BILL ANALYSIS �
SB 1116
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Date of Hearing: July 2, 2012
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Mike Eng, Chair
SB 1116 (Leno) - As Amended: June 27, 2012
SENATE VOTE : 39-0
SUBJECT : California Pollution Control Financing Authority:
Capital Access Loan Program.
SUMMARY : Decreases the minimum contribution required of
borrowers who participate in the Capital Access Loan Program
(CalCAP) and would increase the length of time that a financial
institution has in which to apply to the California Pollution
Control Financing Authority (CPCFA) to enroll a qualified loan
in CalCAP. Specifically, this bill :
1)Extends the amount of time from 10 days to 15 days for a
financial institution to notify the CPCFA to enroll a
qualified loan under CalCAP.
2)Decreases the minimum contribution required of borrowers who
participate in the CalCAP from 2% to 1% of the principal
amount of the loan.
3)Provides a sunset date for #2 above of April 1, 2017.
4)Provides that the executive director may authorize an
additional 5 days for a financial institution to submit the
written notification to the CPCFA on a loan-by-loan basis for
a reason limited to conditions beyond the reasonable control
of the financial institution.
EXISTING LAW provides for CalCAP, administered by the CPCFA to
contract with eligible financial institutions for the purpose of
allowing those financial institutions to participate in CalCAP,
requires the CPCFA to establish a loss reserve account for each
financial institution with which the authority enters into a
contract, requires participating borrowers and participating
financial institutions to pay the same amount into the lender's
loan loss reserve account, and caps the amount that may be
deposited by any single participating financial institution into
any individual loan loss reserve account over a three-year
period, in connection with any single borrower or any group of
borrowers among which a common enterprise exists, at $100,000.
�Health and Safety Code Section 44559 et seq]
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FISCAL EFFECT : Unknown.
COMMENTS :
According to the sponsor of the measure, California State
Treasurer, Bill Lockyer, SB 1116 will increase access to small
business loans supported by CalCAP by reducing from 2% to 1% the
minimum contribution amount for the borrower and lender to
CalCAP reserve accounts, and extending the time for a lender to
submit a loan enrollment application to CalCAP.
Background:
CalCAP is administered by the State Treasurer under the CPCFA
fund. In 1972, CPCFA was established to aid businesses' efforts
to move towards more environmentally-friendly practices. In
the 1970s and 1980s, CPCFA had a surplus of revenue that the
Legislature and State Treasurer decided to use to establish
CalCAP and use the funds towards loan access for small
businesses. Since 1994, CPCFA funds have supported CalCAP;
however, in more recent years the CPCFA funds diminished.
In 2007, various programs within CPCFA, including CalCAP, were
narrowed or even cut in order to prevent overextension of CPCFA
funds. CalCAP continued, but less money was used for small
business loan assistance from 2008 to 2010. In 2010, the
Legislature voted to assist small business financing and boost
the CalCAP program, granting it a $6 million appropriation from
the General Fund. In addition, CalCAP received State Small
Business Credit Initiative Act of 2010 federal funds in the
amount of $84 million that must be spent by 2017. While the
State Treasurer previously found it necessary to reduce and
constrain the program, CalCAP now has a large amount of capital
at its disposal with most of it required to be spent by 2017.
Thus, SB 1116 expands the CalCAP program making it more flexible
and convenient for lenders and borrowers to access this
additional funding.
Lenders participating in CalCAP are largely dictated by the
contribution requirements of the lender, borrower and CalCAP to
the loan loss reserve account. Current state law requires the
borrower and lender to each contribute a minimum of 2% (and a
maximum of 3.5%) of the loan amount into the reserve fund.
Federal law, however, authorizes borrowers and lenders to
contribute 1% to 3.5% into reserve funds, with the state
matching the combined contributions of the borrower and lender.
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Current law also stipulates that lenders in the CalCAP program
must submit loan enrollment applications to CalCAP within ten
days of making a loan. Smaller lenders have found it difficult
to meet the tight timeline to submit the necessary paperwork to
enroll the loan in the CalCAP program. CalCAP does not have any
authority or flexibility to extend the deadline beyond ten days
without legislation.
The lowered borrower and lender contribution amounts will sunset
in 2017 to coincide with the expiration of the $84 million in
federal funds. The federal funds may be used to enroll loans in
CalCAP until December 31, 2016. While no more federal funds may
be used to enroll loans after that date, the State Treasurer's
Office may use the federal funds until March 31, 2017 to cover
any remaining administrative costs necessary to wrap up the use
and expenditure of the federal funds. Without further action
from the Legislature, the minimum contribution for lenders and
borrowers will go back to 2% on April 1, 2017.
CalCAP facilitates small business lending in California by
helping lenders reduce the risk of lending to small businesses.
By providing a form of portfolio insurance through loan loss
reserve accounts, CalCAP encourages banks and other financial
institutions to make loans to small businesses that are having
difficulty obtaining capital. CalCAP, the borrower and the
lender all contribute funds to a loan loss reserve account
associated with the lender. These funds are pooled together and
can be used to cover losses associated with any enrolled loan.
CalCAP collects all interest earned on reserve accounts. The
interest earnings are then used for program purposes.
Businesses with 500 or fewer employees are eligible to obtain
loans that can be enrolled in CalCAP, provided that their
principal place of business is in California and a minimum of
51% of all employees, business income, sales, or payroll is in
the state. There is no minimum amount for a CalCAP loan and the
maximum loan enrollment can be $2.5 million. CalCAP has grown
and assisted many small businesses as conventional financing has
become more difficult to obtain. In 2011, more than 1,500 small
business loans were enrolled in CalCAP; almost three times as
many as in 2009.
SB 1116 aids CalCAP in spending federal funds that expire in
2017, the 1% minimum lender and borrower contribution rate will
sunset on April 1, 2017 to coincide with the end of the federal
funds. By increasing access to CalCAP the State Treasurer will
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be able to more effectively distribute the outstanding Federal
funds in a timely manner and give small businesses more access
to loans needed to help their businesses succeed and grow.
PRIOR AND RELATED LEGISLATION
AB 796 (Blumenfield): Would increase 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.
Pending in Senate Energy, Utilities and Communications
Committee.
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.
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.
AB 1632 (Blumenfield), 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.
REGISTERED SUPPORT / OPPOSITION :
Support
California State Treasurer Bill Lockyer (Sponsor)
California Bankers Association (CBA)
Opposition
None on file.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
SB 1116
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