[House Report 115-655]
[From the U.S. Government Publishing Office]
115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-655
======================================================================
SMALL BUSINESS 7(A) LENDING OVERSIGHT REFORM ACT OF 2018
_______
April 26, 2018.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Chabot, from the Committee on Small Business, submitted the
following
R E P O R T
[To accompany H.R. 4743]
The Committee on Small Business, to whom was referred the
bill (H.R. 4743) to amend the Small Business Act to strengthen
the Office of Credit Risk Management within the Small Business
Administration, and for other purposes, having considered the
same, report favorably thereon with an amendment and recommend
that the bill as amended do pass.
CONTENTS
Page
I. Purpose and Bill Summary........................................6
II. Background and the Need for Legislation.........................6
III. Hearings........................................................8
IV. Committee Consideration.........................................9
V. Committee Votes.................................................9
VI. Section-by-Section Analysis of H.R. 4743.......................13
VII. Congressional Budget Office Cost Estimate......................16
VIII. Unfunded Mandates..............................................16
IX. New Budget Authority, Entitlement Authority and Tax Expenditure16
X. Oversight Findings.............................................16
XI. Statement of Constitutional Authority..........................16
XII. Congressional Accountability Act...............................16
XIII. Federal Advisory Committee Statement...........................17
XIV. Statement of No Earmarks.......................................17
XV. Statement of Duplication of Federal Programs...................17
XVI. Disclosure of Directed Rule Makings............................17
XVII. Performance Goals and Objectives...............................17
XVIII.Changes in Existing Law Made by the Bill, as Reported..........17
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business 7(a) Lending Oversight
Reform Act of 2018''.
SEC. 2. DEFINITIONS.
In this Act, the terms ``Administration'' and ``Administrator'' mean
the Small Business Administration and the Administrator thereof,
respectively.
SEC. 3. CODIFICATION OF THE OFFICE OF CREDIT RISK MANAGEMENT AND THE
LENDER OVERSIGHT COMMITTEE.
(a) In General.--The Small Business Act (15 U.S.C. 631 et seq.) is
amended--
(1) by redesignating section 47 as section 49; and
(2) by inserting after section 46 the following new sections:
``SEC. 47. OFFICE OF CREDIT RISK MANAGEMENT.
``(a) Establishment.--There is established within the Administration
the Office of Credit Risk Management (in this section referred to as
the `Office').
``(b) Duties.--The Office shall be responsible for supervising--
``(1) any lender making loans under section 7(a) (in this
section referred to as a `7(a) lender');
``(2) any Lending Partner or Intermediary participant of the
Administration in a lending program of the Office of Capital
Access of the Administration; and
``(3) any small business lending company or a non-Federally
regulated lender without regard to the requirements of section
23.
``(c) Director.--
``(1) In general.--The Office shall be headed by the Director
of the Office of Credit Risk Management (in this section
referred to as the `Director'), who shall be a career appointee
in the Senior Executive Service (as defined in section 3132 of
title 5, United States Code).
``(2) Duties.--The Director shall be responsible for
oversight of the lenders and participants described in
subsection (b), including by conducting periodic reviews of the
compliance and performance of such lenders and participants.
``(d) Supervision Duties for 7(a) Lenders.--With respect to 7(a)
lenders, an employee of the Office shall--
``(1) be present for and supervise any such review that is
conducted by a contractor of the Office on the premise of the
7(a) lender; and
``(2) supervise any such review that is not conducted on the
premise of the 7(a) lender.
``(e) Enforcement Authority Against 7(a) Lenders.--
``(1) Informal enforcement authority.--The Director may take
an informal enforcement action against a 7(a) lender if the
Director finds that the 7(a) lender has violated a statutory or
regulatory requirement under section 7(a) or any requirement in
a Standard Operating Procedures Manual or Policy Notice related
to a program or function of the Office of Capital Access.
``(2) Formal enforcement authority.--
``(A) In general.--With the approval of the Lender
Oversight Committee established under section 48, the
Director may take a formal enforcement action against
any 7(a) lender if the Director finds that the 7(a)
lender has violated--
``(i) a statutory or regulatory requirement
under section 7(a), including a requirement
relating to credit elsewhere; or
``(ii) any requirement described in a
Standard Operating Procedures Manual or Policy
Notice, related to a program or function of the
Office of Capital Access.
``(B) Enforcement actions.--An enforcement action
imposed on a 7(a) lender by the Director under
subparagraph (A) shall be based on the severity or
frequency of the violation and may include assessing a
civil monetary penalty against the 7(a) lender in an
amount that is not greater than $250,000.
``(3) Appeal by lender.--A 7(a) lender may appeal an
enforcement action imposed by the Director described in this
subsection to the Office of Hearings and Appeals established
under section 5(i) or to an appropriate district court of the
United States.
``(f) Regulations.--Not later than 1 year after the date of the
enactment of this section, the Administrator shall issue regulations,
after opportunity for notice and comment, to carry out subsection (e).
``(g) Servicing and Liquidation Responsibilities.--During any period
during which a 7(a) lender is suspended or otherwise prohibited from
making loans under section 7(a), the 7(a) lender shall remain obligated
to maintain all servicing and liquidation activities delegated to the
lender by the Administrator, unless otherwise specified by the
Director.
``(h) Portfolio Risk Analysis of 7(a) Loans.--
``(1) In general.--The Director shall annually conduct a risk
analysis of the portfolio of the Administration with respect to
all loans guaranteed under section 7(a).
