BILL ANALYSIS �
Bill No: AB
201
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
AB 201 Author: Holden
As Amended: April 30, 2013
Hearing Date: June 11, 2013
Consultant: Paul Donahue
SUBJECT
Small business financial development corporations
DESCRIPTION
Requires the director of the Small Business Loan Guarantee
Program to maintain an Internet website that has
information on the programs administered through the
statewide network of small business financial development
corporations. In addition, this bill :
1)Specifies that programs covered shall include loan
guarantees, direct lending, surety bond guarantees, and
disaster loans.
2)Requires the information to be presented on the website
in a manner appropriate to address the needs of both
small businesses and existing and potential financial
institutions and financial companies.
EXISTING LAW
1)The California Small Business Financial Development
Corporation Law (Corp. Code � 14000 et seq.) authorizes
the formation of small business financial development
corporations to grant loans from, or guarantee loans made
by a financial institution or financial company against,
moneys awarded to the corporation from a specified fund
for the purpose of stimulating small business
AB 201 (Holden) continued
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development.
2)Authorizes or requires the designated director to perform
specified duties to operate the program.
BACKGROUND
1)Purpose : According to the author, the Small Business Loan
Guarantee Program (SBLGP) has been instrumental in
working with banks to guarantee loans to undercapitalized
small businesses. The author states that, at a time when
California is striving to rebound from a long recession,
this program can play a pivotal role in making capital
more accessible to thousands of small businesses so they
can expand, create new jobs, and protect the jobs of
existing employees.
The author notes under the Small Business Act, the Obama
administration has allotted $78 million to the loan
guarantee program, and the state has appropriated another
$38 million. The author states AB 201 would ensure that
information about the SBLGP, including a list of
participating lenders, is posted on the GO-Biz website
for small businesses to explore this resource.
2)Program background : The Small Business Loan Guarantee
Program enables a small business to obtain a term loan or
line of credit when it cannot otherwise qualify for a
loan on its own. The state, working through 11 financial
development corporations (FDCs), offers direct loans or
loan guarantees to qualifying small business borrowers.
Applicants must meet the definition of a small business
(100 or fewer employees), and the specific market rate
loan terms and interest rates are negotiated between the
borrower and the lender. Proceeds of the loan must be
used primarily in California for any standard business
purpose applicable to the applicant's business. The
guarantee program provides guarantees covering up to 90%
of the loan, but not exceeding $500,000. The guarantee
program helps a business to obtain a loan and establish
credit with lenders, so that the business may be more
likely to obtain additional future financing on its own.
PRIOR/RELATED LEGISLATION
AB 201 (Holden) continued
Page 3
AB 1247 (Medina), 2013-2014 Session. Transfers
administration of the California Small Business Financial
Development Corporation Law to the California
Infrastructure and Economic Development Bank and a program
manager designated by the executive director of the
Infrastructure and Economic Development Bank, as specified.
(Pending in Senate Rules Committee)
AB 780 (Bocanegra), 2013-2014 Session. Appropriates $2
million from the General Fund for the purpose of providing
administrative funding to the financial development
corporations. (Pending in Senate Rules Committee)
AB 2671 (V. Manual Perez), Chapter 648, Statutes of 2012.
Extends until January 1, 2018, the sunset date on the
maximum allowable leverage of reserve funds necessary under
Small Business Loan Guarantee Program.
AB 610 (Price), Chapter 601, Statutes of 2007. Increased
the leverage ratio of the Small Business Expansion Fund for
loan guarantee liability from 4-1 to 5-1.
SUPPORT: None on file
OPPOSE: None on file
FISCAL COMMITTEE: Senate Appropriations Committee
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