THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY FONTANA, COSTA, TARTAGLIONE, SOLOBAY, HUGHES, WOZNIAK, YUDICHAK, BREWSTER, FARNESE AND KASUNIC, MARCH 28, 2011

REFERRED TO COMMUNITY, ECONOMIC AND RECREATIONAL DEVELOPMENT, MARCH 28, 2011  

AN ACT

Amending Title 64 (Public Authorities and Quasi-Public

Corporations) of the Pennsylvania Consolidated Statutes,

providing for the definition of "small business"; and further

providing for indebtedness and for Second Stage Loan Program.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 1504 of Title 64 of the Pennsylvania

Consolidated Statutes is amended by adding a definition to read:

§ 1504.  Definitions.

The following words and phrases when used in this chapter

shall have the meaning given to them in this section unless the

context clearly indicates otherwise:

* * *

"Small business."  A company that is engaged in a for-profit

enterprise and that employs no more than 100 individuals.

* * *

Section 2.  Sections 1543(b)(8) and 1553 of Title 64 are

amended to read:

§ 1543.  Indebtedness.

* * *

(b)  Program limitations.--Indebtedness incurred by the

authority under subsection (a) shall not, in aggregate, exceed

any of the following:

* * *

(8)  $50,000,000 for the program established in section

1553 (relating to [Second Stage Loan] Small Business

Investment Guarantee Program).

* * *

§ 1553.  [Second Stage Loan] Small Business Investment Guarantee 

Program.

(a)  Establishment.--There is established a program to be

known as the Second Stage Loan Program. The program shall

provide loan guarantees to commercial lending institutions or

eligible entities that make loans to [life sciences, advanced

technology or manufacturing businesses] Pennsylvania-related

businesses for projects.

(b)  Application for enrollment.--A commercial lending

institution or an eligible entity may apply for enrollment in

the program authorized by this section. The application shall be

on the form prescribed by the board and shall include or

demonstrate all of the following:

(1)  The name and address of the commercial lending

institution or eligible entity and the name and title of the

individual who will serve as the point of contact for the

commercial lending institution or eligible entity.

(2)  A statement defining the service area of the

commercial lending institution or the jurisdiction of the

eligible entity.

(3)  A statement describing the commercial lending

activities engaged in by the commercial lending institution

or eligible entity and how the institution intends to expand

those activities as a result of its participation in the

program authorized by this section.

(3.1)  A statement describing any lending activities

associated with the economic development functions of the

eligible entity and how the eligible entity intends to expand

or supplement those lending activities through participation

in the program authorized under this section.

(4)  Any other information required by the board.

(c)  Enrollment approval.--Upon being satisfied that all

requirements have been met, the board may enroll the commercial

lending institution or eligible entity in the program authorized

by this section, and, if enrolled, the authority shall execute a

master guarantee agreement in favor of the commercial lending

institution or eligible entity. In addition to any other terms

and conditions required by the board, the master guarantee

agreement shall provide for the following:

(1)  The procedure for the submission of a claim for

payment by the commercial lending institution or eligible

entity. This procedure shall require that the commercial

lending institution or eligible entity demonstrate that it

has exhausted all available remedies against the borrower,

other guarantors and collateral for the loan before seeking

payment under the agreement.

(2)  A requirement that a percentage of any moneys

recovered by the commercial lending institution or eligible

entity subsequent to any payment made under the master

guarantee agreement by the authority be remitted to the

authority.

(3)  Periodic reporting requirements by the commercial

lending institution or eligible entity regarding itself and

regarding the loans for which guarantee certificates have

been issued under this section.

(d)  Application for guarantee.--A commercial lending

institution or eligible entity enrolled in the program

authorized by this section may submit an application to the

authority for the guarantee of a proposed loan. The application

shall be on the form prescribed by the board and shall include

or demonstrate all of the following:

(1)  The name and address of the borrower, the type of

business the borrower conducts, the location and age of the

business and the names and addresses of the principals of the

borrower.

(2)  The number of projected new or retained employees of

the borrower as a result of the loan.

(3)  A copy of the borrower's last two years of financial

statements prepared or reported on by an independent

certified public accountant.

(4)  A statement describing the purpose of the loan, the

requested amount of the loan, a copy of the commercial

lending institution's or eligible entity's commitment letter

and applicable credit underwriting that supports the

repayment of the loan, as well as the collateral and other

guarantees offered by the borrower to support the loan.

(4.1)  A statement describing the need for the guarantee,

including the likelihood that the projects can be completed

without the guarantee.

(5)  Any other information required by the board.

(e)  Application review.--

(1)  The board shall review the application to determine

all of the following:

(i)  That the borrower owns and operates a [life

sciences, advanced technology or manufacturing]

Pennsylvania-related business.

[(ii)  That the borrower's business has been in

existence for at least two years but no more than seven

years at the time of application.]

(iii)  That the borrower is financially responsible

and has the ability to repay the loan.

(iv)  That the use of loan proceeds by the borrower

will result in jobs being created or retained within this

Commonwealth.

(v)  That the borrower's business is located within

the commercial lending institution's service area or

within the eligible entity's jurisdiction and within this

Commonwealth.

(v.1)  That the project is unlikely to proceed

without a loan guarantee.

(vi)  That the borrower and the commercial lending

institution or the eligible entity have met all other

requirements established by the board.

(2)  Upon being satisfied that all requirements have been

met, the board may approve the guarantee, and, if approved,

the authority shall issue a guarantee certificate for the

loan to the commercial lending institution or eligible entity 

stating the terms and amount of the guarantee.

(3)  The board may establish a subcommittee composed of

one or more members of the board and staff of the department

to review and approve applications for guarantees under this

section.

(4)  Priority shall be given to applications for loan

guarantees for projects related to the life sciences,

advanced technology or manufacturing.

(f)  Limitations.--

[(1)  During the first two years of the term of a loan

for which a guarantee certificate has been issued, the

guarantee may not exceed 50% of the outstanding principal

amount of the loan. From the end of year two through either

the end of year seven or the end of the term of the loan,

whichever occurs first, the guarantee may not exceed 25% of

the outstanding principal amount of the loan. The guarantee

will terminate at the end of seven years.]

(1.1)  The board may not approve a guarantee unless the

borrower has an equity investment of at least 10% of the

total cost of the project from nonpublic sources.

(2)  At no time may a guarantee exceed [$1,000,000]

$2,000,000 for any one loan.

(3)  At no time may a guarantee exceed 40% of the

outstanding principal amount of the loan, except that in the

case of a loan to a small business a guarantee may not exceed

100% of the principal amount of the loan.

(4)  The board may not approve a guarantee for any

project directly or indirectly related to the conduct of

gaming as defined in 4 Pa.C.S. § 1103 (relating to

definitions).

(g)  Definitions.--For purposes of this section, an "eligible

entity" shall mean a political subdivision, a municipal

authority, a redevelopment authority, an industrial development

corporation or any board, commission or other agency or

instrumentality of a political subdivision, municipal authority,

redevelopment authority or industrial development corporation.

Section 3.  This act shall take effect in 60 days.