Bill Text: CA AB1247 | 2013-2014 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Business investments: Small Business Financial
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Passed) 2013-10-04 - Chaptered by Secretary of State - Chapter 537, Statutes of 2013. [AB1247 Detail]
Download: California-2013-AB1247-Amended.html
Bill Title: Business investments: Small Business Financial
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Passed) 2013-10-04 - Chaptered by Secretary of State - Chapter 537, Statutes of 2013. [AB1247 Detail]
Download: California-2013-AB1247-Amended.html
BILL NUMBER: AB 1247 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 5, 2013
AMENDED IN ASSEMBLY APRIL 17, 2013
INTRODUCED BY Assembly Member Medina
FEBRUARY 22, 2013
An act to repeal and add Chapter 1 (commencing with Section 14000)
of Part 5 of Division 3 of Title 1 of the Corporations Code, and to
add Chapter 6 (commencing with Section 63088) to Division 1 of Title
6.7 to, to repeal Sections 63089.5, 63089.63, 63089.64, and 63089.66
of, the Government Code, relating to business, and
making an appropriation therefor , and declaring the urgency
thereof to take effect immediately .
LEGISLATIVE COUNSEL'S DIGEST
AB 1247, as amended, Medina. Business investments: Small Business
Financial Assistance Act of 2013.
Existing law, the California Small Business Financial Development
Corporation Law, creates the California Small Business Board and the
California Small Business Expansion Fund, a continuously appropriated
fund, which includes General Fund moneys. Existing law authorizes
the formation of small business financial development corporations to
grant loans from, or guarantee loans made by a financial institution
or financial company, as defined, against, moneys awarded to the
corporation from the expansion fund for the purpose of stimulating
small business development. Existing law authorizes a director
designated by the Secretary of Business, Transportation and Housing
to perform specified duties under that law. A violation of certain
conflict-of-interest provisions by the director and other persons, as
specified, is a crime.
This bill would revise and recast these provisions, and would
transfer the administration of the California Small Business
Financial Development Corporation Law to the California
Infrastructure and Economic Development Bank and a program manager
designated by the executive director of the Infrastructure and
Economic Development Bank, as specified. The bill would expand the
definitions of "financial institution" and "financial company" for
those purposes. Because the above-described conflict-of-interest
provisions would apply to the director and executive director, and
other officers and employees, as specified, the bill would extend the
application of a crime, and impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Because this bill would expand the purposes for which a
continuously appropriated fund is expended, the bill would make an
appropriation.
This bill would declare that it is to take effect immediately as
an urgency statute.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Chapter 1 (commencing with Section 14000) of Part 5 of
Division 3 of Title 1 of the Corporations Code is repealed.
SEC. 2. Chapter 1 (commencing with Section 14000) is added to Part
5 of Division 3 of Title 1 of the Corporations Code, to read:
CHAPTER 1. CALIFORNIA SMALL BUSINESS FINANCIAL DEVELOPMENT
CORPORATIONS
Article 1. Introduction
14000. This chapter shall be known and may be cited as the
California Small Business Financial Development Corporation Law.
14001. (a) It is the intent of the Legislature in enacting this
chapter to promote the economic development of small businesses by
making available capital, general management assistance, and other
resources, including loan and equity investment services, personnel,
and business education to small business entrepreneurs, including
women and minority owned businesses, for the purpose of promoting the
health, safety, and social welfare of the citizens of California, to
eliminate unemployment of the economically disadvantaged of the
state, and to stimulate economic development, employment, minority
group, women, and disabled persons entrepreneurship.
(b) It is the further intent of the Legislature to provide a
flexible means to mobilize and commit all available and potential
resources in the various regions of the state to fulfill these
objectives, including federal, state, and local public resources, and
private debt and equity investment.
(c) It is the further intent of the Legislature that corporations
operating pursuant to this law, shall to the maximum extent feasible,
coordinate with other job and business development efforts within
their region directed toward implementing the purpose of this
part chapter .
(d) It is the further intent of the Legislature to provide
expanded resources allowing participation by small and emerging
contractors in state public works contracts. Increased access to
surety bonding resources will assist in supporting participation by
those firms in public works contracts, and by stimulating increased
participation by small firms, the state will benefit from increased
competition and lower bid costs.
14002. If any provision of this chapter or the application
thereof to any person or circumstances is held invalid, this
invalidity shall not affect other provisions or applications of the
chapter which can be given effect without the invalid provision or
application, and to this end the provisions of this chapter are
severable.
Article 2. Definitions
14003. Unless the context otherwise requires, the definitions in
this section shall govern the construction of this chapter.
(a) "Bank board" means the board of directors of the California
Infrastructure and Economic Development Bank.
(b) "Board" means the California Small Business Board.
(c) "Board of directors" means the board of directors of the
corporation.
(d) "Corporation" means any nonprofit California small business
financial development corporation created pursuant to this chapter.
(e) "Executive director" means the executive director of the
Infrastructure and Economic Development Bank.
(f) "Expansion fund" means the California Small Business Expansion
Fund.
(g) "Financial company" means banking organizations, including
national banks and trust companies, savings and loan associations,
certified community development financial institutions,
microlenders, microbusiness lenders, state
insurance companies, mutual insurance companies, and other public and
private banking, lending, retirement, and insurance organizations.
(h) "Financial institution" means regulated banking organizations,
including national banks and trust companies authorized to conduct
business in the state and state-chartered commercial banks, trust
companies, credit unions, and savings and loan associations.
(i) "Loan committee" means a committee appointed by the board of
directors of a corporation to determine the course of action on a
loan application pursuant to Chapter 6 (commencing with Section
63088) of Division 1 of Title 6.7 of the Government Code.
(j) "Program Manager" means the person
manager of a specific program as designated to this title by
the executive director of the Infrastructure and Economic Development
Bank.
(k) "Trust fund" means the money from the expansion fund that is
held in trust by a financial institution or financial
company. A trust fund is not a deposit of state funds and is not
subject to the requirements of Section 16506 of the Government Code.
(l) "Trust fund account" means an account within the trust fund
that is allocated to a particular small business financial
development corporation for the purpose of paying loan defaults and
claims on bond guarantees for a specific small business financial
development corporation.
Article 3. Program Manager
14004. (a) The program manager shall do all of the following:
(1) Administer this chapter.
(2) Make recommendations to the board on the approval or
disapproval of the articles of incorporation. This determination
shall be based upon the following:
(A) Review of the articles of incorporation and bylaws of the
corporation to determine whether they contain the provisions required
by this chapter and conform with the regulations adopted pursuant to
this chapter.
(B) A determination as to whether the legislative intent expressed
in Section 14001 shall be served by the proposed corporation.
(C) A determination as to whether the responsibility, character,
and general fitness of the individuals who will manage the
corporation are such as to command the confidence of the state and to
warrant the belief that the business of the proposed corporation
will be honestly and efficiently conducted in accordance with the
intent and purpose of this chapter and that they include
representatives of the financial and business community, as well as
the economically disadvantaged.
