.................... moves to amend H.F. No. 611, the first engrossment, as follows:
Delete everything after the enacting clause and insert:
"Section 1. [116J.881] SMALL BUSINESS LOAN GUARANTEE PROGRAM.
1.4 Subdivision 1. Definitions. (a) For purposes of this section, the following terms
1.5have the meanings given.
1.6(b) "Borrower" means a small business receiving an eligible loan under this section.
1.7(c) "Commissioner" means the commissioner of employment and economic
1.9(d) "Eligible loan" means a loan to a small business to be used for business
1.10purposes exclusively in Minnesota, including: construction; remodeling or renovation;
1.11leasehold improvements; the purchase of land and buildings; business acquisitions,
1.12including employee stock ownership plan financing; machinery or equipment purchases,
1.13maintenance, or repair; expenses related to moving into or within Minnesota; and working
1.14capital when the working capital is secured by fixed assets.
1.15(e) "Loan guarantee" means a guarantee of 70 percent of the loan amount provided
1.16by a QED lender. The guaranteed portion of the loan must not exceed $1,500,000.
1.17(f) "Loan guarantee trust fund" means a dedicated fund established under this
1.18section for the purpose of compensation for defaulted loan guarantees and for program
1.20(g) "Loan purchaser" means an institutional investor that purchases, holds, and
1.21services small business loans on a nonrecourse basis from QED lenders participating in
1.22the small business loan guarantee program.
1.23(h) "Qualified economic development lender" or "QED lender" means a public entity
1.24or a private nonprofit economic development organization whose headquarters is located
1.25in Minnesota with not less than three years of active lending experience that provides
1.26financing to small businesses in partnership with banks and other commercial lenders, and
1.27that originates subordinated loans to small businesses for sale to the secondary market.
2.1(i) "Secondary market" means the market in which loans are sold to investors, either
2.2directly or through an intermediary.
2.3(j) "Small business" means a business employing no more than 500 persons in
2.5(k) "Subordinated loan" means a loan secured by a lien that is lower in priority than
2.6one or more specified other liens.
2.7 Subd. 2. Loan guarantee program. A small business loan guarantee program to
2.8support the origination and sale of eligible subordinated loans to the secondary market by
2.9providing a credit enhancement in the form of a partial guarantee of small business loans
2.10that are made to Minnesota businesses by a QED lender is created in the Department of
2.11Employment and Economic Development. A loan guarantee shall be provided for eligible
2.12loans under this section only when a bank or other commercial lender provides at least 50
2.13percent of the total amount loaned to the small business. The loan guarantee shall apply
2.14only to the portion of the loan which was made by the QED lender.
2.15 Subd. 3. Required provisions. Loan guarantees under this section for loans to be
2.16sold on the secondary market by QED lenders shall provide that:
2.17(1) principal and interest payments made by the borrower under the terms of the
2.18loan shall be applied by the loan purchaser to reduce the guaranteed and nonguaranteed
2.19portion of the loan on a proportionate basis. The nonguaranteed portion shall not receive
2.20preferential treatment over the guaranteed portion;
2.21(2) the loan purchaser shall not accelerate repayment of the loan or exercise other
2.22remedies if the borrower defaults, unless:
2.23(i) the borrower fails to make a required payment of principal or interest;
2.24(ii) the commissioner consents in writing; or
2.25(iii) the loan guarantee agreement provides for accelerated repayment or other
2.27 In the event of a default, the loan purchaser may not make a demand for payment
2.28pursuant to the guarantee unless the commissioner agrees in writing that the default has
2.29materially affected the rights or security of the parties, and finds that the loan purchaser is
2.30entitled to receive payment pursuant to the loan guarantee;
2.31(3) there is a written commitment from one or more secondary market investors to
2.32purchase the loan, subject to the provision of a state loan guarantee;
2.33(4) the QED lender shall have timely prepared and delivered to the commissioner,
2.34annually by the date specified in the loan guarantee, an audited or reviewed financial
2.35statement for the loan, prepared by a certified public accountant according to generally
3.1accepted accounting principles, and documentation that the borrower used the loan
3.2proceeds solely for purposes of its Minnesota operations;
3.3(5) the commissioner shall have access to the original loan documents prior to
3.4approval of the state credit enhancement to facilitate the sale of the loan to the secondary
3.6(6) the QED lender shall maintain adequate records and documents concerning the
3.7original loan so that the commissioner may determine the borrower's financial condition
3.8and compliance with program requirements; and
3.9(7) orderly liquidation of collateral securing the original loan shall be provided for in
3.10the event of default, with an option on the part of the commissioner to acquire the loan
3.11purchaser's interest in the assets pursuant to the loan guarantee.
3.12 Subd. 4. Loan guarantee trust fund established. A loan guarantee trust fund is
3.13created in the state treasury to pay for defaulted loan guarantees. The commissioner shall
3.14administer this fund and provide annual reports concerning the performance of the fund to
3.15the chairs of the standing committees of the house of representatives and senate having
3.16jurisdiction over economic development issues.
3.17 Subd. 5. Limitation. At no time shall total outstanding loan guarantees for loans
3.18sold to the secondary market exceed five times the amount on deposit in the loan guarantee
3.20 Subd. 6. Guarantee fee. Participating QED lenders shall pay a fee to the fund of
3.210.25 percent of the principal amount of each guaranteed loan upon approval of each loan
3.22guarantee. The guarantee fee, along with any interest earnings from the trust fund, shall
3.23be used only for the administration of the small business loan guarantee program and
3.24as additional loan loss reserves.
3.25 Subd. 7. Loan guarantee application. The commissioner shall prepare a form for
3.26QED lenders to use in applying for loan guarantees under this section. The form shall
3.27include the following information:
3.28(1) the name and contact information for the QED lender, including the name and
3.29title of a contact person;
3.30(2) the names of the financial institutions, including the names and titles of contact
3.31persons, that are participating in the total financing being provided to the small business
3.32borrower, along with the dollar amount of the loan provided by the financial institution;
3.33(3) the percentage and dollar amount of the subordinated debt loan provided to the
3.34Minnesota small business by the QED lender; and
3.35(4) the loan guarantee amount that is requested from the program.
4.1 Subd. 8. Notice and application process. Subject to the availability of funds under
4.2subdivision 4, the commissioner shall publish a notice regarding the opportunity for QED
4.3lenders to originate loans for which the loan guarantee may be secured as the loans are
4.4prepared for sale to the secondary market. The commissioner shall decide whether to
4.5provide a loan guarantee for each loan based on:
4.6(1) the completeness of the loan guarantee application;
4.7(2) the availability of funds in the loan guarantee trust fund; and
4.8(3) execution of agreements that satisfy requirements established in subdivision 3.
Amend the title accordingly