PRIOR PRINTER'S NO. 2116 PRINTER'S NO. 2138
No. 1437 Session of 1984
INTRODUCED BY JUBELIRER, ZEMPRELLI, FISHER, LLOYD, SHAFFER, SHUMAKER, SINGEL, STAPLETON, STOUT, STREET, WILLIAMS, WILT, MOORE, MUSTO, O'CONNELL, O'PAKE, REIBMAN, RHOADES, ROCKS, ROMANELLI, ROSS, SCANLON, HOPPER, HOWARD, KRATZER, LEWIS, LINCOLN, LOEPER, LYNCH, MELLOW, ANDREZESKI, BODACK, CORMAN, HANKINS, HELFRICK, HESS AND HAGER, JUNE 15, 1984
AS AMENDED ON SECOND CONSIDERATION, JUNE 19, 1984
AN ACT 1 Creating a small business incubator program; providing for loans 2 and loan guarantees to small business incubators; specifying 3 the conditions of and requirements for grants and loans; 4 providing for seed grants; and making appropriations. 5 The General Assembly of the Commonwealth of Pennsylvania 6 hereby enacts as follows: 7 Section 1. Short title. 8 This act shall be known and may be cited as the Small 9 Business Incubators Act. 10 Section 2. Definitions. 11 The following words and phrases when used in this act shall 12 have the meanings given to them in this section unless the 13 context clearly indicates otherwise: 14 "Board." The board of the Ben Franklin Partnership Fund as 15 established by the act of December 6, 1982 (P.L.774, No.223), 16 entitled "An act amending the act of April 9, 1929 (P.L.177, 17 No.175), entitled 'An act providing for and reorganizing the
1 conduct of the executive and administrative work of the 2 Commonwealth by the Executive Department thereof and the 3 administrative departments, boards, commissions, and officers 4 thereof, including the boards of trustees of State Normal 5 Schools, or Teachers Colleges; abolishing, creating, 6 reorganizing or authorizing the reorganization of certain 7 administrative departments, boards, and commissions; defining 8 the powers and duties of the Governor and other executive and 9 administrative officers, and of the several administrative 10 departments, boards, commissions, and officers; fixing the 11 salaries of the Governor, Lieutenant Governor, and certain other 12 executive and administrative officers; providing for the 13 appointment of certain administrative officers, and of all 14 deputies and other assistants and employes in certain 15 departments, boards, and commissions; and prescribing the manner 16 in which the number and compensation of the deputies and all 17 other assistants and employes of certain departments, boards and 18 commissions shall be determined,' changing the name of the 19 Pennsylvania Science and Engineering Foundation and further 20 providing for membership on and duties of the board." 21 "Incubator." A facility in which small units of space may be 22 leased by a tenant and in which management maintains or provides 23 access to business development services for use by tenants. 24 "Local sponsor" or "sponsor." An organization which enters 25 into a written agreement with the board to establish, operate 26 and administer a small business incubator facility or to provide 27 funding to an organization which operates such a facility, 28 including municipalities, local development districts of the 29 Appalachian Regional Commission, industrial and commercial 30 development authorities established pursuant to the act of 19840S1437B2138 - 2 -
1 August 23, 1967 (P.L.251, No.102), known as the Industrial and
2 Commercial Development Authority Law, redevelopment authorities
3 established pursuant to the act of May 24, 1945 (P.L.991,
4 No.385), known as the Urban Redevelopment Law, municipal
5 authorities organized pursuant to the act of May 2, 1945
6 (P.L.382, No.164), known as the Municipality Authorities Act of
7 1945, or any private nonprofit or for-profit organization
8 approved by the board.
9 "Seed capital fund." A special investment vehicle which
10 provides equity and other capital to small businesses during the
11 earliest stages of business growth, including businesses in
12 incubators.
13 "Tenant." A sole proprietorship, business partnership or
14 corporation operating a business for profit and leasing or
15 otherwise occupying space in an incubator.
16 Section 3. Creation of program.
17 There is hereby established under the direction of the board
18 a Statewide loan and loan guarantee program for the
19 establishment, operation and administration of small business
20 incubators, to be known as the Small Business Incubator Program.
21 Section 4. Incubator loans and loan guarantees.
22 (a) Application.--A local sponsor may submit an application
23 to the board to obtain a loan or loan guarantee to establish an
24 incubator. Each application shall:
25 (1) Demonstrate that a facility exists that can be
26 transformed into an incubator at a specified cost.
