BILL NUMBER: AB 1247 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 18, 2013
AMENDED IN SENATE JUNE 5, 2013
AMENDED IN ASSEMBLY APRIL 17, 2013
INTRODUCED BY Assembly Member Medina
FEBRUARY 22, 2013
An act to repeal and add Chapter 1 (commencing with Section 14000)
of Part 5 of Division 3 of Title 1 of the Corporations Code, and
to amend Section 8684.2 of, and to add Chapter
6 (commencing with Section 63088) to Division 1 of Title 6.7 to, to
repeal Sections 63089.5, 63089.63, 63089.64, and 63089.66
of, 63089.60, 63089.61, and 63089.62 of, the
Government Code, relating to business, making an appropriation
therefor, and declaring the urgency thereof to take effect
immediately.
LEGISLATIVE COUNSEL'S DIGEST
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 (I-Bank) and
a program manager designated by the executive director of the
Infrastructure and Economic Development Bank
I-Bank , 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 director and members of the
I-Bank's board of directors, the program manager, the
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:
SECTION 1. Chapter 1 (commencing with Section 14000) of Part 5 of
Division 3 of Title 1 of the Corporations Code is repealed.
SEC. 2. Chapter 1 (commencing with Section 14000) is added to Part
5 of Division 3 of Title 1 of the Corporations Code, to read:
CHAPTER 1. CALIFORNIA SMALL BUSINESS FINANCIAL DEVELOPMENT
CORPORATIONS
Article 1. Introduction
14000. This chapter shall be known and may be cited as the
California Small Business Financial Development Corporation Law.
14001. (a) It is the intent of the Legislature in enacting this
chapter to promote the economic development of small businesses
through the California Small Business Finance Center by making
available capital, general management assistance, and other
resources, including loan and equity investment
financial services, personnel, and business education to
small business entrepreneurs, including women , veteran,
and minority owned businesses, for the purpose of promoting the
health, safety, and social welfare of the citizens of California, to
eliminate unemployment of the economically disadvantaged of the
state, and to stimulate economic development, employment, minority
group, women, and disabled persons entrepreneurship.
(b) It is the further intent of the Legislature to provide a
flexible means to mobilize and commit all available and potential
resources in the various regions of the state to fulfill these
objectives, including federal, state, and local public resources, and
private debt and equity investment.
(c) It is the further intent of the Legislature that corporations
operating pursuant to this law, shall to the maximum extent feasible,
coordinate with other job and business development efforts within
their region directed toward implementing the purpose of this
chapter.
(d) It is the further intent of the Legislature to provide
expanded resources allowing participation by small and emerging
contractors in state public works contracts. Increased access to
surety bonding resources will assist in supporting participation by
those firms in public works contracts, and by stimulating increased
participation by small firms, the state will benefit from increased
competition and lower bid costs.
14002. If any provision of this chapter or the application
thereof to any person or circumstances is held invalid, this
invalidity shall not affect other provisions or applications of the
chapter which can be given effect without the invalid provision or
application, and to this end the provisions of this chapter are
severable.
Article 2. Definitions
14003. Unless the context otherwise requires, the definitions in
this section shall govern the construction of this chapter.
(a) "Bank" means the California Infrastructure and Economic
Development Bank.
(a)
(b) "Bank board" means the board of directors of the
California Infrastructure and Economic Development Bank.
(b) "Board" means the California Small Business Board.
(c) "Board of directors" means the board of directors of the
corporation.
(d) "California Small Business Finance Center" means the
governmental unit with the administrative responsibility for programs
authorized pursuant to Section 63088.5 of the Government Code and
this chapter.
(d)
(e) "Corporation" means any nonprofit California small
business financial development corporation created pursuant to this
chapter , or pursuant to Chapter 1 (commencing with Section
32000) of Division 15.5 of the Financial Code .
(f) "Directives and requirements" means a document adopted by the
bank board setting forth policy direction as well as key rules
governing a particular subject area.
(e)
(g) "Executive director" means the executive director
of the Infrastructure and Economic Development Bank.
(f)
(h) "Expansion fund" means the California Small
Business Expansion Fund.
(g)
(i) "Financial company" means banking organizations,
including national banks and trust companies, savings and loan
associations, certified community development financial institutions,
microbusiness lenders, state insurance companies, mutual insurance
companies, and other public and private banking, lending, retirement,
and insurance organizations.
(h)
(j) "Financial institution" means regulated banking
organizations, including national banks and trust companies
authorized to conduct business in the state and state-chartered
commercial banks, trust companies, credit unions, and savings and
loan associations.
(k) "Financial product" means the type of financial assistance
described in Section 63088.5 of the Government Code.
(i)
( l ) "Loan committee" means a
committee appointed by the board of directors of a corporation to
determine the course of action on a loan application pursuant to
Chapter 6 (commencing with Section 63088) of Division 1 of Title 6.7
of the Government Code.
(j)
(m) "Program Manager" means the manager of a
specific program the California Small Business Finance
Center as designated to this title by the executive director
of the Infrastructure and Economic Development Bank
bank .
(k)
(n) "Trust fund" means the money from the expansion
fund that is held in trust by a financial institution or financial
company. A trust fund is not a deposit of state funds and is not
subject to the requirements of Section 16506 of the Government Code.
(l)
(o) "Trust fund account" means an account within the
trust fund that is either allocated to a particular
small business financial development corporation
or shared by multiple corporations for the purpose of
paying loan defaults and claims on bond guarantees for a
specific small business financial development corporation
or other financial products and program uses provided in this
chapter .
Article 3. Program Manager
14004. (a) The program manager shall do all of the following:
(1) Administer this chapter.
(2) Make recommendations to the executive director and the
bank board on the approval or disapproval of the articles of
incorporation. This determination shall be based upon the following:
(A) Review of the articles of incorporation and bylaws of the
corporation to determine whether they contain the provisions required
by this chapter and conform with the regulations
directives and requirements adopted by the bank board
pursuant to this chapter.
(B) A determination as to whether the legislative intent expressed
in Section 14001 shall be served by the proposed corporation.
(C) A determination as to whether the responsibility, character,
and general fitness of the individuals who will manage the
corporation are such as to command the confidence of the state and to
warrant the belief that the business of the proposed corporation
will be honestly and efficiently conducted in accordance with the
intent and purpose of this chapter and that they include
representatives of the financial and business community, as well as
the economically disadvantaged.
(D) A determination by the program manager that there is
significant need for a new corporation.
(3) Have the accounts of each corporation formed under this
chapter audited as of the close of business on June 30 of each year.
Material audit exceptions that are not corrected by
the corporation within a reasonable period of time may result in the
suspension or termination of the corporation pursuant to
Section 63089.3 of the Government Code.
(4) Have the portfolio of each corporation audited a minimum of
once a year. Material audit exceptions that are not corrected by the
corporation within a reasonable period of time may result in the
suspension or termination of the corporation pursuant to
Section 63089.3 of the Government Code.
(5) Review reports from the Department of Business Oversight and
inform corporations as to what corrective action is required.
(6) Examine, or cause to be examined, at any reasonable time, all
books, records, and documents of every kind, and the physical
properties of a corporation. The inspection shall include the right
to make copies, extracts, and search records.
(b) The program manager may attend and participate at corporation
meetings. The program manager, or his or her designee, shall be an ex
officio, nonvoting representative on the board of directors and loan
committees of each corporation. The program manager shall meet
through telecommunication or in person with the board of
directors of each corporation at least once each fiscal year,
commencing January 1, 2014.
14004.1. (a) The California Small Business Board is hereby
continued and created as an advisory board to the California
Infrastructure and Economic Development Bank Board, the executive
director, and the program manager. The California Small Business
Board may also advise the Governor and the Small Business Advocate
regarding issues and programs affecting California's small business
community, including, but not limited to, business innovation and
expansion, export finance, state procurement, management and
technical assistance, venture capital, and financial assistance.
(b) The California Small Business
Board consists of the following membership:
(1) The Director of Finance or his or her designee.
(2) The Director of the Office of the Small Business Advocate or
his or her designee.
(3) The Treasurer or his or her designee.
(4) Two A representative from two
different corporations selected by the corporations.
(5) Two members appointed by the Governor, one of whom will serve
as chair of the board California Small
Business Board , who are actively involved in the California
small business community.
(6) Two persons actively involved in the business or agricultural
communities, one appointed by the Speaker of the Assembly and one
appointed by the Senate Committee on Rules.
(7) Two Members of the Legislature, or their designees, one
appointed by the Speaker of the Assembly and one appointed by the
Senate Committee on Rules, so long as it does not conflict with the
duties of their duties as legislators.
(b)
(c) The California Small Business Board shall
do each of the following: advise the program manager
on matters regarding this chapter and Chapter 6 (commencing with
Section 63088) of Division 1 of Title 6.7 of the Government Code.
(1) Advise the program manager on matters regarding this part and
Chapter 6 (commencing with Section 63088) of Division 1 of Title 6.7
of the Government Code.
(2) Approve new corporations recommended by the program manager,
based on an examination of each of the following:
(A) Review of the articles of incorporation and bylaws of the
corporation to determine whether they contain the provisions required
by this chapter and conform with the regulations adopted pursuant to
this part.
(B) Determination as to whether the legislative intent expressed
in Section 14002 will be served by the proposed corporation.
(C) Determination as to whether the responsibility, character, and
general fitness of the individuals who will manage the corporation
are able to command the confidence of the state and to warrant the
belief that the business of the proposed corporation will be honestly
and efficiently conducted in accordance with the intent and purpose
of this chapter and that they include representatives of the
financial and business community, as well as the economically
disadvantaged.
(c)
(d) The public members of the board
California Small Business Board , at the discretion of the
bank board, may be reimbursed per diem and travel expenses pursuant
to state law.
14004.2. The bank board shall approve new corporations
recommended by the program manager, based on an examination of each
of the following:
(a) Review of the articles of incorporation and bylaws of the
corporation to determine whether they contain the provisions required
by this chapter and conform with the directives and requirements
adopted by the bank board pursuant to this chapter.
(b) Determination as to whether the legislative intent expressed
in Section 14001 will be served by the proposed corporation.
(c) Determination as to whether the responsibility, character, and
general fitness of the individuals who will manage the corporation
are able to command the confidence of the state and to warrant the
belief that the business of the proposed corporation will be honestly
and efficiently conducted in accordance with the intent and purpose
of this chapter and that they include representatives of the
financial and business community, as well as the economically
disadvantaged.
(d) Determination of the program manager that there is significant
need for a new corporation.
Article 4. New Corporations
14005. Upon approval by the bank board to become a
corporation, an entity shall adopt or amend its articles of
incorporation to comply with the following:
(a) The name of the corporation shall include the words "small
business financial development corporation," except for those
corporations formed pursuant to this chapter prior to 2002, which may
also be called "small business development corporations," or those
formed prior to 1985, which may also be called "rural or urban
development corporations."
(b) The purposes for which the corporation is formed, which shall
be those specified in Section 14001. This requirement shall not be
deemed to preclude a statement of powers.
(c) A geographical description of the corporation's primary
service area.
(d) The name and addresses of seven or more persons who are to act
in the capacity of directors until the selection of their
successors.
(e) That the corporation is organized pursuant to the California
Small Business Financial Development Corporation Law.
