2014 -- H 8007

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LC005295

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT - RHODE ISLAND SMALL

BUSINESS MINORITY LENDING PROGRAM

     Introduced By: Representatives Almeida, Williams, Valencia, Abney, and Hull

     Date Introduced: April 02, 2014

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

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

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

CHAPTER 64.20

RHODE ISLAND SMALL BUSINESS MINORITY LENDING PROGRAM

     42-64.20-1. Short title. -- This chapter shall be known as and may be cited as the "Rhode

Island Small Business Minority Lending Program."

     42-64.20-2. Findings of fact. -- The general assembly finds and declares as follows:

     (1) In 2010, the Small Business Jobs Act of 2010 (the Act) created the State Small

Business Credit Initiative (SSBCI).

     (2) The state of Rhode Island was awarded approximately thirteen million and one

hundred thousand dollars ($13,100,000) through the SSBCI Program from the Federal Small

Business Jobs Act of 2010 to help spur lending to small businesses.

     (3) To date, Rhode Island has opted to operate a state-run venture capital program.

     (4) The Small Business Jobs Act of 2010 provides that all programs must include a state

plan to use the federal contributions to the reserve fund to provide access to capital for small

businesses in low and moderate income, minority and other underserved communities including

women and minority owned small businesses.

     (5) The United States Treasury's SSBCI loan program enacted in 2010 bases financial

allocations on state population in relation to the percent of state unemployment.

     (6) The United States Treasury's allocation process supports establishing a state

distribution based on minority population.

     42-64.20-3. Definitions. -- As used in this chapter:

     (1) "CBO" means a community-based organization;

     (2) "Micro-business" means a business that has one employee-owner and proprietor, with

zero to four (0-4) other employees, and gross receipts of seventy thousand dollars ($70,000) or

less annually, averaged over the two (2) fiscal years preceding the application for a micro-

business loan or for collateral support pursuant to this chapter;

     (3) "Minority" and "minority business enterprise" have the same meanings as set forth in

chapter 14.1 of title 37;

     (4) "Minority business" shall include a minority business enterprise; and

     (5) "SSBCI" means the State Small Business Credit Initiative.

     42-64.20-4. Allocation of SSBCI funds to minority business enterprises owners. -- (a)

Of the three million four hundred sixty-six thousand nine hundred and three dollars ($3,476,903)

available from the SSBCI loan program in January of 2013, an initial distribution of twenty-three

and seventy-nine hundredths percent (23.79%) of the SSBCI balance remaining as of January 31,

2014 is hereby made to be allocated throughout 2014 according to the percentage of minorities in

Rhode Island as set forth in the 2012 US Census data as follows:

     (1) Black and African American- 7.3%;

     (2) Asian- 3.2%;

     (3) Hispanic or Latino- 13.2%; and

     (4) American Indian and Alaska Native- .09%.

     (b) As additional SSBCI funds are received in 2014, of twenty-three and seventy-nine

hundredths percent (23.79%) of such funds shall be allocated from federal funds intended for

loans to small business proportional to the representation of each federally designated minority

group in the Rhode Island population based on census data. These shall be construed as a

mandatory minimum lending distribution rates intended to ensure equity in lending, and shall not

be construed to impose a cap or ceiling on the amount which may be allocated to minority

business owners.

     42-64.20-5. Rhode Island small business lending reporting. -- On or before January

15, 2015, and annually thereafter, the commerce corporation, and its subsidiary, the Rhode Island

small business loan corporation, shall prepare a joint status report on lending to small minority

business enterprises. Said report shall include an evaluation of lending policies and outcomes, as

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well as suggestions as to how to increase lending to minority business enterprises. Said report

shall be provided to the governor, the speaker of the house, the president of the senate, and the

house and senate finance committees.

     42-64.20-6. Micro-business lending program established. -- (a) There is hereby

established a micro business lending program to support achievement of minority set aside

lending goals.

