Bill Text: TX HB3271 | 2021-2022 | 87th Legislature | Enrolled

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Bill Title: Relating to establishing loan programs to assist certain micro-businesses by increasing access to capital; authorizing fees.

Sponsorship: Moderate Partisan Bill (Democrat 18-5)

Status: (Passed) 2021-06-18 - Effective immediately [HB3271 Detail]

Download: Texas-2021-HB3271-Enrolled.html

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H.B. No. 3271

AN ACT
relating to establishing loan programs to assist certain
micro-businesses by increasing access to capital; authorizing
fees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 481, Government Code, is amended by
adding Subchapter CC to read as follows:
SUBCHAPTER CC. MICRO-BUSINESS DISASTER RECOVERY PROGRAM
Sec. 481.451. DEFINITIONS. In this subchapter:
(1) "Community development financial institution" has
the meaning assigned by 12 U.S.C. Section 4702.
(2) "Declared disaster" means:
(A) a declaration of a state of disaster under
Section 418.014 or 418.108; or
(B) a disaster declared by the president of the
United States, if any part of this state is named in the federally
designated disaster area.
(3) "Default rate" means the percentage of
micro-business disaster recovery loans made that did not meet the
payment terms during a period specified by the bank.
(4) "Fund" means the micro-business recovery fund
established under Section 481.452.
(5) "Micro-business" means a corporation,
partnership, sole proprietorship, or other legal entity that:
(A) is domiciled in this state and has at least 95
percent of its employees located in this state;
(B) is formed to make a profit; and
(C) employs not more than 20 employees.
(6) "Micro-business disaster recovery loan" or
"disaster recovery loan" means a loan made by a participating
community development financial institution to micro-businesses
under the program.
(7) "Program" means the micro-business disaster
recovery loan program established under this subchapter.
Sec. 481.452. MICRO-BUSINESS RECOVERY FUND. (a) The
micro-business recovery fund is a dedicated account in the general
revenue fund.
(b) Appropriations for the implementation and
administration of this subchapter and any other amounts, including
federal allocations, received by the bank or state under this
subchapter shall be deposited in the fund.
(c) Money in the fund may be appropriated only to the bank
for use in carrying out the purposes of this subchapter.
Sec. 481.453. POWERS OF BANK IN ADMINISTERING
MICRO-BUSINESS RECOVERY FUND. In administering the fund, the bank
has the powers necessary to carry out the purposes of this
subchapter, including the power to:
(1) make, execute, and deliver contracts,
conveyances, and other instruments necessary to the exercise of its
powers;
(2) invest money at the bank's discretion in
obligations determined proper by the bank, and select and use
depositories for its money;
(3) employ personnel and counsel and pay those persons
from money in the fund legally available for that purpose; and
(4) impose and collect fees and charges in connection
with any transaction and provide for reasonable penalties for
delinquent payment of fees or charges.
Sec. 481.454. ESTABLISHMENT OF LOAN PROGRAM; PURPOSE. (a)
The bank shall establish and administer a revolving loan program as
provided by this subchapter.
(b) The program shall expand access to capital for
qualifying micro-businesses to create jobs in this state and
constitutes a capital access program under Subchapter BB.
Sec. 481.455. PROGRAM ADMINISTRATION. (a) The bank, under
the program, shall provide zero interest loans to eligible
community development financial institutions for purposes of
making interest-bearing loans to qualifying micro-businesses that
have difficulty in accessing capital following a declared disaster.
(b) A loan made by an eligible community development
financial institution under the program:
(1) must be made to a micro-business that:
(A) is in good standing under the laws of this
state; and
(B) did not owe delinquent taxes to a taxing unit
of this state before the date of the initial issuance of the
disaster declaration;
(2) may not be made to a micro-business that:
(A) has total revenue that exceeds the amount for
which no franchise tax is due under Section 171.002(d)(2), Tax
Code;
(B) is a franchise;
(C) is a national chain with operations in this
state;
(D) is a lobbying firm; or
(E) is a private equity firm or backed by a
private equity firm; and
(3) must meet any other criteria provided by this
subchapter.
(c) Payments on micro-business disaster recovery loans
shall be made directly to the lending community development
financial institutions.
(d) All income received on a loan made by a community
development financial institution participating in the program is
the property of the financial institution. Income received on a
loan includes the payment of interest by a borrower micro-business
and the administrative fees assessed by the community development
financial institution.
