SB 983: RELATING TO SMALL BUSINESS LOANS.

A BILL FOR AN ACT

RELATING TO SMALL BUSINESS LOANS.

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

     SECTION 1.  The legislature finds that the COVID-19 pandemic, supply chain issues, and inflation have hurt the State's economy and local businesses on every level, including the start-up industry.  Despite this, many small businesses and entrepreneurs are ready to take the leap into starting up a business, but lack the resources to do so, as access to capital is one of the biggest barriers for start-ups.

     The legislature further finds that new businesses and young companies under five years of age create the most net new jobs in the United States.  While the State offers a variety of financial assistance to start-up businesses in Hawaii, most of the assistance is focused on helping existing businesses expand and scale, rather than helping brand new businesses successfully launch.

     The legislature believes that providing support to local small businesses and entrepreneurs seeking to start a new business could lead to the creation of more jobs in the State.

     The purpose of this Act is to benefit the local economy and create new jobs by establishing and appropriating funds for the Hawaii start-up business loan program to encourage entrepreneurship and promote economic diversification and resilience in the State.

     SECTION 2.  The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

HAWAII START-UP BUSINESS LOAN PROGRAM

     §   -1  Definitions.  As used in this chapter:

     "Department" means the department of business, economic development, and tourism.

     "Division" means the business development and support division of the department.

     "Financial institution" means any organization authorized to do business under state or federal laws relating to financial institutions, including without limitation, banks, savings banks, savings and loan companies or associations, financial services loan companies, community development financial institutions, and credit unions.

     "Program" or "loan program" means the Hawaii start-up business loan program.

     "Start-up business" means a business that:

     (1)  Is registered in the State;

     (2)  Has been in business for three years or less; and

     (3)  Fulfills the qualifications established by the division to receive a start-up business loan pursuant to this chapter.

     §   -2  Hawaii start-up business loan program.  There is established a Hawaii start-up business loan program that shall be administered by the division in coordination with the Hawaii technology development corporation.

     §   -3  Functions, powers, and duties of the division.  In the performance of, and with respect to, the functions, powers, and duties vested in the division by this chapter, the division may:

     (1)  Prescribe rules and regulations to carry out this chapter; and

     (2)  Perform all functions necessary to effectuate the purposes of this chapter.

     §   -4  Rules and regulations.  The rules and regulations adopted pursuant to this chapter shall:

     (1)  Prescribe the qualifications for eligibility of applicants for loans;

     (2)  Establish preferences and priorities in determining eligibility for loans;

     (3)  Establish the conditions, consistent with the purposes of this chapter, for the granting or for the continuance of a grant of a loan; and

     (4)  Provide for inspection, at reasonable hours, of the plant, books, and records of an enterprise that has applied for or has been granted a loan, and to require the submission of progress and final reports.

     §   -5  Direct loans, terms, and restrictions.  (a)  The division may make loans to address start-up business concerns, including the financing of working capital, construction or improvement of facilities, and equipment.  The loans pursuant to this section shall not be made in conjunction with any other loans made or grants awarded by the division.  Where the loans made by the division are secured, the security may be subordinated to the loans made by other financial institutions; provided that the subordination is required to obtain loans from those institutions.  The necessity for and the extent of security required in any loan shall be determined by the division.

     (b)  The powers granted to the division pursuant to this section shall be subject to the following restrictions and limitations:

     (1)  No loan shall be granted unless financial assistance is not available to the applicant; provided that the condition may be waived by the division for participation loans or loan guarantees with a private financial institution;

(2)  The amount of the loan shall not exceed a total of $50,000;

(3)  No loan shall be made for a term exceeding eight years;

     (4)  Each loan shall bear simple interest at a rate of four per cent per year;

     (5)  The payment of interest on the principal of a loan may be deferred by the division, but in no event shall interest payments be deferred in excess of twenty-four months from the date of issuance of the loan;

     (6)  Each loan made to a small business declared bankrupt within five years of receiving the loan shall be forgiven; provided that the small business is domiciled in the State; and

     (7)  Each recipient of a loan shall not be required to make a personal guarantee as a condition of receiving the loan.

     (c)  The division may contract with any financial institution for services, including servicing or administering loans pursuant to this section.

     §   -6  Hawaii start-up business loan program special fund.  (a)  There is established in the state treasury the Hawaii start-up business loan program special fund, into which shall be deposited:

     (1)  Appropriations made by the legislature to the fund;

     (2)  Moneys received as repayments of loans; and

     (3)  Payments of loan interest or fees.

     (b)  Moneys in the Hawaii start-up business loan program special fund shall be administered by the department and shall be used for providing loans to start-up businesses.

     (c)  All unexpected and unencumbered moneys remaining in the Hawaii start-up business loan program special fund at the close of each fiscal year shall not lapse to the credit of the state general fund.

     (d)  The department may contract with any financial institution for services including the day-to-day management of the fund pursuant to this section.

     §   -7  Reports.  The department shall submit a report to the legislature on the division's activities in administering the loan program no later than twenty days prior to the convening of each regular session beginning with the regular session of 2026.  The report shall include:

     (1)  A description and uses of the loan program;

     (2)  A summary of information and analytical data concerning the implementation of the loan program; and

     (3)  Repayments made."

