Bill Text: MI HB4020 | 2011-2012 | 96th Legislature | Introduced
Bill Title: Economic development; other; small business loan guarantee program; create. Amends sec. 88d of 1984 PA 270 (MCL 125.2088d).
Spectrum: Partisan Bill (Republican 8-0)
Status: (Introduced - Dead) 2011-01-18 - Printed Bill Filed 01/14/2011 [HB4020 Detail]
Download: Michigan-2011-HB4020-Introduced.html
HOUSE BILL No. 4020
January 13, 2011, Introduced by Reps. Ouimet, Kowall, Crawford, Walsh, MacMaster, Callton, Zorn and Potvin and referred to the Committee on Banking and Financial Services.
A bill to amend 1984 PA 270, entitled
"Michigan strategic fund act,"
by amending section 88d (MCL 125.2088d), as amended by 2008 PA 571.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 88d. (1) The fund shall create and operate a loan
enhancement program.
(2) As a separate and distinct part of the loan enhancement
program, the fund may create a loan guarantee program that does all
of the following:
(a) Provide a loan guarantee mechanism to financial
institutions located in this state that provide commercial loans to
qualified businesses, public authorities, and local units of
government.
(b) Ensures that participating financial institutions do not
refinance prior debt.
(c) Provide that a qualified business is only eligible for a
loan guarantee under this section if it has a documented growth
opportunity. As used in this subdivision, "documented growth
opportunity" means a plant expansion, capital equipment investment,
acquisition of intellectual property or technology, or the hiring
of new employees to meet or satisfy a new business opportunity.
(d) Provide that a qualified business that engages primarily
in retail sales is not eligible for a loan guarantee under this
chapter unless the fund board makes a specific finding that the
loan guarantee supports a new concept that has significant growth
potential.
(e) Provide repayment provisions for a loan or a guarantee
given to a qualified business that leaves Michigan within 3 years
of the provision of the loan or guarantee or otherwise breaches the
terms of an agreement with the fund.
(3) As a separate and distinct part of the loan enhancement
program, the fund shall reestablish the small business capital
access program that was previously operated by the fund for small
businesses in a manner similar to how that program was operated
before January 1, 2002. The small business capital access program
shall operate on a market-driven basis and provide for premium
payments by borrowers into a special reserve fund. The small
business capital access program established by the board shall
prohibit an officer, director, principal shareholder of a
participating financial institution, or his or her immediate family
members from receiving a small business capital access program loan
from the financial institution. A loan under the small business
capital access program may be issued to an eligible production
company or film and digital media private equity fund even if the
eligible production company or film and digital media private
equity fund is not a small business. A loan under the small
business capital access program shall provide that the proceeds of
a loan may only be used for a business purpose within this state
and may not be used for any of the following:
(a) The construction or purchase of residential housing.
(b) To finance passive real estate ownership.
(c) To refinance prior debt from the participating financial
institution that is not part of the small business capital access
program.
(4) As a separate and distinct part of the loan enhancement
program, the fund shall establish a Michigan film and digital media
investment loan program to invest in loans from the investment fund
to eligible production companies or film and digital media private
equity funds. The fund board shall make investments under this
subsection only upon approval of the chief compliance officer and
the Michigan film office after a review by the investment advisory
committee. If an investment is made under this section, not more
than $15,000,000.00 may be loaned to any 1 eligible production
company or film and digital media private equity fund for any 1
qualified production. The fund board may make an investment in a
qualified production if all of the following are satisfied:
(a) The production is filmed wholly or substantially in this
state.
(b) The eligible production company or the film and digital
media private equity fund has shown to the satisfaction of the
Michigan film office that a distribution contract or plan is in
place with a reputable distribution company.
(c) The eligible production company or film and digital media
private equity fund agrees that, while filming in this state, a
majority of the below the line crew for the qualified production
will be residents of this state.
(d) The eligible production company or film and digital media
private equity fund posts a completion bond approved by the
Michigan film office and has obtained no less than 1/3 of the
estimated total production costs from other sources as approved by
the chief compliance officer and the Michigan film office or has
obtained a full, unconditional, and irrevocable guarantee of the
repayment of the amount invested by the fund in favor of the
investment fund that satisfies 1 or more of the following:
(i) The guarantee is from an entity that has a credit rating of
not less than BAA or BBB from a national rating agency.
