Regular Session 2015-2016 Senate Bill 0234 P.N. 0247

PRINTER'S NO. 247

THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

No.

234

Session of

2015

INTRODUCED BY BREWSTER, FONTANA, HAYWOOD, TEPLITZ, MENSCH,

SCHWANK, COSTA, KITCHEN, YUDICHAK, BROWNE AND HUGHES,

JANUARY 28, 2015

REFERRED TO COMMUNITY, ECONOMIC AND RECREATIONAL DEVELOPMENT,

JANUARY 28, 2015

AN ACT

Amending Title 12 (Commerce and Trade) of the Pennsylvania

Consolidated Statutes, in small business first, 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, amended October 22, 2014

(P.L.2569, No.161), are amended to read:

§ 2306. Capital development loans.

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

and any applicable application fee to a certified economic

development organization requesting a loan or line of credit for

certain costs of a capital development project under 64 Pa.C.S.

§ 1121 (relating to common application process). The application

shall be on the form required by the authority and shall include

or demonstrate all of the following, in addition to the contents

required under 64 Pa.C.S. § 1121(b):

(1) The name and address of the applicant.

(2) A statement of the type and amount of 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 authority.

(b) Certified economic development organization review.--

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

economic development 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

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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 authority.

(2) Upon being satisfied that all requirements have been

met, the certified economic development organizations shall

recommend the applicant to the authority and forward the

application with all supporting documentation to the

authority for its review and approval.

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

completed application, the authority shall review the

application. If the authority is satisfied that all

requirements have been met, the authority may approve the

loan request in accordance with the following:

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

equipment may not exceed [$400,000 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 authority shall be

considered part of the total capital development project

costs.

(ii) A loan or line of credit for working capital

may not exceed [$100,000] $150,000 or 75%.

(iii) Except for loans to agricultural producers, a

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

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loaned. The authority may, by submitting notice to the

Legislative Reference Bureau for publication in the

Pennsylvania Bulletin, periodically update the amount

under this subparagraph, based on changes in unemployment

statistics, inflation, the authority's cash flow and the

need to keep this Commonwealth and the businesses of this

Commonwealth competitive.

(2) The authority shall notify the certified economic

development organization and applicant of its decision.

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

authority shall draw an advance equal to the principal amount of

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

certified economic development organization and, upon receipt by

the certified economic development organization, shall become an

obligation of the certified economic development organization.

Prior to providing loan funds to the applicant, the certified

economic development 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 authority may require the certified economic development

organization to impose other terms and conditions on the

recipient if the authority 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

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highest level of priority as may be determined by the

certified economic development organization with the approval

of the authority.

(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 or line of credit for working capital

shall have a repayment period of up to [three] six years.

A line of credit may be renewed for an additional three-

year period at the discretion of the authority.

(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.

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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 authority policies and

procedures by the certified economic development organization

which made the loan. Each certified economic development

organization shall submit an annual report on the form required

by the authority 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 authority.

(g) Penalty.--

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

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 authority may waive the penalty required by

paragraph (1) if the authority determines that the failure

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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 authority 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 authority shall pay all costs arising out of the

foreclosure and acquisition from moneys held in the fund. The

authority may, in order to minimize financial losses and sustain

employment, lease the capital development project. The authority

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

authority 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 certified economic development organization

requesting a loan or line of credit for certain costs of a

capital development project under 64 Pa.C.S. § 1121(a) (relating

to common application process). The application shall be on the

form required by the authority and shall include or demonstrate

all of the following, in addition to the contents required under

64 Pa.C.S. § 1121(b):

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(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 type and amount of 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 authority.

(b) Certified economic development organization review.--

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

economic development organization 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 authority.

(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

authority shall establish criteria that will assist in

making this demonstration.

(iv) Number of employment opportunities to be

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created or preserved by the proposed capital development

project.

(v) If the applicant complied with all other

criteria established by the authority.

