[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2594 Introduced in Senate (IS)]
109th CONGRESS
2d Session
S. 2594
To amend the Small Business Act to reauthorize the loan guarantee
program under section 7(a) of that Act, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 6, 2006
Mr. Kerry (for himself, Mr. Pryor, and Ms. Landrieu) introduced the
following bill; which was read twice and referred to the Committee on
Small Business and Entrepreneurship
_______________________________________________________________________
A BILL
To amend the Small Business Act to reauthorize the loan guarantee
program under section 7(a) of that Act, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; FINDINGS; PURPOSE.
(a) Short Title.--This Act may be cited as the ``7(a) Loan Program
Reauthorization Act of 2006''.
(b) Findings.--Congress finds the following:
(1) According to a recent study by the United States
Chamber of Commerce and Business Loan Express, availability of
financing remains 1 of the top obstacles to the start-up and
growth of small businesses in the United States, particularly
for minorities who are still more likely to use credit cards to
finance their businesses and fear denial from lenders.
(2) In pursuing its mission of aiding small businesses, the
Small Business Administration (referred to in this Act as the
``Administration'') helps small businesses access capital by
guaranteeing loans and venture capital offered through
partnerships with private-sector lenders and investors.
(3) The loan guaranty program under section 7(a) of the
Small Business Act is the largest loan program of the
Administration, and it is intended to serve small business
borrowers who could not otherwise obtain long-term credit under
suitable terms and conditions from the private sector without a
guarantee from the Administration.
(4) Loans under section 7(a) of the Small Business Act have
terms of up to 25 years, allowing small businesses to reduce
their monthly payments and maximize their cash flow.
(5) Loan proceeds can be used for most business purposes,
including working capital, equipment, furniture and fixtures,
land and buildings, leasehold improvements, and debt
refinancing.
(6) In helping qualified small businesses to obtain the
long-term loans they need for start-up and expansion, loans
under section 7(a) of the Small Business Act create and retain
jobs and promote economic development in communities throughout
the United States.
(7) In fiscal year 2005, almost 96,000 small businesses
were approved for loans under section 7(a) of the Small
Business Act, injecting more than $15,000,000,000 of capital
into local communities throughout the United States, and
creating or retaining an estimated 460,000 jobs.
(c) Purposes.--The purpose and intent of this Act are--
(1) to reauthorize the loan program under section 7(a) of
the Small Business Act for 3 years, with appropriate funding
levels to adequately address the capital needs of small
businesses in the United States;
(2) to provide small businesses that need financing for
fixed assets through the loan program under title V of the
Small Business Investment Act of 1958, and for working capital
and equipment financing through the loan program under section
7(a) of the Small Business Act, the option of utilizing both
loan guaranty programs to their maximum amount;
(3) to increase the proportion of small business loans to
minorities and women, addressing concerns that African
Americans, Hispanics, Asians and women have been receiving far
fewer small business loans relative to their share of the
population and that there has been no statistically significant
improvement since fiscal year 2001;
(4) to establish a National Preferred Lenders Program for
qualified lenders who would like to operate in other States,
streamlining and making uniform the application and approval
process;
(5) to ensure that lenders who operate nationally are
qualified by creating eligibility criteria and standards; and
(6) to ensure that lenders who fail to meet the approved
eligibility criteria of the National Preferred Lenders Program
are held accountable to the communities they serve.
SEC. 2. REAUTHORIZATION AND MAXIMUM AMOUNTS.
(a) 7(a) Authorization for Fiscal Years 2007 Through 2009.--Section
20 of the Small Business Act (15 U.S.C. 631 note) is amended--
(1) by redesignating subsection (j) as subsection (f); and
(2) by adding at the end the following:
``(g) Fiscal Year 2007.--For fiscal year 2007, for the program
authorized under section 7(a), the Administrator is authorized to make
$18,500,000,000 in general business loans, and there are authorized to
be appropriated to the Administrator such sums as may be necessary to
carry out such program.
``(h) Fiscal Year 2008.--For fiscal year 2008, for the program
authorized under section 7(a), the Administrator is authorized to make
$19,500,000,000 in general business loans, and there are authorized to
be appropriated to the Administrator such sums as may be necessary to
carry out such program.
``(i) Fiscal Year 2009.--For fiscal year 2009, for the program
authorized under section 7(a), the Administrator is authorized to make
$20,500,000,000 in general business loans, and there are authorized to
be appropriated to the Administrator such sums as may be necessary to
carry out such program.''.