(ii) The guarantee is from a substantial subsidiary of an
entity that has a credit rating of not less than BAA or BBB from a
national rating agency.
(iii) The eligible production company or the film and digital
media private equity fund provides a full, unconditional letter of
credit from a bank with a credit rating of not less than A from a
national rating agency.
(iv) The guarantee is from a substantial and solvent entity as
determined by the investment advisory committee.
(e) The fund board may make a loan under this subsection at a
market rate of interest for a qualified production of up to 80% of
expected and estimated tax credits available to the eligible
production company or film and digital media private equity fund
under sections 455 to 459 of the Michigan business tax act, 2007 PA
36, MCL 208.1455 to 208.1459, if the eligible production company or
the film and digital media private equity fund agrees to name the
fund as its agent for the purpose of filing for the tax credits
should the eligible production company not apply for the tax
credits. The Michigan film office and the state treasurer shall
determine the estimated amount of tax credits for purposes of this
subsection. The fund board shall approve guidelines for the
initiation of a loan and the terms of the loan under this
subsection.
(f) A loan under this subsection may be converted to an equity
investment by the fund board with the approval of the chief
compliance officer and the Michigan film office.
(g) An eligible production company or film and digital media
production company that receives a loan under this subsection is
not also eligible for a loan for the same qualified production
under subsection (5).
(h) Fifty percent of any earnings on a loan or investment
under this subsection shall be deposited in the investment fund and
the remainder of the earnings shall be deposited in the Michigan
film promotion fund created under chapter 2A. One hundred percent
of principal repaid under this subsection shall be deposited in the
investment fund upon repayment.
(5) As a separate and distinct part of the loan enhancement
program, the fund shall establish and operate the choose Michigan
film and digital media loan fund to invest in loans from the
investment fund to eligible production companies or film and
digital media private equity funds eligible for a tax credit under
the Michigan economic growth authority act, 1995 PA 24, MCL 207.801
to 207.810, or sections 455 to 459 of the Michigan business tax
act, 2007 PA 36, MCL 208.1455 to 208.1459. The fund board shall
make investments under this subsection only upon approval of the
chief compliance officer and the Michigan film office. A loan
issued under this subsection is subject to all of the following
requirements:
(a) A loan shall be provided at an interest rate of not less
than 1%.
(b) The minimum amount of a loan under this subsection is
$500,000.00.
(c) The maximum term of a loan under this subsection is 10
years, including up to 3 years of deferred principal payments to
align principal payments with receipt of primary incentives, as
determined by the fund board.
(d) The value of the loan may not exceed the value of the
primary incentive that the eligible production company or film and
digital media private equity fund is eligible to receive over 7
years, as discounted by the fund board. A loan authorized by the
fund board may provide for a loan amount equal to a portion or all
of the discounted value of the primary incentives, as discounted by
the fund board.
(e) The eligible production company or film and digital media
private equity fund is responsible for repayment of the loan
regardless of actual primary incentive amounts received.
(f) The eligible production company or film and digital media
private equity fund is responsible for loan preparation and closing
costs.
(g) An eligible production company or film and digital media
private equity fund that receives a loan under this subsection is
not also eligible for a loan for the same qualified production
under subsection (4).
(h) The eligible production company or film and digital media
private equity fund also obtains an additional loan from an
accredited financial institution or other approved lending market.
(i) The loan shall be issued consistent with guidelines for
the initiation of a loan and the terms of the loan under this
subsection approved by the fund board.
(j) Fifty percent of any earnings on a loan under this
subsection shall be deposited in the investment fund and the
remainder of the earnings shall be deposited in the Michigan film
promotion fund created under chapter 2A. One hundred percent of
principal repaid under this subsection shall be deposited in the
investment fund upon repayment.
(6) As a separate and distinct part of the loan enhancement
program, the fund shall operate the choose Michigan fund program to
invest in loans from the investment fund to a qualified business.
