Current Status Introducing Body:Senate Bill Number:1213 Primary Sponsor:Matthews Committee Number:06 Type of Legislation:GB Subject:Small Businss Development Financing Authority Residing Body:Senate Current Committee:Finance Computer Document Number:1213 Introduced Date:19940224 Last History Body:Senate Last History Date:19940224 Last History Type:Introduced, read first time, referred to Committee Scope of Legislation:Statewide All Sponsors:Matthews Patterson Washington Ford Glover Mitchell Type of Legislation:General Bill
Bill Body Date Action Description CMN Leg Involved
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1213 Senate 19940224 Introduced, read first time, 06
referred to Committee
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TO AMEND TITLE 33 OF THE CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS, SO AS TO PROVIDE FOR THE ESTABLISHMENT OF THE SMALL BUSINESS DEVELOPMENT FINANCING AUTHORITY AS A QUASI-PUBLIC ENTITY WITH THE PURPOSE OF ASSISTING DISADVANTAGED BUSINESS ENTERPRISES IN OBTAINING FINANCING FOR BIDDING ON GOVERNMENT CONTRACTS BY PROVIDING LOAN GUARANTEES ON BEHALF OF QUALIFIED APPLICANTS, DIRECT LOANS TO QUALIFIED APPLICANTS, AND INTEREST SUBSIDIES TO FINANCIAL INSTITUTIONS, AS NEEDED; TO PROVIDE FOR THE APPOINTMENT OF THE AUTHORITY'S GOVERNING BOARD; TO PROVIDE FOR DEFINITIONS; TO PROVIDE FOR POWERS OF THE AUTHORITY AND ITS BOARD; TO PROVIDE FOR THE FINANCING OF THE AUTHORITY; TO PROVIDE A TAX CREDIT FOR INVESTORS OF THE AUTHORITY; AND TO PROVIDE THAT AFTER FIVE YEARS THE AUTHORITY WILL CEASE TO BE A PUBLIC ENTITY.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 33 of the 1976 Code is amended by adding:
Section 33-38-10. (A) There is created a South Carolina Small Business Development Financing Authority, a body politic and corporate under the laws of this State. In addition to any other powers set forth in this chapter, the authority may:
(1) adopt bylaws to regulate its affairs and the conduct of its business;
(2) adopt and use an official seal;
(3) maintain offices at the places that it designates in this State;
(4) sue and be sued in its own name;
(5) contract for and engage the services of consultants;
(6) use the services of other governmental agencies;
(7) contract for and accept, for use in carrying out the provisions of this chapter, loans and grants from the federal government and any of its agencies and instrumentalities;
(8) contract for and accept, for use in carrying out the provisions of this chapter, any grant or contribution of funds from any political subdivision of the State or from any other source and comply, subject to the provisions of this chapter, with the terms and conditions thereof;
(9) purchase, receive, lease, or otherwise acquire, as well as sell, mortgage, lease, pledge, or administer, dispose of, or otherwise deal with property upon such terms and conditions that it may deem advisable;
(10) adopt rules and regulations necessary to carry out its powers;
(11) acquire or take assignments of loan documents; and
(12) do anything necessary or convenient to carry out its powers.
(B) In addition to the powers and duties expressly provided herein, the authority may execute any other powers and duties reasonably necessary to carry out its functions.
(C) The authority may receive funds from, among other sources, state appropriations and private contributions. All private investors of the authority meeting the five thousand dollar minimum investment requirements shall be entitled to a tax credit as provided in Section 33-38-710.
(D) Contributions to the authority from state appropriations may not exceed twenty-five percent of the total amount of funds received annually from private donations or a maximum of three million dollars annually over a five-year period.
(E) Notwithstanding any other provision of law, within five years of receipt of its initial funding the authority may not receive any funding from state appropriations and shall be wholly self-sustaining through other investment sources.
Section 33-38-20. (A) The governing body of the authority consists of the following nine members:
(1) seven members appointed by the Governor; and
(2) as ex officio members:
(a) the State Treasurer or the State Comptroller as designated by the Governor or such person as may be designated by the Governor's designee; and
(b) the chairman or a designee.
(B) The Governor may remove an appointed member for cause.
(C) The members appointed by the Governor shall serve for terms of five years and until their successors are appointed and qualified.
(D) Notwithstanding subsection (C) above, terms of the board members shall be staggered with the original appointments being made as follows: the Governor shall appoint one director to serve until July 1, 1995, and until his successor is appointed and qualified; one director to serve until July 1, 1996, and until his successor is appointed and qualified; one director to serve until July 1, 1997, and until his successor is appointed and qualified; two directors to serve until July 1, 1998, and until their successors are appointed and qualified; and two directors to serve until July 1, 1999, and until their successors are appointed and qualified.
(E) Notwithstanding subsection (D) above, the terms of all board members appointed by the Governor and all ex-officio members shall expire on July 1, 1999. All subsequent board members shall be elected by the investors holding a financial interest in the authority at the time of the election.
(F) A member who is appointed to fill a vacancy shall serve only for the remainder of the term and until a successor is appointed and qualified.
Section 33-38-30. (A) The authority shall appoint an executive director who is the chief administrative officer and secretary of the authority.
(B) The executive director serves at the pleasure of the authority.
(C) In addition to any other duties set forth in this chapter, the executive director shall:
(1) direct and supervise the administrative affairs and technical activities of the authority in accordance with its rules, regulations, and policies;
(2) attend all meetings of the authority;
(3) keep minutes of all proceedings of the authority;
(4) approve all accounts for salaries, per diem payments, and allowable expenses of the authority and its employees and consultants and approve all expenses incidental to the operation of the authority; and
(5) perform any other duty that the authority or the secretary requires for carrying out the provisions of this chapter.
Section 33-38-40. (A) Four appointed members of the authority are a quorum. However, the authority may not act on any matter unless at least four members in attendance concur.
(B) The authority shall determine the times and places of its meetings.
(C) Members of the authority, while serving on business of the authority, shall receive per diem, mileage, and subsistence as provided by law for members of state boards, committees, and commissions.
