New Jersey-2010-A4336-Introduced

An Act establishing a small business loan program within the New Jersey Economic Development Authority and supplementing Title 34 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. As used in this act:

"Authority" means the New Jersey Economic Development Authority established by section 4 of P.L.1974, c.80 (C.34:1B-4).

"Eligible small business" means a business entity that, at the time of application for participation in the small business loan program established pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill), (1) is independently owned and operated; (2) is organized for profit with a place of business located in this State; (3) operates primarily within this State; (4) employs less than 100 full-time employees; (5) is not dominant in its field; (6) has not raised $10,000,000 or more in total equity financing; and (7) has not received $10,000,000 or more in financing from any source.

2. a. The authority shall establish and administer a small business loan program for the purpose of providing small business loans to eligible small businesses.

b. Small business loans may be made to an eligible small business, provided that the total amount of all loans under the program to any such business shall not exceed $250,000. The loan funds may be applied to any aspect of the business that supports its capital purchases, employee training, and salaries for new positions as determined by the authority.

c. In order to receive a small business loan, a business, at the time of application, shall provide proof that it is an eligible small business and shall enter into a small business loan agreement with the authority, which agreement shall provide that the business commits to increasing its full-time employment level by the greater of one full-time employee or no less than 10 percent of its full-time employee employment level at the time of application within four calendar years after the date on which loan funds are disbursed to the business.

d. The authority shall review and may approve applications for the loan program.

e. A business seeking to participate in the small business loan program shall submit an application in such form as the authority shall require. Such application shall include such information as the authority shall determine is necessary in consideration of the provisions of P.L.2011, c.123 (52:14B-21.1 et seq.).

f. (1) Small business loans under this section shall be made pursuant to a small business loan agreement made pursuant to subsection c. of this section and shall bear interest at no more than two percent, and contain other terms and conditions considered appropriate by the authority that are consistent with the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill) and with rules and regulations promulgated by the authority to implement P.L. , c. .

(2) The authority may provide that a small business loan shall bear interest at a rate of less than two percent, at a rate to be established by the authority, if the business commits, under a small business loan agreement established pursuant to subsection c. of this section, to increasing its full-time employment level by more than 10 percent, or by more than one full-time employee if the business employs less than 10 employees at the time of application, within the period of time prescribed under subsection c. of this section, or by no less than 10 percent, or one full-time employee if the business employs less than 10 employees at the time of application, in a period of time that is less than the period of time prescribed under subsection c. of this section, or a combination thereof. The rate of interest established by the authority pursuant to this paragraph with respect to any small business loan shall correspond appropriately, as determined by the authority, to the percentage of employment increase or the period of time to increase employment, or a combination of both, as appropriate, to which the business commits.

g. (1) Unless subject to federal law, rule or regulation, each eligible business that receives a small business loan under P.L. , c. (C. ) (pending before the Legislature as this bill) shall undergo an audit, at its own expense, at least once every two years. The authority shall designate an auditor to conduct the audit.

(2) If an audit is performed under a requirement of federal law, rule or regulation, the authority shall waive the audit required in this subsection with respect to all issues addressed by the federally required audit report. However, the authority may require an audit of matters that are not, in the authority's judgment, addressed by the federally required report including, but not limited to, verification of compliance with requirements specific to the program, such as job-generation standards.

h. A participating eligible small business that is in default for nonperformance under rules and regulations established by the authority may be required to refund the outstanding balance of small business loan funds disbursed prior to the default declaration. At a minimum, rules and regulations established by the authority pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) shall provide that, notwithstanding the good faith efforts of a business to meet its obligations under a small business loan agreement made pursuant to this section that does not hire and retain for a reasonable time period, as determined by the authority, at least one full-time employee with the time period prescribed under a small business loan agreement shall be considered in default. A small business loan shall be secured by a first lien on the receivables of the business entity receiving the loan.

