BILL ANALYSIS



H.B. 2343
By: Patterson
March 28, 1995
Committee Report (Unamended)


BACKGROUND

The Texas Rural Economic Development Loan Guaranty Fund was
authorized in 1989 with a $1.5 million appropriation plus future
payoffs from predecessor agency direct loans.  Program
administration costs since 1989 have been paid from fees and
earnings.  Highlights include the following: 

     Only state loan guaranty program to assist small business
     development in rural areas by guaranteeing loans made by
     financial institutions;
     Maximum guaranty of 90% of loan; maximum amount of $350,000,
     maximum term of 15 yrs.;
     Uses include building, machinery and equipment, working
     capital;
     As of January 30,1995, the fund balance in the state treasury was approximately $4 million,
     with $2 million legally obligated as guarantees to lenders;
     Currently authorized to have a guarantee-to-reserve ratio not to exceed two to one or $8
     million; and
     Since 1989 startup, 17 loan guarantees totaling $3.7 million have been made without any
     losses.

The Texas Exporters Loan Guaranty Fund was authorized in 1989 with a $2 million appropriation. 
Program administration costs since 1989 have been paid from fees and earnings.  Highlights include
the following: 

     Only statewide loan guaranty program to finance small business manufacturer export
     transactions by guaranteeing loans made by financial institutions;
     Maximum guaranty of 90% of loan; maximum amount of $350,000; maximum term is 1
     year;
     As of January 30, 1995, the fund balance in the state treasury was approximately $2 million,
     with $800,000 legally obligated as guarantees to lenders; and
     Since 1989 startup, 57 loan guarantees totaling $12 million have been made in support of $85
     million in export sales without any losses.

PURPOSE

The bill's purpose is to directly address a major finding of the Special House Committee on Small
Business Access to Capital regarding the lack of available capital for small business expansions. 
The bill in effect increases the amount of capital available without additional costs to the state.  The
bill  amends Sections 481.0591 and 481.0842, Government Code, providing that a guarantee-to-reserve ratio  may be adopted by the Policy Board which would permit Commerce to guarantee loans
made by private lenders under the Rural Economic Development Loan Guaranty and Exporters Loan
Guaranty Funds in an amount not to exceed three to one.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does expressly grant rulemaking authority to the Texas
Department of Commerce in Section 1, Subsection (b).



SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Subchapter D, Chapter 481, Government Code by adding Section
481.0591(a) to authorize the making of loan guarantees in excess of the amount in the fund; 

     (b) the policy board by rule shall adopt a guarantee-to-reserve ratio that determines the
amount of loan guarantees in excess of the amount in the fund, but not to exceed three to one;      (c) the policy board shall review annually the guarantee-to-reserve ratio and make
adjustments as necessary; and 
     (d) the state auditor shall review the loan guarantee program and payment activity and make
recommendations to the policy board not later that September 1 of each year.

SECTION 2.  Amends Section 481.0842(b), Government Code, by increasing the ratio of guarantees
to the amount of money available in the fund to three to one.

SECTION 3.  Emergency clause.

SUMMARY OF COMMITTEE ACTION

H.B. 2343 was considered by the committee in a public hearing on March 27, 1995.  Testifying on
the bill was Dan McNeil, representing the Texas Department of Commerce.  No one testified against
the bill.  The bill was reported favorably without amendment, with the recommendation that it do
pass and be printed, by a record vote of 7 ayes, 0 nays, 0 pnv, 2 absent.