(D) The authority may employ a staff as it deems necessary to assist in carrying out its duties and responsibilities under this chapter.
(E) In its internal functions, the authority shall follow the procedures of this State that govern the purchase of office space, supplies, facilities, materials, equipment, and professional services.
Section 33-38-50. A board member of the authority may not participate in any decision related to the approval of financial assistance if the member has any financial interest in the applicant seeking assistance, or if the member has any interest in the financial institution seeking a guarantee or an interest subsidy or both under this chapter.
Section 33-38-60. The authority shall:
(A) keep proper records of its accounts;
(B) keep separate records for the general fund and special fund; and
(C) make an annual report on its condition and operations to the Governor.
Section 33-38-100. (A) `Eligible applicant':
(1) means an individual of good character, approved by the department, who due to social or economic disadvantage, has been denied the opportunity to acquire adequate business financing on reasonable terms, through normal lending channels; and
(2) includes sole proprietorships, partnerships, joint ventures, corporations, and other business enterprises, seventy percent or more of which are owned by individuals qualifying under subsection 1.
(B) `Social or economic disadvantage' means the social or economic disadvantage which results from:
(1) a socially or economically deprived individual who is a member of a group which has been historically deprived of access to normal economic or financial resources because of race, color, creed, sex, religion, or national origin;
(2) an individual suffering from an identifiable physical handicap which severely limits the ability to obtain financial assistance to enter a business venture, provided the physical handicap does not limit the individual's ability to perform the contract; and
(3) a U.S. citizen whose participation in the free enterprise system is impeded due to other social or economic considerations beyond his personal control, such as formal education, financial capacity, geographical, or regional economic distress, provided the impediment does not limit the individual's ability to perform the contract.
(C) `Good character' includes good moral character, and responsible financial reputation as determined from the best available sources, including, past and present creditors, employees, and other individuals who have personal knowledge of the applicant.
(D) `Working capital' means those assets required for the performance of a particular governmental contract covering items of supplies, materials, labor, or equipment which become part of the product or service to be delivered under the contract.
(E) `Authority' means the South Carolina Small Business Development Financing Authority.
(F) `Financial institution' means any financial institution as that term is defined in Section 5312(a)(2), Title 31 of the United States Code.
(G) `General fund' means the Small Business Development Financing Fund.
(H) `Loan documents' means any instrument or agreement evidencing, securing, or guaranteeing the payment or the repayment of a loan, including by way of example any note, financing statement, mortgage, pledge, assignment, loan and security agreement, or guarantee.
(I) `Chairman' means the Chairman of the State Development Board.
(J) `Special fund' means the Small Business Development Special Long-Term Financing Fund.
Section 33-38-110. The authority may assist eligible applicants in the following manner:
(A) The authority may directly loan an eligible applicant not more than $150,000. The duration of the loan may not exceed the term of the contract. The authority shall charge an interest rate equal to the market rate for a conventional loan of comparable risk. The authority may grant a direct loan only as a last resort, when all other avenues for financial assistance have been exhausted.
(B) The authority may guaranty a loan made to an eligible applicant. The terms and conditions of a loan guaranty are within the sole discretion of the authority. The authority may not guaranty more than $150,000 of a loan. The duration of the loan guaranteed may not exceed the term of the contract.
(C)(1) The authority may guaranty no more than ten percent of a person's equity investment in an eligible corporation.
(2) The authority may not guaranty a person's equity investment if that person:
(a) previously held an equity investment in the corporation;
(b) previously participated in the management of the corporation; or
(c) in any other manner is related to the enterprise, its current shareholders, officers, or other management personnel.
(3) The authority may not guaranty more than $150,000 of a person's equity investment in an equitable corporation.
(D) The authority shall grant loans or guarantees primarily for funds used as working capital.
(E) The authority may only guaranty a loan to be used for projects financed by federal, state, or local government, where the individual has applied for such financing but has been rejected.
Section 33-38-120. (A) An applicant shall follow the procedure in this section, in seeking the benefits of Section 33-38-110 of this chapter.
(B) An applicant shall submit to the authority a letter of intent. The letter shall include a brief description of the government project and an estimate of the projected cost.
(C) The applicant shall submit to the authority an application, in writing, on a form supplied by the authority. The application shall include the following information:
(1) a detailed description of the complete scope of the government project, including an itemization of known and estimated costs;
(2) information relating to the applicant's financial status, including a current audited balance sheet, a profit and loss statement, and credit references;
(3) the total amount of investment required under the government contract;
(4) the funds available to the applicant without the benefits of Section 33-38-110 of this chapter;
(5) financial support sought from the authority under Section 33-38-110 of this chapter; and
(6) information relating to the applicant's inability to acquire adequate business financing of reasonable terms through normal lending channels.
(D) An applicant shall provide all other relevant information requested by the authority.
Section 33-38-130. A member of the authority may not participate in a decision concerning an eligible applicant in which he has any direct or indirect interests.
Section 33-38-140. (A)(1) There is established a Small Business Development Financing Fund, also referred to as the general fund, which shall be used by the authority as a nonlapsing, revolving fund for carrying out the provisions of this chapter, including Sections 33-38-300 through 33-38-360 of this chapter. To this fund shall be charged any and all expenses of the authority, and to the fund shall be credited all receipts of the authority.
(2) Monies in the fund not needed currently to meet the expenses and obligations of the authority shall be deposited with the State Treasurer to the credit of the fund and invested in such manner as is provided for by statute.
(3) The State Treasurer shall render annual reports to the authority advising the board members of the authority of the status of the funds invested, the market value of the assets in the fund as of the date such enactment is rendered, and the interest received from the investments during the period covered by the report.
(B) If the authority determines that it will extend a loan to an eligible applicant, it will prepare a loan agreement which includes:
(1) the loan payment schedule, based upon the project's financial needs and coinciding with the applicant's draw from the contract;
(2) a requirement that all payments made to an applicant shall be cosigned by the applicant and the authority before funds may be released;
(3) the loan repayment schedule; and
(4) provisions for security deemed desirable by the authority, including where appropriate and allowable an assignment or lien on payment under the government contract.
