Sen. Dan Kotowski

Filed: 3/2/2012

 

 


 

 


 
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1
AMENDMENT TO SENATE BILL 3243

2    AMENDMENT NO. ______. Amend Senate Bill 3243 by replacing
3everything after the enacting clause with the following:
 
4    "Section 1. Short title. This Act may be cited as the
5Microloan Program Act.
 
6    Section 5. Definitions. For purposes of this Act:
7    "Department" means the Department of Commerce and Economic
8Opportunity.
9    "Director" means the Director of Commerce and Economic
10Opportunity.
11    "Intermediary" means (i) a private, non-profit entity;
12(ii) a private, non-profit community development corporation;
13(iii) a consortium of private, non-profit organizations or
14non-profit community development corporations; or (iv) a
15quasi-governmental economic development entity (such as a
16planning and development district) if no application is

 

 

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1received from an eligible non-profit organization or the
2Director determines that the needs of a region or geographic
3area are not adequately served by an existing, eligible
4non-profit organization that has submitted an application.
5"Intermediary" also includes an intermediary that has
6completed the training program created and administered by the
7Director under Section 60.
8    "Microloan" means a short-term, fixed rate loan of not more
9than $35,000, made by an intermediary to a small business
10concern.
11    "Rural area" means any political subdivision or
12unincorporated area (i) in a non-metropolitan county (as
13defined by the Secretary of Agriculture) or its equivalent or
14(ii) in a metropolitan county or its equivalent that has a
15resident population of less than 20,000 if the Department of
16Commerce and Economic Opportunity has determined such a
17political subdivision or area to be rural.
18    "Small business concern" means a legal entity, including a
19corporation, partnership, or sole proprietorship, that (i) is
20formed for the purpose of making a profit; (ii) is
21independently owned and operated; and (iii) has 5 employees or
22fewer.
23    "Economically distressed area", as used in Section 30,
24means a county or unit of local government in which a small
25business concern is located and in which, according to the most
26recent data available from the Bureau of the Census, Department

 

 

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1of Commerce, not less than 40% of residents have an annual
2income that is at or below the poverty level.
 
3    Section 10. Purposes. The purposes of the Microloan Program
4are:
5        (1) to assist female, low-income, veteran, and
6    minority entrepreneurs and business owners and other
7    individuals possessing the capability to operate
8    successful business concerns;
9        (2) to assist small business concerns in those areas
10    suffering from a lack of credit due to economic downturns;
11        (3) to establish a microloan program to be administered
12    by the Department of Commerce and Economic Opportunity in
13    order to:
14            (A) make loans to eligible intermediaries to
15        enable those intermediaries to provide small-scale
16        loans, particularly loans in amounts averaging not
17        more than $13,000, to small business concerns for
18        working capital or the acquisition of materials,
19        supplies, or equipment;
20            (B) make grants to eligible intermediaries that,
21        together with non-State matching funds, will enable
22        those intermediaries to provide intensive marketing,
23        management, and technical assistance to microloan
24        borrowers;
25            (C) make grants to eligible non-profit entities

 

 

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1        that, together with non-State matching funds, will
2        enable those entities to provide intensive marketing,
3        management, and technical assistance to assist
4        low-income entrepreneurs and other low-income
5        individuals in obtaining private sector financing for
6        their businesses, with or without loan guarantees; and
7            (D) report to the Committee on State Government
8        Administration in the House of Representatives and the
9        State Government and Veterans Affairs Committee in the
10        Senate on the effectiveness of the microloan program.
 
11    Section 15. Microloan program established. A microloan
12program is established in the Department of Commerce and
13Economic Opportunity under which the Director of Commerce and
14Economic Opportunity may:
15        (1) make direct loans to eligible intermediaries, as
16    provided under Section 25, for the purpose of making
17    short-term, fixed interest rate microloans to small
18    business concerns under Section 40;
19        (2) in conjunction with these loans and subject to the
20    requirements of Section 30, make grants to these
21    intermediaries for the purpose of providing intensive
22    marketing, management, and technical assistance to small
23    business concerns that are borrowers under this Act;
24        (3) subject to the requirements of Section 35 make
25    grants to non-profit entities for the purpose of providing

 

 

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1    marketing, management, and technical assistance to
2    low-income individuals seeking to start or enlarge their
3    own businesses, if that assistance includes working with
4    the grant recipient to secure loans in amounts not to
5    exceed $35,000 from private sector lending institutions,
6    with or without a loan guarantee from the non-profit
7    entity; and
8        (4) create and administer a training program to train
9    intermediaries in the knowledge, skills, and understanding
10    of microlending necessary to operate successful microloan
11    programs.
 
