SENATE AMENDED PRIOR PRINTER'S NOS. 121, 180 PRINTER'S NO. 2318
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, COLE, BELFANTI, FLICK AND KASUNIC, JANUARY 25, 1989
SENATOR TILGHMAN, APPROPRIATIONS, IN SENATE, RE-REPORTED AS AMENDED, JANUARY 29, 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:
1 Section 2. Definitions. 2 The following words and phrases when used in this act shall 3 have the meanings given to them in this section unless the 4 context clearly indicates otherwise: 5 "Agricultural processor." A person or entity that adds value 6 by subjecting one or more farm commodities to a process of 7 manufacture, development or preparation for sale; a person or 8 entity that converts a farm product into a marketable form, 9 including, but not limited to, livestock by slaughtering, fruits 10 and vegetables by canning and freezing, and forest products by 11 secondary processing. 12 * * * 13 "Class III loans." All loans made under the provisions of 14 this act other than Class I, Class II, Class IV, apparel 15 industry loans or export assistance loans. 16 "Class IV loans." Loans made to agricultural processors from 17 the Capital Loan Fund under the provisions of this act. 18 * * * 19 "Farm commodity." Any Pennsylvania grown agricultural, 20 horticultural, aquacultural, vegetable, fruit and floricultural 21 product of the soil, livestock and meats, wools, hides, furs, 22 poultry, eggs, dairy products, nuts, mushrooms, honey products 23 and forest products. 24 * * * 25 Section 2. Sections 4 and 5 of the act are amended by adding 26 subsections to read: 27 Section 4. Eligibility for loans; terms and conditions. 28 * * * 29 (f) Class IV loans.-- 30 (1) The secretary shall make advances from the Capital 19890H0110B2318 - 2 -
1 Loan Fund subject to the terms, conditions and restrictions 2 provided under this act to area loan organizations for the 3 purpose of making loans to agricultural processors for 4 capital development projects which demonstrate a need to 5 either maintain or increase market position and produce new 6 employment opportunities. Class IV loans will: 7 (i) Have a maximum loan ceiling of $100,000 or 50% 8 of the cost of the project whichever is less: PROVIDED, <-- 9 HOWEVER, THAT NO LOANS SHALL BE MADE WHICH WILL EXCEED 10 $15,000 FOR EACH NEW EMPLOYMENT OPPORTUNITY CREATED BY 11 THE PROJECT. The department may blend loan funds from 12 other Capital Loan Fund classes in amounts not to exceed 13 $200,000 if the applicant can meet the required 14 eligibility criteria for those classes. 15 (ii) Be limited to physical plant equipment, 16 machinery, buildings and associated lands. 17 (iii) Require a private source of matching funds. 18 (2) No loans shall be made which do any of the 19 following: 20 (i) Cause, aid or assist in, directly or indirectly, 21 the relocation of any business operations from one part 22 of the Commonwealth to another, unless there is at least 23 a 25% increase in employment. 24 (ii) Supplant funding that is otherwise available 25 expeditiously from private sector sources on commercially 26 reasonable terms. 27 (iii) Be for the purpose of refinancing any portion 28 of the total project cost or other existing loans or 29 debt. 30 (iv) Be for the purpose of financing projects 19890H0110B2318 - 3 -
1 located outside the geographic boundaries of this 2 Commonwealth. 3 (v) Be for the purpose of paying off a creditor 4 which is inadequately secured and is in a position to 5 sustain a loss. 6 (vi) Provide funds, directly or indirectly, for 7 payment, distribution, or as a loan to owners, partners 8 or shareholders of the small enterprise, except as 9 ordinary compensation for services rendered. 10 (vii) Be for the purpose of repaying a debt owed to 11 a small business investment company. 12 (viii) Provide funds for speculation in any kind of 13 property, real or personal, tangible or intangible. 14 (3) All loans shall be secured by lien positions on 15 collateral at the highest level of priority which can 16 accommodate the borrower's ability to raise sufficient debt 17 and equity capital and be made for such period and shall bear 18 such interest as may be determined by the area loan 19 organization with the approval of the secretary. Provided, 20 however, That: 21 (i) The interest rate shall be established by the 22 secretary. 23 (ii) The term of any loan shall not exceed five 24 years for machinery and equipment or ten years for 25 building loans. 26 (III) THE INTEREST RATE SHALL IN NO CASE BE LESS <-- 27 THAN 5%. 28 (4) NO CLASS IV LOANS MAY BE APPROVED AFTER JUNE 30, 29 1991. 30 Section 5. Application and administration. 19890H0110B2318 - 4 -
