STAND. COM. REP. NO. 2386

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 2419
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred S.B. No. 2419 entitled: 

     "A BILL FOR AN ACT RELATING TO CAPITAL ACCESS PROGRAM,"

begs leave to report as follows:

     The purpose of this measure is to establish a capital access
program in Hawaii to encourage small business lending.

     Your Committee received testimony in support of this measure
from the Department of Business, Economic Development, and
Tourism (DBEDT).  Informational testimony was presented by the
Department of Commerce and Consumer Affairs.

     This measure also establishes a reserve fund which allows a
lending bank to make loans with a slightly higher risk than under
the bank's conventional underwriting standards.  The bank and the
borrower pay an up-front insurance premium which goes into the
reserve fund held at the originating bank.  The State matches the
combined bank and borrower contribution with a deposit into the
same reserve fund.

     Your Committee finds that capital access programs, first
launched by Michigan in 1986, are operated by states to encourage
small business lending in a cost-efficient and simple manner.
Your Committee further finds that small business lending should
be encouraged in Hawaii and the State has a responsibility to
stimulate such lending.


 
a                                                     SB2419 SD1
                                   STAND. COM. REP. NO. 2386
                                   Page 2


     Your Committee has amended this measure by:

     (1)  Eliminating the capital access fund and instead using
          the existing Hawaii capital loan revolving fund;

     (2)  Changing responsibility for the fund from the
          Department of Commerce and Consumer Affairs to DBEDT;

     (3)  Deleting the requirement that a "small business" or a
          "nonprofit organization" have at least fifty-one
          employees located in Hawaii;

     (4)  Clarifying that a financial institution must certify,
          if applicable, that the borrower is an eligible
          enterprise zone business;

     (5)  Reducing from $150,000 to $100,000 the maximum amount
          to be deposited by DBEDT into a reserve account;

     (6)  Deleting the provision allowing DBEDT to withdraw from
          the financial institution's reserve account when the
          financial institution has not made a capital access
          loan within the preceeding twenty-four months; and

     (7)  Making technical, nonsubstantive changes to reflect
          preferred drafting style.

     As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 2419, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as S.B.
No. 2419, S.D. 1, and be referred to the Committee on Ways and
Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Commerce and
                                   Consumer Protection,



                                   ______________________________
                                   BRIAN KANNO, Co-Chair



                                   ______________________________
                                   BRIAN T. TANIGUCHI, Co-Chair

 
a                                                     SB2419 SD1