68th OREGON LEGISLATIVE ASSEMBLY--1995 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 3271
House Bill 3193
Sponsored by Representative GORDLY (at the request of Leon Smith,
Albina Community Bank)
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
Enacts Franchise Investment for Minority and Women Business
Enterprises Act.
Creates Oregon Franchise Investment Fund. Appropriates moneys
from fund to Economic Development Department.
Creates crime of fraudulent application for franchise.
Punishes by maximum of five years' imprisonment, $20,000 fine, or
both.
A BILL FOR AN ACT
Relating to financial assistance for franchise investments; and
appropriating money.
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + Sections 1 to 8 of this Act may be cited as the
Franchise Investment for Minority and Women Business Enterprises
Act. + }
SECTION 2. { + The Legislative Assembly finds that:
(1) Franchises have proven to be a fast growing and reliable
form of successful business expansion and successful new business
creation.
(2) Franchises play a major role in the economy of the State of
Oregon and have been a continuing source of increasing tax
revenues and job opportunities.
(3) The growth of franchises ought to be encouraged in the
economy of this state and franchising should be an integral part
of the economic development effort in Oregon.
(4) Socially or economically disadvantaged persons often lack
adequate capital and are unable to obtain financing from
financial institutions to begin and develop a franchise.
(5) It is in the interest of the public welfare and purpose to
promote the creation and success of franchises by socially or
economically disadvantaged persons.
(6) Existing state programs intended to assist socially or
economically disadvantaged persons with business opportunities
are inadequate to meet the ever increasing need for additional
assistance and are not focused upon the particular problems
facing prospective franchisees. + }
SECTION 3. { + As used in sections 3 to 8 of this Act:
(1) 'Department' means the Economic Development Department.
(2) 'Financial institution' has the meaning given that term in
ORS 192.800.
(3) 'Franchise,' 'franchisee,' and 'franchisor' have the
meanings given those terms in ORS 650.005.
(4) 'Minority individual' has the meaning given that term in
ORS 200.005.
(5) 'Minority or women business enterprise' has the meaning
given that term in ORS 200.005.
(6) 'Woman' has the meaning given that term in ORS 200.005. + }
SECTION 4. { + The Economic Development Department may:
(1) Provide loans for the establishment and development of
franchises by minority or women business enterprises qualifying
under sections 3 to 7 of this Act.
(2) Enter into agreements, accept funds or grants and cooperate
with agencies of the federal and state governments, local units
of government, institutions of higher education in this state,
research foundations, regional economic development corporations
and other organizations for the purpose of carrying out sections
3 to 7 of this Act.
(3) Enter into contracts and letter of credit agreements,
provide funds for participation agreements, invest or loan moneys
to any participating financial institution, private investor,
public or private development corporation or other entity as may
be necessary or desirable to carry out sections 3 to 7 of this
Act. Any agreement or contract may include terms relating to loan
documentation, review and approval procedures, organization and
servicing rights, contribution requirements, default conditions
and other related provisions.
(4) Fix, charge and collect any premiums, fees, charges, costs
and expenses, including application fees, commitment fees,
program fees, financing charges or publication fees in connection
with the activities of the department under sections 3 to 7 of
this Act.
(5) Establish application, notification, contract and other
forms, procedures and rules considered by the department to be
necessary or appropriate.
(6) Subject to the provisions of any contract with another
person, consent to the modification or restructuring of any loan
agreement to which the department is a party when such
modification is necessary to carry out the purposes of sections 3
to 7 of this Act.
(7) Take whatever actions are necessary or appropriate to
protect this state's interests in the event of bankruptcy,
default, foreclosure or noncompliance with the terms and
conditions of financial assistance provided under sections 3 to 7
of this Act. Actions that may be taken under this subsection
include selling, leasing or renting, upon terms and conditions
determined by the department to be appropriate, real or personal
property that the department may receive under sections 3 to 7 of
this Act.
(8) Consult with state and local government officials in order
to ensure the most effective use of resources without duplicating
existing business opportunity or expansion programs.
(9) Exercise other powers necessary or incidental to the other
powers described in this section. + }
SECTION 5. { + When the minority or women business enterprise
applying to the Economic Development Department for financial
assistance under sections 3 to 7 of this Act is a sole
proprietorship, the business enterprise must be wholly owned and
controlled by a minority individual or a woman. When the minority
or women business enterprise applying to the department for
financial assistance is other than a sole proprietorship, the
business enterprise must be 70 percent owned and controlled by a
minority individual or a woman. The percent of ownership and
control of a business enterprise specified in this section must
be maintained during the period of repayment of any loan received
under sections 3 to 7 of this Act. + }
SECTION 6. { + (1) The Economic Development Department may
provide loans to qualifying minority or women business
enterprises only after the business enterprise submits an
application that contains a business plan that includes:
(a) A description of the franchisor and its management, product
and market.