14006. If the board determines that the facts disclosed
by the investigation provided by Section 14004 are true and finds
that the proposed incorporation meets all the requirements of this
chapter, the program manager shall bank board
concurs with the findings of the program manager pursuant to
Section 14004, the bank board shall direct the program manager to
approve the articles of incorporation and endorse the approval
thereon and forward the same to the Secretary of State for his or her
approval and filing. Likewise, the program manager shall review all
amendments to the articles of incorporation to ensure
consistency with the purposes of the article
this chapter .
14007. (a) The corporation's existence as a small business
development corporation begins upon the filing of the articles with
the Secretary of State and continues perpetually, unless otherwise
expressly provided for by law.
(b) If a corporation is suspended, the corporation may
terminated from participation in all programs, in
order to continue its existence as a nonprofit corporation
pursuant to the Nonprofit Public Benefit Corporation Law (Part 2
(commencing with Section 5110) of Division 2 of Title 1 of the
Corporations Code), but the corporation shall
amend its articles of incorporation in accordance with Chapter 8
(commencing with Section 5180) of Part 2 of Division 2 of Title 1 to
remove the provisions required by Section 14005, including an
amendment to remove the words "small business financial development
corporation," "small business development corporation," or "rural or
urban development corporation," as applicable, from the corporate
name, and shall no longer be registered with the Secretary of
State as a small business financial development corporation. A
corporation shall not enjoy any of the benefits of a small business
financial development corporation following suspension.
14008. (a) Any request for proposal for selection of a
corporation shall be approved by the bank and require the winning
bidder to adopt or amend its bylaws to include provisions governing
the election and qualification of directors, the establishment and
functions of loan committees of the corporation, and the method of
selecting the representative of the corporation on the board.
(b) The bylaws shall provide for removal of officers only by a
two-thirds vote of the directors of the corporation.
14009. (a) Each corporation shall have
provisions establishing a grievance procedure for employees, clients,
or potential clients, to appeal a decision or obtain redress of an
action done by the staff or loan committee of the corporation. The
procedures shall be established in writing during the probationary
period of a new corporation.
(b) The bylaws of the corporation shall authorize the removal of
officers only by a two-thirds vote of the directors of the
corporation.
14010. The program manager may authorize the establishment of a
new corporation using a request for proposal process.
14011. The Nonprofit Public Benefit Corporation Law (Part 2
(commencing with Section 5110) of Division 2 of this title) applies
to corporations formed under this chapter, except as to matters
otherwise provided for in this chapter.
14012. For six months following the establishment of a
corporation, commencing upon filing of the articles of incorporation
with the Secretary of State, a corporation shall be on probation.
While on probation, a corporation may be suspended if suspension is
recommended by the program manager and affirmed by the executive
director . This suspension is nonappealable and not subject to
the procedures for suspension applicable to a corporation not on
probation.
Article 5. Corporation Board
14013. The corporate powers of a corporation shall be exercised
by the board of directors.
14014. A request for proposal for selection of a
corporation The bank shall enter into a contract with
each corporation that shall require the winning bidder
to adopt or amend its bylaws to state that:
(a) A person may not serve on a board of directors who is not a
resident of, or person conducting business in, the primary
service area described in the articles of incorporation.
(b) Each A board of directors shall
include representatives from all of the following:
(1) The financial community.
(2) The business community.
(3) The economically disadvantaged.
(c) Not more than one employee of the corporation may serve on the
board of directors at any one time.
(d) A person who has a financial interest related to a matter over
which the board of directors has authority may not make,
participate in making, or in any way attempt to influence that
matter.
14015. If any director ceases to meet the qualifications
established in Section 14014, he or she shall immediately vacate his
or her position as a director and such the
position shall be deemed vacant.
14016. If any vacancy occurs in the elective membership of the
board of directors through death, resignation, or otherwise, the
remaining directors shall elect a person representing the appropriate
category to fill the vacancy for the unexpired term.
14017. (a) The
California Infrastructure and Economic Development Bank
The bank board shall direct the program manager to
establish new small business financial development corporations
pursuant to the procedures otherwise established by this
chapter. In approving the request for proposal, the bank shall ensure
directives and requirements. The directives and
requirements shall include st eps to achieve a goal of
ensuring that small businesses in all areas of the state would
have reasonable access to the financial programs in
products authorized by Chapter 6 (commencing with
Section 63088) of Division 1 of Title 6.7 of the Government Code for
which they are eligible. Establishment of a new
corporation is dependent upon sufficient funding being available.
(b) Additional corporations have been proposed in the following
areas:
(1) San Jose.
(2) Santa Ana.
(3) San Fernando Valley.
(4) Ontario.
(c) Upon an appropriation in the annual Budget Act for this
purpose, the California Infrastructure and Economic Development Bank
shall approve the issuance of a request for a proposal to establish a
small business financial development corporation in southeast Los
Angeles.
(d) In furtherance of the purposes of this chapter, up to one-half
of the trust funds may be used to guarantee loans utilized to
establish a Business and Industrial Development Corporation (BIDCO)
under Division 15 (commencing with Section 31000) of the Financial
Code.
Article 6. Corporations, Miscellaneous
14018. Every corporation shall provide for, and maintain a
central staff to perform, all administrative requirements of the
corporation, including all those functions required of a corporation
by the director contract and this chapter
.
14019. Reasonable costs incurred by a corporation in the creation
and maintenance of a central staff shall be paid to the corporation
from state funds, including a portion of the interest earned on the
expansion fund and the corporation's trust fund account, if the
corporation has a trust fund account, otherwise, on the expansion
fund.
14020. A corporation shall report to the program manager, or his
or her designated representative, all statistical and other reports
required by this chapter, chapter and Chapter
6 (commencing with Section 63088) of Division 1 of Title 6.7 of the
Government Code, including responses to audit reports, budget
requirements, and other information relating to the establishment,
monitoring, and suspension or termination of a
corporation.
14021. A corporation shall make a report to the program manager,
as of the close of business on June 30 of each year,
describing the corporation's activities and any additional
information requested by the program manager, on or before August 1
of each year required by Chapter 6
(commencing with Section 63088) of Division 1 of Title 6.7 of the
Government Code .
Article 7. Conflict of Interest
14022. It shall be unlawful for a member of the bank board
or for the executive director, program manager, or any person
who is an officer, director, contractor, or employee of a
corporation, or who is a member of a loan committee, or who is an
employee of the California Infrastructure and Economic Development
Bank to do any of the following:
(a) Ask for, consent, or agree to receive, any commission,
emolument, gratuity, money, property, or thing of value for his or
her own use, benefit, or personal advantage, for procuring or
endeavoring to procure for any person, partnership, joint venture,
association, or corporation, any loan, guarantee, financial, or other
assistance from any corporation.
(b) Borrow money, property, or to benefit knowingly, directly or
indirectly, from the use of the money, credit, or property of any
corporation.
(c) Make, maintain, or attempt to make or maintain, a deposit of
the funds of a corporation with any other corporation or association
on condition, or with the understanding, expressed or implied, that
the corporation or association receiving the deposit shall pay any
money or make a loan or advance, directly or indirectly, to any
person, partnership, joint venture, association, or corporation,
other than to a corporation formed under this chapter.
14023. It shall be unlawful for a member of the bank board
or for the executive director, program manager, or any person
who is an officer or director of a corporation, or who is an employee
of the California Infrastructure and Economic Development Bank to
purchase or receive, or to be otherwise interested in the purchase or
receipt, directly or indirectly, of any asset of a corporation,
without paying to the corporation the fair market value of the asset
at the time of the transaction.
14024. Violation of any provision of this article shall
constitute a felony.
SEC. 3. Section 8684.2 of the
Government Code is amended to read:
8684.2. (a) It is the intent of the Legislature:
(1) To provide the Governor with appropriate emergency powers in
order to enable utilization of available emergency funding to provide
guarantees for interim loans to be made by lending institutions, in
connection with relief provided for those persons affected by
disasters or a state of emergency in affected areas during periods of
disaster relief assistance, for the purpose of supplying interim
financing to enable small businesses to continue operations pending
receipt of federal disaster assistance.
(2) That the Governor should utilize this authority to prevent
business insolvencies and loss of employment in areas affected by
these disasters.
(b) In addition to the allocations authorized by Section 8683 and
the loan guarantee provisions of Section 14030.1 of the
Corporations Code 63089.90 , the Governor may
allocate funds made available for the purposes of this chapter, in
connection with relief provided, in affected areas during the period
of federal disaster relief, to the Small Business Expansion Fund for
use by the Office of Small Business
California Infrastructure and Economic Development Bank ,
pursuant to Chapter 1 (commencing with Section 14000) of Part 5 of
Division 3 of Title 1 of the Corporations Code and Chapter 6
(commencing with Section 63088) of Division 1 of Title 6.7 of this
code , to provide guarantees
for low-interest interim loans to be made by lending
institutions for the purpose of providing interim financing to enable
small businesses that have suffered actual physical damage or
significant economic losses, as a result of the disaster or state of
emergency for which funding under this section is made available, to
continue or resume operations pending receipt of loans made or
guaranteed by the federal Small Business Administration. The maximum
amount of any loan guarantee funded under this paragraph shall
be limited by the directives and requirements and shall not
exceed two hundred thousand dollars ($200,000). Each loan guarantee
shall not exceed 95 percent of the loan amount, except that a loan
guarantee may be for 100 percent of the loan amount if the applicant
can demonstrate that access to business records pertinent to the loan
application has been precluded by official action prohibiting
necessary reentry into the affected business premises or that those
business records pertinent to the loan application have been
destroyed. The term of the loan shall be determined by the lending
institution providing the loan or shall be made payable on the date
the proceeds of a loan made or guaranteed by the federal Small
Business Administration with respect to the same damage or loss are
made available to the borrower, whichever event first occurs.
(c) Loan guarantees for which the initial 12-month term has
expired and for which an application for disaster assistance funding
from the federal Small Business Administration is still pending may
be extended until the Small Business Administration has reached a
final decision on the application. Applications for interim loans
shall be processed in an expeditious manner. Wherever possible,
lending institutions shall fund nonconstruction loans within 60
calendar days of application. Loan guarantees for loans that have
been denied funding by the federal Small Business Administration, may
be extended by the financial institution provided that the loan is
for no longer than a maximum of seven years, if the business
demonstrates the ability to repay the loan with an extended loan
term, and a new credit analysis is provided. All loans extended under
this provision shall be repaid in installments of principal and
interest, and be fully amortized over the term of the loan. Nothing
in this section shall preclude the lender from charging reasonable
administrative fees in connection with the loan.
(d) Allocations pursuant to this section shall, for purposes of
all provisions of law, be deemed to be for extraordinary emergency or
disaster response operation costs, as provided in Section 8690.6,
incurred by state employees assigned to work on the financial
development corporation program.
(e) The Business, Transportation and Housing Agency
California Infrastructure and Economic Development
Bank may adopt regulations directives
and requirements to implement the loan guarantee program
authorized by this section. The agency may adopt these
regulations as emergency regulations in accordance with Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3, and for
purposes of that chapter, including Section 11349.6, the adoption of
the regulations shall be considered by the Office of Administrative
Law to be necessary for the immediate preservation of the public
peace, health and safety, and general welfare. Notwithstanding
subdivision (e) of Section 11346.1, the regulations shall be repealed
within 180 days after their effective date unless the agency
complies with Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3, as provided in subdivision (e) of Section 11346.1.
