H.F. 433 Section 1. Section 15.335B, subsection 2, paragraph a, Code 1 2013, is amended by adding the following new subparagraph: 2 NEW SUBPARAGRAPH . (7) For providing linked investment 3 loans pursuant to section 15E.84. 4 Sec. 2. NEW SECTION . 15E.81 Short title. 5 This division shall be known as and may be cited as the 6 “Linked Investment Loans for Emerging Businesses Act” . 7 Sec. 3. NEW SECTION . 15E.82 Definitions. 8 For purposes of this division, unless the context otherwise 9 requires: 10 1. “Authority” means the economic development authority. 11 2. “Eligible borrower” means a business meeting the 12 requirements of section 15E.83. 13 3. “Eligible lending institution” means a financial 14 institution empowered to make commercial loans and eligible to 15 be a depository of state funds pursuant to chapter 12C. 16 4. “Emerging business” means a business in existence less 17 than five years. 18 5. “Fund” means a fund established by the authority pursuant 19 to section 15.106A, subsection 1, paragraph “o” , for the 20 purposes described in section 15.335B. 21 6. “Linked investment” means an agreement between the 22 authority and an eligible lending institution in which the 23 authority obtains a certificate of deposit from the lending 24 institution and in which the eligible lending institution 25 agrees to loan to an eligible borrower an amount at least equal 26 to the amount of the principal specified in the certificate of 27 deposit. 28 7. “Primary sector business” means a business participating 29 in interstate or intrastate commerce and engaged in 30 manufacturing, processing, or assembling products, conducting 31 research and development, or providing services in interstate 32 or intrastate commerce. “Primary sector business” does not 33 include retail, health, or professional services businesses. 34 8. “Program” means the linked investment loans for emerging 35 -1- LSB 1796YH (4) 85 ad/sc 1/ 6

H.F. 433 businesses program established in section 15E.84. 1 9. “Qualifying wage threshold” means the same as defined in 2 section 15.327. 3 Sec. 4. NEW SECTION . 15E.83 Eligible borrowers. 4 1. A business meeting the requirements of this section is 5 eligible to apply for the linked investment loans for emerging 6 businesses program established in section 15E.84. 7 2. To be eligible, a business must meet all of the following 8 requirements: 9 a. The business is an Iowa-based primary sector business. 10 b. The business is an emerging business seeking to 11 expand, an emerging business seeking to purchase another 12 Iowa-based business, or any existing business that has suffered 13 significant physical damage as a result of a natural disaster. 14 c. The business can demonstrate that the proceeds of a 15 linked investment loan will result in the creation or retention 16 of five or more jobs at one hundred eighty percent of the 17 qualifying wage threshold, ten or more jobs at one hundred 18 sixty percent of the qualifying wage threshold, or twenty or 19 more jobs at one hundred thirty percent of the qualifying wage 20 threshold. 21 Sec. 5. NEW SECTION . 15E.84 Linked investment loans for 22 emerging businesses program. 23 1. Program established. 24 a. The authority shall establish and administer a linked 25 investment loans for emerging businesses program for purposes 26 of investing moneys in financial institutions in order to 27 facilitate the flow of private capital to eligible borrowers. 28 b. In investing moneys under the program, the authority 29 shall invest in certificates of deposit at eligible lending 30 institutions. The authority may invest as much as twenty-five 31 percent of the balance of moneys in the fund. 32 c. The authority may obtain or renew a certificate of 33 deposit from an eligible lending institution for an amount of 34 time determined by the authority, but the total amount of time 35 -2- LSB 1796YH (4) 85 ad/sc 2/ 6

H.F. 433 a certificate may be held by an eligible lending institution 1 shall not exceed five years. 2 d. Interest earned under the program shall be considered 3 earnings of the fund and notwithstanding section 12C.7 shall 4 be credited to the fund. 5 e. A loan provided to an eligible borrower through a 6 linked investment pursuant to this division does not receive 7 assistance for purposes of sections 15.329, 15.330, 15.330A, 8 and 15.335B and is not subject to the requirements specified 9 in those sections. 10 2. Application and certification. 11 a. An eligible lending institution wishing to participate in 12 the program shall accept and review applications for loans from 13 eligible borrowers. 14 b. The eligible lending institution shall certify that the 15 applicant is an eligible borrower under the program, determine 16 whether to make a loan to the applicant, and, if so, the amount 17 of the loan. 18 3. Loan packages. 19 a. An eligible lending institution wishing to accept 20 a linked investment from the authority shall send to the 21 authority a loan package. 22 b. The loan package shall include but not be limited to the 23 amount of the loan requested by the applicant, the amount of 24 the investment requested by the eligible lending institution 25 from the authority, a plan detailing the purposes for which 26 the applicant intends to expend the loan proceeds, an estimate 27 of the economic impact to the state of the applicant’s plan 28 for the proceeds, and a certification by the eligible lending 29 institution that the applicant is an eligible borrower pursuant 30 to section 15E.83. 31 4. Linked investment terms. 32 a. The authority shall accept and review loan packages sent 33 by eligible lending institutions. The authority, subject to 34 the requirements of this division, may make a linked investment 35 -3- LSB 1796YH (4) 85 ad/sc 3/ 6

