Senate Bill No. 186
(By Senators Tomblin, Mr. President, and Caruth,
By Request of the Executive)
[Originating in the Committee on Economic Development;
reported January 31, 2008.]
A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §12-1A-1, §12-1A-2,
§12-1A-3, §12-1A-4, §12-1A-5, §12-1A-6, §12-1A-7, §12-1A-8 and
§12-1A-9, all relating to the West Virginia Small Business
Linked Deposit Program; setting interest rates on loans at
three percent below market rate and on deposits at no less
than zero percent; limiting linked deposits and loans to seven
years; limiting loans and deposits to two hundred fifty
dollars; establishing the limitation of twenty million dollars
for linked deposits at any one time; requiring the Small
Business Development Center to ensure at no time shall a
single congressional district receive more than forty percent
of program funds; requiring the West Virginia Development
Office to report annually to the Joint Committee on Government and Finance; and establishing penalties.
Be it enacted by the Legislature of West Virginia:
That §12-1A-9 of the Code of West Virginia, 1931, as amended,
be amended by adding thereto a new article, designated §12-1A-1,
§12-1A-2, §12-1A-3, §12-1A-4, §12-1A-5, §12-1A-6, §12-1A-7, §12-1A-
8 and §12-1A-9, all to read as follows:
CHAPTER 12. PUBLIC MONEYS AND SECURITIES.
ARTICLE 1A. WEST VIRGINIA SMALL BUSINESS LINKED DEPOSIT PROGRAM.
(a) "Treasurer" means the West Virginia treasurer's office.
(b) "Eligible small business" means any business that: (1)
Employs fifty or fewer employees and has gross annual receipts of
five million dollars or less; (2) is headquartered in this state;
(3) is organized for profit; and (4) complies with the terms and
conditions of this article regarding eligibility.
(c) "Eligible lending institution" means a financial
institution that is eligible to make commercial loans, is a public
depository of state funds and agrees to participate in the linked
deposit program and comply with its terms and conditions.
(d) "Linked deposit" means a deposit placed by the treasurer
with an eligible lending institution that agrees to lend a linked
deposit loan to an eligible small business. The amount of the
deposit is equal to the amount of the linked deposit loan at an
interest rate of three percent below the current market rate as
determined and calculated by the treasurer, but in no event may the
interest rate on the deposit be less than zero percent. The linked deposit may be placed with the eligible lending institution for up
to seven years depending upon whether the small business remains
eligible for the program. On an annual date, as determined by the
treasurer, the rate paid to the treasurer shall be recomputed based
upon the current market rate. If the rate is recomputed, the
amount of the deposit shall be reduced by the amount of principal
paid on the outstanding loan.
(e) "Linked deposit loan" means a loan between an eligible
lending institution and an eligible small business for an amount
not to exceed two hundred fifty thousand dollars at a rate of not
more than one percent above the prime interest rate as published by
the wall street journal on the date the treasurer receives the
linked deposit request. In exchange for providing this reduced rate
loan, the eligible lending institution receives a linked deposit.
On an annual date, as determined by the treasurer, the rate charged
to the eligible small business may be recomputed but shall not
exceed the prime interest rate plus one percent. If the rate is
recomputed, the amount of the deposit shall be reduced by the
amount of principal paid on the outstanding loan. The linked
deposit loan may be part of a comprehensive loan package, including
guaranteed loans by the United States small business
administration, or other federal or state agency providing a
partial or full guarantee against loss to the eligible lending
(f) "Small business development center" means the West
Virginia small business development center, a division of the West Virginia Development Office.
§12-1A-2. Legislative findings.
The Legislature finds that many small businesses throughout
the state are experiencing economic stagnation or decline, that
high interest rates have caused small businesses in this state to
suffer disproportionately in profitability and competition and that
high interest rates have fostered a serious increase in
unemployment. The linked deposit program provided for by this
article is intended to provide a statewide availability of lower
cost funds for lending purposes that will materially contribute to
the economic revitalization of this state. Accordingly, it is
declared to be the public policy of the state through the small
business linked deposit program in conjunction with various
guaranteed loan programs to create an availability of lower-cost
funds to inject needed capital into the small business community,
sustain or improve business profitability, provide greater
incentives to lending institutions to lend funds to small
businesses and protect the jobs of citizens of this state. The
Legislature further finds that the involvement of both the
treasurer in facilitating the deposit of funds for the program and
the small business development center in determining which
businesses meet the eligibility requirements of the linked deposit
program is necessary in order for state funds to be used in the
most effective manner possible in assisting small businesses
throughout the state and thereby maximizing the impact of the
§12-1A-3. Limitations on investment in linked deposits.