(f) Within 60 days of the conclusion of the period for
guaranteeing loans under any small business disaster loan guarantee
program conducted for a disaster As long as there are
any outstanding small business disaster loan guarantees, as
authorized by Section 8684.2 , or Section 14075 of the
Corporations Code or 63089.90 , the
agency bank shall provide a report to the
Legislature on loan guarantees approved and rejected by gender,
ethnic group, type of business and location, and each participating
loan institution. The report may be combined with the report
required in Section 63089.98.
SEC. 3. SEC. 4. Chapter 6
(commencing with Section 63088) is added to Division 1 of Title 6.7
of the Government Code, to read:
CHAPTER 6. SMALL BUSINESS FINANCIAL ASSISTANCE ACT OF 2013
Article 1. Introduction
63088. (a) This chapter shall be known, and
may be cited, as the Small Business Financial Assistance Act of
2013.
(b) Notwithstanding any other provision of this division, this
chapter shall not apply to any other activities, powers, and duties
of the bank under any of the other chapters of this division.
63088.1. The Legislature finds all of the following:
(a) Small businesses form the core of the California economy and
that it is in the interest of the state to increase opportunities for
entrepreneurs, the self-employed, and microbusiness and small
business owners to have better access to capital and other technical
resources.
(b) Unemployment in California is a matter of statewide concern
requiring concerted public and private action to develop employment
opportunities for the disadvantaged, unemployed persons, veterans,
and youth.
(c) It is necessary to direct additional capital, general
management assistance, business education, and other resources to
encourage the development of small business opportunities,
particularly for minorities, women, and disabled persons, to
alleviate unemployment.
Article 2. Definitions
63088.3. Unless the context otherwise requires, the definitions
in this section shall govern the construction of this chapter.
The definitions provided in this section shall only apply to this
chapter and not to any other chapter of this division.
(a) "Bank" means the California Infrastructure and Economic
Development Bank.
(b) "Bank board" means the board of directors of the California
Infrastructure and Economic Development Bank.
(c) "Board" means the California Small Business Board.
(c) "Board of directors" means the board of directors of a
corporation.
(d) "California Small Business Finance Center" means the
governmental unit with the administrative responsibility for programs
authorized pursuant to Section 63088.5 and this chapter.
(d)
(e) "Corporation" means any nonprofit California small
business financial development corporation created pursuant to
Chapter 1 (commencing with Section 14000) of Part 5 of Division 3 of
Title 1 of the Corporations Code , or pursuant to Chapter 1
(commencing with Section 32000) of Division 15.5 of the Financial
Code .
(f) "Directives and requirements" means a document adopted by the
bank board setting forth policy direction as well as key rules
governing a particular subject area.
(e)
(g) "Employment incentive loan" means a loan to a
qualified business or to a business located within an enterprise
zone, as defined in subdivision (d) of Section 7072.
(f)
(h) "Executive director" means the executive director
of the California Infrastructure and Economic Development
Bank.
(g)
(i) "Expansion fund" means the California Small
Business Expansion Fund.
(h)
(j) "Financial company" means banking organizations,
including national banks and trust companies, savings and loan
associations, certified community development financial institutions,
microlenders, microbusiness lenders,
state insurance companies, mutual insurance companies, and other
public and private banking, lending, retirement, and insurance
organizations.
(i)
(k) "Financial institution" means regulated banking
organizations, including national banks and trust companies
authorized to conduct business in California and state-chartered
commercial banks, trust companies, credit unions, and savings and
loan associations.
(l) "Financial product" means the type of financial assistance
described in Section 63088.5.
(j)
(m) "Loan committee" means a committee appointed by the
board of directors of a corporation to determine the course of
action on a loan application pursuant to this title
chapter .
(k)
(n) "Program manager" means the person
manager of the California Small Business Finance
Center as designated to this title by the executive director of
the California Infrastructure and Economic Development Bank.
(l) Unless otherwise defined by the executive director by
regulation, "small
(o) "Small business loan" means a
loan to a business defined as an eligible small business as set
forth in Section 121.3-10 of Part 121 of Chapter 1 of Title 13 of the
Code of Federal Regulations, including those businesses organized
for agricultural purposes that create or retain employment as a
result of the loan unless otherwise defined by the executive
director by regulation . From time to time, the
executive director Directives and requirements
shall provide guidelines as to the preferred ratio of jobs created or
retained to total funds borrowed for guidance to the corporations.
(m)
(p) "Trust fund" means the moneys from the expansion
fund that is held in trust by a financial institution or financial
company. A trust fund is not a deposit of state funds and is not
subject to the requirements of Section 16506.
(n)
(q) "Trustee" means the lending institution or
financial company selected by the office bank
board to hold and invest the trust funds , or selected by
a predecessor agency to the bank, if applicable . An agreement
made pursuant to this title chapter
and the trustee shall not be construed to be a deposit of state
funds.
(o)
(r) "Trust fund account" means an account within the
trust fund that is either allocated to a particular
small business financial development corporation
or shared by multiple corporations for the purpose of
paying loan defaults and claims on bond guarantees for a
specific small business financial development corporation
or other financial products and program uses provided in this
chapter .
Article 3. Program Purpose
63088.5. (a) There is within the Governor's Office of Business
and Economic Development the California Infrastructure and Economic
Development Bank, which shall, among other things, administer
the California Small Business Financial Center that administers
programs to assist businesses seeking new capital resources.
(b) Pursuant to this title chapter and
Chapter 1 (commencing with Section 14000) of Part 5 of Title 1 of the
Corporations Code , the bank board may
continue programs funded by the Small Business Expansion Fund or
establish one or more programs administered regionally
under contract with small business financial development
corporations. Programs established pursuant to this title
chapter or Chapter 1 (commencing with Section 14000)
of Part 5 of Title 1 of the Corporations Code may include the
following types of financial products:
(1) Loan guarantees and other credit enhancements .
(2) Direct loans and other debit instruments .
(3) Disaster assistance loans. loan
guarantees.
(4) Surety bond guarantees.
(c) In all of their state-funded programs, the corporations shall,
to the extent practicable, be complementary to, and not competitive
with, commercial lenders and other state and federal programs.
(d) In carrying out this chapter the program manager, the
executive director, and the bank board may call on
the California Small Business Board for advice and recommendations.
All actions by the California Small Business Board are advisory
except where specifically assigned a duty and authority
.
(e) The California Small Business Board may also advise
the Governor, the director, Governor
and the Small Business Advocate regarding issues and programs
affecting California's small business community, including, but not
limited to, business innovation and expansion, export finance, state
procurement, management and technical assistance, venture capital,
and financial assistance.
63088.6. To implement its responsibilities, a corporation shall
undertake a program activities that
shall include, but not be limited to, the following:
(a) Outreach to low-resource small businesses and microbusinesses.
The corporations located in rural areas shall give priority to
low-resource farmers and rural and agriculturally related businesses.
(b) Collaboration with other organizations and lenders to identify
and assist those businesses that are creditworthy but face
impediments to accessing conventional sources because of reasons,
such as low equity, inadequate collateral, unacceptable legal
structure (such as a co-op or nonprofit organization), management
inadequacies, and language problems.
(c) To the extent possible, bringing all possible financial
resources (low-interest lenders, BIDCOs, MESBICs, other guarantors,
etc.) to bear on the borrower's problems.
(d) Technical assistance to businesses receiving loans or
guarantees that will maximize the probability of loan repayment.
(e) Ongoing strategies for increasing program resources through
private sector involvement and nonstate funds.
(f) A program for collecting and liquidating defaulted loans so
that the corporations can qualify to become full-service lenders
under the Small Business Administration. Corporations located in
rural areas shall, in addition, try to qualify for lender status
under the United States Department of Agriculture's Rural Development
and Farm Services Agency.
(g) Become an agent for other financial institutions and financial
companies.
Article 4. Administrative Structure
63089. If regulations have not already been adopted
under The bank board shall adopt directives and
requirements concerning the implementation of this chapter
and pursuant to Chapter 1 (commencing with Section 14000) of
Part 5 of Division 3 of Title 1 of the Corporations Code . Any
regulations adopted pursuant to
Chapter 1 (commencing with Section 14000) of Part 5 of
Division 3 of Title 1 of the Corporations Code , as
that chapter read on January 1, 2013, then the bank shall
adopt regulations concerning the implementation of this title,
Chapter 1 (commencing with Section 14000) of Part 5 of Division 3 of
Title 1 of the Corporations Code, and direct lending as emergency
regulations in accordance with Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2. The adoption of these
regulations is an emergency and necessary for the immediate
preservation of the public peace, health and safety, or general
welfare within the meaning of subdivision (b) of Section 11346.1.
Notwithstanding subdivision (e) of Section 11346.1, the regulations
shall not remain in effect for more than 180 days unless the office
complies with all provisions of Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2, as required by subdivision
(e) of Section 11346.1. This section also applies to any direct loan
program administered by the bank shall remain in
effect until the bank board adopts directives and requirements
relating to the specific policy or activity, but in no case beyond
June 1, 2015 .
63089.1. The program manager acting under the guidance of
the executive director shall do all of the following:
(a) Administer this chapter.
(b) Contract for services Enter into a
contract between the bank and each corporation for services to be
provided by the corporations for one or more programs under
this chapter and Chapter 1 (commencing with Section 14000) of Part 5
of Division 3 of Title 1 of the Corporations Code.
(c) In accordance with available resources, use
allow the use of branch offices for the
purposes of making these programs under this chapter accessible to
all areas of the state.
(d) Require each corporation to submit an annual written plan of
operation.
(e) Authorize the distribution, transfer, and withholding of
moneys in the expansion fund and trust funds.
(f) Authorize the investment of expansion and trust fund moneys.
(g) Oversee the operations of one or more programs authorized
pursuant to this title chapter .
(h) Approve, suspend, or terminate a corporation's ability to
participate in a program under this title.
(h) Act as liaison between corporations, other state and federal
agencies, lenders, and the Legislature.
(i) Act as secretary to the California Small Business Board, and
attend meetings of the California Small Business Board and the bank
board.
(j) Attend and participate at corporation meetings. The program
manager or his or her designee shall be an ex officio, nonvoting
representative on the board of directors and loan committees of each
corporation. The program manager shall confer with the board of
directors of each corporation as appropriate and necessary to carry
out his or her duties, but in no case shall the program manager
confer less than once each fiscal year.
(k) Assist corporations in applying for public and private funding
opportunities, and in obtaining program support from the business
community.
63089.2. The use of state funds paid out to the trust fund and
the return on those funds from investment pursuant to Section
63089.56 is conditional pursuant to Sections 63089.3 and 63089.57.
Each corporation shall enter into a written signed agreement with the
state at the beginning of each fiscal year
bank to provide program management ser vices for one or
more programs authorized under this chapter and Chapter 1 (commencing
with Section 14000) of Part 5 of Division 3 of Title 1 of the
Corporations Code. Agreements with the corporations entered into
pursuant to this chapter are exempt from the requirements of Sections
10295, and 10335 to 10381, inclusive, of the Public
Contracts Code . The agreement shall , at a minimum,
govern the activities in which the corporations engage
corporation engages , the investment of state
funds and its return, and the budgeted administrative expenses the
corporations may incur. In the event the state
program manager and corporation do not reach an agreement,
or the state program manager finds the
corporation has violated the terms of an active agreement, the
state program manager may take any
action under Section 63089.3 or 63089.57, or any other action as
appropriate. In the event the state program
manager and corporation do not reach agreement or the
state program manager finds the corporation has
violated the terms of an active agreement, the corporation shall have
no authority to withdraw or encumber the moneys in the
trust fund or the return of those funds by the issuance of
guarantees, commitments for other financial products, or
by incurring expenses against the fund and its return in any manner
whatsoever, and the state program manager
may take any action under Section 63089.3 or 63089.57, or any
other action as appropriate. Any guarantee or other encumbrance made
by the corporation in violation of this section shall be null and
void, and neither the state nor
, the bank, the expansion fund, or the trust fund will
not be liable therefor.