     SECTION 3.  There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 to be deposited into the Hawaii start-up business loan program special fund.

     SECTION 4.  There is appropriated out of the Hawaii start‑up business loan program special fund the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 to:

     (1)  Implement the Hawaii start-up business loan program; and

     (2)  Provide loans under the Hawaii start-up business loan program.

     The sums appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this Act.

     SECTION 5.  There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 to fund one full-time equivalent (1.0 FTE) business loan officer position within the business support branch of the department of business, economic development, and tourism.

     The sums appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this Act.

     SECTION 6.  There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for the division to upgrade its loan processing systems.

     The sums appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this Act.

     SECTION 7.  If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

     SECTION 8.  This Act shall take effect on July 1, 2050.

Report Title:

DBEDT; Hawaii Start-Up Business Loan Program; Hawaii Start-Up Business Loan Program Special Fund; Small Businesses; Reports; Positions; Appropriations

Description:

Establishes the Hawaii Start-Up Business Loan Program within the Business Development and Support Division of the Department of Business, Economic Development, and Tourism.  Establishes the Hawaii Start-Up Business Loan Program Special Fund.  Requires DBEDT to submit annual reports to the Legislature.  Establishes one full-time equivalent business loan officer position.  Appropriates funds.  Effective 7/1/2050.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

relating to small business loans.

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

     SECTION 1.  The legislature finds that the COVID-19 pandemic, supply chain issues, and inflation have hurt the State's economy and local businesses on every level, including the start-up industry.  Despite this, many small businesses and entrepreneurs are ready to take the leap into starting up a business, but lack the resources to do so, as access to capital is one of the biggest barriers for start-ups.

     The legislature further finds that new businesses and young companies under five years of age create the most net new jobs in the United States.  While the State offers a variety of financial assistance to start-up businesses in Hawaii, most of the assistance is focused on helping existing businesses expand and scale, rather than helping brand new businesses successfully launch.

     The legislature believes that providing support to local small businesses and entrepreneurs seeking to start a new business could lead to the creation of more jobs in the State.

     The purpose of this Act is to benefit the local economy and create new jobs by establishing and appropriating funds for the Hawaii Start-Up Business Loan Program to encourage entrepreneurship and promote economic diversification and resilience in the State.

     SECTION 2.  The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

HAWAII START-UP BUSINESS LOAN PROGRAM

     §   -1 Definitions.  As used in this chapter:

     "Department" means the department of business, economic development, and tourism.

     "Division" means the business development and support division of the department of business, economic development, and tourism.

     "Financial institution" means any organization authorized to do business under state or federal laws relating to financial institutions, including without limitation, banks, savings banks, savings and loan companies or associations, financial services loan companies, community development financial institutions, and credit unions.

     "Program" means the Hawaii start-up business loan program.

     "Start-up business" means a business that:

     (1)  Is registered in the State;

     (2)  Has been in business for three years or less; and

     (3)  Fulfills the qualifications established by the division to receive a start-up business loan pursuant to this chapter.

     §   -2 Hawaii start-up business loan program.  There is established a Hawaii start-up business loan program that shall be administered by the division in coordination with the Hawaii technology development corporation.

     §   -3 Functions, powers, and duties of the division.  In the performance of, and with respect to, the functions, powers, and duties vested in the division by this chapter, the division may:

     (1)  Prescribe rules and regulations to carry out this chapter; and

     (2)  Perform all functions necessary to effectuate the purposes of this chapter.

     §   -4 Rules and regulations.  The rules and regulations adopted pursuant to this chapter shall:

     (1)  Prescribe the qualifications for eligibility of applicants for loans;

     (2)  Establish preferences and priorities in determining eligibility for loans;

     (3)  Establish the conditions, consistent with the purposes of this chapter, for the granting or for the continuance of a grant of a loan; and

     (4)  Provide for inspection, at reasonable hours, of the plant, books, and records of an enterprise that has applied for or has been granted a loan, and to require the submission of progress and final reports.

     §   -5 Direct loans, terms, and restrictions.  (a)  The division may make loans to address start-up business concerns, including the financing of working capital, construction or improvement of facilities, and equipment.  The loans pursuant to this section shall not be made in conjunction with any other loans made or grants awarded by the division.  Where the loans made by the division are secured, the security may be subordinated to the loans made by other financial institutions; provided that the subordination is required to obtain loans from those institutions.  The necessity for and the extent of security required in any loan shall be determined by the division.

     (b)  The powers granted to the division pursuant to this section shall be subject to the following restrictions and limitations:

     (1)  No loan shall be granted unless financial assistance is not available to the applicant; provided that the condition may be waived by the division for participation loans or loan guarantees with a private financial institution;

(2)  The amount of the loan shall not exceed a total of $50,000;

(3)  No loan shall be made for a term exceeding eight years;

     (4)  Each loan shall bear simple interest at a rate of four per cent per year;

     (5)  The payment of interest on the principal of a loan may be deferred by the division, but in no event shall interest payments be deferred in excess of twenty-four months from the date of issuance of the loan;

     (6)  Each loan made to a small business declared bankrupt within five years of receiving the loan shall be forgiven; provided that the small business is domiciled in the State; and

     (7)  Each recipient of a loan shall not be required to make a personal guarantee as a condition of receiving the loan.

