BILL ANALYSIS Ó AB 2671 Page 1 Date of Hearing: May 16, 2012 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 2671 (Committee on Jobs and Economic Development) - As Amended: April 26, 2012 Policy Committee: JEDE Vote:6-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill removes the sunset on statute allowing increased leverage of reserve funds under the Small Business Loan Guarantee Program (SBLGP). The effect of this bill change is to retain the current five dollars of loan guarantees for every dollar held in reserves. FISCAL EFFECT Negligible fiscal impact. COMMENTS 1)Author's purpose : According to the author, AB 2671 is the Assembly Jobs, Economic Development, and the Economy Committee omnibus bill on access to capital and economic development issues. The author argues as California slowly moves out of the recession, maintaining financing options for small businesses is essential. 2)Small Business Loan Guarantee Program : The SBLGP makes loans to a small business that cannot otherwise qualify for a loan. The state, working through 11 small business financial development corporations (FDC), offers direct loans or loan guarantees to a qualifying small business borrower. Applicants must meet the definition of a small business (100 or fewer employees) with the borrower and lender negotiating the specific market rate loan terms and interest rates. Loan proceeds must be used primarily in California for any standard business purpose. The program provides guarantees covering up to 90% of the loan's value, up to a maximum loan of $500,000. AB 2671 Page 2 The guarantee program allows a business to obtain a loan and also establish credit with a lender, so the business can obtain additional financing on its own. In 2010-11, approximately $5 million was made available for loan guarantees, which leveraged $13 million in small business loans. 3)Reorganization. The Governor submitted a reorganization plan to the Little Hoover Commission, which includes transferring economic development programs, including the SBLGP, from the Business, Transportation and Housing Agency to the Governor's Office of Business and Economic Development. The Little Hoover Commission is in the process of reviewing the plan before it submits its recommendation to the Legislature. Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081