Bill Text: IN HB1438 | 2013 | Regular Session | Introduced
Bill Title: Small business loans.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2013-01-22 - First reading: referred to Committee on Commerce, Small Business and Economic Development [HB1438 Detail]
Download: Indiana-2013-HB1438-Introduced.html
Citations Affected: IC 4-4-34.
Synopsis: Small business loans. Establishes the small business loan
program administered by the Indiana finance authority (IFA).
Establishes the small business loan fund. Authorizes the IFA to transfer
money in the fund to financial institutions for deposit at reduced
interest rates. Requires the financial institution to loan the money to
approved small businesses. Provides that the interest rate charged to
the small business may not exceed the rate payable to the IFA plus 3%.
Provides that the maximum amount that may be deposited for a
particular small business loan is $25,000. Provides that at least 50% of
the deposits received by a financial institution for a small business loan
may not exceed $10,000. Requires an annual report from the entity
responsible for carrying out the duties of the Indiana economic
development corporation concerning small business development.
Effective: July 1, 2013.
January 22, 2013, read first time and referred to Committee on Commerce, Small Business
and Economic Development.
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A BILL FOR AN ACT to amend the Indiana Code concerning state
offices and administration.
Chapter 34. Small Business Loan Program
Sec. 1. As used in this chapter, "authority" refers to the Indiana finance authority created by IC 4-4-11-4.
Sec. 2. As used in this chapter, "financial institution" means any bank, trust company, corporate fiduciary, savings association, credit union, savings bank, bank of discount and deposit, or industrial loan and investment company that is:
(1) organized or reorganized under the laws of this state; or
(2) organized or reorganized under the laws of the United States and has its headquarters in Indiana.
The term includes a consumer finance institution licensed to make supervised or regulated loans under IC 24-4.5.
Sec. 3. As used in this chapter, "fund" refers to the small business loan fund established by section 6 of this chapter.
Sec. 4. As used in this chapter, "participating financial institution" means a financial institution approved by the authority to participate in the small business loan program established by this chapter.
Sec. 5. As used in this chapter, "small business" means any person, firm, corporation, limited liability company, partnership, or association that:
(1) is actively engaged in business in Indiana and maintains its principal place of business in Indiana;
(2) is independently owned and operated;
(3) employs not more than fifty (50) full-time employees; and
(4) has gross annual receipts of not more than five million dollars ($5,000,000).
Sec. 6. (a) There is established the small business loan fund. The fund shall be administered by the authority under the direction of the authority's board. Money in the fund must be used for the purposes of this chapter.
(b) The fund consists of the following resources:
(1) Appropriations from the general assembly.
(2) Gifts, grants, and donations of any tangible or intangible property from public or private sources.
(3) Investment income earned on the fund's assets.
(4) Repayments of loans from the fund.
(c) The treasurer of state shall invest the money in the fund not currently needed to meet the obligations of the fund in the same manner as other public funds may be invested.
(d) The money remaining in the fund at the end of a fiscal year does not revert to the state general fund.
(e) Interest earned on the fund may be used by the authority to pay expenses incurred in the administration of the fund.
Sec. 7. A financial institution that wishes to participate in the small business loan program established by this chapter shall apply to the authority for the authority's approval. A financial institution may not participate in the program until the financial institution's application is approved. The authority shall publish and maintain a list of participating financial institutions on the authority's Internet web site.
Sec. 8. (a) A small business that wishes to obtain a loan under this chapter must submit an application to a participating financial institution on a form prescribed by the authority. The application must describe the reasons for which the small business will use a loan received under this chapter.
(b) A small business may not receive a loan under this chapter unless the participating financial institution to which the small business submitted the application required by subsection (a):
(1) approves the application submitted by the small business; and
(2) applies for and receives a deposit of money transferred from the fund that must be used to provide the loan.
(c) A participating financial institution must approve an application submitted under subsection (a) or inform the applicant that the application has been rejected by the participating financial institution not more than fifteen (15) days after the date the application is submitted.
(d) In determining whether to approve an application submitted under subsection (a), the participating financial institution shall:
(1) determine that the applicant is likely to repay the proposed loan, based on the creditworthiness of the applicant and any insurers or guarantors;
(2) require an applicant to have been profitable in at least two (2) of the previous three (3) years the applicant has operated, if the small business has been in existence for three (3) or more years; and
(3) evaluate the application using guidelines and criteria developed by the entity responsible for carrying out the duties of the Indiana economic development corporation under IC 5-28-17 concerning small business development, to the extent those guidelines and criteria do not conflict with the requirements of this chapter.
