AB 1247, as amended, Medina. Business investments: Small Business Financial Assistance Act of 2013.
Existing law, the California Small Business Financial Development Corporation Law, creates the California Small Business Board and the California Small Business Expansion Fund, a continuously appropriated fund, which includes General Fund moneys. Existing law authorizes the formation of small business financial development corporations to grant loans from, or guarantee loans made by a financial institution or financial company, as defined, against, moneys awarded to the corporation from the expansion fund for the purpose of stimulating small business development. Existing law authorizes a director designated by the Secretary of Business, Transportation and Housing to perform specified duties under that law. A violation of certain conflict-of-interest provisions by the director and other persons, as specified, is a crime.
This bill would revise and
recast these provisions, and would transfer the 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
begin delete Infrastructure and Economic Development Bankend delete, as specified. The bill would expand the definitions of “financial institution” and “financial company” for those purposes. Because the above-described conflict-of-interest provisions would apply to the begin delete director andend delete executive director, and other officers and employees, as specified, the bill would extend the application of a crime, and impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Because this bill would expand the purposes for which a continuously appropriated fund is expended, the bill would make an appropriation.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2⁄3. Appropriation: yes. Fiscal committee: yes. State-mandated local program: yes.
The people of the State of California do enact as follows:
Chapter 1 (commencing with Section 14000) of
2Part 5 of Division 3 of Title 1 of the Corporations Code is repealed.
Chapter 1 (commencing with Section 14000) is added
4to Part 5 of Division 3 of Title 1 of the Corporations Code, to read:
This chapter shall be known and may be cited as the
7California Small Business Financial Development Corporation
(a) It is the intent of the Legislature in enacting this
10chapter to promote the economic development of small businesses
11 by making
12available capital, general management assistance, and other
begin delete loan and equity investmentend delete services,
14personnel, and business education to small business entrepreneurs,
15including women and minority owned businesses, for
16the purpose of promoting the health, safety, and social welfare of
17the citizens of California, to eliminate unemployment of the
18economically disadvantaged of the state, and to stimulate economic
19development, employment, minority group, women, and disabled
21(b) It is the further intent of the Legislature to provide a flexible
22means to mobilize and commit all available and potential resources
23in the various regions of the state to fulfill these objectives,
24including federal, state, and local public resources, and private
25debt and equity investment.
26(c) It is the further intent of the Legislature that corporations
27operating pursuant to this law, shall to the maximum extent
28feasible, coordinate with other job and business development
29efforts within their region directed toward implementing the
30purpose of this chapter.
31(d) It is the further intent of the Legislature to provide expanded
32resources allowing participation by small and emerging contractors
33in state public works contracts. Increased access to surety bonding
34resources will assist in supporting participation by those firms in
35public works contracts, and by stimulating increased participation
36by small firms, the state will benefit from increased competition
37and lower bid costs.
If any provision of this chapter or the application thereof
39to any person or circumstances is held invalid, this invalidity shall
40not affect other provisions or applications of the chapter which
P4 1can be given effect without the invalid provision or application,
2and to this end the provisions of this chapter are severable.
Unless the context otherwise requires, the definitions
7in this section shall govern the construction of this chapter.
11 “Bank board” means the board of directors of the
12Infrastructure and Economic Development Bank.
13(b) “Board” means the California Small Business Board.end delete
14(c) “Board of directors” means the board of directors of the
16(d) “California Small Business Finance Center” means the
17governmental unit with the administrative responsibility for
18programs authorized pursuant to Section 63088.5 of the
19Government Code and this chapter.
21 “Corporation” means any nonprofit California small business
22financial development corporation created pursuant to this chapter.
29 “Executive director” means the executive director of the
30Infrastructure and Economic Development Bank.
32 “Expansion fund” means the California Small Business
35 “Financial company” means banking organizations, including
36national banks and trust companies, savings and loan associations,
37certified community development financial institutions,
38microbusiness lenders, state insurance companies, mutual insurance
39companies, and other public and private banking, lending,
40retirement, and insurance organizations.
P5 1(h)end delete
2 “Financial institution” means regulated banking
3organizations, including national banks and trust companies
4authorized to conduct business in the state and state-chartered
5commercial banks, trust companies, credit unions, and savings and
10 “Loan committee” means a committee appointed by the board
11of directors of a corporation to determine the course of action on
12a loan application pursuant to Chapter 6 (commencing with Section
1363088) of Division 1 of Title 6.7 of the Government Code.
15 “Program Manager” means the manager of
begin delete a specific as
17designated to this title by the executive director of the
begin delete Infrastructure .
18and Economic Development Bankend delete
20 “Trust fund” means the money from the expansion fund that
21is held in trust by a financial institution or financial company. A
22trust fund is not a deposit of state funds and is not subject to the
23requirements of Section 16506 of the Government Code.
25 “Trust fund account” means an account within the trust fund
26that is allocated to a particular
begin delete small business financial
28the purpose of paying loan defaults and claims on bond guarantees
begin delete for a specific small business financial development corporationend delete.
(a) The program manager shall do all of the following:
35(1) Administer this chapter.
36(2) Make recommendations to the board on the approval or disapproval of the articles of
38incorporation. This determination shall be based upon the
P6 1(A) Review of the articles of incorporation
and bylaws of the
2corporation to determine whether they contain the provisions
3required by this chapter and conform with the
begin delete regulationsend delete adopted pursuant to this
6(B) A determination as to whether the legislative intent
7expressed in Section 14001 shall be served by the proposed
9(C) A determination as to whether the responsibility, character,
10and general fitness of the individuals who will manage the
11 corporation are such as to command the confidence of the state
12and to warrant the belief that the business of the proposed
13 corporation will be honestly and efficiently conducted in
14accordance with the intent and purpose of this chapter and that
15they include representatives of the financial and business
16community, as well as the economically disadvantaged.
19(3) Have the accounts of each corporation formed under this
20chapter audited as of the close of business on June 30 of each year.
25(4) Have the portfolio of each corporation audited a minimum
26of once a year. Material audit exceptions that are not corrected by
27the corporation within a reasonable period of time may result in
28the suspension of the corporation pursuant to
29Section 63089.3 of the Government Code.
30(5) Review reports from the Department of Business Oversight
31and inform corporations as to what corrective action is required.
32(6) Examine, or cause to be examined, at any reasonable time,
33all books, records, and documents of every kind, and the physical
34properties of a corporation. The inspection shall include the right
35to make copies, extracts, and search records.
36(b) The program manager may attend and participate at
37corporation meetings. The program manager, or his or her designee,
38shall be an ex officio, nonvoting representative on the board of
39directors and loan committees of each corporation. The program
40manager shall meet with
P7 1the board of directors of each corporation at least once each fiscal
2year, commencing January 1, 2014.
(a) The California Small Business Board is hereby
4continued and created as an advisory board to the California
5Infrastructure and Economic Development Bank Board, the
6executive director, and the program manager. The
13 California Small Business Board consists of the
15(1) The Director of Finance or his or her designee.
16(2) The Director of the Office of the Small Business Advocate
17or his or her designee.
18(3) The Treasurer or his or her designee.
begin deleteTwo end deletecorporations
20selected by the corporations.
21(5) Two members appointed by the Governor, one of whom
22will serve as chair of the
begin delete boardend delete,
23who are actively involved in the California small business
25(6) Two persons actively involved in the business or agricultural
26communities, one appointed by the Speaker of the Assembly and
27one appointed by the Senate Committee on Rules.
28(7) Two Members of the Legislature, or their designees, one
29appointed by the Speaker of the Assembly and one appointed by
30the Senate Committee on Rules, so long as it does not conflict with
31the duties of their duties as legislators.
California Small Business Board shall
begin delete do each of the
37(1) Advise the program manager on matters regarding this part
38and Chapter 6 (commencing with Section 63088) of Division 1 of
39Title 6.7 of the Government Code.
