THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY BREWSTER, BLAKE, FONTANA, SOLOBAY, TARTAGLIONE, COSTA, WAUGH, BOSCOLA, YUDICHAK, STACK, HUGHES, WOZNIAK, WASHINGTON, FARNESE, KASUNIC, KITCHEN, DINNIMAN AND WILLIAMS, MARCH 30, 2011

REFERRED TO COMMUNITY, ECONOMIC AND RECREATIONAL DEVELOPMENT, MARCH 30, 2011  

AN ACT

Amending Title 12 (Commerce and Trade) of the Pennsylvania

Consolidated Statutes, further providing for capital

development loans, for loans in distressed communities, for

pollution prevention assistance loans and for export

financing loans.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Sections 2306, 2308, 2309 and 2310 of Title 12 of

the Pennsylvania Consolidated Statutes are amended to read:

§ 2306.  Capital development loans.

(a)  Application.--A small business may submit an application

and any applicable application fee to its area loan organization

requesting a loan for certain costs of a capital development

project. The application shall be on the form required by the

department and shall include or demonstrate all of the

following:

(1)  The name and address of the applicant.

(2)  A statement of the amount of loan assistance sought.

(3)  A statement of the capital development project,

including a detailed statement of the cost of the project.

(4)  A financial commitment from a responsible source for

any cost of the capital development project in excess of the

amount requested.

(5)  Any other information required by the department.

(b)  Area loan organization review.--

(1)  Upon receipt of a completed application, an area

loan organization shall investigate and determine all of the

following:

(i)  If the applicant is a small business.

(ii)  If the project is a capital development

project.

(iii)  If, when the applicant is a small business,

the capital development project demonstrates a

substantial likelihood of creating or preserving

employment activities in this Commonwealth or if, when

the applicant is an agricultural producer, the project

demonstrates a substantial likelihood of enhancing and

growing normal agriculture operations.

(iv)  The ability of the applicant to meet and

satisfy the debt service as it becomes due and payable.

(v)  The existence and sufficiency of collateral for

the loan.

(vi)  Relevant criminal and credit history and

ratings of the applicant as determined from outside

credit reporting services and other sources.

(vii)  The number of employment opportunities to be

created or preserved by the proposed capital development

project.

(viii)  If the applicant complied with all other

criteria established by the department.

(2)  Upon being satisfied that all requirements have been

met, the area loan organizations shall recommend the

applicant to the department and forward the application with

all supporting documentation to the department for its review

and approval.

(c)  Department review.--

(1)  Within 30 days of receiving a recommendation and a

completed application, the department shall review the

application. If the department is satisfied that all

requirements have been met, the department may approve the

loan request in accordance with the following:

(i)  A loan for land, buildings and machinery and

equipment may not exceed [$200,000 or 50%] $250,000 or

75% of the total capital development project costs,

whichever is less. For the purposes of this subparagraph,

capital development project costs incurred during the

[12-month] 18-month period prior to the date of

submission of the application to the department shall be

considered part of the total capital development project

costs.

(ii)  A loan for working capital may not exceed

[$100,000 or 50%] $150,000 or 75% of the total capital

development project costs, whichever is less.

(iii)  Except for loans to agricultural producers, a

loan must create or preserve one job for every $25,000

loaned.

(2)  The department shall notify the area loan

organization and applicant of its decision.

(d)  Approvals.--For applications which are approved, the

department shall draw an advance equal to the principal amount

of the loan from the fund. The advance shall be forwarded to the

area loan organization and, upon receipt by the area loan

organization, shall become an obligation of the area loan

organization. Prior to providing loan funds to the applicant,

the area loan organization shall require the applicant to

execute a note and to enter into a loan agreement. In addition

to the requirements of subsection (e), the loan agreement shall

include a provision requiring the recipient to use the loan

proceeds to pay the costs of the capital development project.

The department may require the area loan organization to impose

other terms and conditions on the recipient if the department

determines that they are in the best interests of this

Commonwealth, including a provision requiring collateral for any

penalty imposed under subsection (g).

