BIDCO's

The provisions governing the formation and operation of a BIDCO are outlined in Tennessee Code Annotated Sections 45-8-201 through 45-8-226 (Link to Statutory Provisions: Tennessee Code Unannotated – Free Public Access | Main Page (lexis.com) and Chapter 0180-18 of the Rules of the Department of Financial Institutions (Link to Rules: RULES (tnsosfiles.com). Please review the statutory provisions outlined above and the provisions of the Rules.

Initial meetings are held between the staff of the TDFI, along with the potential applicant and their counsel, prior to proceeding with the filing of a Notice of Intent required by Rule 0180-18-.02(2)(a). Therefore, should applicants decide to move forward with a Notice of Intent and an application, we strongly suggest a preliminary meeting, via MS Teams with the applicant, organizers and its proposed board of directors, along with legal counsel for the applicant. Please contact the Department by email or telephone to schedule the preliminary meeting:

Debra Grissom, Chief Administrator for Applications, Debra.Grissom@tn.gov 615/741-5018

Or

William Cook, Program Administrator for Applications, William.Cook@tn.gov 615/934-1891

After the initial meeting, the Notice of Intent may be filed. If the information in the Notice of Intent complies with the requirements of Chapter 0180-18-.02(2), the Commissioner of TDFI (the “Commissioner”) shall notify the applicant that an application to organize a BIDCO may be submitted. If the information is not in compliance, the Commissioner shall, within 20 days after receipt of the Notice of Intent, return the notice to the applicant, calling attention to the defect(s) therein.

The application requirements are outlined in Rule 0180-18-.02(2)(c). Please respond to the requirements of each provision of the Rule when submitting the application. The application shall be submitted in letter format to the TDFI along with a non-refundable investigation fee of $20,000.

The TDFI requires that each officer, director and/or organizer submit an Interagency Biographical and Financial Report that can be found at this link: 6200/06, Interagency Biographical and Financial Report (fdic.gov) (“IBFR”). Although tailored to banks, TDFI uses the IBFR for the BIDCO application process relative to organizers, executive officers directors, and anyone who owns control of the BIDCO. The TDFI also uses this information in performing background checks. The TDFI may also request copies of credit reports and tax returns, if needed, to process any BIDCO application. Although the form references and instructs individuals to share the form with federal agencies, the information must not be submitted to any other agency outside of the TDFI upon completion.

Once an application is received, reviewed and assuming the application is considered accepted for filing, the applicant is required to issue a public notice (form of notice to be provide by the Department) and to provide proof of public notice to the TDFI. After public notice is provided, TDFI field personnel will initiate an in-depth investigation of the applicant, and the applicant’s parent company (if the company has a controlling ownership interest in the BIDCO). Please refer to Attachment A regarding items that will be covered in the investigation.

If originating SBA loans is proposed as vital to an applicant’s business plan, proposed applicants should be able to demonstrate that they have the expertise to operate the BIDCO in a prudent manner and that the applicant has experience to engage in the production of SBA loans. In addition, the applicant must provide the TDFI with documentation from the SBA, supporting the applicant’s assertion that a BIDCO license is required for, and will act to ensure, certification of the applicant as an SBA 7(a) lender. Moreover, the applicant must demonstrate that SBA approval of the BIDCO as an approved lender is likely. Finally, applicants should confirm with the SBA the timeframe for review of SBA applications for certification and communicate that timeframe to TDFI.

One of the purposes of the Tennessee BIDCO Act is to encourage the formation of BIDCOs to help meet the financing assistance and management assistance needs of growth-oriented small and medium-sized businesses in the state of Tennessee. Therefore, BIDCO applicants must demonstrate (as part of their business plan) that the BIDCO will make available financial and management assistance to small and medium-sized businesses to locate, remain and expand in the state of Tennessee. In addition, after a BIDCO receives its license, it must, at all times, maintain its main office in the State of Tennessee.

In the event a Tennessee BIDCO License is granted, an Order of Approval is issued by the Commissioner. Those provisions may include, but are not limited to, the items included on Attachment B.

Once licensed, the BIDCO can expect the following relative to ongoing regulation by the TDFI:

a) Management of the BIDCO will generally be notified in advance of an upcoming examination and provided a list of requested information. This information should be submitted by the requested date. Members of management and the board must be available to meet with examiners virtually or in person during the examination. A report of examination will be issued following the examination and findings and recommendations in the report must be addressed by management within required time frames.

b) There will be a six month visitation after opening and possible visitations in between full-scope examinations, depending on the BIDCO’s overall condition.

The BIDCO will be expected to maintain full compliance with the Tennessee BIDCO Act and Chapter 0180-18 of the Rules of the Department of Financial Institutions and to:

a) Hold timely board meetings and maintain accurate board minutes for the benefit of the BIDCO and for review by examiners when requested
b) Maintain adequate risk mitigation practices
c) Maintain adequate Board approved policies and procedures to include:
               1. Loan
               2. Investment
               3. Liquidity
               4. Capital
               5. Audit
               6. Bank Secrecy Act/ Anti-Money laundering Policy
d) Maintain a Capital/Assets ratio of at least 10%