1Amending Title 64 (Public Authorities and Quasi-Public
2Corporations) of the Pennsylvania Consolidated Statutes, 
3providing for the definition of "small business"; and further 
4providing for indebtedness and for Second Stage Loan Program.

5The General Assembly of the Commonwealth of Pennsylvania
6hereby enacts as follows:

7Section 1. Section 1504 of Title 64 of the Pennsylvania
8Consolidated Statutes is amended by adding a definition to read:

9§ 1504. Definitions.

10The following words and phrases when used in this chapter
11shall have the meaning given to them in this section unless the
12context clearly indicates otherwise:

13* * *

14"Small business." A company that is engaged in a for-profit
15enterprise and that employs no more than 100 individuals.

16* * *

17Section 2. Sections 1543(b)(8) and 1553 of Title 64 are
18amended to read:

19§ 1543. Indebtedness.

1* * *

2(b) Program limitations.--Indebtedness incurred by the
3authority under subsection (a) shall not, in aggregate, exceed
4any of the following:

5* * *

6(8) $50,000,000 for the program established in section
71553 (relating to [Second Stage Loan] Small Business 
8Investment Guarantee Program).

9* * *

10§ 1553. [Second Stage Loan] Small Business Investment Guarantee
11Program.

12(a) Establishment.--There is established a program to be
13known as the [Second Stage Loan] Small Business Investment 
14Guarantee Program. The program shall provide loan guarantees to
15commercial lending institutions or economic development 
16organizations that make loans to [life sciences, advanced
17technology or manufacturing businesses] small businesses located 
18in Pennsylvania that are not engaged in commercial, services, 
19retail or agriculture production activities, except that a 
20guarantee may be approved for a small business engaged in the 
21activities if it is located in an underserved area of a 
22distressed community.

23(b) Application for enrollment.--A commercial lending
24institution or an economic development organization may apply
25for enrollment in the program authorized by this section. The
26application shall be on the form prescribed by the board and
27shall include or demonstrate all of the following:

28(1) The name and address of the commercial lending
29institution or economic development organization and the name
30and title of the individual who will serve as the point of

1contact for the commercial lending institution or economic 
2development organization.

3(2) A statement defining the service area of the
4commercial lending institution or the economic development 
5organization.

6(3) A statement describing the commercial lending
7activities engaged in by the commercial lending institution
8or economic development organization and how the institution
9intends to expand those activities as a result of its
10participation in the program authorized by this section.

11(3.1) A statement describing any lending activities 
12associated with the economic development functions of the 
13economic development organization and how the economic 
14development organization intends to expand or supplement 
15those lending activities through participation in the program 
16authorized under this section.

17(4) Any other information required by the board.

18(c) Enrollment approval.--Upon being satisfied that all
19requirements have been met, the board may enroll the commercial
20lending institution or economic development organization in the
21program authorized by this section, and, if enrolled, the
22authority shall execute a master loan guarantee agreement in
23favor of the commercial lending institution or economic 
24development organization. In addition to any other terms and
25conditions required by the board, the master loan guarantee
26agreement shall provide for the following:

27(1) The procedure for the submission of a claim for
28payment by the commercial lending institution or economic 
29development organization. This procedure shall require that
30the commercial lending institution or economic development
 

1organization demonstrate that it has exhausted all available
2remedies against the borrower, other guarantors and
3collateral for the loan before seeking payment under the
4agreement.

5(2) A requirement that a percentage of any moneys
6recovered by the commercial lending institution or economic 
7development organization subsequent to any payment made under
8the master loan guarantee agreement by the authority be
9remitted to the authority.

10(3) Periodic reporting requirements by the commercial
11lending institution or economic development organization
12regarding itself and regarding the [loans for which] loan
13guarantee certificates that have been issued under this
14section.

15(d) Application for loan guarantee.--A commercial lending
16institution or economic development organization enrolled in the
17program authorized by this section may submit an application to
18the authority for [the guarantee of a proposed loan] a loan 
19guarantee. The application shall be on the form prescribed by
20the board and shall include or demonstrate all of the following:

21(1) The name and address of the borrower, the type of
22small business the borrower conducts, the location and age of
23the small business and the names and addresses of the
24principals of the borrower.

