AN ACT
1-1 relating to the establishment of a program in the Texas Department
1-2 of Commerce to secure certain loans made to small and medium-sized
1-3 businesses and nonprofit organizations.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Chapter 481, Government Code, is amended by
1-6 adding Subchapter BB to read as follows:
1-7 SUBCHAPTER BB. CAPITAL ACCESS PROGRAM
1-8 Sec. 481.401. DEFINITIONS. In this subchapter:
1-9 (1) "Capital access loan" means a loan that is
1-10 entitled to be secured by the fund.
1-11 (2) "Financial institution" includes a bank, trust
1-12 company, banking association, savings and loan association,
1-13 mortgage company, investment bank, credit union, or nontraditional
1-14 financial institution.
1-15 (3) "Fund" means the capital access fund.
1-16 (4) "Loan" includes a line of credit.
1-17 (5) "Medium-sized business" means a corporation,
1-18 partnership, sole proprietorship, or other legal entity that:
1-19 (A) is domiciled in this state or has at least
1-20 51 percent of its employees located in this state;
1-21 (B) is formed to make a profit; and
1-22 (C) employs 100 or more but fewer than 500
1-23 full-time employees.
2-1 (6) "Nonprofit organization" means a private,
2-2 nonprofit, tax-exempt corporation, association, or organization
2-3 listed in Section 501(c)(3), Internal Revenue Code of 1986, that is
2-4 domiciled in this state or has at least 51 percent of its members
2-5 located in this state.
2-6 (7) "Participating financial institution" means a
2-7 financial institution participating in the program.
2-8 (8) "Program" means the capital access program.
2-9 (9) "Reserve account" means an account established in
2-10 a participating financial institution on approval of the department
2-11 in which money is deposited to serve as a source of additional
2-12 revenue to reimburse the financial institution for losses on loans
2-13 enrolled in the program.
2-14 (10) "Small business" means a corporation,
2-15 partnership, sole proprietorship, or other legal entity that:
2-16 (A) is domiciled in this state or has at least
2-17 51 percent of its employees located in this state;
2-18 (B) is formed to make a profit;
2-19 (C) is independently owned and operated; and
2-20 (D) employs fewer than 100 full-time employees.
2-21 Sec. 481.402. CAPITAL ACCESS FUND. (a) The capital access
2-22 fund is a dedicated account in the general revenue fund.
2-23 (b) Appropriations for the implementation and administration
2-24 of this subchapter, investment earnings, fees charged under this
2-25 subchapter, and any other amounts received by the state under this
3-1 subchapter shall be deposited in the fund.
3-2 (c) Money in the fund may be appropriated only to the
3-3 department for use in carrying out the purposes of this subchapter.
3-4 Sec. 481.403. TRANSFER OF MONEY FROM OTHER FUNDS TO THE
3-5 CAPITAL ACCESS FUND. (a) At the beginning of each fiscal year,
3-6 the department shall compute for the Texas exporters loan fund
3-7 established under Subchapter D and the Texas rural economic
3-8 development fund established under Subchapter F:
3-9 (1) the amount sufficient for that fiscal year to
3-10 cover loan guarantees made under Subchapter D or F, as applicable
3-11 to each fund;
3-12 (2) the amount sufficient for the fiscal year to repay
3-13 bonds issued under Subchapter D, to carry out the purposes of
3-14 Section 481.059, or for projects that are eligible under Subchapter
3-15 F, as applicable to each fund; and
3-16 (3) the amount of loan repayments for loans made under
3-17 Subchapter D or F that will be expected to be received during the
3-18 fiscal year, as applicable to each fund.
3-19 (b) At the beginning of each fiscal year, the comptroller
3-20 for each fund described by Subsection (a) shall subtract the sum of
3-21 the amount computed by the department under Subsections (a)(1) and
3-22 (a)(2) for the respective fund from the amount in the fund at the
3-23 beginning of the fiscal year.
3-24 (c) If a positive amount results from a computation made
3-25 under Subsection (b), the comptroller shall transfer an amount
4-1 equal to the computed amount from the fund to which the computation
4-2 relates to the capital access fund.
