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HOUSE BILL NO. 302
INTRODUCED BY B. KRENZLER
AN ACT REQUIRING ALL INTEREST EARNED ON DEVELOPMENT LOANS TO MICROBUSINESS DEVELOPMENT CORPORATIONS TO BE DEPOSITED INTO THE MICROBUSINESS FINANCE PROGRAM ADMINISTRATIVE ACCOUNT; ALLOWING A MICROBUSINESS DEVELOPMENT CORPORATION TO CHOOSE THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT FOR ITS ANNUAL AUDIT; CLARIFYING THAT THE DEPARTMENT OF COMMERCE HAS A FIRST LIEN ON ALL FUNDS AND RECEIVABLES OF A MICROBUSINESS DEVELOPMENT CORPORATION RECEIVING A DEVELOPMENT LOAN; AND AMENDING SECTION 17-6-407, MCA.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Section 17-6-407, MCA, is amended to read:
"17-6-407. Microbusiness development loan account and finance program administrative account -- criteria --
limitations. (1) There is in the state special revenue fund a microbusiness development loan account into which the funds
appropriated pursuant to section 11, Chapter 602, Laws of 1991, money appropriated pursuant to section 3, Chapter 413,
Laws of 1995, and money received in repayment of the principal of development loans must be deposited. The department
may make development loans from the account
in amounts not to exceed $250,000 a loan to a certified microbusiness
(2) There is in the state special revenue fund a microbusiness finance program administrative account into which must be deposited:
(a) all interest received on development loans received directly from microbusiness development corporations
(b) service charges or fees received from certified microbusiness development corporations
(c) grants, donations, and private or public income
must be deposited.
(3) Money in the administrative account may be transferred to the development loan account or be used to pay the costs of the program, including personnel, travel, equipment, supplies, consulting costs, and other operating expenses of the program.
(3)(4) Subject to subsection (1), a certified microbusiness development corporation that receives a development loan
may apply for an additional loan if the applicant meets the performance criteria established by the department. (4)(5) To establish the criteria for making development loans, the department shall consider:
(a) the plan for providing services to microbusinesses;
(b) the scope of services to be provided by the certified microbusiness development corporation;
(c) the geographic representation of all regions of the state, including both urban and rural communities;
(d) the plan for providing service to minorities, women, and low-income persons;
(e) the ability of the corporation to provide business training and technical assistance to microbusiness clients;
(f) the ability of the corporation, with its plan, to:
(i) monitor and provide financial oversight of recipients of microbusiness loans;
(ii) administer a revolving loan fund; and
(iii) investigate and qualify financing proposals and to service credit accounts;
(g) sources and sufficiency of operating funds for the certified microbusiness development corporation; and
(h) the intent of the corporation, with its plan and written indications of local institutional support, to provide services to a designated multicounty region of the state.
(5)(6) Development loan funds may be used by a certified microbusiness development corporation to:
(a) satisfy matching fund requirements for other state, federal, or private funding only if funding is intended and used for the purpose of providing or enhancing the certified microbusiness development corporation's ability to provide and administer loans, technical assistance, or management training to microbusinesses;
(b) establish a revolving loan fund from which the certified microbusiness development corporation may make loans to qualified microbusinesses, provided that a single loan does not exceed $35,000 and the outstanding balance of all loans to a microbusiness or a project participated in by more than one microbusiness or to two or more microbusinesses in which any one person holds more than a 20% equity share does not exceed $35,000;
(c) establish a guarantee fund from which the certified microbusiness development corporation may guarantee loans made by financial institutions to qualified microbusinesses. However, a single guarantee may not exceed $35,000, and the aggregate of all guarantees to a microbusiness or a project participated in by more than one microbusiness or to two or more microbusinesses in which any one person holds more than a 20% equity share may not exceed $35,000.
(6)(7) Development loan funds may not be:
(a) loaned for relending or investment in stocks, bonds, or other securities or for property not intended for use in production by the recipient of the loan; or
(b) used to:
(i) refinance a nonperforming loan held by a financial institution; or
(ii) pay the operating costs of a certified microbusiness development corporation. However, interest income earned from the proceeds of a development loan may be used to pay operating expenses.
(7)(8) Certified microbusiness development corporations are required to contribute cash from other sources to leverage
and secure development loans from the program. Contributions provided by the corporation must be on a ratio of at least $1
from other sources for each $6 from the program. These contributions may come from a public or private source other than
the program and may be in the form of equity capital, loans, or grants. (8)(9) Development loans must be made pursuant to a development loan agreement and may be amortization or term
loans, bear interest at less than the market rate, be renewable, be callable, and contain other terms and conditions
considered appropriate by the department that are consistent with the purposes of and with rules promulgated to implement
this part. (9)(10) (a) Unless subject to federal law or rule, each certified microbusiness development corporation that receives a
development loan under this part shall pay the cost of an audit of its operations to be conducted at least once every 2 years.
The department shall designate an auditor to conduct the audit. (b) If an audit is performed under a requirement of federal law or rule, the department shall waive the audit required in
subsection (9)(a) with respect to all issues addressed by the federal audit report. However, the department may require an
audit of matters that are not, in the department's judgment, addressed by the federal report--for example, verification of
compliance with requirements specific to the program, such as job-generation standards and reporting. Each certified
microbusiness development corporation that receives a development loan under this part shall provide the department with
an annual audit from an independent certified public accountant. The audit must cover all of the microbusiness
development corporation's activities and must include verification of compliance with requirements specific to the
microbusiness program. (10)(11) A certified microbusiness development corporation that is in default for nonperformance under rules
established by the department may be required to refund the outstanding balance of development loans awarded prior to the
default declaration. A development loan is secured by a first lien on all funds and all the receivables of administered under
the authority of the microbusiness development act by the corporation receiving the loan."
- END -
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