``(2) Report to congress.--On December 1, 2018, and every
December 1 thereafter, the Director shall submit to Congress a
report containing the results of each portfolio risk analysis
conducted under paragraph (1) during the fiscal year preceding
the submission of the report, which shall include--
``(A) an analysis of the overall program risk of
loans guaranteed under section 7(a);
``(B) an analysis of the program risk, set forth
separately by industry concentration;
``(C) without identifying individual 7(a) lenders by
name, a consolidated analysis of the risk created by
the individual 7(a) lenders responsible for not less
than 1 percent of the gross loan approvals set forth
separately for the year covered by the report by--
``(i) the dollar value of the loans made by
such 7(a) lenders; and
``(ii) the number of loans made by such 7(a)
lenders;
``(D) steps taken by the Administrator to mitigate
the risks identified in subparagraphs (A), (B), and
(C);
``(E) the number of 7(a) lenders, the number of loans
made, and the gross and net dollar amount of loans
made;
``(F) the number and dollar amount of total losses,
the number and dollar amount of total purchases, and
the percentage and dollar amount of recoveries at the
Administration;
``(G) the number and type of enforcement actions
recommended by the Director;
``(H) the number and type of enforcement actions
approved by the Lender Oversight Committee established
under section 48;
``(I) the number and type of enforcement actions
disapproved by the Lender Oversight Committee; and
``(J) the number and dollar amount of civil monetary
penalties assessed.
``(i) Budget Submission and Justification.--The Director shall
annually provide, in writing, a fiscal year budget submission for the
Office and a justification for such submission to the Administrator.
Such submission and justification shall--
``(1) include salaries and expenses of the Office and the
charge for the lender oversight fees;
``(2) be submitted at or about the time of the budget
submission by the President under section 1105(a) of title 31;
and
``(3) be maintained in an indexed form and made available for
public review for a period of not less than 5 years beginning
on the date of submission and justification.
``SEC. 48. LENDER OVERSIGHT COMMITTEE.
``(a) Establishment.--There is established within the Administration
the Lender Oversight Committee (in this section referred to as the
`Committee').
``(b) Membership.--The Committee shall consist of at least 8 members
selected by the Administrator, of which--
``(1) 3 members shall be voting members, 2 of whom shall be
career appointees in the Senior Executive Service (as defined
in section 3132 of title 5, United States Code); and
``(2) the remaining members shall be nonvoting members who
shall serve in an advisory capacity on the Committee.
``(c) Duties.--The Committee shall--
``(1) review reports on lender oversight activities;
``(2) review formal enforcement action recommendations of the
Director of the Office of Credit Risk Management with respect
to any lender making loans under section 7(a) and any Lending
Partner or Intermediary participant of the Administration in a
lending program of the Office of Capital Access of the
Administration;
``(3) in carrying out paragraph (2) with respect to formal
enforcement actions taken under subsection (d) or (e) of
section 23, vote to recommend or not recommend action to the
Administrator or a designee of the Administrator;
``(4) in carrying out paragraph (2) with respect to any
formal enforcement action not specified under subsection (d) or
(e) of section 23, vote to approve, disapprove, or modify the
action;
``(5) review, in an advisory capacity, any lender oversight,
portfolio risk management, or program integrity matters brought
by the Director; and
``(6) take such other actions and perform such other
functions as may be delegated to the Committee by the
Administrator.
``(d) Meetings.--
``(1) In general.--The Committee shall meet as necessary, but
not less frequently than on a quarterly basis.
``(2) Reports.--The Committee shall submit to the
Administrator a report detailing each meeting of the Committee,
including if the Committee does or does not vote to approve a
formal enforcement action of the Director of the Office of
Credit Risk Management with respect to a lender.''.
(b) Supervision Duties for 7(a) Lenders.--Effective January 1, 2019,
subsection (d) of section 47 (as added by subsection (a)) is amended to
read as follows:
``(d) Supervision Duties for 7(a) Lenders.--
``(1) Reviews.--With respect to 7(a) lenders, an employee of
the Office shall--
``(A) be present for and supervise any such review
that is conducted by a contractor of the Office on the
premise of the 7(a) lender; and
``(B) supervise any such review that is not conducted
on the premise of the 7(a) lender.
``(2) Review report timeline.--
``(A) In general.--Notwithstanding any other
requirements of the Office or the Administrator, the
Administrator shall develop and implement a review
report timeline which shall--
``(i) require the Administrator to--
``(I) deliver a written report of the
review to the 7(a) lender not later
than 60 business days after the date on
which the review is concluded; or
``(II) if the Administrator expects
to submit the report after the end of
the 60-day period described in clause
(i), notify the 7(a) lender of the
expected date of submission of the
report and the reason for the delay;
and
``(ii) if a response by the 7(a) lender is
requested in a report submitted under
subparagraph (A), require the 7(a) lender to
submit responses to the Administrator not later
than 45 business days after the date on which
the 7(a) lender receives the report.
``(B) Extension.--The Administrator may extend the
time frame described in subparagraph (A)(i)(II) with
respect to a 7(a) lender as the Administrator
determines necessary.''.
(c) Transfer of Functions.--
(1) Office of credit risk management.--All functions of the
Office of Credit Risk Management of the Small Business
Administration, including the personnel, assets, and obligation
of the Office of Credit Risk Management, as in existence on the
day before the date of the enactment of this Act, shall be
transferred to the Office of Credit Risk Management established
under section 47 of the Small Business Act, as added by
subsection (a).
(2) Lender oversight committee.--All functions of the Lender
Oversight Committee of the Small Business Administration,
including the personnel, assets, and obligations of the Lender
Oversight Committee, as in existence on the day before the date
of the enactment of this Act, shall be transferred to the
Lender Oversight Committee established under section 48 of the
Small Business Act, as added by subsection (a).
(d) Deeming of Name.--
(1) Office of credit risk management.--Any reference in a
law, regulation, guidance, document, paper, or other record of
the United States to the Office of Credit Risk Management of
the Small Business Administration shall be deemed a reference
to the Office of Credit Risk Management, established under
section 47 of the Small Business Act, as added by subsection
(a).
(2) Lender oversight committee.--Any reference in a law,
regulation, guidance, document, paper, or other record of the
United States to the Lender Oversight Committee of the Small
Business Administration shall be deemed a reference to the
Lender Oversight Committee, established under section 48 of the
Small Business Act, as added by subsection (a).