4-3 (d) As loan repayments are received for each fund described
4-4 by Subsection (a), the comptroller shall transfer the payments to
4-5 the capital access fund.
4-6 Sec. 481.404. POWERS OF DEPARTMENT IN ADMINISTERING CAPITAL
4-7 ACCESS FUND. In administering the fund, the department has the
4-8 powers necessary to carry out the purposes of this subchapter,
4-9 including the power to:
4-10 (1) make, execute, and deliver contracts, conveyances,
4-11 and other instruments necessary to the exercise of its powers;
4-12 (2) invest money at the department's discretion in
4-13 obligations determined proper by the department, and select and use
4-14 depositories for its money;
4-15 (3) employ personnel and counsel and pay the persons
4-16 from money in the fund legally available for that purpose; and
4-17 (4) impose and collect fees and charges in connection
4-18 with any transaction and provide for reasonable penalties for
4-19 delinquent payment of fees or charges.
4-20 Sec. 481.405. CAPITAL ACCESS PROGRAM. (a) The department
4-21 shall establish a capital access program to assist a participating
4-22 financial institution in making loans to businesses and nonprofit
4-23 organizations that face barriers in accessing capital.
4-24 (b) The department shall use money in the fund to make a
4-25 deposit in a participating financial institution's reserve account
5-1 in an amount specified by this subchapter to be a source of money
5-2 the institution may receive as reimbursement for losses
5-3 attributable to loans in the program.
5-4 (c) The department shall determine the eligibility of a
5-5 financial institution to participate in the program and may set a
5-6 limit on the number of eligible financial institutions that may
5-7 participate in the program.
5-8 (d) To participate in the program, an eligible financial
5-9 institution must enter into a participation agreement with the
5-10 department that sets out the terms and conditions under which the
5-11 department will make contributions to the institution's reserve
5-12 account and specifies the criteria for a loan to qualify as a
5-13 capital access loan.
5-14 (e) To qualify as a capital access loan, a loan must:
5-15 (1) be made to a small or medium-sized business or to
5-16 a nonprofit organization;
5-17 (2) be used by the business or nonprofit organization
5-18 for any project, activity, or enterprise in this state that fosters
5-19 economic development; and
5-20 (3) meet any other criteria provided by this
5-21 subchapter.
5-22 Sec. 481.406. RULEMAKING AUTHORITY. (a) The policy board
5-23 shall adopt rules relating to the implementation of the program and
5-24 any other rules necessary to accomplish the purposes of this
5-25 subchapter. The rules may:
6-1 (1) provide for criteria under which a certain line of
6-2 credit issued by an eligible financial institution to a small or
6-3 medium-sized business or nonprofit organization qualifies to
6-4 participate in the program; and
6-5 (2) authorize a consortium of financial institutions
6-6 to participate in the program subject to common underwriting
6-7 guidelines.
6-8 (b) To qualify for participation in the program, a line of
6-9 credit must:
6-10 (1) be an account at a financial institution under
6-11 which the financial institution agrees to lend money to a person
6-12 from time to time to finance one or more projects, activities, or
6-13 enterprises that are authorized by this subchapter; and
6-14 (2) contain the same restrictions, to the extent
6-15 possible, that are placed on a capital access loan that is not a
6-16 line of credit.
6-17 Sec. 481.407. PROVISIONS RELATING TO CAPITAL ACCESS LOAN.
6-18 (a) Except as otherwise provided by this subchapter, the
6-19 department may not determine the recipient, amount, or interest
6-20 rate of a capital access loan or the fees or other requirements
6-21 related to the loan.
6-22 (b) A loan is not eligible to be enrolled under this
6-23 subchapter if the loan is for:
6-24 (1) construction or purchase of residential housing;
6-25 (2) simple real estate investments, excluding the
7-1 development or improvement of commercial real estate occupied by
7-2 the borrower's business or organization;
7-3 (3) refinancing of existing loans not originally
7-4 enrolled under this subchapter; or
7-5 (4) inside bank transactions, as defined by the policy
7-6 board.