(3) Have the accounts of each corporation formed under this
chapter audited as of the close of business on June 30 of each year.
(4) Have the portfolio of each corporation audited a minimum of
once a year. Material audit exceptions that are not corrected by the
corporation within a reasonable period of time may result in the
suspension of the corporation pursuant to Section 63089.3 of the
Government Code.
(5) Review reports from the Department of Business Oversight and
inform corporations as to what corrective action is required.
(6) Examine, or cause to be examined, at any reasonable time, all
books, records, and documents of every kind, and the physical
properties of a corporation. The inspection shall include the right
to make copies, extracts, and search records.
(b) The program manager may attend and participate at corporation
meetings. The program manager, or his or her designee, shall be an ex
officio, nonvoting representative on the board of directors and loan
committees of each corporation. The program manager shall meet with
the board of directors of each corporation at least once each fiscal
year, commencing January 1, 2014.
1404.1. 14004.1. (a) The California
Small Business Board is hereby continued and created as a
subcommittee of an advisory board to the
California Infrastructure and Economic Development Bank Board ,
the executive director, and the program manager . The
California Small Business Board consists of the following membership:
(1) The Director of Finance or his or her designee.
(2) The Director of the Office of the Small Business Advocate or
his or her designee.
(3) The Treasurer or his or her designee.
(4) Two corporations selected by the corporations.
(5) Two members appointed by the Governor, one of whom will serve
as chair of the board, who are actively involved in the California
small business community.
(6) Two persons actively involved in the business or agricultural
communities, one appointed by the Speaker of the Assembly and one
appointed by the Senate Committee on Rules.
(7) Two Members of the Legislature, or their designees, one
appointed by the Speaker of the Assembly and one appointed by the
Senate Committee on Rules, so long as it does not conflict with the
duties of their duties as legislators.
(b) The California Small Business Board shall do each of the
following:
(1) Advise the program manager on matters regarding this part and
Chapter 6 (commencing with Section 63088) of Division 1 of Title 6.7
of the Government Code.
(2) Approve new corporations recommended by the program manager,
based on an examination of each of the following:
(A) Review of the articles of incorporation and bylaws of the
corporation to determine whether they contain the provisions required
by this chapter and conform with the regulations adopted pursuant to
this part.
(B) Determination as to whether the legislative intent expressed
in Section 14002 will be served by the proposed corporation.
(C) Determination as to whether the responsibility, character, and
general fitness of the individuals who will manage the corporation
are able to command the confidence of the state and to warrant the
belief that the business of the proposed corporation will be honestly
and efficiently conducted in accordance with the intent and purpose
of this chapter and that they include representatives of the
financial and business community, as well as the economically
disadvantaged.
(c) The public members of the board, at the discretion of the bank
board, may be reimbursed per diem and travel expenses pursuant to
state law.
Article 4. New Corporations
14005. Upon approval by the board to become a corporation, an
entity shall adopt or amend its articles of incorporation to comply
with the following:
(a) The name of the corporation shall include the words "small
business financial development corporation," except for those
corporations formed pursuant to this chapter prior to 2002, which may
also be called "small business development corporations," or those
formed prior to 1985, which may also be called "rural or urban
development corporations."
(b) The purposes for which the corporation is formed, which shall
be those specified in Section 14001. This requirement shall not be
deemed to preclude a statement of powers.
(c) A geographical description of the corporation's primary
service area.
(d) The name and addresses of seven or more persons who are to act
in the capacity of directors until the selection of their
successors.
(e) That the corporation is organized pursuant to the California
Small Business Financial Development Corporation Law.
14006. If the board determines that the facts disclosed by the
investigation provided by Section 14004 are true and finds that the
proposed incorporation meets all the requirements of this chapter,
the program manager shall approve the articles of incorporation and
endorse the approval thereon and forward the same to the Secretary of
State for his or her approval and filing. Likewise, the program
manager shall review all amendments to the articles to ensure
consistency with the purposes of the article.
14007. (a) The corporation's existence as a small business
development corporation begins upon the filing of the articles with
the Secretary of State and continues perpetually, unless otherwise
expressly provided for by law.
(b) If a corporation is suspended, the corporation may continue
its existence as a nonprofit corporation pursuant to the Nonprofit
Public Benefit Corporation Law (Part 2 (commencing with Section 5110)
of Division 2 of Title 1 of the Corporations Code), but shall no
longer be registered with the Secretary of State as a small business
financial development corporation. A corporation shall not enjoy any
of the benefits of a small business financial development corporation
following suspension.
14008. (a) Any request for proposal for selection of a
corporation shall be approved by the bank and require the winning
bidder to adopt or amend its bylaws to include provisions governing
the election and qualification of directors, the establishment and
functions of loan committees of the corporation, and the method of
selecting the representative of the corporation on the board.
(b) The bylaws shall provide for removal of officers only by a
two-thirds vote of the directors of the corporation.
14009. Each corporation shall have provisions establishing a
grievance procedure for employees, clients, or potential clients, to
appeal a decision or obtain redress of an action done by the staff or
loan committee of the corporation. The procedures shall be
established in writing during the probationary period of a new
corporation.
14010. The program manager may authorize the establishment of a
new corporation using a request for proposal process.
14011. The Nonprofit Public Benefit Corporation Law (Part 2
(commencing with Section 5110) of Division 2 of this title) applies
to corporations formed under this chapter, except as to matters
otherwise provided for in this chapter.
14012. For six months following the establishment of a
corporation, commencing upon filing of the articles of incorporation
with the Secretary of State, a corporation shall be on probation.
While on probation, a corporation may be suspended if suspension is
recommended by the program manager. This suspension is nonappealable
and not subject to the procedures for suspension applicable to a
corporation not on probation.
Article 5. Corporation Board
14013. The corporate powers of a corporation shall be exercised
by the board of directors.
14014. A request for proposal for selection of a corporation
shall require the winning bidder to adopt or amend its bylaws to
state that:
(a) A person may not serve on a board of directors who is not a
resident of, or person conducting business in, the service area
described in the articles of incorporation.
(b) Each board of directors shall include representatives from all
of the following:
(1) The financial community.
(2) The business community.
(3) The economically disadvantaged.
(c) Not more than one employee of the corporation may serve on the
board of directors at any one time.
(d) A person who has a financial interest related to a matter over
which the board has authority may not make, participate in making,
or in any way attempt to influence that matter.
14015. If any director ceases to meet the qualifications
established in Section 14014, he or she shall immediately vacate his
or her position as a director and such position shall be deemed
vacant.
14016. If any vacancy occurs in the elective membership of the
board of directors through death, resignation, or otherwise, the
remaining directors shall elect a person representing the appropriate
category to fill the vacancy for the unexpired term.
14017. (a) The California Infrastructure and Economic Development
Bank shall establish new small business financial development
corporations pursuant to the procedures otherwise established by this
chapter. In approving the request for proposal, the bank shall
ensure small businesses in all areas of the state would have
reasonable access to the financial programs,
programs in which they are eligible. Establishment of a new
corporation is dependent upon sufficient funding being available.