(C) If the applicant fails to comply with the terms of a loan agreement, or the requirements of this chapter, the authority, after reasonable notice to the applicant, may withhold further payments to the applicant, pending compliance or exercise other remedies provided by the loan agreement.
Section 33-38-150. The authority may expend, subject to the approval of the Chairman of the State Development Board, out of the fund such monies as may be necessary for any expenses of the authority, including administrative, legal, actuarial, and other services subject to annual approval of the budget by the General Assembly.
Section 33-38-160. (A) If from time to time in the opinion of the authority the addition of monies to the fund shall be required, the authority in writing shall request the Budget and Control Board to provide sufficient monies from the civil contingent fund to maintain its reserve at a level deemed adequate by the authority, and upon receipt of such request, the Budget and Control Board may pay over the amount so requested from its emergency fund.
(B) If at any time the amount of funds credited to the fund exceeds an amount deemed adequate by the authority to meet its obligations, the excess shall, upon resolution duly adopted by the members of the authority, be invested by the Treasurer of the State of South Carolina to the credit of the general fund.
Section 33-38-210. (A) All of the following receipts of the authority shall be placed in the general fund, including:
(1) repayments of principal of and interest on direct loans made pursuant to Section 33-38-330 of this chapter;
(2) premiums for guaranteeing loans pursuant to Section 33-38-310 of this chapter;
(3) premiums for guaranteeing equity investment pursuant to Section 33-38-320 of this chapter;
(4) proceeds from the sale, disposition, lease, or rental of collateral by the authority relating to direct loans or loan guarantees made pursuant to Section 33-38-310 or Section 33-38-330 of this chapter; and
(5) income from investments allocable to the general fund that the State Treasurer, on instruction of the authority, makes for the authority under Section 33-38-250 of this chapter.
(B) The authority shall use the general fund to pay all of the following expenses and disbursements of the authority:
(1) direct loans made pursuant to Section 33-38-330 of this chapter;
(2) guaranty payments required made pursuant to Section 33-38-310 or 33-38-320 of this chapter; and
(3) expenses for administrative, legal, actuarial, and other services.
Section 33-38-230. There is established a Small Business Development Special Long-Term Financing Fund, established as a nonlapsing, revolving fund for carrying out the provisions of Section 33-38-300 through 33-38-440 of this chapter.
Section 33-38-240. (A) All of the following receipts of the authority shall be placed in the special fund:
(1) loans and grants from the federal government and any of its agencies and instrumentalities;
(2) grants and contributions of funds from any political subdivision or government organization of the State from any other source;
(3) premiums for guaranteeing long-term loans pursuant to Section 33-38-410 of this section;
(4) proceeds from the sale, disposition, lease, or rental of collateral by the authority relating to loans guaranteed pursuant to Section 33-38-410 of this chapter; and
(5) income from investments allocable to the special fund that the State Treasurer, on instruction of the authority, makes for the authority under Section 33-38-250 of this chapter.
(B) The authority shall use the special fund to pay the following expenses and disbursements of the authority:
(1) guaranty payments required by defaults pursuant to Section 33-38-410 of this chapter;
(2) interest subsidy payments pursuant to Section 33-38-410 of this chapter; and
(3) expenses for administrative, legal, actuarial and other services.
Section 33-38-250. (A) If, at any time, the amount of money in the general fund or in the special fund exceeds the amount that the authority considers necessary currently to meet its expenses and obligations, the excess shall be:
(1) deposited with the State Treasurer, to the credit of the general fund or the special fund, as appropriate; and
(2) invested in the manner provided for by law.
(B) If, at any time, the amount of money in or credited to the general fund or to the special fund exceeds the amount that the authority considers necessary to meet its obligations, the excess, on resolution of the authority, shall be paid to the State Treasurer.
Section 33-38-260. The State Treasurer shall report annually to the authority as to:
(1) the status of the money invested under Section 33-38-250 of this chapter;
(2) the market value of the assets in the general fund and the special fund as of the date of the report; and
(3) the interest received from investments during the period covered by the report.
Section 33-38-300. Subject to the restrictions of this article, the authority, on application, may provide to an applicant from the general fund the following types of financial assistance:
(1) a guarantee of a loan made to the applicant;
(2) a guarantee of an equity investment in the applicant; or
(3) if the applicant is unable to obtain money from any other source, a loan to the applicant.
Section 33-38-310. (A) The authority may utilize the general fund to guarantee a loan made to an applicant only if:
(1) the applicant meets the qualifications required by this chapter;
(2) the loan is to be used to perform a contract for a project that a federal, state, or local government finances;
(3) the part of the loan to be guaranteed does not exceed $150,000; and
(4) the loan to be guaranteed is to be used primarily for working capital.
(B) A guaranty that the authority makes shall be limited to not more than the term of the government contract, unless the authority finds that a longer term better carries out the purposes of this chapter.
Section 33-38-320. (A) The authority may utilize the general fund to guarantee a person's proposed equity investment in the applicant only if:
(1) the applicant meets the requirements of this chapter;
(2) the amount of the equity investment to be guaranteed does not exceed the lesser of:
(a) ten percent of the person's equity investment in the applicant; or
(b) $150,000; and
(3) the equity investment to be guaranteed is to be used primarily for working capital to perform a contract for a project that a federal, state, or local government finances.
(B) The authority may not guarantee the equity investment of a person who:
(1) previously held an equity investment in the applicant;
(2) previously participated in the management of the applicant; or
(3) in any other manner is related to:
(a) the applicant; or
(b) any of its current stockholders, officers, or other management personnel.
Section 33-38-330. (A) The authority may utilize the general fund to lend money to an applicant only if:
(1) the applicant meets the requirements of this chapter;
(2) the loan does not exceed $150,000; and
(3) the loan is to be used primarily for working capital to perform a contract for a project that a federal, state, or local government finances.