     (c)  The division may contract with any financial institution for services, including servicing or administering loans pursuant to this section.

     §   -6 Hawaii start-up business loan program special fund.  (a)  There is established in the state treasury the Hawaii start-up business loan program special fund, into which shall be deposited:

     (1)  Appropriations made by the legislature to the fund;

     (2)  Moneys received as repayments of loans; and

     (3)  Payments of loan interest or fees.

     (b)  Moneys in the Hawaii start-up business loan program special fund shall be administered by the department and shall be used for providing loans to start-up businesses.

     (c)  All unexpected and unencumbered moneys remaining in the Hawaii start-up business loan program special fund at the close of each fiscal year shall not lapse to the credit of the state general fund.

     (d)  The department may contract with any financial institution for services including the day-to-day management of the fund pursuant to this section.

     §   -7 Reports.  The department shall submit a report to the legislature on the division's activities in administering the loan program no later than twenty days prior to the convening of each regular session beginning with the regular session of 2026.  The report shall include:

     (1)  A description and uses of the loan program;

     (2)  A summary of information and analytical data concerning the implementation of the loan program; and

     (3)  Repayments made."

     SECTION 3.  There is appropriated out of the general revenues of the State of Hawaii the sum of $500,000 or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 to be deposited into the Hawaii start-up business loan program special fund.

     SECTION 4.  There is appropriated out of the Hawaii start‑up business loan program special fund the sum of $500,000 or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 to:

     (1)  Implement the Hawaii start-up business loan program; and

     (2)  Provide loans under the Hawaii start-up business loan program.

     The sums appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this Act.

     SECTION 5.  There is appropriated out of the general revenues of the State of Hawaii the sum of $95,000 or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for to fund one full-time equivalent (1.0 FTE) business loan officer position within the business support branch of the department of business, economic development, and tourism.

     The sums appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this Act.

     SECTION 6.  There is appropriated out of the general revenues of the State of Hawaii the sum of $500,000 or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for the division to upgrade its loan processing systems.

     The sums appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this Act.

     SECTION 7.  If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

     SECTION 8.  This Act shall take effect on July 1, 2025.

Report Title:

DBEDT; Hawaii Start-Up Business Program; Hawaii Start-Up Business Program Special Fund; Small Businesses; Report; Positions; Appropriations

Description:

Establishes that Hawaii Start-Up Business Program within the Business Development and Support Division of the Department of Business, Economic Development, and Tourism.  Establishes the Hawaii Start-Up Business Program Special Fund.  Requires DBEDT to submit an annual report to the Legislature.  Establishes one full-time equivalent loan officer position.  Appropriates funds.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO. 390

Honolulu, Hawaii

RE:    S.B. No. 983

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Economic Development and Tourism, to which was referred S.B. No. 983 entitled:

"A BILL FOR AN ACT RELATING TO SMALL BUSINESS LOANS,"

begs leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Establish the Hawaii Start-Up Business Loan Program within the Business Development and Support Division of the Department of Business, Economic Development, and Tourism;

     (2)  Establish the Hawaii Start-Up Business Loan Program Special Fund;

     (3)  Require the Department of Business, Economic Development, and Tourism to submit annual reports to the Legislature;

     (4)  Establish one full-time equivalent business loan officer position; and

     (5)  Appropriate funds.

     Your Committee received testimony in support of this measure from the Department of Business, Economic Development, and Tourism; Holomua Collaborative; Hawaii Food Industry Association; and Chamber of Commerce Hawaii.

     Your Committee finds that small, local, and new businesses are critical to the State's economy and generate critical entrepreneurial and career opportunities for Hawaii residents.  Your Committee recognizes the gap in resource assistance for initial business start-up costs.  Providing a dedicated source of funding for local small start-up businesses will enable the State to achieve its mandate.  Accordingly, this measure will promote the economic diversification and resilience of the State's local communities by establishing the Hawaii Start-Up Business Loan Program.

     Your Committee has amended this measure by:

     (1)  Changing the appropriation amounts to unspecified amounts;

     (2)  Inserting an effective date of July 1, 2050, to encourage further discussion; and

     (3)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     Your Committee notes that this measure, as amended, contains unspecified appropriation amounts.  Should your Committee on Ways and Means choose to deliberate on this measure, your Committee respectfully requests that it consider inserting the following appropriation amounts:

     (1)  $500,000 to be deposited into and out of the Hawaii Start-Up Business Loan Program Special Fund to implement the Loan Program and provide loans;

     (2)  $95,000 to fund one full-time equivalent (1.0 FTE) Business Loan Officer position; and

     (3)  $500,000 for the Business Development and Support Division of the Department of Business, Economic Development, and Tourism to upgrade its loan processing systems.

     As affirmed by the record of votes of the members of your Committee on Economic Development and Tourism that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 983, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 983, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Economic Development and Tourism,