P8 1(2) Approve new corporations recommended by the program
2manager, based on an examination of each of the following:
3(A) Review of the articles of incorporation and bylaws of the
4corporation to determine whether they contain the provisions
5required by this chapter and conform with the regulations adopted
6pursuant to this part.
7(B) Determination as to whether the legislative intent expressed
8in Section 14002 will be served by the proposed corporation.
9(C) Determination as to whether the responsibility, character,
10and general fitness of the individuals who will manage the
11corporation are able to command the confidence of the state and
12to warrant the belief that the business of the proposed corporation
13will be honestly and efficiently conducted in accordance with the
14intent and purpose of this chapter and that they include
15representatives of the financial and business community, as well
16as the economically disadvantaged.
18 The public members of the
begin delete boardend delete, at the discretion of the bank board, may be reimbursed per
20diem and travel expenses pursuant to state law.
Upon approval by the board to become a
4corporation, an entity shall adopt or amend its articles of
5incorporation to comply with the following:
6(a) The name of the corporation shall include the words “small
7business financial development corporation,” except for those
8corporations formed pursuant to this chapter prior to 2002, which
9may also be called “small business development corporations,” or
10those formed prior to 1985, which may also be called “rural or
11urban development corporations.”
12(b) The purposes for which the corporation is formed, which
13shall be those specified in Section 14001. This requirement shall
14not be deemed to preclude a statement of powers.
15(c) A geographical description of the corporation’s primary
17(d) The name and addresses of seven or more persons who are
18to act in the capacity of directors until the selection of their
20(e) That the corporation is organized pursuant to the California
21Small Business Financial Development Corporation Law.
begin delete board determines that the facts disclosed by the approve the
23investigation provided by Section 14004 are true and finds that
24the proposed incorporation meets all the requirements of this
25chapter, the program manager shallend delete
28articles of incorporation and endorse the approval thereon and
29forward the same to the Secretary of State for his or her approval
30and filing. Likewise, the program manager shall review all
31amendments to the articles to ensure consistency
32with the purposes of
begin delete the articleend delete.
(a) The corporation’s existence as a small business
34development corporation begins upon the filing of the articles with
35the Secretary of State and continues perpetually, unless otherwise
36expressly provided for by law.
37(b) If a corporation is
begin delete suspended, the corporation mayend delete continue its
39existence as a nonprofit corporation pursuant to the Nonprofit
40Public Benefit Corporation Law (Part 2 (commencing with Section
P10 15110) of Division 2 of Title 1 of the Corporations Code),
begin delete butend delete shall
9no longer be registered with the Secretary of State as a small
10business financial development corporation. A corporation shall
11not enjoy any of the benefits of a small business financial
12development corporation following suspension.
(a) Any request for proposal for selection of a
14corporation shall be approved by the bank and require the winning
15bidder to adopt or amend its bylaws to include provisions governing
16the election and qualification of directors, the establishment and
17functions of loan committees of the corporation, and the method
18of selecting the representative of the corporation on the board.
19(b) The bylaws shall provide for removal of officers only by a
20two-thirds vote of the directors of the corporation.
Each corporation shall have provisions establishing
22a grievance procedure for employees, clients, or potential clients,
23to appeal a decision or obtain redress of an action done by the staff
24or loan committee of the corporation. The procedures shall be
25established in writing during the probationary period of a new
The program manager may authorize the establishment
31of a new corporation using a request for proposal process.
The Nonprofit Public Benefit Corporation Law (Part
332 (commencing with Section 5110) of Division 2 of this title)
34applies to corporations formed under this chapter, except as to
35matters otherwise provided for in this chapter.
For six months following the establishment of a
37corporation, commencing upon filing of the articles of
38incorporation with the Secretary of State, a corporation shall be
39on probation. While on probation, a corporation may be suspended
40if suspension is recommended by the program manager. This suspension is
2nonappealable and not subject to the procedures for suspension
3applicable to a corporation not on probation.
The corporate powers of a corporation shall be exercised
8by the board of directors.
begin deleteA request for proposal for selection of a corporation end delete
begin delete the winning bidder to adopt or amend its bylaws to that:
13(a) A person may not serve on a board of directors who is not
14a resident of, or person conducting business in, the service
15area described in the articles of incorporation.
begin deleteEach end deleteboard of directors shall include representatives from
17all of the following:
18(1) The financial community.
19(2) The business community.
20(3) The economically disadvantaged.
21(c) Not more than one employee of the corporation may serve
22on the board of directors at any one time.
23(d) A person who has a financial interest related to a matter over
24which the board has authority may not make,
25participate in making, or in any way attempt to influence that
If any director ceases to meet the qualifications
28established in Section 14014, he or she shall immediately vacate
29his or her position as a director and
begin delete suchend delete position shall be
If any vacancy occurs in the elective membership of
32the board of directors through death, resignation, or otherwise, the
33remaining directors shall elect a person representing the appropriate
34category to fill the vacancy for the unexpired term.
begin delete(a)end delete begin delete end delete begin deleteThe California Infrastructure and Economic shall establish new small business financial development
36Development Bank end delete
38corporations pursuant to the
begin delete procedures otherwise established by
39this chapter. In approving the request for proposal, the bank shall
2 small businesses in all areas of the state would have reasonable
3access to the financial
begin delete programs inend delete which they are eligible. begin delete Establishment
6of a new corporation is dependent upon sufficient funding being
8(b) Additional corporations have been proposed in the following
10(1) San Jose.end delete
11(2) Santa Ana.end delete
12(3) San Fernando Valley.end delete
13(4) Ontario.end delete
14(c) Upon an appropriation in the annual Budget Act for this
15purpose, the California Infrastructure and Economic Development
16Bank shall approve the issuance of a request for a proposal to
17establish a small business financial development corporation in
18southeast Los Angeles.
19(d) In furtherance of the purposes of this chapter, up to one-half
20of the trust funds may be used to guarantee loans utilized to
21establish a Business and Industrial Development Corporation
22(BIDCO) under Division 15 (commencing with Section 31000)
23of the Financial Code.
Every corporation shall provide for, and maintain a
28central staff to perform, all administrative requirements of the
29corporation, including all those functions required of a corporation
begin delete directorend delete.
Reasonable costs incurred by a corporation in the
32creation and maintenance of a central staff shall be paid to the
33corporation from state funds, including a portion of the interest
34earned on the expansion fund and the corporation’s trust fund
35account, if the corporation has a trust fund account, otherwise, on
36the expansion fund.
A corporation shall report to the program manager, or
38his or her designated representative, all statistical and other reports
39required by this
begin delete chapter,end delete responses to audit reports, budget requirements, and
2other information relating to the establishment, monitoring, and
3suspension of a corporation.
A corporation shall make a report to the program
begin delete of the close of business on June 30 of each year, .
6describing the corporation’s activities and any additional
7information requested by the program manager, on or before
8August 1 of each yearend delete
It shall be unlawful for the executive director, program manager, or any person who
15is an officer, director, or employee of a corporation,
16or who is a member of a loan committee, or who is an employee
17of the California Infrastructure and Economic Development Bank
18to do any of the following:
19(a) Ask for, consent, or agree to receive, any commission,
20emolument, gratuity, money, property, or thing of value for his or
21her own use, benefit, or personal advantage, for procuring or
22endeavoring to procure for any person, partnership, joint venture,
23association, or corporation, any loan, guarantee, financial, or other
24assistance from any corporation.
25(b) Borrow money, property, or to benefit knowingly, directly
26or indirectly, from the use of the money, credit, or property of any
28(c) Make, maintain, or attempt to make or maintain, a deposit
29of the funds of a corporation with any other corporation or
30association on condition, or with the understanding, expressed or
31implied, that the corporation or association receiving the deposit
32shall pay any money or make a loan or advance, directly or
33indirectly, to any person, partnership, joint venture, association,
34or corporation, other than to a corporation formed under this
It shall be unlawful for the executive director, program manager, or any person who
38is an officer or director of a corporation, or who is an employee
39of the California Infrastructure and Economic Development Bank
40to purchase or receive, or to be otherwise interested in the purchase
P14 1or receipt, directly or indirectly, of any asset of a corporation,
2without paying to the corporation the fair market value of the asset
3at the time of the transaction.
