Introduced By: Senators Algiere and Enos
Date Introduced : February 9, 1999
It is enacted by the General Assembly as follows:
SECTION 1. Section 42-64-13.1 of the General Laws in Chapter 42-64 entitled "Rhode Island Economic Development Corporation" is hereby amended to read as follows:
42-64-13.1. Assistance to urban communities for economic
revitalization. -- (a) The corporation shall, in furtherance
of its responsibility to assist urban communities, provide for
the establishment of an urban enterprise equity fund, the establishment
of an urban business incubator, and {DEL any DEL} {ADD such ADD}
other programs and activities {ADD as ADD} the corporation may deem
appropriate to assist with urban revitalization.
(b) For purposes of this section, the following words and terms shall have the following meanings:
(1) The {DEL "fund" means DEL} {ADD "fund"
shall mean ADD} a revolving loan fund used to provide equity to
assist start-up and existing businesses in securing resources
from lenders including but not limited to private sector lending
institutions, and federal and non-federal public sector lenders.
(2) "Equity" {DEL means DEL} {ADD shall mean ADD}
cash or cash equivalents, through personal or other assets that
are either pledged to or become part of a small business venture.
Equity constitutes resources that are considered part of the balance
sheet of the small business.
(3) {DEL "Friendly debt" is DEL} {ADD "Equity
Financing" shall be ADD} a loan from an institution, bank,
non-bank or any other resource, by which terms and conditions
are established for repayment of the debt. For the purposes of
this legislation, {DEL "friendly debt" DEL} {ADD "Equity
Financing" ADD} shall be deeply subordinated on the balance
sheet of the business, and by this deep subordination is converted
to equity on the balance sheet. {DEL Friendly debt DEL}
{ADD "Equity Financing" ADD} by virtue of its subordination
shall be the last loan to be paid out of the cash flow of the
business and payment shall be established by the parties based
on the ability to repay.
(4) "Small business" {DEL means DEL} {ADD shall
mean ADD} any corporation, partnership, sole proprietorship, or
other business entity qualifying as "small" under the
standards contained in 13 CFR section121.
(5) "Urban" {DEL means DEL} {ADD shall mean ADD}
any community which exceeds two thousand (2000) persons per square
mile as established by the most recent federal census.
(c) Establishment of an Urban Enterprise Equity Fund.
(1) In order to provide {DEL "friendly debt" DEL}
{ADD "Equity Financing" ADD}, commonly referred to as either
{DEL "equity" DEL} {ADD "Equity" ADD}
or {DEL "equity debt" DEL} {ADD "Equity debt" ADD},
to assist small businesses finance investments, the general assembly
establishes the urban enterprise fund.
This fund will be located at and administered by the economic
development corporation, referred to as the corporation, {ADD hereinafter ADD}
for the purposes of providing equity {ADD financing ADD} to assist
small businesses in obtaining additional resources for capital
investments. Seventy-five percent (75%) of the fund financing
shall be targeted to urban small businesses located in enterprise
zones established pursuant to chapter {DEL 42-64. DEL}
{ADD 42-64.3. ADD} The corporation shall be responsible for the
establishment of "the urban enterprise fund" and for
the adoption of rules and standards and guidelines, eligibility
qualifications, and performance measures for the fund. {DEL The DEL}
{ADD Such ADD} rules shall limit the amount of equity {ADD financing ADD}
from the fund in any small business to an amount not to exceed
one hundred thousand ($100,000) dollars and shall provide {ADD ,
inter alia ADD} that {DEL at no time will DEL} the corporation
be allowed to take {DEL Warrant Positions, or in any other
manner or method have any DEL} {ADD stock, stock options, stock
warrants, equity or other ADD} ownership interest {ADD s ADD} {DEL based
on the equity DEL} in the small business to which it is providing
{ADD such ADD} {DEL equity DEL} {ADD Equity Financing ADD} {DEL financing DEL}.
(2) Nothing herein provided with regard to equity and {DEL friendly
debt DEL} {ADD Equity Financing ADD}shall be deemed to prevent
or restrict the corporation or other private lenders form providing
additional financing to the small business under traditional methods,
conventional financing with or without credit enhancements for
the purposes of fulfilling the necessary instruments to finance
the small {DEL business DEL} {ADD business ADD}.
(3) In the implementation of the provisions of this paragraph, the corporation is encouraged to utilize credit enhancements such as the US Small Business Administration's (SBA) Guaranteed Loan Program in conjunction with SBA's participating lenders to make the small business financing transactions in the best interest of the small business.
(4) The corporation will annually report the status and performance of the Urban Enterprise Equity Fund to the General Assembly on or before the first Tuesday of November.
(d) Establishment of an Urban Business Incubator.. - There is {ADD hereby ADD} authorized, established, and created an urban business incubator to be located in an enterprise zone, as defined in section42-64-3. The incubator shall be designed to foster the growth of businesses through a multi-tenant, mixed-use facility serving companies in a variety of industries including, but not limited to: services, distribution, light manufacturing, or technology-based businesses. The incubator shall provide a range of services designed to assist these new businesses, including, but not limited to: flexible leases, shared office equipment, use of common areas such as conference rooms, and will provide (directly or indirectly) easily accessible business management, training, financial, legal, accounting, and marketing services.
The incubator shall be established as a non-business corporation, and shall have tax exempt status under U.S. Internal Revenue Code section501(c)(3), 26 U.S.C. section501(c)(3), and shall have an independent board of directors. The board of directors, in consultation with the corporations, shall adopt guidelines and performance measures for the purposes of operating and monitoring the incubator.
(e) The General Assembly shall annually appropriate the sums it deems necessary to carry out the provisions of subsections (c) and (d) {ADD of section 42-64-13.1 ADD}.
SECTION 2. This act shall take effect upon passage.