(e) A community development financial institution
participating in the program shall make payments to the bank on the
zero interest loans borrowed by the financial institution under the
program quarterly, and the bank or this state is not responsible or
liable for any defaults in micro-business disaster recovery loans
made by the community development financial institution.
Sec. 481.456. RULEMAKING. The executive director shall
adopt rules relating to the implementation of the program and any
other rules necessary to accomplish the purposes of this
subchapter, including rules that provide criteria under which
community development financial institutions may qualify for the
program.
Sec. 481.457. OVERSIGHT. (a) A community development
financial institution participating in the program shall report
quarterly to the bank:
(1) the names of micro-businesses that have received a
disaster recovery loan;
(2) the current balance of all outstanding disaster
recovery loans;
(3) the default rate on existing disaster recovery
loans; and
(4) any other information the bank requires.
(b) A community development financial institution
participating in the program shall prepare a detailed financial
statement each quarter and provide a copy to the bank.
(c) A community development financial institution shall
allow the bank to inspect the institution's financial records on
request for purposes that relate to loans under the program.
Sec. 481.458. PROGRAM ANNUAL STATUS REPORT. The bank shall
prepare an annual status report on the program. The office shall
include a summary of the report in the report to the legislature
required by Section 489.107.
SECTION 2. The heading to Subchapter BB, Chapter 481,
Government Code, is amended to read as follows:
SUBCHAPTER BB. ACCESS TO CAPITAL PROGRAMS [ACCESS PROGRAM]
SECTION 3. Section 481.401, Government Code, is amended by
amending Subdivisions (3), (7), (8), and (9) and adding Subdivision
(6-a) to read as follows:
(3) "Fund" means the original capital access fund.
(6-a) "Original capital access program" means the
program established under Section 481.405.
(7) "Participating financial institution" means a
financial institution participating in a [the] program.
(8) "Program" means an [the capital] access to capital
program established by the bank under this subchapter.
(9) "Reserve account" means an account established in
a participating financial institution on approval of the bank in
which money is deposited to serve as a source of additional revenue
to reimburse the financial institution for losses on loans enrolled
in a [the] program.
SECTION 4. Section 481.402, Government Code, is amended to
read as follows:
Sec. 481.402. ORIGINAL CAPITAL ACCESS FUND. (a) The
original capital access fund is a dedicated account in the general
revenue fund.
(b) Appropriations for the implementation and
administration of the original capital access program [this
subchapter] and any other amounts received by the state for the
original capital access program [under this subchapter] shall be
deposited in the fund.
(c) Money in the fund may be appropriated only to the bank
for use in carrying out the purposes of the original capital access
program [this subchapter].
SECTION 5. Subchapter BB, Chapter 481, Government Code, is
amended by adding Section 481.403 to read as follows:
Sec. 481.403. ACCESS TO CAPITAL PROGRAMS. The bank may
establish access to capital loan-related programs of the following
types to promote private access to capital to certain businesses
with fewer than 500 full-time employees:
(1) capital access programs;
(2) collateral support programs;
(3) loan guarantee programs; and
(4) loan participation programs.
SECTION 6. The heading to Section 481.404, Government Code,
is amended to read as follows:
Sec. 481.404. POWERS OF BANK IN ADMINISTERING ORIGINAL
CAPITAL ACCESS FUND.
SECTION 7. Section 481.405, Government Code, is amended to
read as follows:
Sec. 481.405. ORIGINAL CAPITAL ACCESS PROGRAM. (a) The
original [bank shall establish a] capital access program has been
established by the bank to assist a participating financial
institution in making loans to businesses and nonprofit
organizations that face barriers in accessing capital.
(b) The bank shall use money in the fund to make a deposit in
a participating financial institution's reserve account in an
amount specified by this subchapter to be a source of money the
institution may receive as reimbursement for losses attributable to
loans in the original capital access program.
(c) The bank shall determine the eligibility of a financial
institution to participate in the original capital access program
and may set a limit on the number of eligible financial institutions
that may participate in the original capital access program.
(d) To participate in the original capital access program,
an eligible financial institution must enter into a participation
agreement with the bank that sets out the terms and conditions under
which the bank will make contributions to the institution's reserve
account and specifies the criteria for a loan to qualify as a
capital access loan under the original capital access program.