(e)  Loan terms.--A loan agreement entered into in accordance

with subsection (c) shall do all of the following:

(1)  State the collateral securing the loan. All loans

shall be secured by lien positions on collateral at the

highest level of priority as may be determined by the area

loan organization with the approval of the department.

(2)  State the repayment period in accordance with the

following:

(i)  A loan for real property shall have a repayment

period of up to [15] 18 years.

(ii)  A loan for machinery and equipment shall have a

repayment period of up to [ten] 13 years.

(iii)  A loan for working capital shall have a

repayment period of up to [three] six years.

(iv)  If, in a capital development project, there are

two or more uses planned, the loan terms may be blended.

(3)  State the interest rate in accordance with the

following:

(i)  Except as provided in subparagraph (ii), loans

shall be made at an interest rate not to exceed [5%] 4.5% 

for the term of the loan.

(ii)  A loan to a small business which is an

agricultural producer shall be made at an interest rate

of not less than [2%] 1.5% for the term of the loan if

all of the following apply:

(A)  A declaration under 35 Pa.C.S. § 7301(c) 

(relating to general authority of Governor) is in

effect for at least ten days prior to the date of

application.

(B)  The application is made within nine months

of termination of the declaration.

(C)  The agricultural producer is in the area

which has been declared to be a natural disaster

area.

(f)  Loan administration.--A loan made under this section

shall be administered in accordance with departmental policies

and procedures by the area loan organization which made the

loan. Each area loan organization shall submit an annual report

on the form required by the department and which includes or

demonstrates all of the following:

(1)  Each outstanding loan.

(2)  The date approved.

(3)  The original principal amount.

(4)  The current principal balance.

(5)  The interest rate.

(6)  The purpose for which the loan was made.

(7)  An enumeration of any problems or issues which have

arisen with regard to each loan.

(8)  A statement regarding the progress of the small

business in creating or preserving its requisite number of

employment opportunities.

(9)  Any other information or documentation required by

the department.

(g)  Penalty.--

(1)  Except as provided in paragraph (2), the department

shall impose a penalty upon a recipient if the recipient

fails to create or preserve the number of employment

opportunities specified in its approved application.

(2)  The department may waive the penalty required by

paragraph (1) if the department determines that the failure

was due to circumstances outside the control of the

recipient.

(3)  The amount of the penalty imposed under paragraph

(1) shall be equal to an increase in the interest rate to

[2%] 2.5% greater than the current prime interest rate for

the remainder of the loan.

(h)  Defaults.--The department may by foreclosure take title

to a capital development project which it financed if

acquisition is necessary to protect a loan made under this

section. The department shall pay all costs arising out of the

foreclosure and acquisition from moneys held in the fund. The

department may, in order to minimize financial losses and

sustain employment, lease the capital development project. The

department may withdraw moneys from the fund to purchase first

mortgages and to make payments on first mortgages on any capital

development project which it financed where purchase or payment

is necessary to protect a loan made under this section. The

department may sell, transfer, convey and assign the first

mortgages and shall deposit any moneys derived from the sale of

any first mortgages in the fund.

§ 2308.  Loans in distressed communities.

(a)  Application.--A small business located in a distressed

community may submit an application and any applicable

application fee to a community development institution

requesting a loan for certain costs of a capital development

project. The application shall be on the form required by the

department and shall include or demonstrate all of the

following:

(1)  The name and address of the applicant.

(2)  A statement that the small business is engaged in

business-to-public service or in the mercantile, commercial

or point-of-sale retail business sectors.

(3)  A statement of the amount of loan assistance sought.

(4)  A statement of the capital development project,

including a detailed statement of the cost of the project.

(5)  A financial commitment from a responsible source for

the cost of the capital development project in excess of the

amount requested.

(6)  Any other information required by the department.

(b)  Community development institution review.--

(1)  Upon receipt of a completed application, a community

development institution shall investigate and determine all

of the following:

(i)  If the applicant is a small business which is

engaged in business-to-public service or in the

mercantile, commercial or point-of-sale retail business

sectors in accordance with conditions or criteria

established by the department.

(ii)  If the project is a capital development

project.

(iii)  If the applicant has demonstrated a direct

impact on the community in which the capital development

project is or will be located, on residents of that

community or on the local and/or regional economy. The

department shall establish criteria that will assist in

making this demonstration.