(e) Technical Amendment.--Section 3(r)(2) of the Small Business Act
(15 U.S.C. 632(r)(2)) is amended by striking ``regulated SBA lender''
each place it appears in heading and text and inserting ``regulated
lender''.
SEC. 4. DEFINITION OF CREDIT ELSEWHERE.
(a) In General.--The Small Business Act (15 U.S.C. 631 et seq.) is
amended--
(1) by striking section 3(h) (15 U.S.C. 632(h)) and inserting
the following:
``(h) The term `credit elsewhere' means--
``(1) for the purposes of this Act (except as used in section
7(b)), the availability of credit on reasonable terms and
conditions to the individual loan applicant from non-Federal,
non-State, or non-local government sources, considering factors
associated with conventional lending practices, including--
``(A) the business industry in which the loan
applicant operates;
``(B) whether the loan applicant is an enterprise
that has been in operation for a period of not more
than 2 years;
``(C) the adequacy of the collateral available to
secure the requested loan;
``(D) the loan term necessary to reasonably assure
the ability of the loan applicant to repay the debt
from the actual or projected cash flow of the business;
and
``(E) any other factor relating to the particular
credit application, as documented in detail by the
lender, that cannot be overcome except through
obtaining a Federal loan guarantee under prudent
lending standards; and
``(2) for the purposes of section 7(b), the availability of
credit on reasonable terms and conditions from non-Federal
sources taking into consideration the prevailing rates and
terms in the community in or near where the applicant business
concern transacts business, or the applicant homeowner resides,
for similar purposes and periods of time.''; and
(2) in section 7(a)(1)(A)(i) (15 U.S.C. 636(a)(1)(A)(i)), by
inserting ``The Administrator has the authority to direct, and
conduct oversight for, the methods by which lenders determine
whether a borrower is able to obtain credit elsewhere.'' before
``No financial assistance''.
(b) Technical Amendment.--Section 18(b) of the Small Business Act (15
U.S.C. 647(b)) is amended to read as follows:
``(b) As used in this Act, the term `agricultural enterprises' means
those small business concerns engaged in the production of food and
fiber, ranching, and raising of livestock, aquaculture, and all other
farming and agricultural-related industries.''.
SEC. 5. AUTHORITY FOR ADMINISTRATOR TO INCREASE AMOUNT FOR GENERAL
BUSINESS LOANS.
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 new subsection:
``(g) Authority To Increase Amount of General Business Loans.--
``(1) In general.--With respect to fiscal year 2018 and each
fiscal year thereafter, if the Administrator determines that
the amount of commitments by the Administrator for general
business loans authorized under section 7(a) for a fiscal year
could exceed the limit on the total amount of commitments the
Administrator may make for those loans under this Act, an
appropriations Act, or any other provision of law, the
Administrator may make commitments for those loans for that
fiscal year in an aggregate amount equal to not more than 115
percent of that limit.
``(2) Approval required before exercising authority.--
``(A) In general.--Not later than 15 days before the
date on which the Administrator intends to exercise the
authority under paragraph (1), the Administrator shall
submit notice of intent to exercise the authority to--
``(i) the Committee on Small Business and
Entrepreneurship and the Subcommittee on
Financial Services and General Government of
the Committee on Appropriations of the Senate;
and
``(ii) the Committee on Small Business and
the Subcommittee on Financial Services and
General Government of the Committee on
Appropriations of the House of Representatives.
``(B) Approval.--The Administrator may not exercise
the authority under paragraph (1) unless such exercise
of authority has been approved, in writing, by the
Committee on Appropriations and the Committee on Small
Business and Entrepreneurship of the Senate and the
Committee on Appropriations and the Committee on Small
Business of the House of Representatives.
``(3) Limitation.--The Administrator shall not exercise the
authority under paragraph (1) more than once during any fiscal
year.''.
SEC. 6. ESTABLISHING A PROCESS FOR WAIVERS.
(a) In General.--If the Administrator exercises statutory or
regulatory authority to waive a regulation or a requirement in the
Standard Operating Procedures Manual or Policy Notice related to a
program or function of the Office of Capital Access of the
Administration, the waiver shall be in writing and be maintained in an
indexed form.
(b) No New Waiver Authority.--Nothing in subsection (a) shall be
construed as creating new authority for the Administrator to waive
regulations of the Administration.
I. Purpose and Bill Summary
Small businesses, entrepreneurs, and startups often have
the creativity to turn their dreams into reality, but regularly
face obstacles when it comes to financing their endeavors. Many
of the nation's smallest firms simply lack the qualifications,
such as collateral, required for conventional bank lending.
However, creditworthy firms that have plans in place to grow
have the opportunity to apply to one of the United States Small
Business Administration's (SBA) capital access programs.
SBA's largest lending program is the 7(a) Loan Program
which does not provide direct loans to borrowers; rather, SBA
guarantees the repayment of the loans made by financial
institutions. The program requires participants to meet,
through its Credit Elsewhere Test, eligibility standards that
prohibit participation by borrowers who can utilize traditional
bank lending. Because lenders are charged fees to run the
program and cover any losses, SBA's 7(a) Loan Program currently
runs on a zero-cost subsidy to American taxpayers.
Recent rapid growth in the program has prompted a more
thorough examination of the tools available at SBA to ensure
comprehensive lender oversight is accomplished. From a lack of
transparency in SBA's oversight budget to underwhelming review
processes to an uneven treatment of the Credit Elsewhere Test,
significant changes are needed to safeguard the 7(a) Loan
Program for small businesses that truly need it.
After multiple Congressional hearings, H.R. 4743, the Small
Business 7(a) Lending Oversight Reform Act of 2018, was
introduced. It will increase SBA's oversight capabilities to
ensure the integrity of the program for small businesses while
protecting American taxpayer dollars.
