(1) PURPOSE.—The Microfinance Loan Program is established in the department to make short-term, fixed-rate microloans in conjunction with business management training, business development training, and technical assistance to entrepreneurs and newly established or growing small businesses for startup costs, working capital, and the acquisition of materials, supplies, furniture, fixtures, and equipment. Participation in the loan program is intended to enable entrepreneurs and small businesses to access private financing upon completing the loan program.

(2) DEFINITION.—As used in this section, the term “loan administrator” means an entity that enters into a contract with the department pursuant to this section to administer the loan program.

(3) REQUEST FOR PROPOSAL.—

(a) By December 1, 2014, the department shall contract with at least one but not more than three entities to administer the loan program for a term of 3 years. The department shall award the contract in accordance with the request for proposal requirements in s. 287.057 to an entity that:

1. Is a corporation registered in this state;

2. Does not offer checking accounts or savings accounts;

3. Demonstrates that its board of directors and managers are experienced in microlending and small business finance and development;

4. Demonstrates that it has the technical skills and sufficient resources and expertise to:

a. Analyze and evaluate applications by entrepreneurs and small businesses applying for microloans;

b. Underwrite and service microloans provided pursuant to this part; and

c. Coordinate the provision of such business management training, business development training, and technical assistance as required by this part;

5. Demonstrates that it has established viable, existing partnerships with public and private nonstate funding sources, economic development agencies, and workforce development and job referral networks; and

6. Demonstrates that it has a plan that includes proposed microlending activities under the loan program, including, but not limited to, the types of entrepreneurs and businesses to be assisted and the size and range of loans the loan administrator intends to make.

(b) To ensure that prospective loan administrators meet the requirements of subparagraphs (a)2.-6., the request for proposal must require submission of the following information:

1. A description of the types of entrepreneurs and small businesses the loan administrator has assisted in the past, and the average size and terms of loans made in the past to such entities;

2. A description of the experience of members of the board of directors and managers in the areas of microlending and small business finance and development;

3. A description of the loan administrator’s underwriting and credit policies and procedures, credit decisionmaking process, monitoring policies and procedures, and collection practices, and samples of any currently used loan documentation;

4. A description of the nonstate funding sources that will be used by the loan administrator in conjunction with the state funds to make microloans pursuant to this section;

5. The loan administrator’s three most recent financial audits or, if no prior audits have been completed, the loan administrator’s three most recent unaudited financial statements; and

6. A conflict of interest statement from the loan administrator’s board of directors certifying that a board member, employee, or agent, or an immediate family member thereof, or any other person connected to or affiliated with the loan administrator, is not receiving or will not receive any type of compensation or remuneration from an entrepreneur or small business that has received or will receive funds from the loan program. The department may waive this requirement for good cause shown. As used in this subparagraph, the term “immediate family” means a parent, child, or spouse, or any other relative by blood, marriage, or adoption, of a board member, employee, or agent of the loan administrator.

(4) CONTRACT AND AWARD OF FUNDS.—

(a) The selected loan administrator must enter into a contract with the department for a term of 3 years to receive state funds for the loan program. Funds appropriated to the program must be reinvested and maintained as a long-term and stable source of funding for the program. The amount of state funds used in any microloan made pursuant to this part may not exceed 50 percent of the total microloan amount. The department shall establish financial performance measures and objectives for the loan program and for the loan administrator in order to maximize the state funds awarded.

(b) State funds may be used only to provide direct microloans to entrepreneurs and small businesses according to the limitations, terms, and conditions provided in this part. Except as provided in subsection (5), state funds may not be used to pay administrative costs, underwriting costs, servicing costs, or any other costs associated with providing microloans, business management training, business development training, or technical assistance.

(c) The loan administrator shall reserve 10 percent of the total award amount from the department to provide microloans pursuant to this part to entrepreneurs and small businesses that employ no more than five people and generate annual gross revenues averaging no more than $250,000 per year for the last 2 years.

(d)1. If the loan program is appropriated funding in a fiscal year, the department shall distribute such funds to the loan administrator within 30 days of the execution of the contract by the department and the loan administrator.