(iv)  Number of employment opportunities to be

created or preserved by the proposed capital development

project.

(v)  If the applicant complied with all other

criteria established by the department.

(2)  Upon being satisfied that all requirements have been

met, the community development institution shall recommend

the applicant to the department and forward the application

with all supporting documentation to the department for its

review and approval.

(c)  Department review.--

(1)  Upon receipt of a recommendation and a completed

application, the department shall investigate and determine

all of the following:

(i)  The ability of the applicant to meet and satisfy

the debt service as it becomes due and payable. In

reviewing repayment obligations, loans shall not be

approved on the basis of direct financial return on

investment and shall not be held to the loan loss

standards of private commercial lenders. Loans shall be

reviewed for the purpose of establishing a strong

economic base and promoting entrepreneurial activity

within the distressed community.

(ii)  The existence and sufficiency of collateral for

the loan.

(iii)  Relevant criminal and credit history and

ratings of the applicant as determined from outside

credit reporting services and other sources.

(2)  If the department is satisfied that all requirements

have been met, the department may approve the loan request in

an amount not to exceed [$200,000 or 50%] $250,000 or 75% of

the total capital development project costs, whichever is

less. For the purpose of this paragraph, capital development

project costs, except the costs related to working capital,

incurred during the [12-month] 18-month period prior to the

date of submission of the application to the department shall

be considered part of the total capital development project

costs.

(3)  The department shall notify the community

development institution and applicant of its decision.

(d)  Approvals.--For applications which are approved, the

department shall draw an advance equal to the principal amount

of the loan from the fund and, prior to providing loan funds to

the applicant, the department shall require the applicant to

execute a note and to enter into a loan agreement. In addition

to the requirements of subsection (e), the loan agreement shall

include a provision requiring the recipient to use the loan

proceeds to pay the costs of the capital development project.

The department may impose other terms and conditions on the

recipient if the department determines they are in the best

interests of this Commonwealth, including a provision requiring

collateral for any penalty imposed under subsection (g).

(e)  Loan terms.--A loan agreement entered into in accordance

with subsection (d) shall do all of the following:

(1)  State any collateral securing the loan. The

department may use its best judgment to identify and secure

collateral.

(2)  State the repayment period which may be flexible.

(3)  State the interest rate which may not be less than

[2%] 1.5% nor more than [5%] 4.5% for the term of the loan.

(4)  State that the recipient agrees to maintain, at a

minimum, the number of jobs in existence as of the date of

loan application.

(f)  Loan administration.--A loan made under this section

shall be administered in accordance with departmental policies

and procedures.

(g)  Penalty.--

(1)  Except as provided in paragraph (2), the department

shall impose a penalty upon a recipient if the recipient

fails to preserve the number of employment opportunities

specified in its approved application.

(2)  The department may waive the penalty required by

paragraph (1) if the department determines that the failure

was due to circumstances outside the control of the

recipient.

(3)  The amount of any penalty imposed under paragraph

(1) shall be equal to an increase in the interest rate to

[2%] 2.5% greater than the current prime interest rate for

the remainder of the loan.

(h)  Defaults.--The department may take title by foreclosure

to a capital development project which it financed where

acquisition is necessary to protect a loan made under this

section. The department shall pay all costs arising out of the

foreclosure and acquisition from money held in the fund. The

department may, in order to minimize financial losses and

sustain employment, lease the capital development project. The

department may withdraw money from the fund to purchase first

mortgages and to make payments on first mortgages on any capital

development project which it financed if purchase or payment is

necessary to protect a loan made under this section. The

department may sell, transfer, convey and assign the first

mortgages and shall deposit in the fund money derived from the

sale of any first mortgages.

§ 2309.  Pollution prevention assistance loans.

(a)  Application.--A small business may submit an application

and any application fee to a pollution prevention assistance

agency requesting a loan for a pollution prevention

infrastructure. The application shall be on the form required by

the department and shall include or demonstrate all of the

following:

(1)  The name and address of the applicant.

(2)  A statement of the amount of loan assistance sought.

(3)  A statement of the pollution prevention

infrastructure, including a detailed statement of the cost of

the infrastructure.

