Opportunity Fund is proud to sponsor Senate Bill 551 authored by Senator Ben Hueso. This bill would help make several key changes to the functioning of the California Capital Access Program (CalCAP) – a program that many of California’s small business lenders such as Opportunity Fund use as an insurance pool to enable us to make loans to underserved businesses.
Small businesses are the engines of our state economy, employing 90% of the state’s private sector workers – but far too many can’t access the capital they need to grow and create jobs. These barriers are even greater for minority, rural and women-owned business. Public dollars are critical for helping responsible financial institutions bring needed capital to small businesses.
Created in 1994, CalCAP is a nationally-recognized loan portfolio insurance program that has helped support over 16,000 loans to our state’s small businesses. Administered by the California Pollution Control Financing Authority (CPCFA), CalCAP provides tremendous leverage on state funds: each dollar contributed by the state yields as much as $30 in loans to underserved businesses.
Both nonprofit and private financial institutions can apply to become CalCAP lenders. The lender and the state both contribute a small and equal portion of funds for every small business loan they wish to cover, which are then pooled in a lender’s loan loss reserve account. In the event a loan defaults, a lender can then access funds in that account to help cover those losses. This enables CalCAP lenders to provide capital to thousands of hard-working business owners who otherwise would be turned down for needed financing. The more loans a lender enrolls in the Program, the bigger their reserve of funding becomes and the more coverage that lender has. The Program allows lenders to build a reserve during economic expansions and create a safety net for themselves and small businesses in times of economic hardship.
SB 551 (Hueso) seeks to increase the sustainability and transparency of the CalCAP program by making the following key three changes:
– Funds go further: Lowers minimum required match rate for CalCAP ensuring public funds go further, helping more businesses thrive.
– Lenders keep lending: Allows lenders to continue enrolling new loans even at times when the state does not have new funds to contribute thus providing a flow of continuous capital to our state’s small businesses.
– Transparency: Clarifies procedures for returning contributions if lenders exit program, in order to maintain lender trust and participation in CalCAP for the long term.
These changes will allow lenders to provide continued access to capital for California’s small businesses. If your organization would like to sign on to support SB 551 please contact Gabriel Villareal, Policy Associate at Gabriel@opportunityfund.org.