12    Section 20. Eligibility for participation. An intermediary
13shall be eligible to receive loans and grants under paragraphs
14(1) and (2) of Section 15 if it meets the definition of
15intermediary in Section 5.
 
16    Section 25. Loans to intermediaries.
17    (a) As part of its application for a loan, each
18intermediary shall submit a description to the Director of the
19type of businesses to be assisted; the size and range of loans
20to be made; the geographic area to be served and its economic,
21poverty, and unemployment characteristics; the status of small
22business concerns in the area to be served and an analysis of
23their credit and technical assistance needs; any marketing,
24management, and technical assistance to be provided in

 

 

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1connection with a loan made under this Act; the local economic
2credit markets, including the costs associated with obtaining
3credit locally; the qualifications of the applicant to carry
4out the purpose of this Act; and any plan to involve other
5technical assistance providers or private sector lenders in
6assisting selected business concerns. In selecting
7intermediaries to participate in the program established under
8this Act, the Director shall give priority to those applicants
9that provide loans in amounts averaging not more than $13,000.
10    (b) As a condition of any loan made to an intermediary
11under paragraph (2) of Section 15, the Department shall require
12the intermediary to contribute not less than 15% of the loan
13amount in cash from non-State sources.
14    (c) No loan shall be made to an intermediary under this Act
15if the total amount outstanding and committed to that
16intermediary (excluding outstanding grants) from the Business
17Loan and Investment Fund would, as a result of that loan,
18exceed $750,000 in the first year of the intermediary's
19participation in the program or $3,500,000 in later years of
20the intermediary's participation in the program.
21    (d) The Department shall, by regulation, require each
22intermediary to establish a loan loss reserve fund, and to
23maintain that reserve fund until all obligations owed to the
24Department under this Act are repaid. Unless otherwise
25authorized under this subsection (d), the Director shall
26require the loan loss reserve fund of an intermediary to be

 

 

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1maintained at a level equal to 15% of the outstanding balance
2of the notes receivable owed to the intermediary. After the
3initial 5 years of an intermediary's participation in the
4program, the Director shall, at the request of the
5intermediary, conduct a review of the annual loss rate of the
6intermediary. The Director may reduce the annual loan loss
7reserve requirement of an intermediary to reflect the actual
8average loan loss rate for the intermediary during the
9preceding 5-year period, except that in no case shall the loan
10loss reserve be reduced to less than 10% of the outstanding
11balance of the notes receivable owed to the intermediary. The
12Director may reduce the annual loan loss reserve requirement of
13an intermediary only if the intermediary demonstrates to the
14satisfaction of the Director that the average annual loss rate
15for the intermediary during the preceding 5-year period is less
16than 15%; and that no other factors exist that may impair the
17ability of the intermediary to repay all obligations owed to
18the Director under this Act.
19    (e) An intermediary may make a loan under this Act of more
20than $20,000 to a small business concern only if the small
21business concern demonstrates that it is unable to obtain
22credit elsewhere at comparable interest rates and that it has
23good prospects for success. In no case shall an intermediary
24make a loan under this Act of more than $35,000, or have
25outstanding or committed to any one borrower more than $35,000.
26    (f) Loans made by the Department to an intermediary under

 

 

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1this Act shall be for a term of 10 years. Except as otherwise
2provided in this subsection (f), loans made by the Department
3to an intermediary under this Act shall bear an interest rate
4equal to 1.25 percentage points below the rate determined by
5the Secretary of the Treasury for obligations of the United
6States with a period of maturity of 5 years, adjusted to the
7nearest one-eighth of 1%. Loans made by the Department to an
8intermediary that makes loans to small business concerns and
9entrepreneurs averaging not more than $7,500, shall bear an
10interest rate that is 2 percentage points below the rate
11determined by the Secretary of the Treasury for obligations of
12the United States with a period of maturity of 5 years,
13adjusted to the nearest one-eighth of 1%. The applicable rate
14of interest under this subsection (f) shall be applied
15retroactively for the first year of an intermediary's
16participation in the program, based upon the actual lending
17practices of the intermediary as determined by the Department
18before the end of that year, and be based in the second and
19subsequent years of an intermediary's participation in the
20program upon the actual lending practices of the intermediary
21during the term of the intermediary's participation in the
22program. The interest rates prescribed in this subsection (f)
23shall apply to all loans made to intermediaries under this Act.
24    (g) The Department shall not require repayment of interest
25or principal of a loan made to an intermediary under this Act
26during the first year of the loan.

