BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                  SB 1465|
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                                 THIRD READING


          Bill No:  SB 1465
          Author:   Yee (D), et al.
          Amended:  5/29/12
          Vote:     21

           
           SENATE GOVERNMENTAL ORGANIZATION COMM.  :  7-5, 4/10/12
          AYES:  Wright, Calderon, Cannella, Corbett, De León, 
            Hernandez, Yee
          NOES:  Anderson, Berryhill, Padilla, Walters, Wyland
          NO VOTE RECORDED:  Evans

           SENATE APPROPRIATIONS COMMITTEE  :  5-2, 5/24/12
          AYES:  Kehoe, Alquist, Lieu, Price, Steinberg
          NOES:  Walters, Dutton


           SUBJECT  :    Loan programs

           SOURCE  :     State Controller


           DIGEST  :    This bill requires the Secretary of Business, 
          Transportation and Housing (BT&H), to the extent that the 
          Secretary determines to be practical, to enter into loans 
          and loan guarantees that provide export financing.  This 
          bill sunsets on March 31, 2017.

           ANALYSIS  :    The federal State Small Business Credit 
          Initiative Act of 2010 allocated $168.6 million to the 
          state, split between the Small Business Loan Guarantee 
          Program (SBLGP) in BT&H and the California Pollution 
          Control Financing Authority (CPCFA) in the STO.  Funds not 
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          allocated by 2017 revert to the federal government.

          For the SBLGP, any small business is eligible for a loan 
          used primarily in the state and for any standard business 
          purpose beneficial to the applicant's business, such as 
          expansion into new facilities or purchase of new equipment. 
           Guarantees can cover up to 90% of the loan amount, with 
          the guaranteed portion of the loan not exceeding $500,000.  
          The term of the loan guarantee may extend up to seven 
          years.  Interest rates are negotiated between the borrower 
          and the lender.  Collateral is generally required with each 
          transaction tailored to meet the borrower's financial 
          situation.

          Within the CPCFA, the California Capital Access Program 
          (CalCAP) insures loans to finance the acquisition of land, 
          construction or renovation of buildings, the purchase of 
          equipment, other capital projects and working capital.  
          CalCAP is a loan loss insurance program that aims to help 
          small businesses obtain loans for which they would 
          otherwise be ineligible.  Participating financial 
          institutions establish all the terms and conditions of 
          CalCAP loans.  Once the financial institution approves a 
          CalCAP loan, it establishes a loan loss reserve account.  
          The financial institution and the borrower pay an equal 
          amount to the reserve account that is equal to 2% to 3.5%, 
          as set forth in statute, of the loan principal, depending 
          on the lender's perception of the borrower's 
          creditworthiness.  CalCAP matches the total paid into the 
          reserve account.

          The maximum loan amount is $5 million and the maximum 
          enrolled amount is $2.5 million.  Each individual borrower 
          is limited by a maximum $2.5 million enrolled over a three 
          year period.  CalCAP allows a maximum lender/borrower 
          contribution for any single borrower in a three year period 
          of $100,000.

          This bill requires the Secretary, to the extent that the 
          Secretary determines to be practical, to enter into loans 
          or loan guarantee agreements with financial institutions 
          that provide export financing in the state for the purpose 
          of increasing exports to out-of-state markets and 
          increasing jobs in California.  This bill sunsets on March 

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          31, 2017.

           Related Legislation
           
          SB 1116 (Leno) reduces the minimum contribution paid by 
          financial institutions and borrowers from 2% to 1% of the 
          loan into a loan loss reserve account under CalCAP and 
          extends the time that financial institutions have to enroll 
          a loan into CalCAP.  The bill is presently on the Senate 
          Third Reading file.

          Governor Brown is proposing to consolidate the SBGLP into 
          the Governor's Office of Business and Economic Development.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

          According to the Senate Appropriations Committee, there 
          would be minor, absorbable costs in federal funds to BT&H 
          through 2016-17 for administration of an export loan 
          program.

            Unknown, potentially hundreds of thousands of dollars in 
             federal funds for increased participation in the SBLGP 
             and the CPCFA through 2016-17.
            Average cost of $4,000 to $7,000 generally per $100,000 
             CPCFA loan.
            Potential General Fund loans by the CPCFA.

           SUPPORT  :   (Verified  5/29/12)

          State Controller (source)
          Latino Business Chamber of Greater Los Angeles

           ARGUMENTS IN SUPPORT  :    The Latino Business Chamber of 
          Greater Los Angeles states this bill seeks to help small 
          businesses secure financing to access out-of-state markets 
          and help California's economy and job market recover from 
          the Great Recession.  To ensure the State is targeting its 
          guarantees to the most worthy businesses, this bill will 
          also establish an oversight committee of high-level trade 
          experts who will advise the State on trends and 
          opportunities in export financing.  This bill is based on 
          the principles of the highly-successful California Export 

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          Finance Office (CEFO), a program within the former 
          Technology, Trade, and Commerce Agency, which provided loan 
          guarantees to help qualified companies acquire short-term 
          working capital loans to complete export sales.  Over its 
          nearly 20-year life, less than 2% of borrowers defaulted.  
          Near its peak, in 1999-2000, the CEFO issued loan 
          guarantees for 18 export transactions valued at $28 
          million, creating 227 jobs in the State-at no cost to the 
          State.


          DLW:kc  5/29/12   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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