PRINTER'S NO. 1284
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1088
Session of
2017
INTRODUCED BY THOMAS, APRIL 7, 2017
REFERRED TO COMMITTEE ON COMMERCE, APRIL 7, 2017
AN ACT
Amending Title 64 (Public Authorities and Quasi-Public
Corporations) of the Pennsylvania Consolidated Statutes, in
Commonwealth Financing Authority, providing for the
definition of "small business" and further providing for
indebtedness and for Second Stage Loan Program.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 1504 of Title 64 of the Pennsylvania
Consolidated Statutes is amended by adding a definition to read:
ยง 1504. Definitions.
The following words and phrases when used in this chapter
shall have the meaning given to them in this section unless the
context clearly indicates otherwise:
* * *
"Small business." A company that is engaged in a for-profit
enterprise and that employs no more than 100 individuals.
* * *
Section 2. Sections 1543(b)(8) and 1553 of Title 64 are
amended to read:
ยง 1543. Indebtedness.
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* * *
(b) Program limitations.--Indebtedness incurred by the
authority under subsection (a) shall not, in aggregate, exceed
any of the following:
* * *
(8) $50,000,000 for the program established in section
1553 (relating to [Second Stage Loan] Small Business
Investment Guarantee Program).
* * *
ยง 1553. [Second Stage Loan] Small Business Investment Guarantee
Program.
(a) Establishment.--There is established a program to be
known as the [Second Stage Loan] Small Business Investment
Guarantee Program. The program shall provide loan guarantees to
commercial lending institutions or economic development
organizations that make loans to [life sciences, advanced
technology or manufacturing businesses.] small businesses
located in this Commonwealth that are not engaged in commercial
services, retail or agriculture production activities, except
that a guarantee may be approved for a small business engaged in
the activities if it is located in an underserved area of a
distressed commun ity .
(b) Application for enrollment.--A commercial lending
institution or an economic development organization may apply
for enrollment in the program authorized by this section. The
application shall be on the form prescribed by the board and
shall include or demonstrate all of the following:
(1) The name and address of the commercial lending
institution or economic development organization and the name
and title of the individual who will serve as the point of
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contact for the commercial lending institution or economic
development organization.
(2) A statement defining the service area of the
commercial lending institution or the economic development
organization.
(3) A statement describing the commercial lending
activities engaged in by the commercial lending institution
or economic development organization and how the institution
intends to expand those activities as a result of its
participation in the program authorized by this section.
(3.1) A statement describing any lending activities
associated with the economic development functions of the
economic development organization and how the economic
development organization intends to expand or supplement
those lending activities through participation in the program
authorized under this section.
(4) Any other information required by the board.
(c) Enrollment approval.--Upon being satisfied that all
requirements have been met, the board may enroll the commercial
lending institution or economic development organization in the
program authorized by this section, and, if enrolled, the
authority shall execute a master loan guarantee agreement in
favor of the commercial lending institution or economic
development organization. In addition to any other terms and
conditions required by the board, the master loan guarantee
agreement shall provide for the following:
(1) The procedure for the submission of a claim for
payment by the commercial lending institution or economic
development organization. This procedure shall require that
the commercial lending institution or economic development
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organization demonstrate that it has exhausted all available
remedies against the borrower, other guarantors and
collateral for the loan before seeking payment under the
agreement.
(2) A requirement that a percentage of any moneys
recovered by the commercial lending institution or economic
development organization subsequent to any payment made under
the master loan guarantee agreement by the authority be
remitted to the authority.
(3) Periodic reporting requirements by the commercial
lending institution or economic development organization
regarding itself and regarding the [loans for which] loan
guarantee certificates that have been issued under this
section.
(d) Application for loan guarantee.--A commercial lending
institution or economic development organization enrolled in the
program authorized by this section may submit an application to
the authority for [the guarantee of a proposed loan] a loan
guarantee. The application shall be on the form prescribed by
the board and shall include or demonstrate all of the following:
(1) The name and address of the borrower, the type of
small business the borrower conducts, the location and age of
the small business and the names and addresses of the
principals of the borrower.
(2) The number of projected new or retained employees of
the borrower as a result of the loan.
(3) A copy of the borrower's last two years of financial
statements prepared or reported on by an independent
certified public accountant.
(4) A statement describing the purpose of the loan, the
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requested amount of the loan, a copy of the commercial
lending institution's or economic development organization's
commitment letter and applicable credit underwriting that
supports the repayment of the loan, as well as the collateral
and other [guarantees] documents offered by the borrower to
support the loan.
(4.1) A statement describing the need for the loan
guarantee, indicating that the project is unlikely to proceed
without the loan guarantee.
(5) Any other information required by the board.
(e) Application review.--
(1) The board shall review the application to determine
all of the following:
(i) That the borrower owns and operates a [life
sciences, advanced technology or manufacturing business]
small business located in this Commonwealth .
[(ii) That the borrower's business has been in
existence for at least two years but no more than seven
years at the time of application.]
(iii) That the borrower is financially responsible
and has the ability to repay the loan.
(iv) That the use of loan proceeds by the borrower
will result in jobs being created or retained within this
Commonwealth.
(v) That the borrower's small business is located
within the commercial lending institution's service area
or within the economic development organization's
jurisdiction and within this Commonwealth.
(v.1) That the project is unlikely to proceed
without a loan guarantee.
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(vi) That the borrower and the commercial lending
institution or the economic development organization have
met all other requirements established by the board.
(2) Upon being satisfied that all requirements have been
met, the board may approve the loan guarantee, and, if
approved, the authority shall issue a loan guarantee
certificate [for the loan] to the commercial lending
institution or economic development organization stating the
terms and amount of the loan guarantee.
[(3) The board may establish a subcommittee composed of
one or more members of the board and staff of the department
to review and approve applications for guarantees under this
section.]
(4) Priority shall be given to applications for loan
guarantees for projects related to the life sciences,
advanced technology, energy production, aviation and
aerospace or manufacturing.
(f) Limitations.--
[(1) During the first two years of the term of a loan
for which a guarantee certificate has been issued, the
guarantee may not exceed 50% of the outstanding principal
amount of the loan. From the end of year two through either
the end of year seven or the end of the term of the loan,
whichever occurs first, the guarantee may not exceed 25% of
the outstanding principal amount of the loan. The guarantee
will terminate at the end of seven years.]
(1.1) The board may not approve a loan guarantee unless
the borrower has an equity investment of at least 10% of the
total cost of the project from nonpublic sources.
(2) At no time may a loan guarantee exceed $1,000,000
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for any one loan.
(3) At no time may a loan guarantee exceed 50% of the
outstanding principal amount of the loan.
(4) The board may not approve a loan guarantee for a
project directly or indirectly related to the conduct of
gaming as defined in 4 Pa.C.S. ยง 1103 (relating to
definitions).
(g) Definitions.--As used in this section, the following
words and phrases shall have the meanings given to them in this
subsection unless the context clearly indicates otherwise:
"Distressed community." Any of the following:
(1) An area which is designated a subzone, expansion
subzone or improvement subzone under the act of October 6,
1998 (P.L.705, No.92), known as the Keystone Opportunity
Zone, Keystone Opportunity Expansion Zone and Keystone
Opportunity Improvement Zone Act.
(2) Any other area designated as a distressed community
according to standards adopted by the authority.
"Economic development organization." A community development
financial institution, an industrial development agency or a
local development district that is certified by the authority as
possessing the qualifications necessary to evaluate and approve
applications to the authority for financial assistance.
Section 3. This act shall take effect in 60 days.
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