(4)  A financial commitment from a responsible source for

the cost of the pollution prevention infrastructure in excess

of the amount requested.

(5)  Any other information required by the department.

(b)  Pollution prevention assistance agency review.--

(1)  Upon receipt of a completed application, a pollution

prevention assistance agency shall investigate and determine

all of the following:

(i)  If the applicant is a small business.

(ii)  If the project is for pollution prevention

infrastructure.

(iii)  If the applicant complied with all other

criteria established by the department.

(2)  Upon being satisfied that all requirements have been

met, the pollution prevention assistance agency shall

recommend the applicant to the department and forward the

application with all supporting documentation to the

department for its review and approval.

(c)  Department review.--

(1)  Upon receipt of a recommendation and a completed

application, the department shall investigate and determine

all of the following:

(i)  If the pollution prevention infrastructure

demonstrates a substantial likelihood of preventing or

reducing pollution. The Department of Environmental

Protection shall assist the department in reviewing the

applications and provide technical assistance.

(ii)  The ability of the applicant to meet and

satisfy the debt service as it becomes due and payable.

In reviewing repayment obligations, loans shall not be

approved on the basis of direct financial return on

investment and shall not be held to the loan loss

standards of private commercial lenders. Loans shall be

reviewed for the purpose of reducing pollution through

source reduction technologies or processes.

(iii)  The existence and sufficiency of collateral

for the loan.

(iv)  Relevant criminal and credit history and

ratings of the applicant as determined from outside

credit reporting services and other sources.

(2)  If the department is satisfied that all requirements

have been met, the department may approve the loan request. A

loan approved under this subsection may not exceed the lesser

of:

(i)  [$100,000] $150,000; or

(ii)  [75%] 85% of infrastructure costs.

(3)  The department shall notify the pollution prevention

assistance agency and applicant of its decision.

(d)  Approvals.--For applications which are approved, the

department shall draw an advance equal to the principal amount

of the loan from the Pollution Prevention Assistance Account.

Prior to providing loan funds to the applicant, the department

shall require the applicant to execute a note and to enter into

a loan agreement. In addition to the requirements of subsection

(e), the loan agreement shall include a provision requiring the

recipient to use the loan proceeds to pay the costs of the

pollution prevention infrastructure. The department may impose

other terms and conditions on the recipient if the department

determines they are in the best interests of this Commonwealth,

including a provision requiring collateral for any penalty

imposed under subsection (g).

(e)  Loan terms.--A loan agreement entered into in accordance

with subsection (d) shall do all of the following:

(1)  State the collateral securing the loan. All loans

shall be secured by lien positions on collateral at the

highest level of priority as may be determined by the

department.

(2)  State the repayment period which may not exceed [10]

15 years.

(3)  State that the interest rate is [2%] 1.5%.

(4)  State that any loan fee is not to exceed [5%] 3.5% 

of the loan amount.

(f)  Loan administration.--A loan made under this section

shall be administered in accordance with departmental policies

and procedures.

(g)  Penalty.--

(1)  Except as provided in paragraph (2), the department

shall impose a penalty upon a recipient if the recipient

fails to carry out the pollution prevention infrastructure

project as specified in its approved application.

(2)  The department may waive the penalty required by

paragraph (1) if the department determines that the failure

was due to circumstances outside the control of the

recipient.

(3)  The amount of any penalty imposed under paragraph

(1) shall be equal to an increase in the interest rate to

[2%] 3% greater than the current prime interest rate for the

remainder of the loan.

(h)  Defaults.--The department may take title by foreclosure

to a pollution prevention infrastructure which it financed if

acquisition is necessary to protect a loan made under this

section. The department shall pay all costs arising out of the

foreclosure and acquisition from money held in the Pollution

Prevention Assistance Account. The department may, in order to

minimize financial losses and sustain employment, lease the

pollution prevention infrastructure. The department may withdraw

money from the Pollution Prevention Assistance Account to

purchase first mortgages and to make payments on first mortgages

on any pollution prevention infrastructure which it financed if

the purchase or payment is necessary to protect a loan made

under this section. The department may sell, transfer, convey

and assign the first mortgages and shall deposit any money

derived from the sale of any first mortgages in the Pollution

Prevention Assistance Account.

