Source: http://www.leginfo.ca.gov/pub/13-14/bill/asm/ab_1201-1250/ab_1247_bill_20130417_amended_asm_v98.htm
Timestamp: 2019-10-15 03:45:28
Document Index: 729122264

Matched Legal Cases: ['art 5', 'art.\n20', 'art 2', 'art 121', 'art 5', 'art 5', 'art 1', 'art 1', 'art 5', 'art 5', 'art 5', 'art 2', 'art 1', 'art 1', 'art 5', 'art 121', 'art 5', 'art 5', 'art 1', 'art 1', 'art 2', 'art 1', 'art 1']

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 addbegin delete Title 25 (commencing with Section 200000)end deletebegin insert Chapter 6 (commencing with Section 63088) to Division 1 of Title 6.7end insert to, to repealbegin delete Section 200009of, and to repeal and addend delete Sectionsbegin delete 200020, 200022, and 200025end deletebegin insert 63089.5, 63089.63, 63089.64, and 63089.66end insert of, the Government Code, relating to business, and making an appropriation therefor.
This bill would revise and recast these provisions, and would transfer the administration of the California Small Business Financial Development Corporation Law to thebegin delete Governor’s Office of Business and Economic Development and an executive directorend deletebegin insert California Infrastructure and Economic Development Bank and a program managerend insert designated by thebegin delete director of the office,end deletebegin insert executive director of the Infrastructure and Economic Development Bank,end insert 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.
P3 1by making available capital, general management assistance, and
2other resources, including loan and equity investment services,
3personnel, and business education to small business entrepreneurs,
4including women and minority owned businesses, for the purpose
5of promoting the health, safety, and social welfare of the citizens
6of California, to eliminate unemployment of the economically
7disadvantaged of the state, and to stimulate economic development,
8employment, minority group, women, and disabled persons
9entrepreneurship.
10(b) It is the further intent of the Legislature to provide a flexible
11means to mobilize and commit all available and potential resources
12in the various regions of the state to fulfill these objectives,
13including federal, state, and local public resources, and private
14debt and equity investment.
15(c) It is the further intent of the Legislature that corporations
16operating pursuant to this law, shall to the maximum extent
17feasible, coordinate with other job and business development
18efforts within their region directed toward implementing the
19purpose of this part.
20(d) It is the further intent of the Legislature to provide expanded
21resources allowing participation by small and emerging contractors
22in state public works contracts. Increased access to surety bonding
23resources will assist in supporting participation by those firms in
24public works contracts, and by stimulating increased participation
25by small firms, the state will benefit from increased competition
26and lower bid costs.
28to any person or circumstances is held invalid, this invalidity shall
29not affect other provisions or applications of the chapter which
30can be given effect without the invalid provision or application,
31and to this end the provisions of this chapter are severable.
33Article 2. Definitions
36in this section shall govern the construction of this chapter.
37(a) “Bank board” means the board of directors of the California
38Infrastructure and Economic Development Bank.
39(b) “Board” means the California Small Business Board.
P4 1begin insert(c)end insert “Board of directors” means the board of directors of the
4begin insert(d)end insert “Corporation” means any nonprofit California small business
8(c) “Director” means the director of the Governor’s Office of
9Business and Economic Development.
10(d) “Executive director” means the person designated to this
11title by the director of the Governor’s Office of Business and
12Economic Development.
14begin insert(f)end insert “Expansion fund” means the California Small Business
15Expansion Fund.
16(g) “Financial company” means banking organizations,
17including national banks and trust companies, savings and loan
18associations, certified community development financial
19institutions, microlenders, state insurance companies, mutual
20insurance companies, and other public and private banking,
21lending, retirement, and insurance organizations.
22(h) “Financial institution” means regulated banking
23organizations, including national banks and trust companies
24authorized to conduct business in the state and state-chartered
25commercial banks, trust companies, credit unions, and savings
26and loan associations.
28begin insert(i)end insert “Loan committee” means a committee appointed by the board
29of directors of a corporation to determine the course of action on
30a loan application pursuant tobegin delete Title 25 (commencing with Section
31200000)end deletebegin insert end insertbegin insertChapter 6 (commencing with Section 63088) of Division
321 of Title 6.7end insert of the Government Code.
33(j) “Program Manager” means the person designated to this
34title by the executive director of the Infrastructure and Economic
35Development Bank.
37begin insert(k)end insert “Trust fund” means the money from the expansion fund that
38is held in trust by financial institution or financial company. A
39trust fund is not a deposit of state funds and is not subject to the
40requirements of Section 16506 of the Government Code.
2begin insert(l)end insert “Trust fund account” means an account within the trust fund
3that is allocated to a particular small business financial
4development corporation for the purpose of paying loan defaults
5and claims on bond guarantees for a specific small business
6financial development corporation.
8Article 3. begin deleteExecutive Director end deletebegin insertProgram Managerend insert
begin insert(a)end insertbegin insert end insert Thebegin delete executive directorend deletebegin insert program managerend insert shall do
13begin insert(1)end insert Administer this chapter.
14(b) Expeditiously approve or disapprove
15begin insert(2)end insertbegin insert end insertbegin insertMake recommendations to the board on the approval or
16disapproval of end insert the articles of incorporationbegin delete and any subsequent
17amendments to the articles of incorporation of a corporationend delete. This
18determination shall be based upon the following:
20begin insert(A)end insert Review of the articles of incorporation and bylaws of the
21corporation to determine whether they contain the provisions
22required by this chapter and conform with the regulations adopted
23pursuant to this chapter.
25begin insert(B)end insert A determination as to whether the legislative intent
26expressed in Section 14001 shall be served by the proposed
29begin insert(C)end insert A determination as to whether the responsibility, character,
30and general fitness of the individuals who will manage the
31corporation are such as to command the confidence of the state
32and to warrant the belief that the business of the proposed
33corporation will be honestly and efficiently conducted in
34accordance with the intent and purpose of this chapter and that
35they include representatives of the financial and business
36community, as well as the economically disadvantaged.
38begin insert(3)end insert Have the accounts of each corporation formed under this
39chapter audited as of the close of business on June 30 of each year.
P6 1begin insert(4)end insert Have the portfolio of each corporation audited a minimum
4the suspension of the corporation pursuant to Sectionbegin delete 200008end delete
5begin insert 63089.3end insert of the Government Code.
7begin insert(5)end insert Review reports from the Department of Business Oversight
8and inform corporations as to what corrective action is required.
10begin insert(6)end insert Examine, or cause to be examined, at any reasonable time,
11all books, records, and documents of every kind, and the physical
12properties of a corporation. The inspection shall include the right
13to make copies, extracts, and search records.
14(g) Attend
15begin insert(b)end insertbegin insert end insertbegin insertThe program manager may attendend insert and participate at
16corporation meetings. Thebegin delete executive director,end deletebegin insert program manager,end insert
17 or his or her designee, shall be an ex officio, nonvoting
18representative on the board of directors and loan committees of
19each corporation. Thebegin delete executive directorend deletebegin insert program managerend insert shall
20meet with the board of directors of each corporation at least once
21each fiscal year, commencing January 1, 2014.
begin insert1404.1.end insert
23continued and created as a subcommittee of the California
24Infrastructure and Economic Development Bank Board. The
25California Small Business Board consists of the following
26membership:
27(1) The Director of Finance or his or her designee.
28(2) The Director of the Office of the Small Business Advocate
29or his or her designee.
30(3) The Treasurer or his or her designee.
31(4) Two corporations selected by the corporations.
32(5) Two members appointed by the Governor, one of whom will
33serve as chair of the board, who are actively involved in the
34California small business community.
35(b) The California Small Business Board shall do each of the
P7 1(2) Approve new corporations recommended by the program
17(c) The public members of the board, at the discretion of the
18bank board, may be reimbursed per diem and travel expenses
19pursuant to state law.
21Article 4. New Corporations
Upon approval by thebegin delete executive directorend deletebegin insert boardend insert to
24become a corporation, an entity shall adopt or amend its articles
25of incorporation to comply with the following:
26(a) The name of the corporation shall include the words “small
27business financial development corporation,” except for those
28corporations formed pursuant to this chapter prior to 2002, which
29may also be called “small business development corporations,” or
30those formed prior to 1985, which may also be called “rural or
31urban development corporations.”
32(b) The purposes for which the corporation is formed, which
33shall be those specified in Section 14001. This requirement shall
34not be deemed to preclude a statement of powers.
35(c) A geographical description of the corporation’sbegin insert primaryend insert
36 service area.
37(d) The name and addresses of seven or more persons who are
38to act in the capacity of directors until the selection of their
39successors.
P8 1(e) That the corporation is organized pursuant to the California
2Small Business Financial Development Corporation Law.
If thebegin delete executive directorend deletebegin insert boardend insert determines that the facts
4disclosed by the investigation provided by Section 14004 are true
5and finds that the proposed incorporation meets all the requirements
6of this chapter, thebegin delete executive directorend deletebegin insert program managerend insert shall
7approve the articles of incorporation and endorse the approval
8thereon and forward the same to the Secretary of State for his or
9her approval and filing. Likewise, thebegin delete executive directorend deletebegin insert program
10managerend insert shallbegin delete approve or disapprove of all amendments to the
11articles. The executive director shall endorse the approval on the
12amendatory document before the document is forwarded to the
13Secretary of State for his or her approval and filingend deletebegin insert review all
14amendments to the articles to ensure consistency with the purposes
15of the articleend insert.
begin insert(a)end insertbegin insert end insert The corporation’s existence as a small business
17development corporation begins upon the filing of the articles with
18the Secretary of State and continues perpetually, unless otherwise
19expressly provided for by law.
20(b) If a corporation is suspended, the corporation may continue
21its existence as a nonprofit corporation pursuant to the Nonprofit
22Public Benefit Corporation Law (Part 2 (commencing with Section
235110) of Division 2 of Title 1 of the Corporations Code), but shall
24no longer be registered with the Secretary of State as a small
25business financial development corporation. A corporation shall
26not enjoy any of the benefits of a small business financial
27development corporation following suspension.
29corporation shallbegin insert be approved by the bank andend insert require the winning
30bidder to adopt or amend its bylaws to include provisions governing
31the election and qualification of directors, the establishment and
32functions of loan committees of the corporation, and the method
33of selecting the representative of the corporation on the board.
34(b) The bylaws shall provide for removal of officers only by a
35two-thirds vote of the directors of the corporation.
37grievance procedure for employees, clients, or potential clients,
P9 1established in writing during the probationary period of a new
Thebegin delete executive directorend deletebegin insert program managerend insert may authorize
4the establishment of a new corporation using a request for proposal
5process.
14if suspension is recommended by thebegin delete executive directorend deletebegin insert program
15managerend insert. This suspension is nonappealable and not subject to the
16procedures for suspension applicable to a corporation not on
17probation.