27 (2) Demonstrate the ability to DIRECTLY provide or <--
28 access ARRANGE FOR THE PROVISION OF business development <--
29 services for tenants of the incubator. These services shall
30 include, but not be limited to, financial consulting
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1 assistance, management and marketing assistance and physical 2 services. 3 (3) Demonstrate a potential for sustained use of the 4 incubator facility by eligible tenants, through a market 5 study or other means. 6 (4) Demonstrate the ability to manage and operate the 7 incubator facility in accordance with section 5. 8 (5) Include other information as the board may require 9 through guidelines. 10 (b) Review of application.--The board shall review and 11 accept applications based on the following criteria: 12 (1) Ability of the local sponsor to carry out the 13 provisions of section 5. 14 (2) Economic impact of the incubator on the community. 15 (3) Conformance with areawide and local economic 16 development plans if such exist. 17 (4) Location of the incubator, in order to encourage 18 geographic distribution of incubators across the State. 19 (5) Such other criteria as may be established by the 20 board through guidelines. 21 (c) Loan conditions.-- 22 (1) Loans awarded or guaranteed shall be used only for 23 the acquisition and leasing of land and existing buildings, 24 the rehabilitation of buildings or other facilities and the 25 purchase of equipment and furnishings, which are necessary 26 for the creation and operation of the incubator. 27 (2) Loans and loan guarantees may not exceed 50% of 28 total eligible project costs, or $650,000, whichever is less. 29 (3) Funds loaned shall be secured by lien positions on 30 collateral at the highest level of priority which can 19840S1437B2138 - 4 -
1 accommodate the borrower's ability to raise sufficient debt
2 and equity capital. When the obligation of a local sponsor is
3 guaranteed, the financial institution holding the obligation
4 shall be required to adequately secure the obligation.
5 (4) Loans and loan guarantees for an incubator in which
6 the facility is currently leased shall only be made if the
7 applicant intends to buy the facility. These loans shall be
8 secured by a leasehold mortgage.
9 (5) Payment of interest and principal on loans may be
10 deferred at the discretion of the board.
11 (6) Interest on all loans shall be no less than the
12 interest paid on the bonds used to fund this act. ISSUED <--
13 PURSUANT TO THE ACT OF (P.L. , NO. ), KNOWN AS THE
14 PENNSYLVANIA ECONOMIC REVITALIZATION ACT.
15 (7) Funds may be lent for a maximum of ten years or the
16 useful life of the property, as established by the United
17 States Department of Treasury, whichever is greater.
18 Section 5. Responsibilities of local sponsors.
19 A local sponsor, or the organization receiving assistance
20 through the local sponsor, shall have the following
21 responsibilities and duties in establishing and operating an
22 incubator with assistance from this program:
23 (1) Secure title on the facility or a lease with the
24 intent to secure title to the facility.
25 (2) Manage the physical development of the incubator
26 facility, including the provision of common conference or
27 meeting space.
28 (3) Furnish and equip the facility to provide business
29 services to the tenants.
30 (4) Market the facility and secure eligible tenants.
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1 (5) Provide financial consulting, marketing and 2 management assistance services or arrange for the provision 3 of these services for tenants of the incubator, including 4 assistance in accessing private financial markets. 5 (6) Set rental and service fees. 6 (7) Encourage the sharing of ideas between tenants and 7 otherwise aid the tenants in an innovative manner while they 8 are within the incubator. 9 (8) Establish policies and criteria for the acceptance 10 of tenants into the incubator and for the termination of 11 occupancy of tenants so as to maximize the opportunity to 12 succeed for the greatest number of tenants, consistent with 13 the other criteria specified in this act. Retail enterprises, 14 not-for-profit enterprises, wholesale enterprises and 15 personal service enterprises are not permitted AS TENANTS in <-- 16 incubators funded through this act. 17 (9) Establish a local advisory committee to assist in 18 the performance of these functions. 19 Section 6. Challenge grants for seed capital funds. 20 (a) Purpose.--The board is authorized to award challenge 21 grants for the purposes of establishing seed capital funds to 22 assist young small businesses, including businesses in 23 incubators, to create new jobs in this Commonwealth. 24 (b) Application.--Advanced technology centers or other 25 organizations approved by the board may submit applications to 26 receive challenge grants to assist in establishing seed capital 27 funds. Each application shall: 28 (1) Describe the purposes of the proposed seed capital 29 fund, including the types of businesses to receive 30 investments and the types of investments to be made, 19840S1437B2138 - 6 -
