House File 2421 - Introduced HOUSE FILE BY L. MILLER, BAILEY, WINCKLER, WESSEL=KROESCHELL, WENTHE, and MAY Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act providing for microenterprise business development by 2 creating a statewide microenterprise financial intermediary, a 3 microenterprise partnership program, and a grant program and 4 making appropriations. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 6037HH 82 7 tw/nh/5 PAG LIN 1 1 Section 1. Section 15.102, Code Supplement 2007, is 1 2 amended by adding the following new subsections: 1 3 NEW SUBSECTION. 1A. "Community microenterprise 1 4 development organization" means a community development, 1 5 economic development, social service, or nonprofit 1 6 organization that provides training, access to financing, and 1 7 technical assistance to microenterprises. 1 8 NEW SUBSECTION. 3A. "Microenterprise" means any business 1 9 with five or fewer employees which generally lacks collateral 1 10 and has difficulty securing financing from conventional 1 11 business lending sources. "Microenterprise" includes 1 12 start=up, home=based, and self=employed businesses. 1 13 NEW SUBSECTION. 3B. "Microloan" means a loan to a 1 14 microenterprise in an amount not to exceed fifty thousand 1 15 dollars. 1 16 NEW SUBSECTION. 4A. "Statewide microenterprise 1 17 development financial intermediary" has the meaning defined in 1 18 section 15.114A, subsection 1. 1 19 Sec. 2. Section 15.108, subsection 7, unnumbered paragraph 1 20 1, Code Supplement 2007, is amended to read as follows: 1 21 To provide assistance to small business, targeted small 1 22 business, microenterprises, and entrepreneurs creating small 1 23 businesses to ensure continued viability and growth. To carry 1 24 out this responsibility, the department shall: 1 25 Sec. 3. Section 15.108, subsection 7, Code Supplement 1 26 2007, is amended by adding the following new paragraph: 1 27 NEW PARAGRAPH. bb. Establish and administer the Iowa 1 28 microenterprise development partnership program established in 1 29 section 15.114. 1 30 Sec. 4. NEW SECTION. 15.114 IOWA MICROENTERPRISE 1 31 DEVELOPMENT PARTNERSHIP PROGRAM. 1 32 The department shall establish and administer an Iowa 1 33 microenterprise development partnership program. The program 1 34 shall provide resources to microenterprises in the state in 1 35 order to create jobs, enhance entrepreneurial skills, expand 2 1 business activities, foster local economic development in 2 2 high=need areas, and increase the capacity of low=income 2 3 households to become economically self=sufficient. 2 4 Sec. 5. NEW SECTION. 15.114A STATEWIDE MICROENTERPRISE 2 5 DEVELOPMENT FINANCIAL INTERMEDIARY == MICROLOAN FUND. 2 6 1. The department shall establish a statewide 2 7 microenterprise development financial intermediary which shall 2 8 perform the duties prescribed in this section. For purposes 2 9 of this section, "statewide microenterprise development 2 10 financial intermediary" means an independent, private 2 11 nonprofit organization with expertise in microenterprise 2 12 development and microlending that serves as an intermediary 2 13 between the department of economic development and community 2 14 microenterprise development organizations and helps those 2 15 organizations increase their capacity to deliver services to 2 16 microenterprises. The director of the department shall ensure 2 17 that the intermediary is not governed by individuals who are 2 18 employed by or associated with organizations that are 2 19 applicants for community microenterprise development 2 20 organization grant funds pursuant to section 15.114B. 2 21 2. The statewide microenterprise development financial 2 22 intermediary shall do all of the following: 2 23 a. Establish and administer a statewide microloan funds in 2 24 the state treasury. Moneys in the fund shall be used for the 2 25 benefit of community microenterprise development 2 26 organizations. In administering the fund, the financial 2 27 intermediary shall engage in efforts to attract new funds from 2 28 the federal, state, or regional level and shall provide 2 29 essential microloan services such as underwriting, loan 2 30 processing, and loan servicing. 