DEPARTMENT OF ENVIRONMENTAL QUALITY

                    ENVIRONMENTAL ASSISTANCE DIVISION

           SMALL BUSINESS POLLUTION PREVENTION ASSISTANCE LOAN


(By authority conferred on the director of the  department  of  environmental 
quality  by  section  502  of  1994  PA  451,  MCL  324.502,  and   Executive 
Reorganization Order No. 1995-16, MCL 324.99903)


R 324.14501 Definitions.
  Rule 1. As used in these rules:
  (a)"Applicant" means a business that applies for a small business pollution 
prevention loan.
  (b) "Department" means the department of environmental quality.
  (c) "Director"  means  the  director  of  the  department  or  his  or  her 
designated representative.
  (d) "Eligible pollution prevention project" means  a  pollution  prevention 
project that meets the criteria set forth in these rules.
  (e) "Energy usage" means the  use  of  nonrenewable  resources  to  support 
business operations, including electricity, water, and natural gas.
  (f) "Environmental  waste"  means  environmental  pollutants,  wastes,  and 
releases, regardless of how they are regulated and regardless of whether they 
are released to the general environment or the workplace environment.
  (g) "Fixed asset" means a permanent asset that is not consumed or converted 
into cash or its equivalent during a 12-month period.
  (h) "Fund," as defined in part 145 of 1994 PA 451, MCL 324.14513  et  seq., 
means the small business pollution prevention assistance revolving loan fund.
  (i)  "Lender  agreement"  means  a  binding  agreement  between  a  lending 
institution and the department that sets forth the terms and conditions for a 
lending institution to make loans and  otherwise  participate  in  the  small 
business pollution prevention loan program.
  (j) "Lending institution" means a  bank,  out-of-state  bank,  or  national 
bank, foreign  bank  branch,  association,  savings  bank,  or  credit  union 
organized under the laws of  this  state,  another  state,  the  District  of 
Columbia, the United States, or a territory or  protectorate  of  the  United 
States that has entered into a lender agreement with the department.
  (k) "Loan agreement" means  a  written  contract  or  agreement  between  a 
lending institution and a loan recipient that  describes  the  terms  of  the 
small business pollution prevention loan.
  (l) "Loan recipient" means a small business that has been approved for  and 
issued a small business pollution prevention loan.
  (m) "Pollution prevention" means source reduction and environmentally sound 
on-site  or  off-site  reuse  or  recycling.    Waste   treatment,   control, 
management, and disposal are not considered pollution prevention.
  (n) "RETAP audit" means an  environmental  waste  assessment  conducted  by 
engineers, scientists, and other qualified professionals participating in the 
retired engineer technical assistance program established under part  145  of 
1994 PA 451, MCL 324.14501 et seq.
  (o) "Small business," as defined in part 145 of 1994 PA 451, MCL  324.14513 
et seq., means a business located in Michigan that is all of the following:
  (i) Employs 100 or fewer people.
  (ii) Is independently owned or operated.
  (iii) Is not dominant in its field.
  (p) "Small business pollution prevention loan" means a low-interest loan to 
a small business to finance  an  eligible  pollution  prevention  project  as 
provided for under these rules and part 145 of 1994 PA 451, MCL 324.14513  et 
seq.
  (q) "Small business pollution prevention loan program"  means  the  program 
the department administers to provide  small  business  pollution  prevention 
loans under these rules.
  (r) "Source  reduction"  means  any  practice  that  reduces  both  of  the 
following:
  (i) The amount  of  any  hazardous  substance,  pollutant,  or  contaminant 
entering any  waste  stream  or  otherwise  released  into  the  environment, 
including fugitive emissions, before recycling, treatment, or disposal.
  (ii) Hazards to public health  and  the  environment  associated  with  the 
release of the substances, pollutants, or contaminants.

  History:  1998-2000 AACS.


R 324.14502 Purpose.
  Rule 2. The purpose  of  these  rules  is  to  establish  requirements  for 
participation in  the  Michigan  small  business  pollution  prevention  loan 
program,   including   applicability,   eligibility,   binding    agreements, 
obligations, and procedures.

