1. The Laws of New York
  2. Unconsolidated Laws
  3. Urban Development Corporation Act 174/68


Section 16-T Small business revolving loan fund

Urban Development Corporation Act 174/68 (UDA)

1. The small business revolving loan fund program is hereby created. The corporation is authorized, within available appropriations, to provide low interest loans to community development financial institutions, in order to provide funding for those lending organizations' loans to small businesses, and micro-businesses located within New York state, that generate economic growth and job creation within New York state but that are unable to obtain adequate credit or adequate terms for such credit. If in the discretion of the corporation the use of a community development financial institution is not practicable based upon the application of rules and regulations developed by the corporation, including, but not limited to, assessments of geographic and administrative capacity, then the corporation is authorized, within available appropriations, to provide low interest loans to the following other local community based lending organizations: small business lending consortia, certified development companies, providers of United States department of agriculture business and industrial guaranteed loans, United States small business administration loan providers, credit unions and community banks. As used in this section "small business" means a business that is resident in New York state, independently owned and operated, not dominant in its field, and employs one hundred or fewer persons. As used in this section "micro-business" means a business that is resident in New York state, independently owned and operated, and employs less than five people.

  2. In order for a lending organization to be eligible to receive program funds, it must have established sufficient expertise to analyze small business and micro-businesses applications for program loans, evaluate the creditworthiness of small businesses, and micro-businesses and regularly monitor program loans. The lending organization shall review every program loan application in order to determine, among other things, the feasibility of the proposed use of the requested financing by the small business or micro-business applicant, the likelihood of repayment and the potential that the loan will generate economic development and jobs within New York state. The corporation shall identify eligible lending organizations through one or more competitive statewide or local solicitations. The corporation shall show preference in awarding program funds to lending organizations who serve micro-businesses and micro-loans.

  3. Program loans to small businesses and micro-businesses shall be targeted and marketed to minority and women-owned enterprises and other small businesses and micro-businesses that are having difficulty accessing traditional credit markets. Program loans to small businesses and micro-businesses shall be used for the creation and retention of jobs, as defined by the corporation, including: (a) working capital; (b) the acquisition and/or improvement of real property; (c) the acquisition of machinery and equipment, property or improvement; or (d) the refinancing of debt obligations. There shall be two categories of loans to small businesses and micro-businesses: a micro loan that shall have a principal amount that is less than twenty-five thousand dollars and a regular loan that shall have a principal amount not less than twenty-five thousand dollars. Prior to receiving program funds, the lending organization must certify to the corporation that such loan complies with this section and rules and regulations promulgated for the program and that the lending organization has performed its obligations pursuant to and is in compliance with this section, the program rules and regulations and all agreements entered into between the corporation and the lending organization. The program funds amount used by the lending organization to fund a program applicant loan shall not be more than fifty percent of the principal amount of such loan. The program funds amount used by the lending organization to fund a program applicant loan shall not be greater than one hundred and twenty-five thousand dollars. Minority- and women-owned business enterprises and other small businesses or micro-businesses who access such program loans under this subdivision shall not be precluded from accessing such short-term financing loans provided under subdivision eleven of this section.

  4. Program funds shall not be used for: (a) projects that would result in the relocation of any business operation from one municipality within the state to another, except under one of the following conditions: (i) when a business is relocating within a municipality with a population of at least one million where the governing body of such municipality approves such relocation; or (ii) the lending organization notifies each municipality from which such business operation will be relocated and each municipality agrees to such relocation; (b) projects of newspapers, broadcasting or other news media; medical facilities, libraries, community or civic centers; or public infrastructure improvements; and (c) providing funds, directly or indirectly, for payment, distribution, or as a loan, to owners, members, partners or shareholders of the applicant business, except as ordinary income for services rendered.

  5. With respect to its program loans, the lending organization may charge application, commitment and loan guarantee fees pursuant to a schedule of fees adopted by the lending organization and approved by the corporation. Approved micro-loans for five thousand dollars or less shall have applications fees waived.

