Cal. Code Regs. tit. 10 § 5002

Current through Register 2024 Notice Reg. No. 48, November 29, 2024

Section 5002 - Guarantee Terms

(a) Following adoption of a resolution by its board of directors, a Corporation shall be authorized to issue a commitment letter specifying the conditions under which it will issue a Guarantee to a specified Borrower. A commitment letter for a Line of Credit Loan shall include a section describing the three (3) alternatives which exist at the maturity of the Loan. The Lender, not less than thirty (30) calendar days prior to the expiration of the Guarantee, shall notify the Corporation whether the Loan is current, whether any problems currently exist with the Loan, and the expiration date. Lender and Corporation shall agree to one of the following three (3) alternatives:

(1) Renew the Guarantee, but as a Term Loan, not a Line of Credit Loan;

(2) Renew the Guarantee as a Line of Credit Loan; or

(3) Do not renew the Guarantee.

(b) The terms and conditions of a Guarantee shall be consistent with the resolution of the Corporation approving the Guarantee and shall include all of the following:

(1) Provision that the Corporation promises to pay up to ninety percent (90%) of the principal and interest on a Line of Credit Loan and Term Loan, and up to one-hundred percent (100%) of the principal and interest on a Micro Loan, or other Loan approved by the Director, subject only to the following restrictions:

(A) The Lender has complied with all material conditions contained in the Guarantee, including perfecting Collateral; and

(B) The Lender has not engaged, and will not engage, in fraudulent or grossly negligent practices in connection with the Borrower, Guarantee, the Loan or the Loan Agreement.

(2) The duration of a Guarantee on a Term Loan shall not exceed seven (7) years.

(3) The duration of a Guarantee on a Line of Credit Loan shall not exceed one (1) year, except for a Line of Credit Loan to a Farm Enterprise, where the duration of a Guarantee shall not exceed two (2) years.

(4) The Corporation shall be authorized to charge the following Loan Guarantee fees:

(A) For a loan guarantee in the amount of $150,000 or less, a loan guarantee fee not to exceed 2 percent of the principal amount guaranteed.

(B) For a loan guarantee in an amount greater than $150,000, a loan guarantee fee not to exceed 3 percent of the principal amount guaranteed.

(C) For a loan guarantee with a term greater than one year, a loan guarantee servicing fee not to exceed .5% of the principal amount guaranteed. The servicing fee shall be authorized to commence on the first anniversary of the effective date of the loan guarantee, and to continue annually until the guarantee is released.

(5) A statement that the Lender shall send to the Corporation executing the Guarantee, a copy of all Delinquency notices mailed to the Borrower.

(6) A description of the procedures and the responsibilities of the Lender and Corporation subsequent to Default.

(7) Section 5003 Demand procedures.

(8) Agreement to abide by binding arbitration by the American Arbitration Association in the event that either the Corporation or the Agency denies the requested Demand pursuant to section 5003(d)(2) or (e)(2), or the amount paid to the Lender is less than the amount contained in the Demand Letter.

(9) Acknowledgment by the Lender that in the event of a Demand, the Lender will allow a representative of the California Department of Financial Institutions, or other auditor selected by the Corporation, to examine the Lender's Loan files.

(10) A designation as to whether the Guarantee is a Collection Guarantee or Loan Guarantee.

(11) A statement that the maximum amount of interest to be paid is ninety (90) calendar days at guaranteed percentage. The ninety (90) calendar day limit can only be exceeded with the written approval of the Corporation.

(12) The maximum guarantee amount from any single trust fund account for any business is $500,000. The maximum guarantee amount from a combination of trust fund accounts for any business is $1,000,000.