  History:  1998-2000 AACS.


R 324.14503 Applicant eligibility.
  Rule 3. An applicant for a small business pollution  prevention  loan  must 
meet all of the following requirements:
  (a) Qualify as a small business as defined in these rules.
  (b) Apply for a small business pollution prevention  loan  from  a  lending 
institution in accordance with these rules.
  (c) Propose to utilize the small  business  pollution  prevention  loan  to 
undertake an eligible pollution prevention project in Michigan.
  (d) Commence the proposed pollution prevention project within 180  days  of 
receipt of a loan.
  (e) Not have received a loan as described in these rules within  the  prior 
3-year period.

  History:  1998-2000 AACS.


R 324.14504 Eligible pollution prevention project.
  Rule 4. (1) An eligible pollution prevention project shall directly  result 
in the reduction or elimination  of  environmental  waste  generated,  energy 
used, or hazards to public health associated with environmental waste at  the 
small business and shall be 1 or more of the following:
  (a) A pollution prevention recommendation made in a RETAP audit.
  (b) A pollution prevention expenditure at the small business, including  an 
expenditure for any of the following:
  (i) Equipment or technology modifications.
  (ii) Process or procedure modifications.
  (iii) Reformulation, reclamation, or redesign of products.
  (iv) Substitution of raw materials.
  (v) Improvements in housekeeping, maintenance, or inventory control.
  (vi) Pollution prevention training of employees.
  (vii) Energy conservation studies or specifications.
  (viii) On-site water conservation projects.
  (2) The following projects  or  expenditures  are  not  eligible  pollution 
prevention projects:
  (a) Costs incurred before the effective date of the loan agreement.
  (b) Refinancing existing obligations or debt.
  (c) Financing building or construction costs that are not integral  to  the 
project.
  (d) Financing salaries, wages, benefits, travel, or operating costs of  the 
applicant business.
  (e) Taxes, attorney fees, permits or licenses, or land acquisition.
  (f) Projects or expenditures to increase process output or production.

  History:  1998-2000 AACS.


R 324.14505 Loan application process.
  Rule 5. (1) A small business shall file an application for a small business 
pollution prevention loan with a lending institution on an  application  form 
provided by the department.
  (2) The application shall include all of the following information:
  (a) A description of  the  pollution  prevention  project,  which  provides 
sufficient detail to properly evaluate the  proposed  project  and  determine 
whether it meets the criteria of R 324.14504 or is based  on  a  RETAP  audit 
recommendation signed by a RETAP auditor.
  (b)  The  expected  reduction  in  environmental  waste  or  energy   used, 
quantified on worksheets provided by the department.
  (c) A project schedule.
  (d) Certification that all necessary  construction  permits  and  operating 
licenses have  been  obtained,  or  will  be  obtained,  in  accordance  with 
applicable laws and regulations.
  (3) The lending institution shall submit the completed loan application and 
supporting documentation to the department for approval.
  (4) A small business, or  a  lending  institution  on  behalf  of  a  small 
business, may seek  a  written  eligibility  determination  on  the  proposed 
pollution prevention project from the department before submitting a complete 
loan application.
  (5) A lending institution  shall  not  award  a  small  business  pollution 
prevention loan until it receives a  notice  from  the  department  that  the 
project described in the application  is  an  eligible  pollution  prevention 
project.
  (6)  A  lending  institution  shall  execute  a  small  business  pollution 
prevention loan in accordance with terms set forth in the loan agreement  and 
the lender agreement.

  History:  1998-2000 AACS.