 

 

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1    (h) Except as provided in subsections (b) and (d) of this
2Section 25, the Department shall not charge any fees or require
3collateral other than an assignment of the notes receivable of
4the microloans with respect to any loan made to an intermediary
5under this Act.
 
6    Section 30. Marketing, management, and technical
7assistance grants to intermediaries.
8    (a) Except as otherwise provided in subsections (b) and (c)
9of this Section 30, each intermediary that receives a loan
10under paragraph (1) of Section 15 shall be eligible to receive
11a grant to provide marketing, management, and technical
12assistance to small business concerns that are borrowers under
13this Act. Except as provided in subsection (c) of this Section
1430, each intermediary meeting the requirements of subsection
15(b) of this Section 30 may receive a grant of not more than 25%
16of the total outstanding balance of loans made to it under this
17Act.
18    (b) As a condition of any grant made under subsection (a)
19of this Section 30, except for a grant made to an intermediary
20that provides not less than 50% of its loans to small business
21concerns located in or owned by one or more residents of an
22economically distressed area, the Department shall require the
23intermediary to contribute an amount equal to 25% of the amount
24of the grant, obtained solely from non-State sources. In
25addition to cash or other direct funding, the contribution may

 

 

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1include indirect costs or in-kind contributions paid for under
2non-State programs.
3    (c) In addition to grants made under subsection (a), each
4intermediary shall be eligible to receive a grant equal to 5%
5of the total outstanding balance of loans made to the
6intermediary under this Act if (i) the intermediary provides
7not less than 25% of its loans to small business concerns
8located in or owned by one or more residents of an economically
9distressed area or (ii) the intermediary has a portfolio of
10loans made under this Act that averages not more than $13,000
11during the period of the intermediary's participation in the
12program.
13    (d) A grant awarded under subsection (c) may be used to
14provide marketing, management, and technical assistance to
15small business concerns that are borrowers under this Act.
16    (e) The contribution requirements in subsection (b) of this
17Section 30 do not apply to grants made under subsection (c).
18    (f) The eligibility for a grant described in subsections
19(a) and (c) shall be determined separately for each loan-making
20site or office of that intermediary.
21    (g) Each intermediary may expend an amount not to exceed
2225% of the grant funds received under paragraph (2) of Section
2315 to provide information and technical assistance to small
24business concerns that are prospective borrowers under this
25Act.
26    (h) An intermediary may expend not more than 25% of the

 

 

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1funds received under paragraph (2) of Section 15 to enter into
2third party contracts for the provision of technical
3assistance.
4    (i) The Department may accept any funds transferred to it
5from the State, State agencies, and departments or agencies of
6the federal government to make grants to participating
7intermediaries and technical assistance providers under this
8Section 30, for use in accordance with subsection (k) to
9provide additional technical assistance and related services
10to low-income individuals under subparagraph (C) of paragraph
11(3) of Section 10 at the time the applicant initially applies
12for assistance.
13    (j) In making grants under subsection (i), the Department
14may select, from among participating intermediaries and
15technical assistance providers described in subsection (i),
16not more than 20 grantees in fiscal year 2013, not more than 25
17grantees in fiscal year 2014, and not more than 30 grantees in
18fiscal year 2015, each of whom may receive a grant under
19subsection (i) in an amount not to exceed $200,000 per year.
20    (k) Grants under subsection (i) are in addition to other
21grants provided under this Act and shall not require the
22contribution of matching amounts as a condition of eligibility;
23and may be used by a grantee to pay or reimburse a portion of
24child care and transportation costs of low-income individuals,
25to the extent these costs are not otherwise paid by State block
26grants under the Child Care Development Block Grant Act of 1990

 

 

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1(42 U.S.C. 9858 et seq.) or under part A of Title IV of the
2Social Security Act (42 U.S.C. 601 et seq.); and for marketing,
3management, and technical assistance to those individuals.
4    (l) Prior to accepting any transfer of funds under
5subsection (i) from the State, a State agency, or a department
6or agency of the federal government, the Department shall enter
7into a Memorandum of Understanding with the State, State
8agency, or department or agency of the federal government,
9which shall specify the terms and conditions of the grants; and
10provide for appropriate monitoring of expenditures by each
11grantee and each recipient of assistance under subsection (i).
 
