REPORT TITLE:
Hawaii capital loan program


DESCRIPTION:
Extends the business loan guarantee program and the neighbor
island preferential business loan interest rate under the Hawaii
capital loan program.  (HB1020 HD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1020
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE HAWAII CAPITAL LOAN PROGRAM.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds it necessary to amend Act
 
 2 311, Session Laws of Hawaii 1996; Act 104, Session Laws of Hawaii
 
 3 1998; and Act 118, Session Laws of Hawaii 1998, to provide
 
 4 appropriate effective dates for the implementation of the
 
 5 business loan guarantee program and an extension of the effective
 
 6 date for the neighbor island preferential business loan interest
 
 7 rate.
 
 8      SECTION 2.  Section 210-6, Hawaii Revised Statutes, shall be
 
 9 amended to read as follows:
 
10      "210-6 Direct loans, terms, and restrictions.(a)  The
 
11 department of business, economic development, and tourism may
 
12 make loans to small business concerns for the financing of plant
 
13 construction, conversion, expansion, the acquisition of land for
 
14 expansion, the acquisition of equipment, machinery, supplies, or
 
15 materials, or for the supplying of working capital.  The loans
 
16 may be made in conjunction with loans made by other financial
 
17 institutions, including the Small Business Administration.  Where
 
18 the loans made by the department are secured, the security may be
 
19 subordinated to the loans made by other financial institutions,
 

 
Page 2                                                     1020
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1 when the subordination is required to obtain loans from such
 
 2 institutions.  The necessity for and the extent of security
 
 3 required in any loan shall be determined by the director of
 
 4 business, economic development, and tourism.
 
 5      (b)  The department may make loans to business concerns
 
 6 located in a county with a population of less than 150,000;
 
 7 provided that the interest on loans made under this subsection
 
 8 shall bear simple interest at the rate of three per cent below
 
 9 the prime rate or at a rate of five and one-half per cent a year,
 
10 whichever is lower.  For purposes of this subsection, the prime
 
11 rate shall be determined on January 1 and July 1 of each year,
 
12 and shall be the rate charged by the two largest banks in the
 
13 State of Hawaii identified by the department of commerce and
 
14 consumer affairs.  Should there be a difference in rate charged
 
15 by the institutions, the lower of the two shall be used.
 
16 Payments required under loans made under this subsection may be
 
17 deferred, but no loans made under this subsection shall be
 
18 forgiven.
 
19      (c)  Except as may be expressly provided otherwise for loans
 
20 made under subsection (b), the foregoing powers shall be subject
 
21 to the following restrictions and limitations:
 
22      (1)  No loans shall be granted unless financial assistance
 
23           is not available to the applicant.  The condition may
 

 
Page 3                                                     1020
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           be waived by the director for participation loans or
 
 2           loan guarantees with a private financial institution;
 
 3      (2)  The amount of the loan or loans to any one applicant at
 
 4           any one time shall in no case exceed a total of
 
 5           $1,000,000;
 
 6      (3)  No loan shall be made for a term exceeding twenty
 
 7           years;
 
 8      (4)  Within counties of population exceeding 150,000, each
 
 9           loan shall bear simple interest at a rate of one per
 
10           cent below the prime rate or at a rate of seven and
 
11           one-half per cent a year, whichever is lower.  For
 
12           purposes of this paragraph, the prime rate shall be
 
13           determined on January 1 and July 1 of each year, and
 
14           shall be the rate charged by the two largest banks in
 
15           the State identified by the department of commerce and
 
16           consumer affairs.  Should there be a difference in rate
 
17           charged by the institutions, the lower of the two shall
 
18           be used;
 
19      (5)  The commencement date for the repayment of the first
 
20           installment on the principal of each loan may be
 
21           deferred by the director, but in no event shall such
 
22           initial payment be deferred in excess of five years;
 
23           and
 

 
Page 4                                                     1020
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      (6)  The payment of interest on the principal of a loan may
 
 2           be deferred by the director, but in no event shall
 
 3           interest payments be deferred in excess of two years
 
 4           from the date of issuance of the loan.
 
 5      (d)  Except as may be expressly provided otherwise for loans
 
 6 made under subsection (b), any restriction or limitation in
 
 7 subsection (c) may be waived at the director's discretion where
 
 8 the applicant is a reuse or recycling business that meets the
 
 9 following criteria:
 
10      (1)  The business has potential to have an impact on overall
 
11           solid waste reduction and achievement of the State's
 
12           reduction goals;
 
13      (2)  The business addresses the alternative management of
 
14           wastes identified by the solid waste disposal facility
 
15           operators as problematic;
 
16      (3)  The business maximizes economic benefits through import
 
17           reduction or an increase in the tax base;
 
18      (4)  The business has potential for job creation; and
 
19      (5)  The business has a plan that accurately reflects
 
20           detailed and justifiable expenses and revenues, shows
 
21           potential for profit, and an ability to meet market
 
22           demand for end products.
 

 
 
 
Page 5                                                     1020
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      (e)  The department may contract with any financial
 
 2 institution for services including servicing or administering
 
 3 loans pursuant to this section.
 
 4      (f)  For purposes of this section, "financial institution"
 
 5 means any organization authorized to do business under state or
 
 6 federal laws relating to financial institutions, including
 
 7 without limitation, banks, savings banks, savings and loan
 
 8 companies or associations, financial services loan companies, and
 
 9 credit unions."
 
