C-Suite Wednesday – State Small Business Credit Initiative Funds Three California Programs

February 8, 2023

Delaney Sexton
Contributing Editor

C-Suite Wednesday – State Small Business Credit Initiative Funds Three California Programs

The U.S. Treasury provided $1.18 billion in funds from the State Small Business Credit Initiative 2.0 to California. Funds were divided equally between IBank and the California Pollution Control Financing Authority (CPCFA). Over the course of eight years, IBank and CPCFA will receive three separate installments of funds. Financial institutions can be enrolled in the following programs, and the programs can be used concurrently. There is no charge to enroll, and fees are paid on a per-loan basis.

The California Small Business Loan Guarantee Program is a credit-support program that is funded by the SSBCI. IBank works with lenders and Financial Development Corporations to provide loan guarantees for small business loans. The program’s loan guarantees can cover up to 80% of a small business’s outstanding loan. Loan guarantee terms include a maximum guarantee amount of $5 million and a guarantee term of up to 7 years. These loans are available to California small businesses in an industry listed in the NAICS codes list and with up to 750 employees. Proceeds can be used for start-up costs, working capital, expansion, inventory, disaster relief, and more.

Another program that stemmed from the SSBCI is CPCFA’s CalCAP for Small Business program. For participating financial institutions, this program uses funds from the SSBCI to make matching contributions to loan loss reserve accounts. It will match contributions from the participating financial institution and the borrower. The maximum loan size is $5 million, and up to $2.5 million of a $5 million loan for a small business can be enrolled in this program. Severely Affected Communities, areas with high unemployment or areas designated as emergency or disaster areas, can receive additional contributions. Businesses with up to 500 employees are eligible which includes non-profits and most business sectors.

A second program by CPCFA is the CalCAP Collateral Support program. The SSBCI funds allow this program to pledge cash to participating financial institutions to cover collateral shortfalls of loans made to small businesses. Loans of $50,000 to $20 million are eligible for the program. The cash pledge will be up to 40% of the loan amount for loans of $50,000 to $250,000, and an additional 10% is pledged if located in a Severely Affected Community. Loans worth $250,001 to $20 million can receive a cash pledge of up to 30% of the loan amount plus 7.5% if the loan is located in a Severely Affected Community.

These lending institutions are eligible under the CalCAP programs:
• Banks
• Community Development Financial Institutions (CDFIs)
• Credit Unions
• Microbusiness Lenders
• Savings Associations
• SBA Lending Institutions
• A Combination of the Preceding Types
• Small Business Financial Development Corporations
• Small Business Investment Companies

Sources:
Small Business Loan Guarantee Program Fact Sheet
CalCAP for Small Business Fact Sheet
CalCap Collateral Support Fact Sheet