California Capital Access Program for Small Business Frequently Asked Questions |
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Eligibility
- Are business start-ups eligible?
- Are non-profit organization businesses eligible?
- Is refinancing eligible?
- Is a loan for the financing of a real estate investment eligible?
- Is a loan for the financing of commercial real estate eligible?
Loan Enrollment
- When do I enroll a loan in the California Capital Access Program (CalCAP)?
- Can I 'pre-qualify' a loan enrollment with CalCAP before making the loan?
- Must I enroll the entire loan amount with CalCAP?
- Can I enroll a CalCAP loan with a borrower who is also receiving a Small Business Administration (SBA) loan?
- When do I notify CalCAP if I have extended or renewed a CalCAP enrolled loan?
Loss Reserve Account
- Where is the loss reserve account maintained?
- How much of a CalCAP loan premium must I charge the borrower?
- Is there a way for a lender not to pay the CalCAP loan premium?
- How much does CalCAP contribute to the lender's loss reserve account?
Claim Reimbursement
- When should I file a claim for reimbursement on a CalCAP loan?
- Can I defer a claim?
- What if I recover funds after a claim has been paid?
- What if I don't have enough in my loss reserve account to pay a claim?
Are business start-ups eligible?
YES. CalCAP loans can assist start-up businesses. All qualified businesses must satisfy all the requirements of a “Qualified Business” and a “Small Business Concern” defined in California Code of Regulations (CCR), Title 4, Section 8070 (r) and (v).1
Are non-profit organization businesses eligible?
YES. All qualified businesses must have at least one paid employee and satisfy all the requirements of a “Qualified Business” and a “Small Business Concern” defined in California Code of Regulations (CCR), Title 4, Section 8070 (r) and (v).1
Is refinancing eligible?
YES AND NO. A lender may use a CalCAP loan to refinance debt held by another non-affiliated lender. A lender may also use a CalCAP loan to refinance one of its existing CalCAP loans. However, a lender may not use a CalCAP loan to refinance one of its existing non-CalCAP loans except to the extent that the loan amount is increased [Section 8070(s)(3)]. Thus, a lender may enroll in CalCAP only the increased loan amount of any refinanced preexisting non-CalCAP debt held by that lender. For example, a lender previously loaned $50,000 to a qualified business, but did not enroll the loan with CalCAP. It will now refinance the existing debt and loan an additional $10,000 to the qualified business. The lender will only be able to submit a CalCAP loan enrollment requesting $10,000 loss coverage for the $60,000 loan.
Is a loan for the financing of a real estate investment eligible?
NO. Loans for “passive” real estate investments cannot be enrolled in CalCAP [Section 8070(s)]. Defined in Section 8070(m), “Passive Real Estate Ownership” means the ownership of real estate for the purpose of deriving income from speculation, trade or rental.
Is a loan for the financing of commercial real estate eligible?
YES. The financing of real estate being used or intended to be used for the operation of the business of the owner of the real estate (the Borrower must be using or planning to use upon acquisition or construction of a building, at least 51 percent of the space in an existing building or at least 67 percent of the space in a newly constructed building); or the ownership of real estate for the purpose of construction or renovation, until the completion of the construction or renovation phase.
When do I enroll a loan in CalCAP?
Loans must be enrolled within 15 business days of the “date of first disbursement” or date of loan. The CalCAP Loan Enrollment Application can be emailed (preferred method) to CalCAP@treasurer.ca.gov or faxed to (916) 589-2805 (be sure to get a fax confirmation) or mailed to CalCAP 915 Capitol Mall, Room 457 Sacramento, CA 95814. Whichever method you choose, it must be received by CalCAP before the end of the 15th business day.
Can I 'pre-qualify' a loan enrollment with CalCAP before making the loan?
YES. Loans over $500,000 must be submitted for pre-qualification. CalCAP encourages participating lenders to contact CalCAP staff if they are unsure if a borrower or a proposed loan satisfies the enrollment requirements for a “Qualified Business” or a “Qualified Loan” in Section 8070. However, CalCAP lenders are still required to submit the Loan Enrollment Application for final review and approval by the Executive Director or his or her designee.
Must I enroll the entire loan amount with CalCAP?
