a) (Definitions). 

i) “Micro-finance lending organization” means any of the following: small business lending consortia, certified development companies, providers of United States Department of Agriculture business and industrial guaranteed loans, United States Small Business Administration loan providers, credit unions and community banks.

ii) “Micro-business” means a business that is resident in [STATE], independently owned and operated, and employs five or fewer people.

b) (Establishment). The micro-business revolving loan fund program is hereby created within the [DEPARTMENT, such as Department of Community and Economic Development]. 

c) (Program). The Department is directed, subject to appropriations, to establish a [$5-10 million] micro-business revolving loan fund, to provide low interest loans to community development financial institutions, in order to provide funding for those lending organizations’ loans to micro-businesses located within [STATE], that generate economic growth and job creation within [STATE] but that are unable to obtain adequate credit or adequate terms for such credit. If the use of a community development financial institution is not practicable, then low interest loans may be provided to other local, community based lending organizations. The Department shall promulgate regulations to effectuate the purposes of this Act.

d) (Eligibility). In order for a micro-finance lending organization to be eligible to receive program funds, it must have established sufficient expertise to analyze micro-businesses’ applications for program loans, evaluate the creditworthiness of micro-businesses, and regularly monitor program loans. The micro-finance lending organization shall review every program loan application in order to determine, among other things, the feasibility of the proposed use of the requested financing by the micro-business applicant, the likelihood of repayment and the potential that the loan will generate economic development and jobs within [STATE]. The Department shall identify eligible lending organizations through one or more competitive statewide or local solicitations.

e) (Loan availability).

i) Program loans to micro-businesses shall be marketed to micro-businesses that are having difficulty accessing traditional credit markets including veteran-, minority-,  and women-owned enterprises. Program loans to micro-businesses shall be used for the creation and retention of jobs, as defined by the Department, including:

1) working capital; 

2) the acquisition or improvement of real property;

3) the acquisition of machinery and equipment, property or improvement; or 

4) the refinancing of debt obligations.

ii) There shall be two categories of loans to micro-businesses: a micro loan that shall have a principal amount that is less than twenty-five thousand dollars and a regular loan that shall have a principal amount not less than twenty-five thousand dollars. Prior to receiving program funds, the micro-finance lending organization must certify to the Department that such loan complies with this section and rules and regulations promulgated for the program and that the micro-finance lending organization has performed its obligations pursuant to and is in compliance with this section, the program rules and regulations and all agreements entered into between the Department and the micro-finance lending organization.

iii)The program funds amount used by the lending organization to fund a program applicant loan shall not be more than fifty [50] percent of the principal amount of such loan, and a higher cap may be set by the Department.

f) With respect to its program loans, the community development financial institution or micro-finance lending organization may charge application, commitment and loan guarantee fees pursuant to a schedule of fees adopted by the community development financial institution or micro-finance  lending organization and approved by the Department. Approved micro-loans for five thousand dollars or less shall have application fees waived.

g) The Department is also hereby directed within 60 days to commence a study into the factors related to increasing the number of micro-finance lending organizations  in [STATE]. A report shall be issued within one year of the effective date of this bill on the findings of the study and any recommendations the Department may have.

h) This Act shall take effect immediately.

i) The provisions of this Act are severable. If any provision of this Act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.