2. The total amount of funding allocated to the loan administrator in a fiscal year may not exceed the amount appropriated for the loan program in the same fiscal year. If the funds appropriated to the loan program in a fiscal year exceed the amount of state funds received by the loan administrator, such excess funds shall revert to the General Revenue Fund.

(e) Within 30 days of executing its contract with the department, the loan administrator must enter into a memorandum of understanding with the network:

1. For the provision of business management training, business development training, and technical assistance to entrepreneurs and small businesses that receive microloans under this part; and

2. To promote the program to underserved entrepreneurs and small businesses.

(f) By September 1, 2014, the department shall review industry best practices and determine the minimum business management training, business development training, and technical assistance that must be provided by the network to achieve the goals of this part.

(g) The loan administrator must meet the requirements of this section, the terms of its contract with the department, and any other applicable state or federal laws to be eligible to receive funds in any fiscal year. The contract with the loan administrator must specify any sanctions for the loan administrator’s failure to comply with the contract or this part.

(5) FEES.—

(a) Except as provided in this section, the department may not charge fees or interest or require collateral from the loan administrator. The department may charge an annual fee or interest of up to 80 percent of the Federal Funds Rate as of the date specified in the contract for state funds received under the loan program. The department shall require as collateral an assignment of the notes receivable of the microloans made by the loan administrator under the loan program.

(b) The loan administrator is entitled to retain a one-time administrative servicing fee of 1 percent of the total award amount to offset the administrative costs of underwriting and servicing microloans made pursuant to this part. This fee may not be charged to or paid by microloan borrowers participating in the loan program. Except as provided in paragraph (7)(c), the loan administrator may not be required to return this fee to the department.

(c) The loan administrator may not charge interest, fees, or costs except as authorized in subsection (9).

(d) Except as provided in subsection (7), the loan administrator is not required to return the interest, fees, or costs authorized under subsection (9).

(6) REPAYMENT OF AWARD FUNDS.—

(a) After collecting interest and any fees or costs permitted under this section in satisfaction of all microloans made pursuant to this part, the loan administrator shall remit to the department the microloan principal collected from all microloans made with state funds received under this part. Repayment of microloan principal to the department may be deferred by the department for a period not to exceed 6 months; however, the loan administrator may not provide a microloan under this part after the contract with the department expires.

(b) If for any reason the loan administrator is unable to make repayments to the department in accordance with the contract, the department may accelerate maturity of the state funds awarded and demand repayment in full. In this event, or if a loan administrator violates this part or the terms of its contract, the loan administrator shall surrender to the department possession of all collateral required pursuant to subsection (5). Any loss or deficiency greater than the value of the collateral may be recovered by the department from the loan administrator.

(c) In the event of a default as specified in the contract, termination of the contract, or violation of this section, the state may, in addition to any other remedy provided by law, bring suit to enforce its interest.

(d) A microloan borrower’s default does not relieve the loan administrator of its obligation to repay an award to the department.

(7) CONTRACT TERMINATION.—

(a) The loan administrator’s contract with the department may be terminated by the department, and the loan administrator required to immediately return all state funds awarded, including any interest, fees, and costs it would otherwise be entitled to retain pursuant to subsection (5) for that fiscal year, upon a finding by the department that:

1. The loan administrator has, within the previous 5 years, participated in a state-funded economic development program in this or any other state and was found to have failed to comply with the requirements of that program;

2. The loan administrator is currently in material noncompliance with any statute, rule, or program administered by the department;

3. The loan administrator or any member of its board of directors, officers, partners, managers, or shareholders has pled no contest to or been found guilty, regardless of whether adjudication was withheld, of any felony or any misdemeanor involving fraud, misrepresentation, or dishonesty;

4. The loan administrator failed to meet or agree to the terms of the contract with the department or failed to meet this part; or

5. The department finds that the loan administrator provided fraudulent or misleading information to the department.

(b) The loan administrator’s contract with the department may be terminated by the department at any time for any reason upon 30 days’ notice by the department. In such a circumstance, the loan administrator shall return all awarded state funds to the department within 60 days of the termination. However, the loan administrator may retain any interest, fees, or costs it has collected pursuant to subsection (5).