63089.3. (a) Upon a finding by the program manager that
irreparable harm may occur if guarantee or direct loan authority is
not temporarily withdrawn from a corporation, the program manager may
temporarily withdraw guarantee or direct loan, or both, authority
from a corporation. The notice of temporary withdrawal sent to the
corporation shall specify the reasons for the action.
(1) As used in this section, "guarantee and direct loan authority"
means the authority to make or guarantee any loan that encumbers
funds in a trust fund account, any account or subaccount under the
direct control of the office or other state entity, or the expansion
fund.
(2) The program manager shall make one of the determinations
specified in subdivision (c) within 30 days of the effective date of
the temporary withdrawal, unless the corporation and the executive
director mutually agree to an extension. The corporation shall have
the opportunity to submit written material to the program manager
addressing the items stated in the temporary withdrawal notice. If
the program manager does not make any determinations within 30 days,
the temporary withdrawal shall be negated. The corporation's yearly
contract shall remain in effect during the period of temporary
withdrawal, and the corporation shall continue to receive
reimbursement of necessary operating expenses.
(b) Failure of a corporation to substantially comply with the
following may result in the suspension of a corporation:
(1) Regulations implementing the California Small Business
Development Corporation Law (Chapter 1 (commencing with Section
14000) of Part 5 of Division 3 of Title 1 of the Corporations Code).
(2) Fiscal and portfolio requirements, as contained in the fiscal
and portfolio audits specified in Section 14004 of the Corporations
Code.
(3) Milestones and scope of work as contained in the annual
contract between the corporation and the office.
(c) Pursuant to subdivision (a) or (b), the program manager may do
the following:
(1) Terminate the temporary withdrawal.
(2) Terminate the temporary withdrawal subject to the corporation'
s adoption of a specified remedial action plan.
(3) Temporarily withdraw, or continue to withdraw, guarantee
authority until a specified time. This determination by the program
manager shall require a finding that the corporation has failed to
comply with the California Small Business Development Corporation Law
(Chapter 1 (commencing with Section 14000) of Part 5 of Division 3
of Title 1 of the Corporations Code).
(4) Suspend the corporation.
(5) Suspend the corporation, with suspension stayed until the
corporation provides a remedial action plan to the executive
director, and the executive director decides whether to repeal or
implement the stayed suspension.
(d) The determinations contained in paragraphs (4) and (5) of
subdivision (c) require a finding that irreparable harm will occur
unless the corporation is suspended.
(e) In considering a determination regarding the recommended
suspension and possible remedial action plans, the program manager
shall consider, along with other criteria as specified in subdivision
(b), the corporation's history and past performance.
(f) Upon suspension of a corporation, the program manager shall
transfer all funds, whether encumbered or not, in the trust fund
account of the suspended corporation into either the expansion fund
or temporarily transfer the funds to another corporation.
(g) If the program manager decides to take any action against the
corporation pursuant to paragraphs (2) to (5), inclusive, of
subdivision (c), the corporation shall be notified of the action 10
days before the effective date of the action. The corporation shall
have the right to appeal the program manager's decision to the
director of the California Small Business Board within that 10-day
period by sending notice to the executive director. Once the
executive director receives notice that the action is being appealed,
the program manager's action shall be stayed except for temporary
withdrawal of guarantee authority. Upon receipt of the notice from
the corporation, the executive director shall notify the small
business board within three working days. The California Small
Business Board shall consider and make a final determination on the
appeal within 30 days of receiving notice. The small business board
may elect to take any of the actions listed in subdivision (h). The
temporary withdrawal of corporation guarantee authority shall remain
in effect until the executive director small business board issues a
decision.
(h) Pursuant to subdivision (g), the small business board may do
any of the following:
(1) Terminate the action taken by the program manager.
(2) Modify the action taken by the program manager subject to the
adoption by the corporation of a specified remedial action plan.
(3) Affirm the action taken by the program manager.
(i) Following suspension, the corporation may continue its
existence as a nonprofit corporation pursuant to the Nonprofit Public
Benefit Corporation Law (Part 2 (commencing with Section 5110) of
Division 2 of Title 1 of the Corporations Code), but shall no longer
be registered with the Secretary of State as a small business
financial development corporation. A corporation shall not enjoy any
of the benefits of a small business financial development corporation
following suspension.
(j) The funds in the trust fund account of a corporation under
temporary withdrawal shall be transferred to the expansion fund. Upon
termination of the temporary withdrawal, unless the termination is
caused by suspension, the funds of the corporation that were
transferred to the expansion fund from the trust fund account shall
be returned to the corporation's trust fund account, notwithstanding
Section 63089.53. While the funds of a corporation's trust fund
account reside in the expansion fund, use of the principal on the
funds shall be governed by the implementing regulations specifying
use of funds in the expansion fund. Interest on the funds moved from
a corporation's trust fund account upon temporary withdrawal shall be
limited to payment of the corporation's administrative expenses, as
contained in the contract between the corporation and the state
pursuant to this title.
63089.3. (a) The program manager may temporarily suspend the
guarantee authority or other financial product authority of a
corporation if in the determination of the program manager a
corporation has substantially failed to comply with any of the
requirements in subdivision (b) causing irreparable harm to the
program, the corporation's guarantee or any other financial products
authority. The notice of temporary suspension sent to the corporation
shall specify the reasons for the action.
(1) As used in this section, "guarantee or any other financial
products authority" means the authority to make or guarantee or
administer any other financial products that encumber funds in a
trust fund account, any account or subaccount under the direct
control of the bank or other state entity, or the expansion fund.
(2) The program manager shall make one of the determinations
specified in subdivision (b) within 30 days of the effective date of
the temporary suspension, unless the corporation and the program
manager mutually agree to an extension. The corporation shall have
the opportunity to submit written material to the program manager
addressing the items stated in the temporary suspension notice. If
the program manager does not make any determinations within 30 days,
the temporary suspension shall be reversed. The corporation's yearly
contract shall remain in effect during the period of temporary
suspension, and the corporation shall continue to receive
reimbursement of necessary operating expenses.
(b) Failure of a corporation to substantially comply with the
following may result in the suspension or termination of a
corporation:
(1) Directives and requirements adopted by the bank board, for
implementing the California Small Business Development Corporation
Law (Chapter 1 (commencing with Section 14000) of Part 5 of Division
3 of Title 1 of the Corporations Code) and this chapter.
(2) Failure to meet any fiscal, audit, or portfolio requirement,
as contained in the directives and requirements.
(3) Failure to significantly meet any milestones or scope of work
as contained in the performance contract between the corporation and
the bank.
(4) Any other action in the opinion of the program manager that
causes irreparable harm to the corporation, the expansion fund, or
the trust fund.
(c) Pursuant to subdivisions (a) and (b), the program manager may
take any of the following actions:
(1) Terminate the temporary suspension.
(2) Terminate the temporary suspension subject to the corporation'
s adoption of a specified remedial action plan approved by the
program manager.
(3) Continue the temporary suspension of guarantee and other
financial product authority until a specified time.
(4) Terminate the corporation's authority to administer specified
loan guarantees or other financial products.
(5) Terminate the corporation's authority to remain a corporation
authorized pursuant to the California Small Business Development
Corporation Law (Chapter 1 (commencing with section 14000) of Part 5
of Division 3 of Title 1 of the Corporations Code) and this chapter.
(d) The program manager shall make one of the determinations
specified in subdivision (c) within 30 days of the effective date of
the temporary suspension notice, unless the corporation and the
program manager mutually agree to an extension. If the program
manager does not make any determinations within 30 days, the
temporary suspension shall be negated. The corporation's yearly
contract shall remain in effect during the period of temporary
suspension, and the corporation shall continue to receive
reimbursement of necessary operating expenses.
(e) The actions contained in paragraphs (3) to (5), inclusive, of
subdivision (c) require a finding that irreparable harm will occur
unless the action is taken, and a finding that the corporation has
failed to comply with the California Small Business Development
Corporation Law (Chapter 1 (commencing with Section 14000) of Part 5
of Division 3 of Title 1 of the Corporations Code) and this chapter.
(f) In considering any action specified in subdivision (c), the
program manager shall consider, along with other criteria as
specified in subdivision (b), the corporation's history and past
performance.
(g) If the program manager decides to take any action pursuant to
paragraphs (3) to (5), inclusive, of subdivision (c), the program
manager shall transfer all funds subject to the action, whether
encumbered or not, in the trust fund account of the suspended or
terminated corporation into either the expansion fund, or either
permanently or temporarily transfer the funds to the trust fund
account of another corporation, unless an appeal is received from the
corporation pursuant to subdivision (h).
(h) If the program manager intends to transfer funds as specified
in paragraph (g), the corporation shall be notified of the funds
transfer 10 days before the effective date of the transfer. The
corporation shall have the right to appeal the program manager's
decision to the executive director within that 10-day period by
sending written notice to the executive director. Once the executive
director receives notice that the action is being appealed, the
program manager's funds transfer shall be stayed.
(i) The corporation shall have the opportunity to submit written
material to the executive director addressing the actions and
findings stated in the program manager's determination. The executive
director shall consider and make a final determination on the appeal
within 30 days of receiving the appeal notice from the corporation,
or such longer time as agreed to by the executive director and the
corporation. The executive director may elect to take any of the
actions listed in subdivision (j). The action of the program manager
shall remain in effect until the executive director issues a
decision. The corporation's performance contract shall remain in
effect during the appeal period, and the corporation shall continue
to receive reimbursement of necessary operating expenses.
(j) Pursuant to subdivision (i), the executive director may
independently take action or seek the advice and recommendation of
the small business board prior to taking any of the following
actions:
(1) Rescind the action taken by the program manager.
(2) Modify the action taken by the program manager subject to the
adoption by the corporation of a specified remedial action plan
approved by the executive director.
(3) Affirm the action taken by the program manager.
(k) Following the executive director's concurrence any action
pursuant to paragraphs (3) to (5), inclusive, of subdivision (c), the
program manager shall transfer all funds subject to the action,
whether encumbered or not, in the trust fund account of the suspended
or terminated corporation into either the expansion fund, or either
permanently or temporarily transfer the funds to the trust fund
account of another corporation. The corporation shall be notified of
the funds transfer 10 days before the effective date of the transfer.
The corporation shall have the right to appeal the executive
director's decision to the bank board within that 10-day period by
sending written notice to the chair of the bank board. Once the chair
of the bank board receives notice that the executive director's
determination is being appealed, the program manager's funds transfer
shall be stayed.