25(2) The number of projected new or retained employees of
26the borrower as a result of the loan.

27(3) A copy of the borrower's last two years of financial
28statements prepared or reported on by an independent
29certified public accountant.

30(4) A statement describing the purpose of the loan, the

1requested amount of the loan, a copy of the commercial
2lending institution's or economic development organization's
3commitment letter and applicable credit underwriting that
4supports the repayment of the loan, as well as the collateral
5and other [guarantees] documents offered by the borrower to
6support the loan.

7(4.1) A statement describing the need for the loan 
8guarantee, indicating that the project is unlikely to proceed 
9without the loan guarantee.

10(5) Any other information required by the board.

11(e) Application review.--

12(1) The board shall review the application to determine
13all of the following:

14(i) That the borrower owns and operates a [life
15sciences, advanced technology or manufacturing business]
16small business located in Pennsylvania.

17(ii) [That the borrower's business has been in
18existence for at least two years but no more than seven
19years at the time of application.] (Reserved).

20(iii) That the borrower is financially responsible
21and has the ability to repay the loan.

22(iv) That the use of loan proceeds by the borrower
23will result in jobs being created or retained within this
24Commonwealth.

25(v) That the borrower's small business is located
26within the commercial lending institution's service area
27or within the economic development organization's 
28jurisdiction and within this Commonwealth.

29(v.1) That the project is unlikely to proceed
30without a loan guarantee.

1(vi) That the borrower and the commercial lending
2institution or the economic development organization have
3met all other requirements established by the board.

4(2) Upon being satisfied that all requirements have been
5met, the board may approve the loan guarantee, and, if
6approved, the authority shall issue a loan guarantee
7certificate [for the loan] to the commercial lending
8institution or economic development organization stating the
9terms and amount of the loan guarantee.

10(3) [The board may establish a subcommittee composed of
11one or more members of the board and staff of the department
12to review and approve applications for guarantees under this
13section.] (Reserved).

14(4) Priority shall be given to applications for loan
15guarantees for projects related to the life sciences,
16advanced technology, energy production, aviation and
17aerospace or manufacturing.

18(f) Limitations.--

19[(1) During the first two years of the term of a loan
20for which a guarantee certificate has been issued, the
21guarantee may not exceed 50% of the outstanding principal
22amount of the loan. From the end of year two through either
23the end of year seven or the end of the term of the loan,
24whichever occurs first, the guarantee may not exceed 25% of
25the outstanding principal amount of the loan. The guarantee
26will terminate at the end of seven years.]

27(1.1) The board may not approve a loan guarantee unless
28the borrower has an equity investment of at least 10% of the
29total cost of the project from nonpublic sources.

30(2) At no time may a loan guarantee exceed $1,000,000

1for any one loan.

2(3) At no time may a loan guarantee exceed 50% of the 
3outstanding principal amount of the loan.

4(4) The board may not approve a loan guarantee for any
5project directly or indirectly related to the conduct of
6gaming as defined in 4 Pa.C.S. § 1103 (relating to
7definitions).

8(g) Definitions.--As used in this section, the following
9words and phrases shall have the meanings given to them in this
10subsection unless the context clearly indicates otherwise:

11"Distressed community." Any of the following:

12(1) An area which is designated a subzone, expansion
13subzone or improvement subzone under the act of October 6,
141998 (P.L.705, No.92), known as the Keystone Opportunity
15Zone, Keystone Opportunity Expansion Zone and Keystone
16Opportunity Improvement Zone Act.

17(2) Any other area designated as a distressed community
18according to standards adopted by the authority.

19"Economic development organization." A community development
20financial institution, an industrial development agency or a
21local development district that is certified by the authority as
22possessing the qualifications necessary to evaluate and approve
23applications to the authority for financial assistance.

24Section 3. This act shall take effect in 60 days.