2005 California Corporations Code Sections 14070-14076 Article 9. Loans and Loan Guarantees

14070.  (a) The corporate guarantee shall be backed by funds on
deposit in the corporation's  trust fund account, or by receivables
due from funds loaned from the corporation's trust fund account to
another fund in state government as directed by the Department of
Finance pursuant to a statute enacted by the Legislature.
   (b) Loan guarantees shall be secured by a reserve of at least 25
percent to be determined by the director, unless the director
authorizes a higher leverage ratio for an individual corporation
pursuant to subdivision (b) of Section 14037.
   (c) The expansion fund and  trust fund accounts shall be used
exclusively to guarantee obligations and pay the administrative costs
of the corporations.  A corporation located in a rural area may
utilize the funds for direct lending to farmers as long as at least
90 percent of the corporate fund farm loans, calculated by dollar
amount, and all expansion fund farm loans are guaranteed by the
United States Department of Agriculture.  The amount of funds
available for direct farm lending shall be determined by the
director.  In its capacity as a direct lender, the corporation may
sell in the secondary market the guaranteed portion of each loan so
as to raise additional funds for direct lending.  The agency shall
issue regulations governing these direct loans, including the maximum
amount of these loans.
   (d) In furtherance of the purposes of this part, up to one-half of
the trust funds may be used to guarantee loans utilized to establish
a Business and Industrial Development Corporation (BIDCO) under
Division 15 (commencing with Section 33000) of the Financial Code.
   (e) To execute the direct loan programs established in this
chapter, the director may loan trust funds to a corporation located
in a rural area for the express purpose of lending those funds to an
identified borrower.  The loan authorized by the director to the
corporation shall be on terms similar to the loan between the
corporation and the borrower.  The amount of the loan may be in
excess of the amount of a loan to any individual farm borrower, but
actual disbursements pursuant to the agency loan agreement shall be
required to be supported by a loan agreement between the farm
borrower and the corporation in an amount at least equal to the
requested disbursement.  The loan between the agency and the
corporation shall be evidenced by a credit agreement.  In the event
that any loan between the corporation and borrower is not guaranteed
by a governmental agency, the portion of the credit agreement
attributable to that loan shall be secured by assignment of any note,
executed in favor of the corporation by the borrower to the agency.
The terms and conditions of the credit agreement shall be similar to
the loan agreement between the corporation and the borrower, which
shall be collateralized by the note between the corporation and the
borrower.  In the absence of fraud on the part of the corporation,
the liability of the corporation to repay the loan to the agency is
limited to the repayment received by the corporation from the
borrower except in a case where the United States Department of
Agriculture requires exposure by the corporation in rule or
regulation.  The corporation may use trust funds for loan repayment
to the agency if the corporation has exhausted a loan loss reserve
created for this purpose.  Interest and principal received by the
agency from the corporation shall be deposited into the same account
from which the funds were originally borrowed.
   (f) Upon the approval of the director, a corporation shall be
authorized to borrow trust funds from the agency for the purpose of
relending those funds to small businesses.  A corporation shall
demonstrate to the director that it has the capacity to administer a
direct loan program, and has procedures in place to limit the default
rate for loans to startup businesses.  Not more than 25 percent of
any trust fund account shall be used for the direct lending
established pursuant to this subdivision.  A loan to a corporation
shall not exceed the amount of funds likely to be lent to small
businesses within three months following the loan to the corporation.
  The maximum loan amount to a small business is fifty thousand
dollars ($50,000).  In the absence of fraud on the part of the
corporation, the repayment obligation pursuant to the loan to the
corporation shall be limited to the amount of funds received by the
corporation for the loan to the small business and any other funds
received from the agency that are not disbursed.  The corporation
shall be authorized to charge a fee to the small business borrower,
in an amount determined by the director pursuant to regulation.  The
program provided for in this subdivision shall be available in all
geographic areas of the state.