(b) Additional corporations have been proposed in the following
areas:
(1) San Jose.
(2) Santa Ana.
(3) San Fernando Valley.
(4) Ontario.
(c) Upon an appropriation in the annual Budget Act for this
purpose, the California Infrastructure and Economic Development Bank
shall approve the issuance of a request for a proposal to establish a
small business financial development corporation in southeast Los
Angeles.
(d) In furtherance of the purposes of this chapter, up to one-half
of the trust funds may be used to guarantee loans utilized to
establish a Business and Industrial Development Corporation (BIDCO)
under Division 15 (commencing with Section 31000) of the Financial
Code.
Article 6. Corporations, Miscellaneous
14018. Every corporation shall provide for, and maintain a
central staff to perform, all administrative requirements of the
corporation, including all those functions required of a corporation
by the director.
14019. Reasonable costs incurred by a corporation in the creation
and maintenance of a central staff shall be paid to the corporation
from state funds, including a portion of the interest earned on the
expansion fund and the corporation's trust fund account, if the
corporation has a trust fund account, otherwise, on the expansion
fund.
14020. A corporation shall report to the program manager, or his
or her designated representative, all statistical and other reports
required by this chapter, responses to audit reports, budget
requirements, and other information relating to the establishment,
monitoring, and suspension of a corporation.
14021. A corporation shall make a report to the program manager,
as of the close of business on June 30 of each year, describing the
corporation's activities and any additional information requested by
the program manager, on or before August 1 of each year.
Article 7. Conflict of Interest
14022. It shall be unlawful for the executive director, program
manager, or any person who is an officer, director, or employee of a
corporation, or who is a member of a loan committee, or who is an
employee of the California Infrastructure and Economic Development
Bank to do any of the following:
(a) Ask for, consent, or agree to receive, any commission,
emolument, gratuity, money, property, or thing of value for his or
her own use, benefit, or personal advantage, for procuring or
endeavoring to procure for any person, partnership, joint venture,
association, or corporation, any loan, guarantee, financial, or other
assistance from any corporation.
(b) Borrow money, property, or to benefit knowingly, directly or
indirectly, from the use of the money, credit, or property of any
corporation.
(c) Make, maintain, or attempt to make or maintain, a deposit of
the funds of a corporation with any other corporation or association
on condition, or with the understanding, expressed or implied, that
the corporation or association receiving the deposit shall pay any
money or make a loan or advance, directly or indirectly, to any
person, partnership, joint venture, association, or corporation,
other than to a corporation formed under this chapter.
14023. It shall be unlawful for the executive director, program
manager, or any person who is an officer or director of a
corporation, or who is an employee of the California Infrastructure
and Economic Development Bank to purchase or receive, or to be
otherwise interested in the purchase or receipt, directly or
indirectly, of any asset of a corporation, without paying to the
corporation the fair market value of the asset at the time of the
transaction.
14024. Violation of any provision of this article shall
constitute a felony.
SEC. 3. Chapter 6 (commencing with Section 63088) is added to
Division 1 of Title 6.7 of the Government Code, to read:
CHAPTER 6. SMALL BUSINESS FINANCIAL ASSISTANCE ACT OF 2013
Article 1. Introduction
63088. This chapter shall be known, and may be cited, as the
Small Business Financial Assistance Act of 2013.
63088.1. The Legislature finds all of the following:
(a) Small businesses form the core of the California economy and
that it is in the interest of the state to increase opportunities for
entrepreneurs, the self-employed, and microbusiness and small
business owners to have better access to capital and other technical
resources.
(b) Unemployment in California is a matter of statewide concern
requiring concerted public and private action to develop employment
opportunities for the disadvantaged, unemployed persons, veterans,
and youth.
(c) It is necessary to direct additional capital, general
management assistance, business education, and other resources to
encourage the development of small business opportunities,
particularly for minorities, women, and disabled persons, to
alleviate unemployment.
Article 2. Definitions
63088.3. Unless the context otherwise requires, the definitions
in this section shall govern the construction of this chapter.
(a) "Bank" means the California Infrastructure and Economic
Development Bank.
(b) "Bank board" means the board of directors of the California
Infrastructure and Economic Development Bank.
(c) "Board" means the California Small Business Board.
(d) "Corporation" means any nonprofit California small business
financial development corporation created pursuant to Chapter 1
(commencing with Section 14000) of Part 5 of Division 3 of Title 1 of
the Corporations Code.
(e) "Employment incentive loan" means a loan to a qualified
business or to a business located within an enterprise zone, as
defined in subdivision (d) of Section 7072.
(f) "Executive director" means the executive director of the
Infrastructure and Economic Development Bank.
(g) "Expansion fund" means the California Small Business Expansion
Fund.
(h) "Financial company" means banking organizations, including
national banks and trust companies, savings and loan associations,
certified community development financial institutions, microlenders,
state insurance companies, mutual insurance companies, and other
public and private banking, lending, retirement, and insurance
organizations.
(i) "Financial institution" means regulated banking organizations,
including national banks and trust companies authorized to conduct
business in California and state-chartered commercial banks, trust
companies, credit unions, and savings and loan associations.
(j) "Loan committee" means a committee appointed by the board of
directors of a corporation to determine the course of action on a
loan application pursuant to this title.
(k) "Program manager" means the person designated to this title by
the executive director of the California Infrastructure and Economic
Development Bank.
(l) Unless otherwise defined by the executive director by
regulation, "small business loan" means a loan to a business defined
as an eligible small business as set forth in Section 121.3-10 of
Part 121 of Chapter 1 of Title 13 of the Code of Federal Regulations,
including those businesses organized for agricultural purposes that
create or retain employment as a result of the loan. From time to
time, the executive director shall provide guidelines as to the
preferred ratio of jobs created or retained to total funds borrowed
for guidance to the corporations.
(m) "Trust fund" means the moneys from the expansion fund that is
held in trust by a financial institution or financial company. A
trust fund is not a deposit of state funds and is not subject to the
requirements of Section 16506.
(n) "Trustee" means the lending institution or financial company
selected by the office to hold and invest the trust funds. An
agreement made pursuant to this title and the trustee shall not be
construed to be a deposit of state funds.
(o) "Trust fund account" means an account within the trust fund
that is allocated to a particular small business financial
development corporation for the purpose of paying loan defaults and
claims on bond guarantees for a specific small business financial
development corporation.
Article 3. Program Purpose
63088.5. (a) There is within the Governor's Office of Business
and Economic Development the California Infrastructure and Economic
Development Bank, which shall, among other things, assist businesses
seeking new capital resources.
(b) Pursuant to this title, the bank may establish one or more
programs administered regionally under contract with small business
financial development corporations. Programs established pursuant to
this title may include the following types of financial products:
(1) Loan guarantees.
(2) Direct loans.
(3) Disaster assistance loans.
(4) Surety bond guarantees.
(c) In all of their state-funded programs, the corporations shall,
to the extent practicable, be complementary to, and not competitive
with, commercial lenders and other state and federal programs.
(d) In carrying out this chapter the bank may call on the
California Small Business Board for advice and recommendations. All
actions by the California Small Business Board are advisory except
where specifically assigned a duty and authority.
