PRINTER'S NO. 121
No. 110 Session of 1989
INTRODUCED BY MORRIS, RUDY, MAINE, BRANDT, D. F. CLARK, JOHNSON,
LEH, SEMMEL, STEIGHNER, D. R. WRIGHT, HERMAN, REBER, WASS,
BUSH, S. H. SMITH, TRELLO, ANGSTADT, SERAFINI, CAPPABIANCA,
VROON, CARLSON, FEE, ARGALL, BILLOW, BOWLEY, BROUJOS,
COLAIZZO, COY, HALUSKA, LaGROTTA, LLOYD, MELIO, SCRIMENTI,
TRICH, HERSHEY, ALLEN, BARLEY, CHADWICK, GODSHALL, DORR,
DALEY, BORTNER, McCALL, E. Z. TAYLOR, LINTON, EVANS, STAIRS,
J. L. WRIGHT AND COLE, JANUARY 25, 1989
REFERRED TO COMMITTEE ON AGRICULTURE AND RURAL AFFAIRS,
JANUARY 25, 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.
1 The following words and phrases when used in this act shall
2 have the meanings given to them in this section unless the
3 context clearly indicates otherwise:
4 "Agricultural processor." A person or entity that adds value
5 by subjecting one or more farm commodities to a process of
6 manufacture, development or preparation for sale; a person or
7 entity that converts a farm product into a marketable form,
8 including, but not limited to, livestock by slaughtering, fruits
9 and vegetables by canning and freezing, and forest products by
10 secondary processing.
11 * * *
12 "Class III loans." All loans made under the provisions of
13 this act other than Class I, Class II, Class IV, apparel
14 industry loans or export assistance loans.
15 "Class IV loans." Loans made to agricultural processors from
16 the Capital Loan Fund under the provisions of this act.
17 * * *
18 "Farm commodity." Any Pennsylvania grown agricultural,
19 horticultural, aquacultural, vegetable, fruit and floricultural
20 product of the soil, livestock and meats, wools, hides, furs,
21 poultry, eggs, dairy products, nuts, mushrooms, honey products
22 and forest products.
23 * * *
24 Section 2. Sections 4 and 5 of the act are amended by adding
25 subsections to read:
26 Section 4. Eligibility for loans; terms and conditions.
27 * * *
28 (f) Class IV loans.--
29 (1) The secretary shall make advances from the Capital
30 Loan Fund subject to the terms, conditions and restrictions
19890H0110B0121 - 2 -
1 provided under this act to area loan organizations for the
2 purpose of making loans to agricultural processors for
3 capital development projects which demonstrate a need to
4 either maintain or increase market position and produce new
5 employment opportunities. Class IV loans will:
6 (i) Be for agricultural processors with 50 or fewer
7 employees.
8 (ii) Have a maximum loan ceiling of $100,000 or 50%
9 of the cost of the project whichever is less. The
10 department may blend loan funds from other Capital Loan
11 Fund classes in amounts not to exceed $200,000 if the
12 applicant can meet the required eligibility criteria for
13 those classes.
14 (iii) Be limited to physical plant equipment,
15 machinery, buildings and associated lands.
16 (iv) Require a private source of matching funds.
17 (2) No loans shall be made which do any of the
18 following:
19 (i) Cause, aid or assist in, directly or indirectly,
20 the relocation of any business operations from one part
21 of the Commonwealth to another, unless there is at least
22 a 25% increase in employment.
23 (ii) Supplant funding that is otherwise available
24 expeditiously from private sector sources on commercially
25 reasonable terms.
26 (iii) Be for the purpose of refinancing any portion
27 of the total project cost or other existing loans or
28 debt.
29 (iv) Be for the purpose of financing projects
30 located outside the geographic boundaries of this
19890H0110B0121 - 3 -
1 Commonwealth.
2 (v) Be for the purpose of paying off a creditor
3 which is inadequately secured and is in a position to
4 sustain a loss.
5 (vi) Provide funds, directly or indirectly, for
6 payment, distribution, or as a loan to owners, partners
7 or shareholders of the small enterprise, except as
8 ordinary compensation for services rendered.
9 (vii) Be for the purpose of repaying a debt owed to
10 a small business investment company.
11 (viii) Provide funds for speculation in any kind of
12 property, real or personal, tangible or intangible.
13 (3) All loans shall be secured by lien positions on
14 collateral at the highest level of priority which can
15 accommodate the borrower's ability to raise sufficient debt
16 and equity capital and be made for such period and shall bear
17 such interest as may be determined by the area loan
18 organization with the approval of the secretary. Provided,
19 however, That:
20 (i) The interest rate shall be established by the
21 secretary.
22 (ii) The term of any loan shall not exceed five
23 years for machinery and equipment or ten years for
24 building loans.