(B) A loan that the authority makes shall mature not later than the terms of the government contract, unless the authority finds that a longer term better carries out the purposes of this chapter.
Section 33-38-340. (A) To qualify for financial assistance under Section 33-38-300 through 33-38-330 of this chapter, an applicant shall meet the requirements of this section.
(B) If the applicant is an individual, the applicant shall satisfy the authority that:
(1) the applicant is of good moral character;
(2) as determined from creditors, employers, and other individuals who have personal knowledge of the applicant, the applicant has a reputation for financial responsibility;
(3) the applicant is a citizen of the United States; and
(4) the applicant is unable to obtain adequate business financing on reasonable terms through normal lending channels and that the applicant:
(a) belongs to a group that historically has been deprived of access to normal economic or financial resources because of race, color, creed, sex, religion, or national origin;
(b) has an identifiable physical handicap that severely limits the ability of the applicant to obtain financial assistance, but does not limit the ability of the applicant to perform the government contract; or
(c) has any other social or economic impediment that is beyond the personal control of the applicant, such as lack of formal education or financial capacity or geographical or regional economic distress but that does not limit the ability of the applicant to perform the government contract.
(C) If the applicant is other than a sole proprietorship, at least seventy percent of the business enterprise shall be owned by individuals who meet the qualifications for applicants under subsection (B) of this section.
(D) In addition to other requirements of this section, an applicant for a guarantee of a loan shall have applied for and been denied a loan by a financial institution.
Section 33-38-350. (A) To apply for financial assistance from the general fund pursuant to Sections 33-38-300 through 33-38-330 of this chapter, an applicant shall submit to the authority an application on the form that the authority requires.
(B) The application shall include:
(1) a detailed description of the government project;
(2) an itemization of known and estimated costs;
(3) the total amount of investment required to perform the government contract;
(4) the funds available to the applicant without financial assistance from the authority;
(5) the amount of financial assistance sought from the authority;
(6) information that relates to the inability of the applicant to obtain adequate financing on reasonable terms through normal lending channels;
(7) information that relates to the financial status of the applicant, including:
(a) a current balance sheet;
(b) a profit and loss statement; and
(c) credit references; and
(8) any other relevant information that the authority requests.
(C) After receipt of an application for assistance from the general fund, the authority may determine by resolution that an applicant shall provide an audited balance sheet before the authority makes its decision on the application.
Section 33-38-360. (A) The authority may set the terms and conditions for guarantees of loans which it elects to make pursuant to Section 33-38-310.
(B)(1) If the authority decides to lend money from the general fund to an applicant, the authority shall prepare a loan agreement.
(2) The loan agreement shall include:
(a) the rate of interest on the loan, which shall equal the market rate for a conventional loan of comparable risk unless the authority finds that a lower rate better carries out the purposes of this chapter;
(b) a payment schedule that provides money to the applicant in the amounts and at the times that the applicant needs the money to perform the government contract;
(c) a requirement that, before each advance of money is released to the applicant, the applicant and the authority cosign the request for the money; and
(d) provisions for repayment of the loan.
(3) The loan agreement documents may include any other provision that the authority determines is necessary to secure the loan, including, if allowable, an assignment of or a lien on payment under the government contract.
Section 33-38-400. Subject to the restrictions of this article, the authority, on application, may provide to a financial institution the following types of financial assistance from the special fund:
(1) a guarantee of a long-term loan made by the financial institution to a qualified applicant; and
(2) an interest subsidy.
Section 33-38-410. (A) The authority may utilize the special fund to guarantee up to ninety percent of the principal and interest of a long-term loan made by a financial institution to an applicant only if:
(1) the applicant meets the requirements of Section 33-38-340 and has not violated any provisions of Section 33-38-440 of this chapter;
(2) the loan amount is not less than $5,000 and not more than $500,000;
(3) the loan is to be used by the applicant for working capital or the acquisition of machinery or equipment;
(4) the loan shall mature in not less than one year and not more than ten years from the date of closing of the loan; and
(5) the rate of interest on the loan is no greater than the rate of interest determined by the authority to be the monthly weighted average of the prime lending rate, plus one percent, prevailing from time to time in the city of Columbia on unsecured commercial loans.
(B) A guarantee shall contain such terms and conditions as the authority may deem appropriate.
(C)(1) The authority may not approve a guarantee pursuant to this section unless the authority considers the economic impact of the loan sought to be guaranteed to be substantial.
(2) To determine the economic impact of a project, the authority may consider:
(a) the amount of the guarantee obligation;
(b) the terms of the loan to be guaranteed;
(c) the number of new jobs that will be created by the loan; and
(d) any other factor that the authority considers relevant.
(D) In addition to the granting of a loan guarantee, the authority may for the benefit of an applicant provide an interest subsidy, not to exceed four percent, to a financial institution issuing a loan guaranteed by the authority pursuant to this section which:
(1) is payable quarterly;
(2) shall not exceed the difference between the rate of interest requested by the financial institution to make the loan, which rate shall not exceed the rate of interest determined by the authority to be the monthly weighted average of the prime lending rate, plus one percent, prevailing from time to time in the city of Columbia on unsecured commercial loans, and the discount rate of interest employed by the federal reserve bank of the United States, the difference to be determined by the authority as of the date of closing of the loan for which the guarantee is given; and
(3) is payable during the term of the loan, excluding any period in which the authority determines that the loan is in default.
Section 33-38-420. (A) To apply for financial assistance from the special fund, a financial institution shall submit to the authority an application on the form that the authority requires.
(B) The application shall include:
(1) a detailed description of the proposed use or uses of the proceeds of the loan including projected cash flow analyses, marketing plans, or descriptions and appraisals;
(2) a detailed description of the funds available to the applicant;
(3) a detailed description of the proposed loan documents to be executed by the financial institution and the applicant;
(4) a detailed description of the property proposed as collateral for the loan together with the financial institution's certification as to value;
(5) information that relates to the inability of the applicant to obtain adequate financing on reasonable terms through normal lending channels;
(6) information that relates to the financial status of the applicant, including:
(a) a current balance sheet;
(b) a profit and loss statement; and
(c) credit references;
(7) a proposed disbursement schedule;
(8) a proposed amortization schedule;
(9) a detailed description of the applicant's experience in the trade or business for which the loan and guarantee are sought;
(10) information that relates to satisfaction of the applicant's requirements of Section 33-38-340; and
(11) any other relevant information that the authority requests.