Violation of any provision of this article shall constitute
(a) It is the intent of the Legislature:
9(1) To provide the Governor with appropriate emergency powers
10in order to enable utilization of available emergency funding to
11provide guarantees for interim loans to be made by lending
12institutions, in connection with relief provided for those persons
13affected by disasters or a state of emergency in affected areas
14during periods of disaster relief assistance, for the purpose of
15supplying interim financing to enable small businesses to continue
16operations pending receipt of federal disaster assistance.
17(2) That the Governor should utilize this authority to prevent
18business insolvencies and loss of employment in areas affected by
20(b) In addition to the allocations authorized by Section 8683
21and the loan guarantee provisions of Section
begin delete 14030.1 of the , the Governor may allocate funds
22Corporations Codeend delete
23made available for the purposes of this chapter, in connection with
24relief provided, in affected areas during the period of federal
25disaster relief, to the Small Business Expansion Fund for use by
begin delete Office of Small Businessend delete, pursuant to Chapter 1 (commencing
28with Section 14000) of Part 5 of Division 3 of Title 1 of the
29Corporations Code, to provide guarantees
31for low-interest interim loans to be made by lending institutions
32for the purpose of providing interim financing to enable small
33businesses that have suffered actual physical damage or significant
34economic losses, as a result of the disaster or state of emergency
35for which funding under this section is made available, to continue
36or resume operations pending receipt of loans made or guaranteed
37by the federal Small Business Administration. The maximum
38amount of any loan guarantee funded under this paragraph shall
39 not exceed
40two hundred thousand dollars ($200,000). Each loan guarantee
P15 1shall not exceed 95 percent of the loan amount, except that a loan
2guarantee may be for 100 percent of the loan amount if the
3applicant can demonstrate that access to business records pertinent
4to the loan application has been precluded by official action
5prohibiting necessary reentry into the affected business premises
6 or that those business records pertinent to the loan application have
7been destroyed. The term of the loan shall be determined by the
8lending institution providing the loan or shall be made payable on
9the date the proceeds of a loan made or guaranteed by the federal
10Small Business Administration with respect to the same damage
11or loss are made available to the borrower, whichever event first
13(c) Loan guarantees for which the initial 12-month term has
14expired and for which an application for disaster assistance funding
15from the federal Small Business Administration is still pending
16may be extended until the Small Business Administration has
17 reached a final decision on the application. Applications for interim
18loans shall be processed in an expeditious manner. Wherever
19possible, lending institutions shall fund nonconstruction loans
20within 60 calendar days of application. Loan guarantees for loans
21that have been denied funding by the federal Small Business
22Administration, may be extended by the financial institution
23provided that the loan is for no longer than a maximum of seven
24years, if the business demonstrates the ability to repay the loan
25with an extended loan term, and a new credit analysis is provided.
26All loans extended under this provision shall be repaid in
27installments of principal and interest, and be fully amortized over
28the term of the loan. Nothing in this section shall preclude the
29lender from charging reasonable administrative fees in connection
30with the loan.
31(d) Allocations pursuant to this section shall, for purposes of
32all provisions of law, be deemed to be for extraordinary emergency
33or disaster response operation costs, as provided in Section 8690.6,
34incurred by state employees assigned to work on the financial
35development corporation program.
begin delete Business, Transportation and Housing Agencyend delete
begin delete regulationsend delete to implement the
39loan guarantee program authorized by this section.
begin delete The agency
40may adopt these regulations as emergency regulations in
P16 1accordance with Chapter 3.5 (commencing with Section 11340)
2of Part 1 of Division 3, and for purposes of that chapter, including
3Section 11349.6, the adoption of the regulations shall be considered
4by the Office of Administrative Law to be necessary for the
5immediate preservation of the public peace, health and safety, and
6general welfare. Notwithstanding subdivision (e) of Section
711346.1, the regulations shall be repealed within 180 days after
8their effective date unless the agency complies with Chapter 3.5
9(commencing with Section 11340) of Part 1 of Division 3, as
10provided in subdivision (e) of Section 11346.1.end delete
begin deleteWithin 60 days of the conclusion of the period for as authorized
12guaranteeing loans under any small business disaster loan guarantee
13program conducted for a disaster end delete
15by Section 8684.2
begin delete, or Section 14075 of the Corporations Codeend delete, the begin delete agencyend delete shall provide a report to the Legislature
17on loan guarantees approved and rejected by gender, ethnic group,
18type of business and location, and each participating loan
Chapter 6 (commencing with Section 63088) is added
23to Division 1 of Title 6.7 of the Government Code, to read:
This chapter shall be known, and may be cited, as
31the Small Business Financial Assistance Act of 2013.
The Legislature finds all of the following:
36(a) Small businesses form the core of the California economy
37and that it is in the interest of the state to increase opportunities
38for entrepreneurs, the self-employed, and microbusiness and small
39business owners to have better access to capital and other technical
P17 1(b) Unemployment in California is a matter of statewide concern
2requiring concerted public and private action to develop
3employment opportunities for the disadvantaged, unemployed
4persons, veterans, and youth.
5(c) It is necessary to direct additional capital, general
6management assistance, business education, and other resources
7to encourage the development of small business opportunities,
8particularly for minorities, women, and disabled persons, to
Unless the context otherwise requires, the definitions
14in this section shall govern the construction of this chapter.
17(a) “Bank” means the California Infrastructure and Economic
19(b) “Bank board” means the board of directors of the California
20Infrastructure and Economic Development Bank.
21(c) “Board” means the California Small Business Board.end delete
28 “Corporation” means any nonprofit California small business
29financial development corporation created pursuant to Chapter 1
30(commencing with Section 14000) of Part 5 of Division 3 of Title
311 of the Corporations Code.
37 “Employment incentive loan” means a loan to a qualified
38business or to a business located within an enterprise zone, as
39defined in subdivision (d) of Section 7072.
P18 1 “Executive director” means the executive director of the
2 Infrastructure and Economic Development Bank.
fund” means the California Small Business
7 “Financial company” means banking organizations, including
8national banks and trust companies, savings and loan associations,
9certified community development financial institutions,
begin delete microlenders,end delete state insurance companies,
11mutual insurance companies, and other public and private banking,
12lending, retirement, and insurance organizations.
14 “Financial institution” means regulated banking
15organizations, including national banks and trust companies
16authorized to conduct business in California and state-chartered
17commercial banks, trust companies, credit unions, and savings and
22 “Loan committee” means a committee appointed by the
23board of directors of a corporation to determine the course of action
24on a loan application pursuant to this
begin delete titleend delete.
26 “Program manager” means the
begin delete personend delete designated to this
28title by the executive director of the California Infrastructure and
29Economic Development Bank.
30(l) Unless otherwise defined by the executive director by
32 business loan” means a loan to a business defined
33as an eligible small business as set forth in Section 121.3-10 of
34Part 121 of Chapter 1 of Title 13 of the Code of Federal
35Regulations, including those businesses organized for agricultural
36purposes that create or retain employment as a result of the loan
begin delete From time to time, the executive directorend delete shall provide guidelines as to the preferred ratio of
P19 1jobs created or retained to total funds borrowed for guidance to
4 “Trust fund” means the moneys from the expansion fund
5that is held in trust by a financial institution or financial company.
6A trust fund is not a deposit of state funds and is not subject to the
7requirements of Section 16506.
9 “Trustee” means the lending institution or financial company
10selected by the
begin delete officeend delete to hold and invest the trust funds. An
12agreement made pursuant to this
begin delete titleend delete and the trustee shall
13not be construed to be a deposit of state funds.
15 “Trust fund account” means an account within the trust fund
16that is allocated to a particular
begin delete small business financial
18the purpose of paying loan defaults and claims on bond guarantees
begin delete for a specific small business financial development corporationend delete.