22by the board of directors.
24shall require the winning bidder to adopt or amend its bylaws to
25state that:
26(a) A person may not serve on a board of directors who is not
27a resident of, or person conducting business in, the service area
28described in the articles of incorporation.
29(b) Each board of directors shall include representatives from
31(1) The financial community.
32(2) The business community.
33(3) The economically disadvantaged.
34(c) Not more than one employee of the corporation may serve
35on the board of directors at any one time.
36(d) A person who has a financial interest related to a matter over
37which the board has authority may not make, participate in making,
38or in any way attempt to influence that matter.
40established in Section 14014, he or she shall immediately vacate
P10 1his or her position as a director and such position shall be deemed
2vacant.
4the board of directors through death, resignation, or otherwise, the
5remaining directors shall elect a person representing the appropriate
6category to fill the vacancy for the unexpired term.
(a) Thebegin delete officeend deletebegin insert California Infrastructure and Economic
8Development Bankend insert shall establish new small business financial
9development corporations pursuant to the procedures otherwise
10established by thisbegin delete chapter in the following areas:end deletebegin insert chapter. In
11approving the request for proposal, the bank shall ensure small
12businesses in all areas of the state would have reasonable access
13to the financial programs, in which they are eligible. Establishment
14of a new corporation is dependent upon sufficient funding being
15available.end insert
16(b) Additional corporations have been proposed in the following
17areas:
18(1) San Jose.
19(2) Santa Ana.
20(3) San Fernando Valley.
21(4) Ontario.
23begin insert(c)end insert Upon an appropriation in the annual Budget Act for this
24purpose, thebegin delete office shallend deletebegin insert California Infrastructure and Economic
25Development Bank shall approve the issuance of a request for a
26proposal toend insert establish a small business financial development
27corporation in southeast Los Angeles.
29begin insert(d)end insert In furtherance of the purposes of this chapter, up to one-half
30of the trust funds may be used to guarantee loans utilized to
31establish a Business and Industrial Development Corporation
32(BIDCO) under Division 15 (commencing with Section 31000)
33of the Financial Code.
35Article 6. Corporations, Miscellaneous
38central staff to perform, all administrative requirements of the
39corporation, including all those functions required of a corporation
40by the director.
2creation and maintenance of a central staff shall be paid to the
3corporation from state funds, including a portion of the interest
4earned on the expansion fund and the corporation’s trust fund
5account, if the corporation has a trust fund account, otherwise, on
6the expansion fund.
A corporation shall report to thebegin delete executive director,end delete
8begin insert program manager,end insert or his or her designated representative, all
9statistical and other reports required by this chapter, responses to
10audit reports, budget requirements, and other information relating
11to the establishment, monitoring, and suspension of a corporation.
A corporation shall make a report to thebegin delete executive
13director,end deletebegin insert program manager,end insert as of the close of business on June 30
14of each year, describing the corporation’s activities and any
15additional information requested by thebegin delete executive director,end deletebegin insert program
16manager,end insert on or before August 1 of each year.
18Article 7. Conflict of Interest
It shall be unlawful for thebegin delete director,end delete executive director,
21begin insert program manager, end insert or any person who is an officer, director, or
22employee of a corporation, or who is a member of a loan
23committee, or who is an employee of thebegin delete officeend deletebegin insert California
24Infrastructure and Economic Development Bankend insert to do any of the
26(a) Ask for, consent, or agree to receive, any commission,
27emolument, gratuity, money, property, or thing of value for his or
28her own use, benefit, or personal advantage, for procuring or
29endeavoring to procure for any person, partnership, joint venture,
30association, or corporation, any loan, guarantee, financial, or other
31assistance from any corporation.
32(b) Borrow money, property, or to benefit knowingly, directly
33or indirectly, from the use of the money, credit, or property of any
35(c) Make, maintain, or attempt to make or maintain, a deposit
36of the funds of a corporation with any other corporation or
37association on condition, or with the understanding, expressed or
38implied, that the corporation or association receiving the deposit
39shall pay any money or make a loan or advance, directly or
40indirectly, to any person, partnership, joint venture, association,
P12 1or corporation, other than to a corporation formed under this
4begin insert program manager, end insert or any person who is an officer or director of
5a corporation, or who is an employee of thebegin delete office,end deletebegin insert California
6Infrastructure and Economic Development Bankend insert to purchase or
7receive, or to be otherwise interested in the purchase or receipt,
8directly or indirectly, of any asset of a corporation, without paying
9to the corporation the fair market value of the asset at the time of
10 the transaction.
12a felony.
14to the Government Code , to read:
16Title 25. Small Business Financial Assistance
17Act of 2013
19Chapter 1. Introduction
22Business Financial Assistance Act of 2013.
24(a) Small businesses form the core of the California economy
25and that it is in the interest of the state to increase opportunities
26for entrepreneurs, the self-employed, and microbusiness and small
27business owners to have better access to capital and other technical
28resources.
29(b) Unemployment in California is a matter of statewide concern
30requiring concerted public and private action to develop
31employment opportunities for the disadvantaged, youth, veterans,
32and unemployed persons.
33(c) It is necessary to direct additional capital, general
34management assistance, business education, and other resources
35to encourage the development of small business opportunities,
36particularly for minority, women, and disabled persons, to alleviate
37unemployment.
P13 1Chapter 2. Definitions
4in this section shall govern the construction of this title.
5(a) “Corporation” means any nonprofit California small business
6financial development corporation created pursuant to Chapter 1
9(b) “Director” means the director of the Governor’s Office of
10Business and Economic Development.
11(c) “Employment incentive loan” means a loan to a qualified
12business or to a business located within an enterprise zone, as
13defined in subdivision (d) of Section 7072.
14(d) “Executive director” means the person designated to this
15title by the director of the Governor’s Office of Business and
16Economic Development.
17(e) “Expansion fund” or “expansion fund” means the California
18Small Business Expansion Fund.
19(f) “Financial company” means banking organizations, including
20national banks and trust companies, savings and loan associations,
21state insurance companies, mutual insurance companies, and other
22public and private banking, lending, retirement, and insurance
23organizations.
24(g) “Financial institution” means banking organizations,
25including national banks and trust companies authorized to conduct
26business in California and state-chartered commercial banks, trust
27companies, community development financial institutions,
28microlenders, and savings and loan associations.
29(h) “Loan committee” means a committee appointed by the
30board of directors of a corporation to determine the course of action
31on a loan application pursuant to this title.
32(i) “Office” means the Governor’s Office of Business and
33Economic Development.
34(j) Unless otherwise defined by the director by regulation, “small
35business loan” means a loan to a business defined as an eligible
36small business as set forth in Section 121.3-10 of Part 121 of
37Chapter 1 of Title 13 of the Code of Federal Regulations, including
38those businesses organized for agricultural purposes that create or
39retain employment as a result of the loan. From time to time, the
40director shall provide guidelines as to the preferred ratio of jobs
P14 1created or retained to total funds borrowed for guidance to the
2corporations.
3(k) “Trust fund” means the money from the expansion fund that
4is held in trust by a financial institution or financial company. A
5trust fund is not a deposit of state funds and is not subject to the
6requirements of Section 16506.
7(l) “Trust fund account” means an account within the trust fund
8that is allocated to a particular small business financial
9development corporation for the purpose of paying loan defaults
10and claims on bond guarantees for a specific small business
11financial development corporation.
12(m) “Trustee” means the lending institution or financial company
13selected by the office to hold and invest the trust funds. An
14 agreement made pursuant to this title and the trustee shall not be
15construed to be a deposit of state funds.
17Chapter 3. Program Purpose
20and Economic Development the California Business Investment
21Service, which shall, among other things, assist businesses seeking
22new capital resources.
23(b) Pursuant to this title, the office may establish one or more
24programs administered regionally under contract with small
25business financial development corporations. Programs established
26pursuant to this title may include the following types of financial
27products:
28(1) Loan guarantees.
29(2) Direct loans.
30(3) Disaster assistance loans.
31(4) Surety bond guarantees.
32(c) In all of their state-funded programs, the corporations shall,
33to the extent practicable, be complementary to, and not competitive
34with, commercial lenders and other state and federal programs.
36undertake a program that shall include, but not be limited to, the
38(a) Outreach to low-resource small businesses and
39microbusinesses. The corporations located in rural areas shall give
P15 1priority to low-resource farmers, rural, and agriculturally related
2businesses.
3(b) Collaboration with other organizations and lenders to identify
4and assist those businesses that are creditworthy but face
5impediments to accessing conventional sources because of reasons,
6such as low equity, inadequate collateral, unacceptable legal
7structure (such as a co-op or nonprofit organization), management
8inadequacies, and language problems.
9(c) To the extent possible, bringing all possible financial
10resources (low-interest lenders, BIDCOs, MESBICs, other
11guarantors, etc.) to bear on the borrower’s problems.
12(d) Technical assistance to businesses receiving loans or
13guarantees that will maximize the probability of loan repayment.
14(e) Ongoing strategies for increasing program resources through
15private sector involvement and nonstate funds.
16(f) A program for collecting and liquidating defaulted loans so
17that the corporations can qualify to become full-service lenders
18under the Small Business Administration. Corporations located in
19rural areas shall, in addition, try to qualify for lender status under
20the Farmers Home Administration.
21(g) Become an agent for other lenders and guarantors.
23Chapter 4. Administrative Structure
26Chapter 1 (commencing with Section 14000) of Part 5 of Division
273 of Title 1 of the Corporations Code, as that chapter read on
28January 1, 2013, then the office shall adopt regulations concerning
29the implementation of this title, Chapter 1 (commencing with
30Section 14000) of Part 5 of Division 3 of Title 1 of the
31Corporations Code, and direct lending as emergency regulations
32in accordance with Chapter 3.5 (commencing with Section 11340)
33of Part 1 of Division 3 of Title 2. The adoption of these regulations
34is an emergency and necessary for the immediate preservation of
35the public peace, health and safety, or general welfare within the
36meaning of subdivision (b) of Section 11346.1. Notwithstanding
37subdivision (e) of Section 11346.1, the regulations shall not remain
38in effect for more than 180 days unless the office complies with
39all provisions of Chapter 3.5 (commencing with Section 11340)
40of Part 1 of Division 3 of Title 2, as required by subdivision (e) of
P16 1Section 11346.1. This section also applies to any direct loan
2program administered by the office.
4(a) Administer this title.
5(b) Contract for services under this title and Chapter 1
6(commencing with Section 14000) of Part 5 of Division 3 of Title
71 of the Corporations Code.
8(c) In accordance with available resources, use branch offices
9for the purposes of making the programs under this title accessible
10to all areas of the state.