II. Background and Need for Legislation
Since the end of the Great Recession in the summer of
2009,\1\ the United States economy has slowly been
improving.\2\ Recent economic trends indicate business
confidence. Despite promising macroeconomic conditions, the
lending and financial environment continue to remain stagnant
for businesses.\3\ For small businesses, which regularly
utilize commercial bank borrowing for expansion projects and
other endeavors, a tepid lending environment is troubling. With
capital options limited, small businesses often turn to the SBA
and its numerous capital access programs to finance their
undertakings.
---------------------------------------------------------------------------
\1\Robert Rich, Federal Reserve Bank of New York, The Great
Recession, Federal Reserve History (2013), available at https://
www.federalreservehistory.org/essays/great_recession_of_200709.
\2\https://fred.stlouisfed.org/series/A191RL1Q225SBEA.
\3\https://fred.stlouisfed.org/series/CILACBQ158SBOG.
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As a way to bridge the lending gaps that exist in the
marketplace for the nation's smallest firms, the SBA
administers the 7(a) Loan Program whereby loan proceeds can be
used for general business purposes. The program does not
provide direct loans to participating small businesses; rather,
SBA guarantees the repayment of loans made by lenders. The
maximum loan a small business can acquire is $5 million and the
guarantee percentage ranges from 75 to 85 percent based on the
loan amount.
The SBA charges lenders an upfront fee to run the loan
program and cover any losses to protect the American taxpayer
in accordance to the 1990 Federal Credit Reform Act (FCRA).\4\
While varying depending on loan size, the maximum fee is capped
at 3.75 percent.\5\ Additionally, SBA charges lenders an
ongoing guarantee fee that is equal to 0.55 percent of the
unpaid balance of the guaranteed portion of the loan.\6\ In
previous years, the program has relied on a subsidy from
Congress to operate the program. However, because the fees have
been sufficient, the program has been running on a zero subsidy
cost to the American taxpayer for the last five fiscal years,
including FY 2018.\7\
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\4\For any government loan program, FCRA requires an agency to
collect an appropriation or fee to cover the cost of the program. For
the 7(a) Loan Program, SBA charges lenders guarantee fees depending
upon the loan amount. 2 U.S.C. Sec. 661.
\5\15 U.S.C. Sec. 636(a)(18)(A).
\6\Id. at Sec. 636(a)(23).
\7\For FY 2014, SBA requested zero subsidy. SBA, FY 2014
Congressional Budget Justification and FY 2012 Annual Performance
Report 36. For FY 2015, SBA requested zero subsidy. SBA, FY 2015
Congressional Budget Justification and FY 2013 Annual Performance
Report 35. For FY 2016, SBA requested zero subsidy. SBA, FY 2016
Congressional Budget Justification and FY 2014 Annual Performance
Report 39. For FY 2017, SBA requested zero subsidy. SBA, FY 2017
Congressional Budget Justification and FY 2015 Annual Performance
Report 37. For FY 2018, SBA requested zero subsidy. SBA, FY 2018
Congressional Budget Justification and FY 2016 Annual Performance
Report 28.
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In recent years, the 7(a) Loan Program has witnessed rapid
growth. In FY 2012, the program approved $15.2 billion in
loans,\8\ while FY 2017 saw the program approve $25.4 billion
in loans.\9\ As loan approvals continue to climb, the 7(a) Loan
Program has also continuously reached its authorized lending
authority limit. The lending authority limit sets a maximum
level for the amount of lending that can be administered
through the 7(a) Loan Program. The lending cap was recently
reached during FY 2015, when the program was set at $18.75
billion. Through the Veterans Entrepreneurship Act of 2015,
Congress raised the limit\10\ and subsequently required more
detailed lending statistics in order to inform Congress on the
limit and activity levels moving forward.\11\ The FY 2018
lending authorization is $29 billion.\12\
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\8\SBA, FY 2018 CONGRESSIONAL BUDGET JUSTIFICATION AND FY 2016
ANNUAL PERFORMANCE REPORT 27.
\9\SBA, SBA Lending Activity in FY17 Shows Consistent Growth
(2017), available at https://www.sba.gov/about-sba/sba-newsroom/press-
releases-media-advisories/sba-lending-activity-fy17-shows-consistent-
growth.
\10\Pub. L. No. 114-38 (2015).
\11\Id. at Sec. (4)(c).
\12\Pub. L. No. 115-141 (2018).
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Within SBA and under the Office of Capital Access, the
Office of Credit Risk Management (OCRM) is charged with
overseeing SBA's lending programs.\13\ Through a combination of
monitoring and enforcement actions, OCRM ensures the lending
partners that are interacting with the nation's small
businesses are operating in a prudent manner. Additionally,
many of the guiding rules for the 7(a) Loan Program live in
SBA's standard operating procedures (SOP).
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\13\``The Office of Credit Risk Management's mission is to maximize
the efficiency of SBA's lending programs by effectively managing
program credit risk, monitoring lender performance, and enforcing
lending program requirements.'' https://www.sba.gov/offices/
headquarters/ocrm.
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With regard to monitoring, OCRM concentrates on numerous
areas including portfolio performance, credit quality,
compliance with loan program requirements and risk metrics.\14\
It is important to note that not all monitoring of a lending
partner is the same. SBA determines its level of engagement
based on the risk profile of the lender with large dollar
lenders subject to heightened observation.\15\ SBA also
utilizes on-site and off-site reviews to obtain the critical
oversight information of their lenders.
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\14\SOP 50-53 (A). Ch. 2(2)(b).
\15\Id. at Ch. 2(2)(a).
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When it comes to enforcement actions, SBA has a
responsibility to hold bad actors accountable for their
actions. SBA uses its discretion to determine the level of
enforcement but generally defines enforcement actions as either
informal or formal. Informal enforcement actions include:
supervisory letters; meetings; agreements not to sell loans
into Secondary Market, etc.\16\ When more serious situations
arise, formal enforcement actions are required by SBA. They can
include the following measures: suspension or revocation of
delegated authority or suspension or revocation from SBA
programs, etc.\17\ Through a combination of both OCRM and the
Lender Oversight Committee,\18\ which votes on OCRM enforcement
recommendations, corrective steps can be taken by SBA to
mitigate problems in the lending community. Like many risk-
based situations, a government guarantee program is only as
strong as its oversight defense.