(b) Maximum Amount and Coordination of SBA Loans.--
(1) In general.--Section 7(a)(3)(A) of the Small Business
Act (15 U.S.C. 636(a)(3)(A)) is amended by striking ``would
exceed $1,500,000 (or if the gross loan amount would exceed
$2,000,000)'' and inserting ``(excluding any amounts
outstanding or committed under title V of the Small Business
Investment Act of 1958) would exceed $2,250,000 (or if the
gross loan amount would exceed $3,000,000)''.
(2) Reporting.--Not later than 90 days after the date of
enactment of this Act, and annually thereafter, the
Administrator shall submit a report to Congress that--
(A) includes the number of small business concerns
(as that term is defined in section 3 of the Small
Business Act (15 U.S.C. 632)) that have financings
under both section 7(a) of the Small Business Act (15
U.S.C. 636(a)) and title V of the Small Business
Investment Act of 1958 (15 U.S.C. 695 et seq.) during
the preceding year; and
(B) describes the total amount and general
performance of the financings described in subparagraph
(A).
SEC. 3. FEES.
Section 7(a)(23) of the Small Business Act (15 U.S.C. 636(a)(23))
is amended by striking subparagraph (C) and inserting the following:
``(C) Lowering of fees.--
``(i) In general.--If the fees paid by all
small business borrowers and by lenders for
guarantees under this subsection, or the sum of
such fees plus any amount appropriated to carry
out this subsection, as applicable, is more
than the amount necessary to equal the cost to
the Administration of making such guarantees,
the Administrator shall reduce fees paid by
small business borrowers and lenders under
clauses (i) through (iv) of paragraph (18)(A)
and subparagraph (A) of this paragraph.
``(ii) Maximum.--The fees paid by small
business borrowers and lenders for guarantees
under this subsection may not be increased
above the maximum level authorized under the
amendments made by division K of the
Consolidated Appropriations Act, 2005 (Public
Law 108-447; 118 Stat. 3441).''.
SEC. 4. ALTERNATIVE SIZE STANDARD.
Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) is
amended by adding at the end the following:
``(4) Optional Size Standard.--
``(A) In general.--The Administrator shall establish, by
rule, an optional size standard for business loan applicants
under section 7(a) and development company loan applicants
under title V of the Small Business Investment Act of 1958,
which utilizes maximum tangible net worth and average net
income as an alternative to the use of industry standards.
``(B) Interim rule.--Until the date on which the optional
size standards established under subparagraph (A) are in
effect, the alternative size standard in section 121.301(b) of
title 13, Code of Federal Regulations, or any successor thereto
shall apply to business loan applicants under section 7(a) and
development company loan applicants under title V of the Small
Business Investment Act of 1958.''.
SEC. 5. MINORITY SMALL BUSINESS DEVELOPMENT.
(a) In General.--The Small Business Act (15 U.S.C. 631 et seq.) is
amended--
(1) by redesignating section 37 as section 38; and
(2) by inserting after section 36 the following:
``SEC. 37. MINORITY SMALL BUSINESS DEVELOPMENT.
``(a) Office of Minority Small Business Development.--There is
established in the Administration an Office of Minority Small Business
Development, which shall be administered by the Associate Administrator
for Minority Small Business Development (in this section referred to as
the `Associate Administrator') appointed under section 4(b)(1).
``(b) Associate Administrator for Minority Small Business
Development.--The Associate Administrator--
``(1) shall be either--
``(A) an appointee in the Senior Executive Service
who is a career appointee; or
``(B) an employee in the competitive service.
``(2) shall be responsible for the formulation, execution,
and promotion of policies and programs of the Administration
that provide assistance to small business concerns owned and
controlled by minorities;
``(3) shall act as an ombudsman for full consideration of
minorities in all programs of the Administration (including
those under section 7(j) and 8(a));
``(4) shall work with the Associate Deputy Administrator
for Capital Access to increase the proportion of loans and loan
dollars, and investments and investment dollars, going to
minorities through the finance programs under this Act and the
Small Business Investment Act of 1958 (including subsections
(a), (b), and (m) of section 7 of this Act and the programs
under part A and B of title III and title V of the Small
Business Investment Act of 1958);
``(5) shall work with the Associate Deputy Administrator
for Entrepreneurial Development to increase the proportion of
counseling and training that goes to minorities through the
entrepreneurial development programs of the Administration;
``(6) shall work with the Associate Deputy Administrator
for Government Contracting and Minority Enterprise Development
to increase the proportion of contracts, including through the
Small Business Innovation Research Program and the Small
Business Technology Transfer Program, to minorities;
``(7) shall work with the partners of the Administration,
trade associations, and business groups to identify and carry
out policies and procedures to more effectively market the
resources of the Administration to minorities;
``(8) shall work with the Office of Field Operations to
ensure that district offices and regional offices have adequate
staff, funding, and other resources to market the programs of
the Administration to meet the objectives described in
paragraphs (4) through (7); and
``(9) shall report to and be responsible directly to the
Administrator.
