BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 2671
                                                                  Page  1

          Date of Hearing:   May 16, 2012

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

              AB 2671 (Committee on Jobs and Economic Development) - As 
                              Amended:  April 26, 2012 

          Policy Committee:                              JEDE Vote:6-0

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              

           SUMMARY  

          This bill removes the sunset on statute allowing increased 
          leverage of reserve funds under the Small Business Loan 
          Guarantee Program (SBLGP).  The effect of this bill change is to 
          retain the current five dollars of loan guarantees for every 
          dollar held in reserves. 

           FISCAL EFFECT  

          Negligible fiscal impact. 

           COMMENTS  

           1)Author's purpose  :  According to the author, AB 2671 is the 
            Assembly Jobs, Economic Development, and the Economy Committee 
            omnibus bill on access to capital and economic development 
            issues.  The author argues as California slowly moves out of 
            the recession, maintaining financing options for small 
            businesses is essential.

           2)Small Business Loan Guarantee Program  :  The SBLGP makes loans 
            to a small business that cannot otherwise qualify for a loan.  
            The state, working through 11 small business financial 
            development corporations (FDC), offers direct loans or loan 
            guarantees to a qualifying small business borrower.  
            Applicants must meet the definition of a small business (100 
            or fewer employees) with the borrower and lender negotiating 
            the specific market rate loan terms and interest rates.  Loan 
            proceeds must be used primarily in California for any standard 
            business purpose.  The program provides guarantees covering up 
            to 90% of the loan's value, up to a maximum loan of $500,000.  








                                                                  AB 2671
                                                                  Page  2

            The guarantee program allows a business to obtain a loan and 
            also establish credit with a lender, so the business can 
            obtain additional financing on its own.  In 2010-11, 
            approximately $5 million was made available for loan 
            guarantees, which leveraged $13 million in small business 
            loans.

           3)Reorganization.   The Governor submitted a reorganization plan 
            to the Little Hoover Commission, which includes transferring 
            economic development programs, including the SBLGP, from the 
            Business, Transportation and Housing Agency to the Governor's 
            Office of Business and Economic Development.  The Little 
            Hoover Commission is in the process of reviewing the plan 
            before it submits its recommendation to the Legislature.

           Analysis Prepared by  :    Roger Dunstan / APPR. / (916) 319-2081