7-7 (c) The borrower of a capital access loan must apply the
7-8 loan to working capital or to the purchase, construction, or lease
7-9 of capital assets, including buildings and equipment used by the
7-10 business or nonprofit organization. Working capital uses include
7-11 the cost of exporting, accounts receivable, payroll, inventory, and
7-12 other financing needs of the business or organization.
7-13 (d) A capital access loan may be sold on the secondary
7-14 market under conditions as may be determined by the department.
7-15 (e) When enrolling a loan in the program, a participating
7-16 financial institution may specify an amount to be covered under the
7-17 program that is less than the total amount of the loan.
7-18 Sec. 481.408. RESERVE ACCOUNT. (a) On approval by the
7-19 department and after entering into a participation agreement with
7-20 the department, a participating financial institution making a
7-21 capital access loan shall establish a reserve account. The reserve
7-22 account shall be used by the institution only to cover any losses
7-23 arising from a default of a capital access loan made by the
7-24 institution under this subchapter or as otherwise provided by this
7-25 subchapter.
8-1 (b) When a participating financial institution makes a loan
8-2 enrolled in the program, the institution shall require the borrower
8-3 to pay to the institution a fee in an amount that is not less than
8-4 two percent but not more than three percent of the principal amount
8-5 of the loan, which the financial institution shall deposit in the
8-6 reserve account. The institution shall also deposit in the reserve
8-7 account an amount equal to the amount of the fee received by the
8-8 institution from the borrower under this subsection. The
8-9 institution may recover from the borrower all or part of the amount
8-10 the institution is required to pay under this subsection in any
8-11 manner agreed to by the institution and borrower.
8-12 (c) For each capital access loan made by a financial
8-13 institution, the institution shall certify to the department,
8-14 within the period prescribed by the department, that the
8-15 institution has made a capital access loan, the amount the
8-16 institution has deposited in the reserve account, including the
8-17 amount of fees received from the borrower, and, if applicable, that
8-18 the borrower is located in or financing a project, activity, or
8-19 enterprise in an area designated as an enterprise zone under
8-20 Chapter 2303.
8-21 (d) On receipt of a certification made under Subsection (c)
8-22 and subject to Section 481.409, the department shall deposit in the
8-23 institution's reserve account for each capital access loan made by
8-24 the institution:
8-25 (1) an amount equal to the amount deposited by the
9-1 institution for each loan if the institution:
9-2 (A) has assets of more than $1 billion; or
9-3 (B) has previously enrolled loans in the program
9-4 that in the aggregate are more than $2 million;
9-5 (2) an amount equal to 150 percent of the total amount
9-6 deposited under Subsection (b) for each loan if the institution is
9-7 not described by Subdivision (1); or
9-8 (3) notwithstanding Subdivisions (1) and (2), an
9-9 amount equal to 200 percent of the total amount deposited under
9-10 Subsection (b) for each loan if:
9-11 (A) the borrower is located in or financing a
9-12 project, activity, or enterprise in an area designated as an
9-13 enterprise zone under Chapter 2303; or
9-14 (B) the borrower is a small or medium-size
9-15 business or a nonprofit organization that operates or proposes to
9-16 operate a day-care center or a group day-care home, as those terms
9-17 are defined by Section 42.002, Human Resources Code.
9-18 Sec. 481.409. LIMITATIONS ON STATE CONTRIBUTION TO RESERVE
9-19 ACCOUNT. (a) The amount deposited by the department into a
9-20 participating financial institution's reserve account for any
9-21 single loan recipient may not exceed $150,000 during a three-year
9-22 period.
9-23 (b) The maximum amount the department may deposit into a
9-24 reserve account for each capital access loan made under this
9-25 subchapter is the lesser of $35,000 or an amount equal to:
10-1 (1) eight percent of the loan amount if:
10-2 (A) the borrower is located in or financing a
10-3 project, activity, or enterprise in an area designated as an
10-4 enterprise zone under Chapter 2303; or
10-5 (B) the borrower is a small or medium-size
10-6 business or a nonprofit organization that operates or proposes to
10-7 operate a day-care center or a group day-care home, as those terms
10-8 are defined by Section 42.002, Human Resources Code; or
10-9 (2) six percent of the loan amount for any other
10-10 borrower.