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\16\Id. at Sec. (4)(a).
\17\Id. at Sec. (4)(b).
\18\Id. at Ch. 2(5)(v).
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Over the years, examinations by government watchdog groups
have investigated the oversight functions of SBA. Consistently,
both the SBA's Office of Inspector General and the U.S.
Government Accountability Office have found deficiencies in
SBA's oversight efforts. Recent rapid growth in the program,
combined with concerning program evaluations by watchdog
groups, have led to heightened Congressional investigations
into the tools available at SBA to ensure comprehensive lender
oversight is accomplished. After multiple Congressional
hearings, H.R. 4743, the Small Business 7(a) Lending Oversight
Reform Act of 2018, was introduced to increase SBA's oversight
capabilities and to ensure the integrity of the program for
small businesses while protecting American taxpayer dollars.
III. Hearings
In the 115th Congress, the issue of SBA's 7(a) Loan Program
oversight was specifically addressed at three House Committee
on Small Business hearings:
March 9, 2017--Subcommittee on Investigations,
Oversight, and Regulations hearing titled ``An Overview of
SBA's 7(a) Loan Program.''
May 17, 2017--Committee on Small Business hearing
titled ``SBA's 7(a) Loan Program: A Detailed Review.''
January 17, 2018--Committee on Small Business
hearing titled ``Strengthening SBA's 7(a) Loan Program.''
IV. Committee Consideration
The Committee on Small Business met in open session, with a
quorum being present, on March 14, 2018, and ordered H.R. 4743,
be favorably reported, as amended, to the House via voice vote
at 11:22 A.M. During the markup, one amendment was offered and
adopted. Disposition of the amendment is addressed below.
Amendment Number One filed by Mr. Chabot (R-OH) includes
numerous technical changes, along with updated language to
ensure SBA implementation. Technical changes were proposed to a
few definitions. Within the Portfolio Risk Analysis report,
updates were proposed to the data requirements to ensure
accurate statistics are captured. Additionally, revisions were
proposed to the Lender Oversight Committee's membership
requirements. A date requirement change was also proposed
within Section 5. The amendment concludes with a proposed
update to language contained in Section 6 that pertains to
waivers. The new language requires SBA to establish a process
for waiving regulations, Standard Operating Procedures, and
policy notices. The amendment was agreed to by a voice vote at
11:22 A.M.
V. Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the recorded
votes on the motion to report the legislation and amendments
thereto. The Committee voted via voice vote to report H.R.
4743, as amended, to the House at 11:22 A.M.
AMENDMENT TO H.R. 4743 OFFERED BY MR. CHABOT OF OHIO
Page 2, line 18, strike ``any participant'' and insert ``any
Lending Partner or Intermediary participant of the
Administration''.
Page 3, line 10, insert ``With'' after ``Lenders.--''.
Page 3, line 11, strike ``(1)'' and all that follows through
``With''.
Page 3, line 13, strike ``(A)'' and insert ``(1)'' (and
adjust the margin accordingly).
Page 3, line 13, strike ``(B)'' and insert ``(2)'' (and
adjust the margin accordingly).
Page 3, strike line 18 and all that follows through page 4,
line 14.
Page 4, line 20, insert ``statutory or regulatory'' before
``requirement''.
Page 5, line 7, insert ``statutory or regulatory'' before
``requirement''.
Page 5, beginning on line 9, strike ``, or any regulation
implementing such section''.
Page 5, Line 24, strike ``paragraph (2)'' and insert ``this
subsection''.
Page 7, line 22, strike ``defaults'' and insert ``losses''.
Page 7, line 23, strike ``repurchases'' and insert
``purchases''.
Page 7, line 24, insert ``at the Administration;'' after
``recoveries''.
Page 9, line 6, strike ``11 members'' and insert ``at least 8
members''.
Page 9, line 11, strike ``8 members'' and insert ``the
remaining members''.
Page 9, line 20, strike ``any participant'' and insert ``any
Lending Partner or Intermediary participant of the
Administration''.
Page 10, line 20, strike ``recommend'' and insert
``approve''.
Page 10, after line 22, insert the following:
(b) Supervision Duties for 7(a) Lenders.--Effective January
1, 2019, subsection (d) of section 47 (as added by subsection
(a)) is amended to read as follows:
``(d) Supervision Duties for 7(a) Lenders.--
``(1) Reviews.--With respect to 7(a) lenders, an
employee of the Office shall--
``(A) be present for and supervise any such
review that is conducted by a contractor of the
Office on the premise of the 7(a) lender; and
``(B) supervise any such review that is not
conducted on the premise of the 7(a) lender.
``(2) Review report timeline.--
``(A) In general.--Notwithstanding any other
requirements of the Office or the
Administrator, the Administrator shall develop
and implement a review report timeline which
shall--
``(i) require the Administrator to--
``(I) deliver a written
report of the review to the
7(a) lender not later than 60
business days after the date on
which the review is concluded;
or
``(II) if the Administrator
expects to submit the report
after the end of the 60-day
period described in clause (i),
notify the 7(a) lender of the
expected date of submission of
the report and the reason for
the delay; and
``(ii) if a response by the 7(a)
lender is requested in a report
submitted under subparagraph (A),
require the 7(a) lender to submit
responses to the Administrator not
later than 45 business days after the
date on which the 7(a) lender receives
the report.
``(B) Extension.--The Administrator may
extend the time frame described in subparagraph
(A)(i)(II) with respect to a 7(a) lender as the
Administrator determines necessary.''.
Page 10, line 23, strike ``(b)'' and insert ``(c)''.
Page 11, line 17, strike ``(c)'' and insert ``(d)''.
Page 12, line 9, strike ``(d)'' and insert ``(e)''.
Page 13, line 21, strike ``small''.
Page 15, beginning on line 15, strike ``30 days'' and insert
``15 days''.