The choose Michigan fund program shall operate on an incentive
basis and shall provide loans to qualified businesses to promote
and enhance significant job creation or retention within this
state. The choose Michigan fund shall not make a loan under this
subsection after September 30, 2009. Notwithstanding any
requirement imposed by the fund before April 1, 2008, to receive a
loan under this subsection, the fund board may or may not require a
qualified business to obtain an additional loan from an accredited
financial institution or other approved lending market to obtain a
loan under this subsection. At the discretion of the fund board,
not more than 3 loans provided through the choose Michigan fund may
be forgivable. A loan issued under this subsection is subject to
all of the following requirements:
(a) A loan shall be provided at an interest rate of not less
than 1%.
(b) The minimum amount of a loan under this subsection is
$500,000.00.
(c) The maximum term of a loan under this subsection is 10
years, including up to 3 years of deferred principal payments to
align principal payments with receipt of any primary incentives, as
determined by the fund board.
(d) Except as provided in subdivision (g), the qualified
business is responsible for repayment of the loan regardless of any
primary incentives received.
(e) The qualified business is responsible for loan preparation
and closing costs.
(f) The loan shall be issued consistent with guidelines for
the initiation of a loan and the terms of the loan under this
subsection approved by the fund board.
(g) A loan under this subsection may be converted to an equity
investment by the fund board.
(h) The loan shall be subject to repayment provisions. If the
loan is with a qualified business that closes down or relocates
outside of Michigan anytime within 3 years after the term of the
loan, then the provisions of the loan shall also include, at a
minimum, immediate repayment of any outstanding principal, payment
of a default interest rate, and repayment of any amounts forgiven.
(i) In determining whether to forgive all or a portion of a
loan to a qualified business, the fund shall consider the net
economic impact of the project on the state's economy. The loan
agreement between the fund and the qualified business shall clearly
enumerate the terms, conditions and requirements under which all or
a portion of the loan may be forgiven, including, but not limited
to, job creation and investment in this state.
(7) As a separate and distinct part of the loan enhancement
program, the fund shall establish and operate the small business
loan guarantee program that does all of the following:
(a) Provides a loan guarantee mechanism of 80% of the loss to
financial institutions located in this state that provide
commercial loans to small businesses located in this state.
(b) Ensures that participating financial institutions do not
finance prior debt that is not part of the small business loan
guarantee program.
(c) Provides that the small businesses eligible for the small
business loan guarantee program do not have more than 250 employees
or more than $6,000,000.00 in gross annual sales.
(d) Provides loans in the amount of $750,000.00 or less and
that the loans cannot be made for the benefit of residential
property or for passive real estate investments.
(e) Provides that loans cannot be made to nonprofit
institutions.
(f) Provides that financial institutions participating in the
small business loan guarantee program will charge the applicant
small business a separate fee of 2% of the loan amount and shall
forward that separate fee to the fund to be used only by the fund
board for the operation of the small business loan guarantee
program described in this subsection.
(g) Provides that the financial institution participating in
the small business loan guarantee program may charge an
administrative fee and interest rate as determined by the financial
institution.
(8) (7)
As used in this section:
(a) "Below the line crew" means that term as defined under
section 459 of the Michigan business tax act, 2007 PA 36, MCL
208.1459.
(b) "Eligible production company" means that term as defined
under section 455 of the Michigan business tax act, 2007 PA 36, MCL
208.1455.
(c) "Film and digital media private equity fund" means any
limited partnership, limited liability company, or corporation
organized and operating in the United States that satisfies all of
the following:
(i) Has as its primary business activity the investment of
funds in return for equity in qualified productions.
(ii) Holds out the prospect for capital appreciation from the
investments.
(iii) Accepts investments only from accredited investors as that
term is defined in section 2 of the federal securities act of 1963
and rules promulgated under that act.
(d) "Investment advisory committee" means the committee
created within the department under section 91 of the executive
organization act of 1965, 1965 PA 380, MCL 16.191.
(e) "Michigan film office" means the office created under
chapter 2A.
(f) "Primary incentive" means a tax credit an eligible
production company is eligible to receive under the Michigan
economic growth authority act, 1995 PA 24, MCL 207.801 to 207.810,
or under sections 455 to 459 of the Michigan business tax act, 2007
PA 36, MCL 208.1455 to 208.1459.
(g) "Qualified production" means that term as defined under
section 455 of the Michigan business tax act, 2007 PA 36, MCL
208.1455.