2 31 b. Award grants to community microenterprise development 2 32 organizations as described in section 15.114B. 2 33 c. Provide technical assistance and business support to 2 34 community microenterprise development organizations. 2 35 d. Promote microlending and educate stakeholders 3 1 throughout the state in best practices for microlending. 3 2 e. Coordinate microenterprise development efforts with 3 3 other economic development efforts in the state, including 3 4 department programs such as the targeted small business 3 5 financial assistance program in section 15.247. 3 6 f. Provide an annual report to the department that 3 7 describes the program's activities, measures impacts, and 3 8 assesses outcomes. The report shall include all of the 3 9 following: 3 10 (1) The number of businesses started. 3 11 (2) The number of businesses expanded. 3 12 (3) The number of businesses stabilized. 3 13 (4) The estimated number of jobs created. 3 14 (5) A summary of the capital available to 3 15 microenterprises. 3 16 (6) A summary of activity for the statewide microloan 3 17 fund. 3 18 (7) The amount of nonstate funds leveraged by the 3 19 intermediary. 3 20 (8) Any other outcome or measurement the department 3 21 reasonably believes necessary. 3 22 g. Provide an annual report to the governor and the 3 23 general assembly on the status of microenterprise development 3 24 in the state, including the impact of microenterprises on the 3 25 economy and the activities of and the results produced by the 3 26 Iowa microenterprise development partnership program. 3 27 Sec. 6. NEW SECTION. 15.114B COMMUNITY MICROENTERPRISE 3 28 DEVELOPMENT ORGANIZATION GRANTS. 3 29 1. The statewide microenterprise development financial 3 30 intermediary shall award grants to community microenterprise 3 31 development organizations. A grant shall not be awarded to a 3 32 community microenterprise development organization unless the 3 33 community microenterprise development organization can match 3 34 at least twenty percent of the funds to be awarded. The 3 35 matching funds may be from private foundations, federal or 4 1 local government funds, financial institutions, or 4 2 individuals. 4 3 2. In awarding grants to community microenterprise 4 4 development organizations, the statewide microenterprise 4 5 development financial intermediary shall consider all of the 4 6 following: 4 7 a. The overall geographic diversity of the applicants for 4 8 grants, including both urban and rural communities. 4 9 b. The ability of a community microenterprise development 4 10 organization to provide services to low=income individuals and 4 11 underserved communities. In determining the ability to 4 12 provide services, all of the following shall be considered: 4 13 (1) The ability to identify potential microentrepreneurs 4 14 within a community. 4 15 (2) The capacity to perform client assessment and 4 16 screening. 4 17 (3) The ability to provide business training and technical 4 18 assistance, including information about access to markets, 4 19 business management, and financial literacy. 4 20 (4) The capacity to provide assistance in securing 4 21 financing. 4 22 c. The scope of services offered and the efficient 4 23 delivery of such services, especially to low=income and 4 24 minority individuals. 4 25 d. The ability to monitor the progress of clients and to 4 26 identify those clients in need of additional technical and 4 27 financial assistance. 4 28 e. The ability to build relationships and coordinate 4 29 resources with other entities supporting microentrepreneurs. 4 30 These entities may include but are not limited to community 4 31 colleges, cooperative extension services, small business 4 32 development centers, chambers of commerce, community economic 4 33 development organizations, workforce centers, and community 4 34 nonprofit service providers that serve low=income individuals. 4 35 f. The ability to coordinate activities with any targeted 5 1 small business advocate services operating in the community. 5 2 g. The amount and sufficiency of operating funds 5 3 available. 5 4 h. Any other criteria the financial intermediary and the 5 5 department may reasonably agree upon. 5 6 Sec. 7. IOWA MICROENTERPRISE DEVELOPMENT PARTNERSHIP 5 7 PROGRAM == COMMUNITY MICROENTERPRISE DEVELOPMENT ORGANIZATIONS 5 8 == APPROPRIATION. 