PRINTER'S NO. 532
No. 508 Session of 1989
INTRODUCED BY STAPLETON, O'PAKE, AFFLERBACH, REGOLI, ROSS,
BODACK, MUSTO, STOUT, STEWART AND PORTERFIELD,
FEBRUARY 10, 1989
REFERRED TO COMMUNITY AND ECONOMIC DEVELOPMENT,
FEBRUARY 10, 1989
AN ACT
1 Amending the act of July 2, 1984 (P.L.545, No.109), entitled "An
2 act establishing a loan program for capital development
3 projects; providing for the use of funds made available under
4 the Appalachian Regional Development Act of 1965 and the
5 Public Works and Economic Development Act of 1965; providing
6 for loans, loan guarantees and other programs for capital
7 development projects of small businesses; creating the
8 Capital Loan Fund; providing standards for and requirements
9 of the program; and making appropriations," further providing
10 for loans to agricultural processors.
11 The General Assembly of the Commonwealth of Pennsylvania
12 hereby enacts as follows:
13 Section 1. The definition of "Class III loans" in section 2
14 of the act of July 2, 1984 (P.L.545, No.109), known as the
15 Capital Loan Fund Act, amended July 9, 1986 (P.L.1226, No.111),
16 is amended and the section is amended by adding definitions to
17 read:
18 Section 2. Definitions.
19 The following words and phrases when used in this act shall
20 have the meanings given to them in this section unless the
21 context clearly indicates otherwise:
1 "Agricultural processor." A person or entity that adds value
2 by subjecting one or more farm commodities to a process of
3 manufacture, development or preparation for sale; a person or
4 entity that converts a farm product into a marketable form,
5 including, but not limited to, livestock by slaughtering, fruits
6 and vegetables by canning and freezing, and hardwood by
7 secondary processing.
8 * * *
9 "Class III loans." All loans made under the provisions of
10 this act other than Class I, Class II, Class IV, apparel
11 industry loans or export assistance loans.
12 "Class IV loans." Loans made to agricultural processors from
13 the Capital Loan Fund under the provisions of this act.
14 * * *
15 "Farm commodity." Any Pennsylvania grown agricultural,
16 horticultural, aquacultural, vegetable, fruit and floricultural
17 product of the soil, livestock and meats, wools, hides, furs,
18 poultry, eggs, dairy products, nuts, mushrooms, honey products
19 and hardwoods.
20 * * *
21 Section 2. Sections 4 and 5 of the act are amended by adding
22 subsections to read:
23 Section 4. Eligibility for loans; terms and conditions.
24 * * *
25 (f) Class IV loans.--
26 (1) The secretary shall make advances from the Capital
27 Loan Fund subject to the terms, conditions and restrictions
28 provided under this act to area loan organizations for the
29 purpose of making loans to agricultural processors for
30 capital development projects which demonstrate a need to
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1 either maintain or increase market position and produce new
2 employment opportunities. Class IV loans will:
3 (i) Be for agricultural processors with 50 or fewer
4 employees.
5 (ii) Have a maximum loan ceiling of $100,000 or 50%
6 of the cost of the project whichever is less. The
7 department may blend loan funds from other Capital Loan
8 Fund classes in amounts not to exceed $200,000 if the
9 applicant can meet the required eligibility criteria for
10 those classes.
11 (iii) Be limited to physical plant equipment,
12 machinery, buildings and associated lands.
13 (iv) Require a private source of matching funds.
14 (2) No loans shall be made which do any of the
15 following:
16 (i) Cause, aid or assist in, directly or indirectly,
17 the relocation of any business operations from one part
18 of the Commonwealth to another, unless there is at least
19 a 25% increase in employment.
20 (ii) Supplant funding that is otherwise available
21 expeditiously from private sector sources on commercially
22 reasonable terms.
23 (iii) Be for the purpose of refinancing any portion
24 of the total project cost or other existing loans or
25 debt.
26 (iv) Be for the purpose of financing projects
27 located outside the geographic boundaries of this
28 Commonwealth.
29 (v) Be for the purpose of paying off a creditor
30 which is inadequately secured and is in a position to
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1 sustain a loss.
2 (vi) Provide funds, directly or indirectly, for
3 payment, distribution, or as a loan to owners, partners
4 or shareholders of the small enterprise, except as
5 ordinary compensation for services rendered.
6 (vii) Be for the purpose of repaying a debt owed to
7 a small business investment company.
8 (viii) Provide funds for speculation in any kind of
9 property, real or personal, tangible or intangible.
10 (3) All loans shall be secured by lien positions on
11 collateral at the highest level of priority which can
12 accommodate the borrower's ability to raise sufficient debt
13 and equity capital and be made for such period and shall bear
14 such interest as may be determined by the area loan
15 organization with the approval of the secretary. Provided,
16 however, That:
17 (i) The interest rate shall be established by the
18 secretary.