(e) The Small Business Board may also advise the Governor, the
director, and the Small Business Advocate regarding issues and
programs affecting California's small business community, including,
but not limited to, business innovation and expansion, export
finance, state procurement, management and technical assistance,
venture capital, and financial assistance.
63088.6. To implement its responsibilities, a corporation shall
undertake a program that shall include, but not be limited to, the
following:
(a) Outreach to low-resource small businesses and microbusinesses.
The corporations located in rural areas shall give priority to
low-resource farmers and rural and agriculturally related businesses.
(b) Collaboration with other organizations and lenders to identify
and assist those businesses that are creditworthy but face
impediments to accessing conventional sources because of reasons,
such as low equity, inadequate collateral, unacceptable legal
structure (such as a co-op or nonprofit organization), management
inadequacies, and language problems.
(c) To the extent possible, bringing all possible financial
resources (low-interest lenders, BIDCOs, MESBICs, other guarantors,
etc.) to bear on the borrower's problems.
(d) Technical assistance to businesses receiving loans or
guarantees that will maximize the probability of loan repayment.
(e) Ongoing strategies for increasing program resources through
private sector involvement and nonstate funds.
(f) A program for collecting and liquidating defaulted loans so
that the corporations can qualify to become full-service lenders
under the Small Business Administration. Corporations located in
rural areas shall, in addition, try to qualify for lender status
under the United States Department of Agriculture's Rural Development
and Farm Services Agency.
(g) Become an agent for other financial institutions and financial
companies.
Article 4. Administrative Structure
63089. If regulations have not already been adopted under Chapter
1 (commencing with Section 14000) of Part 5 of Division 3 of Title 1
of the Corporations Code, as that chapter read on January 1, 2013,
then the bank shall adopt regulations concerning the implementation
of this title, Chapter 1 (commencing with Section 14000) of Part 5 of
Division 3 of Title 1 of the Corporations Code, and direct lending
as emergency regulations in accordance with Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2. The adoption
of these regulations is an emergency and necessary for the immediate
preservation of the public peace, health and safety, or general
welfare within the meaning of subdivision (b) of Section 11346.1.
Notwithstanding subdivision (e) of Section 11346.1, the regulations
shall not remain in effect for more than 180 days unless the office
complies with all provisions of Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2, as required by subdivision
(e) of Section 11346.1. This section also applies to any direct loan
program administered by the bank.
63089.1. The program manager shall do all of the following:
(a) Administer this chapter.
(b) Contract for services under this chapter and Chapter 1
(commencing with Section 14000) of Part 5 of Division 3 of Title 1 of
the Corporations Code.
(c) In accordance with available resources, use branch offices for
the purposes of making these programs under this chapter accessible
to all areas of the state.
(d) Require each corporation to submit an annual written plan of
operation.
(e) Authorize the distribution, transfer, and withholding of
moneys in the expansion fund and trust funds.
(f) Authorize the investment of expansion and trust fund moneys.
(g) Oversee the operations of one or more programs authorized
pursuant to this title.
(h) Approve, suspend, or terminate a corporation's ability to
participate in a program under this title.
63089.2. The use of state funds paid out to the trust fund and
the return on those funds from investment pursuant to Section
63089.56 is conditional pursuant to Sections 63089.3 and 63089.57.
Each corporation shall enter into a written signed agreement with the
state at the beginning of each fiscal year. The agreement shall
govern the activities in which the corporations engage, the
investment of state funds and its return, and the budgeted
administrative expenses the corporations may incur. In the event the
state and corporation do not reach an agreement, or the state finds
the corporation has violated the terms of an active agreement, the
state may take any action under Section 63089.3 or 63089.57, or any
other action as appropriate. In the event the state and corporation
do not reach agreement or the state finds the corporation has
violated the terms of an active agreement, the corporation shall have
no authority to withdraw or encumber the trust fund or the return of
those funds by the issuance of guarantees, by incurring expenses
against the fund and its return in any manner whatsoever, and the
state may take any action under Section 63089.3 or 63089.57, or any
other action as appropriate. Any guarantee or other encumbrance made
by the corporation in violation of this section shall be null and
void, and neither the state nor the trust fund will be liable
therefor.
63089.3. (a) Upon a finding by the program manager that
irreparable harm may occur if guarantee or direct loan authority is
not temporarily withdrawn from a corporation, the program manager may
temporarily withdraw guarantee or direct loan, or both, authority
from a corporation. The notice of temporary withdrawal sent to the
corporation shall specify the reasons for the action.
(1) As used in this section, "guarantee and direct loan authority"
means the authority to make or guarantee any loan that encumbers
funds in a trust fund account, any account or subaccount under the
direct control of the office or other state entity, or the expansion
fund.
(2) The program manager shall make one of the determinations
specified in subdivision (c) within 30 days of the effective date of
the temporary withdrawal, unless the corporation and the executive
director mutually agree to an extension. The corporation shall have
the opportunity to submit written material to the program manager
addressing the items stated in the temporary withdrawal notice. If
the program manager does not make any determinations within 30 days,
the temporary withdrawal shall be negated. The corporation's yearly
contract shall remain in effect during the period of temporary
withdrawal, and the corporation shall continue to receive
reimbursement of necessary operating expenses.
(b) Failure of a corporation to substantially comply with the
following may result in the suspension of a corporation:
(1) Regulations implementing the California Small Business
Development Corporation Law (Chapter 1 (commencing with Section
14000) of Part 5 of Division 3 of Title 1 of the Corporations Code).
(2) Fiscal and portfolio requirements, as contained in the fiscal
and portfolio audits specified in Section 14004 of the Corporations
Code.
(3) Milestones and scope of work as contained in the annual
contract between the corporation and the office.
(c) Pursuant to subdivision (a) or (b), the program manager may do
the following:
(1) Terminate the temporary withdrawal.
(2) Terminate the temporary withdrawal subject to the corporation'
s adoption of a specified remedial action plan.
(3) Temporarily withdraw, or continue to withdraw, guarantee
authority until a specified time. This determination by the program
manager shall require a finding that the corporation has failed to
comply with the California Small Business Development Corporation Law
(Chapter 1 (commencing with Section 14000) of Part 5 of Division 3
of Title 1 of the Corporations Code).
(4) Suspend the corporation.
(5) Suspend the corporation, with suspension stayed until the
corporation provides a remedial action plan to the executive
director, and the executive director decides whether to repeal or
implement the stayed suspension.
(d) The determinations contained in paragraphs (4) and (5) of
subdivision (c) require a finding that irreparable harm will occur
unless the corporation is suspended.
(e) In considering a determination regarding the recommended
suspension and possible remedial action plans, the program manager
shall consider, along with other criteria as specified in subdivision
(b), the corporation's history and past performance.
(f) Upon suspension of a corporation, the program manager shall
transfer all funds, whether encumbered or not, in the trust fund
account of the suspended corporation into either the expansion fund
or temporarily transfer the funds to another corporation.
