SB3719 96TH GENERAL ASSEMBLY

LRB096 20392 RCE 36037 b

96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
SB3719

Introduced 2/11/2010, by Sen. Michael W. Frerichs

SYNOPSIS AS INTRODUCED:

20 ILCS 3501/805-20
20 ILCS 3501/830-55 new

Amends the Illinois Finance Authority Act concerning agricultural assistance. Authorizes the Authority to insure and make advance commitments to insure payments on bonds issued for agricultural assistance. Authorizes the Authority to issue State Guarantees to lenders for working capital loans to finance planting and raising agricultural commodities. Sets forth eligibility, application, and renewal requirements. Establishes fees and loan limits. Contains other provisions. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning government.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Finance Authority Act is amended by changing Section 805-20 and by adding Section 830-55 as follows:

(20 ILCS 3501/805-20)

Sec. 805-20. Powers and Duties; Industrial Project Insurance Program. The Authority has the power:

(a) To insure and make advance commitments to insure all or any part of the payments required on the bonds issued or a loan made to finance any environmental facility under the Illinois Environmental Facilities Financing Act or for any industrial project upon such terms and conditions as the Authority may prescribe in accordance with this Article. The insurance provided by the Authority shall be payable solely from the Fund created by Section 805-15 and shall not constitute a debt or pledge of the full faith and credit of the State, the Authority, or any political subdivision thereof;

(b) To enter into insurance contracts, letters of credit or any other agreements or contracts with financial institutions with respect to the Fund and any bonds or loans insured thereunder. Any such agreement or contract may contain terms and provisions necessary or desirable in connection with the program, subject to the requirements established by this Act, including without limitation terms and provisions relating to loan documentation, review and approval procedures, origination and servicing rights and responsibilities, default conditions, procedures and obligations with respect to insurance contracts made under this Act. The agreements or contracts may be executed on an individual, group or master contract basis with financial institutions;

(c) To charge reasonable fees to defray the cost of obtaining letters of credit or other similar documents, other than insurance contracts under paragraph (b). Any such fees shall be payable by such person, in such amounts and at such times as the Authority shall determine, and the amount of the fees need not be uniform among the various bonds or loans insured;

(d) To fix insurance premiums for the insurance of payments under the provisions of this Article. Such premiums shall be computed as determined by the Authority. Any premiums for the insurance of loan payments under the provisions of this Act shall be payable by such person, in such amounts and at such times as the Authority shall determine, and the amount of the premiums need not be uniform among the various bonds or loans insured;

(e) To establish application fees and prescribe application, notification, contract and insurance forms, rules and regulations it deems necessary or appropriate;

(f) To make loans and to issue bonds secured by insurance or other agreements authorized by paragraphs (a) and (b) of this Section 805-20 and to issue bonds secured by loans that are guaranteed by the federal government or agencies thereof;

(g) To issue a single bond issue, or a series of bond issues, for a group of industrial projects, a group of corporations, or a group of business entities or any combination thereof insured by insurance or backed by any other agreement authorized by paragraphs (a) and (b) of this Section or secured by loans that are guaranteed by the federal government or agencies thereof;

(h) To enter into trust agreements for the management of the Fund created under Section 805-15 of this Act; and

(i) To exercise such other powers as are necessary or incidental to the foregoing.

(j) At the discretion of the Authority, to insure and make advance commitments to insure all or any part of the payments required on the bonds issued or loans made to finance any agricultural facility, project, or program under Article 830 of this Act upon such terms and conditions as the Authority may prescribe in accordance with this Article. The insurance provided by the Authority may be payable from the Fund created by Section 805-15 and is in addition to and not in replacement of the Illinois Agricultural Loan Guarantee Fund and the Illinois Farmer Agribusiness Loan Guarantee Fund created under Article 830 of this Act.

(Source: P.A. 93-205, eff. 1-1-04.)

(20 ILCS 3501/830-55 new)

Sec. 830-55. Working Capital Loan Guarantee Program.

(a) The Authority is authorized to issue State Guarantees to lenders for loans to finance needed input costs related and in connection to planting and raising agricultural commodities in Illinois. Eligible input costs include, but are not limited to, fertilizer, chemicals, feed, seed, fuel, parts, and repairs. Generally, the farmer, producer, or agri-business must be able to provide the originating lender with a first lien on the proposed crop or commodity to be raised and an assignment of Federal Crop Insurance sufficient to secure the Working Capital Loan. Additional collateral may be required as deemed necessary by the lender and the Authority.

For the purposes of this Section, an eligible farmer, producer, or agri-business is a resident of Illinois who is at least 18 years of age and who is a principal operator of a farm or land, who derives at least 50% of annual gross income from farming, and whose debt to asset ratio is not less than 40%. For the purposes of this Section, debt to asset ratio means current outstanding liabilities, including any debt to be financed or refinanced under this Section 830-55, divided by current outstanding assets. The Authority shall establish the maximum permissible debt to asset ratio based on criteria established by the Authority. Lenders shall apply for the State Guarantees on forms provided by the Authority and certify that the application and any other documents submitted are true and correct. The lender or borrower, or both in combination, shall pay an administrative fee as determined by the Authority. The applicant shall be responsible for paying any fee or charge involved in recording mortgages, releases, financing statements, insurance for secondary market issues, and any other similar fee or charge that the Authority may require. The application shall at a minimum contain the borrower's name, address, present credit and financial information, including cash flow statements, financial statements, balance sheets, and any other information pertinent to the application, and the collateral to be used to secure the State Guarantee. In addition, the borrower must certify to the Authority that, at the time the State Guarantee is provided, the borrower will not be delinquent in the repayment of any debt. The lender must agree to charge a fixed or adjustable interest rate that the Authority determines to be below the market rate of interest generally available to the borrower. If both the lender and applicant agree, the interest rate on the State guaranteed loan can be converted to a fixed interest rate at any time during the term of the loan. State Guarantees provided under this Section (i) shall not exceed $250,000 per borrower, (ii) shall be repaid annually, and (iii) shall be subject to an annual review and renewal by the lender and the Authority. The State Guarantee may be extended each year, for a period not to exceed 3 years per commitment, if the borrower meets financial criteria each year, as established by the Authority. A farmer or agri-business may use this program more than once provided the aggregate principal amount of State Guarantees under this Section to that farmer or agri-business does not exceed $250,000 annually. No State Guarantee shall be revoked by the Authority without a 90-day notice, in writing, to all parties.

(b) The Authority shall provide or renew a State Guarantee to a lender if:

(i) The borrower pays a closing fee equal to 100 basis points, with no annual renewal fee.

(ii) The application provides collateral acceptable to the Authority that is at least equal to the State Guarantee.

(iii) The lender assumes all responsibility and costs for pursuing legal action on collecting any loan that is delinquent or in default.

(iv) The lender is at risk for the first 15% of the outstanding principal of the note for which the State Guarantee is provided.

(c) The Illinois Agricultural Loan Guarantee Fund may be used to secure State Guarantees issued under this Section as provided in Section 830-35.

(d) Notwithstanding the provisions of this Section 830-55 with respect to the borrowers and lenders who may obtain State Guarantees, the Authority may promulgate rules establishing the eligibility of borrowers and lenders to participate in the State Guarantee program and the terms, standards, and procedures that will apply, when the Authority finds that emergency conditions in Illinois agriculture have created the need for State Guarantees pursuant to terms, standards, and procedures other than those specified in this Section.

Section 99. Effective date. This Act takes effect upon becoming law.