CalCAP CARB Technical Program Summary
Please refer to the Participating Financial Institution Lender Manual and Program Regulations for any clarifications or items not addressed here. No item shall be construed as contradicting or superseding Program Regulations
The California Capital Access Program (CalCAP) encourages banks and other financial institutions to make loans to small businesses. CalCAP is administered by the California Pollution Control Financing Authority.
CalCAP is a loan loss reserve program which may provide up to 100% coverage on certain loan defaults. By participating in CalCAP, financial institutions have available to them a proven credit enhancement to address the financing needs of California's small businesses.
Eligible Uses of Loan Proceeds
CalCAP supports participating financial institutions making loans to small businesses. The Heavy-Duty Vehicle Air Quality Loan Program, or CalCAP CARB, applies to loans to owners of small fleets. CalCAP CARB supports participating financial institutions when they make loans used to finance heavy-duty vehicles (over 14,000 gross vehicle weight rating (GVWR)) equipped with engines certified to specified engine emission standards for 2010 and newer model year engines. The engines can use diesel fuel, compressed natural gas (CNG), liquefied natural gas (LNG) or other fuels, including zero emission technology. In addition, loans including costs for an equipment warranty are eligible for enrollment when funded with the purchase of an eligible tractor.
The maximum loan amount is $5 million (maximum of $2.5 million enrolled over a three year period) and can be enrolled for up to five years. The maximum interest rate a participating financial institution may charge on any single loan is 20% annual percentage rate (APR). Participating financial institutions set the terms and conditions of the loans and decide which loans to enroll into the CalCAP/CARB Program. CalCAP, in conjunction with CARB, the Independent Contributor, contributes up to 14% of the principal balance enrolled to a loss reserve account.
Loans or Terminal Rental Adjustment Clause (TRAC) leases can be short or long-term, have fixed or variable rates, be secured or unsecured, and bear any type of amortization schedule.
CalCAP makes a contribution to the Participating Financial Institution’s CalCAP/CARB loan loss reserve (LLR) account. The contribution is 14% for LLR accounts with $500,000 or less in contributions; 10% for LLR accounts with more than $500,000 in contributions.
Eligible Financial Institutions
Any federal or state-chartered bank, savings association, certified Community Development Financial Institutions (CDFI), or credit union is eligible to participate in CalCAP. A financial institution must certify that it is in good standing with its regulatory body (Federal Reserve, Federal Deposit Insurance Corporation (FDIC), Comptroller of Currency, Thrift Supervision, National Credit Union Administration (NCUA), or state banking authority). Finance Lenders and others may also be eligible.
How the Program Works
- Business applies to a Participating Financial Institution for a loan or TRAC lease.
- Applies to the California Pollution Control Financing Authority (CPCFA) to participate in CalCAP.
- Enrolls each loan with CalCAP.
- CPCFA administers CARB’s Air Quality Improvement Plan (AQIP) funds dedicated to the Heavy-Duty Vehicle Air Quality Loan Program.
- At the time of loan enrollment approval, CPCFA pays a contribution into the participating financial institution’s loan loss reserve account. The contribution is 14% of the enrolled loan amount until the participating financial institution has received $500,000 in total contributions. Thereafter, the contribution is reduced to 10% for contributions more than $500,000. Loan enrollment applications must be received by CPCFA within 15 business days of the “Date of First Disbursement” (Date of Loan).
- At the time of loss, CPCFA approves claims submitted by the participating financial institution up to the amount in the participating financial institution’s loss reserve account.
When a participating financial institution’s first loan is enrolled, CPCFA establishes a loss reserve account for that participating financial institution. Each time a subsequent loan is enrolled, CPCFA contributes to the loss reserve account.
The more loans a participating financial institution makes and enrolls, the more dollars are deposited into the participating financial institution’s loss reserve account.
How the Loss Reserve Account Grows
Over time, as more and more loans are enrolled, a participating financial institution’s loss reserve account grows. For example, if a new participating financial institution makes 10 loans totaling $500,000.00, the participating financial institution will have $70,000.00 in its loss reserve account. If one loan of $50,000.00 charges off, the participating financial institution has coverage of 100% of the loss. The participating financial institution must return any subsequent recoveries from the borrower, less expenses, to the loss reserve account.
Eligible Small Businesses
- The borrower's fleet size must be 0-10 on-road heavy-duty vehicles at the time of loan.
- The borrower's business activity has its primary economic effect in California (vehicle must be registered in California with the Department of Motor Vehicles).
- The small business must be classified as a small business under U.S. Small Business Administration guidelines (Title 13 of the Code of Federal Regulations) and have 100 employees or fewer.
- The business annual revenue must be $10 million or less, averaged over a three year period.