BILL ANALYSIS �
SB 1116
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator S. Joseph Simitian, Chairman
2011-2012 Regular Session
BILL NO: SB 1116
AUTHOR: Leno
AMENDED: As Introduced
FISCAL: Yes HEARING DATE: April 23, 2012
URGENCY: No CONSULTANT: Peter Cowan
SUBJECT : CALIFORNIA CAPITAL ACCESS PROGRAM
SUMMARY :
Existing law :
1) Establishes the California Pollution Control Financing
Authority (CPCFA) with specified powers and duties, and
authorizes CPCFA to approve financing for projects or
pollution control facilities to prevent or reduce
environmental pollution. (Health and Safety Code �44550 et
seq.).
2) Authorizes CPCFA to establish loss reserve accounts for
financial institutions participating in the California
Capital Access Program (CalCAP) that provide loans to
qualifying small businesses; and to make use of funds
provided by federal capital access programs or other
sources for this purpose (�44559 et seq.), provided that:
a) A financial institution seeking to enroll a loan
under the program and obtain the loss protection
provided by the reserve account notify CPCFA, as
specified, within 10 days of making the loan.
b) When making a qualified loan to be enrolled under the
program, financial institutions and the qualified small
business each pay an equivalent fee of between 2 and
3.5% of the loan principle into the loss reserve account
for the financial institution. The financial
institution may cover the fee of the borrower, or upon
agreement with the borrower recover the costs of the
institution's payments from the borrower.
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c) CPCFA transfer to the loss reserve account an amount
equal to, either the amount required by any federal
program or other source from which matching funds are
available; or an amount equal to the fees paid by the
financial institution, or 150% of those fees if the
business is located within a severely affected
community, as defined; whichever is greatest.
This bill :
1) Extends the deadline for financial institutions to notify
CPCFA regarding an enrolled loan from 10 to 15 days after a
loan is made.
2) Reduces the minimum fee paid by the financial institution
and the borrower from 2% each to 1% each.
COMMENTS :
1) Purpose of Bill . According to the author, SB 1116 "will
increase access to small business loans supported by
�CalCAP] by reducing the minimum contribution amount for
the borrower and lender to CalCAP reserve accounts from 2%
to 1%, and extending the time for a lender to submit a loan
enrollment application to CalCAP."
2) Loan loss reserve accounts . Loan loss reserve accounts are
a form of partial loan guarantee. Small businesses that
fall outside of traditional lending or underwriting
criteria can apply for CalCAP loans from participating
financial institutions. The participating financial
institutions establish all of the terms and conditions of
CalCAP loans. Under CalCAP, accounts are established for
each lending institution and accumulate funds from the
required fees and deposits from CPCFA for all loans
enrolled at that institution. The fees paid by borrowers
and lender are identical, and range from 2 to 3.5%. CPCFA
contribution range from 3 to 10.5% depending on the source
of the funds and whether the business is located within a
"severely affected community" (see Existing Law #2 c). If
a lender sustains a loss resulting from a loan enrolled
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under CalCAP they may apply to CPCFA to cover those losses
from the loan loss reserve account. The lender must return
recoveries from the borrower, less expenses, to the loss
reserve account.
3) Federal funds . As part of the federal Small Business
Credit Initiative Act of 2010, CalCAP received up to $84
million to be released in three $28 million portions. The
first portion was released in April of 2011 and subsequent
portions will be released once the previous portion is
exhausted. Any funds not spent by the end of 2016 revert
to the federal government. Conditions attached to these
funds require lenders and borrowers contribute between 1
and 3.5% of loan amount to the loss reserve account
compared to a range of 2-3.5% under existing state law
(Existing Law #2 b). The sponsor, the State Treasurer's
Office (STO), is seeking to increase borrower participation
by reducing their minimum contribution, resulting in
increased expenditures of federal funds.
4) Extending the deadline . Extending the deadline for a
lender to submit a loan enrollment application to CalCAP
from 10 days to 15 days is intended by STO to provide
flexibility for small lenders, in particular, that may have
difficulty meeting short turn-around times.
5) Support concerns . According to the California Bankers
Association SB 1116 "will increase access to small business
loans supported by CalCAP and allow the program to continue
to thrive by giving small businesses better access to
loans, fostering business ventures and building our
economy." STO notes that SB 1116 "will make �CalCAP] more
consistent with Federal law and ? easier to administer both
for CalCAP and the participating lenders."
6) Senate Banking and Financial Institutions Committee
amendments to be taken in Senate Environmental Quality
Committee . SB 1116 was approved by the Senate Banking and
Financial Institutions Committee April 11, 2012, with
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amendments to be taken in the Senate Environmental Quality
Committee. Those amendments sunset the provision that
lowers the minimum lender and borrower contribution amount
to 1%. When the provision sunsets April 1, 2017, the
minimum lender and borrower contribution amount would go
back to 2%. The provision of the bill that extends the
submission timeline from ten to fifteen days would not
sunset.
7) Prior and Related Legislation :
a) AB 1632 (Committee on Budget) Chapter 731, Statutes
of 2010 transferred a total of $32.4 million from the
General Fund to the California Small Business Expansion
Fund, California Capital Access Fund, and the California
Economic Development Fund, to support small businesses
and facilitate matching funds that would ensure a full
complement of federal funding for these programs.
b) AB 796 (Blumenfield) increases the maximum allowable
contribution by a financial institution participating in
CalCAP to $200,000, provided that the matching
contribution made by the authority is funded exclusively
from funds made available pursuant to the federal Small
Business Jobs Act of 2010. AB 796 is with the Senate
Governance and Finance Committee.
c) AB 901 (V. Manual Perez) Chapter 483, Statutes of
2011 added microbusiness lenders and small business
financial development corporations to the list of
financial institutions eligible to participate in
CalCAP.
d) AB 981 (Hueso) Chapter 484, Statutes of 2011 restored
CalCAP's severely affected area funding augmentations;
authorized the authority to withdraw less than the full
amount of accumulated interest from loan loss reserve
accounts, to offset its costs to administer CalCAP; and
added community development financial institutions to
the list of financial institutions eligible to
participate in CalCAP.
SOURCE : California State Treasurer's Office
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SUPPORT : California Bankers Association
OPPOSITION : None on file