(a) There is within the Governor’s Office of Business
25and Economic Development the California Infrastructure and
26Economic Development Bank, which shall, among other things,
27assist businesses seeking new capital
30(b) Pursuant to this
begin delete titleend delete,
32the bank may establish one or more programs
begin delete regionallyend delete under contract with small business
35financial development corporations. Programs established pursuant
begin delete titleend delete may include the
38following types of financial products:
39(1) Loan guarantees.
40(2) Direct loans.
P20 1(3) Disaster
begin delete assistance loans.end delete
2(4) Surety bond guarantees.
3(c) In all of their state-funded programs, the corporations shall,
4to the extent practicable, be complementary to, and not competitive
5with, commercial lenders and other state and federal programs.
6(d) In carrying out this chapter the bank may call on the California
8Small Business Board for advice and recommendations. All actions
9by the California Small Business Board are advisory
begin delete except where .
10specifically assigned a duty and authorityend delete
Small Business Board may also advise the
begin delete Governor, the director,end delete and the Small Business Advocate
13regarding issues and programs affecting California’s small business
14community, including, but not limited to, business innovation and
15expansion, export finance, state procurement, management and
16technical assistance, venture capital, and financial assistance.
To implement its responsibilities, a corporation shall
begin delete aend delete program that shall include, but not be limited
19to, the following:
20(a) Outreach to low-resource small businesses and
21microbusinesses. The corporations located in rural areas shall give
22priority to low-resource farmers and rural and agriculturally related
24(b) Collaboration with other organizations and lenders to identify
25and assist those businesses that are creditworthy but face
26impediments to accessing conventional sources because of reasons,
27such as low equity, inadequate collateral, unacceptable legal
28structure (such as a co-op or nonprofit organization), management
29inadequacies, and language problems.
30(c) To the extent possible, bringing all possible financial
31resources (low-interest lenders, BIDCOs, MESBICs, other
32guarantors, etc.) to bear on the borrower’s problems.
33(d) Technical assistance to businesses receiving loans or
34guarantees that will maximize the probability of loan repayment.
35(e) Ongoing strategies for increasing program resources through
36private sector involvement and nonstate funds.
37(f) A program for collecting and liquidating defaulted loans so
38that the corporations can qualify to become full-service lenders
39under the Small Business Administration. Corporations located in
40rural areas shall, in addition, try to qualify for lender status under
P21 1the United States Department of Agriculture’s Rural Development
2and Farm Services Agency.
3(g) Become an agent for other financial institutions and financial
begin deleteIf regulations have not already been adopted under end deleteChapter 1
11(commencing with Section 14000) of Part 5 of Division 3 of Title
121 of the Corporations Code, as that chapter read on
15January 1, 2013,
begin delete then the bank shall adopt regulations concerning
16the implementation of this title, Chapter 1 (commencing with
17Section 14000) of Part 5 of Division 3 of Title 1 of the
18Corporations Code, and direct lending as emergency regulations
19in accordance with Chapter 3.5 (commencing with Section 11340)
20of Part 1 of Division 3 of Title 2. The adoption of these regulations
21is an emergency and necessary for the immediate preservation of
22the public peace, health and safety, or general welfare within the
23meaning of subdivision (b) of Section 11346.1. Notwithstanding
24subdivision (e) of Section 11346.1, the regulations shall not remain
25in effect for more than 180 days unless the office complies with
26all provisions of Chapter 3.5 (commencing with Section 11340)
27of Part 1 of Division 3 of Title 2, as required by subdivision (e) of
28Section 11346.1. This section also applies to any direct loan
29program administered by the bankend delete
The program manager shall do all of the following:
34(a) Administer this chapter.
begin deleteContract for services end deleteunder this chapter and
38Chapter 1 (commencing with Section 14000) of Part 5 of Division
393 of Title 1 of the Corporations Code.
P22 1(c) In accordance with available resources,
begin delete useend delete
2 branch offices for the purposes of making these programs under
3this chapter accessible to all areas of the state.
4(d) Require each corporation to submit an annual written plan
6(e) Authorize the distribution, transfer, and withholding of
7moneys in the expansion fund and trust funds.
8(f) Authorize the investment of expansion and trust fund moneys.
9(g) Oversee the operations of one or more programs authorized
10pursuant to this
begin delete titleend delete.
11(h) Approve, suspend, or terminate a corporation’s ability to
12participate in a program under this title.
The use of state funds paid out to the trust fund and
29the return on those funds from investment pursuant to Section
3063089.56 is conditional pursuant to Sections 63089.3 and 63089.57.
31Each corporation shall enter into a written signed agreement with
begin delete state at the beginning of each fiscal yearend delete. The
39agreement shall govern the activities in which the
begin delete corporations engageend delete, the investment of state
P23 1funds and its return, and the budgeted administrative expenses the
2corporations may incur. In the event the
begin delete stateend delete
3 and corporation do not reach an agreement, or the
begin delete stateend delete finds the corporation has violated the terms of an active
begin delete stateend delete may take any action under
6Section 63089.3 or 63089.57, or any other action as appropriate.
7In the event the
begin delete stateend delete and corporation do not
8reach agreement or the
begin delete stateend delete finds the
9corporation has violated the terms of an active agreement, the
10corporation shall have no authority to withdraw or encumber the
11 trust fund or the return of those funds by the
12issuance of guarantees, by incurring expenses against the fund and its return in any
14manner whatsoever, and the
begin delete stateend delete may take any
15action under Section 63089.3 or 63089.57, or any other action as
16appropriate. Any guarantee or other encumbrance made by the
17corporation in violation of this section shall be null and void, and
begin delete neitherend delete the state begin delete norend delete the trust fund
19will be liable therefor.
(a) Upon a finding by the program manager that
21irreparable harm may occur if guarantee or direct loan authority
22is not temporarily withdrawn from a corporation, the program
23manager may temporarily withdraw guarantee or direct loan, or
24both, authority from a corporation. The notice of temporary
25withdrawal sent to the corporation shall specify the reasons for the
27(1) As used in this section, “guarantee and direct loan authority”
28means the authority to make or guarantee any loan that encumbers
29funds in a trust fund account, any account or subaccount under the
30direct control of the office or other state entity, or the expansion
32(2) The program manager shall make one of the determinations
33specified in subdivision (c) within 30 days of the effective date of
34the temporary withdrawal, unless the corporation and the executive
35director mutually agree to an extension. The corporation shall have
36the opportunity to submit written material to the program manager
37addressing the items stated in the temporary withdrawal notice. If
38the program manager does not make any determinations within
3930 days, the temporary withdrawal shall be negated. The
40corporation’s yearly contract shall remain in effect during the
P24 1period of temporary withdrawal, and the corporation shall continue
2to receive reimbursement of necessary operating expenses.
3(b) Failure of a corporation to substantially comply with the
4following may result in the suspension of a corporation:
5(1) Regulations implementing the California Small Business
6Development Corporation Law (Chapter 1 (commencing with
7Section 14000) of Part 5 of Division 3 of Title 1 of the
9(2) Fiscal and portfolio requirements, as contained in the fiscal
10and portfolio audits specified in Section 14004 of the Corporations
12(3) Milestones and scope of work as contained in the annual
13contract between the corporation and the office.
14(c) Pursuant to subdivision (a) or (b), the program manager may
15do the following:
16(1) Terminate the temporary withdrawal.
17(2) Terminate the temporary withdrawal subject to the
18corporation’s adoption of a specified remedial action plan.
19(3) Temporarily withdraw, or continue to withdraw, guarantee
20 authority until a specified time. This determination by the program
21manager shall require a finding that the corporation has failed to
22comply with the California Small Business Development
23Corporation Law (Chapter 1 (commencing with Section 14000)
24of Part 5 of Division 3 of Title 1 of the Corporations Code).
25(4) Suspend the corporation.