11(d) Require each corporation to submit an annual written plan
12of operation.
13(e) Authorize the distribution, transfer, and withholding of
14moneys in the expansion fund and trust funds.
15(f) Authorize the investment of expansion and trust fund moneys.
16(g) Oversee the operations of one or more programs authorized
17pursuant to this title.
18(h) Approve, suspend, or terminate a corporation’s ability to
19participate in a program under this title.
20(i) Advise the Governor, the director, and the Small Business
21Advocate regarding issues and programs affecting California’s
22small business community, including, but not limited to, business
23innovation and expansion, export financing, state procurement,
24management and technical assistance, venture capital, and financial
25assistance.
27the return on those funds from investment pursuant to Section
28200014 is conditional pursuant to Sections 200008 and 200015.
29Each corporation shall enter into a written signed agreement with
30the state at the beginning of each fiscal year. The agreement shall
31govern the activities in which the corporations engage, the
32investment of state funds and its return, and the budgeted
33administrative expenses the corporations may incur. In the event
34the state and corporation do not reach an agreement, or the state
35finds the corporation has violated the terms of an active agreement,
36the state may take any action under Section 200008 or 200015, or
37any other action as appropriate. In the event the state and
38corporation do not reach agreement or the state finds the
39corporation has violated the terms of an active agreement, the
40corporation shall have no authority to withdraw or encumber the
P17 1trust fund or the return of those funds by the issuance of guarantees,
2by incurring expenses against the fund and its return in any manner
3whatsoever, and the state may take any action under Section
4200008 or 200015, or any other action as appropriate. Any
5guarantee or other encumbrance made by the corporation in
6violation of this section shall be null and void, and neither the state
7nor the trust fund will be liable therefor.
9irreparable harm may occur if guarantee or direct loan authority
10is not temporarily withdrawn from a corporation, the executive
11director may temporarily withdraw guarantee or direct loan, or
12both, authority from a corporation. The notice of temporary
13withdrawal sent to the corporation shall specify the reasons for the
14action.
15(1) As used in this section, “guarantee and direct loan authority”
16means the authority to make or guarantee any loan that encumbers
17funds in a trust fund account, any account or subaccount under the
18direct control of the office or other state entity, or the expansion
20(2) The executive director shall make one of the determinations
21specified in subdivision (c) within 30 days of the effective date of
22the temporary withdrawal, unless the corporation and the executive
23director mutually agree to an extension. The corporation shall have
24the opportunity to submit written material to the executive director
25addressing the items stated in the temporary withdrawal notice. If
26the executive director does not make any determinations within
2730 days, the temporary withdrawal shall be negated. The
29period of temporary withdrawal, and the corporation shall continue
32following may result in the suspension of a corporation:
33(1) Regulations implementing the California Small Business
34Development Corporation Law (Chapter 1 (commencing with
35Section 14000) of Part 5 of Division 3 of Title 1 of the
36Corporations Code).
37(2) Fiscal and portfolio requirements, as contained in the fiscal
38and portfolio audits specified in Section 14004 of the Corporations
P18 1(3) Milestones and scope of work as contained in the annual
2contract between the corporation and the office.
3(c) Pursuant to subdivision (a) or (b), the executive director may
5(1) Terminate the temporary withdrawal.
6(2) Terminate the temporary withdrawal subject to the
7corporation’s adoption of a specified remedial action plan.
8(3) Temporarily withdraw, or continue to withdraw, guarantee
9authority until a specified time. This determination by the executive
10director shall require a finding that the corporation has failed to
11comply with the California Small Business Development
12Corporation Law (Chapter 1 (commencing with Section 14000)
13of Part 5 of Division 3 of Title 1 of the Corporations Code).
14(4) Suspend the corporation.
15(5) Suspend the corporation, with suspension stayed until the
16corporation provides a remedial action plan to the executive
17director, and the executive director decides whether to repeal or
18implement the stayed suspension.
19(d) The determinations contained in paragraphs (4) and (5) of
20subdivision (c) require a finding that irreparable harm will occur
21unless the corporation is suspended.
22(e) In considering a determination regarding the recommended
23suspension and possible remedial action plans, the executive
24director shall consider, along with other criteria as specified in
25subdivision (b), the corporation’s history and past performance.
26(f) Upon suspension of a corporation, the executive director
27shall transfer all funds, whether encumbered or not, in the trust
28fund account of the suspended corporation into either the expansion
29fund or temporarily transfer the funds to another corporation.
30(g) If the executive director decides to take any action against
31the corporation pursuant to paragraphs (2) to (5), inclusive, of
32subdivision (c), the corporation shall be notified of the action 10
33days before the effective date of the action. The corporation shall
34have the right to appeal the executive director’s decision to the
35director within that 10-day period by sending notice to the director.
36Once the director receives notice that the action is being appealed,
37the executive director’s action shall be stayed except for temporary
38withdrawal of guarantee authority. Upon receipt of the notice, the
39director shall consider and make a final determination on the appeal
40within 30 days. The director may elect to take any of the actions
P19 1listed in subdivision (h). The temporary withdrawal of corporation
2guarantee authority shall remain in effect until the director issues
3a decision.
4(h) Pursuant to subdivision (g), the director may do any of the
6(1) Terminate the action taken by the executive director.
7(2) Modify the action taken by the executive director subject to
8the adoption by the corporation of a specified remedial action plan.
9(3) Affirm the action taken by the executive director.
10(i) Following suspension, the corporation may continue its
11existence as a nonprofit corporation pursuant to the Nonprofit
12Public Benefit Corporation Law (Part 2 (commencing with Section
135110) of Division 2 of Title 1 of the Corporations Code), but shall
14no longer be registered with the Secretary of State as a small
15business financial development corporation. A corporation shall
16not enjoy any of the benefits of a small business financial
17development corporation following suspension.
18(j) The funds in the trust fund account of a corporation under
19temporary withdrawal shall be transferred to the expansion fund.
20Upon termination of the temporary withdrawal, unless the
21termination is caused by suspension, the funds of the corporation
22that were transferred to the expansion fund from the trust fund
23account shall be returned to the corporation’s trust fund account,
24notwithstanding Section 200011. While the funds of a corporation’s
25trust fund account reside in the expansion fund, use of the principal
26on the funds shall be governed by the implementing regulations
27specifying use of funds in the expansion fund. Interest on the funds
28moved from a corporation’s trust fund account upon temporary
29withdrawal shall be limited to payment of the corporation’s
30administrative expenses, as contained in the contract between the
31corporation and the state pursuant to this title.
33Chapter 5. Expansion Fund
36Treasury the California Small Business Expansion Fund. All or a
37portion of the funds in the expansion fund may be paid out, with
38the approval of the Department of Finance, to a lending institution
39or financial company that will act as trustee of the funds.
P20 1(b) The expansion fund and the trust fund shall be used to pay
2for defaulted loan guarantees issued pursuant to this title, surety
3bond losses, administrative costs of corporations, and those costs
4necessary to protect a real property interest in a defaulted loan or
5guarantee.
7purpose of receiving state, federal, or local government money,
8and other public or private money to make loans, guarantees, and
9restricted investments pursuant to this title.
10(d) One or more accounts may be created by the executive
11director for corporations participating in one or more programs
12authorized under this title. Each account is a legally separate
13account, and shall not be used to satisfy loan or surety bond
14guarantees or other obligations of another corporation.
15(e) The amount of guarantee liability outstanding at any one
16time shall not exceed five times the amount of funds on deposit in
17the expansion fund plus any receivables due from funds loaned
18from the expansion fund to another fund in state government as
19directed by the Department of Finance pursuant to a statute enacted
20by the Legislature, including each of the trust fund accounts within
21the trust fund.
22(f) This section shall remain in effect only until January 1, 2018,
24is enacted before January 1, 2018, deletes or extends that date.
26hereby continuously appropriated, without regard to fiscal years,
27for the purposes of this title.
28(b) Except as specified in subdivision (a) of Section 200011,
29the state shall not be liable or obligated in any way beyond the
30state money that is allocated in the expansion fund from moneys
31from the General Fund moneys appropriated for such purposes.
33with the approval of the Director of Finance, may request the
34trustee to invest those funds in the trust fund in any of the securities
35described in Section 16430. Returns from these investments shall
36be deposited in the expansion fund and shall be used to support
37the programs of this title.
38(b) Any investments made in securities described in Section
3916430 shall be governed by the statement of investment policy
P21 1prepared by the Treasurer pursuant to subdivision (a) of Section
216481.2.
4way beyond the money that is allocated and deposited in the
5corporation’s trust fund account.
6(b) The executive director may reallocate funds held within a
7corporation’s trust fund account.
8(1) The executive director shall reallocate funds based on which
9corporation is most effectively using its guarantee funds. If funds
10are withdrawn from a less effective corporation as part of a
11reallocation, the executive director shall make that withdrawal
12only after giving consideration to that corporation’s fiscal solvency,
13its ability to honor loan guarantee defaults, and its ability to
14maintain a viable presence within the region it serves. Reallocation
15of funds shall occur no more frequently than once per fiscal year.
16Any decision made by the executive director pursuant to this
17subdivision may be appealed to the director. The director has
18authority to repeal or modify any decision to reallocate funds.
19(2) The executive director may authorize a corporation to exceed
20the leverage ratio specified in Section 200009 or subdivision (a)
21of Section 200025, or subdivision (c) of Section 14017 of the
22Corporations Code, pending the annual reallocation of funds
23pursuant to this section. However, no corporation shall be permitted
24to exceed an outstanding guarantee liability of more than five times
25its portion of funds on deposit in the expansion fund.
27Small Business Disaster Recovery Loan Loss Reserve Account,
28as part of the expansion fund. This account shall be used to pay
29for unrecovered losses resulting from loan guarantees issued
30pursuant to subdivision (a) of Section 200030 or subdivision (b)
31of this section, and disaster loan guarantees issued prior to the
32effective date of this section that are in default.
33(b) Any lending institution that issues a low-interest loan that
34is guaranteed by resources in this account shall be fully reimbursed
35for the guaranteed portion of principal and interest that result from
36a loan or loans that are in default. If there are insufficient funds in
37this account to fully satisfy all claimants, the full faith of the
38resources in the General Fund are pledged to satisfy the obligations
39of this account. This account may only guarantee as much loan
40dollar value as is specifically authorized by the Director of Finance
P22 1with the concurrence of the Governor. This account shall receive
2all moneys transferred pursuant to Section 200013, and any
3unencumbered balances transferred to the California Small
4Business Expansion Fund pursuant to Chapters 11 and 12 of the
5First Extraordinary Session of the Statutes of 1989, and Chapter
61525 of the Statutes of 1990, as of July 1, 1992.