12    Section 35. Private sector borrowing technical assistance
13grants.
14    (a) The Department may make not more than 55 grants
15annually, each in an amount not to exceed $200,000 for the
16purposes specified in subparagraph (C) of paragraph (3) of
17Section 10.
18    (b) As a condition of the grant, the Department shall
19require the grant recipient to provide matching funds equal to
2020% of the amount of the grant, obtained solely from non-State
21sources. In addition to cash or other direct funding, the
22matching funds may include indirect costs or in-kind
23contributions paid for under non-State programs.
 
24    Section 40. Loans to small business concerns from eligible

 

 

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1intermediaries.
2    (a) An eligible intermediary shall make short-term, fixed
3rate loans to small business concerns from the funds made
4available to it under paragraph (1) of Section 15 for working
5capital and the acquisition of materials, supplies, furniture,
6fixtures, and equipment.
7    (b) To the extent practicable, each intermediary that
8operates a microloan program under this Act shall maintain a
9microloan portfolio with an average loan size of not more than
10$13,000.
11    (c) The Department shall not review individual microloans
12made by intermediaries prior to approval.
13    (d) In addition to other eligible small business concerns,
14borrowers under any program under this Act may include
15individuals who will use the loan proceeds to establish
16for-profit or non-profit child care establishments or
17businesses providing for-profit transportation services.
 
18    Section 45. Program funding for microloans.
19    (a) Under the program authorized by this Act, the
20Department may fund, on a competitive basis, not more than 300
21intermediaries.
22    (b) Subject to the availability of appropriations, of the
23total amount of new loan funds made available for award under
24this Act in each fiscal year, the Department shall make
25available for award an amount equal to the sum appropriated by

 

 

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1the General Assembly for that purpose.
 
2    Section 50. Equitable distribution of intermediaries. In
3approving intermediaries and providing funding to
4intermediaries under this Act, the Department shall select and
5provide funding to intermediaries as will ensure appropriate
6availability of loans for small businesses in all industries
7located throughout the State, particularly those located in
8urban and in rural areas.
 
9    Section 55. Grants for management, marketing, technical
10assistance, and related services.
11    (a) The Department may procure technical assistance for
12intermediaries participating in the Microloan Program to
13ensure that those intermediaries have the knowledge, skills,
14and understanding of microlending practices necessary to
15operate successful microloan programs.
16    (b) The General Assembly may appropriate up to 7% of the
17balance in the Business Loan and Investment Fund to the
18Department for the specific purpose of providing one or more
19technical assistance grants to experienced microlending
20organizations that have demonstrated experience in providing
21training support for microenterprise development and financing
22to achieve the purposes set forth in Section 10.
 
23    Section 60. Training program.    The Department shall

 

 

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1create and administer a training program for intermediaries
2that presently have minimal or no expertise or experience in
3microlending. The training program shall train the
4intermediaries in the knowledge, skills, and understanding of
5microlending practices necessary to operate successful
6microloan programs.
 
7    Section 65. Report to General Assembly. On November 1,
82014, the Department shall submit to the General Assembly a
9report, including the Department's evaluation of the
10effectiveness of the microloan program and the following:
11        (1) the numbers and locations of the intermediaries
12    funded to conduct microloan programs;
13        (2) the amounts of each loan and each grant to
14    intermediaries;
15        (3) a description of the matching contributions of each
16    intermediary;
17        (4) the numbers and amounts of microloans made by the
18    intermediaries to small business concern borrowers;
19        (5) the repayment history of each intermediary;
20        (6) a description of the loan portfolio of each
21    intermediary including the extent to which it provides
22    microloans to small business concerns in rural areas; and
23        (7) any recommendations for legislative changes that
24    would improve program operations.
 

 

 

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1    Section 70. Business Loan and Investment Fund. The Business
2Loan and Investment Fund is created as a special fund in the
3State treasury to accept appropriations, grants, gifts, and
4other donations made to fund the Microloan Program created by
5this Act. Moneys in the Fund may, subject to appropriation, be
6used by the Department to carry out the requirements of this
7Act.
 
8    Section 75. The State Finance Act is amended by adding
9Section 5.811 as follows:
 
10    (30 ILCS 105/5.811 new)
11    Sec. 5.811. The Business Loan and Investment Fund.".