26(5) Suspend the corporation, with suspension stayed until the
27corporation provides a remedial action plan to the executive
28director, and the executive director decides whether to repeal or
29implement the stayed suspension.
30(d) The determinations contained in paragraphs (4) and (5) of
31subdivision (c) require a finding that irreparable harm will occur
32unless the corporation is suspended.
33(e) In considering a determination regarding the recommended
34suspension and possible remedial action plans, the program
35manager shall consider, along with other criteria as specified in
36subdivision (b), the corporation’s history and past performance.
37(f) Upon suspension of a corporation, the program manager
38shall transfer all funds, whether encumbered or not, in the trust
39fund account of the suspended corporation into either the expansion
40fund or temporarily transfer the funds to another corporation.
P25 1(g) If the program manager decides to take any action against
2the corporation pursuant to paragraphs (2) to (5), inclusive, of
3subdivision (c), the corporation shall be notified of the action 10
4days before the effective date of the action. The corporation shall
5have the right to appeal the program manager’s decision to the
6director of the California Small Business Board within that 10-day
7period by sending notice to the executive director. Once the
8executive director receives notice that the action is being appealed,
9the program manager’s action shall be stayed except for temporary
10withdrawal of guarantee authority. Upon receipt of the notice from
11the corporation, the executive director shall notify the small
12business board within three working days. The California Small
13Business Board shall consider and make a final determination on
14the appeal within 30 days of receiving notice. The small business
15board may elect to take any of the actions listed in subdivision (h).
16The temporary withdrawal of corporation guarantee authority shall
17remain in effect until the executive director small business board
18 issues a decision.
19(h) Pursuant to subdivision (g), the small business board may
20do any of the following:
21(1) Terminate the action taken by the program manager.
22(2) Modify the action taken by the program manager subject to
23the adoption by the corporation of a specified remedial action plan.
24(3) Affirm the action taken by the program manager.
25(i) Following suspension, the corporation may
26existence as a nonprofit corporation pursuant to the Nonprofit
27Public Benefit Corporation Law (Part 2 (commencing with Section
285110) of Division 2 of Title 1 of the Corporations Code), but shall
29no longer be registered with the Secretary of State as a small
30business financial development corporation. A corporation shall
31not enjoy any of the benefits of a small business financial
32development corporation following suspension.
33(j) The funds in the trust fund account of a corporation under
34temporary withdrawal shall be transferred to the expansion fund.
35Upon termination of the temporary withdrawal, unless the
36termination is caused by suspension, the funds of the corporation
37that were transferred to the expansion fund from the trust fund
38account shall be returned to the corporation’s trust fund account,
39notwithstanding Section 63089.53. While the funds of a
40corporation’s trust fund account reside in the expansion fund, use
P26 1of the principal on the funds shall be governed by the implementing
2regulations specifying use of funds in the expansion fund. Interest
3on the funds moved from a corporation’s trust fund account upon
4temporary withdrawal shall be limited to payment of the
5corporation’s administrative expenses, as contained in the contract
6between the corporation and the state pursuant to this title.
(a) There is hereby continued in existence in the State
17Treasury the California Small Business Expansion Fund. All or a
18portion of the funds in the expansion fund may be paid out, with
19the approval of the Department of Finance, to a
begin delete lendingend delete
20 institution or financial company that will act as trustee of the funds.
22(b) The expansion fund and the trust fund shall be used to pay
23for defaulted loan guarantees issued pursuant to this title, surety
24bond losses, administrative costs of corporations, and those costs
25necessary to protect a real property interest in a defaulted loan or
36(c) The expansion fund and trust fund are created solely for the
37purpose of receiving state, federal, or local government moneys,
38and other public or private
begin delete moneyend delete to make loans,
begin delete restricted investmentsend delete
40 pursuant to this
begin delete titleend delete.
P32 1(d) One or more accounts may be created by the program manager for corporations
3participating in one or more programs authorized under this
begin delete titleend delete
4. Each account is a legally separate account, and shall not
5be used to satisfy loan
begin deleteor surety bondend delete guarantees or other obligations of another corporation.
8(e) The amount of guarantee liability outstanding at any one
9time shall not exceed five times the amount of funds on deposit in
10the expansion fund plus any receivables due from funds loaned
11from the expansion fund to another fund in state government as
12directed by the Department of Finance pursuant to a statute enacted
13by the Legislature, including each of the trust fund accounts within
14the trust fund.
15(f) This section shall remain in effect only until January 1, 2018,
16and as of that date is repealed, unless a later enacted statute, that
17is enacted before January 1, 2018, deletes or extends that date.
(a) All money deposited in the expansion fund is
13hereby continuously appropriated, without regard to fiscal years,
14for the purposes of this
begin delete titleend delete.
15(b) Except as specified in subdivision
begin delete (a) of Section 63089.53,end delete
16 the state shall not be liable
17or obligated in any way beyond the state money that is allocated
18in the expansion fund from moneys from the General Fund
begin delete moneysend delete
19 appropriated for those purposes.
(a) The program manager at his or her discretion,
21with the approval of the
begin delete Director of Financeend delete,
22may request the trustee to invest those
begin delete fundsend delete in the trust
23fund in any of the securities described in Section 16430. Returns
24from these investments shall be deposited in the expansion fund
25and shall be used to support the programs of this
begin delete titleend delete.
26(b) Any investments made in securities described in Section
2716430 shall be governed by the
begin delete statement ofend delete investment policy
begin delete prepared by the Treasurer pursuant to subdivision (a) of Section .
(a) The state shall not be liable or
32obligated in any way beyond the money that is allocated and
33deposited in the
begin delete corporation’send delete trust fund begin delete accountend delete.
34(b) The program manager may reallocate funds held within a
35corporation’s trust fund account.
36(1) The program manager shall reallocate funds based on which
37corporation is most effectively using its guarantee funds. If funds
38are withdrawn from a less effective corporation as part of a
39reallocation, the program manager shall make that withdrawal only
40after giving consideration to that corporation’s fiscal solvency, its
P34 1ability to honor loan guarantee defaults, and its ability to maintain
2a viable presence within the region it serves. Reallocation of funds
3shall occur no more frequently than once per fiscal year. Any
4decision made by the program manager pursuant to this subdivision
5may be appealed to the bank board unless otherwise specified. The
6program manager has the authority to repeal or modify any decision
7to reallocate funds.
8(2) The program manager may authorize a corporation to exceed
9the leverage ratio specified in Section 63089.5 or subdivision (a)
10of Section 63089.66, or subdivision (c) of Section 14017 of the
11Corporations Code, pending the annual reallocation of funds
12pursuant to this section. However, no corporation shall be permitted
13to exceed an outstanding guarantee liability of more than five times
14its portion of funds on deposit in the expansion fund.
(a) There is hereby created in the State Treasury
16the Small Business Disaster Recovery Loan Loss Reserve Account,
17as part of the expansion fund. This account shall be used to pay
begin delete unrecoveredend delete losses resulting from loan guarantees issued
19pursuant to subdivision (a) of Section 63089.90 or subdivision (b)
20of this section, and disaster loan guarantees issued prior to the effective date of this
22section that are in default.
23(b) Any lending institution that issues a
begin delete low-interestend delete
24is guaranteed by resources in this account shall be fully reimbursed
25for the guaranteed portion of principal and interest that result from
26a loan or loans that are in default. If there are insufficient funds in
27this account to fully satisfy all claimants, the full faith of the
28resources in the General Fund are pledged to satisfy the obligations
29of this account. This account may only guarantee as much loan
30dollar value as is specifically authorized by the Director of Finance
31with the concurrence of the Governor. This account shall receive
32all moneys transferred pursuant to Section 63089.55, and any
33unencumbered balances transferred to the California Small
34Business Expansion Fund pursuant to Chapters 11 and 12 of the
35First Extraordinary Session of the Statutes of 1989, and Chapter
361525 of the Statutes of 1990, as of July 1, 1992.