(2) Upon being satisfied that all requirements have been

met, the certified economic development organization shall

recommend the applicant to the authority and forward the

application with all supporting documentation to the

authority for its review and approval.

(1) Upon receipt of a recommendation and a completed

application, the authority 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 authority is satisfied that all requirements

have been met, the authority may approve the loan or line of

credit request in an amount not to exceed [$200,000 or 50%]

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$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 authority shall be considered part of the total capital

development project costs.

(3) The authority shall notify the certified economic

development organization and applicant of its decision.

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

authority 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 authority 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 authority

may impose other terms and conditions on the recipient if the

authority 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

authority may use its best judgment to identify and secure

collateral.

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

except that a line of credit may not have a term of more than

three years. A line of credit may be renewed for an

additional three-year period at the discretion of the

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authority.

(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 authority policies and

procedures.

(g) Penalty.--

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

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 authority may waive the penalty required by

paragraph (1) if the authority 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 authority 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

authority shall pay all costs arising out of the foreclosure and

acquisition from money held in the fund. The authority may, in

order to minimize financial losses and sustain employment, lease

the capital development project. The authority may withdraw

money from the fund to purchase first mortgages and to make

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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 authority 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 certified economic development

organization requesting a loan for a pollution prevention

infrastructure under 64 Pa.C.S. § 1121(a) (relating to common

application process). The application shall be on the form

required by the authority and shall include or demonstrate all

of the following, in addition to the contents required under 64

Pa.C.S. § 1121(b):

(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 authority.

(b) Certified economic development organization review.--

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

economic development organization shall investigate and

determine all of the following:

(i) If the applicant is a small business.

(ii) If the project is for pollution prevention

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infrastructure.

(iii) If the applicant complied with all other

criteria established by the authority.

(2) Upon being satisfied that all requirements have been

met, the certified economic development organization shall

recommend the applicant to the department and forward the

application with all supporting documentation to the

authority for its review and approval.

(1) Upon receipt of a recommendation and a completed

application, the authority 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 authority 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.

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(2) If the authority is satisfied that all requirements

have been met, the authority 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 authority shall notify the certified economic

development organization and applicant of its decision.

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

authority 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 authority 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 authority may impose

other terms and conditions on the recipient if the authority

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

authority.

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

15 years.

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

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(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 authority policies and

procedures.

(g) Penalty.--

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

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 authority may waive the penalty required by

paragraph (1) if the authority 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 authority 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 authority shall pay all costs arising out of the

foreclosure and acquisition from money held in the Pollution

Prevention Assistance Account. The authority may, in order to

minimize financial losses and sustain employment, lease the

pollution prevention infrastructure. The authority 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

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under this section. The authority 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 a certified economic development

organization requesting a loan for certain costs of a capital

development project which will be used in export activities

under 64 Pa.C.S. § 1121(a) (relating to common application

process). The application must be on the form required by the

authority and must include or demonstrate all of the following,

in addition to the contents required under 64 Pa.C.S. § 1121(b):

(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 authority.

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

authority 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.

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(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 authority.

requirements have been met, the authority may approve the loan

request. A loan approved under this section may not exceed

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

and, if applicable, the certified economic development

organization of its decision. The authority 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 authority 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 authority

may impose other terms and conditions on the recipient if the

authority 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.

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(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

authority.

(2) State the repayment period as determined by the

authority.

(3) State the interest rate as determined by the

authority.

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

shall be administered in accordance with authority policies and

procedures.

(f) Penalty.--

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

shall impose a penalty upon a recipient if the recipient

fails to carry out the export activities specified in its

approved application.

(2) The authority may waive the penalty required by

paragraph (1) if the authority 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

20150SB0234PN0247 - 18 -

remainder of the loan.

(g) Defaults.--The authority 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 authority 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 authority

may, in order to minimize financial losses and sustain

employment, lease the capital development project. The authority

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 authority 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.

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