BILL NUMBER: AB 1009 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 17, 2009
AMENDED IN SENATE JUNE 29, 2009
AMENDED IN SENATE JUNE 25, 2009
AMENDED IN ASSEMBLY MAY 6, 2009
INTRODUCED BY Assembly Member V. Manuel Perez
FEBRUARY 27, 2009
An act to amend Section 14030 of, and to add and repeal Section
14077 of, the Corporations Code, relating to small business, and
making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
AB 1009, as amended, V. Manuel Perez. Small business: Direct Loan
Program.
The California Small Business Financial Development Corporation
Law authorizes the formation of small business financial development
corporations to grant loans or loan guarantees for the purpose of
stimulating small business development and imposes certain duties
with respect thereto on a director designated by the Secretary of
Business, Transportation and Housing. The California Small Business
Expansion Fund, a continuously appropriated fund, provides funds to
be used to pay for defaulted loan guarantees and administrative costs
of these corporations.
This bill would require the secretary to develop and implement,
until January 1, 2015, a Direct Loan Program to provide loans to
small businesses meeting certain requirements. The bill would require
the maximum loan limit to be $500,000. The bill would establish the
Direct Loan Account in the California Small Business Expansion Fund
and would continuously appropriate all moneys in that account for
purposes of implementing and administering the program. The bill
would authorize a public entity, as defined, to deposit moneys in
this account in order to capitalize the program. The bill would
require the director, prior to distributing these funds to small
businesses, to determine that the program is sufficiently
capitalized. The bill would require the director to report annually
on the activities of the program, as specified, and would also
require the director, by a specified date, to submit to the Governor
and the Legislature the results of an independent audit of the
program. The bill would make certain findings and declarations
of the Legislature.
Vote: majority. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. (a) The Legislature finds and declares
all of the following:
(1) The California Small Business Financial Development
Corporation Law was enacted in 1968 to provide a locally and
regionally based network of financial development professionals to
assist small businesses in meeting their capital formation needs.
Over the years, financial development corporations have assisted
small businesses in accessing capital by providing guarantees on
loans and lines of credit, as well as offering direct loans to small
farmers.
(2) On February 17, 2009, the American Recovery and Reinvestment
Act of 2009 (Public Law 111-5) was signed into law by President
Obama. The act authorizes the expenditure of over $187,000,000,000
nationally, of which California is expected to receive more than
$80,000,000,000. In using these moneys, federal, state, and local
public entities will have the opportunity to assist small businesses
by providing direct loans. California's primary small business
financial assistance program is administered by the Business,
Transportation and Housing Agency through the financial development
corporations.
(3) Given the limited term of the federal stimulus moneys and the
immediate needs of California's small businesses, creating a number
of new loan programs in separate state departments and agencies is
neither a prudent nor an efficient use of stimulus moneys.
(b) The Legislature therefore finds and declares that it is in the
best interest of the state to leverage, to the greatest extent
possible, the existing small business loan and guarantee program, and
utilize the state's existing network of financial development
professionals in offering loans and other financial services to the
state's small businesses.
SECTION 1. SEC. 2. Section 14030 of
the Corporations Code, as amended by Section 1 of Chapter 601 of the
Statutes of 2007, is amended to read:
14030. (a) There is hereby created in the State Treasury the
California Small Business Expansion Fund. All or a portion of the
funds in the expansion fund may be paid out, with the approval of the
Department of Finance, to a lending institution or financial company
that will act as trustee of the funds. The expansion fund and the
trust fund shall be used to pay for defaulted loan guarantees issued
pursuant to Article 9 (commencing with Section 14070), administrative
costs of corporations, and those costs necessary to protect a real
property interest in a defaulted loan or guarantee. The amount of
guarantee liability outstanding at any one time shall not exceed five
times the amount of funds on deposit in the expansion fund plus any
receivables due from funds loaned from the expansion fund to another
fund in state government as directed by the Department of Finance
pursuant to a statute enacted by the Legislature, including each of
the trust fund accounts within the trust fund.
(b) There is hereby created in the expansion fund the Direct Loan
Account. Notwithstanding Section 13340 of the Government Code, all
moneys in the Direct Loan Account shall be continuously appropriated
for the purposes of implementing and administering the Direct Loan
Program established pursuant to Section 14077. A public entity, with
the approval of the director, may deposit moneys in this account for
the purpose of providing capitalization for the Direct Loan Program
pursuant to Section 14077. For the purposes of this section, "public
entity" means the state, the Regents of the University of California,
a county, city, city and county, district, public authority, public
agency, and any other political subdivision or public corporation in
the state or the United States.
