Share this pageFOR IMMEDIATE RELEASE
September 27, 2008
For More Information, Contact:
Hema Sareen Mohan at (650) 688-6384
Sarah Mason at (916) 651-4011
GOVERNOR SIGNS SIMITIAN BILL TO EXPAND
SMALL BUSINESSES LOAN PROGRAM
SACRAMENTO – State Senator Joe Simitian (D-Palo Alto) announced today that Governor Schwarzenegger has signed his Senate Bill 1311, which will make more small business loans available to California businesses.
“There’s no question that our state is feeling the strain of a down economy. With SB 1311, we’re trying to help small business owners in tough economic times, without additional cost to the state. That’s a win-win,” said Simitian.
“The Governor’s signature is good news,” said Pat Dando, President and CEO of the San Jose Silicon Valley Chamber of Commerce. “SB 1311 will help struggling Silicon Valley businesses expand and grow. It’s the kind of help we need to keep Silicon Valley competitive.”
SB 1311 builds on an already successful state program with rigorous criteria, and does not require additional funding. Given the existing program’s proven performance, Simitian agreed with State Treasurer Bill Lockyer that the State could safely reduce the amount of money the State puts in a reserve fund for small business loan defaults under the program. By reducing the amount reserved, the state will free up more money for the California Capital Access Program (CalCAP) to insure additional loans, which makes more loans available for small businesses to grow their business.
Established in 1994, CalCAP helps encourage banks to make loans to small businesses that fall just outside of most banks’ underwriting standards by providing insurance to reimburse lenders when borrowers default. The program has helped hundreds of businesses pay for equipment, land, construction or renovation of buildings, and other capital projects.
Under the current system, CalCAP is set up so that the borrower and the lender make identical contributions to the reserve fund. The state then matches the total of these two. Businesses are eligible to receive loans as small as $500 and as large as $1.5 million. Private lending institutions actually make the loans and determine who receives loans and on what terms.
SB 1311 cuts the state’s share to the reserve fund by half, making it equal to the borrower’s contribution. SB 1311 would leave the state with more funds to insure more loans, thereby encouraging banks and other lenders to issue more loans to small businesses, of which there are more than 3.6 million in California, according to the U.S. Small Business Administration.
“Small businesses are vital to California’s economic health,” said California State Treasurer Bill Lockyer, who sponsored the bill with Simitian. “Senator Simitian’s legislation ensures the CalCAP program can continue to help provide these businesses vital access to low-cost loans that allow them to thrive and create good jobs in our state.”
An example of CalCAP’s impact on California’s small business sector is a loan of $400,000 that it secured for Airborne, Inc., a leading producer of herbal supplements that fight airborne germs and viruses. The company was founded by a Carmel-based elementary school teacher named Victoria Knight-McDowell, who was trying to find a way to boost her immune system. From its humble beginnings, Airborne has grown into a nationally recognized brand.
Simitian added, “Small businesses with CalCAP loans have performed well. Defaults have been few, and lenders feel confident about the program. SB 1311 allows us to grow the loan program and our economy, while still retaining our rigorous standards.”
To learn more about SB 1311, please visit http://www.senatorsimitian.com.