Bill Text: NY S03406 | 2021-2022 | General Assembly | Introduced


Bill Title: Establishes the state of emergency small business and not-for-profit organization loan program.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2022-01-05 - REFERRED TO BANKS [S03406 Detail]

Download: New_York-2021-S03406-Introduced.html



                STATE OF NEW YORK
        ________________________________________________________________________

                                          3406

                               2021-2022 Regular Sessions

                    IN SENATE

                                    January 29, 2021
                                       ___________

        Introduced  by Sen. HARCKHAM -- read twice and ordered printed, and when
          printed to be committed to the Committee on Banks

        AN ACT to amend the executive law, in relation to establishing the state
          of emergency  small  business  and  not-for-profit  organization  loan
          program

          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:

     1    Section 1. The executive law is amended by adding a new  section  29-l
     2  to read as follows:
     3    § 29-l. State of emergency small business and not-for-profit organiza-
     4  tion  loan program. 1. Definitions. As used in this section, the follow-
     5  ing terms shall have the following meanings:
     6    (a) "Affected business or organization"  means  and  includes  both  a
     7  small  business  and  a small not-for-profit organization located within
     8  this state during a state of emergency;
     9    (b) "Bank" means a bank as such term is defined in subdivision one  of
    10  section two of the banking law;
    11    (c)  "Credit  union"  means  a credit union as such term is defined in
    12  subdivision nine of section two of the banking law;
    13    (d) "Department" means the department of financial services;
    14    (e) "Eligible financial institution" means a bank or credit union that
    15  has a physical presence in this state and is in good standing;
    16    (f) "Grace period" means the ninety-day period after a state of  emer-
    17  gency is over;
    18    (g) "Small business" means a business with not more than fifty employ-
    19  ees;
    20    (h)  "Small not-for-profit organization" means a not-for-profit organ-
    21  ization with not more than fifty employees; and
    22    (i) "State of emergency" means the period beginning with a declaration
    23  by the governor that a state of emergency exists.

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD02484-02-1

        S. 3406                             2

     1    2. State of emergency small business and  not-for-profit  organization
     2  loan  program.  (a) The department shall administer a state of emergency
     3  small business and not-for-profit loan program to guarantee  the  repay-
     4  ment  of  loans made by an eligible financial institution to an eligible
     5  affected  business or organization pursuant to this section.  Subject to
     6  the cessation of new claim approvals under paragraph (d) of  subdivision
     7  five of this section, the department shall submit all approved claims to
     8  the  comptroller, who shall pay from the general fund any and all claims
     9  submitted by the department. Claims by  affected  businesses  that  were
    10  mandatorily closed through phase three, four and five pursuant to execu-
    11  tive order 202 of two thousand twenty shall be given priority.
    12    (b)  Any  bank  or credit union may apply to the department to partic-
    13  ipate in the loan guarantee program. Not later  than  one  business  day
    14  after  receiving the application, the department shall determine whether
    15  the financial institution is an eligible financial institution and imme-
    16  diately notify the bank or  credit  union  of  such  determination.  Any
    17  eligible financial institution may make loans to affected businesses and
    18  organizations in accordance with this section.
    19    (c)  Each eligible financial institution that makes a loan pursuant to
    20  this section, shall notify the department in writing not later than  one
    21  business  day  after  making the loan, specifying such information about
    22  the borrower as the department may request.
    23    3. Loan eligibility. An eligible financial institution may make a loan
    24  to an affected business or organization, provided:
    25    (a) The affected business or organization has provided to the eligible
    26  financial institution proof satisfactory to such institution  that  such
    27  affected  business  or organization is an affected business or organiza-
    28  tion located within the state of New York.
    29    (b) The amount of the loan shall not exceed five thousand dollars.
    30    (c) The loan is made in accordance with the eligible financial  insti-
    31  tution's  underwriting  policy  and standards, provided further that the
    32  affected business or organization's  creditworthiness  shall  not  be  a
    33  factor used for the purposes of determining eligibility.
    34    (d)  The  loan  agreement  shall  not (i) require repayment during the
    35  grace period, or (ii) charge interest on the principal amount before  or
    36  during  the  grace period or for one hundred eighty days after the grace
    37  period, provided after such one hundred eighty-day period, the  eligible
    38  financial  institution  may  charge  interest or fees in accordance with
    39  such financial institution's lending policy and the terms of the  under-
    40  lying loan agreement.
    41    (e)  The  loan  agreement  shall require that the affected business or
    42  organization repay the loan in full not later than  one  hundred  eighty
    43  days  after the end of the grace period by making at least three, and no
    44  more than six, equal installment payments. The loan agreement shall  not
    45  contain  a  fee  or  penalty  for the prepayment or early payment of the
    46  loan.
    47    (f) The eligible financial institution shall offer  credit  counseling
    48  services  or  refer  such affected business or organization to nonprofit
    49  credit counselors.
    50    4. Additional loans. An affected  business  or  organization  who  has
    51  received  a loan pursuant to this section may apply to the same eligible
    52  financial institution for an additional loan for each thirty-day  period
    53  such  small  business or not-for-profit organization remains an affected
    54  business or organization, provided no affected business or  organization
    55  may  receive  more  than  three loans under the program. Each additional
    56  loan shall be made in accordance with subdivision three of this section.

