Loan Committee
Jim Ely, Loan Chair
Loan guarantees provided by the Small Business Development Corporation of Orange County derive from the California Infrastructure and Economic Development Bank (IBank) which is backed by a state trust fund. The function and purpose of the IBank and SBDC-OC collaboration is to provide lenders the assurance they need through a guarantee of state financing backed directly by the state’s fund.
SBDC-OC is one of seven Financial Development Corporations (FDC) operating under the California Small Business Development Law as set forth in the California Corporations Code. It is regulated by California’s IBank and is unrelated to any federal Small Business Administration program or Small Business Development Center.
IBank requires each guarantee requested by lenders or directly by businesses to be reviewed and approved by SBDC-OC’s loan committee. This loan committee consists of banking and finance professionals, economic development specialists and other community stakeholders.
The eligibility of each borrower and the proposed use of proceeds must be considered. More importantly, a reasonable assurance of repayment must be determined as too many defaults and losses would deplete the state trust fund. The preservation and expansion of jobs and economic opportunity are weighted against the prospect of potential loss.
The loan will have an identifiable credit weakness since the lender was unwilling to proceed without the guarantee in the first place. The conflicting perspectives of the committee members must reach a consensus.
