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:

1§ 1543. Indebtedness.

2* * *

3(b) Program limitations.--Indebtedness incurred by the
4authority under subsection (a) shall not, in aggregate, exceed
5any of the following:

6* * *

7(8) $50,000,000 for the program established in section
81553 (relating to [Second Stage Loan] Small Business 
9Investment Guarantee Program).

10* * *

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

13(a) Establishment.--There is established a program to be
14known as the [Second Stage Loan] Small Business Investment 
15Guarantee Program. The program shall provide loan guarantees to
16commercial lending institutions or economic development 
17organizations that make loans to [life sciences, advanced
18technology or manufacturing businesses] small businesses located 
19in Pennsylvania that are not engaged in commercial, services, 
20retail or agriculture production activities, except that a 
21guarantee may be approved for a small business engaged in the 
22activities if it is located in an underserved area of a 
23distressed community.

24(b) Application for enrollment.--A commercial lending
25institution or an economic development organization may apply
26for enrollment in the program authorized by this section. The
27application shall be on the form prescribed by the board and
28shall include or demonstrate all of the following:

29(1) The name and address of the commercial lending
30institution or economic development organization and the name

1and title of the individual who will serve as the point of
2contact for the commercial lending institution or economic 
3development organization.

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

7(3) A statement describing the commercial lending
8activities engaged in by the commercial lending institution
9or economic development organization and how the institution
10intends to expand those activities as a result of its
11participation in the program authorized by this section.

12(3.1) A statement describing any lending activities 
13associated with the economic development functions of the 
14economic development organization and how the economic 
15development organization intends to expand or supplement 
16those lending activities through participation in the program 
17authorized under this section.

18(4) Any other information required by the board.

19(c) Enrollment approval.--Upon being satisfied that all
20requirements have been met, the board may enroll the commercial
21lending institution or economic development organization in the
22program authorized by this section, and, if enrolled, the
23authority shall execute a master loan guarantee agreement in
24favor of the commercial lending institution or economic 
25development organization. In addition to any other terms and
26conditions required by the board, the master loan guarantee
27agreement shall provide for the following:

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

1the commercial lending institution or economic development 
2organization demonstrate that it has exhausted all available
3remedies against the borrower, other guarantors and
4collateral for the loan before seeking payment under the

6(2) A requirement that a percentage of any moneys
7recovered by the commercial lending institution or economic 
8development organization subsequent to any payment made under
9the master loan guarantee agreement by the authority be
10remitted to the authority.

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

16(d) Application for loan guarantee.--A commercial lending
17institution or economic development organization enrolled in the
18program authorized by this section may submit an application to
19the authority for [the guarantee of a proposed loan] a loan 
20guarantee. The application shall be on the form prescribed by
21the board and shall include or demonstrate all of the following:

22(1) The name and address of the borrower, the type of
23small business the borrower conducts, the location and age of
24the small business and the names and addresses of the
25principals of the borrower.

26(2) The number of projected new or retained employees of
27the borrower as a result of the loan.

28(3) A copy of the borrower's last two years of financial
29statements prepared or reported on by an independent
30certified public accountant.

1(4) A statement describing the purpose of the loan, the
2requested amount of the loan, a copy of the commercial
3lending institution's or economic development organization's
4commitment letter and applicable credit underwriting that
5supports the repayment of the loan, as well as the collateral
6and other [guarantees] documents offered by the borrower to
7support the loan.

8(4.1) A statement describing the need for the loan 
9guarantee, indicating that the project is unlikely to proceed 
10without the loan guarantee.

11(5) Any other information required by the board.

12(e) Application review.--

13(1) The board shall review the application to determine
14all of the following:

15(i) That the borrower owns and operates a [life
16sciences, advanced technology or manufacturing business]
17small business located in Pennsylvania.

18(ii) [That the borrower's business has been in
19existence for at least two years but no more than seven
20years at the time of application.] (Reserved).

21(iii) That the borrower is financially responsible
22and has the ability to repay the loan.

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

26(v) That the borrower's small business is located
27within the commercial lending institution's service area
28or within the economic development organization's 
29jurisdiction and within this Commonwealth.

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

1without a loan guarantee.

2(vi) That the borrower and the commercial lending
3institution or the economic development organization have
4met all other requirements established by the board.

5(2) Upon being satisfied that all requirements have been
6met, the board may approve the loan guarantee, and, if
7approved, the authority shall issue a loan guarantee
8certificate [for the loan] to the commercial lending
9institution or economic development organization stating the
10terms and amount of the loan guarantee.

11(3) [The board may establish a subcommittee composed of
12one or more members of the board and staff of the department
13to review and approve applications for guarantees under this
14section.] (Reserved).

15(4) Priority shall be given to applications for loan
16guarantees for projects related to the life sciences,
17advanced technology 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

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.