(g) If the program manager decides to take any action against the
corporation pursuant to paragraphs (2) to (5), inclusive, of
subdivision (c), the corporation shall be notified of the action 10
days before the effective date of the action. The corporation shall
have the right to appeal the program manager's decision to the
director of the California Small Business Board within that 10-day
period by sending notice to the executive director. Once the
executive director receives notice that the action is being appealed,
the program manager's action shall be stayed except for temporary
withdrawal of guarantee authority. Upon receipt of the notice from
the corporation, the executive director shall notify the small
business board within three working days. The California Small
Business Board shall consider and make a final determination on the
appeal within 30 days of receiving notice. The small business board
may elect to take any of the actions listed in subdivision (h). The
temporary withdrawal of corporation guarantee authority shall remain
in effect until the executive director small business board issues a
decision.
(h) Pursuant to subdivision (g), the small business board may do
any of the following:
(1) Terminate the action taken by the program manager.
(2) Modify the action taken by the program manager subject to the
adoption by the corporation of a specified remedial action plan.
(3) Affirm the action taken by the program manager.
(i) Following suspension, the corporation may continue its
existence as a nonprofit corporation pursuant to the Nonprofit Public
Benefit Corporation Law (Part 2 (commencing with Section 5110) of
Division 2 of Title 1 of the Corporations Code), but shall no longer
be registered with the Secretary of State as a small business
financial development corporation. A corporation shall not enjoy any
of the benefits of a small business financial development corporation
following suspension.
(j) The funds in the trust fund account of a corporation under
temporary withdrawal shall be transferred to the expansion fund. Upon
termination of the temporary withdrawal, unless the termination is
caused by suspension, the funds of the corporation that were
transferred to the expansion fund from the trust fund account shall
be returned to the corporation's trust fund account, notwithstanding
Section 63089.53. While the funds of a corporation's trust fund
account reside in the expansion fund, use of the principal on the
funds shall be governed by the implementing regulations specifying
use of funds in the expansion fund. Interest on the funds moved from
a corporation's trust fund account upon temporary withdrawal shall be
limited to payment of the corporation's administrative expenses, as
contained in the contract between the corporation and the state
pursuant to this title.
Article 5. Expansion Fund
63089.5. (a) There is hereby continued in existence in the State
Treasury the California Small Business Expansion Fund. All or a
portion of the funds in the expansion fund may be paid out, with the
approval of the Department of Finance, to a lending institution or
financial company that will act as trustee of the funds.
(b) The expansion fund and the trust fund shall be used to pay for
defaulted loan guarantees issued pursuant to this title, surety bond
losses, administrative costs of corporations, and those costs
necessary to protect a real property interest in a defaulted loan or
guarantee.
(c) The expansion fund and trust fund are created solely for the
purpose of receiving state, federal, or local government moneys, and
other public or private money to make loans, guarantees, and
restricted investments pursuant to this title.
(d) One or more accounts may be created by the program manager for
corporations participating in one or more programs authorized under
this title. Each account is a legally separate account, and shall not
be used to satisfy loan or surety bond guarantees or other
obligations of another corporation.
(e) The amount of guarantee liability outstanding at any one time
shall not exceed five times the amount of funds on deposit in the
expansion fund plus any receivables due from funds loaned from the
expansion fund to another fund in state government as directed by the
Department of Finance pursuant to a statute enacted by the
Legislature, including each of the trust fund accounts within the
trust fund.
(f) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
63089.51. (a) All money deposited in the expansion fund is hereby
continuously appropriated, without regard to fiscal years, for the
purposes of this title.
(b) Except as specified in subdivision (a) of Section 63089.53,
the state shall not be liable or obligated in any way beyond the
state money that is allocated in the expansion fund from moneys from
the General Fund moneys appropriated for those purposes.
63089.52. (a) The program manager at his or her discretion, with
the approval of the Director of Finance, may request the trustee to
invest those funds in the trust fund in any of the securities
described in Section 16430. Returns from these investments shall be
deposited in the expansion fund and shall be used to support the
programs of this title.
(b) Any investments made in securities described in Section 16430
shall be governed by the statement of investment policy prepared by
the Treasurer pursuant to subdivision (a) of Section 16481.2.
63089.53. (a) The state shall not be liable or obligated in any
way beyond the money that is allocated and deposited in the
corporation's trust fund account.
(b) The program manager may reallocate funds held within a
corporation's trust fund account.
(1) The program manager shall reallocate funds based on which
corporation is most effectively using its guarantee funds. If funds
are withdrawn from a less effective corporation as part of a
reallocation, the program manager shall make that withdrawal only
after giving consideration to that corporation's fiscal solvency, its
ability to honor loan guarantee defaults, and its ability to
maintain a viable presence within the region it serves. Reallocation
of funds shall occur no more frequently than once per fiscal year.
Any decision made by the program manager pursuant to this subdivision
may be appealed to the bank board unless otherwise specified. The
program manager has the authority to repeal or modify any decision to
reallocate funds.
(2) The program manager may authorize a corporation to exceed the
leverage ratio specified in Section 63089.5 or subdivision (a) of
Section 63089.66, or subdivision (c) of Section 14017 of the
Corporations Code, pending the annual reallocation of funds pursuant
to this section. However, no corporation shall be permitted to exceed
an outstanding guarantee liability of more than five times its
portion of funds on deposit in the expansion fund.
63089.54. (a) There is hereby created in the State Treasury the
Small Business Disaster Recovery Loan Loss Reserve Account, as part
of the expansion fund. This account shall be used to pay for
unrecovered losses resulting from loan guarantees issued pursuant to
subdivision (a) of Section 63089.90 or subdivision (b) of this
section, and disaster loan guarantees issued prior to the effective
date of this section that are in default.
(b) Any lending institution that issues a low-interest loan that
is guaranteed by resources in this account shall be fully reimbursed
for the guaranteed portion of principal and interest that result from
a loan or loans that are in default. If there are insufficient funds
in this account to fully satisfy all claimants, the full faith of
the resources in the General Fund are pledged to satisfy the
obligations of this account. This account may only guarantee as much
loan dollar value as is specifically authorized by the Director of
Finance with the concurrence of the Governor. This account shall
receive all moneys transferred pursuant to Section 63089.55, and any
unencumbered balances transferred to the California Small Business
Expansion Fund pursuant to Chapters 11 and 12 of the First
Extraordinary Session of the Statutes of 1989, and Chapter 1525 of
the Statutes of 1990, as of July 1, 1992.
(c) The Governor may utilize this authority to prevent business
insolvencies and loss of employment in an area affected by a state of
emergency within the state and declared a disaster by the President
of the United States, by the Administrator of the United States Small
Business Administration, or by the United States Secretary of
Agriculture, or declared to be in a state of emergency by the
Governor of California.
63089.55. The Director of Finance, with the approval of the
Governor, may transfer moneys in the Special Fund for Economic
Uncertainties to the California Small Business Expansion Fund for use
as authorized by the bank board, in an amount necessary to make loan
guarantees pursuant to this title.