7(c) The Governor may utilize this authority to prevent business
8insolvencies and loss of employment in an area affected by a state
9of emergency within the state and declared a disaster by the
10President of the United States, by the Administrator of the United
11States Small Business Administration, or by the United States
12Secretary of Agriculture, or declared to be in a state of emergency
13by the Governor of California.
15Governor, may transfer moneys in the Special Fund for Economic
16Uncertainties to the California Small Business Expansion Fund
17for use as authorized by the director, in an amount necessary to
18make loan guarantees pursuant to this title.
20to trust fund accounts by the Treasurer on warrants drawn by the
21Controller and requisitioned by the executive director, pursuant
22to the purposes of this title. The executive director may transfer
23funds allocated from the expansion fund to accounts, established
24solely to receive the funds, in lending institutions designated by
25the office to act as trustee. The lending institutions so designated
26shall be approved by the state for the receipt of state deposits.
27Interest earned on the trust fund accounts in lending institutions
28may be utilized by the corporations pursuant to the purposes of
29this title.
30(b) Except as specified in subdivision (d), the executive director
P23 1(c) Any decision made by the executive director pursuant to
2subdivision (b) may be appealed to the director within 15 days of
3notice of the proposed action. The director may repeal or modify
4any reallocation and transfer decisions made by the executive
6(d) The criteria specified in subdivision (b) shall not apply to a
7corporation that has been in existence for five years or less. If not
8already adopted, the office shall develop regulations specifying
9the basis for transferring account funds to those corporations that
10have been in existence for five years or less.
12pursuant to this title, the state has residual interest in the funds
13deposited by the state to a trust fund account and to the return on
14these funds from investments. On dissolution or suspension of the
15corporation, these funds shall be withdrawn by the executive
16director from the trust fund account and returned to the expansion
17fund or temporarily transferred to another trust fund account. This
18provision shall be contained in the trust instructions to the trustee.
20guarantee account, and, upon recommendation by the executive
21director, a bond guarantee account, each of which is a legally
22separate account, and the assets of one account shall not be used
23to satisfy loan guarantees or other obligations of another
24corporation. Not more than one-third of a trust fund account shall
25be allocated to a bond guarantee account. A corporation shall not
26use trust fund accounts to secure a corporate indebtedness. State
27funds deposited in the trust fund accounts, with the exception of
28guarantees established pursuant to this title, shall not be subject
29to liens or encumbrances of the corporation or its creditors.
31the trust fund shall be designated after review by the executive
32director. The corporation shall not receive money on deposit to
33support guarantees issued under this title without the approval of
34the executive director.
35(b) State funds may not be used to finance an expense incurred
36by a corporation in a location not approved pursuant to a statewide
37plan. The prohibition against use of state funds also applies to the
38location of satellite offices, and the area served from a corporation
39office.
P13 1Chapter 6. Guarantee Program
4which is hereby continued in existence, shall provide guarantees
5to loans offered by financial institutions to small businesses.
6(b) The Legislature finds and declares that the Small Business
7Loan Guarantee Program has enabled participating small businesses
8that do not qualify for conventional business loans or Small
9Business Administration loans to secure funds to expand their
10businesses. These small businesses would not have been able to
11expand their businesses in the absence of the program. The program
12has also provided valuable technical assistance to small businesses
13to ensure growth and stability. The study commissioned by former
14Section 14069.6 of the Corporations Code, as added by Chapter
15919 of the Statutes of 1997, documented the return on investment
16of the program and the need for its services. The value of the
17program has also been recognized by the Governor through
18proposals contained in the May Revision to the Budget Act of
192000 for the 2000-01 fiscal year.
21director, may do all of the following:
22(a) Contract for services entered into pursuant to this title.
23(b) Hold public hearings.
24(c) Act as liaison between corporations, other state and federal
25agencies, lenders, and the Legislature.
26(d) Process and tabulate on a monthly basis all corporate reports.
27(e) Attend board meetings.
28(f) Attend and participate at corporation meetings. The executive
29 director, or his or her designee, shall be an ex officio, nonvoting
30representative on the board of directors and loan committees of
31each corporation. The executive director shall meet with the board
32of directors of each corporation at least once each fiscal year.
33(g) Assist corporations in applying for public and private funding
37the expansion fund and trust fund accounts are to be leveraged,
38and if so, by how much. Upon the request of the corporation, the
39executive director’s decision may be repealed or modified by an
40office resolution.
P25 1(b) The amount of guarantee liability outstanding at any one
2time shall not exceed five times the amount of funds on deposit in
3the expansion fund plus any receivables due from funds loaned
4from the expansion fund to another fund in state government as
5directed by the Department of Finance pursuant to a statute enacted
6by the Legislature, including each of the trust fund accounts within
7the trust fund.
12the expansion fund and trust fund accounts are to be leveraged,
13and if so, by how much. Upon the request of the corporation, the
14executive director’s decision may be repealed or modified by an
15office resolution.
16(b) The amount of guarantee liability outstanding at any one
17time shall not exceed four times the amount of funds on deposit
18in the expansion fund plus any receivables due from funds loaned
19from the expansion fund to another fund in state government as
20directed by the Department of Finance pursuant to a statute enacted
21by the Legislature, including each of the trust fund accounts within
22the trust fund, unless the executive director has permitted a higher
23leverage ratio for an individual corporation pursuant to subdivision
24(b) of Section 200011.
27on deposit in the corporation’s trust fund account, or by receivables
28due from funds loaned from the corporation’s trust fund account
29to another fund in state government, as directed by the Department
30of Finance pursuant to a statute enacted by the Legislature.
31(b) Loan guarantees shall be secured by a reserve of at least 20
32percent to be determined by the executive director.
33(c) The expansion fund and trust fund accounts shall be used
34exclusively to guarantee obligations and pay the administrative
35costs of the corporations.
40on deposit in the corporation’s trust fund account, or by receivables
P26 1due from funds loaned from the corporation’s trust fund account
2to another fund in state government, as directed by the Department
3of Finance pursuant to a statute enacted by the Legislature.
4(b) Loan guarantees shall be secured by a reserve of at least 25
5percent to be determined by the executive director, unless the
6executive director authorizes a higher leverage ratio for an
7individual corporation pursuant to subdivision (b) of Section
8200011.
9(c) The expansion fund and trust fund accounts shall be used
10exclusively to guarantee obligations and pay the administrative
11costs of the corporations.
12(d) This section shall become operative on January 1, 2018.
14institution a loan fee on all loans made or guaranteed by the
15corporation to defray the operating expenses of the corporation.
16The amount of the fee shall be determined by the executive
17director.
19corporations make maximal use of their statutory authority to
20guarantee loans and surety bonds, including the authority to secure
21loans with a minimum loan loss reserve of only 20 percent, so that
22the financing needs of small business may be met as fully as
23possible within the limits of corporations’ loan loss reserves. The
24office shall report annually to the Legislature on the financial status
25of the corporations and their portfolio of loans and surety bonds
26guaranteed pursuant to Section 9795.
27(b) Any corporation that serves an area declared to be in a state
28of emergency by the Governor or a disaster area by the President
29of the United States, the Administrator of the United States Small
30 Business Administration, or the United States Secretary of
31Agriculture shall increase the portfolio of loan guarantees where
32the dollar amount of the loan is less than one hundred thousand
33dollars ($100,000), so that at least 15 percent of the dollar value
34of loans guaranteed by the corporation is for those loans. The
35corporation shall comply with this requirement within one year of
36the date the emergency or disaster is declared. Upon application
37of a corporation, the executive director may waive or modify the
38rule for the corporation if the corporation demonstrates that it made
39a good faith effort to comply and failed to locate lending
P27 1institutions in the region that the corporation serves that are willing
2to make guaranteed loans in that amount.
7corporations make maximal use of their statutory authority to
8guarantee loans and surety bonds, including the authority to secure
9loans with a minimum loan loss reserve of only 25 percent, unless
10the office authorizes a higher leverage ratio for an individual
11corporation pursuant to subdivision (b) of Section 200011, so that
12the financing needs of small business may be met as fully as
13possible within the limits of corporations’ loan loss reserves. The
14office shall report annually to the Legislature on the financial status
15of the corporations and their portfolio of loans and surety bonds
16guaranteed pursuant to Section 9795.
17(b) Any corporation that serves an area declared to be in a state
18of emergency by the Governor or a disaster area by the President
19of the United States, the Administrator of the United States Small
20Business Administration, or the United States Secretary of
21Agriculture shall increase the portfolio of loan guarantees where
22the dollar amount of the loan is less than one hundred thousand
23dollars ($100,000), so that at least 15 percent of the dollar value
24of loans guaranteed by the corporation is for those loans. The
25corporation shall comply with this requirement within one year of
26the date the emergency or disaster is declared. Upon application
27of a corporation, the executive director may waive or modify the
28rule for the corporation if the corporation demonstrates that it made
29a good faith effort to comply and failed to locate lending
30institutions in the region that the corporation serves that are willing
31to make guaranteed loans in that amount.
32(c) This section shall become operative on January 1, 2018.
34committees, each of which shall be composed of five or more
35persons, a majority of whom shall be experienced in banking and
36lending operations.
37(b) A loan committee shall review applications to the corporation
38for a loan or guarantee and shall do each of the following:
39(1) Determine the feasibility of the proposed transaction. The
40loan committee shall recommend approval of the application only
P28 1upon a determination that there is a reasonable chance that the loan
15loan committee shall do all of the following:
25 commission, or a county health authority organized pursuant to
28(c) Not grant a loan or guarantee, unless it determines that the
29conditions of Section 200033 are satisfied.
31high priority to the issuance of loan guarantees to small business
32incubators, and to businesses that lease space in incubators.
33(b) For the purposes of this section, “incubator” means a facility
34that allows new small businesses to increase their probability of
35success by sharing needed capital equipment, services, and
36facilities, which may include, but is not limited to, the following:
37(1) Reception and meeting area.
38(2) Secretarial services, such as collating, telephone answering,
39or mailhandling.
40(3) Accounting and bookkeeping services.
P29 1(4) Research libraries.
2(5) Onsite financial and management counseling.
3(6) Parking.
4(7) Flexible lease arrangements for flexible space.
5(8) Computer or word processing facilities.
6(9) Day care facilities.
7(10) Office furniture rentals.
8(11) A graduation policy sometimes requiring firms to leave
9after three to five years in a subsidized, nurturing environment.
10(12) Employee training and placement services.
11(c) Among other priorities, corporations shall give high priority
12to marketing their services to Phase 1 or Phase 2 Small Business
13Innovation Research (SBIR) recipients and providing loan
14guarantees, whenever possible.
16Chapter 7. Direct Lending
19as long as at least 80 percent of the corporate funds, calculated by
20dollar amount, and all expansion funds are guaranteed by another
21public or private financial institution.
