Rep. Lou Lang

Filed: 11/15/2010

 

 


 

 


 
09600HB1420ham001LRB096 04906 RCE 43753 a

1
AMENDMENT TO HOUSE BILL 1420

2    AMENDMENT NO. ______. Amend House Bill 1420 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Department of Commerce and Economic
5Opportunity Law of the Civil Administrative Code of Illinois is
6amended by adding Section 605-422 as follows:
 
7    (20 ILCS 605/605-422 new)
8    Sec. 605-422. Capital Access Loan Pilot Program.
9    (a) The Illinois General Assembly finds and declares that
10it is in the best interest of the State of Illinois to create
11the Capital Access Loan Pilot Program to assist small
12businesses in obtaining access to capital that will allow them
13to create jobs. Small businesses have difficulty gaining access
14to capital for start-up and expansion purposes. Small
15businesses owned by minorities, women, the disabled, and
16veterans, and those located in rural and low-income to

 

 

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1moderate-income areas of our State, have special capital access
2difficulties. The General Assembly finds that improving access
3to capital for these small businesses will spur investment,
4create jobs, expand economic opportunities, assist in the
5recovery of communities affected by the economic downturn, and
6help sustain and strengthen the economic recovery of Illinois.
7    (b) As used in this Section, the following words and
8phrases have the following meanings:
9        (1) "Financial institution" means any bank, savings
10    and loan association, savings bank, or credit union
11    organized under the laws of this State or another other
12    state, or organized under the laws of the United States,
13    the accounts of which are insured by applicable law, and
14    their subsidiaries and affiliates.
15        (2) "Capital Access Loan Loss Reserve Fund" means a
16    fund created outside the State treasury, subject to the
17    limitations and procedures set forth in this Section.
18        (3) "Department" means the Department of Commerce and
19    Economic Opportunity.
20        (4) "Authority" means the Illinois Finance Authority.
21        (5) "Participating financial institution" means a
22    financial institution, as defined in this Section, that has
23    been approved by the Department to enroll eligible loans in
24    the program and has agreed to all terms and conditions
25    established in this Section and in administrative rules.
26        (6) "Eligible loan" means a loan or a portion of a loan

 

 

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1    made by a participating financial institution to an
2    eligible small business for any business activity that will
3    create or retain jobs in the State of Illinois and that
4    meets the criteria of the Capital Access Loan Pilot Program
5    established in this Section.
6        (7) "Eligible business" means a small business, as
7    defined in this Section, that meets all of the following
8    criteria:
9            (A) It is a general or limited corporation, general
10        or limited partnership, cooperative, or other entity,
11        whether that entity is a nonprofit entity or an entity
12        established for profit, that is authorized to conduct
13        business in the State of Illinois.
14            (B) It has its primary business location in the
15        State of Illinois.
16            (C) It has a physical presence in the State of
17        Illinois.
18            (D) It is a business not in contravention of the
19        public good.
20        (8) "Small business" means a business having fewer than
21    100 employees and with annual gross receipts totaling less
22    than $5 million.
23        (9) "Program" means the Capital Access Loan Pilot
24    Program.
25        (10) "Realized loss" means the amount of the principal
26    balance remaining on the loan at the time a borrower

 

 

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1    defaults, less any amount subsequently recovered by the
2    financial institution pursuant to collection efforts after
3    loan default. The realized loss does not include any fees
4    paid by the financial institution or on behalf of the
5    borrower that are assessed by the State to participate in
6    this Program.
7    (c) The Capital Access Loan Pilot Program is created. The
8Program shall be administered by the Department and shall have
9an initial term of 2 years or until a full commitment of the
10Capital Access Loan Loss Reserve Fund has been made, whichever
11occurs first, running from the effective date of this
12amendatory Act of the 96th General Assembly. Before the second
13year of the program expires or before the Fund has been fully
14guaranteed, the Department shall provide to the General
15Assembly a report showing the amount of guarantees made by the
16State and the number of jobs created or retained. The
17Department's authority to enter into agreements and generate
18guarantees of small business loans shall cease at the end of
19the pilot program term, and the Department shall transfer back
20to the General Revenue Fund any portion of the Fund not serving
21as a guarantee, unless the General Assembly extends the Program
22by law.
23    (d) The Capital Access Loan Loss Reserve Fund is created,
24to be held outside the State treasury and to be administered by
25the Authority.
26        (1) The General Assembly, subject to appropriation,