     (b) Among black business owners in Rhode Island, approximately three thousand two

hundred (3,200) or ninety-five percent (95%) of such businesses have no employees other than

the business owner, and thus can be classified as micro-businesses.

     (c) The micro business lending program shall support existing minority micro-business

owners with business loans of up to fifty thousand dollars ($50,000) and provide business

development support to help them expand and grow and to assist and support startups.

     (d) The micro-business lending program shall be administered by the commerce

corporation. Loans shall be administered through the Rhode Island small business loan fund

corporation with oversight from the commerce corporation. In administering the program, the

commerce corporation shall implement the following strategies:

     (1) Administering the micro-business lending program set forth in this chapter;

     (2) Implementing a waiver of the one-to-one (1:1) ratio based on the individual loan as

allowed in the federal guidelines;

     (3) Offer interest rates ranging from prime plus one percent (1%) to prime plus two

percent (2%); and

     (4) Provide loans to small and micro-businesses in amounts of up to fifty thousand dollars

($50,000), through the Rhode Island small business loan fund corporation.

     42-64.20-7. Collateral support program established. -- (a) There is hereby established

a collateral support program to support achievement of minority set aside lending goals.

     (b) Both black and Latino business owners have less wealth and liquidity and fewer

assets overall than white business owners, male or female. Their equipment and property may

have lost value during the recession and may no longer be considered as assets by banks.

     (c) The Rhode Island collateral support program shall be administered through the

commerce corporation. Actual credit shall be extended through the Rhode Island small business

loan fund corporation with oversight from the commerce corporation. In administering the

program, the commerce corporation shall implement the following strategies:

     (1) Only micro-businesses shall be eligible to participate in the program;

     (2) Micro-businesses shall be eligible for support in the form of up to thirty percent

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(30%) of new commercial credit;

     (3) Maximum participation in the program shall be capped at fifteen thousand dollars

($15,000) per minority business enterprise;

     (4) The collateral support program shall increase the collateral position of a borrower by

deposits of cash into accounts at participating lending institutions that shall serve as collateral on

behalf of the borrower;

     (5) Collateral balances shall be reduced in proportion to the commercial credit balance;

and

     (6) Lenders shall make periodic reports to the state small business lending corporation.

     42-64.20-8. Benchmarks to be met. -- (a) In the event that the Rhode Island small

business loan fund corporation does not meet the initial overall minority loan benchmarks and

achieve at least fifty percent (50%) of the initial targets within group bench marked lending goals

by December 31, 2014, as set forth in this chapter, the micro-business lending program and the

collateral support program shall be transferred to a Rhode Island community-based organization

(CBO) selected by a minority small business owners' committee appointed by the governor. This

CBO shall have experience working with minority business enterprises. Such transfer, if

necessary, shall be completed within three (3) months of the December 31, 2014 date. The

minority small business owners' committee shall review benchmarks to make the determination

whether said goals have been met.

     (b) In the event of such transfer pursuant to this section, administrative costs necessary to

administer the programs allowable under the SSBCI will be allocated to the CBO. Appropriate

fiduciary and administrative controls shall be required and the CBO will report on a quarterly

basis to the Rhode Island commerce corporation.

     42-64.20-9. Rules and regulations. -- The commerce corporation shall implement rules

and regulations to implement the provisions of this chapter. Such rules and regulations shall

include, but shall not be limited to, establishing application procedures and guidelines for issuing

loans and credit through the micro-business lending program and the collateral support program.

     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT - RHODE ISLAND SMALL

BUSINESS MINORITY LENDING PROGRAM

***

     This act would provide a mandatory percentage rate of twenty-three and seventy-nine

hundredths percent (23.79%) of federal funds from the State Small Business Credit Initiative

would be for small minority business enterprises. The act would also establish new loan and

credit programs through the Rhode Island commerce corporation and the Rhode Island small

business loan fund corporation which would be designed to facilitate and promote loans to

minority small business enterprises.

     This act would take effect upon passage.

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