NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A10212
SPONSOR: Otis TITLE OF BILL:
An act to amend the executive law, in relation to establishing the state
of emergency small business and not-for-profit organization loan program
PURPOSE OR GENERAL IDEA OF BILL:
This bill seeks to establish the state of emergency small business and
not-for-profit loan program.
SUMMARY OF PROVISIONS:
Section 1, subdivision 1 adds new section 29-1 to the executive law.
Subdivision 2 establishes the state of emergency small business and
not-for-profit loan program to guarantee the repayment of loans made by
eligible financial institutions to eligible small businesses and not-
for-profits.
Subdivision 3 establishes the eligibility requirements for the program.
Subdivision 4 establishes procedure for small businesses and not-for-
profits to apply for additional loans within the program for each addi-
tional thirty days they remain affected by the state of emergency.
Subdivision 5 establishes the procedures for loan collection.
Section 2 establishes that this act shall take effect immediately.
DIFFERENCE BETWEEN ORIGINAL AND AMENDED VERSION (IF APPLICABLE):
n/a
JUSTIFICATION:
With the outbreak of the coronavirus, many of New York's small busi-
nesses and not-for-profits have been put into precarious financial posi-
tions. Workers are forced to take sick days, customers and clients are
staying home, and supply costs are skyrocketing. For small businesses
and not-for-profits which already run on tight margins this can be
catastrophic. This bill seeks to create a loan program that would allow
eligible financial institutions to make loans to small businesses and
not-for-profits with no interest during a 90 day grace period or 180
days following the grace period. With the urgency that goes along with
combatting the coronavirus, it is vital to protect New York's small
businesses and not-for-profits during this state of emergency.
PRIOR LEGISLATIVE HISTORY:
This is a new bill.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
To be determined.
EFFECTIVE DATE:
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
10212
IN ASSEMBLY
March 24, 2020
___________
Introduced by M. of A. OTIS -- read once and referred to the Committee
on Governmental Operations
AN ACT to amend the executive law, in relation to establishing the state
of emergency small business and not-for-profit organization loan
program
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The executive law is amended by adding a new section 29-l
2 to read as follows:
3 § 29-l. State of emergency small business and not-for-profit organiza-
4 tion loan program. 1. Definitions. As used in this section, the follow-
5 ing terms shall have the following meanings:
6 (a) "Affected business or organization" means and includes both a
7 small business and a small not-for-profit organization located within
8 this state during a state of emergency;
9 (b) "Bank" means a bank as such term is defined in subdivision one of
10 section two of the banking law;
11 (c) "Credit union" means a credit union as such term is defined in
12 subdivision nine of section two of the banking law;
13 (d) "Department" means the department of financial services;
14 (e) "Eligible financial institution" means a bank or credit union that
15 has a physical presence in this state and is in good standing;
16 (f) "Grace period" means the ninety-day period after a state of emer-
17 gency is over;
18 (g) "Small business" means a business with not more than fifty employ-
19 ees;
20 (h) "Small not-for-profit organization" means a not-for-profit organ-
21 ization with not more than fifty employees; and
22 (i) "State of emergency" means the period beginning with a declaration
23 by the governor that a state of emergency exists.
24 2. State of emergency small business and not-for-profit organization
25 loan program. (a) The department shall administer a state of emergency
26 small business and not-for-profit loan program to guarantee the repay-
27 ment of loans made by an eligible financial institution to an eligible
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD08858-08-0
A. 10212 2
1 affected business or organization pursuant to this section. Subject to
2 the cessation of new claim approvals under paragraph (d) of subdivision
3 five of this section, the department shall submit all approved claims to
4 the comptroller, who shall pay from the general fund any and all claims
5 submitted by the department.
6 (b) Any bank or credit union may apply to the department to partic-
7 ipate in the loan guarantee program. Not later than one business day
8 after receiving the application, the department shall determine whether
9 the financial institution is an eligible financial institution and imme-
10 diately notify the bank or credit union of such determination. Any
11 eligible financial institution may make loans to affected businesses and
12 organizations in accordance with this section.