Sec. 9. A participating financial institution that approves an application submitted under section 8 of this chapter for a small business loan shall apply to receive a deposit under this chapter by submitting to the authority:
(1) a copy of the approved application; and
(2) any additional information required by the authority on a form prescribed by the authority.
Sec. 10. The authority shall establish a program review committee to review each application received from a participating financial institution under section 9 of this chapter. The committee must consider whether the proposed small business loan is economically sound and will benefit the people of Indiana by strengthening the economy of Indiana before making a recommendation to the authority concerning the small business loan for which the participating financial institution has applied
for a deposit.
Sec. 11. Upon the recommendation of the program review
committee approving a small business loan, the authority may
transfer money from the fund to the participating financial
institution for deposit. Interest payable to the authority on money
deposited in the financial institution under this section may not
exceed the greater of:
(1) zero percent (0%); or
(2) the difference between:
(A) the interest rate for fifty-two (52) week United States
Treasury bills, as in effect on the day of the deposit; minus
(B) one and five-tenths percent (1.5%).
Sec. 12. (a) A participating financial institution that receives
money for deposit under section 11 of this chapter must use the
money to provide a low interest loan to the owner of the small
business, and the owner of the small business must use the loan
only for purposes allowed by section 13 of this chapter. A
participating financial institution that makes a loan under this
chapter may not charge an interest rate to the owner of the small
business that exceeds:
(1) the interest rate payable to the authority under section 11
of this chapter; plus
(2) three percent (3%).
(b) A participating financial institution and the owner of a small
business that receives a loan under this chapter shall enter a loan
agreement that must include the following:
(1) A requirement that the loan proceeds be used for specified
purposes consistent with the requirements of this chapter.
(2) The term of the loan, which may not exceed five (5) years.
(3) A provision specifying that interest does not begin to
accrue on the principal amount of the loan until the date
occurring six (6) months after the date the agreement is
entered into.
(4) The repayment schedule, the first payment of which is not
due until the date occurring six (6) months after the date the
agreement is entered into.
(5) The interest rate of the loan.
(6) Any other terms and provisions that the authority or
financial institution requires.
(c) A loan agreement under this section may also contain:
(1) a requirement that the loan be insured directly or
indirectly by a loan insurer or be guaranteed by a loan
guarantor; and
(2) a requirement of any other type of security or collateral
that the authority or financial institution considers reasonable
or necessary.
Sec. 13. The owner of a small business may use the proceeds of
a loan received under this chapter for one (1) or more of the
following purposes:
(1) To purchase real property.
(2) To construct, renovate, or expand a building.
(3) To purchase equipment, furniture, fixtures, or inventory.
(4) Working capital purposes, including debt reduction.
Sec. 14. (a) The maximum amount of a deposit made under
section 11 of this chapter for a particular small business loan is
twenty-five thousand dollars ($25,000).
(b) In addition to the limit specified in subsection (a), at least
fifty percent (50%) of the deposits made to a participating
financial institution under section 11 of this chapter for all small
business loans that the participating financial institution makes
under this chapter may not exceed ten thousand dollars ($10,000).
Sec. 15. (a) The authority shall, following the close of each state
fiscal year, submit an annual report of its activities under this
chapter for the preceding state fiscal year to the governor, the
budget committee, and the general assembly. A report submitted
to the general assembly must be in an electronic format under
IC 5-14-6. The governor shall forward a copy of the report to the
entity responsible for carrying out the duties of the Indiana
economic development corporation under IC 5-28-17 concerning
small business development.
(b) Beginning November 1, 2014, and before November 1 of
each succeeding year, the entity responsible for carrying out the
duties of the Indiana economic development corporation under
IC 5-28-17 concerning small business development shall:
(1) review the report submitted under subsection (a);
(2) evaluate the effectiveness of the small business loan
program; and
(3) submit its findings to the governor, the budget committee,
the authority, and the general assembly.
A report submitted to the general assembly must be in an
electronic format under IC 5-14-6.
Sec. 16. (a) An obligation of the authority for losses on loans
resulting from death, default, bankruptcy, or total or permanent
disability of borrowers is not a debt of the state but is payable
solely from the fund.
(b) The making of loans from money transferred from the fund
under this chapter does not constitute the lending of credit by the
state for purposes of any other statute or the Constitution of the
State of Indiana.