(l ) The corporation shall have the opportunity to submit
written material to the bank board addressing the actions and
findings stated in the executive director's determination. The bank
board shall consider and make a final determination on the appeal
within 30 days of receiving the appeal notice from the corporation,
or such longer time as agreed to by the chair of the bank board and
the corporation. The action of the executive director shall remain in
effect until the bank board issues a decision. The corporation's
performance contract shall remain in effect during the appeal period,
and the corporation shall continue to receive reimbursement of
necessary operating expenses.
(m) Pursuant to subdivision (l), the bank board may independently
take action or seek the advice and recommendation of the California
Small Business Board prior to taking any of the following actions:
(1) Rescind the action taken by the executive director.
(2) Modify the action taken by the executive director subject to
the adoption by the corporation of a specified remedial action plan
acceptable to the executive director.
(3) Affirm the action taken by the executive director. The
decision of the bank board is final.
(n) Following the bank board's concurrence with the executive
director's determination consistent with any action pursuant to
paragraphs (3) to (5), inclusive, of subdivision (c), transfer all
funds subject to the action, whether encumbered or not, in the trust
fund account of the suspended or terminated corporation into either
the expansion fund, or either permanently or temporarily transfer the
funds to the trust fund account of another corporation. The
corporation shall be notified of the funds transfer 10 days before
the effective date of the transfer.
(o) Notwithstanding Section 63089.53, in the event a final
determination was made by the program manager, the executive director
or the bank board, whichever is applicable, to temporarily transfer
the funds of the corporation to the expansion fund or to the trust
fund account of another corporation, upon compliance with all
requirements of that final determination as determined by the
executive director, the transferred funds shall be returned to the
corporations trust fund account. While the funds of a corporation's
trust fund account reside in the expansion fund, use of the principal
on the funds shall be governed by the implementing directives and
requirements specifying use of funds in the expansion fund. Interest
on the funds moved from a corporation's trust fund account upon
temporary withdrawal shall be limited to payment of the corporation's
administrative expenses, as contained in the contract between the
corporation and the bank pursuant to this chapter.
(p) Following a final determination of termination of all
activities of an active corporation, in order to continue its
existence as a nonprofit corporation pursuant to the Nonprofit Public
Benefit Corporation Law (Part 2 (commencing with Section 5110) of
Division 2 of Title 1 of the Corporations Code), the corporation must
amend its articles of incorporation in accordance with Chapter 8 of
Part 2 of Division 2 of the Corporations Code to remove the
provisions required by Section 14005 of the Corporations Code,
including an amendment to remove the words "small business financial
development corporation," "small business development corporation,"
or "rural or urban development corporation," as applicable, from the
corporate name and shall no longer be registered with the Secretary
of State as a small business financial development corporation. A
corporation shall not enjoy any of the benefits of a small business
financial development corporation following suspension.
63089.4. The bank is authorized to:
(a) Approve new corporations recommended by the program manager.
(b) Enter into contracts with corporations for program management
services.
(c) Select a financial institution or financial company to act as
trustee of the trust fund as specified in this chapter.
(d) Invest expansion fund and trust fund moneys as specified in
this chapter.
(e) Affirm, modify, or rescind the determinations of the program
manager and the executive director as specified in this chapter.
(f) Adopt directives and requirements as specified in this
chapter.
(g) Authorize new financial product programs pursuant to the
provisions of this chapter.
Article 5. Expansion Fund and Trust Fund
63089.5. (a) There is hereby continued in existence in the State
Treasury the California Small Business Expansion Fund. All or a
portion of the funds in the expansion fund may be paid out, with the
approval of the Department of Finance, to a lending
financial institution or financial company that
will establish a trust fund and act as trustee of the
funds.
(b) The expansion fund and the trust fund shall be used to pay for
defaulted loan guarantees issued pursuant to this title, surety bond
losses, administrative costs of corporations, and those costs
necessary to protect a real property interest in a defaulted loan or
guarantee.
(b) The expansion fund and the trust fund shall be used for the
following purposes:
(1) To pay defaulted loan guarantee or surety bond losses, or
other financial product defaults or losses.
(2) To fund direct loans and other debt instruments.
(3) To pay administrative costs of corporations.
(4) To pay state support and administrative costs.
(5) To pay those costs necessary to protect a real property
interest in a financial product default.
(c) The expansion fund and trust fund are created solely for the
purpose of receiving state, federal, or local government moneys, and
other public or private money moneys to
make loans, guarantees, and restricted investments
other financial products pursuant to this
title chapter .
(d) One or more accounts in the expansion fund and the trust
fund may be created by the program manager for corporations
participating in one or more programs authorized under this
title chapter . Each account is a legally
separate account, and shall not be used to satisfy loan or
surety bond guarantees or other financial product
obligations of another corporation except when the
expansion fund or trust fund is shared by multiple corporations
.
(e) The amount of guarantee liability outstanding at any one time
shall not exceed five times the amount of funds on deposit in the
expansion fund plus any receivables due from funds loaned from the
expansion fund to another fund in state government as directed by the
Department of Finance pursuant to a statute enacted by the
Legislature, including each of the trust fund accounts within the
trust fund.
(f) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
63089.5. (a) There is hereby continued in existence in the State
Treasury the California Small Business Expansion Fund. All or a
portion of the funds in the expansion fund may be paid out, with the
approval of the Department of Finance, to a financial institution or
financial company that will establish a trust fund and act as trustee
of the funds.
(b) The expansion fund and the trust fund shall be used for the
following purposes:
(1) To pay defaulted loan guarantee or surety bond losses, or
other financial product defaults or losses.
(2) To fund direct loans and other debt instruments.
(3) To pay administrative costs of corporations.
(4) To pay state support and administrative costs.
(5) To pay those costs necessary to protect a real property
interest in a financial product default.
(c) The expansion fund and trust fund are created solely for the
purpose of receiving state, federal, or local government moneys, and
other public or private moneys to make loans, guarantees, and other
financial products pursuant to this chapter.
(d) One or more accounts in the expansion fund and the trust fund
may be created by the program manager for corporations participating
in one or more programs authorized under this chapter. Each account
is a legally separate account, and shall not be used to satisfy loan
guarantees or other financial product obligations of another
corporation except when the expansion fund or trust fund is shared by
multiple corporations.
(e) The amount of guarantee liability outstanding at any one time
shall not exceed four times the amount of funds on deposit in the
expansion fund plus any receivables due from funds loaned from the
expansion fund to another fund in state government as directed by the
Department of Finance pursuant to a statute enacted by the
Legislature, including each of the trust fund accounts within the
trust fund.
(f) This section shall become operative on January 1, 2018.
63089.51. (a) All money deposited in the expansion fund is hereby
continuously appropriated, without regard to fiscal years, for the
purposes of this title chapter .
(b) Except as specified in subdivision (a) of Section
63089.53, (b) of Section 63089.54, the state
or the bank shall not be liable or obligated in any way
beyond the state money that is allocated in the expansion fund from
moneys from the General Fund moneys appropriated
for those purposes.
63089.52. (a) The program manager at his or her discretion, with
the approval of the Director of Finance
executive director , may request the trustee to invest those
funds moneys in the trust fund in any
of the securities described in Section 16430. Returns from these
investments shall be deposited in the expansion fund and shall be
used to support the programs of this title
chapter .
(b) Any investments made in securities described in Section 16430
shall be governed by the statement of investment
policy prepared by the Treasurer pursuant to subdivision (a)
of Section 16481.2 approved by the bank board .
63089.53. (a) The state Except as specified in subdivision
(b) of Section 63089.54, the state or the bank shall not be
liable or obligated in any way beyond the money that is allocated and
deposited in the corporation's trust fund
account accounts .
(b) The program manager may reallocate funds held within a
corporation's trust fund account.
(1) The program manager shall reallocate funds based on which
corporation is most effectively using its guarantee funds. If funds
are withdrawn from a less effective corporation as part of a
reallocation, the program manager shall make that withdrawal only
after giving consideration to that corporation's fiscal solvency, its
ability to honor loan guarantee defaults, and its ability to
maintain a viable presence within the region it serves. Reallocation
of funds shall occur no more frequently than once per fiscal year.
Any decision made by the program manager pursuant to this subdivision
may be appealed to the bank board unless otherwise specified. The
program manager has the authority to repeal or modify any decision to
reallocate funds.
(2) The program manager may authorize a corporation to exceed the
leverage ratio specified in Section 63089.5 or subdivision (a) of
Section 63089.66, or subdivision (c) of Section 14017 of the
Corporations Code, pending the annual reallocation of funds pursuant
to this section. However, no corporation shall be permitted to exceed
an outstanding guarantee liability of more than five times its
portion of funds on deposit in the expansion fund.
63089.54. (a) There is hereby created in the State Treasury the
Small Business Disaster Recovery Loan Loss Reserve Account, as part
of the expansion fund. This account shall be used to pay for
unrecovered losses resulting from loan guarantees issued
pursuant to subdivision (a) of Section 63089.90 or subdivision (b) of
this section, and disaster loan guarantees and other credit
enhancement defaults issued prior to the effective date of this
section that are in default.
(b) Any lending institution that issues a low-interest
loan that is guaranteed by resources in this account shall
be fully reimbursed for the guaranteed portion of principal and
interest that result from a loan or loans that are in default. If
there are insufficient funds in this account to fully satisfy all
claimants, the full faith of the resources in the General Fund are
pledged to satisfy the obligations of this account. This account may
only guarantee as much loan dollar value as is specifically
authorized by the Director of Finance with the concurrence of the
Governor. This account shall receive all moneys transferred pursuant
to Section 63089.55, and any unencumbered balances transferred to the
California Small Business Expansion Fund pursuant to Chapters 11 and
12 of the First Extraordinary Session of the Statutes of 1989, and
Chapter 1525 of the Statutes of 1990, as of July 1, 1992.
(c) The Governor may utilize this authority to prevent business
insolvencies and loss of employment in an area affected by a state of
emergency within the state and declared a disaster by the President
of the United States, by the Administrator of the United States Small
Business Administration, or by the United States Secretary of
Agriculture, or declared to be in a state of emergency by the
Governor of California.
63089.55. The Director of Finance, with the approval of the
Governor, may transfer moneys in the Special Fund for Economic
Uncertainties to the California Small Business Expansion Fund for use
as authorized by the bank board, in an amount necessary to make loan
guarantees pursuant to this title Section
8684.2 and thi s chapter .
63089.56. (a) The funds in the expansion fund shall be paid out
to trust fund accounts by the Treasurer on warrants
funds drawn by the Controller and requisitioned
by the executive director program manager
, pursuant to the purposes of this title
chapter . The program manager may transfer funds allocated
from the expansion fund to accounts, established solely to receive
the funds, in lending institutions financial
institutions or financial companies designated by the
office bank to act as trustee. The
lending institutions financial institutions or
financial companies so designated shall be approved by the
state for the receipt of state deposits. Interest earned on the trust
fund accounts in lending institutions
financial institutions or financial companies may be utilized
by the corporations or the bank pursuant to the purposes
of this title chapter .
(b) The program manager may reallocate funds held within a
corporation's trust fund account.
(1) The program manager shall reallocate funds based on which
corporation is most effectively using its guarantee funds. If funds
are withdrawn from a less effective corporation as part of a
reallocation, the program manager shall make that withdrawal only
after giving consideration to that corporation's fiscal solvency, its
ability to honor loan guarantee defaults, and its ability to
maintain a viable presence within the region it serves. Reallocation
of funds shall occur no more frequently than once per fiscal year.