10      SECTION 3.  Act 311, Session Laws of Hawaii 1996, is amended
 
11 by amending section 4 to read as follows:
 
12      "SECTION 4.  This Act shall take effect on July 1, 1996[,
 
13 and shall be repealed on June 30, 1999; provided that section
 
14 210-6, Hawaii Revised Statutes, is reenacted in the form in which
 
15 it read on the day before the approval of this Act]."
 
16      SECTION 4.  Act 104, Session Laws of Hawaii 1998, is amended
 
17 by amending section 6 to read as follows:
 
18      "SECTION 6.  This Act shall take effect on July 1, 1998[;
 
19 provided that section 4 of this Act shall be repealed on June 30,
 
20 2000, and section 210-6(c), Hawaii Revised Statutes, is reenacted
 
21 as it appeared on July 2, 1996]."
 
22      SECTION 5.  Act 118, Session Laws of Hawaii 1998, is amended
 
23 as follows:
 

 
Page 6                                                     1020
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      1.  By amending section 11 to read as follows:
 
 2      "SECTION 11.  This Act shall take effect upon its approval;
 
 3 provided that:
 
 4     [(1)] Part I shall take effect on July 1, 1998, and shall be
 
 5           repealed on June 30, 2000[; and
 
 6      (2)  Section 7 shall take effect on July 1, 1999.]"
 
 7      2.  By repealing section 7.
 
 8      ["SECTION 7.  Section 210-6, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "210-6 Direct loans, terms, and restrictions.(a)  The
 
11 department of business, economic development, and tourism may
 
12 make loans to small business concerns for the financing of plant
 
13 construction, conversion, expansion, the acquisition of land for
 
14 expansion, the acquisition of equipment, machinery, supplies, or
 
15 materials, or for the supplying of working capital.  The loans
 
16 may be made in conjunction with loans made by other financial
 
17 institutions, including the Small Business Administration.  Where
 
18 the loans made by the department are secured, the security may be
 
19 subordinated to the loans made by other financial institutions,
 
20 when the subordination is required to obtain loans from such
 
21 institutions.  The necessity for and the extent of security
 
22 required in any loan shall be determined by the director of
 
23 business, economic development, and tourism.
 

 
Page 7                                                     1020
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      (b)  The foregoing powers shall be subject, however, to the
 
 2 following restrictions and limitations:
 
 3      (1)  No loans shall be granted unless financial assistance
 
 4           is not available to the applicant.  The condition may
 
 5           be waived by the director for participation loans with
 
 6           a private financial institution;
 
 7      (2)  The amount of the loan or loans to any one applicant at
 
 8           any one time shall in no case exceed a total of
 
 9           $1,000,000;
 
10      (3)  No loan shall be made for a term exceeding twenty
 
11           years;
 
12      (4)  Each loan shall bear simple interest at a rate of one
 
13           per cent below the prime rate or at a rate of seven and
 
14           one-half per cent a year, whichever is lower.  For
 
15           purposes of this paragraph, the prime rate shall be
 
16           determined on January 1 and July 1 of each year, and
 
17           shall be the rate charged by the two largest banks in
 
18           the State of Hawaii identified by the department of
 
19           commerce and consumer affairs.  Should there be a
 
20           difference in rate charged by the institutions, the
 
21           lower of the two shall be used;
 
22      (5)  The commencement date for the repayment of the first
 
23           installment on the principal of each loan may be
 

 
Page 8                                                     1020
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           deferred by the director, but in no event shall such
 
 2           initial payment be deferred in excess of five years;
 
 3           and
 
 4      (6)  The payment of interest on the principal of a loan may
 
 5           be deferred by the director, but in no event shall
 
 6           interest payments be deferred in excess of two years
 
 7           from the date of issuance of the loan.
 
 8      (c)  Any restriction or limitation in subsection (b) may be
 
 9 waived at the director's discretion where the applicant is a
 
10 reuse or recycling business that meets the following criteria:
 
11      (1)  The business has potential to have an impact on overall
 
12           solid waste reduction and achievement of the State's
 
13           reduction goals;
 
14      (2)  The business addresses the alternative management of
 
15           wastes identified by the solid waste disposal facility
 
16           operators as problematic;
 
17      (3)  The business maximizes economic benefits through import
 
18           reduction or an increase in the tax base;
 
19      (4)  The business has potential for job creation; and
 
20      (5)  The business has a plan that accurately reflects
 
21           detailed and justifiable expenses and revenues, shows
 
22           potential for profit, and an ability to meet market
 
23           demand for end products.
 

 
Page 9                                                     1020
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      (d)  The department may contract with any financial
 
 2 institution for services including servicing or administering
 
 3 loans pursuant to this section.
 
 4      (e)  For purposes of this section, "financial institution"
 
 5 means any organization authorized to do business under state or
 
 6 federal laws relating to financial institutions, including
 
 7 without limitation, banks, savings banks, savings and loan
 
 8 companies or associations, financial services loan companies, and
 
 9 credit unions."]
 
10      SECTION 6.  Statutory material to be repealed is bracketed.
 
11 New statutory material is underscored.
 
12      SECTION 7.  This Act shall take effect on June 29, 1999.