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SB-551 California Pollution Control Financing Authority: Capital Access Loan Program for Small Businesses.(2017-2018)

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Date Published: 04/18/2017 04:00 AM
SB551:v96#DOCUMENT

Amended  IN  Senate  April 17, 2017
Amended  IN  Senate  April 17, 2017
Amended  IN  Senate  March 27, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 551


Introduced by Senator Hueso

February 16, 2017


An act to amend Section 44559.4 of the Health and Safety Code, relating to the Capital Access Loan Program.


LEGISLATIVE COUNSEL'S DIGEST


SB 551, as amended, Hueso. California Pollution Control Financing Authority: Capital Access Loan Program for Small Businesses.
(1) Existing law establishes the Capital Access Loan Program for small businesses, administered by the California Pollution Control Financing Authority, which provides loans through participating financial institutions to qualifying small businesses. The authority is required to create a loss reserve account for each financial institution. Existing law requires a financial institution, if it decides to enroll a qualified loan in order to obtain the protection against loss provided by its loss reserve account, to notify the authority in writing, as specified, within a specified number of days after the date on which the loan is made. Existing law, commencing April 1, 2017, requires a participating financial institution, when making a qualified loan that will be enrolled under existing law, to require the qualified business to which the loan is made to pay a fee of not less than 2% of the principal amount of the loan, but not more than 3 ½ % of the principal amount, for deposit in the loss reserve account.
This bill would instead require the qualified business to which the loan is made to pay a fee of not less than 1% of the principal loan, but not more than 3 ½ % of the principal amount, for deposit in the loss reserve account.
(2) Existing law establishes certain other programs administered by the authority that follow the terms and conditions for the Capital Access Loan Program, along with additional program-specific requirements, including provisions that authorize the recapture from the loss reserve account the authority’s contribution for each enrolled loan upon a prescribed date, to be deposited in a fund established for the purpose of the program and applied to future program and administrative expenditures.
This bill would similarly authorize the authority, with regard to the Capital Access Loan Program, to recapture, from a loss reserve account established by the authority for a participating financial institution, the authority’s contribution for each enrolled loan, upon the maturation of the loan or after 5 years from the date of enrollment, whichever happens first, to be deposited in the California Capital Access Fund and applied to future small business capital access program and administrative expenditures. The bill, with specific exceptions, would prohibit the authority from recapturing its contribution from a loss reserve account unless the balance remaining in that loss reserve account following recapture is greater than 20% of the total amount in the account. The bill would also prohibit these recaptured contributions from being applied to other specified programs. limit the application of the recapture provisions to loans made with contributions from specified sources.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 44559.4 of the Health and Safety Code, as amended by Section 192 of Chapter 86 of the Statutes of 2016, is amended to read:

44559.4.
 (a) If a financial institution that is participating in the Capital Access Loan Program established pursuant to this article decides to enroll a qualified loan under the program in order to obtain the protection against loss provided by its loss reserve account, it shall notify the authority in writing on a form prescribed by the authority, within 15 days after the date on which the loan is made, of all of the following:
(1) The disbursement of the loan.
(2) The dollar amount of the loan enrolled.
(3) The interest rate applicable to, and the term of, the loan.
(4) The amount of the agreed upon premium.
(b) The executive director may authorize an additional five days for a financial institution to submit the written notification described in subdivision (a) to the authority on a loan-by-loan basis for a reason limited to conditions beyond the reasonable control of the financial institution.
(c) The financial institution may make a qualified loan to be enrolled under the program to an individual, or to a partnership or trust wholly owned or controlled by an individual, for the purpose of financing property that will be leased to a qualified business that is wholly owned by that individual. In that case, the property shall be treated as meeting the requirements of paragraph (1) of subdivision (i) of Section 44559.1.
(d) When making a qualified loan that will be enrolled under the program, the participating financial institution shall require the qualified business to which the loan is made to pay a fee of not less than 1 percent of the principal amount of the loan, but not more than 31/2 percent of the principal amount. The financial institution shall also pay a fee in an amount equal to the fee paid by the borrower. The financial institution shall deliver the fees collected under this subdivision to the authority for deposit in the loss reserve account for the institution. The financial institution may recover from the borrower the cost of its payments to the loss reserve account through the financing of the loan, upon the agreement of the financial institution and the borrower. The financial institution may cover the cost of borrower payments to the loan loss reserve account.
(e) When depositing fees collected under subdivision (d) to the credit of the loss reserve account for a participating financial institution, the authority shall do the following:
(1) If matching funds are not available under a federal capital access program or other source, the authority shall transfer to the loss reserve account an amount that is not less than the amount of the fees paid by the participating financial institution. However, if the qualified business is located within a severely affected community, the authority shall transfer to the loss reserve account an amount not less than 150 percent of the amount of the fees paid by the participating financial institution.
(2) If matching funds are available under a federal capital access program or other source, the authority shall transfer, on an immediate or deferred basis, to the loss reserve account the amount required by that federal program or other source. However, the total amount deposited into the loss reserve account shall not be less than the amount which would have been deposited in the absence of matching funds.
(f) The (1) Subject to the limitation in paragraph (2), the authority may recapture from a loss reserve account established by the authority for a participating financial institution the contribution of the authority for each enrolled loan, upon the maturation of the loan or after five years from the date of enrollment, whichever happens first, to be deposited in the California Capital Access Fund and applied to future small business capital access program and administrative expenditures. Recapture shall not apply to contributions on charged-off loans for which a claim has been approved.
(g)Except approved. Except as provided in Sections 44559.13 and 44559.14, the authority shall not recapture its contribution from a loss reserve account pursuant to this subdivision (f) unless the balance remaining in that loss reserve account following recapture is greater than 20 percent of the total amount in the loss reserve account. Contributions recaptured pursuant to this subdivision shall not be applied to programs established pursuant to Sections 44559.13 and 44559.14.
(2) The recapture provisions set forth in this subdivision shall apply only to loans for which the contributions by the authority were made with funds received under the State Small Business Credit Initiative, Chapter 54 (commencing with Section 5701) of Title 12 of the United States Code, or with the six million dollars ($6,000,000) appropriated to the authority for this purpose in subdivision (b) of Section 2 of Chapter 731 of the Statutes of 2010.