(c) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
SEC. 2. SEC. 3. Section 14030 of the
Corporations Code, as added by Section 2 of Chapter 601 of the
Statutes of 2007, is amended to read:
14030. (a) There is hereby created in the State Treasury the
California Small Business Expansion Fund. All or a portion of the
funds in the expansion fund may be paid out, with the approval of the
Department of Finance, to a lending institution or financial company
that will act as trustee of the funds. The expansion fund and the
trust fund shall be used to pay for defaulted loan guarantees issued
pursuant to Article 9 (commencing with Section 14070), administrative
costs of corporations, and those costs necessary to protect a real
property interest in a defaulted loan or guarantee. The amount of
guarantee liability outstanding at any one time shall not exceed four
times the amount of funds on deposit in the expansion fund plus any
receivables due from funds loaned from the expansion fund to another
fund in state government as directed by the Department of Finance
pursuant to a statute enacted by the Legislature, including each of
the trust fund accounts within the trust fund, unless the director
has permitted a higher leverage ratio for an individual corporation
pursuant to subdivision (b) of Section 14037.
(b) There is hereby created in the expansion fund the Direct Loan
Account. Notwithstanding Section 13340 of the Government Code, all
moneys in the Direct Loan Account shall be continuously appropriated
for the purposes of implementing and administering the Direct Loan
Program established pursuant to Section 14077. A public entity, with
the approval of the director, may deposit moneys in this account for
the purpose of providing capitalization for the Direct Loan Program
pursuant to Section 14077. For the purposes of this section, "public
entity" means the state, the Regents of the University of California,
a county, city, city and county, district, public authority, public
agency, and any other political subdivision or public corporation in
the state or the United States.
(c) This section shall become operative on January 1, 2013.
SEC. 3. SEC. 4. Section 14077 is
added to the Corporations Code, to read:
14077. (a) The secretary shall establish the Direct Loan Program
for the purpose of providing business loans directly to qualified
small businesses.
(b) The Direct Loan Program may include individual special loan
programs funded by moneys deposited by public entities pursuant to
subdivision (b) of Section 14030. Each of these programs shall be
administered pursuant to an agreement between the director and the
respective funding public entity. These agreements shall specify any
laws, rules, regulations, policies, and procedures governing the
lawful use of the moneys, deposited by the public entity, to be
administered by the director, who shall comply with the terms of
these agreements in making direct loans.
(b) The
(c) Unless otherwise specified in an
agreement pursuant to subdivision (b), the director shall
provide for the development and implementation of the application and
the review process for the program, including, but not limited to,
defining the eligibility standards, rating and ranking criteria, and
other appropriate policies and procedures for evaluating direct loans
subject to the following provisions:
(1) The maximum loan limit shall be five hundred thousand dollars
($500,000).
(2) All loan applicants shall demonstrate that they will have
reasonable access to business and management technical assistance
during the term of the loan.
(3) Loans may be provided at terms and conditions below market to
the extent that the overall revolving loan portion of the program
remains financially viable.
(4) Loans shall be provided to applicants demonstrating that they
cannot otherwise reasonably obtain a loan from a private lender.
(5) Loans shall only be provided to applicants demonstrating the
ability to repay the loan.
(c)
(d) The director shall have the authority to administer
the distribution of funds from the Direct Loan Account created in
subdivision (b) of Section 14030. However, prior to distributing
these funds, the director shall make a determination that the Direct
Loan Program is sufficiently capitalized.
(d)
(e) To execute direct loans, the director may loan
funds from the Direct Loan Account to a corporation for the purpose
of lending those funds to an approved borrower.
(1) The loan authorized by the director to the corporation shall
be on terms similar to the loan between the corporation and the
borrower and shall be evidenced by a credit agreement.
(2) In the absence of fraud on the part of the corporation, the
liability of the corporation to repay the loan to the agency is
limited to the repayment received by the corporation from the
borrower except in a case where the federal guarantor requires
exposure by the corporation in rule or regulation.
(3) Interest and principal received by the agency from the
corporation shall be deposited into the Direct Loan Account.
(e)
(f) The director shall annually report on the
activities of the Direct Loan Program as part of his or her existing
annual reporting requirements.
(f)
(g) The director shall submit to the Governor and the
Legislature the results of an audit of the Direct Loan Program
undertaken by an independent entity. The independent audit shall
cover the first two full years of operation of the Direct Loan
Program and it shall be submitted no later than six months after the
close of the second full fiscal year of operation.
(g)
(h) This section shall remain in effect only until
January 1, 2015, and as of that date is repealed, unless a later
enacted statute, that is enacted before January 1, 2015, deletes or
extends that date.