South Carolina General Assembly
116th Session, 2005-2006

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H. 3157

STATUS INFORMATION

General Bill
Sponsors: Reps. Harrell, Chellis, Barfield, Wilkins, G.R. Smith, Leach, Kirsh, Bailey, Battle, Rice, Hinson, Clark, Walker, Cobb-Hunter and Sandifer
Document Path: l:\council\bills\bbm\10458mm05.doc

Introduced in the House on January 11, 2005
Introduced in the Senate on February 15, 2005
Last Amended on February 10, 2005
Currently residing in the Senate Committee on Judiciary

Summary: CAP Bill

HISTORY OF LEGISLATIVE ACTIONS

     Date      Body   Action Description with journal page number
-------------------------------------------------------------------------------
  12/15/2004  House   Prefiled
  12/15/2004  House   Referred to Committee on Labor, Commerce and Industry
   1/11/2005  House   Introduced and read first time HJ-104
   1/11/2005  House   Referred to Committee on Labor, Commerce and Industry 
                        HJ-105
    2/9/2005  House   Committee report: Favorable with amendment Labor, 
                        Commerce and Industry HJ-3
   2/10/2005  House   Amended HJ-21
   2/10/2005  House   Read second time HJ-21
   2/10/2005  House   Unanimous consent for third reading on next legislative 
                        day HJ-22
   2/11/2005  House   Read third time and sent to Senate HJ-1
   2/15/2005  Senate  Introduced and read first time SJ-8
   2/15/2005  Senate  Referred to Committee on Judiciary SJ-8
   2/15/2005  Senate  Referred to Subcommittee: Gregory (ch), Elliott, 
                        Anderson, Ritchie, Cleary

View the latest legislative information at the LPITS web site

VERSIONS OF THIS BILL

12/15/2004
2/9/2005
2/10/2005

(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

Indicates Matter Stricken

Indicates New Matter

AMENDED

February 10, 2005

H. 3157

Introduced by Reps. Harrell, Chellis, Barfield, Wilkins, G.R. Smith, Leach, Kirsh, Bailey, Battle, Rice, Hinson, Clark, Walker, Cobb-Hunter and Sandifer

S. Printed 2/10/05--H.

Read the first time January 11, 2005.

            

A BILL

TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING ARTICLE 10 TO CHAPTER 37 OF TITLE 33 SO AS TO ESTABLISH A CAPITAL ACCESS PROGRAM PROVIDING FOR FLEXIBILITY IN THE MAKING OF LOANS BY FINANCIAL INSTITUTIONS TO SMALL BUSINESSES WHO FAIL TO QUALIFY FOR CONVENTIONAL OR OTHER GUARANTEED OR ASSISTED FINANCING, AND TO PROVIDE FOR FUNDING OF A LOAN LOSS RESERVE TO REPAY PARTICIPATING FINANCIAL INSTITUTIONS WHO SUFFER A LOSS ON A LOAN, ADMINISTRATION OF THE PROGRAM BY BUSINESS DEVELOPMENT CORPORATION OF SOUTH CAROLINA, GUIDELINES FOR SELECTING LOAN RECIPIENTS, RECORDKEEPING AND REPORTING, AND DISTRIBUTION OF RESERVE FUNDS UPON TERMINATION OF INSTITUTIONAL PARTICIPATION OR THE CAPITAL ACCESS PROGRAM ITSELF; TO AMEND SECTION 33-37-460, AS AMENDED, RELATING TO LIMITATIONS ON A LOAN TO A CORPORATION BY A MEMBER, SO AS TO PROVIDE FOR A REFERENCE TO THE LOAN CALL AGREEMENT AND TO DISALLOW A LOAN THAT RESULTS IN OBLIGATIONS THAT EXCEED TEN TIMES THE GREATER OF THE NET WORTH OF THE CORPORATION OR THE AMOUNT PAID IN ON OUTSTANDING CAPITAL STOCK; AND TO AMEND SECTION 33-37-465, RELATING TO A SHORT-TERM LOAN TO A CORPORATION BY A MEMBER, SO AS TO PROVIDE THAT THE LIMITATIONS AND RESTRICTIONS DO NOT APPLY TO A SHORT-TERM LOAN.

