Full Text of HB5420 96th General Assembly
HB5420eng 96TH GENERAL ASSEMBLY
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| AN ACT concerning State government.
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| Be it enacted by the People of the State of Illinois,
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| represented in the General Assembly:
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| Section 1. Short title. This Act may be cited as the | 5 |
| Microloan Program Act. | 6 |
| Section 5. Definitions. For purposes of this Act: | 7 |
| "Department" means the Department of Commerce and Economic | 8 |
| Opportunity. | 9 |
| "Director" means the Director of Commerce and Economic | 10 |
| Opportunity. | 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 | 14 |
| non-profit community development corporations; or (iv) a | 15 |
| quasi-governmental economic development entity (such as a | 16 |
| planning and development district) if no application is | 17 |
| received from an eligible non-profit organization or the | 18 |
| Director determines that the needs of a region or geographic | 19 |
| area are not adequately served by an existing, eligible | 20 |
| non-profit organization that has submitted an application. | 21 |
| "Microloan" means a short-term, fixed rate loan of not more | 22 |
| than $35,000, made by an intermediary to a startup, newly | 23 |
| established, or growing small business concern. |
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| "Rural area" means any political subdivision or | 2 |
| unincorporated area (i) in a non-metropolitan county (as | 3 |
| defined by the Secretary of Agriculture) or its equivalent or | 4 |
| (ii) in a metropolitan county or its equivalent that has a | 5 |
| resident population of less than 20,000 if the Department of | 6 |
| Commerce and Economic Opportunity has determined such a | 7 |
| political subdivision or area to be rural. | 8 |
| "Economically distressed area", as used in Section 30, | 9 |
| means a county or unit of local government in which a small | 10 |
| business concern is located and in which, according to the most | 11 |
| recent data available from the Bureau of the Census, Department | 12 |
| of Commerce, not less than 40% of residents have an annual | 13 |
| income that is at or below the poverty level. | 14 |
| Section 10. Purposes. The purposes of the Microloan Program | 15 |
| are: | 16 |
| (1) to assist female, low-income, veteran, and | 17 |
| minority entrepreneurs and business owners and other | 18 |
| individuals possessing the capability to operate | 19 |
| successful business concerns; | 20 |
| (2) to assist small business concerns in those areas | 21 |
| suffering from a lack of credit due to economic downturns; | 22 |
| (3) to establish a microloan program to be administered | 23 |
| by the Department of Commerce and Economic Opportunity in | 24 |
| order to: | 25 |
| (A) make loans to eligible intermediaries to |
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| enable those intermediaries to provide small-scale | 2 |
| loans, particularly loans in amounts averaging not | 3 |
| more than $13,000, to startup, newly established, or | 4 |
| growing small business concerns for working capital or | 5 |
| the acquisition of materials, supplies, or equipment; | 6 |
| (B) make grants to eligible intermediaries that, | 7 |
| together with non-State matching funds, will enable | 8 |
| those intermediaries to provide intensive marketing, | 9 |
| management, and technical assistance to microloan | 10 |
| borrowers; | 11 |
| (C) make grants to eligible non-profit entities | 12 |
| that, together with non-State matching funds, will | 13 |
| enable those entities to provide intensive marketing, | 14 |
| management, and technical assistance to assist | 15 |
| low-income entrepreneurs and other low-income | 16 |
| individuals in obtaining private sector financing for | 17 |
| their businesses, with or without loan guarantees; and | 18 |
| (D) report to the Committee on State Government | 19 |
| Administration in the House of Representatives and the | 20 |
| State Government and Veterans Affairs Committee in the | 21 |
| Senate on the effectiveness of the microloan program. | 22 |
| Section 15. Microloan program established. A microloan | 23 |
| program is established in the Department of Commerce and | 24 |
| Economic Opportunity under which the Director of Commerce and | 25 |
| Economic Opportunity may: |