(C) After receipt of an application for financial assistance from the special fund, the authority may determine by resolution that an applicant shall provide an audit report and balance sheet certified by an independent certified public accountant in accordance with generally accepted accounting principles before the authority makes its decision on the application.
Section 33-38-440. (A) A person may not knowingly make or cause any false statement or report to be made in any application or in any document furnished to the authority.
(B) A person may not knowingly make or cause any false statement or report to be made for the purpose of influencing the action of the authority on an application for financial assistance or for the purpose of influencing any action of the authority affecting financial assistance whether or not such assistance may have been already extended.
(C) Any person, his aiders and abettors, who violates or attempts to violate any provision of subsection (A) or (B) of this section is guilty of a misdemeanor and, upon conviction, is subject to a fine not exceeding $50,000 or imprisonment not exceeding five years, or both.
Section 33-38-450. If an applicant or financial institution violates any provision of the loan agreement or ceases to meet the requirements of this chapter, on reasonable notice to the applicant or financial institution, the authority may:
(1) withhold from the applicant further loan payments until the applicant complies with the loan agreement or requirements;
(2) withhold from the financial institution further interest subsidy payments until the financial institution complies with the loan documents or requirements; and
(3) exercise any other remedy for which the loan agreement provides.
Section 33-38-470. There is established a Small Business Development Contract Financing Fund, established as a nonlapsing, revolving fund for carrying out the provisions of Section 33-38-470 through 33-38-520 of this chapter.
Section 33-38-480. (A) All of the following receipts of the authority shall be placed in the contract fund:
(1) loans and grants from the federal government and any of its agencies and instrumentalities;
(2) grants and contributions of funds from any political subdivision or government organization of the State from any other source;
(3) premiums for guaranteeing long-term loans pursuant to Sections 33-38-490 and 33-38-500 of this chapter;
(4) proceeds from the sale, disposition, lease, or rental of collateral by the authority relating to loans guaranteed pursuant to Section 33-38-490 of this chapter; and
(5) income from investments allocable to the special fund that the State Treasurer, on instruction of the authority, makes for the authority under Section 33-38-520 of this chapter.
(B) The authority shall use the special fund to pay the following expenses and disbursements of the authority:
(1) guaranty payments required by defaults pursuant to Sections 33-38-490 and 33-38-500 of this chapter;
(2) direct loans to qualified applicants pursuant to Section 33-38-510 of this chapter; and
(3) expenses for administrative, legal, actuarial and other services.
Section 33-38-490. (A) The authority may utilize the Contract Financing Fund to guarantee a loan made to an applicant only if:
(1) the applicant meets the qualifications required by this chapter;
(2) the loan is to be used to perform a contract financed by the federal or state government, a local government, or a utility regulated by the Public Service Commission;
(3) the part maximum amount payable by the authority under its guarantee does not exceed $500,000; and
(4) the loan to be guaranteed is to be used for:
(a) working capital; or
(b) equipment needed to perform the contract, the cost of which can be repaid from contract proceeds, if the authority has entered into an agreement with the applicant necessary to secure the loan or guarantee.
(B) A guaranty that the authority make shall be limited to not more than the term of the contract, unless the authority finds that a longer term better carries out the purposes of this chapter.
Section 33-38-500. (A) The authority may utilize the Contract Financing Fund to guarantee a person's proposed equity investment in the applicant only if:
(1) the applicant meets the requirements of this chapter;
(2) the amount of the equity investment to be guaranteed does not exceed the lesser of:
(a) ten percent of the person's equity investment in the applicant; or
(b) $250,000; and
(3) the equity investment to be guaranteed is to be used primarily for working capital to perform a contract for a project financed by the federal or state government, a local government, or a utility regulated by the Public Service Commission.
(B) The authority may not guarantee the equity investment of a person who:
(1) previously held an equity investment in the applicant;
(2) previously participated in the management of the applicant; or
(3) in any other manner is related to:
(a) the applicant; or
(b) any of its current stockholders, officers, or other management personnel.
Section 33-38-510. (A) The authority may utilize the Contract Financing Fund to lend money to an applicant only if:
(1) the applicant meets the requirements of this chapter;
(2) the loan does not exceed $500,000;
(3) the loan is to be used to perform a contract for a project financed by the federal or state government, a local government, or a utility regulated by the Public Service Commission; and
(4) the loan is to be used for:
(a) working capital; or
(b) equipment needed to perform the contract, the cost of which can be repaid from contract proceeds, if the authority has entered into an agreement with the applicant necessary to secure the loan.
(B) A loan that the authority makes shall mature not later than the term of the contract, unless the authority finds that a longer term better carries out the purposes of this chapter.
Section 33-38-520. (A) If, at any time, the amount of money in the Contract Financing Fund exceeds the amount that the authority considers necessary currently to meet its expenses and obligations, the excess shall be:
(1) deposited with the State Treasurer, to the credit of the Contract Financing Fund, as appropriate; and
(2) invested in the manner provided for by law.
(B) If, at any time, the amount of money in or credited to the Contract Financing Fund exceeds the amount that the authority considers necessary to meet its obligations, the excess, on resolution of the authority, shall be paid to the State Treasurer.
Section 33-38-530. (A) In this article the following words have the meanings indicated.
(B) `Authority' means the South Carolina Small Business Development Financing Authority.
(C)(1) `Contract term' means the term of the contract.
(2) `Contract term' includes:
(a) the maintenance or warranty period required by the contract; and
(b) the period during which the surety may be liable for latent defects.
(D) `Fund' means the Small Business Surety Bond Fund.
(E) `Principal' means a small business entity that has assets, income, or employees that do not exceed limits established by the authority pursuant to regulation or administrative determination.
