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OLR Bill Analysis
sHB 6467 (as amended by House "A")*
AN ACT CONCERNING THE SMALL BUSINESS EXPRESS
PROGRAM.
SUMMARY
This bill makes changes to the Department of Economic and
Community Development’s (DECD) Small Business Express program
(EXP), generally increasing flexibility in the department ’s
administration of the program and allowing for increased participation
by private lenders. The bill eliminates certain administrative
provisions concerning participant eligibility criteria, application
process, and funding priority. It also makes the following changes to
the program’s components:
1. expands the revolving loan fund’s allowed uses and eliminates
related requirements on the uses, amounts, rates and terms, and
prioritization of these loans;
2. allows the DECD commissioner, in consultation with
Connecticut Innovations (CI), to establish a new EXP
component and eliminates the job creation incentive and
matching grant components;
3. removes the requirement that there be no more than two
minority business revolving loan funds (MBRLFs) and increases
the maximum size of loans these funds can provide; and
4. makes changes to the administration and funding allocation of
the EXP component operated in collaboration with Connecticut-
based banks.
The bill also (1) creates a new requirement for loan loss reserve
accounts under the Connecticut Capital Access Fund program; (2)
makes changes to DECD’s EXP and annual reporting requirements and 2021HB-06467-R01-BA.DOCX
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the legislative hearing requirements related to the department’s audit
and annual report; and (3) makes it a goal of the department that by
July 1, 2026, EXP (a) be self-funded and (b) have a default rate of 20%
or less for small businesses receiving assistance.
Additionally, the bill eliminates (1) a requirement that the DECD
commissioner work with eligible applicants to provide a package of
EXP financial assistance, with the ability to refer these applicants to the
Subsidized Training and Employment program or other appropriate
state programs, and (2) the commissioner’s ability to, at his discretion,
partner with lenders in the Connecticut Credit Consortium to fulfill the
program requirements.
It also makes technical and conforming changes.
*House Amendment “A” replaces the underlying bill, which also
made changes to the EXP, and, among other things, (1) makes various
changes to (a) the program’s administration and components and (b)
DECD’s EXP and annual reporting requirements and legislative
hearing requirements; (2) creates new EXP program goals for DECD;
and (3) makes technical and conforming changes.
EFFECTIVE DATE: July 1, 2021, except the provisions related to
DECD’s annual reporting requirements and the legislative hearing
requirement are effective upon passage.
ELIMINATED ADMINISTRATIVE PROVISIONS
Eligibility Criteria
The bill changes eligibility criteria for a small business to receive
assistance under the EXP program by (1) eliminating the requirement
that a business have been registered for at least 12 months and (2)
modifying the maximum employee requirement to simply require the
business have no more than 100 employees. Under current law, to be
eligible for EXP financial assistance, a business must: (1) have
employed no more than 100 employees on at least half of the working
days in the previous 12 months and (2) have been registered to
conduct business for at least 12 months. 2021HB-06467-R01-BA.DOCX
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As is the case under existing law, to be eligible, a business must also
(1) operate in Connecticut and (2) be in good standing with all state
and local tax payments and with all state agencies.
Application Process and Funding Priority
The bill eliminates certain EXP provisions related to application
process and funding priority, including those:
1. requiring the DECD commissioner to establish a streamlined
application process;
2. requiring approved small businesses to receive funding within
30 days after submitting a completed application to DECD; and
3. requiring the DECD commissioner to prioritize funding for
small businesses creating jobs and allowing him to do so for
those (a) in Connecticut’s economic base industries (e.g.,
precision manufacturing, business services, bioscience, green
and sustainable technology, and information technology); (b)
attempting to export products or services to foreign markets;
and (c) located in CTNext-designated innovation places.
CHANGES TO EXP COMPO NENTS
Currently, EXP funding is available to eligible businesses in the
form of a loan or a grant through five components:
1. the revolving loan fund,
2. the job creation incentive component,
3. the matching grant component,
4. up to two MBRLFs, and
5. a private lender component operated in collaboration with
Connecticut-based banks.
Among other things, the bill eliminates the EXP program’s job
creation incentive and matching grant components and eliminates the 2021HB-06467-R01-BA.DOCX
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cap on the number of MBRLFs. The bill also adds a new component, to
be established in consultation with CI, and expands the revolving loan
fund’s allowed uses.
Revolving Loan Fund Purposes Expanded
Under current law, DECD can provide loans to eligible small
businesses through the revolving loan fund. The bill expands this by
allowing the department to also provide loan guarantees, loan
portfolio guarantees, portfolio insurance, and grants under this EXP
component.