Page 16, line 18, strike ``disclosure of'' and insert
``establishing a process for''.
Page 16, line 20, after ``regulation'' insert ``or
requirement in the Standard Operating Procedures Manual or
Policy Notice''.
Page 16, line 22, strike ``Administration--'' and all that
follows through page 17, line 16 and insert ``Administration,
the waiver shall be in writing and be maintained in an indexed
form''.
Page 17, strike line 21 and all that follows through page 18,
line 12.
VI. Section-by-Section Analysis of H.R. 4743
Section 1. Short title
This section designates the bill as the ``Small Business
7(a) Lending Oversight Reform Act of 2018.''
Section 2. Definitions
This section defines the term ``Administration'' in the
bill to mean the Small Business Administration (SBA) and the
term ``Administrator'' to mean the Administrator of the Small
Business Administration.
Section 3. Codification of the Office of Credit Risk Management and the
Lender Oversight Committee
To increase and strengthen the oversight of SBA's 7(a) Loan
Program, this provision creates a new section in the Small
Business Act that codifies the Office of Credit Risk Management
(OCRM). OCRM is charged with supervising and overseeing all
lenders within SBA's lending programs, including lending
partners operating within the CDC/504 Loan Program and the
Microloan Program and those that are categorized as small
business lending companies or non-federally regulated lenders.
OCRM's oversight responsibilities are found in Standard
Operating Procedure (SOP) 5053(A). H.R. 4743 took a measured
approach to codify OCRM into law and its respective
responsibilities to all of the SBA's lending programs. However,
this legislation deliberately outlines additional oversight
requirements for OCRM when operating with 7(a) lenders.
Specifically, to bolster the program, this section codifies the
responsibilities of OCRM and its director, including a
requirement that the director is a career Senior Executive
Service appointee.
An important oversight tool at SBA's disposal is the
ability to conduct reviews of lenders. This review process can
be conducted in one of two forms. SBA can conduct either an
onsite review or an offsite review that relies heavily on a
virtual process. SBA has come to rely on third party
contractors to conduct the onsite review of a lender. Industry
groups have reported that contractors, at times, have had an
underwhelming understanding of the 7(a) loan program. To ensure
the onsite lender review process is as comprehensive and
effective as possible, this section requires SBA employees to
be present and supervise all on-site and off-site reviews.
Furthermore, once a review is conducted, SBA reports their
findings to a lender. While a current timetable is not set,
industry representatives have reported that it has taken
upwards of 18-24 months for a lender to receive its findings.
Not only does this lengthy time frame create a situation where
a lender could possibly be prepping for its next review before
it has received its findings from the last review, but it also
could delay the process of correcting existing issues. To
address this timing issue, effective on January 1, 2019, H.R.
4743 requires SBA to report all review findings to lenders in a
timely manner of 60 business days after the completion of any
review. Congressional intent of the term ``concluded'' is when
the review has been substantially completed, and should not be
extended indefinitely by the technicality of extraneous
documents. If SBA cannot reasonable meet the 60 business day
deadline, this provision provides an extension mechanism,
whereby SBA must alert the lender of the delay, provide an
expected delivery date, and detail the reasons for the delay.
In turn, if a report review requires a lender to respond back
to SBA, the lender is required to do so in 45 business days.
The intent of this provision is to increase the lines of
communication between a lender and SBA during the post-review
process.
H.R. 4743 outlines numerous enforcement provisions,
including that a violation is defined by a lender violating a
requirement under section 7(a) of the Small Business Act or any
requirement in a SOP or Policy Notice. This is to ensure
lenders are following rules that have been reviewed at the
highest level of SBA. SOP 5053 (A) details the actions that
OCRM can impose on a lender that range from informal actions
such as a supervisory letter, meetings, etc. to formal actions
that include the suspension or revocation from SBA program
participation. Missing from OCRM's toolbox is the ability to
apply a civil monetary penalty. To establish this penalty H.R.
4743 provides a civil monetary penalty of up to $250,000. It is
the intent of Congress that the money collected from the civil
monetary penalty shall be deposited in the United States
Treasury. Additionally, this section also provides options for
lenders when disputes with SBA develop. Specifically, H.R. 4743
outlines an Office of Hearing and Appeals process for lenders
to utilize, if they deem necessary. It is important to note
that the ability to use an appeal is mentioned in SOP 5053 (A)
and points to the Code of Federal Regulations (13 C.F.R.
Sec. 134); however, H.R. 4743 enshrines this ability in
statute.
It is also important to note that SBA uses the SOP process
vigorously. The use of SOPs is more flexible than the
Administrative Procedures Act (Pub. L. No. 79-404 (1946)),
which outlines the rulemaking process. To encourage SBA to
utilize the traditional rulemaking process and include an
opportunity for notice and comment, H.R. 4743 requires SBA to
undertake a rulemaking of all of the enforcement actions that
are currently outlined in SOP 5053 (A), and include the
addition of a civil monetary penalty.
To ensure certainty for small businesses that receive
financing via the 7(a) Loan Program, this section also outlines
the servicing and liquidation responsibilities should certain
enforcement actions be taken on a lender.
This section also requires OCRM to conduct a Portfolio Risk
Analysis and report the findings to Congress annually. In order
to ensure SBA is providing the proper funds to OCRM for
oversight activities, this section requires an annual internal
budget submission process at SBA that must be in writing and
indexed for public review. Finally, this section also codifies
in the Small Business Act the Lender Oversight Committee (LOC)
which is charged with reviewing formal enforcement
recommendations from OCRM. LOC is an existing SBA committee
that is outlined in SOP 5053 (A).
It is important to note that SBA currently has the
authority to increase fees on lenders to pay for enhanced
oversight. This authority is found within 13 C.F.R.
Sec. 120.1070 and in Sec. 5(b)(14) of the Small Business Act.
This authority will allow SBA to amend their fee structure to
carry out the provisions set forth in H.R. 4743.