Amend Title To Conform

Be it enacted by the General Assembly of the State of South Carolina:

SECTION    1.    Chapter 37, Title 33 of the 1976 Code is amended by adding:

"Article 10

Capital Access Program

Section 33-37-1010.    For purposes of this article:

(1)    'CAP' means the capital access program created in this article.

(2)    'BDC' means Business Development Corporation of South Carolina.

(3)    'Financial institution' means a bank, trust company, savings bank, savings and loan association, or cooperative bank chartered by the State or a national banking association, federal savings and loan association, or federal savings bank, if that financial institution has offices located in South Carolina.

(4)    'Participating financial institution' means a financial institution participating in the capital access program.

(5)    'Small business' means:

(a)    a retail or service business with annual sales not exceeding two million dollars;

(b)    a wholesale business with annual sales not exceeding five million dollars;

(c)    a manufacturing business with no more than fifty employees; or

(d)    another business with annual revenue not exceeding two million dollars.

(6)    'State fund' and 'state fund account' means the funds appropriated by the General Assembly of South Carolina for the CAP, provided to BDC as custodian for the State of South Carolina, and deposited by BDC into one or more interest-bearing trust accounts maintained by it as custodian for the State of South Carolina.

(7)    'Loss reserve account' means one or more interest-bearing trust accounts maintained by BDC for holding and administering the loan loss reserve pursuant to this article.

Section 33-37-1020.    (A)    Upon appropriation of funds by the General Assembly for the CAP in the minimum initial sum of two million five hundred thousand dollars, those funds and funds resulting from later appropriations to the state fund must be provided to BDC for deposit in the state fund account.

(B)    BDC shall establish the CAP to provide a loan loss reserve from the state fund to assist participating financial institutions making loans to small businesses located in South Carolina that otherwise find it difficult to obtain regular bank financing.

(C)    The assistance must be provided by BDC through transfers by it from a state fund account into a loss reserve account maintained by, in the name of, and controlled by BDC as custodian to provide loan loss reserves for loans made to those small businesses.

Section 33-37-1030.    A financial institution desiring to become a participating financial institution shall execute an agreement in a form BDC prescribes, containing the terms and provisions provided in Section 33-37-1040 and other terms and provisions BDC considers necessary or appropriate.

Section 33-37-1040.    A participating financial institution originating a loan to a small business pursuant to this article shall:

(1)    use its existing business and banking network to market and perpetuate the CAP so as to promote economic development among small businesses in South Carolina;

(2)    provide financing to small businesses for their business purposes including, without limitation, expansion, start-up, purchase of fixed assets or inventory, facility or technology upgrading, and working capital;

(3)    limit loans outstanding to one small business borrower pursuant to this article and the CAP to an aggregate balance outstanding of two hundred fifty thousand dollars or a lesser amount the BDC determines, in the exercise of its discretion for the benefit of the CAP and the small business community at large in this State;

(4)    limit loans made pursuant to this article and under the CAP to those that are not guaranteed or otherwise assisted by another governmental entity or program;

(5)    set aside an amount of at least one and one-half percent but no more than three and one-half percent of the principal amount of the loan, into the loss reserve account;

(6)    obtain from the small business an amount equal to the reserve contribution made by the participating financial institution with respect to the loan;

(7)    forward the funds collected and determined pursuant to items (5) and (6) of this section to BDC for deposit into the loss reserve account together with a written report in the form and with the content BDC prescribes; and

(8)    report annually to BDC, in the manner and with the supporting information BDC prescribes, the outstanding balance of loans made by it pursuant to the CAP, and a projection and estimate of loans it anticipates making pursuant to the program in the succeeding year.

