritten by lenders making amortized loans.
(f) "Department" means the Department of Housing and Community Development.
(g) "Developer Fee" means the same as the definition of that term in California Code of Regulations, Title 4, Section 10302.
(h) "Distributions" means the amount of cash or other benefits received from the operation of a Rental Housing Development and available to be distributed pursuant to Section 8314 to the Sponsor or any party having a beneficial interest in the Sponsor or the Project, after payment of all due and outstanding obligations incurred in connection with the Rental Housing Development. Distributions do not include payments for: deferred Developer Fee up to the limit set forth in Sections 8312, approved partnership and asset management fees, mandatory debt service, approved reserve accounts established to prevent tenant displacement resulting from the termination of rent subsidies, operations, maintenance, payments to required reserve accounts, land lease payments to parties that do not have a beneficial interest in the Sponsor entity, or payments for property management or other services as set forth in the Regulatory Agreement for the Rental Housing Development.
(i) "Eligible Households" for MHP means "eligible household" as defined in Section 7301, for HOME this term means the same as "low income families" as defined in 24 CFR 92.2, and for JSJFWHG this term means the same as "agricultural household" as defined in Section 7202.
(j) "Operating Expenses" means the amount approved by the Department that is necessary to pay for the recurring expenses of the Project, such as utilities, maintenance, management, taxes, licenses, and the cost of on-site supportive services coordination, but not including debt service, required reserve account deposits, or other supportive services costs.
(k) "Operating Income" means all income generated in connection with operation of the Rental Housing Development including rental income for Assisted Units and non-Assisted Units, rental income for Commercial Space, laundry and equipment rental fees, rental subsidy payments, and interest on any accounts, other than approved reserve accounts, related to the Rental Housing Development. "Operating Income" does not include security and equipment deposits, payments to the Sponsor for supportive services (except for funds applied towards the cost of on-site supportive service coordination), or tax benefits received by the Sponsor. (continued)