(e) To qualify as a capital access loan under the original
capital access program, a loan must:
(1) be made to a small or medium-sized business or to a
nonprofit organization;
(2) be used by the business or nonprofit organization
for any project, activity, or enterprise in this state that fosters
economic development; and
(3) meet any other criteria provided by this
subchapter.
SECTION 8. Section 481.406, Government Code, is amended to
read as follows:
Sec. 481.406. RULEMAKING AUTHORITY. (a) The executive
director may [shall] adopt rules relating to the implementation of
any [the] program established under this subchapter and any other
rules necessary to accomplish the purposes of this subchapter.
(b) The rules for the original capital access program may:
(1) provide for criteria under which a certain line of
credit issued by an eligible financial institution to a small or
medium-sized business or nonprofit organization qualifies to
participate in the original capital access program; and
(2) authorize a consortium of financial institutions
to participate in the original capital access program subject to
common underwriting guidelines.
(c) [(b)] To qualify for participation in the original
capital access program, a line of credit must:
(1) be an account at a financial institution under
which the financial institution agrees to lend money to a person
from time to time to finance one or more projects, activities, or
enterprises that are authorized by this subchapter; and
(2) contain the same restrictions, to the extent
possible, that are placed on a capital access loan under the
original capital access program that is not a line of credit.
SECTION 9. Section 481.407, Government Code, is amended to
read as follows:
Sec. 481.407. PROVISIONS RELATING TO CAPITAL ACCESS LOAN
UNDER ORIGINAL CAPITAL ACCESS PROGRAM. (a) Except as otherwise
provided by this subchapter, the bank may not determine the
recipient, amount, or interest rate of a capital access loan under
the original capital access program or the fees or other
requirements related to the loan.
(b) A loan under the original capital access program is not
eligible to be enrolled under this subchapter if the loan is for:
(1) construction or purchase of residential housing;
(2) simple real estate investments, excluding the
development or improvement of commercial real estate occupied by
the borrower's business or organization; or
(3) inside bank transactions, as defined by the policy
board.
(c) The borrower of a capital access loan under the original
capital access program must apply the loan to working capital or to
the purchase, construction, or lease of capital assets, including
buildings and equipment used by the business or nonprofit
organization. Working capital uses include the cost of exporting,
accounts receivable, payroll, inventory, and other financing needs
of the business or organization.
(d) A capital access loan under the original capital access
program may be sold on the secondary market with no recourse to the
bank or to the loan loss reserve correspondent to the loan and under
conditions as may be determined by the bank.
(e) When enrolling a loan in the original capital access
program, a participating financial institution may specify an
amount to be covered under the original capital access program that
is less than the total amount of the loan.
SECTION 10. Section 481.408, Government Code, is amended to
read as follows:
Sec. 481.408. ORIGINAL CAPITAL ACCESS PROGRAM RESERVE
ACCOUNT. (a) On approval by the bank and after entering into a
participation agreement with the bank, a participating financial
institution making a capital access loan under the original capital
access program shall establish a reserve account. The reserve
account shall be used by the institution only to cover any losses
arising from a default of a capital access loan under the original
capital access program made by the institution under this
subchapter or as otherwise provided by this subchapter.
(b) When a participating financial institution makes a loan
enrolled in the original capital access program, the institution
shall require the borrower to pay to the institution a fee in an
amount that is not less than two percent but not more than three
percent of the principal amount of the loan, which the financial
institution shall deposit in the reserve account. The institution
shall also deposit in the reserve account an amount equal to the
amount of the fee received by the institution from the borrower
under this subsection. The institution may recover from the
borrower all or part of the amount the institution is required to
pay under this subsection in any manner agreed to by the institution
and borrower.
(c) For each capital access loan under the original capital
access program made by a financial institution, the institution
shall certify to the bank, within the period prescribed by the bank,
that the institution has made a capital access loan, the amount the
institution has deposited in the reserve account, including the
amount of fees received from the borrower, and, if applicable, that
the borrower is financing an enterprise project or is located in or
financing a project, activity, or enterprise in an area designated
as an enterprise zone under Chapter 2303.