(F) `Program' means the Small Business Surety Bond Program created by Section 33-38-540 of this article.
Section 33-38-540. (A) There is created a Small Business Surety Bond Program and Fund.
(B) The fund is a continuing, nonlapsing, revolving fund that consists of:
(1) monies appropriated by the State to the fund;
(2) premiums, fees, and any other amounts received by the authority with respect to bonding assistance provided by the authority under this program;
(3) proceeds designated by the authority from the sale, lease, or other disposition of property or contracts held or acquired by the authority;
(4) income from investments that the State Treasurer makes from monies in the fund; and
(5) any other monies made available under this program.
(C) The fund shall be used:
(1) for the purposes described in this program; and
(2) to pay any and all expenses of the authority in administering the program.
(D) Monies in the fund shall be deposited with the State Treasurer and invested and reinvested in the same manner as other state funds, and any investment earnings shall be paid into the fund.
Section 33-38-550. In addition to any other of its powers, the authority may:
(1) use the services of other governmental agencies;
(2) contract for and accept, for use in carrying out the provisions of this program, loans and grants from the federal, state, or any loan government and any of their respective agencies and instrumentalities;
(3) acquire, manage, operate, dispose of, or otherwise deal with property, take assignments of rentals and leases, and make contracts, leases, agreements, and arrangements that are necessary or incidental to the performance of its duties, upon any terms and conditions that it deems advisable;
(4) prescribe or approve the form of and terms and conditions in applications, guarantee agreements, or any other documents entered into by the authority, principals, or sureties in connection with the program;
(5) acquire or take assignments of documents executed, obtained, or delivered in connection with any assistance provided by the authority under this program;
(6) fix, determine, charge, and collect any premiums, fees, charges, costs, and expenses in connection with any assistance provided by the authority under this program;
(7) adopt rules and regulations necessary to carry out the purposes of this program; and
(8) do anything necessary or convenient to carry out its powers and the purposes of this program.
Section 33-38-560. (A) Subject to the restrictions of this chapter, the authority, on application, may guarantee any surety up to ninety percent of its losses incurred under a bid bond, a payment bond, or a performance bond of not more than $1,000,000 for each bond on any contract with the federal or state or local government or a utility regulated by the Public Service Commission.
(B) The term of a guaranty under this article may not exceed the contract term.
(C) The authority may vary the terms and conditions of the guaranty from surety to surety, based upon the authority's history of experience with that surety and upon any other factor that the authority considers relevant.
(D)(1) The authority may execute and perform bid, performance, and payment bonds as a surety for the benefit of a principal in connection with any contract with the federal or state government, a local government in the state, or a utility regulated by the State Public Service Commission.
(2) The bonds:
(a) may not exceed $250,000 each; and
(b) shall be subject to the approval of the authority, based on the bond worthiness of the principal as determined by the authority on review of an application.
(3) The limit in this subsection does not apply if the sources for the bonds are grants.
(E)(1) The authority may not approve a guaranty or a bond under this article unless the authority considers the economic impact of the contract, for which a bond is sought to be guaranteed or issued, to be substantial.
(2) To determine the economic impact of a contract, the authority may consider:
(a) the amount of the guaranty obligation;
(b) the terms of the bond to be guaranteed;
(c) the number of new jobs that will be created by the contract to be bonded; and
(d) any other factor that the authority considers relevant.
Section 33-38-570. In addition to its authority under this program, on application, the authority may establish a surety bonding line in order to guarantee multiple bonds to a principal within approved terms, conditions, and limitations.
Section 33-38-580. (A) To qualify for a surety bond or guaranty under Sections 33-38-540 through 33-38-580 of this chapter, a principal shall meet the requirements of this section.
(B) The principal shall satisfy the authority that:
(1)(a) the principal is of good moral character; or
(b) if the principal is not an individual, the principal is owned by individuals of good moral character;
(2) as determined from creditors, employers, and other individuals who have personal knowledge of the principal:
(a) the principal has a reputation for financial responsibility; or
(b) if the principal is not an individual, a majority of the principal is owned by individuals with a reputation for financial responsibility;
(3) the principal is a resident of South Carolina or has its principal place of business in South Carolina; and
(4) the principal is unable to obtain adequate bonding on reasonable terms through normal channels.
(C) The principal shall certify to the authority and the authority shall be satisfied that:
(1) a bond is required in order to bid on a contract or to serve as a prime contractor or subcontractor;
(2) a bond is not obtainable on reasonable terms and conditions without assistance under the South Carolina Small Business Surety Bond [Guaranty] Program; and
(3) the principal will not subcontract more than seventy-five percent of the dollar value of the contract.
Section 33-38-590. (A) To apply for financial assistance from the South Carolina Small Business Surety Bond [Guaranty] Program pursuant to Sections 33-38-540 through 33-38-580 of this chapter, a principal and, where applicable, a surety bond shall submit to the authority an application on the form that the authority provides.
(B) The application shall include:
(1) a detailed description of the government or utility project;
(2) an itemization of known and estimated costs;
(3) the total amount of investment required to perform the government or utility contract;
(4) the funds available to the principal for working capital;
(5) the amount of bonding assistance sought from the authority;
(6) information that relates to the inability of the principal to obtain adequate bonding on reasonable terms through normal channels;
(7) information that relates to the financial status of the principal, including:
(a) a current balance sheet;
(b) a profit and loss statement; and
(c) credit references;
(8) a schedule of all existing and pending contracts and the current status of each; and
(9) any other relevant information that the authority requests.
(C) After receipt of an application for assistance from the South Carolina Small Business Surety Bond [Guaranty] Program, the authority may determine that a principal shall provide an audited balance sheet before the authority makes its decision on the application.
(D) If a principal has ever defaulted on any loan or guaranty provided by the authority, the authority may approve a guaranty or bond under this article if:
(1) two years have elapsed since the time of the default; and
(2) the principal has cured any default in any financing program administered by the department.
