GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1989

H	2 

HOUSE BILL 1227
Committee Substitute Favorable 6/24/89

Short Title:  Self-employment Loan Program.	(Public)
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Sponsors:
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Referred to:  

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April 12, 1989

A BILL TO BE ENTITLED
AN ACT TO CREATE A SELF-EMPLOYMENT LOAN GUARANTEE PROGRAM TO ASSIST LOW-INCOME PERSONS IN ESTABLISHING OR EXPANDING SMALL BUSINESS VENTURES.
The General Assembly of North Carolina enacts:
Section 1.  Article 7 of Chapter 143B of the General Statutes is amended by adding a new Part to read:
“Part 28.
"Self-employment Loan Program.
"§ 143B-344.20.  Purpose.
The primary purpose of this Part is to promote the establishment and expansion of small business ventures by providing guarantees for low-interest loans by lending institutions to low-income persons.
"§ 143B-344.21.  Self-employment Loan Program.
The Department shall develop and implement a Self-employment Loan Guarantee Program to be conducted in coordination with the partnership programs of the State Job Training Coordinating Council and any State programs designed to implement the federal Job Training Partnership Act.  The Department may contract with local community action agencies or other local entities in administering the Program, and shall work with the Department of Commerce and the Department of Human Resources in developing the Program.
"§ 143B-344.22.  Self-employment Fund.
(a)	A loan guarantee fund, to be called the Self-employment Fund, is created.  Any moneys appropriated to, paid to, or earned by the Fund shall be deposited with the State Treasurer.  The Fund shall be administered by the Department.
(b)	The Self-employment Fund shall be used to guarantee the payment of loans made by lending institutions to low-income persons for establishing or expanding small businesses, subject to the terms, conditions, limitations, collateral and security provisions, and reserve requirements as shall be determined by the Department in accordance with the provisions of this Part.
(c)	The aggregate amount of loan obligations guaranteed under this Part shall not constitute a debt, liability, or obligation of the State or any of its political subdivisions or a pledge of the faith and credit of the State or any of its political subdivisions, but shall be payable solely from the funds on deposit to the credit of the Self-employment Fund.
"§ 143B-344.23.  Loan Guarantee Limitations; rules.
Loan guarantees made pursuant to this Part shall be subject to the following limitations:
(1)	Unless otherwise determined by the Department, the guarantee of a self-employment loan shall be in the amount of one hundred percent (100%) of the unpaid principal and interest on each loan; provided, however, that no single loan guarantee shall exceed the sum of ten thousand dollars ($10,000) and no person or family of low-income shall be entitled to more than one loan guarantee.
(2)	For the purposes of this Part, a ‘low-income' person is one who meets the poverty guidelines established by the Department.
(3)	A loan shall be eligible for a guarantee under this Part only if the annual interest rate thereon does not exceed five percent.
(4)	The aggregate value of all self-employment loans guaranteed pursuant to this Part and outstanding at any one time shall not exceed 15 times the total value of funds (including appropriations, income, investments, grants, gifts, and all other funds from any other source) in the Self-employment Fund.
(5)	The guarantee of a self-employment loan shall be made only upon the determination by the Department that such a loan was at the time of approval not otherwise available from private lenders upon reasonably equivalent terms and conditions.
(6)	The Department shall from time to time adopt, modify, or repeal rules governing the guaranteeing of self-employment loans, including rules as to any or all of the following:
a.	Procedures for the submission and approval of requests to guarantee self-employment loans, including advance commitments by the Department to guarantee loans;
b.	Limitations and restrictions on the types of self-employment opportunities for which loans may be guaranteed and on the types of expenditures that may be made and the types of assets that may be purchased or leased with guaranteed loans;
c.	Restrictions as to interest rates, subject to the maximum annual rate of interest specified in this Part, on self-employment loans;
d.	Schedules of any fees and charges necessary to provide for the expenses of administering the Self-employment Fund;
e.	Procedures regarding the servicing of self-employment loans including procedures for honoring defaults and procedures to be implemented to enforce the obligations of the borrowers to repay guaranteed self-employment loans.
f.	Any other matters related to the duties and the exercise of the power of the Department with respect to the Self-employment Loan Guarantee Program deemed necessary to effectuate the purposes of this Part."
Sec. 2.  The Department of Natural Resources and Community Development shall begin implementation of the Program created in Section 1 of this act on July 1, 1990.
Sec. 3.  There is appropriated from the General Fund to the Department of Natural Resources and Community Development, Division of Economic Opportunity, for fiscal year 1990-91 the sum of five hundred thousand dollars ($500,000) to be placed into the Self-employment Fund created by this act and to be used to guarantee self-employment loans by private lending institutions to low-income persons in accordance with the provisions of this act.
Sec. 4.  The Department shall maintain records of all loans guaranteed pursuant to this Part and shall report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division no later than January 15 of each year on the number of loans guaranteed, the balance of the Self-employment Fund, and the effectiveness of the loan guarantees in establishing and expanding small business ventures for low-income persons.
Sec. 5.  If the Division of Economic Opportunity is transferred to another agency of State government, all functions, powers, and duties of the Department of Natural Resources and Community Development with respect to the administration of the Self-employment Loan Guarantee Program are likewise transferred to said agency.  
Sec. 6.  This act is effective upon ratification.