  6. Program funds shall be disbursed to a lending organization by the corporation in the form of a loan to the lending organization. The term of the loan shall commence upon disbursement of the program funds by the corporation to the lending organization. The loan shall carry a low interest rate determined by the corporation based on then prevailing interest rates and the circumstances of the lending organization. Notwithstanding the performance of the loans made by the lending organization using program funds, the lending organization shall remain liable to the corporation with respect to any unpaid amounts due from the lending organization pursuant to the terms of the corporation's loans to the lending organization. In addition, a portion of program funds may be disbursed to a lending organization in the form of a grant or forgivable loan, provided those funds are used by the lending organization for administrative expenses associated with the fund, loan-loss reserves, or other eligible expenses as determined by the corporation.

  7. Notwithstanding anything to the contrary in this section, the corporation shall provide at least five hundred thousand dollars in program funds pursuant to this section to lending organizations for the purpose of making loans to small business located in Niagara county.

  8. Notwithstanding anything to the contrary in this section, the corporation shall provide at least five hundred thousand dollars in program funds pursuant to this section to lending organizations for the purpose of making loans to small business located in St. Lawrence county.

  9. Notwithstanding anything to the contrary in this section, the corporation shall provide at least five hundred thousand dollars in program funds pursuant to this section to lending organizations for the purpose of making loans to small business located in Erie county.

  10. Notwithstanding anything to the contrary in this section, the corporation shall provide at least five hundred thousand dollars in program funds pursuant to this section to lending organizations for the purpose of making loans to small business located in Jefferson county.

  11. Notwithstanding anything to the contrary in this section, the corporation may provide at least five hundred thousand dollars in program funds pursuant to this section to lending organizations for the purpose of making short-term financing available to minority- and women-owned business enterprises and other small businesses performing contracts to provide construction or professional services for state procurement purposes. Such loans shall be used to underwrite the cost of labor, materials, and equipment directly associated with (1) the contract being financed or (2) a contract that has been satisfied for which the business is awaiting payment from the state. The program funds amount used by the lending organization to fund a program applicant loan shall not be more than eighty percent of the principal amount of such loan. The program funds amount used by the lending organization to fund a program applicant loan shall not be greater than one hundred twenty-five thousand dollars. Minority- and women-owned business enterprises and other small businesses who access such short-term financing loans under this subdivision shall not be precluded from accessing such program loans provided under subdivision three of this section.

  12. Notwithstanding any provision of law to the contrary, the corporation may establish a program fund for program use and pay into such fund any funds available to the corporation from any source that are eligible for program use, including moneys appropriated by the state.

  13. With respect to a lending organization program loan applicants, no person who is a member of the board or other governing body, officer, employee, or member of a loan committee, or a family member of any such lending organization shall participate in any decision on such application if such person is a party to or has a financial or personal interest in such loan. Any person who cannot participate in a loan application decision for such reasons shall not be counted as a member of the loan committee, board or other governing body for purposes of determining the number of members required for approval of such application.

  14. The lending organization shall submit to the corporation annual reports stating: the number of program loans made; the amount of program funding used for loans; the use of loan proceeds by the borrower; the number of jobs created or retained; the status of each outstanding program loan, including fund balance; and such other information as the corporation may require.

  14-a. Beginning April 1, 2019, the corporation shall publish on its website the information contained in the annual reports required under subdivision fourteen of this section in aggregate form omitting borrower identifiable information.

  15. The corporation may conduct audits of the lending organization in order to ensure compliance with the provisions of this section, any regulations promulgated with respect thereto and agreements between the lending organization and the corporation of all aspects of the use of program funds and program loan transactions. In the event that the corporation finds substantive noncompliance, the corporation may terminate the lending organization's participation in the program.

  16. Upon termination of a lending organization's participation in the program, the lending organization shall return to the corporation, promptly after its demand therefor, all program fund proceeds held by the lending organization; and provide to the corporation, promptly after its demand therefor, an accounting of all program funds received by the lending organization, including all currently outstanding loans that were made using program funds. Notwithstanding such termination, the lending organization shall remain liable to the corporation with respect to any unpaid amounts due from the lending organization pursuant to the terms of the corporation's loans to the lending organization.