BILL ANALYSIS �
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THIRD READING
Bill No: SB 1465
Author: Yee (D), et al.
Amended: 5/29/12
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMM. : 7-5, 4/10/12
AYES: Wright, Calderon, Cannella, Corbett, De Le�n,
Hernandez, Yee
NOES: Anderson, Berryhill, Padilla, Walters, Wyland
NO VOTE RECORDED: Evans
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/24/12
AYES: Kehoe, Alquist, Lieu, Price, Steinberg
NOES: Walters, Dutton
SUBJECT : Loan programs
SOURCE : State Controller
DIGEST : This bill requires the Secretary of Business,
Transportation and Housing (BT&H), to the extent that the
Secretary determines to be practical, to enter into loans
and loan guarantees that provide export financing. This
bill sunsets on March 31, 2017.
ANALYSIS : The federal State Small Business Credit
Initiative Act of 2010 allocated $168.6 million to the
state, split between the Small Business Loan Guarantee
Program (SBLGP) in BT&H and the California Pollution
Control Financing Authority (CPCFA) in the STO. Funds not
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allocated by 2017 revert to the federal government.
For the SBLGP, any small business is eligible for a loan
used primarily in the state and for any standard business
purpose beneficial to the applicant's business, such as
expansion into new facilities or purchase of new equipment.
Guarantees can cover up to 90% of the loan amount, with
the guaranteed portion of the loan not exceeding $500,000.
The term of the loan guarantee may extend up to seven
years. Interest rates are negotiated between the borrower
and the lender. Collateral is generally required with each
transaction tailored to meet the borrower's financial
situation.
Within the CPCFA, the California Capital Access Program
(CalCAP) insures loans to finance the acquisition of land,
construction or renovation of buildings, the purchase of
equipment, other capital projects and working capital.
CalCAP is a loan loss insurance program that aims to help
small businesses obtain loans for which they would
otherwise be ineligible. Participating financial
institutions establish all the terms and conditions of
CalCAP loans. Once the financial institution approves a
CalCAP loan, it establishes a loan loss reserve account.
The financial institution and the borrower pay an equal
amount to the reserve account that is equal to 2% to 3.5%,
as set forth in statute, of the loan principal, depending
on the lender's perception of the borrower's
creditworthiness. CalCAP matches the total paid into the
reserve account.
The maximum loan amount is $5 million and the maximum
enrolled amount is $2.5 million. Each individual borrower
is limited by a maximum $2.5 million enrolled over a three
year period. CalCAP allows a maximum lender/borrower
contribution for any single borrower in a three year period
of $100,000.
This bill requires the Secretary, to the extent that the
Secretary determines to be practical, to enter into loans
or loan guarantee agreements with financial institutions
that provide export financing in the state for the purpose
of increasing exports to out-of-state markets and
increasing jobs in California. This bill sunsets on March
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31, 2017.
Related Legislation
SB 1116 (Leno) reduces the minimum contribution paid by
financial institutions and borrowers from 2% to 1% of the
loan into a loan loss reserve account under CalCAP and
extends the time that financial institutions have to enroll
a loan into CalCAP. The bill is presently on the Senate
Third Reading file.
Governor Brown is proposing to consolidate the SBGLP into
the Governor's Office of Business and Economic Development.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, there
would be minor, absorbable costs in federal funds to BT&H
through 2016-17 for administration of an export loan
program.
Unknown, potentially hundreds of thousands of dollars in
federal funds for increased participation in the SBLGP
and the CPCFA through 2016-17.
Average cost of $4,000 to $7,000 generally per $100,000
CPCFA loan.
Potential General Fund loans by the CPCFA.
SUPPORT : (Verified 5/29/12)
State Controller (source)
Latino Business Chamber of Greater Los Angeles
ARGUMENTS IN SUPPORT : The Latino Business Chamber of
Greater Los Angeles states this bill seeks to help small
businesses secure financing to access out-of-state markets
and help California's economy and job market recover from
the Great Recession. To ensure the State is targeting its
guarantees to the most worthy businesses, this bill will
also establish an oversight committee of high-level trade
experts who will advise the State on trends and
opportunities in export financing. This bill is based on
the principles of the highly-successful California Export
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Finance Office (CEFO), a program within the former
Technology, Trade, and Commerce Agency, which provided loan
guarantees to help qualified companies acquire short-term
working capital loans to complete export sales. Over its
nearly 20-year life, less than 2% of borrowers defaulted.
Near its peak, in 1999-2000, the CEFO issued loan
guarantees for 18 export transactions valued at $28
million, creating 227 jobs in the State-at no cost to the
State.
DLW:kc 5/29/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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