Any decision made by the program manager pursuant to this subdivision
may be appealed to the executive director unless otherwise
specified. The executive director has the authority to repeal or
modify any decision to reallocate funds.
(2) The program manager may authorize a corporation to exceed the
leverage ratio specified in Section 63089.5 or subdivision (a) of
Section 63089.62, pending the annual reallocation of funds pursuant
to this section. However, no corporation shall be permitted to exceed
an outstanding guarantee liability of more than specified in
subdivision (a) of Section 63089.62 after a reallocation is made.
(b)
(c) Except as specified in subdivision (d),
(e), the program manager shall allocate and
transfer money to trust fund accounts based on performance-based
criteria. The criteria shall include,
but not be limited to, the following:
(1) The default record of the corporation.
(2) The number and amount of loans guaranteed by a corporation.
(3) The number and amount of loans made by a corporation if state
funds were used to make those loans.
(4) The number and amount of surety bonds guaranteed by a
corporation.
(5) The number and amount of other financial product activity.
(6) The number of jobs created or retained due to the financial
product activity.
(c) Any decision made by the executive director pursuant to
subdivision (b) may be appealed to the director within 15 days of
notice of the proposed action. The director may repeal or modify any
reallocation and transfer decisions made by the executive director.
(d) The criteria specified in subdivision (b)
(c) shall not apply to a corporation that has been in
existence for five years or less. If not already adopted, the
office bank board shall develop
regulations directives and requirements
specifying the basis for transferring account funds to those
corporations that have been in existence for five years or less.
(e) Any decision made by the program manager pursuant to this
section may be appealed to the executive director within 15 days of
notice of the proposed action. The executive director may repeal or
modify any reallocation and transfer decisions made by the program
manager. The appealing corporation shall submit, in writing, the
specific area or areas of appeal and set forth any recommendation to
the executive director for consideration. The executive director
shall render a final decision within five business days of receiving
the written appeal.
(f) Any decision made by the executive director shall be
appealable in writing to the bank board within 15 days of the
executive director's decision, or such longer period as agreed to
between the executive director and the corporation. The bank board
shall make a final reallocation or transfer decision within 30 days
of receiving the appeal, or such longer period agreed to between the
executive director and the corporation.
(g) In the event of an appeal under this section, all allocations
or transfers of money to trust fund accounts shall be on hold pending
resolution by the executive director or bank board, as applicable.
63089.57. Pursuant to this section and any regulations
chapter and any directives and requirements
adopted pursuant to this title chapter
, the state has residual interest in the funds deposited by the
state to a trust fund account and to the return on these funds from
investments. On dissolution or suspension
dissolution, suspension, or termination of the corporation,
these funds shall be withdrawn by the executive director
program manager from the trust fund account and
returned to the expansion fund or temporarily transferred to another
trust fund account. This provision shall be contained in the trust
instructions to the trustee.
63089.58. Each trust fund account shall consist of a loan
guarantee account, and, upon recommendation by the program manager, a
bond guarantee account or other financial product account
, each of which is a legally separate account, and the assets of one
account shall not be used to satisfy loan guarantees or other
financial product obligations of another corporation .
Not more than one-third of a trust fund account shall be allocated to
a bond guarantee account , except when a
trust fund account is designated by the program manager to be shared
by multiple corporations. The amount of funds allocated to a bond
guarantee account shall be pursuant to the directives and
requirements . A corporation shall not use trust fund accounts
to secure a corporate indebtedness. State funds deposited in the
trust fund accounts, with the exception of guarantees established
pursuant to this title chapter , shall
not be subject to liens or encumbrances of the corporation or its
creditors.
63089.59. (a) The financial institution or financial company
that is to act as trustee of the trust fund shall be
designated after review by the program manager
by the bank . The corporation shall not receive money on
deposit to support guarantees or other financial products
issued under this title chapter without
the approval of the program manager.
(b) State funds may not be used to finance an expense incurred by
a corporation in a location not approved pursuant to a
statewide plan the contract between the bank and the
corporation . The prohibition against use of state funds also
applies to the location of satellite offices, and the area served
from a corporation office.
(c) Except as otherwise provided in this chapter, the trust fund
account shall be used solely to make loans, guarantee bonds and
loans, and provide other financial products approved by the
corporation that meet the financial product criteria of the
directives and requirements. Except as provided in subdivision (b) of
Section 63089.54, the state or the bank shall not be liable or
obligated in any way as a result of the allocation of state moneys to
a trust fund account beyond the state moneys that are allocated and
deposited in the fund pursuant to this chapter, and that are not
otherwise withdrawn by the state pursuant to this chapter.
63089.60. (a) The program manager shall recommend whether the
expansion fund and trust fund accounts are to be leveraged, and if
so, by how much. Upon the request of the corporation, the program
manager's decision may be repealed or modified by the executive
director or the bank board.
(b) The amount of guarantee liability outstanding at any one time
shall not exceed five times the amount of funds on deposit in the
expansion fund plus any receivables due from funds loaned from the
expansion fund to another fund in state government as directed by the
Department of Finance pursuant to a statute enacted by the
Legislature, including each of the trust fund accounts within the
trust fund.
(c) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
63089.60. (a) The program manager shall recommend whether the
expansion fund and trust fund accounts are to be leveraged, and if
so, by how much. Upon the request of the corporation, the program
manager's decision may be repealed or modified by the executive
director or the bank board.
(b) The amount of guarantee liability outstanding at any one time
shall not exceed four times the amount of funds on deposit in the
expansion fund plus any receivables due from funds loaned from the
expansion fund to another fund in state government as directed by the
Department of Finance pursuant to a statute enacted by the
Legislature, including each of the trust fund accounts within the
trust fund, unless the program manager has permitted a higher
leverage ratio for an individual corporation pursuant to subdivision
(b) of Section 63089.56.
(c) This section shall become operative on January 1, 2018.
63089.61. (a) The corporate guarantee shall be backed by funds on
deposit in the corporation's trust fund account, or by receivables
due from funds loaned from the corporation's trust fund account to
another fund in state government, as directed by the Department of
Finance pursuant to a statute enacted by the Legislature.
(b) Loan guarantees shall be secured by a reserve of at least 20
percent to be determined by the program manager unless a higher
leverage ratio for an individual corporation has been approved
pursuant to subdivision (b) of Section 63089.56.
(c) The expansion fund and trust fund accounts shall be used to
guarantee obligations and other financial product obligations, to pay
the administrative costs of the corporations, and for other uses
pursuant to this chapter.
(d) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
63089.61. (a) The corporate guarantee shall be backed by funds on
deposit in the corporation's trust fund account, or by receivables
due from funds loaned from the corporation's trust fund account to
another fund in state government, as directed by the Department of
Finance pursuant to a statute enacted by the Legislature.
(b) Loan guarantees shall be secured by a reserve of at least 25
percent to be determined by the program manager, unless a higher
leverage ratio has been approved for an individual corporation
pursuant to subdivision (b) of Section 63089.56.
(c) The expansion fund and trust fund accounts shall be used to
guarantee obligations and other financial product obligations, to pay
the administrative costs of the corporations, and for other uses
pursuant to this chapter.
(d) This section shall become operative on January 1, 2018.
63089.62. (a) It is the intent of the Legislature that the
corporations make maximum use of their statutory authority to
guarantee loans and surety bonds, and administer other financial
products, including the authority to secure loans with a minimum loan
loss reserve of only 20 percent, unless the program manager
authorizes a higher leverage ratio for an individual corporation
pursuant to subdivision (b) of Section 63089.56, so that the
financing needs of small business may be met as fully as possible
within the limits of corporations' trust fund account balance.
(b) Any corporation that serves an area declared to be in a state
of emergency by the Governor or a disaster area by the President of
the United States, the Administrator of the United States Small
Business Administration, or the United States Secretary of
Agriculture shall increase the portfolio of loan guarantees where the
dollar amount of the loan is less than one hundred thousand dollars
($100,000), so that at least 15 percent of the dollar value of loans
guaranteed by the corporation is for those loans. The corporation
shall comply with this requirement within one year of the date the
emergency or disaster is declared. Upon application of a corporation,
the executive director may waive or modify the rule for the
corporation if the corporation demonstrates that it made a good faith
effort to comply and failed to locate lending institutions in the
region that the corporation serves that are willing to make
guaranteed loans in that amount.
(c) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
63089.62. (a) It is the intent of the Legislature that the
corporations make maximum use of their statutory authority to
guarantee loans and surety bonds, and administer other financial
products, including the authority to secure loans with a minimum loan
loss reserve of only 25 percent, unless the program manager
authorizes a higher leverage ratio for an individual corporation
pursuant to subdivision (b) of Section 63089.56, so that the
financing needs of small business may be met as fully as possible
within the limits of corporations' trust fund account balance.
(b) Any corporation that serves an area declared to be in a state
of emergency by the Governor or a disaster area by the President of
the United States, the Administrator of the United States Small
Business Administration, or the United States Secretary of
Agriculture shall increase the portfolio of loan guarantees where the
dollar amount of the loan is less than one hundred thousand dollars
($100,000), so that at least 15 percent of the dollar value of loans
guaranteed by the corporation is for those loans. The corporation
shall comply with this requirement within one year of the date the
emergency or disaster is declared. Upon application of a corporation,
the program manager may waive or modify the rule for the corporation
if the corporation demonstrates that it made a good faith effort to
comply and failed to locate lending institutions in the region that
the corporation serves that are willing to make guaranteed loans in
that amount.
(c) This section shall become operative on January 1, 2018.
Article 6. Guarantee Program
Corporations, Miscellaneous
63089.61. (a) The Small Business Loan Guarantee Program, which is
hereby continued in existence, shall provide guarantees to loans
offered by financial institutions to small businesses.
(b) The Legislature finds and declares that the Small Business
Loan Guarantee Program has enabled participating small businesses
that do not qualify for conventional business loans or Small Business
Administration loans to secure funds to expand their businesses.
These small businesses would not have been able to expand their
businesses in the absence of the program. The program has also
provided valuable technical assistance to small businesses to ensure
growth and stability. The study commissioned by former Section
14069.6 of the Corporations Code, as added by Chapter 919 of the
Statutes of 1997, documented the return on investment of the program
and the need for its services. The value of the program has also been
recognized by the Governor through proposals contained in the May
Revision to the Budget Act of 2000 for the 2000-01 fiscal year.
63089.62. The program manager, following notification to the bank
director, may do all of the following:
(a) Contract for services entered into pursuant to this title.
(b) Hold public hearings.
(c) Act as liaison between corporations, other state and federal
agencies, lenders, and the Legislature.
(d) Process and tabulate on a monthly basis all corporate reports.
(e) Attend board meetings.
(f) Attend and participate at corporation meetings. The program
manager, or his or her designee, shall be an ex officio, nonvoting
representative on the board of directors and loan committees of each
corporation. The program manager shall meet with the board of
directors of each corporation at least once each fiscal year.
(g) Assist corporations in applying for public and private funding
opportunities, and in obtaining program support from the business
community.
63089.63. (a) The program manager shall recommend whether the
expansion fund and trust fund accounts are to be leveraged, and if
so, by how much. Upon the request of the corporation, the program
manager's decision may be repealed or modified by a bank board
resolution.
(b) The amount of guarantee liability outstanding at any one time
shall not exceed five times the amount of funds on deposit in the
expansion fund plus any receivables due from funds loaned from the
expansion fund to another fund in state government as directed by the
Department of Finance pursuant to a statute enacted by the
Legislature, including each of the trust fund accounts within the
trust fund.