37(c) The Governor may utilize this authority to prevent business
38insolvencies and loss of employment in an area affected by a state
39of emergency within the state and declared a disaster by the
40President of the United States, by the Administrator of the United
P35 1States Small Business Administration, or by the United States
2Secretary of Agriculture, or declared to be in a state of emergency
3by the Governor of California.
The Director of Finance, with the approval of the
5Governor, may transfer moneys in the Special Fund for Economic
6Uncertainties to the California Small Business Expansion Fund
7for use as authorized by the bank board, in an amount necessary
8to make loan guarantees pursuant to
begin delete this titleend delete.
(a) The funds in the expansion fund shall be paid
11out to trust fund accounts by the Treasurer on
begin delete warrantsend delete drawn
12by the Controller and requisitioned by the
begin delete executive directorend delete
13, pursuant to the purposes of this
begin delete titleend delete.
14 The program manager may transfer funds allocated from the
15expansion fund to accounts, established solely to receive the funds,
begin delete lending institutionsend delete
17 designated by the
begin delete officeend delete to act as trustee. The begin delete lending so
19designated shall be approved by the state for the receipt of state
20deposits. Interest earned on the trust fund accounts in
begin delete lending may be
22utilized by the corporations pursuant to the purposes
begin delete titleend delete.
6 Except as specified in subdivision
begin delete (d),end delete the program
7manager shall allocate and transfer money to trust fund accounts
8based on performance-based criteria. The criteria shall include,
9but not be limited to, the following:
10(1) The default record of the corporation.
11(2) The number and amount of loans guaranteed by a
13(3) The number and amount of loans made by a corporation if
14state funds were used to make those loans.
15(4) The number and amount of surety bonds guaranteed by a
20(c) Any decision made by the executive director pursuant to
21subdivision (b) may be appealed to the director within 15 days of
22notice of the proposed action. The director may repeal or modify
23any reallocation and transfer decisions made by the executive
25(d) The criteria specified in subdivision
begin delete (b)end delete shall not apply
26to a corporation that has been in existence for five years or less.
27If not already adopted, the
begin delete officeend delete shall develop
begin delete regulationsend delete specifying the basis for
29transferring account funds to those corporations that have been in
30existence for five years or less.
Pursuant to this
begin delete section and any regulationsend delete adopted pursuant to this begin delete titleend delete
14, the state has residual interest in the funds deposited by
15the state to a trust fund account and to the return on these funds
16from investments. On
begin delete dissolution or suspensionend delete of the corporation, these funds shall be
18withdrawn by the
begin delete executive directorend delete from the
19trust fund account and returned to the expansion fund or
20temporarily transferred to another trust fund account. This
21provision shall be contained in the trust instructions to the trustee.
Each trust fund account shall consist of a loan
23guarantee account, and, upon recommendation by the program
24manager, a bond guarantee account, each of which is a legally separate account, and the assets
26of one account shall not be used to satisfy loan guarantees or other
27 obligations of another corporation
begin delete. Not more . A corporation shall
28than one-third of a trust fund account shall be allocated to a bond
29guarantee accountend delete
33not use trust fund accounts to secure a corporate indebtedness.
34State funds deposited in the trust fund accounts, with the exception
35of guarantees established pursuant to this
begin delete titleend delete, shall not
36be subject to liens or encumbrances of the corporation or its
(a) The financial institution
39 that is to act as trustee of the trust fund shall be designated
begin delete after . The corporation shall
40review by the program managerend delete
P38 1not receive money on deposit to support guarantees issued under this
begin delete titleend delete without the
3approval of the program manager.
4(b) State funds may not be used to finance an expense incurred
5by a corporation in a location not approved pursuant to
begin delete a statewide . The
7prohibition against use of state funds also applies to the location
8of satellite offices, and the area served from a corporation office.
(a) The Small Business Loan Guarantee Program,
17which is hereby continued in existence, shall provide guarantees
18to loans offered by financial institutions to small businesses.
19(b) The Legislature finds and declares that the Small Business
20Loan Guarantee Program has enabled participating small businesses
21that do not qualify for conventional business loans or Small
22Business Administration loans to secure funds to expand their
23businesses. These small businesses would not have been able to
24expand their businesses in the absence of the program. The program
25has also provided valuable technical assistance to small businesses
26to ensure growth and stability. The study commissioned by former
27Section 14069.6 of the Corporations Code, as added by Chapter
28919 of the Statutes of 1997, documented the return on investment
29of the program and the need for its services. The value of the
30program has also been recognized by the Governor through
31proposals contained in the May Revision to the Budget Act of
322000 for the 2000-01 fiscal year.
The program manager, following notification to the
34bank director, may do all of the following:
35(a) Contract for services entered into pursuant to this title.
36(b) Hold public hearings.
37(c) Act as liaison between corporations, other state and federal
38agencies, lenders, and the Legislature.
39(d) Process and tabulate on a monthly basis all corporate reports.
40(e) Attend board meetings.
P42 1(f) Attend and participate at corporation meetings. The program
2manager, or his or her designee, shall be an ex officio, nonvoting
3representative on the board of directors and loan committees of
4each corporation. The program manager shall meet with the board
5of directors of each corporation at least once each fiscal year.
6(g) Assist corporations in applying for public and private funding
7opportunities, and in obtaining program support from the business
(a) The program manager shall recommend whether
10the expansion fund and trust fund accounts are to be leveraged,
11and if so, by how much. Upon the request of the corporation, the
12program manager’s decision may be repealed or modified by a
13bank board resolution.
14(b) The amount of guarantee liability outstanding at any one
15time shall not exceed five times the amount of funds on deposit in
16the expansion fund plus any receivables due from funds loaned
17from the expansion fund to another fund in state government as
18directed by the Department of Finance pursuant to a statute enacted
19by the Legislature, including each of the trust fund accounts within
20the trust fund.
21(c) This section shall remain in effect only until January 1, 2018,
22and as of that date is repealed, unless a later enacted statute, that
23is enacted before January 1, 2018, deletes or extends that date.
(a) The program manager shall recommend whether
25the expansion fund and trust fund accounts are to be leveraged,
26and if so, by how much. Upon the request of the corporation, the
27program manager’s decision may be repealed or modified by an
29(b) The amount of guarantee liability outstanding at any one
30time shall not exceed four times the amount of funds on deposit
31in the expansion fund plus any receivables due from funds loaned
32from the expansion fund to another fund in state government as
33directed by the Department of Finance pursuant to a statute enacted
34by the Legislature, including each of the trust fund accounts within
35the trust fund, unless the program manager has permitted a higher
36leverage ratio for an individual corporation pursuant to subdivision
37(b) of Section 63089.53.
38(c) This section shall become operative on January 1, 2018.
(a) The corporate guarantee shall be backed by
40funds on deposit in the corporation’s trust fund account, or by
P43 1receivables due from funds loaned from the corporation’s trust
2fund account to another fund in state government, as directed by
3the Department of Finance pursuant to a statute enacted by the
5(b) Loan guarantees shall be secured by a reserve of at least 20
6percent to be determined by the executive director.
7(c) The expansion fund and trust fund accounts shall be used
8exclusively to guarantee obligations and pay the administrative
9costs of the corporations.
10(d) This section shall remain in effect only until January 1, 2018,
11and as of that date is repealed, unless a later enacted statute, that
12is enacted before January 1, 2018, deletes or extends that date.
(a) The corporate guarantee shall be backed by
14funds on deposit in the corporation’s trust fund account, or by
15receivables due from funds loaned from the corporation’s trust
16fund account to another fund in state government, as directed by
17the Department of Finance pursuant to a statute enacted by the
19(b) Loan guarantees shall be secured by a reserve of at least 25
20percent to be determined by the executive director, unless the
21executive director authorizes a higher leverage ratio for an
22individual corporation pursuant to subdivision (b) of Section
24(c) The expansion fund
and trust fund accounts shall be used
25exclusively to guarantee obligations and pay the administrative
26costs of the corporations.