Section 4. Definition of Credit Elsewhere
Acting as the gatekeeper of the 7(a) Loan Program, the
Credit Elsewhere Test determines whether a small business is
eligible to receive a federal government guarantee through the
SBA. To update and modernize this foundational test, H.R. 4743
codifies in statute many of the provisions currently outlined
in SOP 5010 5(J) and thus clarifies the factors utilized in the
process, including the consideration of the industry and the
availability of collateral. Over the years, the test
problematically shifted focus from a borrower's needs to a
lender's capacity to operate within the program. The bill
realigns the test to ensure it is based on a borrower's ability
to obtain credit, rather than a lender's ability to offer
credit. Strengthening of the Credit Elsewhere Test will guard
the program for use by small businesses that justly require
SBA's assistance. Additionally, language has been included in
H.R. 4743 to emphasize the importance of and the verification
of the Credit Elsewhere Test for the Administrator and SBA.
Section 5. Authority for Administrator to increase amount for general
business loans
To ensure the integrity of the program is reinforced for
small businesses that truly require SBA's assistance, this
provision delivers certainty by providing the Administrator of
the SBA with the flexibility to notify Congress, once per
fiscal year, to increase the 7(a) Loan Program limit by 15
percent. It is important to note that this program is market
driven and susceptible to reaching cap limitations. Often
times, when the program nears a limit an artificial run on the
program occurs where lenders force through loans to ensure the
loan is not cut off by a breach of the limit. In fact, the
program reached its lending limit in the summer of 2015. While
not intended, this breach caused uncertainty for small
businesses and required emergency legislation by Congress. It
is the intent of Congress that this authority is to be used
when the program nears its annual appropriation cap level, and
only if necessary.
Section 6. Disclosure of waivers
If specifically outlined in regulation, SBA has the ability
to waive certain regulations. H.R. 4743 includes a provision to
bring further sunlight to this waiver process for all parties.
When waiver authority is exercised within the 7(a) loan
program, a process is required to be in place at SBA.
Additionally, language in H.R. 4743 prohibits any
interpretation of the language to provide new authority to
grant waivers.
VII. Congressional Budget Office Cost Estimate
The cost estimate prepared by the Director of the
Congressional Budget Office pursuant to Sec. 402 of the
Congressional Budget Act of 1974 was not submitted timely to
the Committee.
VIII. Unfunded Mandates
H.R. 4743 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act, Pub.
L. No. 104-4, and would impose no costs on state, local or
tribal governments.
IX. New Budget Authority, Entitlement Authority and Tax Expenditures
The Committee has not received an estimate of new budget
authority contained in the cost estimate prepared by the
Director of the Congressional Budget Office pursuant to
Sec. 402 of the Congressional Budget Act of 1974. In compliance
with clause 3(c)(2) of rule XIII of the Rules of the House, the
Committee opines that H.R. 4743 will not establish any new
budget or entitlement authority or create any tax expenditures.
X. Oversight Findings
In accordance with clause 2(b)(1) of rule X of the Rules of
the House, the oversight findings and recommendations of the
Committee on Small Business with respect to the subject matter
contained in H.R. 4743 are incorporated into the descriptive
portions of this report.
XI. Statement of Constitutional Authority
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
authority for this legislation in Art. I, Sec. 8, cl. 3 of the
Constitution of the United States.
XII. Congressional Accountability Act
H.R. 4743 does not relate to the terms and conditions of
employment or access to public services or accommodations
within the meaning of Sec. 102(b)(3) of Pub. L. No. 104-1.
XIII. Federal Advisory Committee Act Statement
H.R. 4743 does not establish or authorize the establishment
of any new advisory committees as that term is defined in the
Federal Advisory Committee Act, 5 U.S.C. App. 2.
XIV. Statement of No Earmarks
Pursuant to clause 9 of rule XXI, H.R. 4743 does not
contain any congressional earmarks, limited tax benefits or
limited tariff benefits as defined in subsections (d), (e) or
(f) of clause 9 of rule XXI of the Rules of the House.
XV. Statement of Duplication of Federal Programs
Pursuant to clause 3(c) of the rule XIII of the Rules of
the House, no provision of H.R. 4743 establishes or
reauthorizes a program of the federal government known to be
duplicative of another federal program, a program that was
included in any report from the United States Government
Accountability Office pursuant to Sec. 21 of Pub. L. No. 111-
139, or a program related to a program identified in the most
recent catalog of federal domestic assistance.
XVI. Disclosure of Directed Rule Makings
Pursuant to clause 3(c) of rule XIII of the Rules of the
House, H.R. 4743 does direct rulemaking within Section 3 of the
legislation. Specifically, Section 3(f) directs the
Administrator to issue regulations, after opportunity for
notice and comment, which follows Administrative Procedures Act
guidelines, to carryout Section 3(e). Section 3(e) outlines the
enforcement authority that OCRM currently has in place. As is
common practice at SBA, the details of the enforcement
authority are provided in SOP. Specifically, the tools
available for OCRM to conduct proper oversight are detailed in
SOP 5053(A). This directed rulemaking requires SBA to take the
current enforcement authority and conduct traditional
rulemaking.
XVII. Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House, the Committee establishes the following performance-
related goals and objectives in this legislation:
H.R. 4743 includes a number of provisions designed to
increase the oversight authority of SBA's Office of
Credit Risk Management in order to ensure the integrity
of the 7(a) Loan Program for small businesses, while
protecting American taxpayer dollars.
XVIII. Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
SMALL BUSINESS ACT
* * * * * * *
SEC. 3. DEFINITIONS.
(a) Small Business Concerns.--
(1) In general.--For the purposes of this Act, a
small-business concern, including but not limited to
enterprises that are engaged in the business of
production of food and fiber, ranching and raising of
livestock, aquaculture, and all other farming and
agricultural related industries, shall be deemed to be
one which is independently owned and operated and which
is not dominant in its field of operation.
