THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY FONTANA, COSTA, TARTAGLIONE, SOLOBAY, HUGHES, WOZNIAK, YUDICHAK, BREWSTER, FARNESE, KASUNIC, FERLO, WASHINGTON AND BLAKE, MARCH 28, 2011

SENATOR EARLL, COMMUNITY, ECONOMIC AND RECREATIONAL DEVELOPMENT, AS AMENDED, MARCH 27, 2012   

AN ACT

Amending Title 64 (Public Authorities and Quasi-Public

Corporations) of the Pennsylvania Consolidated Statutes,

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:

§ 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:

§ 1543.  Indebtedness.

* * *

(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).

* * *

§ 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 eligible entities economic

<--

development organizations that make loans to [life sciences,

advanced technology or manufacturing businesses] Pennsylvania-

<--

related businesses for projects small businesses located in

<--

Pennsylvania 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 community.

(b)  Application for enrollment.--A commercial lending

institution or an eligible entity 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 eligible entity economic development

<--

organization and the name and title of the individual who

will serve as the point of contact for the commercial lending

institution or eligible entity economic development

<--

organization.

(2)  A statement defining the service area of the

commercial lending institution or the jurisdiction of the 

<--

eligible entity economic development organization.

<--

(3)  A statement describing the commercial lending

activities engaged in by the commercial lending institution

or eligible entity 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

eligible entity and how the eligible entity 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 eligible entity 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

eligible entity 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 eligible

<--

entity economic development organization. This procedure

<--

shall require that the commercial lending institution or

eligible entity economic development 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 eligible

<--

entity 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 eligible entity 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 eligible entity 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

requested amount of the loan, a copy of the commercial

lending institution's or eligible entity's 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 guarantee,

<--

including the likelihood that the projects can be completed

without 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] 

<--

Pennsylvania-related business business] small business

<--

located in Pennsylvania.

[(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.] (Reserved).

<--

(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 eligible entity's economic development

<--

organization's jurisdiction and within this Commonwealth.

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

without a loan guarantee.

(vi)  That the borrower and the commercial lending

institution or the eligible entity 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 eligible entity 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.] (Reserved).

<--

(4)  Priority shall be given to applications for loan

guarantees for projects related to the life sciences,

advanced technology 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]

<--

$2,000,000 $1,000,000 for any one loan.

<--

(3)  At no time may a loan guarantee exceed 40% 50% of

<--

the outstanding principal amount of the loan, except that in

<--

the case of a loan to a small business a guarantee may not

exceed 100% of the principal amount of the loan.

(4)  The board may not approve a loan guarantee for any

<--

project directly or indirectly related to the conduct of

gaming as defined in 4 Pa.C.S. § 1103 (relating to

definitions).

(g)  Definitions.--For purposes of this section, an "eligible

<--

entity" shall mean a political subdivision, a municipal

authority, a redevelopment authority, an industrial development

corporation or any board, commission or other agency or

instrumentality of a political subdivision, municipal authority,

redevelopment authority or industrial development corporation.

(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.