NO. The lender determines how much of its loan to enroll with CalCAP. For example, the lender may loan $50,000 to the borrower, but it may choose to enroll only $10,000 of the loan with CalCAP. The premium is only charged on the amount enrolled. In case of a loan default, the lender can only recover any outstanding amount from that portion of the loan that was enrolled with CalCAP.
Can I enroll a CalCAP loan with a borrower who is also receiving an SBA loan?
YES. CalCAP complements SBA programs with its full loan loss protection. For example, a CalCAP lender can make a $100,000 loan and enroll it with SBA. SBA may protect $85,000 (85%) of the total loan amount. The CalCAP lender can enroll the uncovered SBA amount of $15,000 with CalCAP, thereby providing the lender 100% loan loss protection for the loan. However, CalCAP cannot use Federal funds for the premium contribution for the unguaranteed portion of an SBA loan. This means CalCAP will contribute other available funds at a slightly lower amount.
When do I notify CalCAP if I have extended or renewed a CalCAP enrolled loan?
Notification of extended terms will be indicated on the required quarterly report that the lender submits to CalCAP. If the enrolled portion of the loan amount has increased, then the lender must submit a new Loan Enrollment Application with evidence of the additional borrower and lender loan premium contributions based on the increased CalCAP covered portion of the loan.
Where is the loss reserve account maintained?
Loss reserve accounts are held by the CalCAP trustee, currently Deutsche Bank, or by a CalCAP lender upon approval of the Executive Director. The loss reserve account must be held in a federally insured, interest-bearing, demand deposit account, with no fees [Section 8073(c)].
How much of a CalCAP loan premium must I charge the borrower?
The CalCAP lender must charge 1 to 3.5 percent of the enrolled loan amount to the borrower for deposit in the CalCAP loss reserve account [Section 8070(d)]. The CalCAP lender determines the loan premium amount to charge the borrower and pays an equal premium.
Is there a way for a lender not to pay the CalCAP loan premium?
YES. The borrower can agree to pay both the lender and borrower loan premiums. They must, however, sign the “Borrower Agreement to Pay Lender Fee”. This would then be included with the enrollment application when it’s submitted to CalCAP.
How much does CalCAP contribute to the lender's loss reserve account?
Generally, CalCAP matches the borrower and the lender premium. For example:
ENROLLED LOAN AMOUNT = $100,000
Borrower premium (2%) = $2,000
Lender premium (2%) = $2,000
CalCAP contribution (4%) = $4,000
Total loss reserve contribution = $8,000
However, if the small business is not eligible to receive Federal fund contributions, other CalCAP funds may be available at a lower matching amount.
ENROLLED LOAN AMOUNT = $100,000
Borrower premium (2%) = 2,000
Lender premium (2%) = 2,000
CalCAP contribution (3%) = 3,000
Total loss reserve contribution = $ 7,000
When should I file a claim for reimbursement on a CalCAP loan?
A lender can file a claim by submitting a CalCAP Financial Institution Claim Application within 120 days of charging off all or part of a defaulted loan. The lender may file a claim for reimbursement of a loss before the liquidation of collateral or the realization of personal or other financial guarantees, or recovery of outstanding amounts from other sources [Section 8074(a-d)].
Can I defer a claim?
YES. The lender may defer making a claim for up to 180 days from the date of charge off, but must still notify CalCAP in writing within 120 days of the charge off.
What if I recover funds after a claim has been paid?
The lender will reimburse the loss reserve account the amount received, less expenses related to recovery. The reimbursement is essentially the amount of money needed to fully recover the lender's loss on the loan, even if a portion of the loan was not enrolled in CalCAP. Recoveries which exceed reimbursements to the loss reserve account may be retained by the lender.
What if I don't have enough in my loss reserve account to pay a claim?
If there is not enough money in a lender's loss reserve account to fully cover the loss, the lender can withdraw the amount in the loss reserve account at that time (less the interest accrued). Once the loss reserve account is replenished, the lender can withdraw additional funds to fully cover the earlier claim, as long as that does not exceed 75% of the loss reserve account at that time.
1 All regulatory references are to Title 4 of the California Code of Regulations.