63089.56. (a) The funds in the expansion fund shall be paid out
to trust fund accounts by the Treasurer on warrants drawn by the
Controller and requisitioned by the executive director, pursuant to
the purposes of this title. The program manager may transfer funds
allocated from the expansion fund to accounts, established solely to
receive the funds, in lending institutions designated by the office
to act as trustee. The lending institutions so designated shall be
approved by the state for the receipt of state deposits. Interest
earned on the trust fund accounts in lending institutions may be
utilized by the corporations pursuant to the purposes of this title.
(b) Except as specified in subdivision (d), the program manager
shall allocate and transfer money to trust fund accounts based on
performance-based criteria. The criteria shall include, but not be
limited to, the following:
(1) The default record of the corporation.
(2) The number and amount of loans guaranteed by a corporation.
(3) The number and amount of loans made by a corporation if state
funds were used to make those loans.
(4) The number and amount of surety bonds guaranteed by a
corporation.
(c) Any decision made by the executive director pursuant to
subdivision (b) may be appealed to the director within 15 days of
notice of the proposed action. The director may repeal or modify any
reallocation and transfer decisions made by the executive director.
(d) The criteria specified in subdivision (b) shall not apply to a
corporation that has been in existence for five years or less. If
not already adopted, the office shall develop regulations specifying
the basis for transferring account funds to those corporations that
have been in existence for five years or less.
63089.57. Pursuant to this section and any regulations adopted
pursuant to this title, the state has residual interest in the funds
deposited by the state to a trust fund account and to the return on
these funds from investments. On dissolution or suspension of the
corporation, these funds shall be withdrawn by the executive director
from the trust fund account and returned to the expansion fund or
temporarily transferred to another trust fund account. This provision
shall be contained in the trust instructions to the trustee.
63089.58. Each trust fund account shall consist of a loan
guarantee account, and, upon recommendation by the program manager, a
bond guarantee account, each of which is a legally separate account,
and the assets of one account shall not be used to satisfy loan
guarantees or other obligations of another corporation. Not more than
one-third of a trust fund account shall be allocated to a bond
guarantee account. A corporation shall not use trust fund accounts to
secure a corporate indebtedness. State funds deposited in the trust
fund accounts, with the exception of guarantees established pursuant
to this title, shall not be subject to liens or encumbrances of the
corporation or its creditors.
63089.59. (a) The financial institution that is to act as trustee
of the trust fund shall be designated after review by the program
manager. The corporation shall not receive money on deposit to
support guarantees issued under this title without the approval of
the program manager.
(b) State funds may not be used to finance an expense incurred by
a corporation in a location not approved pursuant to a statewide
plan. The prohibition against use of state funds also applies to the
location of satellite offices, and the area served from a corporation
office.
CHAPTER 6. GUARANTEE PROGRAM
63089.61.
Article 6. Guarantee Program
63089.61. (a) The Small Business Loan Guarantee
Program, which is hereby continued in existence, shall provide
guarantees to loans offered by financial institutions to small
businesses.
(b) The Legislature finds and declares that the Small Business
Loan Guarantee Program has enabled participating small businesses
that do not qualify for conventional business loans or Small Business
Administration loans to secure funds to expand their businesses.
These small businesses would not have been able to expand their
businesses in the absence of the program. The program has also
provided valuable technical assistance to small businesses to ensure
growth and stability. The study commissioned by former Section
14069.6 of the Corporations Code, as added by Chapter 919 of the
Statutes of 1997, documented the return on investment of the program
and the need for its services. The value of the program has also been
recognized by the Governor through proposals contained in the May
Revision to the Budget Act of 2000 for the 2000-01 fiscal year.
63089.62. The program manager, following notification to the bank
director, may do all of the following:
(a) Contract for services entered into pursuant to this title.
(b) Hold public hearings.
(c) Act as liaison between corporations, other state and federal
agencies, lenders, and the Legislature.
(d) Process and tabulate on a monthly basis all corporate reports.
(e) Attend board meetings.
(f) Attend and participate at corporation meetings. The program
manager, or his or her designee, shall be an ex officio, nonvoting
representative on the board of directors and loan committees of each
corporation. The program manager shall meet with the board of
directors of each corporation at least once each fiscal year.
(g) Assist corporations in applying for public and private funding
opportunities, and in obtaining program support from the business
community.
63089.63. (a) The program manager shall recommend whether the
expansion fund and trust fund accounts are to be leveraged, and if
so, by how much. Upon the request of the corporation, the program
manager's decision may be repealed or modified by a bank board
resolution.
(b) The amount of guarantee liability outstanding at any one time
shall not exceed five times the amount of funds on deposit in the
expansion fund plus any receivables due from funds loaned from the
expansion fund to another fund in state government as directed by the
Department of Finance pursuant to a statute enacted by the
Legislature, including each of the trust fund accounts within the
trust fund.
(c) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
63089.63. (a) The program manager shall recommend whether the
expansion fund and trust fund accounts are to be leveraged, and if
so, by how much. Upon the request of the corporation, the program
manager's decision may be repealed or modified by an office
resolution.
(b) The amount of guarantee liability outstanding at any one time
shall not exceed four times the amount of funds on deposit in the
expansion fund plus any receivables due from funds loaned from the
expansion fund to another fund in state government as directed by the
Department of Finance pursuant to a statute enacted by the
Legislature, including each of the trust fund accounts within the
trust fund, unless the program manager has permitted a higher
leverage ratio for an individual corporation pursuant to subdivision
(b) of Section 63089.53.
(c) This section shall become operative on January 1, 2018.
63089.64. (a) The corporate guarantee shall be backed by funds on
deposit in the corporation's trust fund account, or by receivables
due from funds loaned from the corporation's trust fund account to
another fund in state government, as directed by the Department of
Finance pursuant to a statute enacted by the Legislature.
(b) Loan guarantees shall be secured by a reserve of at least 20
percent to be determined by the executive director.
(c) The expansion fund and trust fund accounts shall be used
exclusively to guarantee obligations and pay the administrative costs
of the corporations.
(d) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
63089.64. (a) The corporate guarantee shall be backed by funds on
deposit in the corporation's trust fund account, or by receivables
due from funds loaned from the corporation's trust fund account to
another fund in state government, as directed by the Department of
Finance pursuant to a statute enacted by the Legislature.
(b) Loan guarantees shall be secured by a reserve of at least 25
percent to be determined by the executive director, unless the
executive director authorizes a higher leverage ratio for an
individual corporation pursuant to subdivision (b) of Section
63089.53.
(c) The expansion fund and trust fund accounts shall be used
exclusively to guarantee obligations and pay the administrative costs
of the corporations.
(d) This section shall become operative on January 1, 2018.
63089.65. A corporation may charge the borrower or financial
institution a loan fee on all loans made or guaranteed by the
corporation to defray the operating expenses of the corporation. The
amount of the fee shall be determined by the program manager.
63089.66. (a) It is the intent of the Legislature that the
corporations make maximal use of their statutory authority to
guarantee loans and surety bonds, including the authority to secure
loans with a minimum loan loss reserve of only 20 percent, so that
the financing needs of small business may be met as fully as possible
within the limits of corporations' loan loss reserves. The office
shall report annually to the Legislature on the financial status of
the corporations and their portfolio of loans and surety bonds
guaranteed pursuant to Section 9795.
