Report Title:

Commercial and Personal Loan Program; Disaster Assistance.

Description:

Provides for variable interest rates below the applicable Small Business Administration rates; increases loan amounts; allows for remediation/mitigation; adjusts loan application deadlines; and makes other housekeeping changes to the State Disaster Commercial and Personal Loan Program.

THE SENATE	S.B. NO.	2984
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO DISASTER LOANS.

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

     SECTION 1.  The legislature finds that there exists a continual need to make available funds for disaster relief and rehabilitation through commercial and personal loans after it has been determined and declared by the Governor that a disaster has occurred.  Loan funds are used to rehabilitate businesses, individuals, and families to nearly as possible their pre-disaster level.  This disaster loan program has resulted in immediate and effective relief for disaster victims.

The purpose of this Act is to amend sections of part III, chapter 209, Hawaii Revised Statutes in order to implement the following changes: (1) conform to the revised Small Business Administration Disaster Loan Program, (2) allow for the remediation of damaged real property, (3) set loan application deadlines, (4) increase loan ceiling for individuals and businesses to $50,000 and $100,000, respectively, (5) set loan interest rate at 1.0% below Small Business Administration’s interest rate, (6) delete provisions for the transfer of funds from other state loan programs that are no longer funded, and (7) make other technical and non-substantive changes.

     SECTION 2.  Section 209-26, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  For purposes of this section, "financial institution" means any organization authorized to do business under state or federal laws relating to financial institutions, including without limitation, banks, savings banks, savings and loan companies or associations, financial services loan companies, and credit unions.  It also means any federal agency authorized to provide disaster loans or other disaster assistance, including, but not limited to, the Small Business Administration, the Department of Agriculture, the Department of Commerce and the Department of Homeland Security."

     SECTION 3.  Section 209-27, Hawaii Revised Statutes, is amended to read as follows:

"§209-27  Types of loans; participation.  The director of business, economic development, and tourism may make two types of loans:

     (1)  Loans in participation with private financial institutions to be known as [participating] participation loans; and which may be required before a direct loan can be made; and

     (2)  Loans wholly from state funds to be known as direct loans.

The director may negotiate contracts with private financial institutions upon reasonable terms for the participation of the institutions with the State in the making of loans pursuant to this part including but not limited to a term by which the financial institutions undertake to service the loan.  The participation agreement shall provide that at least ten per cent of the total loan be comprised of funds from the private financial institution.  The private financial institution's share of the disbursement of funds of any loan shall be the same percentage agreed upon for its participation in the total amount of that loan.  [No direct loan shall be made unless a participating loan cannot be negotiated at reasonable terms.]"

     SECTION 4.  Section 209-28, Hawaii Revised Statutes, is amended to read as follows:

     "§209-28  Purpose of loans.  (a)  Commercial loans may be made for the following purposes:  to purchase inventory, equipment, and machinery; to construct, repair, or restore buildings; to provide operating funds; and to refinance outstanding business loans on equipment and buildings; provided that the loans shall be used to rehabilitate the business of the disaster victim as nearly as possible to its predisaster level[;], including remediation or other measures intended to prevent damage to property from subsequent disasters; and provided further that the loans shall not be used to begin a business substantially different from the one the disaster victim was engaged in before the state disaster.  Business concerns which were [nonowners] tenants or lessees of buildings before the state disaster shall not be precluded from obtaining building loans under this part.

     (b)  Personal loans may be made for the purpose of repairing residential property, including remediation or other measures intended to prevent damage to property from subsequent disasters, meeting necessary expenses, or to satisfy serious needs of individuals and families including reciprocal beneficiaries which arose as an immediate and direct result of a disaster."