Section 33-38-600. (A) In this article the following words have the meanings indicated:
(1) `Enterprise' means a business entity, including a sole proprietorship, a partnership, a limited partnership, a corporation, or a joint venture proposing to carry on a business within the State and meeting the requirements of Section 33-38-340 of this chapter.
(2) `Equity participation financing' means any financial assistance provided under the program including investment or guaranty of investment in an enterprise.
(3) `Existing business' means a business whose board of directors or owners approve the sale of the business to an enterprise receiving equity participation financing.
(4) `Franchise' means:
(a) an oral or written agreement, either express or implied which:
(i) grants the right to distribute goods or provide services under a marketing plan prescribed or suggested in substantial part by the franchisor;
(ii) requires payment of a franchise fee to a franchisor or its affiliate; and
(iii) allows the franchise business to be substantially associated with a trademark, service mark, trade name, logo type, advertising, or other commercial symbol of or designating the franchisor or its affiliate; or
(b) a master franchise.
(5) `Program' means the Equity Participation Investment Program in the South Carolina Small Business Development Financing Authority.
(6) `Qualified security' means:
(a) any note, bond, debenture, or other evidence of indebtedness;
(b) any stock or other form of equity participation;
(c) any certificate of interest or participation in a profit sharing agreement;
(d) any investment contract;
(e) any certificate of deposit for a security;
(f) any certificate of interest or participation in a patent or patent application
or in royalty or other payments under a patent or patent application; or
(g) any interest or instrument commonly known as a `security' or any certificate for, receipt for, guarantee of, or option, warrant, or right to subscribe to or purchase any qualified security.
(7) `Technology-based business' means a commercial or industrial enterprise engaged in the application of scientific knowledge to practical purposes in a particular field for a profit.
Section 33-38-610. (A) There is created an Equity Participation Investment Program.
(B) The program is administered by the South Carolina Small Business Development Financing Authority.
Section 33-38-620. The purpose of the Equity Investment Program is to encourage and aid in the creation and development of franchises and technology-based businesses, and in the acquisition of existing businesses, in the State by socially or economically disadvantaged persons.
Section 33-38-630. For the purposes of administering the program, the authority may:
(1) provide equity participation financing for the establishment and development of franchises and technology-based businesses, and the acquisition of existing businesses, by socially or economically disadvantaged persons in the State:
(2) buy, hold, and sell qualified securities;
(3) prepare, publish, and distribute, with or without charge as the authority may determine, technical studies, reports, and other materials it considers appropriate; and
(4) provide and pay for any advisory services and technical assistance necessary or desirable to carry out the purposes of the program.
Section 33-38-640. (A) Under the program, the authority may provide equity participation financing, including the purchase of qualified securities issued by a franchise, by a technology-based business, or by an enterprise acquiring an existing business, only after the enterprise has submitted an application that contains a business plan, including:
(1) a description of the franchisor, technology-based business, or existing business and its management, product, and market;
(2) a statement of the amount, immediacy of need, and projected use of the capital required;
(3) a statement of the potential economic impact of the purchase;
(4) information that relates to the satisfaction of the applicant's requirements of Section 33-38-340 of this chapter; and
(5) any other information the authority requires.
(B) Under the program, any equity participation financing shall satisfy the following requirements:
(1) The authority may not:
(a)(i) own securities representing more than forty-five percent of the voting stock of any franchise or technology-based business; or
(ii) own an interest greater than forty-five percent in any franchise or technology-based business; or
(b)(i) own securities representing more than twenty-five percent of the voting stock of any enterprise acquiring an existing business; or
(ii) own an interest greater than twenty-five percent in any enterprise acquiring an existing business.
(2) The amount of the authority's equity participation financing may not exceed:
(a)(i) $100,000 for any franchise;
(ii) forty-five percent of the total initial investment in the franchise;
(b)(i) $500,000 for any enterprise acquiring an existing business; or
(ii) twenty-five percent of the total investment in the enterprise acquiring an existing business; or
(c) $500,000 for a technology-based business.
(3) The total amount of equity participation financing disbursed may not exceed $3,000,000 for a calendar year
(4)(a) The authority shall find that there is a reasonable probability that the authority will recover its initial investment and an adequate return of investment.
(b) The authority's investment shall be recoverable within:
(i) seven years of the equity participation financing in a franchise;
(ii) seven years of the equity participation financing in an enterprise acquiring an existing business; or
(iii) ten years of the equity participation financing in a technology-based business.
(c) The authority's recovery shall be the greater of the current value of the percentage of the equity investment in the enterprise or the amount of the initial investment in the enterprise.
(d) The value of the business entity at the time of recovery shall be determined after obtaining at least one independent appraisal of the value from an appraiser selected from a list of at least three appraisers supplied by the authority.
(5) The liability of the State and of the authority in providing equity participation financing is limited to its investments under the program.
(6) When applying to the authority to acquire an existing business, an enterprise shall have the following minimum qualifications:
(a) the enterprise or its principals shall have a minimum net worth of at least $75,000 pledged as security; and
(b) the enterprise or its principals shall have had three or more years of successful experience with demonstrated achievements and management responsibilities.
(7) When being acquired, the existing business shall meet the following minimum qualifications:
(a) the existing business shall have been in existence for at least five years;
(b) the existing business shall have been profitable for at least two of the previous three years;
(c) the existing business shall have sufficient cash flow to service the debt and ensure adequate return of the authority's investment;
(d) the existing business shall have the capacity for growth and job creation;
(e) the existing business shall have its principal place of business in South Carolina; and
(f) the existing business shall have a strong customer base.
Section 33-38-650. (A) There is an Equity Participation Investment Program Fund established as a nonlapsing, revolving fund.
(B) The fund consists of:
(1) money drawn from the Small Business Development Guaranty Program;
(2) money appropriated by the State to the fund;
(3) money made available to the fund through federal programs or private contributions;
(4) income from investments that the State Treasurer, on instruction from the authority, makes from monies in the fund;
(5) proceeds from the sale, disposition, lease, or rental by the authority of collateral related to equity participation financing provided by the authority;
(6) premiums, fees, royalties, and repayments of principal, interest, and investments paid by and on behalf of enterprises to the authority under the terms of equity participation financing provided by the authority; and
(7) any other monies made available under this program.