        S. 3406                             3

     1    5. Collection of loans. (a) On and after one hundred eighty days  from
     2  the  end of the grace period, an eligible financial institution that has
     3  made a good-faith effort to collect the  outstanding  principal  from  a
     4  loan  issued pursuant to this section may make a claim to the department
     5  for  recovery  of  an amount equal to the outstanding principal for such
     6  loan. Prior to the department's approving and submitting a claim to  the
     7  comptroller,  such  eligible  financial institution shall demonstrate to
     8  the satisfaction of the department that the eligible financial  institu-
     9  tion  has  made a good-faith effort to collect the outstanding principal
    10  from the eligible small business or not-for-profit organization employee
    11  in accordance with  such  financial  institution's  loan  servicing  and
    12  collection policies. Upon payment of a claim, the loan shall be assigned
    13  to  the  state,  and  the  department  shall  have the right to continue
    14  collection efforts on the loan.
    15    (b) The department shall maintain records in  the  regular  course  of
    16  administration  of  the  loan  guarantee  program, including a record of
    17  loans issued and of payments made to honor loan guarantees issued  under
    18  this  section.  The  department  shall  regularly review such records to
    19  determine total loans issued and identify duplicative applications.
    20    (c) The department may terminate any loan guarantee  if  the  eligible
    21  financial  institution  misrepresents  any information pertaining to the
    22  guarantee or fails to comply with any requirements of  this  section  in
    23  connection with the guarantee of the underlying loan.
    24    (d) If the amounts expended to honor loan guarantees under the program
    25  exceed  ten  percent  of  total loans issued, the department shall imme-
    26  diately cease to approve claims and shall  notify  the  comptroller  and
    27  each eligible financial institution of the total amount of payments made
    28  and that the department has ceased honoring loan guarantees.
    29    (e)  Any  interest  deferred  or  not charged related to a loan issued
    30  pursuant to this section shall be exempt from all state taxes  that  may
    31  be  applicable  to  such  interest amounts as they relate to an affected
    32  business  or  organization.    Eligible  financial  institutions   shall
    33  disclose  to  affected  business or organization borrowers in the signed
    34  affidavit or loan documents that there may be federal  tax  consequences
    35  to the program loans.
    36    (f)  No  new  loan  applications  shall be submitted under the program
    37  after the state of emergency ends. The program  shall  expire  upon  the
    38  repayment  of  all  loans  made  under the program and, for all loans in
    39  default, the repayment of claims made under the program, or  the  cessa-
    40  tion of new claim approvals under paragraph (d) of this subdivision.
    41    § 2. This act shall take effect immediately.
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