22(b) The amount of funds available for direct lending shall be
23determined by the executive director. In its capacity as a direct
24lender, the corporation may sell in the secondary market the
25guaranteed portion of each loan so as to raise additional funds for
26direct lending. The office shall issue regulations governing these
27direct loans, including the maximum amount of these loans.
28(c) To execute the direct loan programs established in this
29chapter, the executive director may loan trust funds to a corporation
30located in a rural area for the express purpose of lending those
31funds to an identified borrower. The loan authorized by the
32executive director to the corporation shall be on terms similar to
33the loan between the corporation and the borrower.
34(d) The amount of the loan may be in excess of the amount of
35a loan to any individual borrower, but actual disbursements
36pursuant to the office loan agreement shall be required to be
37supported by a loan agreement between the borrower and the
38corporation in an amount at least equal to the requested
39disbursement. The loan between the office and the corporation
40shall be evidenced by a credit agreement. In the event that any
P30 1loan between the corporation and borrower is not guaranteed by
2a governmental agency, the portion of the credit agreement
3attributable to that loan shall be secured by assignment of any note,
4executed in favor of the corporation by the borrower to the office.
5The terms and conditions of the credit agreement shall be similar
6to the loan agreement between the corporation and the borrower,
7which shall be collateralized by the note between the corporation
8and the borrower.
9(e) In the absence of fraud on the part of the corporation, the
10liability of the corporation to repay the loan to the office is limited
11to the repayment received by the corporation from the borrower,
12except in a case where the United States Department of Agriculture
13requires exposure by the corporation in rule or regulation. The
14corporation may use trust funds for loan repayment to the office
15if the corporation has exhausted a loan loss reserve created for this
16purpose. Interest and principal received by the office from the
17corporation shall be deposited into the same account from which
18the funds were originally borrowed.
19(f) Upon the approval of the executive director, a corporation
20shall be authorized to borrow trust funds from the office for the
21purpose of relending those funds to small businesses. A corporation
22shall demonstrate to the executive director that it has the capacity
23to administer a direct loan program, and has procedures in place
24to limit the default rate for loans to startup businesses. Not more
25than 25 percent of any trust fund account shall be used for the
26direct lending established pursuant to this subdivision. A loan to
27a corporation shall not exceed the amount of funds likely to be
28lent to small businesses within three months following the loan to
29the corporation.
30(g) The maximum loan amount to a small business is fifty
31thousand dollars ($50,000). In the absence of fraud on the part of
32the corporation, the repayment obligation pursuant to the loan to
33the corporation shall be limited to the amount of funds received
34by the corporation for the loan to the small business and any other
35funds received from the office that are not disbursed. The
36corporation shall be authorized to charge a fee to the small business
37borrower, in an amount determined by the executive director
38pursuant to regulation. The program provided for in this subdivision
39shall be available in all geographic areas of the state.
P13 1Chapter 8. Disaster Loan Guarantees
4of emergency within the state and declared a disaster by the
5President of the United States, the Administrator of the United
6States Small Business Administration, or the United States
7Secretary of Agriculture, or declared to be in a state of emergency
8by the Governor of California, provide loan guarantees from funds
9allocated in Section 200013 to small businesses, small farms,
10nurseries, and agriculture-related enterprises that have suffered
11actual physical damage or significant economic injury as a result
12of the disaster.
13(b) If regulations have not otherwise been adopted, the office
14may adopt or readopt regulations to implement the loan guarantee
15program authorized by this section. The office may adopt these
16regulations as emergency regulations in accordance with Chapter
173.5 (commencing with Section 11340) of Part 1 of Division 3 of
18Title 2, and for purposes of that chapter, including Section 11349.6,
19the adoption of the regulations shall be considered by the Office
20of Administrative Law to be necessary for the immediate
21preservation of the public peace, health and safety, and general
22welfare. Notwithstanding subdivision (e) of Section 11346.1, the
23regulations shall be repealed within 180 days after their effective
24date unless the office complies with Chapter 3.5 (commencing
25with Section 11340) of Part 1 of Division 3 of Title 2, as provided
26in subdivision (e) of Section 11346.1.
27(c) Allocations pursuant to subdivision (a) shall be deemed to
28 be for extraordinary emergency or disaster response operations
29costs incurred by the office.
31Chapter 9. Energy Efficiency Loans
34improvement loans.
35(b) The office shall enter into an agreement with the California
36Energy Extension Service of the Office of Planning and Research
37to assist small business owners in reducing their energy costs
38through low-interest loans and by providing assistance and
P13 1Chapter 10. Surety Bonds
4200001 of this code and Section 14002 of the Corporations Code,
5a corporation may do any one or more of the following activities,
6but only to the extent that the activities are authorized pursuant to
7the contract between the office and corporation: guarantee, endorse,
8or act as surety on the bonds, notes, contracts, or other obligations
9of, or assist financially, any person, firm, corporation, or
10association, and may establish and regulate the terms and
11conditions with respect to any such loans or financial assistance
12and the charges for interest and service connected therewith, except
13that the corporation shall not make or guarantee any loan, unless
14and until it determines:
15(a) There is no probability that the loan or other financial
16assistance would be granted by a financial company under
17reasonable terms or conditions, and the borrower has demonstrated
18a reasonable prospect of repayment of the loan.
19(b) The loan proceeds shall be used exclusively in this state.
20(c) The loan qualifies as a small business loan or an employment
21incentive loan.
22(d) That the borrower has a minimum equity interest in the
23business as determined by the director.
24(e) As a result of the loan, the jobs generated or retained
25demonstrate reasonable conformance to the regulations specifying
26employment criteria.
28200033, upon approval of the executive director, a corporation
29may act as guarantor on a surety bond for any small business
30contractor, including, but not limited to, women, minority, and
31disabled veteran contractors.
32(b) The provisions of subdivision (a) allowing a corporation to
33act as a guarantor on surety bonds may be funded through
34appropriate federal funding sources. Federal funds shall be
35deposited in the Federal Trust Fund in the State Treasury in
36accordance with Section 16360, for transfer to the expansion fund.
P13 1Chapter 11. Reporting
4fund account shall be used solely to make loans, guarantee bonds,
5and guarantee loans, approved by the corporation, that meet the
6loan criteria under this title. The state shall not be liable or
7obligated in any way as a result of the allocation of state money
8to a trust fund account beyond the state money that is allocated
10otherwise withdrawn by the state pursuant to this title.
11(b) A summary of all loans and bonds to which a state guarantee
12is attached shall be submitted to the executive director upon
13execution of the loan agreement and periodically thereafter.
14(c) A summary of all loans made by a corporation shall be
15submitted to the executive director upon execution of the loan
16agreement and periodically thereafter.
18commencing January 1, 2014, the executive director shall prepare
19a report regarding the loss experience for the expansion fund for
20loan guarantees, loss reserves, and surety bond guarantees for the
21preceding fiscal year. At a minimum, the report shall also include
22data regarding numbers of surety bond and loan guarantees awarded
23through the expansion fund, including ethnicity and gender data
24of participating contractors and other entities, and experience of
25surety insurer participants in the bond guarantee program. The
26report shall include the information described in Section 200025.
27The executive director shall submit that report to the Governor
28and the Legislature pursuant to Section 9795.
29(b) A corporation shall also report to the executive director, or
30his or her designated representative, all statistical and other reports
31required by this title, responses to audit reports, budget
32requirements, invoices submitted for payment by the state, and
33information concerning loans made or guaranteed.
3560 days of the conclusion of the period for guaranteeing loans
36under any small business disaster loan guarantee program
37conducted for a disaster as authorized by Section 8684.2 or 200030,
38the office shall provide a report to the Legislature on loan
39guarantees approved and rejected by gender, ethnic group, type of
40business and location, and each participating loan institution
P34 1pursuant to Section 9795. The office need only submit one report
2to comply with this section and subdivision (f) of Section 8684.2.
begin insertChapter 6 (commencing with Section 63088) is added
4to Division 1 of Title 6.7 of the end insertbegin insert Government Code end insertbegin insert, to read:end insert
6Chapter begin insert6.end insert Small Business Financial Assistance Act of
9Article begin insert1.end insert Introduction
begin insert63088.end insert
12Small Business Financial Assistance Act of 2013.
begin insert63088.1.end insert
14(a) Small businesses form the core of the California economy
15and that it is in the interest of the state to increase opportunities
16for entrepreneurs, the self-employed, and microbusiness and small
17business owners to have better access to capital and other technical
19(b) Unemployment in California is a matter of statewide concern
20requiring concerted public and private action to develop
21employment opportunities for the disadvantaged, unemployed
22persons, veterans, and youth.
23(c) It is necessary to direct additional capital, general
24management assistance, business education, and other resources
25to encourage the development of small business opportunities,
26particularly for minorities, women, and disabled persons, to
27alleviate unemployment.
29Article begin insert2.end insert Definitions
begin insert63088.3.end insert
32in this section shall govern the construction of this chapter.
33(a) “Bank” means the California Infrastructure and Economic
34Development Bank.
35(b) “Bank board” means the board of directors of the California
36Infrastructure and Economic Development Bank.
37(c) “Board” means the California Small Business Board.
38(d) “Corporation” means any nonprofit California small
39business financial development corporation created pursuant to
P35 1Chapter 1 (commencing with Section 14000) of Part 5 of Division
23 of Title 1 of the Corporations Code.
3(e) “Employment incentive loan” means a loan to a qualified
4business or to a business located within an enterprise zone, as
5defined in subdivision (d) of Section 7072.
6(f) “Executive director” means the executive director of the
8(g) “Expansion fund” means the California Small Business
10(h) “Financial company” means banking organizations,
11including national banks and trust companies, savings and loan
12associations, certified community development financial
13institutions, microlenders, state insurance companies, mutual
14insurance companies, and other public and private banking,
16(i) “Financial institution” means regulated banking
18authorized to conduct business in California and state-chartered
19commercial banks, trust companies, credit unions, and savings
20and loan associations.
21(j) “Loan committee” means a committee appointed by the
22board of directors of a corporation to determine the course of
23action on a loan application pursuant to this title.
24(k) “Program manager” means the person designated to this
25title by the executive director of the California Infrastructure and
26Economic Development Bank.
27(l) Unless otherwise defined by the executive director by
28regulation, “small business loan” means a loan to a business
29defined as an eligible small business as set forth in Section
30121.3-10 of Part 121 of Chapter 1 of Title 13 of the Code of
31Federal Regulations, including those businesses organized for
32agricultural purposes that create or retain employment as a result
33of the loan. From time to time, the executive director shall provide
34guidelines as to the preferred ratio of jobs created or retained to
35total funds borrowed for guidance to the corporations.
36(m) “Trust fund” means the moneys from the expansion fund
37that is held in trust by a financial institution or financial company.