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| (1) make direct loans to eligible intermediaries, as | 2 |
| provided under Section 25, for the purpose of making | 3 |
| short-term, fixed interest rate microloans to startup, | 4 |
| newly established, and growing small business concerns | 5 |
| under Section 40; | 6 |
| (2) in conjunction with these loans and subject to the | 7 |
| requirements of Section 30, make grants to these | 8 |
| intermediaries for the purpose of providing intensive | 9 |
| marketing, management, and technical assistance to small | 10 |
| business concerns that are borrowers under this Act; and | 11 |
| (3) subject to the requirements of Section 35 make | 12 |
| grants to non-profit entities for the purpose of providing | 13 |
| marketing, management, and technical assistance to | 14 |
| low-income individuals seeking to start or enlarge their | 15 |
| own businesses, if that assistance includes working with | 16 |
| the grant recipient to secure loans in amounts not to | 17 |
| exceed $35,000 from private sector lending institutions, | 18 |
| with or without a loan guarantee from the non-profit | 19 |
| entity. | 20 |
| Section 20. Eligibility for participation. An intermediary | 21 |
| shall be eligible to receive loans and grants under paragraphs | 22 |
| (1) and (2) of Section 15 if it meets the definition of | 23 |
| intermediary in Section 5. | 24 |
| Section 25. Loans to intermediaries. |
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| (a) As part of its application for a loan, each | 2 |
| intermediary shall submit a description to the Director of the | 3 |
| type of businesses to be assisted; the size and range of loans | 4 |
| to be made; the geographic area to be served and its economic, | 5 |
| poverty, and unemployment characteristics; the status of small | 6 |
| business concerns in the area to be served and an analysis of | 7 |
| their credit and technical assistance needs; any marketing, | 8 |
| management, and technical assistance to be provided in | 9 |
| connection with a loan made under this Act; the local economic | 10 |
| credit markets, including the costs associated with obtaining | 11 |
| credit locally; the qualifications of the applicant to carry | 12 |
| out the purpose of this Act; and any plan to involve other | 13 |
| technical assistance providers or private sector lenders in | 14 |
| assisting selected business concerns.
In selecting | 15 |
| intermediaries to participate in the program established under | 16 |
| this Act, the Director shall give priority to those applicants | 17 |
| that provide loans in amounts averaging not more than $13,000. | 18 |
| (b) As a condition of any loan made to an intermediary | 19 |
| under paragraph (2) of Section 15, the Department shall require | 20 |
| the intermediary to contribute not less than 15% of the loan | 21 |
| amount in cash from non-State sources. | 22 |
| (c) No loan shall be made to an intermediary under this Act | 23 |
| if the total amount outstanding and committed to that | 24 |
| intermediary (excluding outstanding grants) from the Business | 25 |
| Loan and Investment Fund would, as a result of that loan, | 26 |
| exceed $750,000 in the first year of the intermediary's |
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| participation in the program or $3,500,000 in later years of | 2 |
| the intermediary's participation in the program. | 3 |
| (d) The Department shall, by regulation, require each | 4 |
| intermediary to establish a loan loss reserve fund, and to | 5 |
| maintain that reserve fund until all obligations owed to the | 6 |
| Department under this Act are repaid.
Unless otherwise | 7 |
| authorized under this subsection (d), the Director shall | 8 |
| require the loan loss reserve fund of an intermediary to be | 9 |
| maintained at a level equal to 15% of the outstanding balance | 10 |
| of the notes receivable owed to the intermediary.
After the | 11 |
| initial 5 years of an intermediary's participation in the | 12 |
| program, the Director shall, at the request of the | 13 |
| intermediary, conduct a review of the annual loss rate of the | 14 |
| intermediary.
The Director may reduce the annual loan loss | 15 |
| reserve requirement of an intermediary to reflect the actual | 16 |
| average loan loss rate for the intermediary during the | 17 |
| preceding 5-year period, except that in no case shall the loan | 18 |
| loss reserve be reduced to less than 10% of the outstanding | 19 |
| balance of the notes receivable owed to the intermediary.