1 consistent with subsection (c). 2 (2) Explain the need for the challenge grant in 3 attracting private investment to the proposed seed capital 4 fund. 5 (3) Present a plan for establishing the proposed seed 6 capital fund, including the amount of private investment 7 sought, the strategy for obtaining such investments and the 8 persons or organizations who may manage the fund. 9 (4) List private investment commitments obtained to 10 date. 11 (c) Use of funds.--The board may award challenge grants to 12 eligible applicants following receipt of an application 13 consistent with the criteria specified in this act. Recipients 14 of grants shall not expend any of the funds awarded unless and 15 until the board has given approval for the expenditure, based on <-- 16 evidence ASSURED ITSELF that the following conditions hold: <-- 17 (1) Either: 18 (i) at least $3 of private investment has been 19 committed to the proposed seed capital fund for every $1 20 of the challenge grant awarded and at least $3,000,000 of 21 total investment, including the challenge grant, has been 22 committed to the proposed fund; or 23 (ii) at least $1 of private investment has been 24 committed to the proposed seed capital fund for every $1 25 of the challenge grant awarded; at least $1.5 million of 26 total investment, including the challenge grant, has been 27 committed to the seed capital fund; and no investment is 28 to be made from the fund in a small business project 29 without an equal or greater investment from private 30 sources other than the fund in the same small business 19840S1437B2138 - 7 -
1 project, such that, in total, at least $3 of private 2 investment has been committed to an individual small 3 business project for every $1 of challenge grant funds 4 invested. 5 (2) Investments from the seed capital fund will be made 6 exclusively in small businesses located in this Commonwealth, 7 including, but not limited to, tenants of incubators. For the 8 purposes of this section, small businesses shall not include 9 businesses of a mercantile or services related nature, but 10 shall include international export related services, 11 international export related mercantile ventures and advanced 12 technology or computer related ventures which will increase 13 the Commonwealth's share of domestic or international 14 markets. 15 (3) Total investments in a small business using seed 16 capital funds should ordinarily be less than $250,000 during 17 any round of financing for a small business. 18 (4) The grant recipient shall serve as a limited partner 19 or co-investor with limited liability in the proposed fund 20 and returns on investment of challenge grant funds shall be 21 reinvested in the seed capital fund. 22 In the event that recipients of funds cannot demonstrate these 23 conditions by June 30, 1986, the grants, or the portions thereof 24 for which the conditions are not satisfied, shall be rescinded 25 by the board and shall be available to the board to use for 26 loans AND LOAN GUARANTEES to incubators consistent with section <-- 27 4. 28 Section 7. General powers and duties of the board. 29 The board shall: 30 (1) Adopt such rules, statements of policy, procedures, 19840S1437B2138 - 8 -
1 forms and guidelines as may be necessary for the 2 implementation of this act. 3 (2) Make loans and loan guarantees to local sponsors for 4 incubators and award seed capital challenge grants. 5 (3) Ensure that local sponsors receiving loans or loan 6 guarantees and recipients of challenge grants meet the 7 conditions of this act. 8 (4) Receive and evaluate annual reports from local 9 sponsors. The annual reports shall include, but not be 10 limited to, a financial statement for the incubator, evidence 11 that all tenants in the facility are eligible under the terms 12 of the legislation and a list of companies in the incubator. 13 (5) Receive and evaluate annual reports from recipients 14 of seed capital challenge grants. The reports shall include, 15 but not be limited to, the policies and procedures of the 16 seed capital fund, the amount of private investment in the 17 fund and the number, types and amounts of investment in small 18 firms by the fund. 19 Section 8. Indicators of program impact. 20 On or before March 1 of each year, the board shall provide a 21 report to both the Chief Clerk of the House of Representatives 22 and the Secretary of the Senate which shall include, but not be 23 limited to: 24 (1) The number of applications for incubators submitted 25 to the board. 26 (2) The number of applications for incubators approved 27 by the board. 28 (3) The number of incubators created through this 29 program. 30 (4) The number of tenants occupying each incubator. 19840S1437B2138 - 9 -
1 (5) The number of jobs provided by each incubator and 2 tenants of each incubator. 3 (6) The occupancy rate of each incubator. 4 (7) The number of firms still operating in the 5 Commonwealth after leaving incubators and the number of jobs 6 they have provided. The board shall attempt to identify the 7 reasons why any companies have left the Commonwealth after 8 starting in an incubator. 9 (8) The number of seed capital funds established with 10 challenge grants, the amount of private investment in the 11 funds and the number, types and amounts of investments in 12 small firms by the funds. 13 SECTION 9. NONDISCRIMINATION. <-- 14 NO LOAN OR LOAN GUARANTEE SHALL BE MADE TO A SMALL BUSINESS 15 ENTERPRISE UNLESS THE SMALL BUSINESS ENTERPRISE CERTIFIES TO THE 16 BOARD, IN A FORM SATISFACTORY TO THE BOARD, THAT IT SHALL NOT 17 DISCRIMINATE AGAINST ANY EMPLOYEE OR AGAINST ANY APPLICANT FOR 18 EMPLOYMENT BECAUSE OF RACE, RELIGION, COLOR, NATIONAL ORIGIN, 19 SEX OR AGE. 20 Section 9 10. Appropriations. <-- 21 (1) The sum of $5,000,000, or as much thereof as may be 22 necessary, is hereby appropriated from the Pennsylvania 23 Economic Revitalization Fund for the fiscal year July 1, 1984 24 to June 30, 1985, for loans and LOAN guarantees to local <-- 25 sponsors PURSUANT TO SECTION 4. <-- 26 (2) The sum of $3,000,000 is appropriated from the 27 Pennsylvania Economic Revitalization Fund for the fiscal year 28 beginning July 1, 1984, for the Seed Capital Challenge Grant 29 Program. These funds shall not lapse at the end of the fiscal <-- 30 year but shall be available for expenditure pursuant to 19840S1437B2138 - 10 -
1 section 6(c) until June 30, 1986 1987. <-- 2 Section 10 11. Time limit on approvals. <-- 3 No assistance under section 4 shall be approved by the board 4 after June 30, 1987. 5 Section 11 12. Effective date. <-- 6 This act shall take effect immediately. F12L12CHF/19840S1437B2138 - 11 -