Senate Bill 2525

AN ACT TO CREATE THE MISSISSIPPI SMALL BUSINESS ASSISTANCE PROGRAM AND FUND TO PROVIDE ADDITIONAL FINANCING FOR THE STARTUP OR EXPANSION OF SMALL BUSINESSES; TO DEFINE RELEVANT TERMS; TO AUTHORIZE WHAT EXPENSES LOAN FUNDS MAY BE USED TO COVER; TO PROVIDE THE LOAN ADMINISTRATOR WITH THE AUTHORITY TO DETERMINE THE ELIGIBILITY AND TERMS OF THE LOAN; TO PROVIDE LIMITATIONS REGARDING THE TERMS AND AMOUNT OF LOANS A SMALL BUSINESS MAY RECEIVE; TO PROVIDE TERMS OF REPAYMENT AND HOW INTEREST MUST BE DISTRIBUTED; TO PROVIDE A LIMIT TO THE CLOSING FEE THAT MAY BE CHARGED BY THE PROGRAM ADMINISTRATOR; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. (1) As used in this act, the following terms have the meanings as defined in this section, unless the context clearly indicates otherwise:

(a) "Department" means the Mississippi Department of Finance and Administration; and

(b) "Fund" means the Mississippi Small Business Assistance Revolving Loan Fund.

(2) The Mississippi Small Business Assistance Program is hereby established to provide financing for the startup or expansion of a small business, in conjunction with traditional commercial lending.

(3) (a) There is created in the State Treasury a special fund to be known as the Mississippi Small Business Assistance Revolving Loan Fund, which shall be administered by a qualified non-depository, nonprofit community development financial institution (CDFI) domiciled in the State of Mississippi under the oversight of the department.

The fund shall consist of legislative appropriations, federal funds, contributions, donations, gifts and monies from any other source that are made available for deposit into the fund. Monies in the fund shall be expended by the department upon appropriation of the Legislature for the sole purpose of providing loans to small businesses under the provisions of this section. Monies remaining in the fund at the end of a fiscal year shall not lapse into the State General Fund, and any interest earned from the investment of monies in the fund shall be deposited to the credit of the fund.

(b) The State Fiscal Officer shall transfer from the Capital Expense Fund to the Mississippi Small Business Assistance Revolving Loan Fund, as created in subsection (3)(a) of this section, the sum of Ten Million Dollars ($10,000,000.00) during fiscal year 2025.

(4) The proceeds of such loans authorized under this act shall be used by small businesses only for the following purposes:

(a) Permanent working capital;

(b) Building purchases;

(d) Facility expansion;

(e) Machinery and equipment purchases;

(f) Leasehold improvements;

(g) Closing costs; and

(h) Business acquisitions.

(5) The program administrator shall determine the terms and conditions of each loan, including the repayment of the loan, which shall be subject to the following provisions:

(a) To be eligible, a small business must meet the Small Business Administration (SBA) guidelines for small businesses;

(b) The borrower must be qualified as a small business based on SBA standards;

(c) The primary lending institution, which may consist of banks or planning & development districts, must provide not less than fifty percent (50%) of the total financing to the small business from any source available to the primary lending institution.

(d) The maximum Mississippi Small Business Assistance Revolving Fund loan amount shall be not more than fifty percent (50%) of the total financing to the small business;

(e) At least one (1) job must be created or retained for every Twenty-five Thousand Dollars ($25,000.00) in Mississippi Small Business Assistance Revolving Fund loan funding;

(f) A small business may have no more than one (1) loan from the Mississippi Small Business Assistance Revolving Loan Fund program at any given time; the program administrator shall make reasonable efforts to ensure that no business obtains more than one (1) such loan at any time, including through the use of affiliated entities;

(g) If such deal involves real estate, no less than fifty-one percent (51%) of such real estate shall be occupied by the small business;

(h) The Mississippi Small Business Assistance Revolving Loan Fund program administrator shall require a personal guarantee from the borrower. Nothing in this section shall be construed to give the program administrator preference or priority to collateral over the primary lending institution;

(i) Repayments of such loan shall be collected by the program administrator; and

(j) A small business shall not be penalized for prepayment of a Mississippi Small Business Assistance Revolving Loan Fund loan.

(6) The program administrator shall offer technical assistance to all loan borrowers, and shall manage not less than sixty percent (60%) of the portfolio to meet CDFI requirements.

(7) The department shall select the program administrator through an open and competitive process and is authorized to enter into a contract with the program administrator for a term of ten (10) years.

(8) When the department selects the administrator, the administrator shall receive a one-time grant of Five Hundred Thousand Dollars ($500,000.00) to fund technical assistance and other borrower support by the administrator.

(9) Loans under this program shall be for a ten (10) year term. There shall be no payments due in the first six (6) months of a Mississippi Small Business Assistance Revolving Loan Fund loan and only interest payments shall be due in the second six (6) months. The administrator shall set the rate of interest for the loans at a competitive interest rate based on market conditions and program sustainability. The program administrator, with the approval of the department, may make adjustments to the terms of the loans and the payment schedule listed above to respond to market conditions and economic necessities. Any interest collected shall be divided as follows:

(a) Twenty-five percent (25%) of any interest shall be reinvested into the revolving loan fund;

(b) Twenty-five percent (25%) of any interest shall be placed in a technical assistance fund under the direction of the program administrator; and

(10) The program administrator may charge borrowers a closing fee, but it shall not exceed the market-rate closing fee for similar borrowings.

SECTION 2. This act shall take effect and be in force from and after July 1, 2024.