13 (c) Each eligible financial institution that makes a loan pursuant to
14 this section, shall notify the department in writing not later than one
15 business day after making the loan, specifying such information about
16 the borrower as the department may request.
17 3. Loan eligibility. An eligible financial institution may make a loan
18 to an affected business or organization, provided:
19 (a) The affected business or organization has provided to the eligible
20 financial institution proof satisfactory to such institution that such
21 affected business or organization is an affected business or organiza-
22 tion located within the state of New York.
23 (b) The amount of the loan shall not exceed five thousand dollars.
24 (c) The loan is made in accordance with the eligible financial insti-
25 tution's underwriting policy and standards, provided further that the
26 affected business or organization's creditworthiness shall not be a
27 factor used for the purposes of determining eligibility.
28 (d) The loan agreement shall not (i) require repayment during the
29 grace period, or (ii) charge interest on the principal amount before or
30 during the grace period or for one hundred eighty days after the grace
31 period, provided after such one hundred eighty-day period, the eligible
32 financial institution may charge interest or fees in accordance with
33 such financial institution's lending policy and the terms of the under-
34 lying loan agreement.
35 (e) The loan agreement shall require that the affected business or
36 organization repay the loan in full not later than one hundred eighty
37 days after the end of the grace period by making at least three, and no
38 more than six, equal installment payments. The loan agreement shall not
39 contain a fee or penalty for the prepayment or early payment of the
40 loan.
41 (f) The eligible financial institution shall offer credit counseling
42 services or refer such affected business or organization to nonprofit
43 credit counselors.
44 4. Additional loans. An affected business or organization who has
45 received a loan pursuant to this section may apply to the same eligible
46 financial institution for an additional loan for each thirty-day period
47 such small business or not-for-profit organization remains an affected
48 business or organization, provided no affected business or organization
49 may receive more than three loans under the program. Each additional
50 loan shall be made in accordance with subdivision three of this section.
51 5. Collection of loans. (a) On and after one hundred eighty days from
52 the end of the grace period, an eligible financial institution that has
53 made a good-faith effort to collect the outstanding principal from a
54 loan issued pursuant to this section may make a claim to the department
55 for recovery of an amount equal to the outstanding principal for such
56 loan. Prior to the department's approving and submitting a claim to the
A. 10212 3
1 comptroller, such eligible financial institution shall demonstrate to
2 the satisfaction of the department that the eligible financial institu-
3 tion has made a good-faith effort to collect the outstanding principal
4 from the eligible small business or not-for-profit organization employee
5 in accordance with such financial institution's loan servicing and
6 collection policies. Upon payment of a claim, the loan shall be assigned
7 to the state, and the department shall have the right to continue
8 collection efforts on the loan.
9 (b) The department shall maintain records in the regular course of
10 administration of the loan guarantee program, including a record of
11 loans issued and of payments made to honor loan guarantees issued under
12 this section. The department shall regularly review such records to
13 determine total loans issued and identify duplicative applications.
14 (c) The department may terminate any loan guarantee if the eligible
15 financial institution misrepresents any information pertaining to the
16 guarantee or fails to comply with any requirements of this section in
17 connection with the guarantee of the underlying loan.
18 (d) If the amounts expended to honor loan guarantees under the program
19 exceed ten percent of total loans issued, the department shall imme-
20 diately cease to approve claims and shall notify the comptroller and
21 each eligible financial institution of the total amount of payments made
22 and that the department has ceased honoring loan guarantees.
23 (e) Any interest deferred or not charged related to a loan issued
24 pursuant to this section shall be exempt from all state taxes that may
25 be applicable to such interest amounts as they relate to an affected
26 business or organization. Eligible financial institutions shall
27 disclose to affected business or organization borrowers in the signed
28 affidavit or loan documents that there may be federal tax consequences
29 to the program loans.
30 (f) No new loan applications shall be submitted under the program
31 after the state of emergency ends. The program shall expire upon the
32 repayment of all loans made under the program and, for all loans in
33 default, the repayment of claims made under the program, or the cessa-
34 tion of new claim approvals under paragraph (d) of this subdivision.
35 § 2. This act shall take effect immediately.