(C) The fund shall be self-sustaining and shall achieve investment returns on its portfolio in the form of:
(1) royalties from enterprises in amounts to be determined by the authority; and
(2) if a debt security is used, interest payments.
(D) The authority may, from time to time as needed for the program, withdraw amounts from the Small Business Development Guaranty Fund, not to exceed a total of $2,000,000 and deposit these funds into the Equity Participation Investment Program Fund.
(E) The authority shall use the fund and income from the fund:
(1) in the purchase of qualified securities issued by an enterprise for the purpose of providing equity participation financing as permitted under the program;
(2) to provide guarantees of investments to expand the capital resources of qualified enterprises;
(3) in the purchase of advisory services and technical assistance consistent with the program;
(4) in the purchase of any securities that may be a lawful investment for a fiduciary of the State;
(5) to provide equity participation financing as permitted under the program; and
(6) to pay expenses for administrative, legal, and actuarial services relating to the program.
(F)(1) The State Treasurer shall hold and the State Comptroller shall account for the fund.
(2) Any investment earnings of the fund shall be paid into the fund.
(G) The authority shall file an annual report by January first with the General Assembly in a form to be prescribed by the General Assembly."
Section 33-38-700. In this article the following words have the meanings indicated:
(1) `Fund' means the Small Business Development Special Long-Term Financing Fund as detailed in Article 5 of this chapter.
(2) `Authority' means the S.C. Small Business Development Financing Authority.
(3) `Qualified investment' means investment in the Small Business Development Special Long-Term Financing Fund.
(4) `State tax liability' means a taxpayer's total income tax liability that is incurred under Title 12 or insurance premium tax liability incurred pursuant to Chapter 7 of Title 38, or both, as computed after the application of credits, except the credits provided by this chapter.
(5) `Taxpayer' means any individual, corporation, partnership, trust, or other entity that has any state tax liability and has made a qualified investment.
(6) `South Carolina business' means a corporation, general partnership, limited partnership, joint venture, trust, proprietorship or any other similar entity or organization which is either established and operating or will be established to operate in South Carolina.
Section 33-38-710. There is a tax credit provided to all private businesses having an investment in the Small Business Development Long-Term Financing Fund. All such taxpayers shall be entitled to have the tax credit to be determined in accordance with Section 33-38-730 applied against any state tax liability which may be imposed on the taxpayer.
Section 33-38-720. Private investors wishing to avail themselves of the tax credit provided herein shall be required to make a minimum aggregate investment in the authority of not less than five thousand dollars.
Section 33-38-730. The amount of the credit that a taxpayer may receive under this chapter for a particular taxable year is equal to the lesser of:
(1) the taxpayer's state tax liability for that taxable year;
(2) the amount determined in Step Three of the following steps: Step One: Add the consideration paid for all qualified investments of the taxpayer during the taxable year of the taxpayer. Step Two: Multiply the amount determined in Step One by three-tenths. Step Three: Add the product determined in Step Two to the credit carryover, if any, to which the taxpayer is entitled for the taxable year under Section 33-38-740; or
(3) one-half of all the qualified investments of the taxpayer multiplied by three-tenths.
Section 33-38-740. If the amount of the credit determined under Section 33-38-730 exceeds the taxpayer's state tax liability, as defined in Section 33-38-700(4) for that taxable year, then the taxpayer may carry the excess over to the immediately succeeding taxable years. However, the credit carryover may not be used for any taxable year that begins on or after ten years from the date of the qualified investment. The amount of the credit carryover from a taxable year must be reduced to the extent that the carryover is used by the taxpayer to obtain a credit under this chapter for any subsequent taxable year.
Section 33-39-750. The total amount of credits allowed under this chapter may not exceed in the aggregate five million dollars for all taxpayers and all taxable years, excluding any allowable tax credits of the authority. The credit must be allowed to taxpayers in the order of the time of the purchase of the qualified investments.
Section 33-38-760. If a qualified investment which is the basis for a credit under this chapter is redeemed by a taxpayer, within five years of the date it is purchased, the credit provided by this chapter for the qualified investment is disallowed, and any credit previously claimed and allowed with respect to the qualified investment so redeemed must be paid to the Tax Commission with the appropriate return of the taxpayer covering the period in which the redemption occurred. When payments are made to the commission under this section, the amount collected must be handled in the same manner as if no credit had been allowed.
Section 33-38-770. To receive the credit provided by this chapter, a taxpayer shall:
(1) claim the credit on the taxpayer's annual state income or premium tax return in the manner prescribed by the appropriate commission; and
(2) file with the appropriate commission and with the taxpayer's annual state income or premium tax return a copy of the form issued by the authority as to the qualified investment by the taxpayer, which includes an undertaking by the taxpayer to report to the appropriate commission any redemption of the qualified investment within the meaning of Section 33-38-700(3).
Section 33-38-780. The authority shall complete forms prescribed by the appropriate commission which must show as to each qualified investment in the fund:
(1) the name, address, and identification number of the taxpayer who purchased a qualified investment; and
(2) the nature of the qualified investment purchased by the taxpayer and the amount paid for it. These forms must be filed with the appropriate commission on or before the fifteenth day of the third month following the month in which the qualified investment is purchased. Copies of the forms to be provided to the appropriate commission must be mailed to the taxpayer on or before the fifteenth day of the second month following the month in which the qualified investment is purchased."
SECTION 2. The General Assembly shall provide funds in the General Appropriation Act for fiscal year 1994-95 only to be used to provide for the various forms of assistance authorized by this act and shall provide funds in the General Appropriation Act for fiscal years 1994-95, 1995-96, and 1996-97 to be used to pay salaries, employee benefits, and administrative expenses of the authority.
SECTION 3. On July 1, 1999, the authority shall cease to be a public entity.
SECTION 4. This act takes effect on July 1, 1994.