An EDB loan for a care centre

It is a credit guarantee and investment programme Act 212-2000 placed in the hands of the Economic Development Bank for Puerto Rico, with a four million dollar revolving fund, to finance the establishment or expansion of care centres. The Act covers four facility types under the same fund: day care centres for children, day care centres for older adults, multiple-activity centres and long-term care establishments for older adults. The one who lends is the Bank; the one who certifies you comply so you can apply is the Department of the Family through its Licensing Office.

The Act does not define an applicant by legal form: it speaks of the existing or newly created entity and of the applicant. What it does condition is purpose and compliance. The purpose, per Article 3(a), must be to establish a new centre or to expand the services of existing centres. Compliance is twofold: every application must meet the requirements of law and regulation to operate set by the Department of the Family and its Licensing Office, plus any other applicable regulation, and the compliance certification issued by the Department of the Family must be presented. If the centre already exists and what it wants is to improve or expand services, acquire equipment or acquire the property where it sits, Article 3(b) adds two conditions: demonstrate it has no net operating losses and that it is in good standing with the specific regulations covering all its financial and operational activities.

• Every financing application must comply with all requirements of law and applicable regulation for its operation established by the Department of the Family and its Licensing Office (Article 2).Verified against the official source
• The entity, existing or newly created, must present a compliance certification with those requirements, issued by the Department of the Family, as part of the requirements for presenting the application to the Bank (Article 2).Verified against the official source
• The purpose of the application must be to establish a new centre or to expand the services of existing centres, subject to compliance with the requirements of law and regulation for their operation (Article 3(a)).Verified against the official source
• Existing centres applying to improve or expand services, acquire equipment or acquire the property where the facility sits must demonstrate they have no net operating losses and are in good standing with the regulations covering all their financial and operational activities (Article 3(b)).Verified against the official source
• The economic contribution, however it is structured, must come from one of the programmes the institution has, subsidised with federal funds or others available at the time of application (Article 3(f)).Verified against the official source
• No loan shall be granted unless, based on the facts and conditions of each case, there is a reasonable expectation that the recipient will in due course repay the amount offered as a loan (Article 3).Verified against the official source

• The compliance certification issued by the Department of the Family, which Article 2 requires as part of the requirements for presenting the application to the Bank.
• The evidence that the existing centre has no net operating losses and is in good standing, if the application is to improve or expand services, acquire equipment or acquire the property (Article 3(b)).

1. 1

   Step 1: What the programme is and how large the fund is

   Article 2 empowers the Economic Development Bank for Puerto Rico to facilitate guarantee or credit lines for the development of day care centres for children and for older adults, multiple-activity centres or long-term care establishments for older adults. The Bank administers a loan and guarantee fund with an appropriation of four million dollars from the central government’s general fund, and that fund is used on a revolving basis: what is repaid becomes available again. It is worth noting the scope, because many people arrive looking only for the children’s side: the same Act and the same fund cover all four classes of facility.

2. 2

   Step 2: The right order: the Family first, the Bank second

   This is what saves a wasted trip. The second paragraph of Article 2 says every financing application presented to the Economic Development Bank regarding an existing or newly created centre must comply with all requirements of law and applicable regulation for its operation established by the Department of the Family and its Licensing Office. And it continues: to that end, the existing or newly created entity must present a compliance certification with such requirements, which will be issued by the Department of the Family as part of the requirements for presenting an application to the Bank. Read it as a sequence: the certification is not a document obtained afterwards nor a parallel errand, it is part of the requirements for being able to present the application.

3. 3

   Step 3: What the money can be asked for

   Article 3(a) sets the purpose: to establish a new centre, or to expand the services of existing centres, subject to compliance with the requirements of law and regulation for their operation set by the Department of the Family and its Licensing Office, as well as any other regulation or norm applicable to this type of activity. Article 3(b) opens the list for centres already operating: improve or expand their services, acquire equipment for their facilities, or acquire the property where the facility is located. And the Bank may grant more than loans: the Act mentions loans or other investment products, guarantee funds for external loans and credit lines, among others.