14071.  In furtherance of the purposes set forth in Section 14002, a
corporation may do any one or more of the following activities, but
only to the extent that the activities are authorized pursuant to the
contract between the agency and corporation:  guarantee, endorse, or
act as surety on the bonds, notes, contracts, or other obligations
of, or assist financially, any person, firm, corporation, or
association, and may establish and regulate the terms and conditions
with respect to any such loans or financial assistance and the
charges for interest and service connected therewith, except that the
corporation shall not make or guarantee any loan unless and until it
determines:
   (a) There is no probability that the loan or other financial
assistance would be granted by a financial company under reasonable
terms or conditions, and the borrower has demonstrated a reasonable
prospect of repayment of the loan.
   (b) The loan proceeds shall be used exclusively in this state.
   (c) The loan qualifies as a small business loan or an employment
incentive loan.
   (d) That the borrower has a minimum equity interest in the
business as determined by the director.
   (e) As a result of the loan, the jobs generated or retained
demonstrate reasonable conformance to the regulations specifying
employment criteria.
14071.5.  In addition to the authority granted by Section 14071,
upon approval of the director, a corporation may act as guarantor on
a surety bond for any small business contractor, including, but not
limited to, women, minority, and disabled veteran contractors.
   The provisions of this section allowing a corporation to act as a
guarantor on surety bonds may be funded through appropriate federal
funding sources.  Federal funds shall be deposited in the Federal
Trust Fund in the State Treasury in accordance with Section 16360 of
the Government Code, for transfer to the Small Business Expansion
Fund, as created by Section 14030 of the Corporations Code.
14072.  A corporation may charge the borrower or financial
institution a loan fee on all loans made or guaranteed by the
corporation to defray the operating expenses of the corporation.  The
amount of the fee shall be determined by the director.
14073.  Corporations may grant energy efficiency improvement loans.
14074.  The agency shall enter into an agreement with the California
Energy Extension Service of the Office of Planning and Research to
assist small business owners in reducing their energy costs through
low interest loans and by providing assistance and information.
14075.  (a) A corporation may, in an area  declared to be in a state
of emergency by the Governor, provide loan guarantees from funds
allocated in Section 14037.5 to small businesses, small farms,
nurseries, and agriculture-related enterprises that have suffered
actual physical damage or significant economic injury as a result of
the disaster.
   (b) The agency may adopt regulations to implement the loan
guarantee program authorized by this section.  The agency may adopt
these regulations as emergency regulations in accordance with Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of the
Government Code, and for purposes of that chapter, including Section
11349.6 of the Government Code, the adoption of the regulations shall
be considered by the Office of Administrative Law to be necessary
for the immediate preservation of the public peace, health and
safety, and general welfare.  Notwithstanding subdivision (e) of
Section 11346.1 of the Government Code, the regulations shall be
repealed within 180 days after their effective date unless the agency
complies with Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of the Government Code, as provided in subdivision (e)
of Section 11346.1 of the Government Code.
   (c) Allocations pursuant to subdivision (a) shall be deemed to be
for extraordinary emergency or disaster response operations costs
incurred by the agency.
14076.  (a) It is the intent of the Legislature that the
corporations make maximal use of their statutory authority to
guarantee loans and surety bonds, including the authority to secure
loans with a minimum loan loss reserve of only 25 percent, unless the
agency authorizes a higher leverage ratio for an individual
corporation pursuant to subdivision (b) of Section 14037, so that the
financing needs of small business may be met as fully as possible
within the limits of corporations' loan loss reserves.  The agency
shall report annually to the Legislature on the financial status of
the corporations and their portfolio of loans and surety bonds
guaranteed.
   (b) Any corporation that serves an area declared to be in a state
of emergency by the Governor or a disaster area by the President of
the United States, the Administrator of the United States Small
Business Administration, or the United States Secretary of
Agriculture shall increase the portfolio of loan guarantees where the
dollar amount of the loan is less than one hundred thousand dollars
($100,000), so that at least 15 percent of the dollar value of loans
guaranteed by the corporation is for those loans.  The corporation
shall comply with this requirement within one year of the date the
emergency or disaster is declared.  Upon application of a
corporation, the director may waive or modify the rule for the
corporation if the corporation demonstrates that it made a good faith
effort to comply and failed to locate lending institutions in the
region that the corporation serves that are willing to make
guaranteed loans in that amount.