Cal. Code Regs. Tit. 10, § 5002

1. Editorial correction of NOTE filed 5-19-82 (Register 82, No. 21).
2. Editorial correction filed 2-16-83 (Register 83, No. 8).
3. Amendment filed 4-12-88 as an emergency; operative 4-12-88 (Register 88, No. 18). A Certificate of Compliance must be transmitted to OAL within 180 days or emergency language will be repealed on 10-11-88.
4. Amendment filed 9-19-88 as an emergency; operative 9-19-88 (Register 88, No. 39). A Certificate of Compliance must be transmitted to OAL within 180 days or emergency language will be repealed on 3-20-89 and Section 5002 will be reprinted as it existed prior to 4-12-88.
5. Certificate of Compliance as to 9-19-88 order including amendment of subsection (g) filed 2-8-89 (Register 89, No. 8).
6. Repealer and new section filed 6-24-91; operative 7-24-91 (Register 91, No. 42).
7. New subsection (b)(12) filed 2-22-94; operative 2-22-94 (Register 94, No. 8).
8. Amendment of subsections (b)(1) and (b)(11) filed 6-9-97 as an emergency; operative 6-9-97 (Register 97, No. 24). A Certificate of Compliance must be transmitted to OAL by 10-7-97 or emergency language will be repealed by operation of law on the following day.
9. Reinstatement of subsections (b)(1) and (b)(11) as they existed prior to 6-9-97 emergency amendment by operation of Government Code section 11346.1(f) (Register 98, No. 30)
10. Amendment of subsections (a), (b)(1), (b)(2)-(4), (b)(9) and (b)(11) and amendment of NOTE filed 7-24-98; operative 7-24-98 pursuant to Government Code section 11343.4(d) (Register 98, No. 30).
11. Amendment of subsection (b)(12) filed 2-11-2002; operative 3-13-2002 (Register 2002, No. 7).
12. Amendment of subsection (b)(4), new subsections (b)(4)(A)-(C) and amendment of NOTE filed 11-14-2002 as an emergency; operative 11-14-2002 (Register 2002, No. 46). Pursuant to Corporations Code section 14024 a Certificate of Compliance must be transmitted to OAL by 5-13-2003 or emergency language will be repealed by operation of law on the following day.
13. Certificate of Compliance as to 11-14-2002 order transmitted to OAL 3-5-2003 and filed 4-17-2003 (Register 2003, No. 16).
14. Amendment of subsection (b)(12) filed 7-29-2003 as an emergency; operative 7-29-2003 (Register 2003, No. 31). Pursuant to Corporations Code section 14024 a Certificate of Compliance must be transmitted to OAL by 1-26-2004 or emergency language will be repealed by operation of law on the following day.
15. Editorial correction of HISTORY 14 (Register 2003, No. 49).
16. Reinstatement of subsection (b)(12) as it existed prior to 7-29-2003 amendment by operation of Government Code section 11346.1(f) (Register 2004, No. 32).
17. Amendment of subsections (b)(8) and (b)(12) filed 12-27-2004 as a deemed emergency pursuant to Corporations Code section 14024; operative 12-27-2004 (Register 2004, No. 53). A Certificate of Compliance must be transmitted to OAL by 6-27-2005 or emergency language will be repealed by operation of law on the following day.
18. Editorial correction of HISTORY 17 (Register 2005, No. 27).
19. Certificate of Compliance as to 12-27-2004 order, including amendment of NOTE, transmitted to OAL 5-25-2005 and filed 7-7-2005 (Register 2005, No. 27).

Note: Authority cited: Section 14024, Corporations Code. Reference: Sections 14070, 14071 and 14072, Corporations Code.

1. Editorial correction of Note filed 5-19-82 (Register 82, No. 21).
2. Editorial correction filed 2-16-83 (Register 83, No. 8).
3. Amendment filed 4-12-88 as an emergency; operative 4-12-88 (Register 88, No. 18). A Certificate of Compliance must be transmitted to OAL within 180 days or emergency language will be repealed on 10-11-88.
4. Amendment filed 9-19-88 as an emergency; operative 9-19-88 (Register 88, No. 39). A Certificate of Compliance must be transmitted to OAL within 180 days or emergency language will be repealed on 3-20-89 and Section 5002 will be reprinted as it existed prior to 4-12-88.
5. Certificate of Compliance as to 9-19-88 order including amendment of subsection (g) filed 2-8-89 (Register 89, No. 8).
6. Repealer and new section filed 6-24-91; operative 7-24-91 (Register 91, No. 42).
7. New subsection (b)(12) filed 2-22-94; operative 2-22-94 (Register 94, No. 8).
8. Amendment of subsections (b)(1) and (b)(11) filed 6-9-97 as an emergency; operative 6-9-97 (Register 97, No. 24). A Certificate of Compliance must be transmitted to OAL by 10-7-97 or emergency language will be repealed by operation of law on the following day.
9. Reinstatement of subsections (b)(1) and (b)(11) as they existed prior to 6-9-97 emergency amendment by operation of Government Code section 11346.1(f) (Register 98, No. 30)
10. Amendment of subsections (a), (b)(1), (b)(2)-(4), (b)(9) and (b)(11) and amendment of Note filed 7-24-98; operative 7-24-98 pursuant to Government Code section 11343.4(d) (Register 98, No. 30).
11. Amendment of subsection (b)(12) filed 2-11-2002; operative 3-13-2002 (Register 2002, No. 7).
12. Amendment of subsection (b)(4), new subsections (b)(4)(A)-(C) and amendment of Note filed 11-14-2002 as an emergency; operative 11-14-2002 (Register 2002, No. 46). Pursuant to Corporations Code section 14024 a Certificate of Compliance must be transmitted to OAL by 5-13-2003 or emergency language will be repealed by operation of law on the following day.
13. Certificate of Compliance as to 11-14-2002 order transmitted to OAL 3-5-2003 and filed 4-17-2003 (Register 2003, No. 16).
14. Amendment of subsection (b)(12) filed 7-29-2003 as an emergency; operative 7-29-2003 (Register 2003, No. 31). Pursuant to Corporations Code section 14024 a Certificate of Compliance must be transmitted to OAL by 1-26-2004 or emergency language will be repealed by operation of law on the following day.
15. Editorial correction of History 14 (Register 2003, No. 49).
16. Reinstatement of subsection (b)(12) as it existed prior to 7-29-2003 amendment by operation of Government Code section 11346.1(f) (Register 2004, No. 32).
17. Amendment of subsections (b)(8) and (b)(12) filed 12-27-2004 as a deemed emergency pursuant to Corporations Code section 14024; operative 12-27-2004 (Register 2004, No. 53). A Certificate of Compliance must be transmitted to OAL by 6-27-2005 or emergency language will be repealed by operation of law on the following day.
18. Editorial correction of History 17 (Register 2005, No. 27).
19. Certificate of Compliance as to 12-27-2004 order, including amendment of Note, transmitted to OAL 5-25-2005 and filed 7-7-2005 (Register 2005, No. 27).