(b) A statement of the amount, urgency of need and projected
use of the loan moneys sought.
(c) A statement of the potential economic impact of the
purchase of the franchise.
(d) Information that relates to the qualifications of the
business enterprise to participate in the program created under
sections 3 to 7 of this Act.
(e) A statement that describes, for each individual owning any
interest in the business enterprise, the business experience of
the individual during the 10 years immediately preceding the date
of the application, the history of civil or criminal proceedings
to which the individual was a party and in which fraud was an
essential element in the proceeding and any failure to satisfy an
enforceable judgment entered against the individual if the action
or proceeding giving rise to the judgment was based on fraudulent
behavior by the individual. Notwithstanding any other law, the
statement provided under this paragraph shall be confidential and
may be used only for the purposes of sections 3 to 7 of this Act.
(f) A description of other financing to be used for the
proposed purchase of the franchise by the minority or women
business enterprise. Such other financing may be in any form
approved by the department.
(g) Any other information required by the department.
(2) A loan granted under sections 3 to 7 of this Act shall
satisfy the following requirements:
(a) A minority or women business enterprise may receive only
one loan under the program for the purchase of a franchise.
(b) The amount of a loan under sections 3 to 7 of this Act
shall not exceed $100,000 for any franchise and shall not exceed
45 percent of the total initial investment in the franchise.
(c) The department must find that there is a reasonable
probability that the department will recover the amount of the
loan plus an adequate return on such investment within seven
years after the date of the loan.
(d) The return on the loan proceeds shall be the greater of the
current value of the percentage of the loan financing of the
franchise purchase or the amount of the initial investment in the
franchise.
(e) Loans shall be made only to qualified minority or women
business enterprises.
(3) The liability of the department and the State of Oregon is
limited to the amount of loans made under sections 3 to 7 of this
Act. + }
SECTION 7. { + (1) There is created within the State Treasury
a revolving fund known as the Oregon Franchise Investment Fund,
separate and distinct from the General Fund. Interest earned by
the fund shall be credited to the fund. Moneys in this fund are
continuously appropriated to the Economic Development Department
for the following purposes:
(a) Administrative expenses of the department in processing
applications, investigating proposed franchise purchases and
servicing outstanding loans.
(b) Payment of loans to applicants under sections 3 to 7 of
this Act.
(c) Purchase or buyout of superior or prior liens or mortgages
on or a security interest in any franchise financed in part by a
loan from the fund, when the department determines that:
(A) A loan from the fund is in default and is in liquidation or
at risk of being forced into liquidation by another creditor of
the franchise;
(B) Such action is necessary to maintain or enhance the value
of the department's collateral in the franchise; and
(C) The amount of the purchase or buyout of superior or prior
liens or mortgages on that project does not exceed $___.
(2) The fund created by subsection (1) of this section shall
consist of:
(a) Repayment of moneys loaned to minority or women business
enterprises from the Oregon Franchise Investment Fund, including
interest on those moneys.
(b) Royalty payments from business enterprises that purchased
franchises with loans made under sections 3 to 7 of this Act.
(c) Payment of such moneys as may be appropriated to the fund
by the Legislative Assembly.
(d) All proceeds or assets received by the department as a
result of default or delinquency with respect to loan agreements
made by the department.
(e) Moneys obtained from any interest accrued from funds.
(f) Moneys from any grant made to the fund by any federal
agency.
(3) The Oregon Franchise Investment Fund shall be
self-sustaining and shall achieve investment returns on its
portfolio in the form of:
(a) Royalties from minority or women business enterprises in
amounts to be determined by the department; and
(b) If debt security is used, interest payments.
(4) Moneys in the Oregon Franchise Investment Fund shall be
used by the department as follows:
(a) To purchase advisory services and technical assistance
consistent with the requirements of sections 3 to 7 of this Act;
(b) To provide loans as permitted under sections 3 to 7 of this
Act; and
(c) To pay expenses for administrative, legal and actuarial
services related to the loan program operated under sections 3 to
7 of this Act. + }
SECTION 8. { + (1) A person commits the crime of fraudulent
application for a franchise if, with intent to defraud, the
person knowingly makes or causes any false statement or report to
be made in any application or in any document furnished to the
Economic Development Department under section 6 of this Act.
(2) Fraudulent application for a franchise is a felony
punishable on conviction by a fine not exceeding $20,000 or
imprisonment not exceeding five years, or both. + }
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