Establishes an Emergency Loan Guarantee Program for small businesses during the aftermath of the September 11, 2001 attacks on New York and Washington D.C.

A BILL FOR AN ACT

SECTION 1. The September 11, 2001 attacks on New York and Washington D.C. have had devastating effects on our nation and our State. A squeamish stock market and an airline industry facing new security challenges have led to record unemployment rates, faltering visitor occupancy indicators, and local businesses desperately anticipating the worst.

To address these problems, the state administration has proposed a relief package to stimulate the economy, to assist laid-off workers, and to generally, get the State back on track. But these solutions have for the most part, ignored small businesses in Hawaii.

The legislature is concerned that the backbone of our local economy -- small businesses, will suffer the most. Without government support, these businesses which have valiantly survived the worst and longest economic slump in Hawaii's history will surely falter during the hard economic times to come.

The purpose of this Act is to establish an emergency small business loan guaranty program to provide emergency relief to small businesses during the aftermath of the terrorist attacks on New York and Washington D.C.

SECTION 2. Chapter 201, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§201- Emergency small business loan guaranty program. (a) The department of business, economic development, and tourism may guarantee up to _____ per cent of the principal balance of a loan, plus interest due thereon, made to a qualified applicant; provided that at no time shall the aggregate amount of the State's liability, contingent or otherwise, on loans guaranteed under this section exceed $___________.

For the purposes of this section, "qualified applicant" means a small business owner who qualifies for the loan guaranty under this section pursuant to rules adopted by the department and who can also prove an urgent need for the loan guarantee based on the applicant's financial business records following September 11, 2001.

(b) Interest charged on a guaranteed loan made under this section shall not be more than percentage points above the prime rate charged by the lender and shall not exceed $100,000 per loan.

(c) When the application for a guaranteed loan has been approved by the department, the department shall issue to the lender a guaranty for that percentage of the loan on which it guarantees payment of principal and interest. The lender shall collect all payments from the borrower and otherwise service the loan.

(d) In return for the department's guaranty, the lender shall remit a one-time insurance fee of two per cent on the principal amount of the guaranteed portion of the loan, at the time the loan is booked, except that for the following loans a reduced fee of one per cent shall be paid:

(e) When any installment of principal and interest has been due for sixty days and has not been paid by the borrower, the department shall issue, on request of the lender, a check for the percentage of the overdue payment guaranteed, thereby acquiring a division of interest in the collateral pledged by the borrower in proportion to the amount of the payment. The department shall be reimbursed for any amounts so paid plus interest at the applicable rate, where payment is collected from the borrower.

(f) Under conditions specified in department rules, the lender may request that a portion or all of the guaranteed percentage of the principal balance of the loan be converted to a participating share held by the department.

(g) Should the lender deem that foreclosure proceedings are necessary to collect moneys due from the borrower, it shall so notify the department. Within thirty days of the notification, the department may elect to request an assignment of the loan on payment in full to the lender of the principal balance and interest due. Foreclosure proceedings shall be held in abeyance in the interim.

(h) The lender may reduce the percentage of the principal balance guaranteed under this section at any time.

(i) The department may adopt rules pursuant to chapter 91 to effectuate this Act."

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $ , or so much thereof as may be necessary for fiscal years 2001-2003, for the purposes of the emergency small business loan guaranty program under section 2 of this Act.

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.