H.F. 433 according to the terms requested in the loan package or may 1 negotiate other terms. 2 b. In reviewing a loan package as a potential linked 3 investment, the authority shall consider the type or terms of 4 the loan involved, the nature of the applicant’s business, the 5 availability of state funds, and the compliance history of both 6 the eligible borrower and the eligible lending institution. 7 c. Upon reaching acceptable terms for the linked 8 investment, the authority shall deposit with the eligible 9 lending institution moneys from the fund, and the eligible 10 lending institution shall issue to the authority one or more 11 certificates of deposit. 12 d. The interest rate of a certificate of deposit may 13 be negotiated by the authority and the eligible lending 14 institution but shall be at a rate below the current market 15 rate. However, the authority shall not negotiate an annualized 16 interest rate on the certificate of deposit that is less than 17 one-half of one percent. 18 e. The eligible lending institution shall remit the interest 19 earned on the certificate of deposit and any principal not 20 renewed on the date the certificate of deposit matures. 21 f. Certificates of deposit issued pursuant to this division 22 shall not be subject to a penalty for early withdrawal. 23 5. Loan terms. An eligible lending institution accepting 24 a linked investment shall make a loan to the applicant for an 25 amount at least equal to the value of the moneys deposited by 26 the authority. The loan shall be at an interest rate not more 27 than four percent above the interest rate of the certificate 28 of deposit. 29 Sec. 6. NEW SECTION . 15E.85 Liability. 30 1. Neither the state nor the authority shall be liable to 31 an eligible lending institution in any manner for payment of 32 the principal or interest on the loan from an eligible lending 33 institution to an eligible borrower. 34 2. In making linked investments with eligible lending 35 -4- LSB 1796YH (4) 85 ad/sc 4/ 6

H.F. 433 institutions for loans to eligible borrowers, the authority 1 shall not pledge the credit or taxing power of the state nor 2 in any manner give or loan the state’s credit in aid of the 3 eligible borrower. 4 3. In making linked investments with eligible lending 5 institutions for loans to eligible borrowers, the authority 6 shall not pay, assume, or become responsible for the debts or 7 liabilities of the eligible borrower. 8 4. A delay in payments by an eligible borrower to an 9 eligible lending institution or a default on the part of an 10 eligible borrower shall not in any manner affect the linked 11 investment agreement between the eligible lending institution 12 and the authority. 13 Sec. 7. NEW SECTION . 15E.86 Rules. 14 The authority shall adopt rules pursuant to chapter 17A to 15 administer this division. The rules shall provide for the 16 administration of the program and for monitoring the compliance 17 of eligible lending institutions and eligible borrowers with 18 the requirements of this division. 19 EXPLANATION 20 This bill creates a linked investment loans for emerging 21 businesses program. 22 Under the program created in the bill, an eligible business 23 applies to an eligible lending institution for a loan, and the 24 lending institution seeks a linked investment from the economic 25 development authority. Moneys invested by the authority come 26 from the high quality jobs fund or funds. 27 An eligible lending institution is a financial institution 28 empowered to make commercial loans and eligible to be a 29 depository of state funds pursuant to Code chapter 12C. An 30 eligible borrower is a business that is: (1) an Iowa-based 31 primary sector business; (2) an emerging business seeking 32 to expand, an emerging business seeking to purchase another 33 Iowa-based business, or any existing business that has suffered 34 significant physical damage as a result of a natural disaster; 35 -5- LSB 1796YH (4) 85 ad/sc 5/ 6

H.F. 433 and (3) a business that can demonstrate that the proceeds of a 1 linked investment loan will result in the creation or retention 2 of five or more jobs at 180 percent of the qualifying wage 3 threshold, 10 or more jobs at 160 percent of the qualifying 4 wage threshold, or 20 or more jobs at 130 percent of the 5 qualifying wage threshold. 6 If a lending institution wishes to receive a linked 7 investment, the lending institution must send a loan package 8 to the authority for review. The authority may negotiate the 9 terms of the linked investment and accept a certificate of 10 deposit from the lending institution. The lending institution 11 must agree to loan an amount at least equal to the value of 12 the certificate of deposit to the eligible borrower. The 13 annualized interest rate on the certificate of deposit is 14 negotiable but cannot be less than one-half of 1 percent. 15 The loan to the eligible borrower cannot be at a rate of 16 interest more than 4 percent above the rate of the authority’s 17 certificate of deposit. 18 The linked investments do not constitute the payment of a 19 business debt by the state nor do they pledge the credit or 20 taxing power of the state. 21 The authority is directed to adopt rules for the 22 administration of the program. 23 -6- LSB 1796YH (4) 85 ad/sc 6/ 6