BILL ANALYSIS �
AB 2671
Page 1
ASSEMBLY THIRD READING
AB 2671 (Jobs, Economic Development, and the Economy Committee)
As Amended April 26, 2012
Majority vote
ECONOMIC DEVELOPMENT 6-0 APPROPRIATIONS 16-0
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|Ayes:|V. Manuel P�rez, Grove, |Ayes:|Fuentes, Harkey, |
| |Beall, Block, Hueso, | |Blumenfield, Bradford, |
| |Morrell | |Charles Calderon, Campos, |
| | | |Davis, Gatto, Hall, Hill, |
| | | |Lara, Mitchell, Nielsen, |
| | | |Norby, Solorio, Wagner |
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SUMMARY : Makes the 2007 program enhancements permanent by
removing the sunset on the maximum allowable leverage of reserve
funds under the Small Business Loan Guarantee Program (SBLGP).
More specifically, this bill deletes the sections of the law
that would become effective January 1, 2013 that set the maximum
reserve of four dollars for every one dollar of loan guaranteed.
The effect of this change is to make the five dollars for every
one dollar guarantee the permanent maximum reserve. The
Director of the SBLGP has the discretion to set a lesser
leverage amount for the overall program and for any individual
small business financial development corporation (FDC).
EXISTING LAW :
1)Establishes the SBLGP within the Business, Transportation and
Housing Agency (BTH) for the purpose of assisting small
businesses in obtaining long-term loans or lines of credit
from conventional financial institutions, which small
businesses would not otherwise qualify for without the
guarantee. Under this program, FDCs act as financial
intermediaries between the state, the small business, and the
financial institution.
2)Establishes the California Small Business Expansion Fund
(Expansion Fund) for the purpose of retaining the moneys which
separately capitalize the SBLGP and paying out defaulted loan
guarantees issued under the SBLGP. Each account within the
Expansion Fund is legally separate and is prohibited from
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securing loan guarantees or other obligations of another FDC.
The state is not liable or obligated beyond the funds
allocated and deposited in an individual trust fund account
within the Expansion Fund.
3)Authorizes the Director of the SBLGP to:
a) Reallocate moneys between individual accounts based on
which corporations most effectively use the guarantee
funds; and,
b) Recommend whether the Expansion Fund and individual FDC
trust fund accounts are to be leveraged, and if so, how
much the funds may be leveraged.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, the bill has a negligible fiscal impact.
COMMENTS : The SBLGP enables a small business to obtain a term
loan or line of credit when it cannot otherwise qualify for a
loan on its own. The state, working through 11 FDCs, offers
direct loans or loan guarantees that a qualifying small business
borrower could not otherwise obtain.
Applicants must meet the definition of a small business (100 or
fewer employees) with the specific market rate loan terms and
interest rates being negotiated between the borrower and the
lender. Proceeds of the loan must be used primarily in
California for any standard business purpose applicable to the
applicant's business. The guarantee program provides guarantees
covering up to 90% of the loan, but not exceeding $500,000. The
guarantee program allows a business to not only obtain a loan
but to also establish credit with a lender. The business is
then more likely to obtain additional financing on its own.
In 2010-11, approximately $5 million was made available for loan
guarantees under the SBLGP, which leveraged $13 million in small
business loans. During this period, 99 guarantees were
provided, creating and/or retaining 595 jobs. As noted in these
numbers, 2010-11 was a slow year in providing guarantees; in the
current year (2011-12), however, the program has demonstrated
higher volume with 38 guarantees within the first quarter.
As of the close of the first quarter of 2011-12, the outstanding
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loan portfolio was $37 million in total reserves covering $215
million in total loans, representing 1,548 in outstanding
guarantees.
Reorganization :
On May 3, 2012, the Governor submitted to the Legislature a
broad-based reorganization. Among other things, Governor's
reorganization plan (GRP) 2 proposes dismantling BTH and the
State and Consumer Services Agency (SCS) and moving programs to
other existing and new agencies. Overall, the number of state
agencies is reduced from 12 to 10.
In addition, the proposal transfers the following programs from
BTH to the Governor's Office of Business and Economic
Development:
1)Small Business Loan Guarantee Program;
2)The California Travel and Tourism Commission;
3)The California Film Commission;
4)The Film California First Program; and,
5)The Infrastructure and Economic Development Bank.
The Legislature now has 60 days to consider the plan. The plan
goes into effect unless the Legislature takes an action to
disapprove the plan with a majority of the Members in either
house voting.
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090 FN:
0003677