38A trust fund is not a deposit of state funds and is not subject to the
39requirements of Section 16506.
P36 1(n) “Trustee” means the lending institution or financial company
2selected by the office to hold and invest the trust funds. An
3agreement made pursuant to this title and the trustee shall not be
4construed to be a deposit of state funds.
5(o) “Trust fund account” means an account within the trust
6fund that is allocated to a particular small business financial
7development corporation for the purpose of paying loan defaults
8and claims on bond guarantees for a specific small business
9financial development corporation.
11Article begin insert3.end insert Program Purpose
begin insert63088.5.end insert
14and Economic Development the California Infrastructure and
15Economic Development Bank, which shall, among other things,
16assist businesses seeking new capital resources.
17(b) Pursuant to this title, the bank may establish one or more
18programs administered regionally under contract with small
19business financial development corporations. Programs established
20pursuant to this title may include the following types of financial
21products:
22(1) Loan guarantees.
23(2) Direct loans.
24(3) Disaster assistance loans.
25(4) Surety bond guarantees.
26(c) In all of their state-funded programs, the corporations shall,
27to the extent practicable, be complementary to, and not competitive
28with, commercial lenders and other state and federal programs.
29(d) In carrying out this chapter the bank may call on the
30California Small Business Board for advice and recommendations.
31All actions by the California Small Business Board are advisory
32except where specifically assigned a duty and authority.
33(e) The Small Business Board may also advise the Governor,
34the director, and the Small Business Advocate regarding issues
35and programs affecting California’s small business community,
36including, but not limited to, business innovation and expansion,
37export finance, state procurement, management and technical
38assistance, venture capital, and financial assistance.
begin insert63088.6.end insert
2undertake a program that shall include, but not be limited to, the
4(a) Outreach to low-resource small businesses and
5microbusinesses. The corporations located in rural areas shall
6give priority to low-resource farmers and rural and agriculturally
7related businesses.
8(b) Collaboration with other organizations and lenders to
9identify and assist those businesses that are creditworthy but face
10impediments to accessing conventional sources because of reasons,
11such as low equity, inadequate collateral, unacceptable legal
12structure (such as a co-op or nonprofit organization), management
13inadequacies, and language problems.
14(c) To the extent possible, bringing all possible financial
15resources (low-interest lenders, BIDCOs, MESBICs, other
16guarantors, etc.) to bear on the borrower’s problems.
17(d) Technical assistance to businesses receiving loans or
18guarantees that will maximize the probability of loan repayment.
19(e) Ongoing strategies for increasing program resources
20through private sector involvement and nonstate funds.
21(f) A program for collecting and liquidating defaulted loans so
22that the corporations can qualify to become full-service lenders
23under the Small Business Administration. Corporations located
24in rural areas shall, in addition, try to qualify for lender status
25under the United States Department of Agriculture’s Rural
26Development and Farm Services Agency.
27(g) Become an agent for other financial institutions and financial
28companies.
30Article begin insert4.end insert Administrative Structure
begin insert63089.end insert
33Chapter 1 (commencing with Section 14000) of Part 5 of Division
343 of Title 1 of the Corporations Code, as that chapter read on
35January 1, 2013, then the bank shall adopt regulations concerning
36the implementation of this title, Chapter 1 (commencing with
37Section 14000) of Part 5 of Division 3 of Title 1 of the Corporations
38Code, and direct lending as emergency regulations in accordance
39with Chapter 3.5 (commencing with Section 11340) of Part 1 of
40Division 3 of Title 2. The adoption of these regulations is an
P38 1emergency and necessary for the immediate preservation of the
2public peace, health and safety, or general welfare within the
3meaning of subdivision (b) of Section 11346.1. Notwithstanding
4subdivision (e) of Section 11346.1, the regulations shall not remain
5in effect for more than 180 days unless the office complies with
6all provisions of Chapter 3.5 (commencing with Section 11340)
7of Part 1 of Division 3 of Title 2, as required by subdivision (e) of
8Section 11346.1. This section also applies to any direct loan
9program administered by the bank.
begin insert63089.1.end insert
11(a) Administer this chapter.
12(b) Contract for services under this chapter and Chapter 1
15(c) In accordance with available resources, use branch offices
16for the purposes of making these programs under this chapter
17accessible to all areas of the state.
18(d) Require each corporation to submit an annual written plan
19of operation.
20(e) Authorize the distribution, transfer, and withholding of
21moneys in the expansion fund and trust funds.
22(f) Authorize the investment of expansion and trust fund moneys.
23(g) Oversee the operations of one or more programs authorized
24pursuant to this title.
25(h) Approve, suspend, or terminate a corporation’s ability to
26participate in a program under this title.
begin insert63089.2.end insert
28the return on those funds from investment pursuant to Section
2963089.56 is conditional pursuant to Sections 63089.3 and
3063089.57. Each corporation shall enter into a written signed
31agreement with the state at the beginning of each fiscal year. The
32agreement shall govern the activities in which the corporations
33engage, the investment of state funds and its return, and the
34budgeted administrative expenses the corporations may incur. In
35the event the state and corporation do not reach an agreement, or
36the state finds the corporation has violated the terms of an active
37agreement, the state may take any action under Section 63089.3
38or 63089.57, or any other action as appropriate. In the event the
39state and corporation do not reach agreement or the state finds
40the corporation has violated the terms of an active agreement, the
P39 1corporation shall have no authority to withdraw or encumber the
2trust fund or the return of those funds by the issuance of
3guarantees, by incurring expenses against the fund and its return
4in any manner whatsoever, and the state may take any action under
5Section 63089.3 or 63089.57, or any other action as appropriate.
6Any guarantee or other encumbrance made by the corporation in
7violation of this section shall be null and void, and neither the
8state nor the trust fund will be liable therefor.
10irreparable harm may occur if guarantee or direct loan authority
11is not temporarily withdrawn from a corporation, the program
12manager may temporarily withdraw guarantee or direct loan, or
13both, authority from a corporation. The notice of temporary
14withdrawal sent to the corporation shall specify the reasons for
15the action.
16(1) As used in this section, “guarantee and direct loan
17authority” means the authority to make or guarantee any loan that
18encumbers funds in a trust fund account, any account or
19subaccount under the direct control of the office or other state
20entity, or the expansion fund.
21(2) The program manager shall make one of the determinations
22specified in subdivision (c) within 30 days of the effective date of
23the temporary withdrawal, unless the corporation and the executive
24director mutually agree to an extension. The corporation shall
25have the opportunity to submit written material to the program
26manager addressing the items stated in the temporary withdrawal
27notice. If the program manager does not make any determinations
28within 30 days, the temporary withdrawal shall be negated. The
29corporation’s yearly contract shall remain in effect during the
30period of temporary withdrawal, and the corporation shall continue
31to receive reimbursement of necessary operating expenses.
32(b) Failure of a corporation to substantially comply with the
33following may result in the suspension of a corporation:
34(1) Regulations implementing the California Small Business
38(2) Fiscal and portfolio requirements, as contained in the fiscal
39and portfolio audits specified in Section 14004 of the Corporations
P40 1(3) Milestones and scope of work as contained in the annual
3(c) Pursuant to subdivision (a) or (b), the program manager
4may do the following:
9 authority until a specified time. This determination by the program
10manager shall require a finding that the corporation has failed to
23suspension and possible remedial action plans, the program
24manager shall consider, along with other criteria as specified in
26(f) Upon suspension of a corporation, the program manager
28fund account of the suspended corporation into either the
29expansion fund or temporarily transfer the funds to another
31(g) If the program manager decides to take any action against
32the corporation pursuant to paragraphs (2) to (5), inclusive, of
33subdivision (c), the corporation shall be notified of the action 10
34days before the effective date of the action. The corporation shall
35have the right to appeal the program manager’s decision to the
36director of the California Small Business Board within that 10-day
37period by sending notice to the executive director. Once the
38executive director receives notice that the action is being appealed,
39the program manager’s action shall be stayed except for temporary
40withdrawal of guarantee authority. Upon receipt of the notice from
P41 1the corporation, the executive director shall notify the small
2business board within three working days. The California Small
3Business Board shall consider and make a final determination on
4the appeal within 30 days of receiving notice. The small business
5board may elect to take any of the actions listed in subdivision (h).
6The temporary withdrawal of corporation guarantee authority
7shall remain in effect until the executive director small business
8board issues a decision.
9(h) Pursuant to subdivision (g), the small business board may
10do any of the following:
11(1) Terminate the action taken by the program manager.
12(2) Modify the action taken by the program manager subject to
13the adoption by the corporation of a specified remedial action
14plan.
15(3) Affirm the action taken by the program manager.
16(i) Following suspension, the corporation may continue its
17existence as a nonprofit corporation pursuant to the Nonprofit
18Public Benefit Corporation Law (Part 2 (commencing with Section
195110) of Division 2 of Title 1 of the Corporations Code), but shall
20no longer be registered with the Secretary of State as a small
21business financial development corporation. A corporation shall
22not enjoy any of the benefits of a small business financial
23development corporation following suspension.
24(j) The funds in the trust fund account of a corporation under
25temporary withdrawal shall be transferred to the expansion fund.
26Upon termination of the temporary withdrawal, unless the
27termination is caused by suspension, the funds of the corporation
28that were transferred to the expansion fund from the trust fund
29account shall be returned to the corporation’s trust fund account,
30notwithstanding Section 63089.53. While the funds of a
31corporation’s trust fund account reside in the expansion fund, use
32of the principal on the funds shall be governed by the implementing
33regulations specifying use of funds in the expansion fund. Interest
34on the funds moved from a corporation’s trust fund account upon
35temporary withdrawal shall be limited to payment of the
36corporation’s administrative expenses, as contained in the contract
37between the corporation and the state pursuant to this title.
P42 1Article begin insert5.end insert Expansion Fund
11necessary to protect a real property interest in a defaulted loan
12or guarantee.
14purpose of receiving state, federal, or local government moneys,
17(d) One or more accounts may be created by the program
18manager for corporations participating in one or more programs
26directed by the Department of Finance pursuant to a statute
27enacted by the Legislature, including each of the trust fund
28accounts within the trust fund.
begin insert63089.51.end insert
35(b) Except as specified in subdivision (a) of Section 63089.53,
38from the General Fund moneys appropriated for those purposes.
begin insert63089.52.end insert
P43 1trustee to invest those funds in the trust fund in any of the securities
begin insert63089.53.end insert
12(b) The program manager may reallocate funds held within a
14(1) The program manager shall reallocate funds based on which
17reallocation, the program manager shall make that withdrawal
18only after giving consideration to that corporation’s fiscal
19solvency, its ability to honor loan guarantee defaults, and its ability
20to maintain a viable presence within the region it serves.