4. 4

   Step 4: The two extra conditions if your centre already exists

   Article 3(b) is specific and worth looking at before assembling the file. Existing centres interested in presenting an application to the Bank to improve or expand their services, acquire equipment for their facilities or acquire the property where the facility is located must demonstrate two things. First: that they have no net operating losses. Second: that they are in good standing with the specific regulations related to all their financial and operational activities. The Act does not say how either is demonstrated, nor what period it looks at, nor what document serves as evidence. It says what must be demonstrated.

5. 5

   Step 5: Interest, terms and collateral

   Article 3 places these three points in the Bank’s hands, with a guide on each. Interest, subsection (c): the prevailing legal market interest shall apply, or a lower interest according to the applicant’s economic resources. There is no fixed rate in the Act and that is why cost here is marked unverified. Terms, subsection (d): the Bank is to establish the payment terms of the loan or credit line, as well as of extension requests for payment of capital and interest, as the case may be. Collateral, subsection (e): the Bank determines the nature and value of the guarantee required, if any. That "if any" in the text is literal: the Act contemplates that none may be required.

6. 6

   Step 6: The repayment rule and the door the Act itself leaves open

   The last two paragraphs of Article 3 must be read together because one qualifies the other. The first: no loan shall be granted unless, based on the facts and conditions of each case, there is a reasonable expectation that the person to whom it is to be granted will in due course repay the amount offered as a loan. The second: nonetheless, not subject to the foregoing provisions, and having due financial soundness per applicable laws, regulations and practices, the Bank may make flexible or release the financing requirements for applicants, without needing to establish loan quotas and with the establishment of lesser requirements in their collateral. That is: there is a repayment standard, and there is an express power of the Bank to relax it. The same article adds that the Bank shall exercise the supervision it deems proper in cases where it provides investment capital for the operation.

7. 7

   Step 7: Where the detailed rules live

   In the Bank, not in the Act. Article 4 provides that the Economic Development Bank for Puerto Rico shall establish and revise, from time to time, its policies, guides and procedures for the functioning of the Credit Guarantee and Investment Programme created under this Act. That means two practical things. One: the form, the required documentation, the evaluation terms and the fine criteria are not in the Act and must be sought at the Bank. Two: they can change without the Act changing, so it is worth confirming them before assembling the file. We do not publish here what we did not read.

Two doors, in this order. The compliance certification is issued by the Department of the Family through its Licensing Office, and without it the Act does not let you present the application. The financing — loan, investment product, guarantee fund for external loans or credit line — is granted and administered by the Economic Development Bank for Puerto Rico, an entity distinct from the Department of the Family. The programme’s policies, guides and procedures are established and revised by the Bank itself. The Act publishes no addresses, telephones, forms or portals for either, and we do not guess government internet addresses.

• Going to the Bank first: the Department of the Family’s compliance certification is part of the requirements for being able to present the application.
• Believing the Department of the Family lends the money: the one granting and administering the financing is the Economic Development Bank for Puerto Rico.
• Thinking the programme is only for child care: the same fund covers centres for older adults, multiple-activity centres and long-term care establishments.
• Looking for the interest rate in the Act: it only sets that the prevailing legal market interest shall apply, or a lower one according to the applicant’s resources.
• Assuming collateral is always required: Article 3(e) leaves the Bank to determine the nature and value of the guarantee required, if any.
• Believing only new centres are financed: existing ones may apply to improve or expand services, acquire equipment or acquire the property.
• Forgetting the two conditions of Article 3(b) if the centre already operates: no net operating losses and being in good standing.
• Taking for granted the economic contribution can come from anywhere: Article 3(f) requires it to come from one of the programmes the institution has.
• Looking for the form in the Act: the programme’s policies, guides and procedures are established and revised by the Bank itself.
• Counting on the fund as if it were unlimited: it is four million dollars used on a revolving basis.

These are the government pages this guide is based on.

• Departamento de la Familia

  Familia

  bvirtualogp.pr.gov