Small business financial development corporations: loans and loan guarantees.

(1) The California Small Business Financial Development Corporation Law authorizes the formation of small business financial development corporations to grant loans or loan guarantees for the purpose of stimulating small business development. The law imposes certain duties with respect thereto on a director designated by the Secretary of Business, Transportation and Housing. The California Small Business Expansion Fund, which is created under that law and is continuously appropriated, provides funds to be used to pay for defaulted loan guarantees and administrative costs of these corporations. Existing law, until January 1, 2013, specifies that the amount of guarantee liability outstanding at any one time shall not exceed 5 times the amount of funds on deposit in the expansion fund plus any receivables due from funds loaned from the fund to another fund in state government, as specified. Existing law, beginning January 1, 2013, instead provides that the amount of guarantee liability outstanding shall not exceed 4 times those amounts. This bill would extend, until January 1, 2018, the provisions limiting the amount of guarantee liability outstanding from exceeding 5 times the amount of funds on deposit in the expansion fund, as specified. The bill would also provide that the provisions limiting the amount of guarantee liability outstanding from exceeding 4 times the amount of those funds become operative on January 1, 2018. Existing law requires the former Trade and Commerce Agency to contract with an entity to conduct an independent statewide assessment of capital needs in California pertaining to the program established under the California Small Business Financial Development Corporation Law, and to establish minimum standards for the siting of small business financial development corporations, to be completed no later than June 30, 1998. This bill would repeal that obsolete requirement imposed on the abolished agency. (2) Existing law requires a corporate guarantee to be backed by funds on deposit in the corporation's trust fund account, or by receivables due from the corporation's trust fund account to another fund in state government, as specified. Existing law, until January 1, 2013, requires that loan guarantees be secured by a reserve of at least 20%, to be determined by the director. Existing law, beginning January 1, 2013, requires that loan guarantees be secured by a reserve of at least 25%, to be determined by the director. This bill would make the minimum 20% reserve requirement effective only until January 1, 2018. The bill would provide that the provisions requiring a minimum 25% reserve become operative on January 1, 2018. The bill would make conforming changes.