R 324.14506 Lending institution responsibilities.
  Rule 6. (1) A lending institution shall enter into a lender agreement  with 
the department.
  (2) A lender agreement shall provide for all of the following:
  (a) A lending institution may make a small  business  pollution  prevention 
loan to a loan recipient of up to $100,000.00, with  participation  from  the 
fund not to exceed $50,000.00.
  (b) The total amount of the loan shall be shared  equally  by  the  lending 
institution and the fund, unless the director increases the fund's  share  of 
the loan to insure that the fund's interest rate of return is not  less  than 
0%.
  (c) The lending institution shall notify the department  of  the  effective 
interest rate being assessed to the applicant, including  the  interest  rate 
assessed as part of the fund's share and the interest rate assessed  as  part 
of the lending institution's share.
  (d) The effective interest rate that the loan recipient pays  on  the  full 
amount of the loan under the loan agreement shall not exceed 5%.
  (e) The lending institution shall provide an  executed  copy  of  the  loan 
agreement to the department.
  (f)  Only  appropriate  and  reasonable  costs  or  fees  associated   with 
processing the loan are eligible for reimbursement as part of the loan.
  (g) The lending institution will remit principal and interest payments  not 
less frequently than on a quarterly basis to  the  fund  until  the  loan  is 
repaid in full.
  (h) The lending institution will pursue the  collection  of  all  defaulted 
loans until brought current, collected in full, reduced  to  a  judgment,  or 
settled with the concurrence of the department.
  (i) The lending institution will  consider  loan  recipients  who  fail  to 
complete the project to be in default of the loan.

  History:  1998-2000 AACS.


R 324.14507 Project review and approval process.
  Rule  7.  (1)  The  department  shall  process  loan  applications  on   an 
as-received basis.
  (2) The department shall determine whether the application  and  supporting 
documentation meet the requirements of these rules within 30 days of  receipt 
of a complete application.
  (3) The department shall notify the lending institution and the  applicant, 
in writing, within 14 days of making its determinations.
  (4) A loan recipient  shall  not  proceed  with  the  pollution  prevention 
project until it is notified in writing by the lending institution to proceed.
  (5) The department's determination of project eligibility is valid  for  90 
days from the date of notification.
  (6) The lending institution or the loan recipient shall promptly notify the 
department, in writing, of any substantive change to  an  eligible  pollution 
prevention project before expenditure or encumbrance of any loan funds.
  (7) The department will remit payment for its share of the  loan  from  the 
fund to the lending institution within 30 days from the date  of  receipt  of 
the executed loan agreement.
  (8) In the case of an ineligibility  determination,  the  department  shall 
provide  the  applicant  with  written  notice  of   the   reason   for   the 
determination.  There is no formal appeal of the department's loan decision.
  (9) A small business can reapply for a loan at any time.

  History:  1998-2000 AACS.


R 324.14508 Small business loan recipient responsibilities.
  Rule 8. (1) In addition to any financial provisions required by the lending 
institution, within 90 days of the  project  eligibility  determination,  the 
small business loan recipient shall enter into  a  loan  agreement  with  the 
lending institution that requires  the  loan  recipient  to  do  all  of  the 
following:
  (a)  Initiate the pollution prevention project within 180 days  of  signing 
the loan documents or agreement.
  (b)  Secure qualified personnel or contractors, or both,  to  complete  the 
pollution prevention activities specified in the loan application.
  (c)  Within 90 days of project completion, submit to the department a final 
report upon project completion describing the pollution  prevention  benefits 
attained,  including  a  demonstration   of   the   expected   reduction   in 
environmental waste or energy usage.
  (d)  Obtain written department approval of any amendments to  the  proposed 
project, before making the change.
  (e)   Maintain  project  records  and  documentation  in  accordance   with 
generally accepted accounting principles and practices for  a  minimum  of  3 
years after the project is completed.
  (f)  Maintain  all  of  the  following  documentation  at  the  recipient's 
business:
  (i)  Copies of invoices and evidence of payment of invoiced expenditures.
  (ii)  Information pertinent to the project implementation as agreed  to  in 
the loan application.
  (iii)  Evidence  that  the  project  was  implemented  in  compliance  with 
applicable rules and regulations.
  (2)   Upon  reasonable  notice,  the  department  or  its  duly  authorized 
representatives  shall  be  allowed  access  to  the  records  or   documents 
maintained by the small business under these rules.

  History:  1998-2000 AACS.