BILL ANALYSIS Ó
AB 901
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CONCURRENCE IN SENATE AMENDMENTS
AB 901 (V. Manuel Pérez)
As Amended August 30, 2011
Majority vote
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|ASSEMBLY: |71-7 |(June 2, 2011) |SENATE: |39-0 |(September 1, |
| | | | | |2011) |
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Original Committee Reference: B. & F.
SUMMARY: Expands the definition of financial institutions
eligible to participate in the California Capital Access Program
(CalCAP) and increases CalCAP reporting requirements.
Specifically, this bill:
1)Defines "microbusiness lender" as a nonprofit or nonbank
lender that serves very small business in low- and moderate-
income communities that experience barriers in accessing
capital.
2)Establishes that a financial institution includes an insured
depository institution, insured credit union or community
development financial institution.
3)Adds, to the definition of financial institution, small
business financial development corporation or microbusiness
lender that meets standards established by the CPCFA.
4)Requires that when a financial institution contracts with the
CPCFA to use the North American Industry Classification
System, in addition, report the number of jobs created and the
number of jobs retained.
5)Requires the CPCFA to include in their annual report to the
Governor and Legislature the programmatic results which shall
include:
a) All outstanding loans on the date the report is
issued;
b) New loans issued since the report from the prior
year;
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c) Total number of businesses served;
d) Jobs created;
e) Jobs retained;
f) The geographic distribution of the loans; and,
g) The breakdown of businesses served by the industry
sector.
The Senate amendments add the definition of a "microbusiness
lender" and clarifies that a financial institution includes
depository institutions, insured credit union or a community
development financial institution.
EXISTING FEDERAL LAW enacted the Small Business Jobs Act (H.R.
5297) on September 27, 2010, which creates the Small Business
Lending Fund Program to direct the Secretary of the Treasury to
make capitol investment in eligible institutions in order to
increase the availability of credit for small businesses and to
amend the Internal Revenue Code of 1986 to provide tax
incentives for small business job creation (15 U.S.C. Sec. 631
et seq.).
EXISTING STATE LAW:
1)Defines the "California Capital Access Fund" as a fund created
within the CPCFA to be used for purposes of the program
(Health and Safety Code Section 44559.1).
2)Defines "financial institution" as a federal- or
state-chartered bank, savings association, credit union,
not-for-profit community development financial institution
certified under Part 1805 (commencing with Section 1805.100)
of Chapter XVIII of Title 12 of the Code of Federal
Regulations, or a consortium of these entities. A consortium
of those entities may include a nonfinancial corporation if
the percentage of capitalization by all nonfinancial
corporations in the consortium does not exceed 49% (Health and
Safety Code Section 44559.1).
3)Defines, "financial institution" as a lending institution that
has executed a participation agreement with the Small Business
Administration under the guaranteed loan program pursuant to
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Part 120 (commencing with Section 120.1) of Chapter I of Title
13 of the Code of Federal Regulations and meets the
requirements of Section 120.410 of Chapter I of Title 13 of
the Code of Federal Regulations, and a small business
investment company licensed pursuant to Part 107 (commencing
with Section 107.20) of Chapter I of Title 13 of the Code of
Federal Regulations. For loans where all or part of the fees
and matching contributions are paid by an entity participating
in the program pursuant to subdivision (e) of Section 44559.2,
"financial institution" also includes financial lenders, as
defined in Financial Code Section 22009, making commercial
loans, as defined in Financial Code Section 22502 (Health and
Safety Code Section 44559.1).
4)Requires the CPCFA to annually prepare a report to the
Governor and the Legislature that describes the financial
condition and programmatic results of the capital access loan
program for small businesses (Health and Safety Code Section
44559.6).
5)Establishes the California Small Business Financial
Development Corporation Law (Corporations Code Sections
14000-14091).
AS PASSED BY THE ASSEMBY, this measure is substantially similar
to the measure passed by the Senate.
FISCAL EFFECT: According to the Assembly Appropriations
Committee, minor and absorbable costs to the CPCFA.
COMMENTS: This bill is one of seven measures sponsored by the
Assembly Jobs, Economic Development and the Economy (JEDE)
Committee. AB 901(V. Manuel Pérez) expands the definition of
financial institutions to include a small business financial
development corporation or microenterprise development
organization that meets the standard established by the CPCFA.
This bill will give small business financial development
corporations and microbusiness lenders access to the $6 million
allocated in AB 1632 (Assembly Budget Committee), Chapter 731,
Statutes of 2010. Neither of these entities will have access to
funding allocated in the federal Small Business Jobs Act since
this act does not apply to these entities.
According to the California Association for Micro Enterprise
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Opportunity (CAMEO), a microenterprise is a business that
generally requires $35,000 or less in start-up capital and often
does not have access to the traditional commercial banking
sector. CAMEO reports that 85% of all businesses in the U.S.
are microenterprises. These very small firms generate close to
25% of all jobs in our economy.
The measure adds a definition of microbusiness lenders which is
a nonprofit or nonbank lender that serves very small businesses
in low- and moderate-income communities that experience barriers
in accessing capital. These businesses are often owned by
minorities, immigrants, women, and persons with disabilities.
Microbusiness lenders generally provide loans under fifty
thousand dollars ($50,000) and offer business technical
assistance, both preloan and postloan, to improve an applicant's
ability to qualify and successfully repay a loan.
Under California law, a small business financial development
corporation is a nonprofit corporation. When Corporations Code
Section 14002 was enacted it was the intent of the Legislature
"to promote the economic development of small businesses by
making available capital, general management assistance, and
other resources, including loan services, personnel, and
business education to small business entrepreneurs, including
women 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" (Corporations Code Section 14002).
This bill deletes the Standard Industrial Classification (SIC)
and replaces it with the North American Industry Classification
System (NAICS). This is a necessary change since SIC was
replaced by the NAICS in 1997, but several data sets are still
available with SIC-based data. Both SIC and NAICS classify
establishments by their primary type of activity. NAICS is the
standard used by federal statistical agencies in classifying
business establishments for the purpose of collecting,
analyzing, and publishing statistical data related to the U.S.
business economy.
NAICS was developed under the auspices of the Office of
Management and Budget (OMB). It was developed jointly by the
U.S. Economic Classification Policy Committee (ECPC), Statistics
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Canada, and Mexico's Instituto Nacional de Estadistica y
Geografia, to allow for a high level of comparability in
business statistics among the North American countries.
This bill also expands reporting requirements placed on the
CPCFA. The CPCFA is already required to report to the Governor
and Legislature annually regarding CalCAP but this bill provides
more detailed information that needs to be required in the
report.
Related legislation. AB 981 (Hueso) of 2011 would make various
changes to the California Capitol Access Loan Program with the
intention of making it easier to implement the Federal Small
Business Jobs Act.
Previous legislation. AB 1632 (Blumenfield), Chapter 731,
Statutes of 2010, transfers $32.4 million from the General Fund
to support four small-business and jobs programs that exist in
current law. More importantly, AB 1632 appropriates $6 million
to triple the size of CalCAP and provide statutory flexibility
to access federal funding in the Small Business Jobs Act.
According to the State Treasurer's office, who administers this
program, this appropriation potentially leverages over $135
million in loans, serving 1,000 businesses and creating or
retailing 3,200 jobs.
Analysis Prepared by: Kathleen O'Malley / B. & F. / (916)
319-3081
FN:
0002460