(b) Any corporation that serves an area declared to be in a state
of emergency by the Governor or a disaster area by the President of
the United States, the Administrator of the United States Small
Business Administration, or the United States Secretary of
Agriculture shall increase the portfolio of loan guarantees where the
dollar amount of the loan is less than one hundred thousand dollars
($100,000), so that at least 15 percent of the dollar value of loans
guaranteed by the corporation is for those loans. The corporation
shall comply with this requirement within one year of the date the
emergency or disaster is declared. Upon application of a corporation,
the executive director may waive or modify the rule for the
corporation if the corporation demonstrates that it made a good faith
effort to comply and failed to locate lending institutions in the
region that the corporation serves that are willing to make
guaranteed loans in that
amount.
(c) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
63089.66. (a) It is the intent of the Legislature that the
corporations make maximal use of their statutory authority to
guarantee loans and surety bonds, including the authority to secure
loans with a minimum loan loss reserve of only 25 percent, unless the
office authorizes a higher leverage ratio for an individual
corporation pursuant to subdivision (b) of Section 63089.53, so that
the financing needs of small business may be met as fully as possible
within the limits of corporations' loan loss reserves. The bank
shall report annually to the Legislature on the financial status of
the corporations and their portfolio of loans and surety bonds
guaranteed pursuant to Section 9795.
(b) Any corporation that serves an area declared to be in a state
of emergency by the Governor or a disaster area by the President of
the United States, the Administrator of the United States Small
Business Administration, or the United States Secretary of
Agriculture shall increase the portfolio of loan guarantees where the
dollar amount of the loan is less than one hundred thousand dollars
($100,000), so that at least 15 percent of the dollar value of loans
guaranteed by the corporation is for those loans. The corporation
shall comply with this requirement within one year of the date the
emergency or disaster is declared. Upon application of a corporation,
the program manager may waive or modify the rule for the corporation
if the corporation demonstrates that it made a good faith effort to
comply and failed to locate lending institutions in the region that
the corporation serves that are willing to make guaranteed loans in
that amount.
(c) This section shall become operative on January 1, 2018.
63089.67. (a) A corporation shall establish one or more loan
committees, each of which shall be composed of five or more persons,
a majority of whom shall be experienced in banking and lending
operations.
(b) A loan committee shall review applications to the corporation
for a loan or guarantee and shall do each of the following:
(1) Determine the feasibility of the proposed transaction. The
loan committee shall recommend approval of the application only upon
a determination that there is a reasonable chance that the loan will
be repaid.
(2) On the basis of that determination, recommend to the board of
directors any action that the loan committee deems appropriate under
the circumstances, or, in the event that approval authority has been
delegated to the loan committee by the board of directors, approve or
disapprove the loan application.
(c) A loan committee shall expeditiously act to accept or reject
loan applications.
(d) A person who has a financial interest related to a matter over
which the loan committee has authority may not make, participate in
making, or in any way attempt to influence that matter.
63089.68. Unless delegated to its loan committee, the corporation'
s board of directors, upon a recommendation from its loan committee
, shall do all of the following:
(a) Emphasize consideration to applications that will increase
employment of disadvantaged, disabled, or unemployed persons, or
increase employment of youth residing in areas of high youth
unemployment and high youth delinquency.
(b) Give consideration to applications from traditional and
safety-net providers of Medi-Cal services that will promote access to
quality medical care for individuals enrolled in Medi-Cal managed
health care networks that are contracting with or owned or operated
by a county board of supervisors, a county health commission, or a
county health authority organized pursuant to Section 14018.7,
14087.31, 14087.35, 14087.36, 14087.38, or 14087.9605 of the Welfare
and Institutions Code.
(c) Not grant a loan or guarantee, unless it determines that the
conditions of Section 200033 are satisfied.
63089.69. (a) Among other priorities, corporations shall give
high priority to the issuance of loan guarantees to small business
incubators and to businesses that lease space in incubators.
(b) For the purposes of this section, "incubator" means a facility
that allows new small businesses to increase their probability of
success by sharing needed capital equipment, services, and
facilities, which may include, but are not limited to, the following:
(1) Reception and meeting area.
(2) Secretarial services, such as collating, telephone answering,
or mailhandling.
(3) Accounting and bookkeeping services.
(4) Research libraries.
(5) Onsite financial and management counseling.
(6) Parking.
(7) Flexible lease arrangements for flexible space.
(8) Computer or word processing facilities.
(9) Day care facilities.
(10) Office furniture rentals.
(11) A graduation policy sometimes requiring firms to leave after
three to five years in a subsidized, nurturing environment.
(12) Employee training and placement services.
(c) Among other priorities, corporations shall give high priority
to marketing their services to Phase 1 or Phase 2 Small Business
Innovation Research (SBIR) recipients and providing loan guarantees,
whenever possible.
CHAPTER 7. DIRECT LENDING
63089.80.
Article 7. Direct Lending
63089.80. (a) A corporation may utilize funds for
direct lending as long as at least 80 percent of the corporate funds,
calculated by dollar amount, and all expansion funds are guaranteed
by another public or private financial institution.
(b) The amount of funds available for direct lending shall be
determined by the program manager. In its capacity as a direct
lender, the corporation may sell in the secondary market the
guaranteed portion of each loan so as to raise additional funds for
direct lending. The office shall issue regulations governing these
direct loans, including the maximum amount of these loans.
(c) To execute the direct loan programs established in this
chapter, the program manager may loan trust funds to a corporation
located in a rural area for the express purpose of lending those
funds to an identified borrower. The loan authorized by the program
manager to the corporation shall be on terms similar to the loan
between the corporation and the borrower.
(d) The amount of the loan may be in excess of the amount of a
loan to any individual borrower, but actual disbursements pursuant to
the office loan agreement shall be required to be supported by a
loan agreement between the borrower and the corporation in an amount
at least equal to the requested disbursement. The loan between the
bank and the corporation shall be evidenced by a credit agreement. In
the event that any loan between the corporation and borrower is not
guaranteed by a governmental agency, the portion of the credit
agreement attributable to that loan shall be secured by assignment of
any note, executed in favor of the corporation by the borrower to
the bank. The terms and conditions of the credit agreement shall be
similar to the loan agreement between the corporation and the
borrower, which shall be collateralized by the note between the
corporation and the borrower.
(e) In the absence of fraud on the part of the corporation, the
liability of the corporation to repay the loan to the bank is limited
to the repayment received by the corporation from the borrower,
except in a case where the United States Department of Agriculture
requires exposure by the corporation in rule or regulation. The
corporation may use trust funds for loan repayment to the office if
the corporation has exhausted a loan loss reserve created for this
purpose. Interest and principal received by the office from the
corporation shall be deposited into the same account from which the
funds were originally borrowed.
