The California Pollution Control Financing Authority administers a range of programs, including bond programs to fund pollution control facilities and equipment, the California Recycle Underutilized Sites (CALReUSE) Program, California Capital Access Program Annual Reports, and the Sustainable Communities Grant and Loan Program Annual Reports.
According to the CPCFA website, "CPCFA partners with sister state agencies to achieve the state’s environmental policy objectives by administering high-impact financing programs designed to assist regulated entities and other stakeholders with accessing private capital. As a government agency that issues tax-exempt private activity bonds, CPCFA can facilitate low cost financing to qualified waste and recycling projects, and other projects to control pollution and improve water supply." As part of its bond-related activities, CPCFA is issuing Green Bonds to pollution control and other environmental projects meeting commonly accepted standards for climate investments.
The California Capital Access Program (CalCAP)
CalCAP for Small Business program was established through legislation enacted in 1994 for the purpose of incentivizing financial institutions to provide small businesses with the capital to maintain and grow their businesses.
The program uses a portfolio-based credit enhancement model, whereby a loss reserve account is established to offset losses incurred in connection with small business loans enrolled in the program. Funding in the loss reserve account consists of moneys paid by the participating borrower and financial institution, with CPCFA matching these contributions.
Unlike a loan guarantee that ensures payment on a certain percentage of the defaulted loan [80% in the guarantee program], under the loss reserve fund model, the default payment amount is based on the amount of funds available in the reserve account. This means a lender could potentially recover 100% of the value of the defaulted loan, if sufficient moneys are in the account. The model encourages lenders to maintain good underwriting practices because utilization of the loss reserve too often can quickly draw-down the reserve, leaving little for other potential defaults of enrolled loans within the portfolio.
Loans enrolled through CalCAP can be used for working capital and to finance land acquisition, construction or renovation of buildings, purchase of equipment, and other capital projects. There are some limitations on real estate loans and loan refinancing. The maximum loan amount is $2.5 million. Lenders set the terms and conditions of the loans and decide which loans to enroll into CalCAP. Loan fees, which are used to capitalize the loss reserve account, are set by the lender and are 2% to 3.5% of the total loan amount. Loans can be short- or long-term, have fixed or variable rates, be secured or unsecured, and bear any amortization schedule.
CalCAP was initially funded through excess fees from the issuance of CPCFA pollution control tax-exempt bonds. The Legislature appropriated $6 million in 2010 to expand the program, and in 2011 CalCAP received approximately one-half of the state's $168 million SSBCI allocation based on a joint application to the US Treasury. Later, California amended its SSBCI application to re-direct $65 million to a collateral support program.
CPCFA contracts with several of state agencies, including the California Air Resources Board and the California Energy Commission, to provide lenders with loan loss reserve accounts to finance new, cleaner-burning, heavy-duty, diesel trucks and buses and the acquisition of electric vehicle charging station equipment.
According to the 2020 Annual Report, through the end of December 2020, the total number of loans enrolled in each CalCAP program is as follows:
CalCAP for Small Business since 1994 is 23,209.
CalCAP/CARB since 2009 is 29,883.
Collateral Support Program (CalCAP/CSP or CSP) since 2013 is 329.
CalCAP Electric Vehicle Charging Station (EVCS) Financing Program (CalCAP/EVCS) since 2015 is three.
California Seismic Safety Capital Access Loan Program (CalCAP/Seismic Safety) since 2016 is three.
CalCAP American with Disabilities Act Program has not enrolled any loans to date.
2020 CalCap Program Activity
In 2020, participating lenders enrolled 860 small business loans, down from 2,271 small business loans in 2017. 2020 program activity $23.9 million in total enrolled loan dollars. The average size of one of these loans in 2020 was $39,087. Of the 860 loans enrolled in CalCAP, 334 (38.8%) were located in a severely affected community. Overall enrolled loans came from businesses located in 41 of the state's 58 counties. In 2020, loans enrolled in CalCAP helped to create 960 new jobs and retain 3,279 existing jobs.
Of the 860 total loans made in 2020, 690 were microloans representing $10.9 million. These figures demonstrate the unique ability of loss reserve programs to serve the small-size financing needs of owner-operators and microbusinesses.
Between 1994 and the close of 2017, 68 lenders participated in the CalCAP for Small Business program. The number of participating lenders has significantly dropped in recent years, with 19 lenders participating in 2020, of which only 11 enrolled loans. The top three participating lenders -- Opportunity Fund, Murphy Bank, and Working Solutions CDFI -- enrolled approximately 81% of the total loan volume.
CPCFA processed and approved 286 claims for $4.2 million from lenders against their loss reserve accounts in 2020. This represents a 33.26% default rate in 2020. This is a substantially higher default rate than prior years. The annual report provides charts illustrating this significant rise, including a chart on claims filed and defaulted loans over time.
Below is a chart showing 2020 CalCAP loan activities by industry sector.
2020 CalCap Small Business Program – All Funding Sources | ||||
NAICS Sector | Description | Number of Enrollments | Dollars Loaned | Dollars Enrolled |
11 | Agriculture, Forestry, Fishing, and Hunting | 6 | $464,520 | $341,212 |
21 | Mining, Quarrying, and Oil and Gas Extraction | 1 | $6,359 | $6,359 |
22 | Utilities | 0 | $ 0 | $ 0 |
23 | Construction | 45 | $2,179,525 | $1,619,341 |
31-33 | Manufacturing | 130 | $ 9,452,713 | $ 9,411,850 |
42 | Wholesale Trade | 18 | $474,083 | $436,029 |
44-45 | Retail Trade | 104 | $1,617,123 | $1,617,123 |
48-49 | Transportation and Warehousing | 369 | $16,790,924 | $10,266,887 |
51 | Information | 12 | $282,772 | $279,654 |
52 | Finance and Insurance | 8 | $178,473 | $178,473 |
53 | Real Estate and Rental and Leasing | 15 | $367,094 | $367,094 |
54 | Professional, Scientific, and Technical Services | 59 | $1,423,394 | $1,417,884 |
55 | Management of Companies and Enterprises | 0 | $ 0 | $ 0 |
56 | Administrative Support and Waste Management and Remediation Services | 35 | $1,070,204 | $911,445 |
61 | Educational Services | 6 | $124,330 | $124,330 |
62 | Health Care and Social Assistance | 26 | $888,313 | $888,313 |
71 | Arts, Entertainment, and Recreation | 6 | $144,472 | $144,472 |
72 | Accommodation and Food Services | 82 | $3,091,427 | $3,091,427 |
81 | Other Services (except Public Administration) | 32 | $640,199 | $628,718 |
92 | Public Administration | 2 | $30,701 | $29,770 |
| Grand Total | 860 | $33,614,511 | $23,950,601 |
Source: California Pollution Control Financing Authority, 2020 Annual Report | ||||
The annual report provides similar data for each of other CalCAP-related programs, including the CalCAP California Air Resources Board Heavy-Duty Vehicle Air Quality Loan Program; the Collateral Support Program; CalCAP Electric Vehicle Charging Station Financing Program; California Americans with Disabilities Act Small Business Capital Access Loan Program; and the California Seismic Safety Capital Access Loan Program.