California Industrial Development Financing Advisory Commission
Small Business Program (SBP)
Program Objective
The Small Business Program (SBP), through cost effective public offerings and private placements, makes tax-exempt financing of capital expenditures viable and services a sector that generally does not have access to tax-exempt funds. Due to the fixed costs associated with bond financing, projects for small dollar amounts are usually not as cost effective and can require Borrowers to advance large sums of up front payments.
Minimum Requirements
- The Borrower must be a Small Business - A small business is defined as follows (based on SBA guidelines): a) average annual income after taxes for the last two full calendar years does not exceed $2.0 million; and b) tangible net worth does not exceed $6.0 million. If the project is in a labor market surplus area, as defined by SBA, the numbers for a) and b) above are increased by 25%. In addition, if the Borrower meets the income net worth guidelines outlined above, and the company's total number of employees does not exceed 500, the Borrower is a Small Business.
- Maximum dollar amount of SBP financing – The maximum amount of tax-exempt SBP financing is $4.0 million or less, annually per small business. A Borrower cannot apply to both the Small Business Program (SBP) and the CIDFAC-IDB Program in the same year.
- Job Ratio – Applications must establish that the project will result in job creation. [Section 20.VA.5 of CDLAC Procedures]
- Prevailing Wage – SBP participants with construction projects will be subject to a prevailing wage requirement. The definition of prevailing wage for the SBP will be the same definition contained in the California Government Code Section 91533(l).
- Permits – The Borrower must provide documentation of the applicable discretionary use permits and approvals from federal, state or local planning agencies for the proposed project at the time of Application. Borrowers are not required to have obtained ministerial approvals at the time of Application.
Application Process
The Issuer must submit a completed Application form and supplemental material in a manner prescribed by CIDFAC for each project requesting allocation on behalf of the Borrower. All questions set forth in the Application must be answered completely and accurately. Each Application must be accompanied by the required documentation outlined in the Application. Only complete Applications bearing original signatures will be accepted.
Each Application must include:
- A complete signed Small Business Application.
- Financial statements for the past three years.
- Certified Minutes of TEFRA hearing.
- Local Inducement Resolution.
- Qualified Institutional Buyer (QIB) bond purchase commitment or a letter of credit commitment.
- Borrower completed Legal Questionnaire.
Ongoing Allocation and Funding Process
- Funding of projects is contingent upon state and local government approvals outlined below:
- California Debt Limit Allocation Committee (CDLAC) approves a general allocation for CIDFAC's Small Business Program.
- Use of the allocation is for specific identified Small Business Program projects.
- Funding is contingent upon CIDFAC Authority approval.
Eligible Projects for Financing
It is the activity or "use" for which a project is acquired or built which determines the eligibility for financing. A company whose major activity is not industrial may qualify if the activity for which the application is filed is industrial.
Eligible projects include:
- Industrial projects for assembling, fabrication, manufacturing or processing which creates a product for resale.
- Projects which manufacture or process recycled or reused products and materials.
- Agricultural projects that process raw products for resale.