Distribution of moneys — interest — categories of permissible loans

The department of economic development shall distribute moneys, in the form of loans or grants to eligible lenders from the microenterprise revolving loan fund within the limits of appropriations made by the general assembly. The eligible lenders shall charge the market rate of interest for loans made pursuant to sections 620.1069 to 620.1081. No loan shall be made pursuant to sections 620.1069 to 620.1081 for the refinancing of existing debt. Loans may only be made by eligible lenders in any of the following categories: (1) Group-based loans shall be available to microenterprises in need of loans between five hundred dollars and seven thousand five hundred dollars. A group-based loan program shall be approved by the eligible lending institution. A group shall consist of between five and seven eligible members who shall meet to make credit decisions, help one another in the solution of business problems, and receive loan repayments. The initial loan made by the group to the first eligible borrower shall not exceed two thousand five hundred dollars. All such loans shall be subject to examination by the state auditor; (2) Institution-based loans shall be available to microenterprises directly from eligible lenders in amounts of between seven thousand five hundred dollars and fifteen thousand dollars. Such loans shall be made by eligible lenders who possess significant experience in providing business assistance. Repayment of such loans shall be placed in a revolving loan fund established by the eligible lender as provided in subdivision (1) of this section for group-based loans. Institution-based loan applications shall be reviewed by a credit committee which shall judge the merits of the proposed loan according to the local economy, the borrower's character, and the credit risk of the proposed loan. Institution-based loans shall be subject to examination by the state auditor the same as group-based loans; (3) Challenge loans and grants shall be made available to eligible lenders. Such loans and grants shall be made to groups which demonstrate new or innovative approaches to microenterprise development, as determined by the oversight committee established pursuant to section 620.1069. All such loans and grants shall satisfy the requirements of section 620.1075. Loans shall be made available from a group to microenterprises in amounts of between five hundred dollars and seven thousand five hundred dollars. Repayment of such loans shall be placed in a revolving fund established by the lender similar to that as provided for in subdivision (1) of this section.