 

 

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1    shall allocate $15 million to the Fund, to be used by the
2    Department to secure 10% of loans to eligible small
3    businesses, if the participating financial institution
4    would not offer the borrower a small business loan under
5    the institution's prevailing credit standards without the
6    incentive of the 10% guarantee.
7        (2) The Fund shall be interest-bearing, and interest
8    earned by the moneys held in this Fund shall remain in the
9    Fund.
10        (3) Notwithstanding any other law to the contrary, the
11    Fund is not subject to administrative charges or
12    charge-backs that would in any way transfer any moneys from
13    the Fund into any other fund of the State.
14    (e) The Department shall enter into agreements with
15financial institutions for the purpose of allowing the
16financial institution to participate in the Capital Access Loan
17Pilot Program established by this Section. The agreement shall
18provide for all of the following:
19        (1) The participating financial institution and the
20    eligible business shall deposit the fees to the credit of
21    the Capital Access Loan Loss Reserve Fund when the
22    financial institution makes an eligible loan.
23        (2) The liability of the State and the Department to
24    the financial institution under the agreement is limited to
25    providing a guarantee of 10% of the outstanding principal
26    balance on loans made by these participating financial

 

 

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1    institutions.
2        (3) Before any guarantee applies, the participating
3    financial institution must submit an application to
4    participate in the Program that includes the following:
5            (A) a certification from the small business
6        identifying the number of jobs the business
7        anticipates will be created or saved if the loan is
8        made; and
9            (B) a certification from the participating
10        financial institution that the participating financial
11        institution would not offer the borrower the loan under
12        the institution's prevailing credit standards without
13        the incentive of the 10% guarantee.
14        (4) Before any guarantee applies, the participating
15    financial institution shall provide any additional
16    information that the Department may require, including
17    financial information that is identifiable with, or
18    identifiable from, the financial records of a particular
19    small business seeking a loan through this Program.
20        (5) All loan applicants are encouraged to seek business
21    plan development assistance from the Department's Small
22    Business Development Center (SBDC) technical advisors. All
23    new startup businesses and loan applicants eligible for the
24    enhanced loan guarantee, available pursuant to subsection
25    (o) of this Section, are required to seek business plan
26    development assistance from an SBDC and certify to the

 

 

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1    Department that they have pursued that assistance as part
2    of its application to the Department.
3    (f) The Department has the sole authority to determine
4whether a loan is considered "eligible" to merit the State's
5guarantee. The Department shall consider the following
6guidelines:
7        (1) An eligible loan is a loan that would not be
8    extended to a small business under the institution's
9    prevailing credit standards, but for the incentive of the
10    guarantee provided for in this Section.
11        (2) An eligible loan may be made in the form of a line
12    of credit, in which case the participating financial
13    institution shall specify the amount of the line of credit
14    to be covered under the Program, which may be equal to the
15    maximum commitment under the line of credit or an amount
16    that is less than that maximum commitment.
17        (3) An eligible loan made under the Program may be made
18    with the interest rate, fees, and other terms and
19    conditions agreed upon by the participating financial
20    institution and the borrower, but the Department shall not
21    approve as an eligible loan one where the interest rate
22    charged to an eligible small business participating in this
23    Program is higher than 4 points over the WSJ (Wall Street
24    Journal) prime rate on the date of the loan closing.
25    (g) A financial institution that participates in this
26Program shall submit to the Department an application seeking

 

 

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1approval of the loan guarantee as applied to that small
2business loan. If the small business meets the criteria
3established in subsection (o) of this Section, the
4participating financial institution shall provide the
5Department with substantiating documentation of meeting those
6criteria. The Department shall approve the loan guarantee and
7shall notify the participating financial institution of the
8amount of the guarantee if all of the following criteria are
9met:
10        (1) The applicant is an eligible small business, as
11    defined in this Section.
12        (2) The applicant has provided a certification
13    indicating the number of jobs this loan will create or
14    retain within the first year of the loan.
15        (3) The applicant meets other criteria that the
16    Department deems relevant, in its discretion.
17    (h) Within 10 business days after an eligible loan closing,
18the participating financial institution shall notify the
19Department of the following, using a form approved by the
20Department:
21        (1) the date on which the loan closed;
22        (2) the principal amount of the loan;
23        (3) the interest rate applied to the loan; and
24        (4) the fees collected and deposited into the Capital
25    Access Loan Loss Reserve Fund for this loan.
26    (i) After the Department certifies that this is an eligible