1 * * * 2 (e) Class IV loans.-- 3 (1) The secretary shall designate an area loan 4 organization to receive loan applications from agricultural 5 processors. Applications shall be made to the area loan 6 organization in the form and manner as the secretary and 7 organization may require. 8 (2) Upon receipt of the application the area loan 9 organization shall investigate and review the application and 10 either approve or disapprove the loan application by proper 11 action of the governing body of the organization. The 12 decision action of the organization shall be based, in whole 13 or in part, upon the following criteria: 14 (i) Ability of the applicant to meet and satisfy all 15 debt service as it becomes due and payable. 16 (ii) Sufficiency of available collateral, including 17 satisfactory lien positions on real and personal 18 property. 19 (iii) Eligibility of the applicant as an 20 agricultural processor. 21 (iv) Capital need of the applicant. 22 (v) Conformity or nonconformity of the project, in 23 all respects, to the provisions of this act. 24 (vi) Such information and documentation as the 25 secretary shall require. 26 (vii) Relevant criminal and credit history and 27 ratings of applicant as determined from outside credit 28 reporting services and other sources. 29 (viii) Number of net new employment opportunities 30 created by the proposed project. 19890H0110B2318 - 5 -
1 (3) Area loan organizations may establish and charge 2 reasonable fees for processing loans or guarantees under this 3 act with the approval of the secretary. Area loan 4 organizations may not receive administrative expenses from 5 funds provided for Class IV loans. 6 (4) Upon approval of the loan application, the area loan 7 organization shall forward the application and all supporting 8 documentation to the Secretary of Agriculture and the 9 Secretary of Commerce for review. Each application and 10 supporting documentation shall be reviewed to ensure the 11 following: 12 (i) Loans will assist small agricultural processing 13 firms to increase their market share and enhance their 14 competitive advantage. 15 (ii) Loans will enable the Commonwealth to meet 16 changing agricultural market demands and increased 17 productivity requirements in the future. 18 (iii) Eligibility of the agricultural processor and 19 the project for which proceeds will be used. 20 (iv) Creation or preservation of a satisfactory <-- 21 number of net employment opportunities within this 22 Commonwealth. 23 (v) Compliance with the loan amount limitations 24 provided by this act. 25 (vi) Payment to date of all tax obligations due and 26 owing to the Commonwealth or any political subdivision 27 thereof. 28 (vii) Conformity of all aspects of the loan 29 transaction with the substantive and procedural 30 provisions of this act and regulations promulgated 19890H0110B2318 - 6 -
1 hereunder. 2 (5) The secretary shall, to the extent practicable, 3 notify the area loan organization and the applicant 4 agricultural processor of his or her final approval or 5 disapproval of the loan application within 30 business days 6 after the receipt of the application. In the case of approval 7 of a loan application, the secretary shall arrange to draw 8 the loan amount from the Capital Loan Fund and advance the 9 sum to the area loan organization. The advance shall be a 10 debt obligation of the organization to the Commonwealth and 11 shall be evidenced by a note or bond issued by the 12 organization in an amount equal to the amount actually 13 advanced and secured in a manner as the secretary shall 14 require. Upon receipt of the advance, the area loan 15 organization shall make the advance available to the 16 agricultural processor in the form of a loan transaction, 17 which loan shall be evidenced by a note executed by the 18 agricultural processor, secured in a manner as the 19 organization and the secretary shall require and conform in 20 all respects to the loan package as approved by the 21 organization and the secretary. 22 (6) All loans shall be administered and monitored by the 23 appropriate area loan organization in accordance with 24 policies and procedures prescribed by the secretary. Each 25 area loan organization shall submit reports to the Department 26 of Agriculture and the Department of Commerce as the 27 secretary shall require, but in no case less than twice a 28 year. The report shall show the following: 29 (i) Each outstanding loan. 30 (ii) The date approved. 19890H0110B2318 - 7 -
1 (iii) The original principal amount. 2 (iv) The current principal balance. 3 (v) The interest rate. 4 (vi) The purpose for which the loan was made. 5 (vii) An enumeration of any problems or issues which 6 have arisen with regard to each loan. 7 (viii) A statement regarding the progress of the 8 agricultural processor in creating its requisite number 9 of new long-term employment opportunities. 10 (ix) Such other information and documentation as the 11 secretary shall require. 12 (f) Finality of decision.--All decisions of the Secretary of 13 Commerce regarding the approval or disapproval of loans under 14 this act, including eligibility of agricultural processors and 15 loan projects, shall be final. 16 Section 3. This act shall take effect in 60 days. A17L12JLW/19890H0110B2318 - 8 -