The | 20 |
| Director may reduce the annual loan loss reserve requirement of | 21 |
| an intermediary only if the intermediary demonstrates to the | 22 |
| satisfaction of the Director that the average annual loss rate | 23 |
| for the intermediary during the preceding 5-year period is less | 24 |
| than 15%; and that no other factors exist that may impair the | 25 |
| ability of the intermediary to repay all obligations owed to | 26 |
| the Director under this Act. |
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| (e) An intermediary may make a loan under this Act of more | 2 |
| than $20,000 to a small business concern only if the small | 3 |
| business concern demonstrates that it is unable to obtain | 4 |
| credit elsewhere at comparable interest rates and that it has | 5 |
| good prospects for success. In no case shall an intermediary | 6 |
| make a loan under this Act of more than $35,000, or have | 7 |
| outstanding or committed to any one borrower more than $35,000. | 8 |
| (f) Loans made by the Department to an intermediary under | 9 |
| this Act shall be for a term of 10 years. Except as otherwise | 10 |
| provided in this subsection (f), loans made by the Department | 11 |
| to an intermediary under this Act shall bear an interest rate | 12 |
| equal to 1.25 percentage points below the rate determined by | 13 |
| the Secretary of the Treasury for obligations of the United | 14 |
| States with a period of maturity of 5 years, adjusted to the | 15 |
| nearest one-eighth of 1%. Loans made by the Department to an | 16 |
| intermediary that makes loans to small business concerns and | 17 |
| entrepreneurs averaging not more than $7,500, shall bear an | 18 |
| interest rate that is 2 percentage points below the rate | 19 |
| determined by the Secretary of the Treasury for obligations of | 20 |
| the United States with a period of maturity of 5 years, | 21 |
| adjusted to the nearest one-eighth of 1%. The applicable rate | 22 |
| of interest under this subsection (f) shall be applied | 23 |
| retroactively for the first year of an intermediary's | 24 |
| participation in the program, based upon the actual lending | 25 |
| practices of the intermediary as determined by the Department | 26 |
| before the end of that year and be based in the second and |
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| subsequent years of an intermediary's participation in the | 2 |
| program, upon the actual lending practices of the intermediary | 3 |
| during the term of the intermediary's participation in the | 4 |
| program. The interest rates prescribed in this subsection (f) | 5 |
| shall apply to all loans made to intermediaries under this Act. | 6 |
| (g) The Department shall not require repayment of interest | 7 |
| or principal of a loan made to an intermediary under this Act | 8 |
| during the first year of the loan. | 9 |
| (h) Except as provided in subsections (b) and (d) of this | 10 |
| Section 25, the Department shall not charge any fees or require | 11 |
| collateral other than an assignment of the notes receivable of | 12 |
| the microloans with respect to any loan made to an intermediary | 13 |
| under this Act. | 14 |
| Section 30. Marketing, management, and technical | 15 |
| assistance grants to intermediaries. | 16 |
| (a) Except as otherwise provided in subsections (b) and (c) | 17 |
| of this Section 30, each intermediary that receives a loan | 18 |
| under paragraph (1) of Section 15 shall be eligible to receive | 19 |
| a grant to provide marketing, management, and technical | 20 |
| assistance to small business concerns that are borrowers under | 21 |
| this Act. Except as provided in subsection (c) of this Section | 22 |
| 30, each intermediary meeting the requirements of subsection | 23 |
| (b) of this Section 30 may receive a grant of not more than 25% | 24 |
| of the total outstanding balance of loans made to it under this | 25 |
| Act. |
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| (b) As a condition of any grant made under subsection (a) | 2 |
| of this Section 30, except for a grant made to an intermediary | 3 |
| that provides not less than 50% of its loans to small business | 4 |
| concerns located in or owned by one or more residents of an | 5 |
| economically distressed area, the Department shall require the | 6 |
| intermediary to contribute an amount equal to 25% of the amount | 7 |
| of the grant, obtained solely from non-State sources. In | 8 |
| addition to cash or other direct funding, the contribution may | 9 |
| include indirect costs or in-kind contributions paid for under | 10 |
| non-State programs. | 11 |
| (c) In addition to grants made under subsection (a), each | 12 |
| intermediary shall be eligible to receive a grant equal to 5% | 13 |