(c) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
63089.63. (a) The program manager shall recommend whether the
expansion fund and trust fund accounts are to be leveraged, and if
so, by how much. Upon the request of the corporation, the program
manager's decision may be repealed or modified by an office
resolution.
(b) The amount of guarantee liability outstanding at any one time
shall not exceed four times the amount of funds on deposit in the
expansion fund plus any receivables due from funds loaned from the
expansion fund to another fund in state government as directed by the
Department of Finance pursuant to a statute enacted by the
Legislature, including each of the trust fund accounts within the
trust fund, unless the program manager has permitted a higher
leverage ratio for an individual corporation pursuant to subdivision
(b) of Section 63089.53.
(c) This section shall become operative on January 1, 2018.
63089.64. (a) The corporate guarantee shall be backed by funds on
deposit in the corporation's trust fund account, or by receivables
due from funds loaned from the corporation's trust fund account to
another fund in state government, as directed by the Department of
Finance pursuant to a statute enacted by the Legislature.
(b) Loan guarantees shall be secured by a reserve of at least 20
percent to be determined by the executive director.
(c) The expansion fund and trust fund accounts shall be used
exclusively to guarantee obligations and pay the administrative costs
of the corporations.
(d) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
63089.64. (a) The corporate guarantee shall be backed by funds on
deposit in the corporation's trust fund account, or by receivables
due from funds loaned from the corporation's trust fund account to
another fund in state government, as directed by the Department of
Finance pursuant to a statute enacted by the Legislature.
(b) Loan guarantees shall be secured by a reserve of at least 25
percent to be determined by the executive director, unless the
executive director authorizes a higher leverage ratio for an
individual corporation pursuant to subdivision (b) of Section
63089.53.
(c) The expansion fund and trust fund accounts shall be used
exclusively to guarantee obligations and pay the administrative costs
of the corporations.
(d) This section shall become operative on January 1, 2018.
63089.65. A corporation may charge the borrower or financial
institution a loan fee on all loans made or guaranteed by the
corporation to defray the operating expenses of the corporation. The
amount of the fee shall be determined by the program manager.
63089.66. (a) It is the intent of the Legislature that the
corporations make maximal use of their statutory authority to
guarantee loans and surety bonds, including the authority to secure
loans with a minimum loan loss reserve of only 20 percent, so that
the financing needs of small business may be met as fully as possible
within the limits of corporations' loan loss reserves. The office
shall report annually to the Legislature on the financial status of
the corporations and their portfolio of loans and surety bonds
guaranteed pursuant to Section 9795.
(b) Any corporation that serves an area declared to be in a state
of emergency by the Governor or a disaster area by the President of
the United States, the Administrator of the United States Small
Business Administration, or the United States Secretary of
Agriculture shall increase the portfolio of loan guarantees where the
dollar amount of the loan is less than one hundred thousand dollars
($100,000), so that at least 15 percent of the dollar value of loans
guaranteed by the corporation is for those loans. The corporation
shall comply with this requirement within one year of the date the
emergency or disaster is declared. Upon application of a corporation,
the executive director may waive or modify the rule for the
corporation if the corporation demonstrates that it made a good faith
effort to comply and failed to locate lending institutions in the
region that the corporation serves that are willing to make
guaranteed loans in that amount.
(c) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
63089.66. (a) It is the intent of the Legislature that the
corporations make maximal use of their statutory authority to
guarantee loans and surety bonds, including the authority to secure
loans with a minimum loan loss reserve of only 25 percent, unless the
office authorizes a higher leverage ratio for an individual
corporation pursuant to subdivision (b) of Section 63089.53, so that
the financing needs of small business may be met as fully as possible
within the limits of corporations' loan loss reserves. The bank
shall report annually to the Legislature on the financial status of
the corporations and their portfolio of loans and surety bonds
guaranteed pursuant to Section 9795.
(b) Any corporation that serves an area declared to be in a state
of emergency by the Governor or a disaster area by the President of
the United States, the Administrator of the United States Small
Business Administration, or the United States Secretary of
Agriculture shall increase the portfolio of loan guarantees where the
dollar amount of the loan is less than one hundred thousand dollars
($100,000), so that at least 15 percent of the dollar value of loans
guaranteed by the corporation is for those loans. The corporation
shall comply with this requirement within one year of the date the
emergency or disaster is declared. Upon application of a corporation,
the program manager may waive or modify the rule for the corporation
if the corporation demonstrates that it made a good faith effort to
comply and failed to locate lending institutions in the region that
the corporation serves that are willing to make guaranteed loans in
that amount.
(c) This section shall become operative on January 1, 2018.
63089.67. 63089.65. (a) A
corporation shall establish one or more loan committees, each of
which shall be composed of five or more persons, a majority of whom
shall be experienced in banking and lending operations.
(b) A loan committee shall review applications to the corporation
for a loan or guarantee and shall do each of the following:
(1) Determine the feasibility of the proposed transaction. The
loan committee shall recommend approval of the application only upon
a determination that there is a reasonable chance that the loan will
be repaid.
(2) On the basis of that determination, recommend to the board of
directors any action that the loan committee deems appropriate under
the circumstances, or, in the event that approval authority has been
delegated to the loan committee by the board of directors, approve or
disapprove the loan application.
(c) A loan committee shall expeditiously act to accept or reject
loan applications.
(d) A person who has a financial interest related to a matter over
which the loan committee has authority may not make, participate in
making, or in any way attempt to influence that matter.
63089.68. 63089.66. Unless
delegated to its loan committee, the corporation's board of
directors, upon a recommendation from its loan committee, shall do
all of the following:
(a) Emphasize consideration to applications that will increase
employment of disadvantaged, disabled, or unemployed persons, or
increase employment of youth residing in areas of high youth
unemployment and high youth delinquency.
(b) Give consideration to applications from traditional and
safety-net providers of Medi-Cal services that will promote access to
quality medical care for individuals enrolled in Medi-Cal managed
health care networks that are contracting with or owned or operated
by a county board of supervisors, a county health commission, or a
county health authority organized pursuant to Section 14018.7,
14087.31, 14087.35, 14087.36, 14087.38, or 14087.9605 of the Welfare
and Institutions Code.
(c) Not grant a loan or guarantee, unless it determines that the
conditions of Section 200033 are satisfied.
63089.69. (a) Among other priorities, corporations shall give
high priority to the issuance of loan guarantees
to small business incubators and to
businesses that lease space in incubators.
(b) For the purposes of this section, "incubator" means a facility
that allows new small businesses to increase their probability of
success by sharing needed capital equipment, services, and
facilities, which may include, but are not limited to, the following:
(1) Reception and meeting area.
(2) Secretarial services, such as collating, telephone answering,
or mailhandling.
(3) Accounting and bookkeeping services.
(4) Research libraries.
(5) Onsite financial and management counseling.
(6) Parking.
(7) Flexible lease arrangements for flexible space.
(8) Computer or word processing facilities.
(9) Day care facilities.
(10) Office furniture rentals.
(11) A graduation policy sometimes requiring firms to leave after
three to five years in a subsidized, nurturing environment.
(12) Employee training and placement services.
(c) Among other priorities, corporations shall give high priority
to marketing their services to Phase 1 or Phase 2 Small Business
Innovation Research (SBIR) recipients and providing loan guarantees,
whenever possible.
63089.67. A corporation may charge the borrower or financial
institution a loan fee or credit enhancement fee on all loans made or
guaranteed by the corporation to defray the operating expenses of
the corporation. The amount of the fee shall be determined by the
directives and requirements.
Article 7. Loan Guarantees
63089.70. (a) The Small Business Expansion Fund, which is hereby
continued in existence, shall, among other things, provide guarantees
to loans offered by financial institutions and financial companies
to small businesses.
(b) The Legislature finds and declares that the Small Business
Loan Guarantee Program has enabled participating small businesses
that do not qualify for conventional business loans or Small Business
Administration loans to secure funds to expand their businesses.
These small businesses would not have been able to expand their
businesses in the absence of the program. The program has also
provided valuable technical assistance to small businesses to ensure
growth and stability. The study commissioned by former Section
14069.6 of the Corporations Code, as added by Chapter 919 of the
Statutes of 1997, documented the return on investment of the program
and the need for its services. The value of the program has also been
recognized by the Governor through proposals contained in the May
Revision to the Budget Act of 2000 for the 2000-01 fiscal year.
(c) A corporation shall not issue a loan or guarantee, unless it
determines that the following conditions are satisfied:
(1) There is no probability that the loan would be granted by a
financial company or financial institution under reasonable terms and
conditions and the borrower has demonstrated a reasonable prospect
of repayment.
(2) The loan proceeds will be used exclusively in this state.
(3) The loan qualifies as a small business loan or an employment
incentive loan.
(4) The borrower has a minimum equity interest in the business as
determined by the directives and requirements.
(5) As a result of the loan, the jobs generated or retained
demonstrate reasonable conformance to any directives and requirements
specifying employment criteria.
63089.71. (a) Among other priorities, corporations shall give
high priority to the issuance of loan guarantees to small business
incubators and to businesses that lease space in incubators.
(b) For the purposes of this section, "incubator" means a facility
that allows new small businesses to increase their probability of
success by sharing needed capital equipment, services, and
facilities, which may include, but are not limited to, the following:
(1) Reception and meeting area.
(2) Secretarial services, such as collating, telephone answering,
or mailhandling.
(3) Accounting and bookkeeping services.
(4) Research libraries.
(5) Onsite financial and management counseling.
(6) Parking.
(7) Flexible lease arrangements for flexible space.
(8) Computer or word processing facilities.
(9) Day care facilities.
(10) Office furniture rentals.
(11) A graduation policy sometimes requiring firms to leave after
three to five years in a subsidized, nurturing environment.
(12) Employee training and placement services.
(c) Among other priorities, corporations shall give high priority
to marketing their services to Phase 1 or Phase 2 Small Business
Innovation Research (SBIR) recipients and providing loan guarantees,
whenever possible.
Article 7. 8. Direct Lending
and Other Debt Instruments
63089.80. (a) A corporation may utilize funds for direct lending
as long as at least 80 percent of the corporate funds,
calculated by dollar amount, and all expansion funds are guaranteed
by another public or private financial institution or
other debt instruments pursuant to the directives and requirements
.
(b) The amount of funds available for direct lending and
other debt instruments shall be determined by the
program manager directives and requirements
. In its capacity as a direct lender, the corporation may sell
in the secondary market the guaranteed portion of each loan , if
guaranteed, so as to raise additional funds for direct
lending. The office shall issue regulations governing these
direct loans, including the maximum amount of these loans.
(c) To execute the direct loan and other debt instrument
programs established in this chapter, the program
manager bank may loan trust funds to a
corporation located in a rural area for the
express purpose of lending those funds to an identified borrower. The
loan authorized by the program manager bank
to the corporation shall be on terms similar to the loan
between the corporation and the borrower.