25 Section 5. Application and administration.
26 * * *
27 (e) Class IV loans.--
28 (1) The secretary shall designate an area loan
29 organization to receive loan applications from agricultural
30 processors. Applications shall be made to the area loan
19890H0110B0121 - 4 -
1 organization in the form and manner as the secretary and
2 organization may require.
3 (2) Upon receipt of the application the area loan
4 organization shall investigate and review the application and
5 either approve or disapprove the loan application by proper
6 action of the governing body of the organization. The
7 decision action of the organization shall be based, in whole
8 or in part, upon the following criteria:
9 (i) Ability of the applicant to meet and satisfy all
10 debt service as it becomes due and payable.
11 (ii) Sufficiency of available collateral, including
12 satisfactory lien positions on real and personal
13 property.
14 (iii) Eligibility of the applicant as an
15 agricultural processor.
16 (iv) Capital need of the applicant.
17 (v) Conformity or nonconformity of the project, in
18 all respects, to the provisions of this act.
19 (vi) Such information and documentation as the
20 secretary shall require.
21 (vii) Relevant criminal and credit history and
22 ratings of applicant as determined from outside credit
23 reporting services and other sources.
24 (viii) Number of net new employment opportunities
25 created by the proposed project.
26 (3) Area loan organizations may establish and charge
27 reasonable fees for processing loans or guarantees under this
28 act with the approval of the secretary. Area loan
29 organizations may not receive administrative expenses from
30 funds provided for Class IV loans.
19890H0110B0121 - 5 -
1 (4) Upon approval of the loan application, the area loan
2 organization shall forward the application and all supporting
3 documentation to the Secretary of Agriculture and the
4 Secretary of Commerce for review. Each application and
5 supporting documentation shall be reviewed to ensure the
6 following:
7 (i) Loans will assist small agricultural processing
8 firms to increase their market share and enhance their
9 competitive advantage.
10 (ii) Loans will enable the Commonwealth to meet
11 changing agricultural market demands and increased
12 productivity requirements in the future.
13 (iii) Eligibility of the agricultural processor and
14 the project for which proceeds will be used.
15 (iv) Creation or preservation of a satisfactory
16 number of net employment opportunities within this
17 Commonwealth.
18 (v) Compliance with the loan amount limitations
19 provided by this act.
20 (vi) Payment to date of all tax obligations due and
21 owing to the Commonwealth or any political subdivision
22 thereof.
23 (vii) Conformity of all aspects of the loan
24 transaction with the substantive and procedural
25 provisions of this act and regulations promulgated
26 hereunder.
27 (5) The secretary shall, to the extent practicable,
28 notify the area loan organization and the applicant
29 agricultural processor of his or her final approval or
30 disapproval of the loan application within 30 business days
19890H0110B0121 - 6 -
1 after the receipt of the application. In the case of approval
2 of a loan application, the secretary shall arrange to draw
3 the loan amount from the Capital Loan Fund and advance the
4 sum to the area loan organization. The advance shall be a
5 debt obligation of the organization to the Commonwealth and
6 shall be evidenced by a note or bond issued by the
7 organization in an amount equal to the amount actually
8 advanced and secured in a manner as the secretary shall
9 require. Upon receipt of the advance, the area loan
10 organization shall make the advance available to the
11 agricultural processor in the form of a loan transaction,
12 which loan shall be evidenced by a note executed by the
13 agricultural processor, secured in a manner as the
14 organization and the secretary shall require and conform in
15 all respects to the loan package as approved by the
16 organization and the secretary.
17 (6) All loans shall be administered and monitored by the
18 appropriate area loan organization in accordance with
19 policies and procedures prescribed by the secretary. Each
20 area loan organization shall submit reports to the Department
21 of Agriculture and the Department of Commerce as the
22 secretary shall require, but in no case less than twice a
23 year. The report shall show the following:
24 (i) Each outstanding loan.
25 (ii) The date approved.
26 (iii) The original principal amount.
27 (iv) The current principal balance.
28 (v) The interest rate.
29 (vi) The purpose for which the loan was made.
30 (vii) An enumeration of any problems or issues which
19890H0110B0121 - 7 -
1 have arisen with regard to each loan.
2 (viii) A statement regarding the progress of the
3 agricultural processor in creating its requisite number
4 of new long-term employment opportunities.
5 (ix) Such other information and documentation as the
6 secretary shall require.
7 (f) Finality of decision.--All decisions of the Secretary of
8 Commerce regarding the approval or disapproval of loans under
9 this act, including eligibility of agricultural processors and
10 loan projects, shall be final.
11 Section 3. This act shall take effect in 60 days.
A17L12JLW/19890H0110B0121 - 8 -