19 (ii) The term of any loan shall not exceed five
20 years for machinery and equipment or ten years for
21 building loans.
22 Section 5. Application and administration.
23 * * *
24 (e) Class IV loans.--
25 (1) The secretary shall designate an area loan
26 organization to receive loan applications from agricultural
27 processors. Applications shall be made to the area loan
28 organization in the form and manner as the secretary and
29 organization may require.
30 (2) Upon receipt of the application the area loan
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1 organization shall investigate and review the application and
2 either approve or disapprove the loan application by proper
3 action of the governing body of the organization. The
4 decision action of the organization shall be based, in whole
5 or in part, upon the following criteria:
6 (i) Ability of the applicant to meet and satisfy all
7 debt service as it becomes due and payable.
8 (ii) Sufficiency of available collateral, including
9 satisfactory lien positions on real and personal
10 property.
11 (iii) Eligibility of the applicant as an
12 agricultural processor.
13 (iv) Capital need of the applicant.
14 (v) Conformity or nonconformity of the project, in
15 all respects, to the provisions of this act.
16 (vi) Such information and documentation as the
17 secretary shall require.
18 (vii) Relevant criminal and credit history and
19 ratings of applicant as determined from outside credit
20 reporting services and other sources.
21 (viii) Number of net new employment opportunities
22 created by the proposed project.
23 (3) Area loan organizations may establish and charge
24 reasonable fees for processing loans or guarantees under this
25 act with the approval of the secretary. Area loan
26 organizations may not receive administrative expenses from
27 funds provided for Class IV loans.
28 (4) Upon approval of the loan application, the area loan
29 organization shall forward the application and all supporting
30 documentation to the Secretary of Agriculture and the
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1 Secretary of Commerce for review. Each application and
2 supporting documentation shall be reviewed to ensure the
3 following:
4 (i) Loans will assist small agricultural processing
5 firms to increase their market share and enhance their
6 competitive advantage.
7 (ii) Loans will enable the Commonwealth to meet
8 changing agricultural market demands and increased
9 productivity requirements in the future.
10 (iii) Eligibility of the agricultural processor and
11 the project for which proceeds will be used.
12 (iv) Creation or preservation of a satisfactory
13 number of net employment opportunities within this
14 Commonwealth.
15 (v) Compliance with the loan amount limitations
16 provided by this act.
17 (vi) Payment to date of all tax obligations due and
18 owing to the Commonwealth or any political subdivision
19 thereof.
20 (vii) Conformity of all aspects of the loan
21 transaction with the substantive and procedural
22 provisions of this act and regulations promulgated
23 hereunder.
24 (5) The secretary shall, to the extent practicable,
25 notify the area loan organization and the applicant
26 agricultural processor of his or her final approval or
27 disapproval of the loan application within 30 business days
28 after the receipt of the application. In the case of approval
29 of a loan application, the secretary shall arrange to draw
30 the loan amount from the Capital Loan Fund and advance the
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1 sum to the area loan organization. The advance shall be a
2 debt obligation of the organization to the Commonwealth and
3 shall be evidenced by a note or bond issued by the
4 organization in an amount equal to the amount actually
5 advanced and secured in a manner as the secretary shall
6 require. Upon receipt of the advance, the area loan
7 organization shall make the advance available to the
8 agricultural processor in the form of a loan transaction,
9 which loan shall be evidenced by a note executed by the
10 agricultural processor, secured in a manner as the
11 organization and the secretary shall require and conform in
12 all respects to the loan package as approved by the
13 organization and the secretary.
14 (6) All loans shall be administered and monitored by the
15 appropriate area loan organization in accordance with
16 policies and procedures prescribed by the secretary. Each
17 area loan organization shall submit reports to the Department
18 of Agriculture and the Department of Commerce as the
19 secretary shall require, but in no case less than twice a
20 year. The report shall show the following:
21 (i) Each outstanding loan.
22 (ii) The date approved.
23 (iii) The original principal amount.
24 (iv) The current principal balance.
25 (v) The interest rate.
26 (vi) The purpose for which the loan was made.
27 (vii) An enumeration of any problems or issues which
28 have arisen with regard to each loan.
29 (viii) A statement regarding the progress of the
30 agricultural processor in creating its requisite number
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1 of new long-term employment opportunities.
2 (ix) Such other information and documentation as the
3 secretary shall require.
4 (f) Finality of decision.--All decisions of the Secretary of
5 Commerce regarding the approval or disapproval of loans under
6 this act, including eligibility of agricultural processors and
7 loan projects, shall be final.
8 Section 3. This act shall take effect in 60 days.
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