3. a. To implement the loan program, the authority shall establish and maintain a special revolving fund to be known as the "New Jersey Small Business Loan Fund," which shall be credited with:

(1) such moneys from the economic growth account of the "Economic Recovery Fund" established pursuant to section 3 of P.L.1992, c.16 (C.34:1B-7.12), as the authority determines are necessary to effectively implement the program based upon the response to the program;

(2) any moneys that shall be received by the authority from the repayment of the moneys in the loan fund used to provide small business loans pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) and interest thereon;

(3) any moneys as may be available to the authority from business assistance programs administered by the authority or by other State agencies or authorities;

(4) appropriations made by the Legislature to effectuate the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill);

(5) fees collected from applicants pursuant to subsection c. of this section; and

(6) other moneys made available including, but not limited to, funds provided by agreement with private investors, small business investment corporations, banks, and other lending institutions to effectuate the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. Moneys in the loan fund which are determined by the authority not to be needed for current responsibilities of the loan fund, may be invested by the authority in any direct obligations as to which the principal and interest thereof are guaranteed by the United States of America or any other obligation deemed appropriate by the authority. Income from the investment of moneys in the loan fund shall be credited to the loan fund.

c. The authority may charge fees in connection with applications for participation in the small business loan program as it deems reasonable.

4. The authority may appoint a director to manage the activities associated with the loan fund established pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill). The director shall receive compensation as determined by the authority.

5. The authority may adopt such rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) as may be necessary to effectuate the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill).

6. This act shall take effect immediately.

STATEMENT

This bill directs the New Jersey Economic Development Authority ("authority") to establish a small business loan program to provide low interest loans in amounts not exceeding $250,000 to eligible small businesses, which may use the loan funds to support capital their purchases, employee training, and salaries for new positions. "Eligible small business" is defined to mean a business entity that, at the time of application for participation in the small business loan program (1) is independently owned and operated; (2) is organized for profit with a place of business located in this State; (3) operates primarily within this State; (4) employs less than 100 full-time employees; (5) is not dominant in its field; (6) has not raised $10,000,000 or more in total equity financing; and (7) has not received $10,000,000 or more in financing from any source.

A participating business would enter into a small business loan agreement with the authority which agreement shall provide that the business commits to increasing full-time employment by no less than 10 percent of full-time employment level, or one full-time employee whichever is greater, at the time of application within four calendar years after the date loan funds are disbursed. The loans would bear interest at no more than two percent but may bear interest at a rate of less than two percent, as established by the authority if the business commits to increasing its full-time employment level by more than 10 percent, or more than one full-time employee for businesses employing less than 10 full-time employees at the time of application, or by no less than 10 percent, or one full-time employee, as appropriate, in less than four calendar years after the date on which the loan funds are disbursed to the business, or a combination thereof. The rate of interest would correspond appropriately to the percentage of full-time employment increase or the decrease in time to increase employment, or a combination of both, to which the business commits. A participating business that is in default for nonperformance may be required to refund the outstanding balance of small business loans disbursed prior to the default declaration. A small business loan is secured by a first lien on the receivables of the corporation receiving the loan.

To implement the loan program, the authority is directed to establish and maintain a special revolving fund to be known as the "New Jersey Small Business Loan Fund," which shall be credited with: (1) such moneys from the economic growth account of the "Economic Recovery Fund" established pursuant to section 3 of P.L.1992, c.16 (C.34:1B-7.12), which the authority determines are necessary to effectively implement the program, within the limits of funding available from the Economic Recovery Fund, based upon the response to the program; (2) any moneys that shall be received by the authority from the repayment of the moneys in the loan fund used to provide small business loans and interest thereon; (3) any moneys as may be available to the authority from business assistance programs administered by the authority or by other State agencies or authorities; (4) appropriations made by the Legislature; (5) fees collected from applicants and (6) other moneys made available including, but not limited to, funds provided by agreement with private investors, small business investment corporations, banks, and other lending institutions.