27(d) This section shall become operative on January 1, 2018.
A corporation may charge the borrower or financial
29institution a loan fee on all loans made or guaranteed by the
30corporation to defray the operating expenses of the corporation.
31The amount of the fee shall be determined by the program manager.
(a) It is the intent of the Legislature that the
33corporations make maximal use of their statutory authority to
34guarantee loans and surety bonds, including the authority to secure
35loans with a minimum loan loss reserve of only 20 percent, so that
36the financing needs of small business may be met as fully as
37possible within the limits of corporations’ loan loss reserves. The
38office shall report annually to the Legislature on the financial status
39of the corporations and their portfolio of loans and surety bonds
40guaranteed pursuant to Section 9795.
P44 1(b) Any corporation that serves an area declared to be in a state
2of emergency by the Governor or a disaster area by the President
3of the United States, the Administrator of the United States Small
4Business Administration, or the United States Secretary of
5Agriculture shall increase the portfolio of loan guarantees where
6the dollar amount of the loan is less than one hundred thousand
7dollars ($100,000), so that at least 15 percent of the dollar value
8of loans guaranteed by the corporation is for those loans. The
9corporation shall comply with this requirement within one year of
10the date the emergency or disaster is declared. Upon application
11of a corporation, the executive director may waive or modify the
12rule for the corporation if the corporation demonstrates that it made
13a good faith effort to comply and failed to locate lending
14institutions in the region that the corporation serves that are willing
15to make guaranteed loans in that amount.
section shall remain in effect only until January 1, 2018,
17and as of that date is repealed, unless a later enacted statute, that
18is enacted before January 1, 2018, deletes or extends that date.
(a) It is the intent of the Legislature that the
20corporations make maximal use of their statutory authority to
21guarantee loans and surety bonds, including the authority to secure
22loans with a minimum loan loss reserve of only 25 percent, unless
23the office authorizes a higher leverage ratio for an individual
24corporation pursuant to subdivision (b) of Section 63089.53, so
25that the financing needs of small business may be met as fully as
26possible within the limits of corporations’ loan loss reserves. The
27bank shall report annually to the Legislature on the financial status
28of the corporations and their portfolio of loans and surety bonds
29guaranteed pursuant to Section 9795.
30(b) Any corporation that serves an area declared to be in a state
31of emergency by the Governor or a disaster area by the President
32of the United States, the Administrator of the United States Small
33Business Administration, or the United States Secretary of
34Agriculture shall increase the portfolio of loan guarantees where
35the dollar amount of the loan is less than one hundred thousand
36dollars ($100,000), so that at least 15 percent of the dollar value
37of loans guaranteed by the corporation is for those loans. The
38corporation shall comply with this requirement within one year of
39the date the emergency or disaster is declared. Upon application
40of a corporation, the program manager may waive or modify the
P45 1rule for the corporation if the corporation demonstrates that it made
2a good faith effort to comply and failed to locate lending
3institutions in the region that the corporation serves that are willing
4to make guaranteed loans in that amount.
5(c) This section shall become operative on January 1, 2018.
(a) A corporation shall establish one or more loan
8committees, each of which shall be composed of five or more
9persons, a majority of whom shall be experienced in banking and
11(b) A loan committee shall review applications to the corporation
12for a loan or guarantee and shall do each of the following:
13(1) Determine the feasibility of the proposed transaction. The
14loan committee shall recommend approval of the application only
15upon a determination that there is a reasonable chance that the loan
16will be repaid.
17(2) On the basis of that determination, recommend to the board
18of directors any action that the loan committee deems appropriate
19under the circumstances, or, in the event that approval authority
20has been delegated to the loan committee by the board of directors,
21approve or disapprove the loan application.
22(c) A loan committee shall expeditiously act to accept or reject
24(d) A person who has a financial interest related to a matter over
25which the loan committee has authority may not make, participate
26in making, or in any way attempt to influence that matter.
Unless delegated to its loan committee, the
29corporation’s board of directors, upon a recommendation from its
30loan committee, shall do all of the following:
31(a) Emphasize consideration to applications that will increase
32employment of disadvantaged, disabled, or unemployed persons,
33or increase employment of youth residing in areas of high youth
34unemployment and high youth delinquency.
35(b) Give consideration to applications from traditional and
36safety-net providers of Medi-Cal services that will promote access
37to quality medical care for individuals enrolled in Medi-Cal
38managed health care networks that are contracting with or owned
39or operated by a county board of supervisors, a county health
40commission, or a county health authority organized pursuant to
P46 1Section 14018.7, 14087.31, 14087.35, 14087.36, 14087.38, or
214087.9605 of the Welfare and Institutions Code.
3(c) Not grant a loan or guarantee, unless it determines that the
4conditions of Section 200033 are satisfied.
(a) Among other priorities, corporations shall give
6high priority to the issuance of loan guarantees to small business
7incubators and to businesses that lease space in incubators.
8(b) For the purposes of this section, “incubator” means a facility
9that allows new small businesses to increase their probability of
10success by sharing needed capital equipment, services, and
11facilities, which may include, but are not limited to, the following:
12(1) Reception and meeting area.
13(2) Secretarial services, such as collating, telephone answering,
15(3) Accounting and bookkeeping services.
16(4) Research libraries.
17(5) Onsite financial and management counseling.
19(7) Flexible lease arrangements for flexible space.
20(8) Computer or word processing facilities.
21(9) Day care facilities.
22(10) Office furniture rentals.
23(11) A graduation policy sometimes requiring firms to leave
24after three to five years in a subsidized, nurturing environment.
25(12) Employee training and placement services.
26(c) Among other priorities, corporations shall give high priority
27to marketing their services to Phase 1 or Phase 2 Small Business
28Innovation Research (SBIR) recipients and providing loan
29guarantees, whenever possible.
(a) A corporation may utilize funds for direct
begin delete as long as at least 80 percent of the corporate funds, .
21calculated by dollar amount, and all expansion funds are guaranteed
22by another public or private financial institutionend delete
24(b) The amount of funds available for direct lending
shall be determined by the
begin delete program managerend delete
26. In its capacity as a direct lender, the
27corporation may sell in the secondary market the guaranteed
28portion of each loan so as to raise additional funds
29for direct lending.
begin delete The office shall issue regulations governing
30these direct loans, including the maximum amount of these loans.end delete
31(c) To execute the direct loan
32 programs established in this chapter, the
begin delete program managerend delete
33 may loan trust funds to a corporation
begin delete located in a rural areaend delete for the
34express purpose of lending those funds to an identified borrower.
35The loan authorized by the
begin delete program managerend delete to the
36corporation shall be on terms similar to the loan between the
37corporation and the borrower.
38(d) The amount of the loan may be in excess of the amount of
39a loan to any individual borrower, but actual disbursements
40 pursuant to the
begin delete officeend delete loan agreement shall be required to be
P49 1supported by a loan agreement between the borrower and the
2corporation in an amount at least equal to the requested
3disbursement. The loan between the bank and the corporation shall
4be evidenced by a credit agreement. In the event that any loan
5between the corporation and borrower is not guaranteed by a
6governmental agency, the portion of the credit agreement
7attributable to that loan shall be secured by assignment of any note,
8executed in favor of the corporation by the borrower to the bank.
9The terms and conditions of the credit agreement shall be similar
10to the loan agreement between the corporation and the borrower,
11which shall be collateralized by the note between the corporation
12and the borrower.
13(e) In the absence of fraud on the part of the corporation, the
14liability of the corporation to repay the loan to the bank is limited
15to the repayment received by the corporation from the borrower,
16except in a case where the United States Department of Agriculture
17requires exposure by the corporation in rule or regulation. The
18corporation may use trust funds for loan repayment to the
begin delete officeend delete
19 if the corporation has exhausted a loan loss reserve created
20for this purpose. Interest and principal received by the
begin delete officeend delete
21 from the corporation shall be deposited into the same account from
22which the funds were originally borrowed.