21 Reallocation of funds shall occur no more frequently than once
22per fiscal year. Any decision made by the program manager
23pursuant to this subdivision may be appealed to the bank board
24unless otherwise specified. The program manager has the authority
25to repeal or modify any decision to reallocate funds.
26(2) The program manager may authorize a corporation to
27exceed the leverage ratio specified in Section 63089.5 or
28subdivision (a) of Section 63089.66, or subdivision (c) of Section
2914017 of the Corporations Code, pending the annual reallocation
30of funds pursuant to this section. However, no corporation shall
31be permitted to exceed an outstanding guarantee liability of more
32than five times its portion of funds on deposit in the expansion
begin insert63089.54.end insert
35the Small Business Disaster Recovery Loan Loss Reserve Account,
36as part of the expansion fund. This account shall be used to pay
37for unrecovered losses resulting from loan guarantees issued
38pursuant to subdivision (a) of Section 63089.90 or subdivision (b)
39of this section, and disaster loan guarantees issued prior to the
40effective date of this section that are in default.
P44 1(b) Any lending institution that issues a low-interest loan that
2is guaranteed by resources in this account shall be fully reimbursed
3for the guaranteed portion of principal and interest that result
4from a loan or loans that are in default. If there are insufficient
5funds in this account to fully satisfy all claimants, the full faith of
6the resources in the General Fund are pledged to satisfy the
7obligations of this account. This account may only guarantee as
8much loan dollar value as is specifically authorized by the Director
9of Finance with the concurrence of the Governor. This account
10shall receive all moneys transferred pursuant to Section 63089.55,
11and any unencumbered balances transferred to the California
12Small Business Expansion Fund pursuant to Chapters 11 and 12
13of the First Extraordinary Session of the Statutes of 1989, and
14Chapter 1525 of the Statutes of 1990, as of July 1, 1992.
15(c) The Governor may utilize this authority to prevent business
16insolvencies and loss of employment in an area affected by a state
17of emergency within the state and declared a disaster by the
18President of the United States, by the Administrator of the United
19States Small Business Administration, or by the United States
20Secretary of Agriculture, or declared to be in a state of emergency
21by the Governor of California.
begin insert63089.55.end insert
23Governor, may transfer moneys in the Special Fund for Economic
24Uncertainties to the California Small Business Expansion Fund
25for use as authorized by the bank board, in an amount necessary
26to make loan guarantees pursuant to this title.
begin insert63089.56.end insert
28out to trust fund accounts by the Treasurer on warrants drawn by
29the Controller and requisitioned by the executive director, pursuant
30to the purposes of this title. The program manager may transfer
31funds allocated from the expansion fund to accounts, established
32solely to receive the funds, in lending institutions designated by
33the office to act as trustee. The lending institutions so designated
34shall be approved by the state for the receipt of state deposits.
35Interest earned on the trust fund accounts in lending institutions
36may be utilized by the corporations pursuant to the purposes of
37this title.
38(b) Except as specified in subdivision (d), the program manager
39shall allocate and transfer money to trust fund accounts based on
P45 1performance-based criteria. The criteria shall include, but not be
2limited to, the following:
3(1) The default record of the corporation.
4(2) The number and amount of loans guaranteed by a
6(3) The number and amount of loans made by a corporation if
7state funds were used to make those loans.
8(4) The number and amount of surety bonds guaranteed by a
10(c) Any decision made by the executive director pursuant to
11subdivision (b) may be appealed to the director within 15 days of
12notice of the proposed action. The director may repeal or modify
13any reallocation and transfer decisions made by the executive
14director.
15(d) The criteria specified in subdivision (b) shall not apply to
16a corporation that has been in existence for five years or less. If
17not already adopted, the office shall develop regulations specifying
18the basis for transferring account funds to those corporations that
19have been in existence for five years or less.
begin insert63089.57.end insert
21pursuant to this title, the state has residual interest in the funds
22deposited by the state to a trust fund account and to the return on
23these funds from investments. On dissolution or suspension of the
24corporation, these funds shall be withdrawn by the executive
25director from the trust fund account and returned to the expansion
26fund or temporarily transferred to another trust fund account. This
27provision shall be contained in the trust instructions to the trustee.
begin insert63089.58.end insert
29guarantee account, and, upon recommendation by the program
30manager, a bond guarantee account, each of which is a legally
31separate account, and the assets of one account shall not be used
32to satisfy loan guarantees or other obligations of another
33corporation. Not more than one-third of a trust fund account shall
34be allocated to a bond guarantee account. A corporation shall not
35use trust fund accounts to secure a corporate indebtedness. State
36funds deposited in the trust fund accounts, with the exception of
37guarantees established pursuant to this title, shall not be subject
38to liens or encumbrances of the corporation or its creditors.
begin insert63089.59.end insert
40of the trust fund shall be designated after review by the program
P46 1manager. The corporation shall not receive money on deposit to
2support guarantees issued under this title without the approval of
3the program manager.
5by a corporation in a location not approved pursuant to a statewide
6plan. The prohibition against use of state funds also applies to the
7location of satellite offices, and the area served from a corporation
8office.
10Chapter begin insert6.end insert Guarantee Program
13which is hereby continued in existence, shall provide guarantees
14to loans offered by financial institutions to small businesses.
15(b) The Legislature finds and declares that the Small Business
16Loan Guarantee Program has enabled participating small
17businesses that do not qualify for conventional business loans or
18Small Business Administration loans to secure funds to expand
19their businesses. These small businesses would not have been able
20to expand their businesses in the absence of the program. The
21program has also provided valuable technical assistance to small
22businesses to ensure growth and stability. The study commissioned
23by former Section 14069.6 of the Corporations Code, as added by
24Chapter 919 of the Statutes of 1997, documented the return on
25investment of the program and the need for its services. The value
26of the program has also been recognized by the Governor through
27proposals contained in the May Revision to the Budget Act of 2000
28for the 2000-01 fiscal year.
30bank director, may do all of the following:
31(a) Contract for services entered into pursuant to this title.
32(b) Hold public hearings.
33(c) Act as liaison between corporations, other state and federal
34agencies, lenders, and the Legislature.
35(d) Process and tabulate on a monthly basis all corporate
36reports.
37(e) Attend board meetings.
38(f) Attend and participate at corporation meetings. The program
39manager, or his or her designee, shall be an ex officio, nonvoting
40representative on the board of directors and loan committees of
P47 1each corporation. The program manager shall meet with the board
2of directors of each corporation at least once each fiscal year.
3(g) Assist corporations in applying for public and private
4funding opportunities, and in obtaining program support from the
5business community.
begin insert63089.63.end insert
9program manager’s decision may be repealed or modified by a
10bank board resolution.
12time shall not exceed five times the amount of funds on deposit in
13the expansion fund plus any receivables due from funds loaned
15directed by the Department of Finance pursuant to a statute
16enacted by the Legislature, including each of the trust fund
17accounts within the trust fund.
18(c) This section shall remain in effect only until January 1, 2018,
22the expansion fund and trust fund accounts are to be leveraged,
23and if so, by how much. Upon the request of the corporation, the
24program manager’s decision may be repealed or modified by an
25office resolution.
26(b) The amount of guarantee liability outstanding at any one
27time shall not exceed four times the amount of funds on deposit in
28the expansion fund plus any receivables due from funds loaned
29from the expansion fund to another fund in state government as
30directed by the Department of Finance pursuant to a statute
31enacted by the Legislature, including each of the trust fund
32accounts within the trust fund, unless the program manager has
33permitted a higher leverage ratio for an individual corporation
34pursuant to subdivision (b) of Section 63089.53.
35(c) This section shall become operative on January 1, 2018.
begin insert63089.64.end insert
37funds on deposit in the corporation’s trust fund account, or by
38receivables due from funds loaned from the corporation’s trust
39fund account to another fund in state government, as directed by
P48 1the Department of Finance pursuant to a statute enacted by the
3(b) Loan guarantees shall be secured by a reserve of at least
420 percent to be determined by the executive director.
5(c) The expansion fund and trust fund accounts shall be used
6exclusively to guarantee obligations and pay the administrative
7costs of the corporations.
8(d) This section shall remain in effect only until January 1, 2018,
12funds on deposit in the corporation’s trust fund account, or by
13receivables due from funds loaned from the corporation’s trust
14fund account to another fund in state government, as directed by
15the Department of Finance pursuant to a statute enacted by the
16Legislature.
17(b) Loan guarantees shall be secured by a reserve of at least
1825 percent to be determined by the executive director, unless the
19executive director authorizes a higher leverage ratio for an
20individual corporation pursuant to subdivision (b) of Section
2163089.53.
22(c) The expansion fund and trust fund accounts shall be used
23exclusively to guarantee obligations and pay the administrative
24costs of the corporations.
25(d) This section shall become operative on January 1, 2018.
begin insert63089.65.end insert
27institution a loan fee on all loans made or guaranteed by the
28corporation to defray the operating expenses of the corporation.
29The amount of the fee shall be determined by the program manager.
begin insert63089.66.end insert
31corporations make maximal use of their statutory authority to
32guarantee loans and surety bonds, including the authority to secure
33loans with a minimum loan loss reserve of only 20 percent, so that
34the financing needs of small business may be met as fully as
35possible within the limits of corporations’ loan loss reserves. The
36office shall report annually to the Legislature on the financial
37status of the corporations and their portfolio of loans and surety
38bonds guaranteed pursuant to Section 9795.
39(b) Any corporation that serves an area declared to be in a state
40of emergency by the Governor or a disaster area by the President
P49 1of the United States, the Administrator of the United States Small
2Business Administration, or the United States Secretary of
3Agriculture shall increase the portfolio of loan guarantees where
4the dollar amount of the loan is less than one hundred thousand
5dollars ($100,000), so that at least 15 percent of the dollar value
6of loans guaranteed by the corporation is for those loans. The
7corporation shall comply with this requirement within one year
8of the date the emergency or disaster is declared. Upon application
9of a corporation, the executive director may waive or modify the
10rule for the corporation if the corporation demonstrates that it
11made a good faith effort to comply and failed to locate lending
12institutions in the region that the corporation serves that are willing
13to make guaranteed loans in that amount.
14(c) This section shall remain in effect only until January 1, 2018,
18corporations make maximal use of their statutory authority to
19guarantee loans and surety bonds, including the authority to secure
20loans with a minimum loan loss reserve of only 25 percent, unless
21the office authorizes a higher leverage ratio for an individual
22corporation pursuant to subdivision (b) of Section 63089.53, so
23that the financing needs of small business may be met as fully as
24possible within the limits of corporations’ loan loss reserves. The
25bank shall report annually to the Legislature on the financial status
26of the corporations and their portfolio of loans and surety bonds
27guaranteed pursuant to Section 9795.