``(c) Authorization of Appropriations.--There are authorized to be
appropriated to carry out this section--
``(1) $5,000,000 for fiscal year 2007;
``(2) $5,000,000 for fiscal year 2008; and
``(3) $5,000,000 for fiscal year 2009.''.
(b) Conforming Amendments.--Section 4(b)(1) of the Small Business
Act (15 U.S.C. 633(b)(1)) is amended in sixth sentence, by striking
``Minority Small Business and Capital Ownership Development'' and all
that follows through the end of the sentence and inserting ``Minority
Small Business Development.''.
SEC. 6. NATIONAL PREFERRED LENDERS PROGRAM.
(a) In General.--Section 7(a) of the Small Business Act (15 U.S.C.
636(a)) is amended by adding at the end the following:
``(32) National preferred lenders program.--
``(A) Definitions.--In this paragraph--
``(i) the term `national preferred lender'
means a lender authorized by the Administrator
to participate in the National Preferred
Lenders Program;
``(ii) the term `National Preferred Lenders
Program' means the program established under
subparagraph (B); and
``(iii) the term `Preferred Lenders
Program' has the meaning given the term in
paragraph (2)(C)(ii).
``(B) Establishment of program.--In addition to the
Preferred Lenders Program, the Administrator shall
establish a National Preferred Lenders Program, under
which the Administrator may authorize a preferred
lender to operate in any area served by a district
office of the Administration.
``(C) Eligibility criteria.--
``(i) In general.--Not later than 60 days
after the date of enactment of this paragraph,
the Administrator shall establish, by rule,
eligibility criteria for national preferred
lenders.
``(ii) Considerations.--The eligibility
criteria established by the Administrator under
clause (i) may include consideration of whether
the lender has--
``(I) satisfactorily operated as a
preferred lender in areas encompassing
all or part of the territory in not
fewer than 5 district offices of the
Administration for a minimum of 3 years
in each territory;
``(II) centralized loan approval,
servicing, and liquidation functions
and processes that are satisfactory to
the Administration;
``(III) uniform written policies
and procedures relating to loans under
this subsection, including the
processing of loans under the Preferred
Lenders Program;
``(IV) an average rate of
performance in currency rate, default
rate, and recovery rate for loans made
under the Preferred Lenders Program
that is equal to or better than the
national average rate of performance in
such categories for all loans under
this subsection; and
``(V) received a generally
satisfactory or substantially
satisfactory compliance review rating
from the Administrator in its most
recent audit and examination as a
preferred lender and a small business
lending company, if applicable, or an
in compliance rating, as a result of a
follow-up review.
``(D) Delegated authority.--
``(i) In general.--The Administrator shall
authorize a national preferred lender to take
certain action relating to the servicing of
loans on behalf of the Administrator under
section 5(b)(7), including authorizing the
lender--
``(I) to make and close a loan
guaranteed by the Administrator,
without obtaining the prior specific
approval of the Administrator; and
``(II) to service and liquidate a
loan, without obtaining the prior
specific approval of the Administrator
for routine servicing and liquidation
activities.
``(ii) Limitation.--In exercising any
authority delegated under clause (i), a
national preferred lender may not take any
action that creates an actual or apparent
conflict of interest.
``(E) Corrective action.--If a national preferred
lender fails to continue to meet the eligibility
criteria established under subparagraph (C)(i), the
Administrator shall notify the lender of the deficiency
and allow a reasonable period of time for the lender to
correct the deficiency.
``(F) Suspension or revocation.--
``(i) In general.--The Administrator shall
suspend or revoke the authorization of a
national preferred lender to participate in the
National Preferred Lenders Program, if the
Administrator determines that the lender--
``(I) is not adhering to the rules
and regulations of the Administration
applicable to such lender; or
``(II) after the date on which a
period of time for correction of
deficiencies under subparagraph (F)
expires, has failed to meet the
eligibility criteria established under
subparagraph (C)(i).
``(ii) Outstanding guarantees.--Any
suspension or revocation under clause (i) shall
not affect any guarantee in effect on the date
of such suspension or revocation.''.
(b) Conforming Amendment.--Section 7(a)(2)(C) of the Small Business
Act (15 U.S.C. 636(a)(2)(C)) is amended--
(1) in the subparagraph heading, by inserting ``and
national preferred lenders program'' before the period at the
end; and
(2) by inserting ``or the National Preferred Lenders
Program under paragraph (32)'' after ``Preferred Lenders
Program''.
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