 

 

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1loan to which the guarantee may be applied, the participating
2financial institution shall require the eligible business to
3which the loan is made to pay a one-time fee of no more than 25
4basis points, to be assessed in the discretion of the
5Department. The participating financial institution shall also
6pay a fee of the same amount. The participating financial
7institution shall deposit these fees into the Capital Access
8Loan Loss Reserve Fund.
9    (j) The Department is authorized to offer the State of
10Illinois' 10% guarantee on eligible loans approved by the
11Department. The dollar amount of that guarantee shall be
12calculated against the original loan amount of the eligible
13loan.
14    (k) The Department is authorized to seek available funds
15from a federal capital access program or other source,
16including a not-for-profit entity. If those funds are made
17available, then they shall be deposited into the Capital Access
18Loan Loss Reserve Fund. At no time during this pilot program,
19however, may the Department allocate more than the original
20appropriation to loan guarantees.
21    (l) The Department shall establish procedures under which
22the participating financial institution may submit claims for
23reimbursement for losses incurred as a result of qualified loan
24defaults. These procedures shall be posted on the Department's
25website.
26    (m) If the eligible business receiving the loan defaults on

 

 

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1the loan, as determined by the participating financial
2institution's guidelines, the participating financial
3institution shall notify the Department of the default
4contemporaneously with providing notification of default to
5the borrower. The participating financial institution shall
6also notify the Department of the realized loss suffered by the
7participating financial institution. After approving the
8realized loss amount, the Department is then authorized to
9release that portion of moneys in the Capital Access Loan Loss
10Reserve Fund that amounts to the participating financial
11institution's realized loss, up to the amount of the guarantee
12for that eligible loan.
13    (n) After an eligible loan has been active for at least one
14year, the Department is authorized to seek records from the
15small business showing documentation of jobs created or
16retained, and all small businesses participating in this
17Program shall comply with any requests for information from the
18Department. If the small business receiving an eligible loan
19through this Program fails to save or create the number of jobs
20indicated in the Program application, or fails to comply with
21the Department's request for documentation pursuant to this
22Section, the Department may assess an additional fee of not
23more than 10% of the loan. This additional fee shall be added
24to the monthly payments collected by the participating
25financial institution, and the Participating Financial
26Institution shall deposit the additional funds into the Capital

 

 

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1Access Loan Loss Reserve Fund.
2    (o) The amount of the State's guarantee on an eligible loan
3shall be increased to 20% if the participating financial
4institution determines, and the Department confirms, that the
5loan is being made to a borrower that meets one or more of the
6following criteria:
7        (1) The small business is minority-owned, as certified
8    by the State of Illinois.
9        (2) The small business is women-owned, as certified by
10    the State of Illinois.
11        (3) The small business is owned by a person with a
12    disability, as determined by the ADA (Americans with
13    Disabilities Act).
14        (4) The small business is owned by a veteran of the
15    U.S. military or National Guard.
16        (5) The chief operations of the small business are
17    located in a low-income to moderate-income census tract.
18    (p) The State's guarantee shall cease when either of the
19following events occurs:
20        (1) the small business borrower defaults on the loan,
21    and the guarantee is paid to the participating financial
22    institution; or
23        (2) the loan becomes 5 years old, as measured from the
24    date on which the loan originally closes.
25    (q) For all loans entered into pursuant to this Section,
26the Department's guarantee shall not exceed $100,000 for any

 

 

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1individual loan.
2    (r) The priority of issuance of the State's loan guarantees
3for eligible loan applicants shall be based solely on the
4chronological order in which applications are submitted.
5    (s) The Department is authorized to make administrative
6rules to implement this Section.
 
7    Section 99. Effective date. This Act takes effect upon
8becoming law.".