5 9 1. There is appropriated from the general fund of the 5 10 state to the department of economic development for the fiscal 5 11 year beginning July 1, 2008, and ending June 30, 2009, the 5 12 following amount, or so much thereof as is necessary, to be 5 13 used for the purposes designated: 5 14 For the administration of an Iowa microenterprise 5 15 development partnership program and for competitive grants to 5 16 community microenterprise development organizations, including 5 17 salaries, support, maintenance, miscellaneous purposes, and 5 18 for not more than the following full=time equivalent 5 19 positions: 5 20 .................................................. $ 1,050,000 5 21 ............................................... FTEs 1.00 5 22 2. Of the moneys appropriated in subsection 1, not more 5 23 than $80,000 shall be expended on any one community 5 24 microenterprise development organizations. 5 25 3. From the moneys appropriated in subsection 1, the 5 26 department shall award grants to at least four community 5 27 microenterprise development organizations in rural areas of 5 28 the state that show an economic growth rate lower than the 5 29 average economic growth rate of the state. 5 30 4. From the moneys appropriated in subsection 1, the 5 31 department shall award grants to at least three community 5 32 microenterprise development organizations in neighborhoods in 5 33 urban areas of the state that show high rates of poverty and 5 34 signs of economic distress. 5 35 5. Of the moneys appropriated in subsection 1, not more 6 1 than $90,000 may be used for a full=time equivalent staff 6 2 person to administer the microenterprise development 6 3 partnership program. 6 4 Sec. 8. STATEWIDE MICROENTERPRISE DEVELOPMENT FINANCIAL 6 5 INTERMEDIARY == APPROPRIATION. There is appropriated from the 6 6 general fund of the state to the department of economic 6 7 development for the fiscal year beginning July 1, 2008, and 6 8 ending June 30, 2009, the following amount, or so much thereof 6 9 as is necessary, to be used for the purpose designated: 6 10 1. For establishing a statewide microenterprise 6 11 development financial intermediary: 6 12 .................................................. $ 250,000 6 13 2. For capitalization of the microloan fund and loan loss 6 14 reserve fund administered by the financial intermediary: 6 15 .................................................. $ 250,000 6 16 EXPLANATION 6 17 This bill relates to microenterprise business development. 6 18 Microenterprises are businesses with fewer than five employees 6 19 that lack collateral for loans and have difficulty securing 6 20 financing. 6 21 The bill directs the department of economic development to 6 22 establish an Iowa microenterprise development partnership 6 23 program to assist microenterprises in business management and 6 24 the development of entrepreneurial skills. 6 25 The bill also directs the department to establish a 6 26 statewide microenterprise financial intermediary to administer 6 27 a microloan program, award grants to community microenterprise 6 28 development organizations, provide technical assistance and 6 29 business support to community microenterprise development 6 30 organizations, promote microlending and educate stakeholders 6 31 throughout the state in best practices for microlending, and 6 32 coordinate microenterprise development efforts with other 6 33 entities. The statewide microenterprise financial 6 34 intermediary must submit annual reports on its activities to 6 35 the department and to the governor and the general assembly. 7 1 The bill creates a competitive grant program for community 7 2 microenterprise development organizations to be administered 7 3 by the statewide microenterprise financial intermediary. 7 4 The bill appropriates $1,050,000 for FY 2008=2009 to the 7 5 department for the creation of the partnership program and the 7 6 awarding of the competitive grant funds. 7 7 The bill appropriates $250,000 for FY 2008=2009 for the 7 8 establishment of the statewide microenterprise financial 7 9 intermediary and another $250,000 for the capitalization of 7 10 the loan fund managed by the statewide microenterprise 7 11 financial intermediary. 7 12 LSB 6037HH 82 7 13 tw/nh/5.1