Guaranteeing California’s Renewable Energy Small Business Future

In late February, Senator Leland Yee (D-San Francisco) (in collaboration with State Controller John Chiang) introduced California Senate Bill 1465.  The legislation would seek to provide credit support for small renewable energy and agricultural businesses in the form of loan guarantees.  By doing so, the bill hopes to “facilitate export expansion” and promote job retention and growth in these sectors.

I think we are all well aware of the recession that has gripped the country as a whole and many states – California included.  One of the many negative impacts of the economic climate has been the inability of small businesses to secure much-needed financing.  This is particularly true for emerging small businesses like those in the renewable energy sector.  That is where SB 1465 hopes to come in.

In order to qualify for a loan guarantee under the program contemplated in SB 1465, an independently owned and operated business must (i) be primarily engaged in agricultural business or renewable energy manufacturing and production, (ii) not be dominant in its field, (iii) have a principal office in California and have officers that are domiciled in California, (iv) have fewer than 100 employees, (v) have average gross receipts of $10 million or less over the previous three years, and (vi) create and sell products that are at least 85 percent produced and manufactured in California.  In addition, if more than $200,000 is being borrowed, the small business would be required to create at least one job per $200,000 (if the loan is for less than $200,000, the business is required to retain all jobs that existed at the time of their application).

Obviously, the devil is always in the details and there aren’t many of them in the bill.  It is essentially a shell that, if passed, would be filled in with regulations promulgated by the California Pollution Control Financing Authority, which would be the governmental body implementing the program.  As reported by CalWatchdog.com, some have criticized the program as being duplicative of other successful state programs like the Small Business Loan Guarantee Program and worry that it will “‘cannibalize existing fund programs.’”

SB 1465 is beginning to move through the committee ranks.  Earlier this week, it was amended slightly (mainly to cover all renewable energy small businesses rather than just solar) and passed by the Senate’s Governmental Organization Committee.  Next stop – the Senate’s Governance and Finance Committee.