§ 2310.  Export financing loans.

(a)  Application.--A person may submit an application and any

applicable application fee to the department or its area loan

organization requesting a loan for certain costs of a capital

development project which will be used in export activities. The

application must be on the form required by the department and

must include or demonstrate all of the following:

(1)  The name and address of the applicant.

(2)  A statement of the amount of loan assistance sought.

(3)  A statement of the capital development project,

including a detailed statement of the cost of the project.

(4)  A financial commitment from a responsible source for

any cost of the capital development project in excess of the

amount requested.

(5)  A statement that the loan, if approved, would not

supplant funding from private sector sources on commercially

reasonable terms.

(6)  Any other information required by the department.

(b)  Review.--Upon receipt of a completed application, the

department shall investigate and determine all of the following:

(1)  If the applicant is an export business.

(2)  If the project is a capital development project.

(3)  The ability of the applicant to meet and satisfy the

debt service as it becomes due and payable.

(4)  The existence and sufficiency of collateral for the

loan.

(5)  Relevant criminal and credit history and ratings of

the applicant as determined from outside credit reporting

services and other sources.

(6)  Number of employment opportunities to be created or

preserved by the proposed capital development project.

(7)  If the applicant complied with all other criteria

established by the department.

(c)  Approvals.--If the department is satisfied that all

requirements have been met, the department may approve the loan

request. A loan approved under this section may not exceed

[$350,000] $400,000. The department shall notify the applicant

and, if applicable, the area loan organization of its decision.

The department shall reserve an amount equal to the principal

amount of the loan within the fund or the special account

authorized by section 2304(c)(2) (relating to fund and

accounts). Prior to providing funds to the applicant, the

department shall require the applicant to execute a note and

enter into a loan agreement. In addition to the requirements of

subsection (d), the loan agreement shall include a provision

requiring the recipient to use the loan proceeds to pay the

costs of the capital development project. The department may

impose other terms and conditions on the recipient if the

department determines they are in the best interests of this

Commonwealth, including any of the following:

(1)  A provision requiring collateral for any penalty

imposed under subsection (f).

(2)  A provision requiring the person to be eligible for

an insurance policy.

(3)  A provision requiring the loan to be guaranteed by

the Working Capital Guaranty Program offered by the Ex-Im

Bank.

(4)  A provision requiring an export credit sales

contract insured by an insurance policy.

(d)  Loan terms.--A loan agreement entered into in accordance

with subsection (c) shall do all of the following:

(1)  State the collateral securing the loan. All loans

shall be secured by lien positions on collateral at the

highest level of priority as may be determined by the

department.

(2)  State the repayment period as determined by the

department.

(3)  State the interest rate as determined by the

department.

(e)  Loan administration.--A loan made under this section

shall be administered in accordance with departmental policies

and procedures.

(f)  Penalty.--

(1)  Except as provided in paragraph (2), the department

shall impose a penalty upon a recipient if the recipient

fails to carry out the export activities specified in its

approved application.

(2)  The department may waive the penalty required by

paragraph (1) if the department determines that the failure

was due to circumstances outside the control of the

recipient.

(3)  The amount of the penalty imposed under paragraph

(1) shall be equal to an increase in the interest rate to 2%

greater than the current prime interest rate for the

remainder of the loan.

(g)  Defaults.--The department may, by foreclosure, take

title to a capital development project which it financed if

acquisition is necessary to protect a loan made under this

section. The department shall pay all costs arising out of the

foreclosure and acquisition from money held in the fund or a

special account authorized by section 2304(c)(2). The department

may, in order to minimize financial losses and sustain

employment, lease the capital development project. The

department may withdraw money from the fund or a special account

authorized by section 2304(c)(2) to purchase first mortgages and

to make payments on first mortgages on any capital development

project which it financed if purchase or payment is necessary to

protect a loan made under this section. The department may sell,

transfer, convey and assign the first mortgages and shall

deposit any money derived from the sale of any first mortgages

in the fund or a special account authorized by section 2304(c)

(2).

Section 2.  This act shall take effect in 60 days.