2012 -- H 7354

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT -- SMALL BUSINESS CAPITAL

ACCESS PROGRAM

     Introduced By: Representatives Blazejewski, Silva, McLaughlin, Keable, and Phillips

     Date Introduced: February 02, 2012

     Referred To: House Small Business

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 42 of the General Laws entitled "STATE AFFAIRS AND

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GOVERNMENT" is hereby amended by adding thereto the following chapter:

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     CHAPTER 64.15

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SMALL BUSINESS CAPITAL ACCESS PROGRAM

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     42-64.15-1. Short title. – This chapter shall be known and may be cited as the “Small

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Business Capital Access Program.”

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     42-64.15-2. Definitions. – As used in this chapter, the following words and terms shall

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have the following meanings unless the context clearly indicates another or different meaning or

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intent:

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     (1) “Agency” means the Rhode Island economic development corporation;

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     (2) “Borrower” means any business that receives a loan, with respect to which a reserve

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is created in accordance with this section;

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     (3) “Business” means the carrying on of any business activity for profit, whether as a

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corporation, partnership, sole proprietorship or otherwise;

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     (4) “Financial institution” means any bank, trust company, savings bank, savings and

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loan association or cooperative bank, chartered by the state or any national banking association,

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federal savings and loan association or federal savings bank; provided, however, that the financial

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institution has its principal office located in this state;

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     (5) “Loan” means, without limitation, a sale and lease back, a financial lease, a

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conditional sale or any other arrangement that is in the nature of a loan;

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     (6) “Participating financial institution” means any financial institution participating in the

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program established by this section;

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     (7) “Program” means small business capital access program established by this section;

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     (8) “Small business” means a business entity, including its affiliate, that: (i) Is

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independently owned and operated; (ii) Has a principal place of business in this state; and (iii)

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Would be defined as a “small business” under applicable federal law, as established by the United

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States Code and promulgated from time to time by the United States Small Business

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Administration.

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     42-64.15-3. Loss reserve account. – (a) Each time a participating financial institution

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originates a loan to a small business borrower after the effective date of this chapter, said

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institution shall set aside an amount specified by the agency or its agent, which amount shall not

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be less than one and one-half percent (1.5%) nor more than three and one-half percent (3.5%) of

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the principal amount of the loan, into a loss reserve which said institution shall maintain

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applicable to all such loans by said institution to small business borrowers pursuant to the

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program.

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     (b) At the time of the making of such loan to a small business borrower, the participating

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financial institution shall obtain from said borrower an amount equal to the reserve contribution

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made by the participating financial institution with respect to such loan as provided in subsection

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(a) and shall set aside such amount into said loss reserve maintained by the participating financial

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institution applicable to all such loans by said participating financial institution to borrowers

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pursuant to the program. The participating financial institution may obtain such amount as

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payment from the borrower or may advance the amount to the borrower as part of the loan.

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     42-64.15-4. Certification. – After such loan to a small business borrower has been made,

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the participation financial institution shall certify to the agency or its agent, in such fashion and

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with such supporting information as the agency or its agent shall prescribe, that it has made such

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loan and has set aside its contribution and the equal contribution of the borrower into said loss

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reserve.

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     42-64.15-5. Matching loss reserve. – (a) The agency or its agent shall, after such

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certification as provided in section 42-64.15-4, transfer to the participating financial institution an

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amount equal to the contributions of the participating financial institution and the borrower or

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such additional amount up to one hundred fifty percent (150%) of such contributions as

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determined by the agency or its agent, and the participating financial institution shall set aside

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such amount received into said loss reserve.

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     (b) In the event the participating financial institution suffers a loss on any such loan, it

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may, in its discretion, draw upon the funds in such loss reserve to repay the loan in whole or in

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part.

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     42-64.15-6. Loss reserve account earnings or interest. – All amounts set aside by the

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participating financial institution into said loss reserve shall be deposited by it in an account at

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said institution. All earnings or interest on said loss reserve account shall be added to the

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principal of said loss reserve account and held as additional loss reserve; provided, however, that

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the agency or its agent may require at any time and from time to time that a portion or all of the

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accrued earnings or interest remaining in said loss reserve account be paid to the agency or its

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agent to be used to defray the costs of administering the program.

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     42-64.15-7. Business activities. -- Any loan made under this program shall be used

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predominantly for business activities within this state.

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     42-64.15-8. Passive real estate. – No loan or loans in an aggregate principal amount in

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excess of five hundred thousand dollars ($500,000) shall be provided to a borrower under the

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program and no small business borrower under the program shall be provided a loan under the

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program for passive real estate purposes.

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     42-64.15-9. Agreement. – Any financial institution desiring to become a participating

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financial institution shall execute an agreement in such form as the agency or in chapter 42-69.15

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prescribe, which agreement shall contain the terms and provisions set forth, and such other terms

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as the agency or its agent may deem necessary or appropriate.

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     SECTION 2. This act shall take effect upon passage.

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LC00009

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT -- SMALL BUSINESS CAPITAL

ACCESS PROGRAM

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     This act would establish a new program which would assist small Rhode Island

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businesses obtain loans.

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     This act would take effect upon passage.

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