10-11 Sec. 481.410. STATE'S RIGHTS WITH RESPECT TO RESERVE
10-12 ACCOUNT. (a) All of the money in a reserve account established
10-13 under this subchapter is property of the state.
10-14 (b) The state is entitled to earn interest on the amount of
10-15 contributions made by the department, borrower, and institution to
10-16 a reserve account under this subchapter. The department shall
10-17 withdraw monthly or quarterly from a reserve account the amount of
10-18 the interest earned by the state. The department shall deposit the
10-19 amount withdrawn under this subsection into the fund.
10-20 (c) If the amount in a reserve account exceeds an amount
10-21 equal to 33 percent of the balance of the financial institution's
10-22 outstanding capital access loans, the department may withdraw the
10-23 excess amount and deposit the amount in the fund. A withdrawal of
10-24 money authorized under this subsection may not reduce an active
10-25 reserve account to an amount that is less than $200,000.
11-1 (d) The department shall withdraw from the institution's
11-2 reserve account the total amount in the account and any interest
11-3 earned on the account and deposit the amount in the fund when:
11-4 (1) a financial institution is no longer eligible to
11-5 participate in the program or a participation agreement entered
11-6 into under this subchapter expires without renewal by the
11-7 department or institution;
11-8 (2) the financial institution has no outstanding
11-9 capital access loans; and
11-10 (3) the financial institution has not made a capital
11-11 access loan within the preceding 24 months.
11-12 Sec. 481.411. ANNUAL REPORT. A participating financial
11-13 institution shall submit an annual report to the department. The
11-14 report must:
11-15 (1) provide information regarding outstanding capital
11-16 access loans, capital access loan losses, and any other information
11-17 on capital access loans the department considers appropriate;
11-18 (2) state the total amount of loans for which the
11-19 department has made a contribution from the fund under this
11-20 subchapter;
11-21 (3) include a copy of the institution's most recent
11-22 financial statement; and
11-23 (4) include information regarding the type and size of
11-24 businesses and nonprofit organizations with capital access loans.
11-25 Sec. 481.412. REPORTS; AUDITS. (a) The department shall
12-1 submit to the legislature an annual status report on the program's
12-2 activities.
12-3 (b) The financial transactions of the fund are subject to
12-4 audit by the state auditor as provided by Chapter 321.
12-5 Sec. 481.413. STATE LIABILITY PROHIBITED. The state is not
12-6 liable to a participating financial institution for payment of the
12-7 principal, the interest, or any late charges on a capital access
12-8 loan made under this subchapter.
12-9 Sec. 481.414. GIFTS AND GRANTS. The department may accept
12-10 gifts, grants, and donations from any source for the purposes of
12-11 this subchapter.
12-12 SECTION 2. Section 481.059, Government Code, is amended by
12-13 adding Subsection (h) to read as follows:
12-14 (h) The department may not guarantee or make a loan under
12-15 this section after August 31, 1997.
12-16 SECTION 3. Section 481.084, Government Code, is amended by
12-17 adding Subsection (g) to read as follows:
12-18 (g) The department may not guarantee or make a loan under
12-19 this section after August 31, 1997.
12-20 SECTION 4. The policy board to the Texas Department of
12-21 Commerce shall adopt rules required by Section 481.406, Government
12-22 Code, as added by this Act, not later than December 1, 1997.
12-23 SECTION 5. This Act takes effect September 1, 1997.
12-24 SECTION 6. The importance of this legislation and the
12-25 crowded condition of the calendars in both houses create an
13-1 emergency and an imperative public necessity that the
13-2 constitutional rule requiring bills to be read on three several
13-3 days in each house be suspended, and this rule is hereby suspended.
_______________________________ _______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 266 passed the Senate on
February 20, 1997, by a viva-voce vote; and that the Senate
concurred in House amendments on May 28, 1997, by a viva-voce vote.
_______________________________
Secretary of the Senate
I hereby certify that S.B. No. 266 passed the House, with
amendments, on May 26, 1997, by a non-record vote.
_______________________________
Chief Clerk of the House
Approved:
_______________________________
Date
_______________________________
Governor