(f) Upon the approval of the program manager, a corporation shall
be authorized to borrow trust funds from the bank for the purpose of
relending those funds to small businesses. A corporation shall
demonstrate to the program manager that it has the capacity to
administer a direct loan program, and has procedures in place to
limit the default rate for loans to startup businesses. Not more than
25 percent of any trust fund account shall be used for the direct
lending established pursuant to this subdivision. A loan to a
corporation shall not exceed the amount of funds likely to be lent to
small businesses within three months following the loan to the
corporation.
(g) The maximum loan amount to a small business shall be set by
the program manager, but in no case shall it be more than three
hundred thousand dollars ($300,000). In the absence of fraud on the
part of the corporation, the repayment obligation pursuant to the
loan to the corporation shall be limited to the amount of funds
received by the corporation for the loan to the small business and
any other funds received from the office that are not disbursed. The
corporation shall be authorized to charge a fee to the small business
borrower, in an amount determined by the executive director pursuant
to regulation. The program provided for in this subdivision shall be
available in all geographic areas of the state.
CHAPTER 8. DISASTER LOAN GUARANTEES
63089.90.
Article 8. Disaster Loan Guarantees
63089.90. (a) A corporation may, in an area affected
by a state of emergency within the state and declared a disaster by
the President of the United States, the Administrator of the United
States Small Business Administration, or the United States Secretary
of Agriculture, or declared to be in a state of emergency by the
Governor of California, provide loan guarantees from funds allocated
in Section 63089.55 to small businesses, small farms, nurseries, and
agriculture-related enterprises that have suffered actual physical
damage or significant economic injury as a result of the disaster.
(b) If regulations have not otherwise been adopted, the bank board
may adopt or readopt regulations to implement the loan guarantee
program authorized by this section. The bank board may adopt these
regulations as emergency regulations in accordance with Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2,
and for purposes of that chapter, including Section 11349.6, the
adoption of the regulations shall be considered by the Office of
Administrative Law to be necessary for the immediate preservation of
the public peace, health and safety, and general welfare.
Notwithstanding subdivision (e) of Section 11346.1, the regulations
shall be repealed within 180 days after their effective date unless
the office complies with Chapter 3.5 (commencing with Section 11340)
of Part 1 of Division 3 of Title 2, as provided in subdivision (e) of
Section 11346.1.
(c) Allocations pursuant to subdivision (a) shall be deemed to be
for extraordinary emergency or disaster response operations costs
incurred by the office.
CHAPTER 9. ENERGY EFFICIENCY LOANS
63089.93.
Article 9. Energy Efficiency Loans
63089.93. (a) Corporations may grant energy efficiency
improvement loans.
(b) The bank shall enter into an agreement with the California
Energy Extension Service of the Office of Planning and Research to
assist small business owners in reducing their energy costs through
low-interest loans and by providing assistance and information.
CHAPTER 10. SURETY BONDS
63089.95.
Article 10. Surety Bonds
63089.95. In furtherance of the purposes set forth in
Section 63088.1 of this code and Section 14002 of the Corporations
Code, a corporation may do any one or more of the following
activities, but only to the extent that the activities are authorized
pursuant to the contract between the bank and corporation:
guarantee, endorse, or act as surety on the bonds, notes, contracts,
or other obligations of, or assist financially, any person, firm,
corporation, or association, and may establish and regulate the terms
and conditions with respect to any such loans or financial
assistance and the charges for interest and service connected
therewith, except that the corporation shall not make or guarantee
any loan, unless and until it determines:
(a) There is no probability that the loan or other financial
assistance would be granted by a financial company under reasonable
terms or conditions, and the borrower has demonstrated a reasonable
prospect of repayment of the loan.
(b) The loan proceeds shall be used exclusively in this state.
(c) The loan qualifies as a small business loan or an employment
incentive loan.
(d) That the borrower has a minimum equity interest in the
business as determined by the director.
(e) As a result of the loan, the jobs generated or retained
demonstrate reasonable conformance to the regulations specifying
employment criteria.
63089.96. (a) In addition to the authority granted by Section
63089.95, upon approval of the executive director, a corporation may
act as guarantor on a surety bond for any small business contractor,
including, but not limited to, women, minority, and disabled veteran
contractors.
(b) The provisions of subdivision (a) allowing a corporation to
act as a guarantor on surety bonds may be funded through appropriate
federal funding sources. Federal funds shall be deposited in the
Federal Trust Fund in the State Treasury in accordance with Section
16360, for transfer to the expansion fund.
CHAPTER 11. REPORTING
63089.97.
Article 11. Reporting
63089.97. (a) Except as otherwise provided in this
title, the trust fund account shall be used solely to make loans,
guarantee bonds, and guarantee loans, approved by the corporation,
that meet the loan criteria under this chapter. The state shall not
be liable or obligated in any way as a result of the allocation of
state moneys to a trust fund account beyond the state moneys that is
allocated and deposited in the fund pursuant to this title, and that
is not otherwise withdrawn by the state pursuant to this chapter.
(b) A summary of all loans and bonds to which a state guarantee is
attached shall be submitted to the program manager upon execution of
the loan agreement and periodically thereafter.
(c) A summary of all loans made by a corporation shall be
submitted to the program manager upon execution of the loan agreement
and periodically thereafter.
63089.98. (a) Annually, not later than January 1 of each year
commencing January 1, 2014, the program manager shall prepare a
report regarding the loss experience for the expansion fund for loan
guarantees, loss reserves, and surety bond guarantees for the
preceding fiscal year. At a minimum, the report shall also include
data regarding numbers of surety bond and loan guarantees awarded
through the expansion fund, including ethnicity and gender data of
participating contractors and other entities, and experience of
surety insurer participants in the bond guarantee program. The report
shall include the information described in Section 63089.66. The
program manager shall post the information on the bank' Internet Web
site and submit notice report to the Governor and the Legislature
when that information in is available
on its Internet Web site.
(b) A corporation shall also report to the program manager, or his
or her designated representative, all statistical and other reports
required by this title, responses to audit reports, budget
requirements, invoices submitted for payment by the state, and
information concerning loans made or guaranteed.
63089.99. Pursuant to subdivision (f) of Section 8684.2, within
60 days of the conclusion of the period for guaranteeing loans under
any small business disaster loan guarantee program conducted for a
disaster as authorized by Section 8684.2 or 200030, the bank shall
provide a report to the Legislature on loan guarantees approved and
rejected by gender, ethnic group, type of business and location, and
each participating loan institution pursuant to Section 9795. The
bank need only submit one report to comply with this section and
subdivision (f) of Section 8684.2.
SEC. 4. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
SEC. 5 . This act is an urgency statute
necessary for the immediate preservation of the public peace,
health, or safety within the meaning of Article IV of the
Constitution and shall go into immediate effect. The facts
constituting the necessity are:
It is necessary that this bill take effect immediately in order to
provide, as is necessary to timely implement the Governor's
reorganization plan, for a better managed and more efficient
transition of small business assistance programs from the soon to be
defunct Business, Transportation and Housing Agency to the California
Infrastructure and Economic Development Bank within the Governor's
Office of Business and Economic Development.