| of the total outstanding balance of loans made to the | 14 |
| intermediary under this Act if (i) the intermediary provides | 15 |
| not less than 25% of its loans to small business concerns | 16 |
| located in or owned by one or more residents of an economically | 17 |
| distressed area or (ii) the intermediary has a portfolio of | 18 |
| loans made under this Act that averages not more than $13,000 | 19 |
| during the period of the intermediary's participation in the | 20 |
| program. | 21 |
| (d) A grant awarded under subsection (c) may be used to | 22 |
| provide marketing, management, and technical assistance to | 23 |
| small business concerns that are borrowers under this Act. | 24 |
| (e) The contribution requirements in subsection (b) of this | 25 |
| Section 30 do not apply to grants made under subsection (c). | 26 |
| (f) The eligibility for a grant described in subsections |
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| (a) and (c) shall be determined separately for each loan-making | 2 |
| site or office of that intermediary. | 3 |
| (g) Each intermediary may expend an amount not to exceed | 4 |
| 25% of the grant funds received under paragraph (2) of Section | 5 |
| 15 to provide information and technical assistance to small | 6 |
| business concerns that are prospective borrowers under this | 7 |
| Act. | 8 |
| (h) An intermediary may expend not more than 25% of the | 9 |
| funds received under paragraph (2) of Section 15 to enter into | 10 |
| third party contracts for the provision of technical | 11 |
| assistance. | 12 |
| (i) The Department may accept any funds transferred to it | 13 |
| from the State, State agencies, and departments or agencies of | 14 |
| the Federal Government to make grants to participating | 15 |
| intermediaries and technical assistance providers under this | 16 |
| Section 30, for use in accordance with subsection (k) to | 17 |
| provide additional technical assistance and related services | 18 |
| to low-income individuals under subparagraph (C) of paragraph | 19 |
| (3) of Section 10 at the time the applicant initially applies | 20 |
| for assistance. | 21 |
| (j) In making grants under subsection (i), the Department | 22 |
| may select, from among participating intermediaries and | 23 |
| technical assistance providers described in subsection (i), | 24 |
| not more than 20 grantees in fiscal year 2011, not more than 25 | 25 |
| grantees in fiscal year 2012, and not more than 30 grantees in | 26 |
| fiscal year 2013, each of whom may receive a grant under |
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| subsection (i) in an amount not to exceed $200,000 per year. | 2 |
| (k) Grants under subsection (i) are in addition to other | 3 |
| grants provided under this Act and shall not require the | 4 |
| contribution of matching amounts as a condition of eligibility; | 5 |
| and may be used by a grantee to pay or reimburse a portion of | 6 |
| child care and transportation costs of low-income individuals, | 7 |
| to the extent these costs are not otherwise paid by State block | 8 |
| grants under the Child Care Development Block Grant Act of 1990 | 9 |
| (42 U.S.C. 9858 et seq.) or under part A of Title IV of the | 10 |
| Social Security Act (42 U.S.C. 601 et seq.); and for marketing, | 11 |
| management, and technical assistance to those individuals. | 12 |
| (l) Prior to accepting any transfer of funds under | 13 |
| subsection (i) from the State, a State agency, or a department | 14 |
| or agency of the federal government, the Department shall enter | 15 |
| into a Memorandum of Understanding with the State, State | 16 |
| agency, or department or agency of the federal government, | 17 |
| which shall specify the terms and conditions of the grants; and | 18 |
| provide for appropriate monitoring of expenditures by each | 19 |
| grantee and each recipient of assistance under subsection (i). | 20 |
| Section 35. Private sector borrowing technical assistance | 21 |
| grants. | 22 |
| (a) The Department may make not more than 55 grants | 23 |
| annually, each in an amount not to exceed $200,000 for the | 24 |
| purposes specified in subparagraph (C) of paragraph (3) of | 25 |
| Section 10. |
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| (b) As a condition of the grant, the Department shall | 2 |
| require the grant recipient to provide matching funds equal to | 3 |
| 20% of the amount of the grant, obtained solely from non-State | 4 |
| sources. In addition to cash or other direct funding, the | 5 |
| matching funds may include indirect costs or in-kind | 6 |
| contributions paid for under non-State programs. | 7 |
| Section 40. Loans to small business concerns from eligible | 8 |
| intermediaries. | 9 |
