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Minnesota Legislature

Office of the Revisor of Statutes

HF 1158

as introduced - 87th Legislature (2011 - 2012) Posted on 03/16/2011 09:50am

KEY: stricken = removed, old language.
underscored = added, new language.

Bill Text Versions

Engrossments
Introduction Posted on 03/16/2011

Current Version - as introduced

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A bill for an act
relating to economic development; creating a startup business loan guarantee
program; establishing a loan guarantee trust fund; requiring reports; appropriating
money; proposing coding for new law in Minnesota Statutes, chapter 116J.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [116J.881] STARTUP BUSINESS LOAN GUARANTEE PROGRAM.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms
have the meanings given them.
new text end

new text begin (b) "Borrower" means a startup business receiving an eligible loan under this section.
new text end

new text begin (c) "Commissioner" means the commissioner of employment and economic
development.
new text end

new text begin (d) "Eligible loan" means a loan provided by a private lender to a startup business for
which the federal government has provided a guarantee of 90 percent of the loan amount.
An eligible loan is for business startup purposes exclusively in Minnesota.
new text end

new text begin (e) "Loan guarantee trust fund" means a dedicated fund established under this
section for the purpose of compensation for defaulted loan guarantees and for program
administration.
new text end

new text begin (f) "Startup business" means a new business employing fewer than ... persons
that has not previously operated in Minnesota. It does not include a business that has
previously operated under another name.
new text end

new text begin (g) "State loan guarantee" means a guarantee of ten percent of the loan amount
provided by a private lender up to a maximum of $200,000 per loan.
new text end

new text begin Subd. 2. new text end

new text begin Loan guarantee program. new text end

new text begin A startup business loan guarantee program to
support the origination of eligible loans by providing a guarantee of startup business loans
that are made to Minnesota businesses by a private lender is created in the Department of
Employment and Economic Development.
new text end

new text begin Subd. 3. new text end

new text begin Required provisions. new text end

new text begin Loan guarantees under this section shall provide
that, to the extent allowable under the terms of use of the federal loan guarantee:
new text end

new text begin (1) principal and interest payments made by the borrower under the terms of the loan
shall be applied by the lender to reduce the state guaranteed portion of the loan;
new text end

new text begin (2) the lender shall not accelerate repayment of the loan or exercise other remedies
if the borrower defaults, unless:
new text end

new text begin (i) the borrower fails to make a required payment of principal or interest;
new text end

new text begin (ii) the state consents in writing; or
new text end

new text begin (iii) the loan guarantee agreement provides for accelerated repayment or other
remedies;
new text end

new text begin (3) in the event of a default, the lender may not make a demand for payment pursuant
to the guarantee unless the state agrees in writing that the default has materially affected
the rights or security of the parties, and finds that the lender is entitled to receive payment
pursuant to the loan guarantee; and
new text end

new text begin (4) orderly liquidation of collateral securing the loan shall be provided for in the
event of default, with an option on the part of the state to acquire the lender's interest in
the assets pursuant to the loan guarantee.
new text end

new text begin Subd. 4. new text end

new text begin Loan guarantee trust fund established. new text end

new text begin A loan guarantee trust fund is
created in the state treasury to pay for defaulted loan guarantees. The commissioner shall
administer the fund and provide annual reports concerning the performance of the fund to
the chairs of the standing committees of the legislature having jurisdiction over economic
development issues. Participating lenders shall be required to pay a fee to the fund of 0.25
percent of the principal amount of each guaranteed loan upon approval of each state loan
guarantee. The guarantee fee, along with any interest earnings from the trust fund, shall be
used only for the administration of the startup business loan guarantee program and as
additional loan loss reserves. At no time shall total outstanding loan guarantees exceed
five times the amount on deposit in the loan guarantee trust fund.
new text end

new text begin Subd. 5. new text end

new text begin Loan guarantee application. new text end

new text begin The commissioner shall prepare a form for
use in applying for loan guarantees under this section. The application shall include
the following information:
new text end

new text begin (1) the name and contact information for the borrower, including the name and
title of a contact person;
new text end

new text begin (2) the names of the financial institutions, including the names and titles of contact
persons, that are participating in the total financing being provided to the borrower, along
with the dollar amount of the loan provided by the financial institution;
new text end

new text begin (3) the loan guarantee amount that is requested from the program; and
new text end

new text begin (4) the business plan of the borrower, including information on the feasibility of the
business activity, the markets for the product or service being developed by the business,
and the potential number of jobs created and potential wage rates to be paid to employees.
new text end

new text begin Subd. 6. new text end

new text begin Notice and application process. new text end

new text begin The commissioner shall publish a notice
regarding the opportunity for lenders to originate loans for which the loan guarantee
may be secured. The commissioner shall decide whether to provide a loan guarantee
for each loan based on:
new text end

new text begin (1) the completeness of the loan guarantee application;
new text end

new text begin (2) the availability of funds in the loan guarantee trust fund; and
new text end

new text begin (3) execution of agreements to satisfy requirements established in subdivision 3.
new text end

Sec. 2. new text beginAPPROPRIATION.
new text end

new text begin $10,000,000 is appropriated from the general fund in fiscal year 2012 to the
commissioner of employment and economic development for the loan guarantee trust
fund authorized in Minnesota Statutes, section 116J.881.
new text end