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ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
microbusiness loans; commerce authority
Purpose
Establishes the Microbusiness Revolving Loan Fund Program (Program) to provide low‑interest loans to community development financial institutions or community-based lending organizations.
Background
Statute establishes the Arizona Commerce Authority (ACA) to provide private sector leadership in growing and diversifying the economy of Arizona and create employment in Arizona through the expansion, attraction and retention of businesses. The ACA is led by a board of directors composed of private sector business leaders and public officials (A.R.S § 15-1502).
Community Development Financial Institutions (CDFIs) are specialized community based financial institutions that are designated and certified by the Community Development Financial Institutions Fund (CDFI Fund). The primary mission of CDFIs is to promote economic development by providing financial products and services to people and communities underserved by traditional financial institutions. CDFIs include community development banks, credit unions and non-regulated institutions such as nonprofit loan funds or venture capital funds (CDFI Fund). Certified CDFIs are eligible to apply for awards through a variety of programs offered by the CDFI Fund (CDFI Fund).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Establishes the Program.
2. Establishes the Microbusiness Revolving Loan Fund (Fund) to consist of legislative appropriations and requires the ACA to administer the Fund.
3. Allows the ACA to use fund monies to provide low-interest loans to CDFIs for funding Arizona microbusinesses that generate economic growth and job creation but are unable to obtain adequate credit or terms of credit.
4. Allows the ACA, if the use of CDFIs is not practicable, to provide low-interest loans to the following local community-based lending organizations:
a) small business lending consortia;
b) certified development companies;
c) U.S. Department of Agriculture business and industrial guaranteed loan providers;
d) U.S. Small Business Administration loan providers;
e) credit unions; and
f) community banks.
5. Requires the ACA to:
a) identify eligible lending organizations through one or more competitive statewide or local solicitations; and
b) establish a microloan with a principal amount less than $25,000 and a regular loan with a principal amount of at least $25,000.
6. Requires, for Program eligibility, a lending organization to:
a) establish sufficient expertise to analyse microbusiness applications for Program loans;
b) evaluate the creditworthiness of microbusinesses; and
c) regularly monitor the eligibility of Program loans.
7. Requires a lending organization to review every Program loan application to determine:
a) the feasibility of the proposed use of the requested financing by the microbusiness applicant;
b) the likelihood of repayment; and
c) the potential of the loan generating economic development and jobs in Arizona.
8. Requires Program loans to microbusinesses to be targeted and marketed to minority-owned and women-owned enterprises and other microbusinesses having difficulty accessing traditional credit markets.
9. Requires Program loans to microbusinesses to be used for the creation and retention of jobs, as defined by the ACA, including:
a) working capital;
b) acquiring and improving real property;
c) acquiring machinery and equipment, property or improvements; and
d) refinancing debt obligations.
10. Requires a lending organization to certify to the ACA that the loan and lending organization comply with statutory requirements and Program rules and all agreements between the ACA and lending organization.
11. Limits, to a maximum of 25 percent of the principal amount, fund monies used by a lending organization to fund a Program applicant loan, unless the ACA sets a higher cap by rule.
12. Allows a lending organization to charge application, commitment and loan guarantee fees according to a schedule of fees the lending organization adopts and that ACA approves for Program loans.
13. Prohibits a lending organization from charging an application fee for a Program loan of less than $5,000.
14. Requires the ACA to:
a) by January 1, 2021, study factors related to increasing the number of microfinance lenders in Arizona; and
b) by July 1, 2021, submit a report of its findings and recommendations to the Governor, the President of the Senate and the Speaker of the House of Representatives and provide a copy of the report to the Secretary of State.
15. Defines microbusiness as a business that is resident in Arizona, is independently owned and operated and employs five or fewer people.
16. Ends the Program on July 1, 2030.
17. Becomes effective on the general effective date.
Prepared by Senate Research
February 18, 2020
LB/JDP/gs