| (a) An eligible intermediary shall make short-term, fixed | 10 |
| rate loans to startup, newly established, and growing small | 11 |
| business concerns from the funds made available to it under | 12 |
| paragraph (1) of Section 15 for working capital and the | 13 |
| acquisition of materials, supplies, furniture, fixtures, and | 14 |
| equipment. | 15 |
| (b) To the extent practicable, each intermediary that | 16 |
| operates a microloan program under this Act shall maintain a | 17 |
| microloan portfolio with an average loan size of not more than | 18 |
| $13,000. | 19 |
| (c) The Department shall not review individual microloans | 20 |
| made by intermediaries prior to approval. | 21 |
| (d) In addition to other eligible small businesses | 22 |
| concerns, borrowers under any program under this Act may | 23 |
| include individuals who will use the loan proceeds to establish | 24 |
| for-profit or non-profit child care establishments or | 25 |
| businesses providing for-profit transportation services. |
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| Section 45. Program funding for microloans. | 2 |
| (a) Under the program authorized by this Act, the | 3 |
| Department may fund, on a competitive basis, not more than 300 | 4 |
| intermediaries. | 5 |
| (b) Subject to the availability of appropriations, of the | 6 |
| total amount of new loan funds made available for award under | 7 |
| this Act in each fiscal year, the Department shall make | 8 |
| available for award an amount equal to the sum appropriated by | 9 |
| the General Assembly for that purpose. | 10 |
| Section 50. Equitable distribution of intermediaries. In | 11 |
| approving intermediaries and providing funding to | 12 |
| intermediaries under this Act, the Department shall select and | 13 |
| provide funding to intermediaries as will ensure appropriate | 14 |
| availability of loans for small businesses in all industries | 15 |
| located throughout the State, particularly those located in | 16 |
| urban and in rural areas.
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| Section 55. Grants for management, marketing, technical | 18 |
| assistance, and related services.
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| (a) The Department may procure technical assistance for | 20 |
| intermediaries participating in the Microloan Program to | 21 |
| ensure that those intermediaries have the knowledge, skills, | 22 |
| and understanding of microlending practices necessary to | 23 |
| operate successful microloan programs. |
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| (b) The General Assembly may appropriate up to 7% of the | 2 |
| balance in the Business Loan and Investment Fund to the | 3 |
| Department for the specific purpose of providing one or more | 4 |
| technical assistance grants to experienced microlending | 5 |
| organizations that have demonstrated experience in providing | 6 |
| training support for microenterprise development and financing | 7 |
| to achieve the purposes set forth in Section 10. | 8 |
| Section 60. Report to General Assembly. On November 1, | 9 |
| 2012, the Department shall submit to the General Assembly a | 10 |
| report, including the Department's evaluation of the | 11 |
| effectiveness of the microloan program and the following: | 12 |
| (1) the numbers and locations of the intermediaries | 13 |
| funded to conduct microloan programs; | 14 |
| (2) the amounts of each loan and each grant to | 15 |
| intermediaries; | 16 |
| (3) a description of the matching contributions of each | 17 |
| intermediary; | 18 |
| (4) the numbers and amounts of microloans made by the | 19 |
| intermediaries to small business concern borrowers; | 20 |
| (5) the repayment history of each intermediary; | 21 |
| (6) a description of the loan portfolio of each | 22 |
| intermediary including the extent to which it provides | 23 |
| microloans to small business concerns in rural areas; and | 24 |
| (7) any recommendations for legislative changes that | 25 |
| would improve program operations. |
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| Section 65. Business Loan and Investment Fund. The Business | 2 |
| Loan and Investment Fund is created as a special fund in the | 3 |
| State treasury to accept appropriations, grants, gifts, and | 4 |
| other donations made to fund the Microloan Program created by | 5 |
| this Act. Moneys in the Fund may, subject to appropriation, be | 6 |
| used by the Department to carry out the requirements of this | 7 |
| Act. | 8 |
| Section 70. The State Finance Act is amended by adding | 9 |
| Section 5.755 as follows: | 10 |
| (30 ILCS 105/5.755 new) | 11 |
| Sec. 5.755. The Business Loan and Investment Fund.
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