     SECTION 5.  Section 209-29, Hawaii Revised Statutes, is amended to read as follows:

     "§209-29  Eligibility for loans.  Loans may be made to individuals, partnerships, limited liability companies, joint ventures, corporations, cooperatives, or other business associations, but only if the applicant:

(1)  Has submitted a loan application within six months of the state declaration of a disaster or within three months of the denial of a loan application made to a federal agency in the case of a federally declared disaster, or whichever is later;

    [(1)] (2)  Suffered loss of or damage to property in a rehabilitation area as a result of a state disaster;

    [(2)] (3)  For a commercial loan, had operated an industrial, manufacturing, processing, wholesaling, or retailing business, or professional or service business, or building rental business, immediately before the disaster;

    [(3)](4)  Presents a suitable program for:

          (A)  Rehabilitation or re-establishment of the applicant's business to its predisaster level when applying for a commercial loan; or

          (B)  Meeting necessary expenses and satisfying the serious needs of the applicant and the applicant's family including reciprocal beneficiary when applying for a personal loan;

    [(4)] (5)  Has reasonable ability to repay the loan; and

    [(5)] (6)  For a commercial loan, presents written evidence that the Small Business Administration or other federal agency had declined an application for financial assistance under [the Small Business Administration] its disaster loan program or has reduced the amount of the loan request[;] to a level below that needed to repair the damage; provided that the declination was not due to the applicant's having sufficient financial resources to rehabilitate the applicant; or

    [(6)] (7)  For a commercial loan, cannot secure any loans from [the Small Business Administration Disaster Loan Program] a federal disaster loan program because the making of the loans is not covered by the program, and the director of business, economic development, and tourism is reasonably satisfied that the applicant is not able to secure loans from private lending institutions and does not have sufficient financial resources to rehabilitate the applicant.

     Paragraph [(6)] (7) shall be applied in the alternative with respect to paragraph [(5)] (6) of this section."

     SECTION 6.  Section 209-30, Hawaii Revised Statutes, is amended to read as follows:

     "§209-30  Terms.  (a)  No loan shall include any portion or item of loss covered by a contract of insurance or for which the applicant receives assistance from any other federal, state, or county program of disaster relief[,] in an amount equal to the amount of damage sustained, and the amount of loans to any one applicant shall in no case exceed [$75,000] $100,000 for a commercial loan and [$35,000] $50,000 for a personal loan.

     (b)  No loan shall be made for a term exceeding twenty years.

     (c)  Each loan shall bear simple interest at [the] a rate of [five per cent a year] one per cent below the then current applicable rate set by the Small Business Administration Disaster Loan Program for direct loans and the State's share of [participating] participation loans.

     (d)  The commencement date for the repayment of the first installment on principal only for each loan may be deferred for a period of six months from the date of the loan."

     SECTION 7.  Section 209-34, Hawaii Revised Statutes, is amended to read as follows:

     "§209-34  State disaster revolving loan fund.  [(a)]  There is established the state disaster revolving loan fund into which shall be deposited all moneys appropriated by the legislature to the fund, contributed or transferred to the fund, and received as repayment of loans and interest payments as provided in this part, and from which the director of business, economic development, and tourism may make loans in accordance with this part.

     [(b)  The director may transfer moneys from the state disaster revolving loan fund established by this section to either the Hawaii capital loan revolving fund established by section 210-3 or the Hawaii innovation development fund established by section 211E-2.  Moneys from the Hawaii capital loan revolving fund established by section 210-3, the Hawaii innovation development loan revolving fund established by section 211E-2, and the state disaster revolving loan fund shall be disbursed by the department or the director pursuant to chapters 209, 210, and 211E, respectively.  The department or the director may transfer moneys from the Hawaii capital loan revolving fund and the Hawaii innovation development fund to the state disaster revolving loan fund for disbursement pursuant to this chapter.

(c)  The total amount of moneys transferred to the state disaster revolving loan fund, the Hawaii capital loan revolving fund, or the Hawaii innovation development fund shall not exceed $1,000,000 for each respective fund within the calendar year.

(d)  Notwithstanding subsection (c) to the contrary, the total amount of moneys transferred between the state disaster revolving loan fund and the Hawaii capital loan revolving fund or the Hawaii innovation development fund shall not exceed $1,000,000 within the calendar year if the governor proclaims a state disaster pursuant to section 209-2.

(e)  The director shall report any transfer of funds made under this section to the legislature within ten days of the transfer.

(f)  All unexpended and unencumbered moneys remaining in the state disaster revolving loan fund at the close of each fiscal year, which are deemed by the director of finance to be in excess of the moneys necessary to carry out the purposes of this section over the next following fiscal year, shall lapse to the credit of the general fund.]"

     SECTION 8.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 9.  This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________
	BY REQUEST