(d) On receipt of a certification made under Subsection (c)
and subject to Section 481.409, the bank shall deposit in the
institution's reserve account for each capital access loan made by
the institution under the original capital access program:
(1) an amount equal to the amount deposited by the
institution for each loan if the institution:
(A) has assets of more than $1 billion; or
(B) has previously enrolled loans in the original
capital access program that in the aggregate are more than $2
million;
(2) an amount equal to 150 percent of the total amount
deposited under Subsection (b) for each loan if the institution is
not described by Subdivision (1); or
(3) notwithstanding Subdivisions (1) and (2), an
amount equal to 200 percent of the total amount deposited under
Subsection (b) for each loan if:
(A) the borrower is financing an enterprise
project or is located in or financing a project, activity, or
enterprise in an area designated as an enterprise zone under
Chapter 2303;
(B) the borrower is a small or medium-sized
business or a nonprofit organization that operates or proposes to
operate a day-care center or a group day-care home, as those terms
are defined by Section 42.002, Human Resources Code; or
(C) the participating financial institution is a
community development financial institution, as that term is
defined by 12 U.S.C. Section 4702, as amended.
(e) A participating financial institution must obtain
approval from the bank to withdraw funds from the reserve account.
SECTION 11. Section 481.409, Government Code, is amended to
read as follows:
Sec. 481.409. LIMITATIONS ON STATE CONTRIBUTION TO ORIGINAL
CAPITAL ACCESS PROGRAM RESERVE ACCOUNT. (a) The amount deposited
by the bank into a participating financial institution's reserve
account for any single loan recipient under the original capital
access program may not exceed $150,000 during a three-year period.
(b) The maximum amount the bank may deposit into a reserve
account for each capital access loan under the original capital
access program made under this subchapter is the lesser of $35,000
or an amount equal to:
(1) eight percent of the loan amount if:
(A) the borrower is financing an enterprise
project or is located in or financing a project, activity, or
enterprise in an area designated as an enterprise zone under
Chapter 2303;
(B) the borrower is a small or medium-sized
business or a nonprofit organization that operates or proposes to
operate a day-care center or a group day-care home, as those terms
are defined by Section 42.002, Human Resources Code; or
(C) the participating financial institution is a
community development financial institution, as that term is
defined by 12 U.S.C. Section 4702, as amended; or
(2) six percent of the loan amount for any other
borrower.
SECTION 12. Section 481.410, Government Code, is amended to
read as follows:
Sec. 481.410. STATE'S RIGHTS WITH RESPECT TO ORIGINAL
CAPITAL ACCESS PROGRAM RESERVE ACCOUNT. (a) All of the money in a
reserve account established under this subchapter for the original
capital access program is property of the state.
(b) The state is entitled to earn interest on the amount of
contributions made by the bank, borrower, and institution to a
reserve account under this subchapter for the original capital
access program. The bank shall withdraw monthly or quarterly from a
reserve account for the original capital access program the amount
of the interest earned by the state. The bank shall deposit the
amount withdrawn under this subsection into the fund.
(c) If the amount in a reserve account for the original
capital access program exceeds an amount equal to 33 percent of the
balance of the financial institution's outstanding capital access
loans under the original capital access program, the bank may
withdraw the excess amount and deposit the amount in the fund. A
withdrawal of money authorized under this subsection may not reduce
an active reserve account for the original capital access program
to an amount that is less than $200,000.
(d) The bank shall withdraw from the institution's reserve
account under the original capital access program the total amount
in the account and any interest earned on the account and deposit
the amount in the fund when:
(1) a financial institution is no longer eligible to
participate in the original capital access program or a
participation agreement entered into under this subchapter for the
original capital access program expires without renewal by the bank
or institution;
(2) the financial institution has no outstanding
capital access loans under the original capital access program;
(3) the financial institution has not made a capital
access loan under the original capital access program within the
preceding 24 months; or
(4) the financial institution fails to submit a report
or other document requested by the bank for the original capital
access program within the time or in the manner prescribed.
SECTION 13. Section 481.411, Government Code, is amended to
read as follows:
Sec. 481.411. ANNUAL REPORT. A participating financial
institution shall submit an annual report to the bank. The report
must, at a minimum:
(1) provide information regarding outstanding
[capital access] loans, [capital access] loan losses, and any other
information related to participation in a program established under
this subchapter [on capital access loans] the bank considers
appropriate;
(2) state the total amount of loans for which the bank
has made a contribution from the fund under this subchapter;
(3) include a copy of the institution's most recent
financial statement; and
(4) include information regarding the type and size of
businesses and nonprofit organizations with [capital access] loans
under this subchapter.