Section 33-37-1050.    After receipt of the funds and report provided in Section 33-37-1040(7) of this article, BDC shall transfer from the state fund account to the loss reserve account an amount equal to one hundred fifty percent of the total of the contributions of the participating financial institution and the small business. BDC shall maintain accurate records to determine the allocation and allocable share of each participating financial institution in and to the loan loss reserves in the loss reserve account and shall provide a report of the allocation to each participating financial institution annually. BDC also shall provide the report to a participating financial institution upon its written request during the year, but not more often than quarterly, and to the South Carolina Department of Commerce quarterly. In addition, the BDC shall provide an internal quarterly report on the project job creation and capital investment associated with each loan.

Section 33-37-1060.    If the participating financial institution suffers a loss on a loan made pursuant to the CAP and this article, it may request that all or a portion of its allocated loan reserve in the loss reserve account be applied to the loan. Upon receipt by BDC of a certification of loss by the participating financial institution, BDC shall release the funds in the account to repay the loan in whole or in part, in an amount not to exceed the actual loss incurred by the participating financial institution. BDC shall prescribe the form and content of the certification report.

Section 33-37-1070.    Earnings or interest from the principal of the state fund account and the loss reserve account must be paid monthly to BDC:

(1)    as compensation for its administration and management of the CAP and the accounts; and

(2)    for economic development in South Carolina for the purposes and within the meanings set forth in this chapter and in the corporate charter of BDC.

Section 33-37-1080.    If a participating financial institution that elects to discontinue its participation in the CAP has funds on deposit in the loss reserve account, the funds must be forfeited by the institution to the state fund and used in the CAP as loss reserves as provided in this article.

Section 33-37-1090.    An independent certified public accountant, as elected annually by the board of directors of the BDC, shall conduct an annual certified audit of its management, administration, and recordkeeping in connection with the CAP and provide the audit to the South Carolina Board of Financial Institutions upon its request, the General Assembly upon its request, and the South Carolina Department of Commerce. Annual reports to the South Carolina Department of Commerce and the General Assembly also must include projected capital investment and job creation associated with each CAP loan provided.

Section 33-37-1100.    If a loan is not made by participating financial institutions for three consecutive years and the General Assembly does not appropriate additional funds for the program for those three consecutive years, BDC may pay over to the participating financial institutions their allocable shares of funds in the loss reserve account and pay over to the State of South Carolina, as directed by the South Carolina Board of Financial Institutions, funds held in the state fund account."

SECTION    2.    Section 33-37-460(2) and (3) of the 1976 Code, as last amended by Act 234 of 2000, is further amended to read:

"(2)    A loan to the corporation under the loan call agreement may not be made if, immediately after the loan, the total amount of the obligations of the corporation under the loan call agreement exceeds ten times the greater of the net worth of the corporation or the amount then paid in on the outstanding capital stock of the corporation.

(3)    The total amount outstanding on loans to the corporation made by a member at any one time, when added to the amount of the investment in capital stock of the corporation then held by the member, under the loan call agreement may not exceed:

(a)    ten percent of the total amount then outstanding on loans to the corporation by all members, including in the total amount outstanding amounts validly called for loan but not yet loaned or committed, or both, under the loan call agreement; or

(b)    any federal or state statutory or regulatory limitations applicable to the members."

SECTION    3.    Section 33-37-465 of the 1976 Code, as added by Act 234 of 2000, is amended to read:

"Section 33-37-465.    A member may make short-term loans to the corporation independently of the loan calls made pursuant to Section 33-37-460, except that the aggregate of the outstanding balance of the short-term loans and the outstanding amount of a loan call to that member may not exceed the statutory and regulatory limitations as provided in Section 33-37-460. These short-term loans are not subject to the limitations and restrictions described in Section 33-37-460. When the purpose of the short-term loan is to provide funds to the corporation for disbursement of a loan, the corporation may grant to the member funding the short-term loan a security interest in or collateral assignment of the loan on the condition that the security interest or collateral assignment is terminated upon payment of the short-term loan."

SECTION    4.    This act takes effect upon approval by the Governor.

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