(d) The amount of the loan may be in excess of the amount of a
loan to any individual borrower, but actual disbursements pursuant to
the office bank loan agreement shall
be required to be supported by a loan agreement between the borrower
and the corporation in an amount at least equal to the requested
disbursement. The loan between the bank and the corporation shall be
evidenced by a credit agreement. In the event that any loan between
the corporation and borrower is not guaranteed by a governmental
agency, the portion of the credit agreement attributable to that loan
shall be secured by assignment of any note, executed in favor of the
corporation by the borrower to the bank. The terms and conditions of
the credit agreement shall be similar to the loan agreement between
the corporation and the borrower, which shall be collateralized by
the note between the corporation and the borrower.
(e) In the absence of fraud on the part of the corporation, the
liability of the corporation to repay the loan to the bank is limited
to the repayment received by the corporation from the borrower,
except in a case where the United States Department of Agriculture
requires exposure by the corporation in rule or regulation. The
corporation may use trust funds for loan repayment to the
office bank if the corporation has exhausted a
loan loss reserve created for this purpose. Interest and principal
received by the office bank from the
corporation shall be deposited into the same account from which the
funds were originally borrowed.
(f) Upon the approval of the program manager, a corporation shall
be authorized to borrow trust funds from the bank for the purpose of
relending those funds to small businesses. A corporation shall
demonstrate to the program manager that it has the capacity to
administer a direct loan program, and has procedures in place to
limit the default rate for loans to startup businesses. Not
more than 25 percent The percentage of any trust
fund account shall to be used for the
direct lending established pursuant to this
subdivision . A loan to a corporation shall not exceed the
amount of funds likely to be lent to small businesses within three
months following the loan to the corporation shall be
established in the directives and requirements .
(g) A corporation shall not issue a direct loan or other financial
product, unless and until it determines that all of the following
conditions are satisfied:
(1) The direct loan or other financial product assistance would
not be granted by a financial company or financial institution under
reasonable terms and conditions and the borrower has demonstrated a
reasonable prospect of repayment.
(2) The loan or financial product proceeds will be used
exclusively in this state.
(3) The direct loan or financial product qualifies as a small
business loan or employment incentive loan.
(4) The borrower has a minimum equity interest in the business as
determined by the directives and requirements.
(5) As a result of the direct loan or other debt instrument, the
jobs generated or retained demonstrate reasonable conformance to any
directives and requirements specifying employment criteria.
(g)
(h) The maximum loan or other debt instrument
amount to a small business shall be set by the program
manager, but in no case shall it be more than three hundred thousand
dollars ($300,000) directives and requirements
. In the absence of fraud on the part of the corporation, the
repayment obligation pursuant to the loan or other
debt instrument to the corporation shall be limited to the
amount of funds received by the corporation for the loan
or other debt instrument to the small business and any
other funds received from the office bank
that are not disbursed. The corporation shall be authorized to
charge a fee to the small business borrower, in an amount determined
by the executive director pursuant to regulation
pursuant to the directives and requirements . The
program programs provided for in this
subdivision shall be available in all geographic areas of the state.
Article 8. 9. Disaster Loan
Guarantees
63089.90. (a) A Pursuant to Section
8684.2 and the contract between a corporation and the bank, a
corporation may, in an area affected by a state of emergency within
the state and declared a disaster by the President of the United
States, the Administrator of the United States Small Business
Administration, or the United States Secretary of Agriculture, or
declared to be in a state of emergency by the Governor of California,
provide loan guarantees from funds allocated in Section 63089.55 to
small businesses, small farms, nurseries, and agriculture-related
enterprises that have suffered actual physical damage or significant
economic injury as a result of the disaster.
(b) If regulations have not otherwise been adopted, the
The bank board may adopt or readopt
regulations directives and requirements to
implement the disaster loan guarantee program authorized
by this section. The bank board may adopt these regulations
as emergency regulations in accordance with Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2, and for
purposes of that chapter, including Section 11349.6, the adoption of
the regulations shall be considered by the Office of Administrative
Law to be necessary for the immediate preservation of the public
peace, health and safety, and general welfare. Notwithstanding
subdivision (e) of Section 11346.1, the regulations shall be repealed
within 180 days after their effective date unless the office
complies with Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2, as provided in subdivision (e) of Section
11346.1. Any regulations adopted under Chapter 1
(commencing with Section 14000) of Part 5 of Division 3 of Title 1 of
the Corporations Code shall remain in effect until the bank adopts
directives and requirements.
(c) A corporation shall not issue a disaster loan guarantee unless
and until it determines that the following conditions are satisfied:
(1) The borrower cannot reasonably obtain a loan without some form
of credit enhancement.
(2) The borrower has demonstrated a reasonable prospect of
repayment.
(3) The guaranteed loan will be used exclusively in this state.
(4) The disaster loan qualifies as a small business loan or
employment incentive loan.
(c)
(d) Allocations pursuant to subdivision (a) shall be
deemed to be for extraordinary emergency or disaster response
operations costs incurred by the office
issuance of disaster loan guarantees .
Article 9. Energy Efficiency Loans
63089.93. (a) Corporations may grant energy efficiency
improvement loans.
(b) The bank shall enter into an agreement with the California
Energy Extension Service of the Office of Planning and Research to
assist small business owners in reducing their energy costs through
low-interest loans and by providing assistance and information.
Article 10. Surety Bonds Bond
Guarantees
63089.95. In furtherance of the purposes set forth in Section
63088.1 of this code and Section 14002 14001
of the Corporations Code, a corporation may do any one or more
of the following activities, but only to the extent that the
activities are authorized pursuant to the contract between the bank
and corporation: guarantee, endorse, or act as surety on the bonds,
notes, contracts, or other obligations of, or assist financially, any
person, firm, corporation, or association, and may establish and
regulate the terms and conditions with respect to any such loans or
financial assistance and the charges for interest and service
connected therewith, except that the corporation shall not make or
guarantee any loan, unless and until it determines:
(a) There is no probability that the loan or other financial
assistance would be granted by a financial institution or
financial company under reasonable terms or conditions, and the
borrower has demonstrated a reasonable prospect of repayment of the
loan.
(b) The loan proceeds shall will be
used exclusively in this state.
(c) The loan qualifies as a small business loan or an employment
incentive loan.
(d) That the The borrower has a
minimum equity interest in the business as determined by the
director directives and requirements .
(e) As a result of the loan, the jobs generated or retained
demonstrate reasonable conformance to the regulations
directives and requirements specifying
employment criteria.
63089.96. (a) In addition to the authority granted by Section
63089.95, upon approval of the executive director,
pursuant to the directives and requirement
s a corporation may act as guarantor on a surety bond for
any small business contractor, including, but not limited to, women,
minority, and disabled veteran contractors.
(b) The provisions of subdivision (a) allowing a corporation to
act as a guarantor on surety bonds may be funded through appropriate
state or federal funding sources. Federal funds shall be
deposited in the Federal Trust Fund in the State Treasury in
accordance with Section 16360, for transfer to the expansion fund.
Article 11. Reporting
63089.97. (a)
Except as otherwise provided in this title, the trust fund account
shall be used solely to make loans, guarantee bonds, and guarantee
loans, approved by the corporation, that meet the loan criteria under
this chapter. The state shall not be liable or obligated in any way
as a result of the allocation of state moneys to a trust fund account
beyond the state moneys that is allocated and deposited in the fund
pursuant to this title, and that is not otherwise withdrawn by the
state pursuant to this chapter. Each corporation shall
provide to the program manager, in a fo rmat prescribed
by him or her, the following data and reports:
(b)
(a) A summary of all loans and bonds
outstanding loans, bonds, and other credit enhancements
to which a state corporation guarantee
, as authorized by this chapter, is attached
shall be submitted to the program manager upon execution of the loan
agreement and periodically thereafter , on a schedule
determined by the program manager .
(c)
(b) A summary of all loans
outstanding loans and other debt instruments made by a
corporation shall be submitted to the program manager upon
execution of the loan agreement and periodically thereafter
, as authorized by this chapter, on a schedule
determined by the program manager .
(c) A summary of all outstanding other financial project
obligations made by a corporation, as authorized by this chapter, on
a schedule of determined by the program manager.
(d) Statement of economic interests from each designated person
pursuant to Section 87302.
(e) No later than July 31 of each fiscal year, commencing January
1, 2014, each of the following documents:
(1) A copy of the corporation board approved budget for the
current fiscal year.
(2) Projected fiscal year summary of authorized program activities
including loans, loan guarantees, bond guarantees, and other
financial product activity supported by the expansion fund.
(3) A copy of the written plan of operation or strategic plan for
the current fiscal year as approved by the corporations board of
directors.
(4) A copy of the current and valid articles of incorporation and
bylaws of the corporation with noted amendments from the prior fiscal
year.
(f) No later than October 31 of each year commencing January 1,
2014, a copy of the corporation's prior fiscal year audit, auditor
findings, if any, and finding responses.
(g) Any other statistical and other data, reports, or other
information required by the directives and requirements or the
program manager.
63089.98. (a) Annually, not later than January 1 of each year
commencing January 1, 2014, the program manager shall prepare
a report regarding the loss experience for the expansion
fund for loan guarantees, loss reserves, and surety bond guarantees
for the preceding fiscal year. At a minimum, the report shall also
include data regarding numbers of surety bond and loan guarantees
awarded through the expansion fund, including ethnicity
and submit to the Governor and the Legislature, pursuant to
Section 9795, a report for the preceding fiscal year ending June 30,
containing the expansion fund and trust fund financial product
activity of each corporation, including all of the
following:
(1) Loans, guarantees, and other financial products awarded and
outstanding balances.
(2) Default and loss statistics.
(3) Employment data.
(4) Ethnicity and gender data of
participating contractors and other entities, and experience of
surety insurer participants in the bond guarantee program.
The report shall include the information described in Section
63089.66. The
(5) Significant events.
(b) The program manager shall
post the information report on the
bank' bank's Internet Web site
and submit notice report to the Governor and the Legislature when
that information is available on its Internet Web site .
(b) A corporation shall also report to the program manager, or his
or her designated representative, all statistical and other reports
required by this title, responses to audit reports, budget
requirements, invoices submitted for payment by the state, and
information concerning loans made or guaranteed.
63089.99. Pursuant to subdivision (f) of Section 8684.2, within
60 days of the conclusion of the period for guaranteeing loans under
any small business disaster loan guarantee program conducted for a
disaster as authorized by Section 8684.2 or 200030, the bank shall
provide a report to the Legislature on loan guarantees approved and
rejected by gender, ethnic group, type of business and location, and
each participating loan institution pursuant to Section 9795. The
bank need only submit one report to comply with this section and
subdivision (f) of Section 8684.2.
SEC. 4. SEC. 5. No reimbursement is
required by this act pursuant to Section 6 of Article XIII B of the
California Constitution because the only costs that may be incurred
by a local agency or school district will be incurred because this
act creates a new crime or infraction, eliminates a crime or
infraction, or changes the penalty for a crime or infraction, within
the meaning of Section 17556 of the Government Code, or changes the
definition of a crime within the meaning of Section 6 of Article XIII
B of the California Constitution.
SEC. 5. SEC. 6. This act is an
urgency statute necessary for the immediate preservation of the
public peace, health, or safety within the meaning of Article IV of
the Constitution and shall go into immediate effect. The facts
constituting the necessity are:
It is necessary that this bill take effect immediately in order to
provide, as is necessary to timely implement the Governor's
reorganization plan, for a better managed and more efficient
transition of small business assistance programs from the soon to be
defunct Business, Transportation and Housing Agency to the California
Infrastructure and Economic Development Bank within the Governor's
Office of Business and Economic Development.