23(f) Upon the approval of the program manager, a corporation
24shall be authorized to borrow trust funds from the bank for the
25purpose of relending those funds to small businesses. A corporation
26shall demonstrate to the program manager that it has the capacity
27to administer a direct loan program, and has procedures in place
28to limit the default rate for loans to startup businesses.
begin delete Not more of any trust fund account
29than 25 percentend delete
begin delete shallend delete
30 be used for the direct lending
begin delete establishedend delete
pursuant to this
begin delete. A loan to a corporation shall not exceed the amount
32of funds likely to be lent to small businesses within three months
33following the loan to the corporationend delete
13 The maximum loan amount to a
14small business shall be set by the
begin delete program manager, but in no case
15shall it be more than three hundred thousand dollars ($300,000)end delete
16. In the absence of fraud on the part
17of the corporation, the repayment obligation pursuant to the loan
18 to the corporation shall be limited to the
19amount of funds received by the corporation for the loan to the small business and any other funds received
begin delete officeend delete
that are not disbursed. The corporation shall
22be authorized to charge a fee to the small business borrower, in an
begin delete by the executive director pursuant to regulationend delete
begin delete programend delete
25 provided for in this subdivision shall be available in all
26geographic areas of the state.
begin deleteA end deletecorporation may, in an area
32affected by a state of emergency within the state and declared a
33disaster by the President of the United States, the Administrator
34of the United States Small Business Administration, or the United
35States Secretary of Agriculture, or declared to be in a state of
36emergency by the Governor of California, provide loan guarantees
37from funds allocated in Section 63089.55 to small businesses,
38small farms, nurseries, and agriculture-related enterprises that have
39suffered actual physical damage or significant economic injury as
40a result of the disaster.
begin deleteIf regulations have not otherwise been adopted, the end deletebank
2board may adopt
begin delete or
readopt regulationsend delete
3 to implement the loan guarantee program authorized by
begin delete The bank board may adopt these regulations as
5emergency regulations in accordance with Chapter 3.5
6(commencing with Section 11340) of Part 1 of Division 3 of Title
72, and for purposes of that chapter, including Section 11349.6, the
8adoption of the regulations shall be considered by the Office of
9Administrative Law to be necessary for the immediate preservation
10of the public peace, health and safety, and general welfare.
11Notwithstanding subdivision (e) of Section 11346.1, the regulations
12shall be repealed within 180 days after their effective date unless
13the office complies with Chapter 3.5 (commencing with Section
1411340) of Part 1 of Division 3 of Title 2, as provided in subdivision
15(e) of Section 11346.1.end delete
30 Allocations pursuant to subdivision (a) shall be deemed to
31be for extraordinary emergency or disaster response operations
32costs incurred by the
begin delete officeend delete.
(a) Corporations may grant energy efficiency
38(b) The bank shall enter into an agreement with the California
39Energy Extension Service of the Office of Planning and Research
40to assist small business owners in reducing their energy costs
P52 1through low-interest loans and by providing assistance and
In furtherance of the purposes set forth in Section
763088.1 of this code and Section
begin delete 14002end delete of the Corporations
8Code, a corporation may do any one or more of the following
9activities, but only to the extent that the activities are authorized
10pursuant to the contract between the bank and corporation:
11guarantee, endorse, or act as surety on the bonds, notes, contracts,
12or other obligations of, or assist financially, any person, firm,
13corporation, or association, and may establish and regulate the
14terms and conditions with respect to any such loans or financial
15assistance and the charges for interest and service connected
16therewith, except that the corporation shall not make or guarantee
17any loan, unless and until it determines:
18(a) There is no probability that the loan or other financial
19assistance would be granted by a financial
20company under reasonable terms or conditions, and the borrower
21has demonstrated a reasonable prospect of repayment of the loan.
22(b) The loan proceeds
begin delete shallend delete be used exclusively in this state.
23(c) The loan qualifies as a small business loan or an employment
begin deleteThat the end deleteborrower has a minimum equity interest in the
26business as determined by the
begin delete directorend delete.
27(e) As a result of the loan, the jobs generated or retained
28demonstrate reasonable conformance to the
begin delete regulationsend delete specifying employment criteria.
(a) In addition to the authority granted by Section
begin delete upon approval of the executive director,end delete
32 a corporation may act as guarantor
33on a surety bond for any small business contractor, including, but
34not limited to, women, minority, and disabled veteran contractors.
35(b) The provisions of subdivision (a) allowing a corporation to
36act as a guarantor on surety bonds may be funded through
37appropriate federal funding sources. Federal funds shall
38be deposited in the Federal Trust Fund in the State Treasury in
39accordance with Section 16360, for transfer to the expansion fund.
begin delete(a)end delete begin delete end delete begin deleteExcept as otherwise provided in this title, the
4trust fund account shall be used solely to make loans, guarantee
5bonds, and guarantee loans, approved by the corporation, that meet
6the loan criteria under this chapter. The state shall not be liable or
7obligated in any way as a result of the allocation of state moneys
8to a trust fund account beyond the state moneys that is allocated
9and deposited in the fund pursuant to this title, and that is not
10otherwise withdrawn by the state pursuant to this chapter.end delete
14 A summary of all
begin delete loans and bondsend delete to which a begin delete stateend delete
16 guarantee is attached
begin delete shall be
17submitted to the program manager upon execution of the loan
18agreement and periodically thereafterend delete
21 A summary of all
begin delete loansend delete made by a corporation begin delete shall be submitted to the .
23program manager upon execution of the loan agreement and
24periodically thereafterend delete
(a) Annually, not later than January 1 of each year
11commencing January 1, 2014, the program manager shall prepare
begin delete a report regarding the loss experience for the expansion fund for
13loan guarantees, loss reserves, and surety bond guarantees for the
14preceding fiscal year. At a minimum, the report shall also include
15data regarding numbers of surety bond and loan guarantees awarded
16through the expansion fund, including ethnicityend delete
25 and gender data of
participating contractors and
26other entities, and experience of surety insurer participants in the
27bond guarantee program.
begin delete The report shall include the information
28described in Section 63089.66.end delete
begin deleteTheend delete
program manager shall post the
begin delete informationend delete on
begin delete bank’end delete Internet Web site begin delete and
submit notice report to the
32Governor and the Legislature when that information is available
33on its Internet Web siteend delete
34(b) A corporation shall also report to the program manager, or
35his or her designated representative, all statistical and other reports
36required by this title, responses to audit reports, budget
37requirements, invoices submitted for payment by the state, and
38information concerning loans made or guaranteed.
Pursuant to subdivision (f) of Section 8684.2, within
4060 days of the conclusion of the period for guaranteeing loans
P55 1under any small business disaster loan guarantee program
2conducted for a disaster as authorized by Section 8684.2 or 200030,
3the bank shall provide a report to the Legislature on loan guarantees
4approved and rejected by gender, ethnic group, type of business
5and location, and each participating loan institution pursuant to
6Section 9795. The bank need only submit one report to comply
7with this section and subdivision (f) of Section 8684.2.
No reimbursement is required by this act pursuant to
10Section 6 of Article XIII B of the California Constitution because
11the only costs that may be incurred by a local agency or school
12district will be incurred because this act creates a new crime or
13infraction, eliminates a crime or infraction, or changes the penalty
14for a crime or infraction, within the meaning of Section 17556 of
15the Government Code, or changes the definition of a crime within
16the meaning of Section 6 of Article XIII B of the California
This act is an urgency statute necessary for the
20immediate preservation of the public peace, health, or safety within
21the meaning of Article IV of the Constitution and shall go into
22immediate effect. The facts constituting the necessity are:
23It is necessary that this bill take effect immediately in order to
24provide, as is necessary to timely implement the Governor’s
25reorganization plan, for a better managed and more efficient
26transition of small business assistance programs from the soon to
27be defunct Business, Transportation and Housing Agency to the
28 California Infrastructure and Economic Development Bank within
29the Governor’s Office of Business and Economic Development.