Expand Small Business Loans

Section 1. Statement of legislative intent. The legislature hereby finds and declares that small businesses are the economic backbone of the state and the source of a majority of new jobs. The legislature further finds that such businesses often have difficulty obtaining small amounts of capital from traditional banking organizations that is necessary to start-up, improve, or expand operations. State assistance in the form of loans to meet such capital gaps would enable the formation and expansion of small businesses across the state and, thus, provide job opportunities to the state's citizens. The legislature further finds that the existing regional revolving loan program of the state urban development corporation demonstrated that it is more efficient and effective to provide such loans through regional not-for-profit corporations that are knowledgeable about local businesses and economic conditions. Therefore, it is the intent of the legislature to improve job opportunities in the state by revitalizing the urban development corporation's regional revolving loan program and re-naming it the small business regional revolving loan program.

§ 2. The New York state urban development corporation created by chapter 174 of the laws of 1968 is hereby directed to audit, pursuant to subdivision (19) of section 16-a of section 1 of the urban development corporation act, each existing regional corporation administering a small business regional revolving loan fund and to either recertify such regional corporation or decertify such regional corporation and competitively select a successor corporation to administer the small business

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD06075-02-9

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regional revolving loan fund. In the case of regions that do not have a regional corporation administering a small business regional revolving loan fund or that have a decertified regional corporation, the urban development corporation shall issue a request for proposals, pursuant to the provisions of section 16-a of section 1 of the urban development corporation act, to administer small business regional revolving loan funds. The corporation shall select from the proposals received the most qualified applicant in each region pursuant to subdivisions (4), (5), and (6) of such section 16-a. If there is no applicant or no qualified applicant in a region of the state, that region shall not participate in the small business regional revolving loan fund program. The corporation, from money available for this purpose, shall allocate funds to each regional corporation pursuant to subdivision 1 of such section 16-a.

§ 3. Section 16-a of section 1 of chapter 174 of the laws of 1968, constituting the New York state urban development corporation act, as amended by chapter 477 of the laws of 2002, subdivision 3-a as added by chapter 474 of the laws of 2017, subdivision 20 as amended by chapter 378 of the laws of 2018 and subdivision 21 as amended by chapter 524 of the laws of 2005, is amended to read as follows:

§ 16-a. [Regional] Small business regional revolving loan program. (1) The corporation shall establish a fund to be known as the "small business regional revolving loan trust fund" and shall pay into such fund any monies made available to the corporation for such fund from any source. The monies held in or credited to the fund shall be expended solely for the purposes set forth in this section. The corporation shall not commingle the monies of such fund with any other monies of the corporation or any monies held in trust by the corporation.

(2) The corporation shall allocate any monies made available for such fund for the purpose of making grants to regional corporations. The grants shall be allocated as follows:

(a) fifty percent divided equally among the regions;

(b) fifty percent according to a formula weighted in favor of those regions with the greatest levels of economic distress as determined by poverty rates, number of persons receiving public assistance, unemployment rates, rate of employment decline and such other indicators of economic distress as the corporation deems appropriate; and

(c) in the event a regional corporation advises the corporation that it does not require all or a portion of the funds to be distributed pursuant to this subdivision, such funds shall be re-distributed by the corporation equally among the other regional corporations.

(3) In accordance with the rules and regulations of the corporation, each regional corporation shall establish two special accounts for monies received by the regional corporation pursuant to the provisions of this section. The grant monies received from the corporation, earnings on such monies, and any principal repayments shall be deposited in a loan fund account; any interest earned by the regional corporation on loans will be deposited in a separate interest repayment account. A regional corporation shall be authorized to provide financing assistance to eligible projects. Any interest earned from its loans may be used by a regional corporation for the cost of administering the programs authorized by this section.

(3-a) Notwithstanding subdivision three of this section, where applicable, the corporation is authorized to enter into agreements as may be necessary for the administration and reporting of funds repaid, received, expended or collected in a manner consistent with the

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provisions in section sixteen-t of this act. The use of such funds by the corporation shall be consistent with the terms, conditions and restrictions set forth in subdivision four of this section, to provide financial assistance to eligible regional corporations as defined in subdivision eighteen of section three of this act. Outstanding expenses, loans and other obligations executed prior to the effective date of this subdivision shall be subject to the terms and conditions of the original contract or contracts.

(4) Regional corporations shall be selected by the corporation from among eligible applicants to administer a small business regional revolving loan program. An eligible applicant shall:

(a) represent at least two entire contiguous counties;

(b) have available to it staff with sufficient expertise to analyze applications for financial assistance, to regularly monitor financial assistance to clients, and have made arrangements to provide management or technical assistance to clients;

(c) have an effective plan to market its services to small businesses through such entities as chambers of commerce, industry trade associations, banks, local development corporations, community based organizations and industrial development agencies; and

(d) have established a loan committee composed of five or more persons experienced in commercial lending or in the operation of a for-profit business and a staff person of the regional office of the department of economic development. Such loan committee shall review every application to the regional corporation for financial assistance pursuant to this section, shall determine the feasibility of the transaction proposed in the application and shall recommend to the board of directors or other governing body of the regional corporation such action as the committee deems appropriate.