The bill also eliminates provisions in current law addressing
permissible loan uses; loan amounts, rates and terms; and
prioritization of loans issued from this fund. (Currently, this
component provides loans ranging from $10,000 to $100,000 for a term
of up to 10 years and a maximum 4% interest rate. DECD must
prioritize applicants that plan to create new jobs that will be
maintained for at least a year.)
New Component in Collaboration With CI
The bill allows the DECD commissioner to establish and operate, in
consultation and collaboration with CI, a new EXP component. The
new component can provide financial assistance consistent with CI’s
powers and the provisions and purposes of the (1) Connecticut Works
Fund and (2) Connecticut Capital Access Fund. CI may administer the
component in collaboration with DECD.
The Connecticut Capital Access Fund program is designed to
provide portfolio insurance to participating financial institutions to
help them make loans that are somewhat riskier than conventional
loans. The Connecticut Works Fund provides direct loans for eligible
projects and includes a loan guarantee program to encourage
participating lenders to provide additional credit on more favorable
terms.
Eliminated Job Creation Incentive and Matching Grant
Components 2021HB-06467-R01-BA.DOCX
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The bill eliminates the EXP program’s job creation incentive and
matching grant components.
Under current law, businesses that receive job creation incentive
loans may use the funds for training, marketing, working capital, or
other DECD-authorized business expenses that support job creation.
Loans range from $10,000 to $300,000 and the DECD commissioner
may allow deferred loan payments and forgive all or part of a loan.
Under current law, businesses that receive matching grants may use
the funds for ongoing or new training, working capital, machinery and
equipment purchases, construction, relocation costs, rent payments,
and other DECD-authorized business expenses. This EXP component
provides eligible businesses with grants ranging from $10,000 to
$100,000. To receive a grant, a business must match the state award
dollar-for-dollar, unless located in a distressed municipality.
Minimum MBRLF Requirement and Raised Loan Cap
The bill eliminates the requirement that there be no more than two
MBRLFs, instead requiring a minimum of one. Additionally, it
increases, from $100,000 to $500,000, the maximum size of loans these
funds can provide.
Private Lender Component’s Administration and Funding Cap
Existing law allows DECD to establish, in consultation with private
lenders, a new EXP component comprised of (1) loan guarantees, (2)
short-term loans used as a bridge to private sector financing, and (3)
the transfer of loans issued under the revolving loan fund or job
creation incentive fund. The bill requires CI to administer this
component in collaboration with DECD, if the department establishes
it.
The bill eliminates the requirement that no more than 10% of
available EXP funding be allocated to this component.
CONNECTICUT CAPITAL ACCESS FUND PARTICIPATION
Under current law, participation agreements between CI and a
financial institution participating in the Connecticut Capital Access 2021HB-06467-R01-BA.DOCX
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Fund program (see above) must establish a separate loan loss reserve
account owned and controlled by CI but earmarked to cover losses on
loans enrolled by a financial institution in the program. The bill
requires that these loan loss reserve accounts be located within (1) the
financial institution entering the participation agreement or (2) a third-
party financial institution approved by CI.
DECD REPORTING REQUI REMENTS
The bill (1) reduces the frequency, from biannually to annually, of
the DECD commissioner’s report on the EXP program to the General
Assembly and (2) makes the report due February 1, beginning in 2022.
The bill also requires this report, and DECD’s annual report due on
the same day under existing law, to include available data on (1) the
default rate of small businesses that received EXP assistance and (2)
participating lenders’ progress in becoming self-sustainable. It
removes the requirement that these reports include data on the
number of small businesses that applied to the program.
LEGISLATIVE HEARING REQUIREMENTS
Under current law, within 60 days after the state auditors submit an
audit of DECD or a stand-alone performance audit of the department’s
incentive programs, the Appropriations; Finance, Revenue and
Bonding; and Commerce committees must hold, individually or
jointly, one or more public hearings on these reports and certain
analyses and data the department is required to include in its annual
report. The bill eliminates the requirement that the DECD audits be
subject to this particular hearing requirement and adds DECD’s annual
report data on the EXP program as a required component to be
included in the hearing or hearings.
Under the bill, these hearings must be held annually, with the first
held by April 1, 2022. (Existing law, unchanged by the bill, requires the
legislature to hold hearings on state agency audit reports, unless the
requirement is waived by the chairpersons of the committee of
cognizance.) 2021HB-06467-R01-BA.DOCX
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COMMITTEE ACTION
Commerce Committee
Joint Favorable Substitute
Yea 23 Nay 0 (03/22/2021)
Finance, Revenue and Bonding Committee
Joint Favorable
Yea 49 Nay 0 (05/03/2021)