(a) The treasurer shall invest in linked deposits. The total
amount deposited at any one time shall not exceed, in the
aggregate, twenty million dollars. When deciding how much to
invest in linked deposits, the treasurer shall give priority to the
investment, liquidity and cash flow needs of the state.
(b)The small business development center shall monitor the
program loans and ensure that at no time shall a single
congressional district receive more than forty percent of the funds
available under this article.
§12-1A-4. Applications for loan priority; loan package; counseling.
(a) An eligible lending institution that desires to
participate in the linked deposit program shall accept and review
loan applications from eligible small businesses that have been
prepared with the advice of the small business development center.
The lending institution shall apply all usual lending standards to
determine the credit worthiness of each eligible small business and
whether the loan application meets the criteria established in this
(b) An eligible small business shall certify on its loan
application that: (1) The small business is in good standing with
the state tax division, the workers' compensation commission and
the bureau of employment programs as of the date of the
application; (2) the linked deposit loan will be used to create new
jobs or preserve existing jobs and employment opportunities; and
(3) the linked deposit loan shall not be used to refinance an existing debt.
(c) In considering which eligible small businesses should
receive linked deposit loans, the eligible lending institution
shall give priority to the economic needs of the area in which the
business is located, the number of jobs to be created and preserved
by the receipt of the loan, the reasonable ability of the small
business to repay the loan and other factors considered appropriate
by the eligible financial institution.
(d) A small business receiving a linked deposit loan shall
receive supervision and counseling provided by the small business
development center when applying for the loan. The services
available from the small business development center include
eligibility certification, business planning, quarterly financial
statement review and loan application assistance. The state tax
division, the bureau of employment programs and the workers'
compensation commission shall provide the small business
development center with information as to the standing of each
small business loan applicant. The small business development
center shall include these certifications with the loan
(e) After all approvals of the small business development
center and the financial institution have been given for a linked
deposit loan, the small business development center and the
financial institution shall forward to the treasurer a linked
deposit loan request in the form and manner prescribed by the
treasurer. The treasurer shall notify the small business development center when the linked deposit is made.
§12-1A-5. Acceptance or rejection of loan request; deposit
agreement for linked deposits.
(a) The treasurer may accept or reject a linked deposit loan
request or any portion of a request based on the criteria
prescribed by this article.
(b) Upon approving the linked deposit loan request, the
treasurer shall place a linked deposit with the lending
(c) The eligible lending institution shall enter into a
deposit agreement with the treasurer in a form prescribed by the
treasurer and in compliance with the requirements of this article.
§12-1A-6. Certification and monitoring of compliance;
accountability and reporting.
(a) Upon the placement of a linked deposit with an eligible
lending institution, the institution shall lend the funds to the
approved eligible small business listed in the linked deposit loan
package. A certification of compliance with this section shall be
sent to the small business development center by the eligible
(b) As a condition of remaining in good standing with the
lending institution and the state and as a condition of having the
loan for up to seven years, the loan recipient shall receive
supervision and counseling provided by the small business
development center. Eligible small businesses shall also grant the
lending institution the right to provide information on the status of the loan to the small business development center so as to
assist the small business.
(c) The small business development center shall take any and
all steps necessary to implement, advertise and monitor compliance
with the linked deposit program.
(d) By the thirty-first day of January of each year, the
small business development center shall report on the linked
deposit program for the preceding calendar year to the West
Virginia development office, which shall then report to the joint
committee on government and finance. The reports shall set forth
the name of the small business, terms, delinquency and default
rates, job growth, gross income evaluation and amounts of the loans
upon which the linked deposits were based.
§12-1A-7. Liability of state.
The state, the treasurer and the small business development
center are not liable to any eligible lending institution in any
manner for payment of the principal or interest on the loan to an
eligible small business. Any delay in payment or default on the
part of an eligible small business does not in any manner affect
the deposit agreement between the eligible lending institution and
§12-1A-8. Penalties for violation of article.
(a) Any person who knowingly makes a false statement
concerning an application or violates another provision of this
article is guilty of a misdemeanor and, upon conviction thereof,
shall be fined not less than one hundred nor more than five hundred dollars or confined in the county or regional jail not less than
one month nor more than one year.
(b) In addition to the criminal penalties provided in this
section, no person who is convicted of a violation of subsection
(a) of this section is eligible to participate in the linked
§12-1A-9. Effective dates.
This article shall be effective from the first day of July,
two thousand eight, through the first day of July, two thousand