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Title 3 . Commerce, Community, and Economic Development
Chapter 80 . Fisheries Enhancement Tax Appropriations
Section 55. Lending practices

3 AAC 80.055. Lending practices

(a) If the balance of the commercial fishing revolving loan fund is not adequate to meet the anticipated loan demand for the remainder of the fiscal year, the department will, in its discretion, process loan applications in the following order:

(1) permits;

(2) federal tax obligations;

(3) vessel upgrade or purchase;

(4) gear;

(5) quota shares; and

(6) refinancing as permitted under AS 16.10.310 (a)(11).

(b) An applicant will be considered eligible for a loan to purchase a limited entry permit, vessel, or gear under AS 16.10.310 (a)(1)(B) or purchase quota shares under AS 16.10.310 (a)(1)(C) if the department determines that the applicant is not eligible for an alternative source of financing. An applicant's ability to provide a guarantor for a loan does not make the applicant ineligible for a loan under AS 16.10.310 (a)(1)(B) or (a)(1)(C).

(c) A loan will not be approved if its primary purpose would be to

(1) speculate in the acquisition and sale of limited entry permits, quota shares, vessels, or gear;

(2) lease out a limited entry permit; or

(3) purchase a commercial fishing vessel, gear, a limited entry permit, or quota shares that will not be put to use in the fishing season immediately following the loan approval date.

(d) Except as provided in AS 16.10.310 (a)(10) and (a)(11), a loan will not be approved for refinancing long-term debt. Interim or construction financing is not considered long-term debt if the term is 24 months or less and the promissory note or the original agreement was executed less than 24 months before receipt of the application by the department, except that the department will, in its discretion, waive these restrictions if

(1) the applicant shows that the application of these restrictions would result in undue hardship for the applicant;

(2) the applicant is a good financial risk; and

(3) the state's investment is preserved.

(e) In determining the maximum loan amount that may be approved for the purchase of a limited entry permit, the department will rely on the value established by the Alaska Commercial Fisheries Entry Commission or other appropriate sources as determined by the department.

(f) Repealed 7/30/2000.

(g) Repealed 7/30/2000.

(h) A loan for the purchase of a vessel for use in a limited entry fishery will not be approved unless the applicant has access to a limited entry permit for that fishery and the primary use of the vessel will be commercial fishing by the borrower.

(i) A vessel that is being purchased under this chapter cannot be leased unless the vessel is primarily used by the borrower for commercial fishing. All lease agreements must have prior approval by the department.

(j) Except as provided in AS 16.10.310 (a)(11), loan proceeds may not be used to reimburse an applicant for expenses paid more than one year before receipt of the application by the department. The department will, in its discretion, waive this restriction if

(1) the applicant shows that the application of this restriction would result in undue hardship for the applicant;

(2) the applicant is a good financial risk; and

(3) the state's investment is preserved.

(k) The department will, in its discretion, quarterly set the interest rates for loans under this chapter. The interest rates set for a quarter remain in effect until the department changes the rates, will not exceed the maximum interest allowed under AS 16.10.320 (a)(2), and will be established at the nearest one-half point. The interest rates set by the department are based on the bank prime rate listed in the Wall Street Journal during the previous quarter as follows:

(1) for a loan made to upgrade existing vessels and gear for the purpose of improving the quality of Alaska seafood products, the interest rate is based on the bank prime rate minus two percentage points; and

(2) for all other loans under this chapter, the interest rate is based on the bank prime rate plus two percentage points.

( l ) The interest rate for a loan is the quarterly interest rate in effect at the time the loan commitment is made. The interest rate for a loan will be at a fixed rate for the term of the loan.

(m) Repealed 7/30/2000.

(n) If refinancing funds are limited, the department will, in its discretion, process refinancing requests in the following order:

(1) applicants who have existing loans made under AS 16.10.300 - 16.10.370;

(2) applicants who are under-collateralized on their existing loan, but would meet the collateral requirements of AS 16.10.310 - 16.10.370 by the addition of a limited entry permit;

(3) applicants who could significantly improve their loan terms by receiving a loan under AS 16.10.310 (a)(11); and

(4) applicants in default on their existing loan who otherwise meet the requirements of AS 16.10.310 - 16.10.370.

(o) To be eligible for a lower interest loan under (k) of this section to upgrade an existing vessel or gear for the purpose of "improving the quality of Alaska seafood products," an applicant must establish to the satisfaction of the department that the upgrade to be financed with the loan will enhance product quality. Examples of types of acceptable upgrades are refrigeration, hold insulation, and slider reels.

(p) Beginning July 30, 2000, the department will grant a credit on an existing loan with payments due annually if, before the late fee date as described in 3 AAC 80.075(c) , the borrower paid in full the amount due for the current calendar year. Beginning July 30, 2000, the department will grant a credit on an existing loan with payments due monthly, quarterly, or semi-annually if, for each payment due within a 12-month period, the borrower paid in full the amount due before the late fee date for that payment as described in 3 AAC 80.075(c) . For each payment to which the department applies a credit under this subsection, the amount of that credit is the amount by which that payment is reduced if the annual interest rate on the loan were reduced by one percentage point. If the department grants a credit under this subsection, the department will apply that credit beginning from the late fee date, as described in 3 AAC 80.075(c) , for the payment that qualified the borrower for the credit. Every 12 months after that date, the department will review the borrower's loan payment history, and will discontinue a credit granted under this subsection if during that 12-month period the borrower failed to make in full a payment due by the late fee date for that payment as described in 3 AAC 80.075(c) . The maximum credit that will be granted under this subsection is one percentage point of the annual interest rate.

History: Eff. 9/11/85, Register 95; am 5/23/88, Register 106; am 11/28/92, Register 124; am 3/16/95, Register 133; am 8/10/97, Register 143; am 10/17/98, Register 148; am 7/30/2000, Register 155

Authority: AS 16.10.310

AS 16.10.320

AS 16.10.325

AS 16.10.339


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Last modified 7/05/2006