(c) The loan administrator’s contract with the department may be terminated by the loan administrator at any time for any reason upon 30 days’ notice by the loan administrator. In such a circumstance, the loan administrator shall return all awarded state funds to the department, including any interest, fees, and costs it has retained or would otherwise be entitled to retain pursuant to subsection (5), within 30 days of the termination.

(8) AUDITS AND REPORTING.—

(a) The loan administrator shall annually submit to the department a financial audit performed by an independent certified public accountant and an operational performance audit for the most recently completed fiscal year. Both audits must indicate whether any material weakness or instances of material noncompliance are indicated in the audit.

(b) The loan administrator shall submit quarterly reports to the department as required by s. 288.9936(3).

(c) The loan administrator shall make its books and records related to the loan program available to the department or its designee for inspection upon reasonable notice.

(9) ELIGIBILITY AND APPLICATION.—

(a) To be eligible for a microloan, an applicant must, at a minimum, be an entrepreneur or small business located in this state.

(b) Microloans may not be made if the direct or indirect purpose or result of granting the microloan would be to:

1. Pay off any creditors of the applicant, including the refund of a debt owed to a small business investment company organized pursuant to 15 U.S.C. s. 681;

2. Provide funds, directly or indirectly, for payment, distribution, or as a microloan to owners, partners, or shareholders of the applicant’s business, except as ordinary compensation for services rendered;

3. Finance the acquisition, construction, improvement, or operation of real property which is, or will be, held primarily for sale or investment;

4. Pay for lobbying activities; or

5. Replenish funds used for any of the purposes specified in subparagraphs 1.-4.

(c) A microloan applicant shall submit a written application in the format prescribed by the loan administrator and shall pay an application fee not to exceed $50 to the loan administrator.

(d) The following minimum terms apply to a microloan made by the loan administrator:

1. The amount of a microloan may not exceed $50,000;

2. A borrower may not receive more than $75,000 per year in total microloans;

3. A borrower may not receive more than two microloans per year and may not receive more than five microloans in any 3-year period;

4. The proceeds of the microloan may be used only for startup costs, working capital, and the acquisition of materials, supplies, furniture, fixtures, and equipment;

5. The period of any microloan may not exceed 1 year;

6. The interest rate may not exceed the prime rate published in the Wall Street Journal as of the date specified in the microloan, plus 1000 basis points;

7. All microloans must be personally guaranteed;

8. The borrower must participate in business management training, business development training, and technical assistance as determined by the loan administrator in the microloan agreement;

9. The borrower shall provide such information as required by the loan administrator, including monthly job creation and financial data, in the manner prescribed by the loan administrator; and

10. The loan administrator may collect fees for late payments which are consistent with standard business lending practices and may recover costs and fees incurred for any collection efforts necessitated by a borrower’s default.

(e) The department may not review microloans made by the loan administrator pursuant to this part before approval of the loan by the loan administrator.

(10) STATEWIDE STRATEGIC PLAN.—In implementing this section, the department shall be guided by the 5-year statewide strategic plan adopted pursuant to s. 20.60(5). The department shall promote and advertise the loan program by, among other things, cooperating with government, nonprofit, and private industry to organize, host, or participate in seminars and other forums for entrepreneurs and small businesses.

(11) STUDY.—By December 31, 2014, the department shall commence or commission a study to identify methods and best practices that will increase access to credit to entrepreneurs and small businesses in this state. The study must also explore the ability of, and limitations on, Florida nonprofit organizations and private financial institutions to expand access to credit to entrepreneurs and small businesses in this state.

(12) CREDIT OF THE STATE.—With the exception of funds appropriated to the loan program by the Legislature, the credit of the state may not be pledged. The state is not liable or obligated in any way for claims on the loan program or against the loan administrator or the department.

History.—s. 52, ch. 2014-218; s. 18, ch. 2015-2.