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ARIZONA STATE SENATE
Fifty-Fifth Legislature, First Regular Session
microbusiness loans; commerce authority
Purpose
Establishes the
Microbusiness Revolving Loan Fund Program (Program) to provide
low-interest loans to community development financial institutions (CDFIs) and
local
community-based lending organizations for funding microbusinesses that generate
economic growth and job creation in Arizona.
Background
The
Arizona Commerce Authority (ACA) promotes economic, community and workforce
development. The ACA's duties include the support of statewide business
expansion, retention, attraction, workforce development and job training and
online assistance for new business
start-ups and tax credit administration (A.R.S.
§ 41-1502).
The CDFI Fund within the U.S. Department of Treasury certifies CDFIs to promote economic development by providing financial products and services to people underserved by traditional financial institutions, particularly in low-income communities. The goal of the CDFI Fund is to promote community development in distressed urban and rural communities by increasing the availability of credit, investment capital and financial services available. CDFIs include community development banks, credit unions and non-regulated institutions such as nonprofit loan funds or venture capital funds (CDFIs in Arizona).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Establishes the Program.
2. Establishes the Microbusiness Revolving Loan Fund (Fund) to consist of legislative appropriations and requires the ACA to administer the Fund.
3. Allows the ACA to use Fund monies to provide low-interest loans to CDFIs for funding microbusinesses that generate economic growth and job creation in Arizona but are unable to obtain adequate credit or terms for credit.
4. Allows the ACA to provide low-interest loans to the following local community-based lending organizations if the use of CDFIs is not practicable:
a) small business lending consortia;
b) certified development companies;
c) U.S. Department of Agriculture business and industrial guaranteed loan providers;
d) U.S. Small Business Administration loan providers;
e) credit unions; and
f) community banks.
5. Requires the ACA to:
a) identify eligible lending organizations through one or more competitive statewide or local solicitations; and
b) establish a microloan with a principal amount less than $25,000 and a regular loan with a principal amount of at least $25,000.
6. Requires, for Program eligibility, a lending organization to:
a) establish sufficient expertise to analyze microbusiness applications for Program loans;
b) evaluate the creditworthiness of microbusinesses; and
c) regularly monitor the eligibility of Program loans.
7. Requires a lending organization to review every Program loan application to determine:
a) the feasibility of the proposed use of the financing request by the microbusiness applicant;
b) the likelihood of repayment; and
c) the potential of the loan generating economic development and jobs in Arizona.
8. Requires Program loans to microbusinesses to target and market to minority-owned and women-owned enterprises and other microbusinesses having difficulty accessing traditional credit markets.
9. Requires Program loans to microbusinesses to be used to create and retain jobs, as defined by the ACA, including:
a) working capital;
b) acquiring or improving real property, or both;
c) acquiring machinery and equipment, property or improvements; and
d) refinancing debt obligations.
10. Requires a lending organization to certify to the ACA that the loan and lending organization comply with statutory requirements, Program rules and all agreements between the ACA and the lending organization.
11. Limits, to a maximum of 25 percent of the principal amount, Fund monies used by a lending organization to fund a Program applicant loan, unless the ACA sets a higher cap by rule.
12. Allows a lending organization to charge application, commitment and loan guarantee fees according to a schedule of fees the lending organization adopts and the ACA approves.
13. Prohibits a lending organization from charging an application fee for a Program loan that is $5,000 or less.
14. Requires the ACA to:
a) by January 1, 2021, study the factors related to increasing the number of microfinance lenders in Arizona; and
b) by July 1, 2021, submit a report of its findings and recommendations to the Governor, the President of the Senate and the Speaker of the House of Representatives and provide a copy of the report to the Secretary of State.
15. Defines microbusiness as a business that is resident in Arizona, independently owned and operated and employs five or fewer people.
16. Terminates the Program on July 1, 2030.
17. Becomes effective on the general effective date.
Prepared by Senate Research
February 8, 2021
LB/MC/kja