28(b) Any corporation that serves an area declared to be in a state
29of emergency by the Governor or a disaster area by the President
30of the United States, the Administrator of the United States Small
31Business Administration, or the United States Secretary of
32Agriculture shall increase the portfolio of loan guarantees where
33the dollar amount of the loan is less than one hundred thousand
34dollars ($100,000), so that at least 15 percent of the dollar value
35of loans guaranteed by the corporation is for those loans. The
36corporation shall comply with this requirement within one year
37of the date the emergency or disaster is declared. Upon application
38of a corporation, the program manager may waive or modify the
39rule for the corporation if the corporation demonstrates that it
40made a good faith effort to comply and failed to locate lending
P50 1institutions in the region that the corporation serves that are willing
3(c) This section shall become operative on January 1, 2018.
5committees, each of which shall be composed of five or more
6persons, a majority of whom shall be experienced in banking and
7lending operations.
8(b) A loan committee shall review applications to the
9corporation for a loan or guarantee and shall do each of the
11(1) Determine the feasibility of the proposed transaction. The
12loan committee shall recommend approval of the application only
13upon a determination that there is a reasonable chance that the
14loan will be repaid.
15(2) On the basis of that determination, recommend to the board
16of directors any action that the loan committee deems appropriate
17under the circumstances, or, in the event that approval authority
18has been delegated to the loan committee by the board of directors,
19approve or disapprove the loan application.
20(c) A loan committee shall expeditiously act to accept or reject
21loan applications.
22(d) A person who has a financial interest related to a matter
23over which the loan committee has authority may not make,
24participate in making, or in any way attempt to influence that
25matter.
begin insert63089.68.end insert
27corporation’s board of directors, upon a recommendation from
28its loan committee shall do all of the following:
29(a) Emphasize consideration to applications that will increase
30employment of disadvantaged, disabled, or unemployed persons,
31or increase employment of youth residing in areas of high youth
32unemployment and high youth delinquency.
33(b) Give consideration to applications from traditional and
34safety-net providers of Medi-Cal services that will promote access
35to quality medical care for individuals enrolled in Medi-Cal
36managed health care networks that are contracting with or owned
37or operated by a county board of supervisors, a county health
38commission, or a county health authority organized pursuant to
39Section 14018.7, 14087.31, 14087.35, 14087.36, 14087.38, or
4014087.9605 of the Welfare and Institutions Code.
P51 1(c) Not grant a loan or guarantee, unless it determines that the
2conditions of Section 200033 are satisfied.
begin insert63089.69.end insert
4high priority to the issuance of loan guarantees to small business
5incubators and to businesses that lease space in incubators.
6(b) For the purposes of this section, “incubator” means a facility
7that allows new small businesses to increase their probability of
8success by sharing needed capital equipment, services, and
9facilities, which may include, but are not limited to, the following:
10(1) Reception and meeting area.
11(2) Secretarial services, such as collating, telephone answering,
12or mailhandling.
13(3) Accounting and bookkeeping services.
14(4) Research libraries.
15(5) Onsite financial and management counseling.
16(6) Parking.
17(7) Flexible lease arrangements for flexible space.
18(8) Computer or word processing facilities.
19(9) Day care facilities.
20(10) Office furniture rentals.
21(11) A graduation policy sometimes requiring firms to leave
22after three to five years in a subsidized, nurturing environment.
23(12) Employee training and placement services.
24(c) Among other priorities, corporations shall give high priority
25to marketing their services to Phase 1 or Phase 2 Small Business
26Innovation Research (SBIR) recipients and providing loan
27guarantees, whenever possible.
29Chapter begin insert7.end insert Direct Lending
32lending as long as at least 80 percent of the corporate funds,
33calculated by dollar amount, and all expansion funds are
34guaranteed by another public or private financial institution.
35(b) The amount of funds available for direct lending shall be
36determined by the program manager. In its capacity as a direct
37lender, the corporation may sell in the secondary market the
38guaranteed portion of each loan so as to raise additional funds
39for direct lending. The office shall issue regulations governing
40these direct loans, including the maximum amount of these loans.
P52 1(c) To execute the direct loan programs established in this
2chapter, the program manager may loan trust funds to a
3corporation located in a rural area for the express purpose of
4lending those funds to an identified borrower. The loan authorized
5by the program manager to the corporation shall be on terms
6similar to the loan between the corporation and the borrower.
7(d) The amount of the loan may be in excess of the amount of a
8loan to any individual borrower, but actual disbursements pursuant
9to the office loan agreement shall be required to be supported by
10a loan agreement between the borrower and the corporation in
11an amount at least equal to the requested disbursement. The loan
12between the bank and the corporation shall be evidenced by a
13credit agreement. In the event that any loan between the
14corporation and borrower is not guaranteed by a governmental
15agency, the portion of the credit agreement attributable to that
16loan shall be secured by assignment of any note, executed in favor
17of the corporation by the borrower to the bank. The terms and
18conditions of the credit agreement shall be similar to the loan
19agreement between the corporation and the borrower, which shall
20be collateralized by the note between the corporation and the
21borrower.
22(e) In the absence of fraud on the part of the corporation, the
23liability of the corporation to repay the loan to the bank is limited
24to the repayment received by the corporation from the borrower,
25except in a case where the United States Department of Agriculture
26requires exposure by the corporation in rule or regulation. The
27corporation may use trust funds for loan repayment to the office
28if the corporation has exhausted a loan loss reserve created for
29this purpose. Interest and principal received by the office from the
30corporation shall be deposited into the same account from which
31the funds were originally borrowed.
32(f) Upon the approval of the program manager, a corporation
33shall be authorized to borrow trust funds from the bank for the
34purpose of relending those funds to small businesses. A corporation
35shall demonstrate to the program manager that it has the capacity
36to administer a direct loan program, and has procedures in place
37to limit the default rate for loans to startup businesses. Not more
38than 25 percent of any trust fund account shall be used for the
39direct lending established pursuant to this subdivision. A loan to
40a corporation shall not exceed the amount of funds likely to be
P53 1lent to small businesses within three months following the loan to
2the corporation.
3(g) The maximum loan amount to a small business shall be set
4by the program manager, but in no case shall it be more than three
5hundred thousand dollars ($300,000). In the absence of fraud on
6the part of the corporation, the repayment obligation pursuant to
7the loan to the corporation shall be limited to the amount of funds
8received by the corporation for the loan to the small business and
9any other funds received from the office that are not disbursed.
10The corporation shall be authorized to charge a fee to the small
11business borrower, in an amount determined by the executive
12director pursuant to regulation. The program provided for in this
13subdivision shall be available in all geographic areas of the state.
15Chapter begin insert8.end insert Disaster Loan Guarantees
(a) A corporation may, in an area affected by a
18state of emergency within the state and declared a disaster by the
19President of the United States, the Administrator of the United
20States Small Business Administration, or the United States
21Secretary of Agriculture, or declared to be in a state of emergency
22by the Governor of California, provide loan guarantees from funds
23allocated in Section 63089.55 to small businesses, small farms,
24nurseries, and agriculture-related enterprises that have suffered
25actual physical damage or significant economic injury as a result
26of the disaster.
27(b) If regulations have not otherwise been adopted, the bank
28board may adopt or readopt regulations to implement the loan
29guarantee program authorized by this section. The bank board
30may adopt these regulations as emergency regulations in
31 accordance with Chapter 3.5 (commencing with Section 11340)
32of Part 1 of Division 3 of Title 2, and for purposes of that chapter,
33including Section 11349.6, the adoption of the regulations shall
34be considered by the Office of Administrative Law to be necessary
35for the immediate preservation of the public peace, health and
36safety, and general welfare. Notwithstanding subdivision (e) of
37Section 11346.1, the regulations shall be repealed within 180 days
38after their effective date unless the office complies with Chapter
393.5 (commencing with Section 11340) of Part 1 of Division 3 of
40Title 2, as provided in subdivision (e) of Section 11346.1.
P54 1(c) Allocations pursuant to subdivision (a) shall be deemed to
3costs incurred by the office.
5Chapter begin insert9.end insert Energy Efficiency Loans
8improvement loans.
9(b) The bank shall enter into an agreement with the California
10Energy Extension Service of the Office of Planning and Research
11to assist small business owners in reducing their energy costs
12through low-interest loans and by providing assistance and
15Chapter begin insert10.end insert Surety Bonds
20but only to the extent that the activities are authorized pursuant
21to the contract between the bank and corporation: guarantee,
22endorse, or act as surety on the bonds, notes, contracts, or other
23obligations of, or assist financially, any person, firm, corporation,
24or association, and may establish and regulate the terms and
31reasonable terms or conditions, and the borrower has
32demonstrated a reasonable prospect of repayment of the loan.
begin insert63089.96.end insert
12Chapter begin insert11.end insert Reporting
15trust fund account shall be used solely to make loans, guarantee
16bonds, and guarantee loans, approved by the corporation, that
17meet the loan criteria under this chapter. The state shall not be
18liable or obligated in any way as a result of the allocation of state
19moneys to a trust fund account beyond the state moneys that is
20allocated and deposited in the fund pursuant to this title, and that
21is not otherwise withdrawn by the state pursuant to this chapter.
22(b) A summary of all loans and bonds to which a state guarantee
23is attached shall be submitted to the program manager upon
24execution of the loan agreement and periodically thereafter.
25(c) A summary of all loans made by a corporation shall be
26submitted to the program manager upon execution of the loan
27agreement and periodically thereafter.
begin insert63089.98.end insert
29commencing January 1, 2014, the program manager shall prepare
30a report regarding the loss experience for the expansion fund for
31loan guarantees, loss reserves, and surety bond guarantees for
32the preceding fiscal year. At a minimum, the report shall also
33include data regarding numbers of surety bond and loan
34guarantees awarded through the expansion fund, including
35ethnicity and gender data of participating contractors and other
36entities, and experience of surety insurer participants in the bond
37guarantee program. The report shall include the information
38described in Section 63089.66. The program manager shall post
39the information on the bank’ Internet Web site and submit notice
P56 1report to the Governor and the Legislature when that information
2in available on its Internet Web site.
3(b) A corporation shall also report to the program manager, or
4his or her designated representative, all statistical and other
5reports required by this title, responses to audit reports, budget
6requirements, invoices submitted for payment by the state, and
7information concerning loans made or guaranteed.
begin insert63089.99.end insert
960 days of the conclusion of the period for guaranteeing loans
10under any small business disaster loan guarantee program
11conducted for a disaster as authorized by Section 8684.2 or
12200030, the bank shall provide a report to the Legislature on loan
13guarantees approved and rejected by gender, ethnic group, type
14of business and location, and each participating loan institution
15pursuant to Section 9795. The bank need only submit one report
16to comply with this section and subdivision (f) of Section 8684.2.