SECTION 14. Section 481.412(a), Government Code, is amended
to read as follows:
(a) The office shall submit to the legislature an annual
status report on the [program's] activities of all programs
established under this subchapter.
SECTION 15. The heading to Section 481.415, Government
Code, is amended to read as follows:
Sec. 481.415. ALLOCATION AND TRANSFER OF MONEY FROM
ORIGINAL CAPITAL ACCESS FUND.
SECTION 16. Section 481.415(a), Government Code, is amended
to read as follows:
(a) Notwithstanding any other provision of this subchapter,
the bank may allocate money held in or due to the original capital
access fund to programs administered by the bank under Section
489.108 or Subchapter D, Chapter 489. The bank may transfer money
from the original capital access fund to the Texas product
development fund or the Texas small business incubator fund.
SECTION 17. Section 489.105(b), Government Code, is amended
to read as follows:
(b) The fund consists of:
(1) appropriations for the implementation and
administration of this chapter;
(2) investment earnings under the original capital
access fund established under Section 481.402;
(3) fees charged under Subchapter BB, Chapter 481;
(4) interest earned on the investment of money in the
fund;
(5) fees charged under this chapter;
(6) investment earnings from the programs
administered by the bank;
(7) amounts transferred under Section 2303.504(b), as
amended by Article 2, Chapter 1134, Acts of the 77th Legislature,
Regular Session, 2001;
(8) investment earnings under the Texas product
development fund under Section 489.211;
(9) investment earnings under the Texas small business
incubator fund under Section 489.212; and
(10) any other amounts received by the state under
this chapter.
SECTION 18. Section 489.108, Government Code, is amended to
read as follows:
Sec. 489.108. PROGRAMS, SERVICES, AND FUNDS UNDER BANK'S
DIRECTION. Notwithstanding any other law, the bank shall perform
the duties and functions of the office with respect to the following
programs, services, and funds:
(1) the original capital access program established
under Section 481.405;
(2) the Texas leverage fund;
(3) the enterprise zone program established under
Chapter 2303;
(4) the industrial revenue bond program;
(5) the defense economic readjustment zone program
established under Chapter 2310;
(6) the Empowerment Zone and Enterprise Community
grant program established under Section 481.025; and
(7) the renewal community program.
SECTION 19. Section 489.211(b), Government Code, is amended
to read as follows:
(b) The product fund is composed of proceeds of bonds issued
under this subchapter, financing application fees, loan
repayments, guarantee fees, royalty receipts, dividend income,
money appropriated by the legislature for authorized purposes of
the product fund, amounts received by the state from loans, loan
guarantees, and equity investments made under this subchapter,
amounts received by the state from federal grants or other sources,
amounts transferred from the original capital access fund under
Section 481.415, and any other amounts received under this
subchapter and required by the bank to be deposited in the product
fund. The product fund contains a program account, an interest and
sinking account, and other accounts that the bank authorizes to be
created and maintained. Money in the product fund is available for
use by the board under this subchapter. Investment earnings under
the product fund must be transferred to the fund created under
Section 489.105. Notwithstanding any other provision of this
subchapter, any money in the product fund may be used for debt
service.
SECTION 20. Section 489.212(b), Government Code, is amended
to read as follows:
(b) The small business fund is composed of proceeds of bonds
issued under this subchapter, financing application fees, loan
repayments, guarantee fees, royalty receipts, dividend income,
money appropriated by the legislature for authorized purposes of
the small business fund, amounts received by the state from loans,
loan guarantees, and equity investments made under this subchapter,
amounts received by the state from federal grants or other sources,
amounts transferred from the original capital access fund under
Section 481.415, and any other amounts received under this
subchapter and required by the bank to be deposited in the small
business fund. The small business fund contains a project account,
an interest and sinking account, and other accounts that the bank
authorizes to be created and maintained. Money in the small
business fund is available for use by the board under this
subchapter. Investment earnings under the small business fund must
be transferred to the fund created under Section 489.105.
Notwithstanding any other provision of this subchapter, any money
in the small business fund may be used for debt service.
SECTION 21. This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, this Act takes effect September 1, 2021.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 3271 was passed by the House on April
28, 2021, by the following vote: Yeas 97, Nays 43, 2 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 3271 on May 28, 2021, by the following vote: Yeas 101, Nays 44,
1 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 3271 was passed by the Senate, with
amendments, on May 24, 2021, by the following vote: Yeas 23, Nays
6, 1 present, not voting.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor