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:

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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 64.20

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RHODE ISLAND SMALL BUSINESS MINORITY LENDING PROGRAM

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

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Island Small Business Minority Lending Program."

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

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

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Business Credit Initiative (SSBCI).

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

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

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

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

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

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

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

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women and minority owned small businesses.

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

 

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

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

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distribution based on minority population.

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

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

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

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

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

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business loan or for collateral support pursuant to this chapter;

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

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chapter 14.1 of title 37;

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

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

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

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

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

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

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

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

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     (1) Black and African American- 7.3%;

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     (2) Asian- 3.2%;

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     (3) Hispanic or Latino- 13.2%; and

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

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

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

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

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

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

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

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business owners.

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

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

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

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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

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

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house and senate finance committees.

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

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

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lending goals.

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

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

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

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

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

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

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

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

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

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commerce corporation shall implement the following strategies:

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

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

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allowed in the federal guidelines;

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

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percent (2%); and

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

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

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

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

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

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

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

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

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

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

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program, the commerce corporation shall implement the following strategies:

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

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     (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;

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

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($15,000) per minority business enterprise;

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

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

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behalf of the borrower;

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

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and

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

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

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

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

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

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

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

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

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

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

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whether said goals have been met.

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

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

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

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basis to the Rhode Island commerce corporation.

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

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

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

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

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     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

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

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

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

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

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

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minority small business enterprises.

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     This act would take effect upon passage.

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