(5) Applications to the corporation for certification or recertification as a regional corporation shall:

(a) describe the applicant corporation, including its organization, membership, loan committee, staff, and sources of other funds, if any;

(b) identify the geographic region to be served;

(c) explain the methods and criteria to be used in determining firms eligible for financial assistance from the small business regional revolving loan program;

(d) describe the means for coordinating financial assistance available from the small business regional revolving loan program with financial assistance available from other public funding sources within the region and how such program will be used to leverage private financing for projects;

[(e) at any time, the corporation may consider proposals to reconfigure geographic areas served by regional corporations;] and

[(f)] (e) contain such other information as the corporation deems appropriate.

(6) The corporation shall select, from among eligible applicants, regional corporations to administer revolving loan programs, on the basis of:

(a) the ability of the regional corporation to administer the financial assistance programs authorized under this section;

(b) the extent of coordination with other publicly supported financial assistance programs available within the region represented by the regional corporation;

(c) the degree of public and private support within the region for the applicant regional corporation; and

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(d) the ability of the regional corporation to provide financial and other assistance to businesses located in distressed areas within the region.

(6-a) The corporation shall, every five years, recertify that each regional corporation has complied with the terms and conditions of this section. In the event a regional corporation is not recertified, or its certification is withdrawn pursuant to subdivision nineteen of this section, then the corporation shall give written notice to such regional corporation which shall thereafter neither make new loans nor undertake new obligations except upon written approval of the corporation. The corporation may thereafter certify another regional corporation in the manner provided in this section for the selection of regional corporations. Upon the certification of a successor regional corporation, all remaining loan funds, records and accounts of the regional corporation not recertified shall be transferred to the corporation and the regional corporation not recertified shall cease to function pursuant to this section. The corporation shall transfer returned funds to a successor regional corporation, or in the event no successor regional corporation is formed, equally to other existing regional corporations.

(7) A regional corporation certified by the corporation shall use the funds received from the corporation, subject to the terms, conditions and restrictions set forth in this section, to provide financial assistance to eligible businesses as defined in subdivision seventeen of section three of this act, for projects that demonstrate a substantial likelihood of providing increases in net new permanent jobs or retaining jobs in businesses that need such financial assistance to remain viable. The regional corporation certified by the corporation shall also use the funds received from the corporation, subject to the terms, conditions, and restrictions set forth in this section, to provide financial assistance to micro-enterprises, defined as any commercial business with five or fewer employees, one or more of whom is the owner.

(8) The decision to approve or reject an application for financial assistance pursuant to the provisions of this section shall be made by a majority of the directors of the regional corporation, and such decision shall be final. No member of the board or other governing body of a regional corporation shall participate in a decision on a project application when such member is a party to or has a financial interest in such project. Any member who cannot participate in a decision on a project application for such reason shall not be counted as a member of the board or other governing body for purposes of determining the number of members required for a majority vote on such application.

(9) No employee or officer of any regional corporation shall be a party to or have any financial interest in any project that receives financial assistance pursuant to this section.

(10) A regional corporation, in approving applications for financial assistance, shall give priority to projects:

(a) that will provide increases in net new permanent jobs;

(b) located in economically distressed areas as defined by the corporation or employing persons who live in such areas;

(c) of minority or women-owned enterprises or enterprises owned by dislocated workers, such workers as defined in the Workforce Investment Act (P.L. 105-220); and

(d) of businesses in the early stages of development that have been denied access to credit.

(11) The funds allocated to each regional corporation pursuant to this section may be used to guarantee the repayment of a working capital loan

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provided by a banking organization to finance an eligible project. Guarantees may be provided for up to ninety percent of the required total project financing, provided that no more than one hundred thousand dollars may be guaranteed for any project. Guarantees may be made for the following types of financing: short and medium term loans for working capital, revolving lines of credit, and seasonal inventory and accounts receivable loans. Guarantees may be made for up to ninety percent of the required total financing up to a maximum of one hundred fifty thousand dollars for interim financing where another lender or guarantor will provide permanent financing within one hundred eighty days. In no event may a loan guarantee be for a term longer than five years. Any loan made by a banking organization that is guaranteed pursuant to this subdivision shall be secured by a security agreement, chattel paper, loan agreement, or such other instruments or documents deemed necessary or convenient by the regional corporation to secure the loan. Any guarantee made pursuant to this subdivision shall be backed by a minimum reserve within the account established by each regional corporation of at least twenty-five percent of the amount guaranteed that is outstanding.