(2) Establishment of size standards.--
(A) In general.--In addition to the criteria
specified in paragraph (1), the Administrator
may specify detailed definitions or standards
by which a business concern may be determined
to be a small business concern for the purposes
of this Act or any other Act.
(B) Additional criteria.--The standards
described in paragraph (1) may utilize number
of employees, dollar volume of business, net
worth, net income, a combination thereof, or
other appropriate factors.
(C) Requirements.--Unless specifically
authorized by statute, no Federal department or
agency may prescribe a size standard for
categorizing a business concern as a small
business concern, unless such proposed size
standard--
(i) is proposed after an opportunity
for public notice and comment;
(ii) provides for determining--
(I) the size of a
manufacturing concern as
measured by the manufacturing
concern's average employment
based upon employment during
each of the manufacturing
concern's pay periods for the
preceding 12 months;
(II) the size of a business
concern providing services on
the basis of the annual average
gross receipts of the business
concern over a period of not
less than 3 years;
(III) the size of other
business concerns on the basis
of data over a period of not
less than 3 years; or
(IV) other appropriate
factors; and
(iii) is approved by the
Administrator.
(3) Variation by industry and consideration of other
factors.--When establishing or approving any size
standard pursuant to paragraph (2), the Administrator
shall ensure that the size standard varies from
industry to industry to the extent necessary to reflect
the differing characteristics of the various industries
and consider other factors deemed to be relevant by the
Administrator.
(4) Exclusion of certain security expenses from
consideration for purpose of small business size
standards.--
(A) Determination required.--Not later than
30 days after the date of enactment of this
paragraph, the Administrator shall review the
application of size standards established
pursuant to paragraph (2) to small business
concerns that are performing contracts in
qualified areas and determine whether it would
be fair and appropriate to exclude from
consideration in the average annual gross
receipts of such small business concerns any
payments made to such small business concerns
by Federal agencies to reimburse such small
business concerns for the cost of subcontracts
entered for the sole purpose of providing
security services in a qualified area.
(B) Action required.--Not later than 60 days
after the date of enactment of this paragraph,
the Administrator shall either--
(i) initiate an adjustment to the
size standards, as described in
subparagraph (A), if the Administrator
determines that such an adjustment
would be fair and appropriate; or
(ii) provide a report to the
Committee on Small Business and
Entrepreneurship of the Senate and the
Committee on Small Business of the
House of Representatives explaining in
detail the basis for the determination
by the Administrator that such an
adjustment would not be fair and
appropriate.
(C) Qualified areas.--In this paragraph, the
term ``qualified area'' means--
(i) Iraq,
(ii) Afghanistan, and
(iii) any foreign country which
included a combat zone, as that term is
defined in section 112(c)(2) of the
Internal Revenue Code of 1986, at the
time of performance of the relevant
Federal contract or subcontract.
(5) Alternative Size Standard.--
(A) In general.--The Administrator shall
establish an alternative size standard for
applicants for business loans under section
7(a) and applicants for development company
loans under title V of the Small Business
Investment Act of 1958 (15 U.S.C. 695 et seq.),
that uses 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 alternative size standard established under
subparagraph (A) is in effect, an applicant for
a business loan under section 7(a) or an
applicant for a development company loan under
title V of the Small Business Investment Act of
1958 may be eligible for such a loan if--
(i) the maximum tangible net worth of
the applicant is not more than
$15,000,000; and
(ii) the average net income after
Federal income taxes (excluding any
carry-over losses) of the applicant for
the 2 full fiscal years before the date
of the application is not more than
$5,000,000.
(6) Proposed rulemaking.--In conducting rulemaking to
revise, modify or establish size standards pursuant to
this section, the Administrator shall consider, and
address, and make publicly available as part of the
notice of proposed rulemaking and notice of final rule
each of the following:
(A) a detailed description of the industry
for which the new size standard is proposed;
(B) an analysis of the competitive
environment for that industry;
(C) the approach the Administrator used to
develop the proposed standard including the
source of all data used to develop the proposed
rule making; and
(D) the anticipated effect of the proposed
rulemaking on the industry, including the
number of concerns not currently considered
small that would be considered small under the
proposed rule making and the number of concerns
currently considered small that would be deemed
other than small under the proposed rulemaking.
(7) Common size standards.--In carrying out this
subsection, the Administrator may establish or approve
a single size standard for a grouping of 4-digit North
American Industry Classification System codes only if
the Administrator makes publicly available, not later
than the date on which such size standard is
established or approved, a justification demonstrating
that such size standard is appropriate for each
individual industry classification included in the
grouping.
(8) Number of size standards.--The Administrator
shall not limit the number of size standards
established pursuant to paragraph (2), and shall assign
the appropriate size standard to each North American
Industry Classification System Code.
(9) Petitions for reconsideration of size
standards.--
(A) In general.--A person may file a petition
for reconsideration with the Office of Hearings
and Appeals (as established under section 5(i))
of a size standard revised, modified, or
established by the Administrator pursuant to
this subsection.
(B) Time limit.--A person filing a petition
for reconsideration described in subparagraph
(A) shall file such petition not later than 30
days after the publication in the Federal
Register of the notice of final rule to revise,
modify, or establish size standards described
in paragraph (6).
(C) Process for agency review.--The Office of
Hearings and Appeals shall use the same process
it uses to decide challenges to the size of a
small business concern to decide a petition for
review pursuant to this paragraph.
(D) Judicial review.--The publication of a
final rule in the Federal Register described in
subparagraph (B) shall be considered final
agency action for purposes of seeking judicial
review. Filing a petition for reconsideration
under subparagraph (A) shall not be a condition
precedent to judicial review of any such size
standard.
(E) Rules or guidance.--The Office of
Hearings and Appeals shall begin accepting
petitions for reconsideration described in
subparagraph (A) after the date on which the
Administration issues a rule or other guidance
implementing this paragraph. Notwithstanding
the provisions of subparagraph (B), petitions
for reconsideration of size standards revised,
modified, or established in a Federal Register
final rule published between November 25, 2015,
and the effective date of such rule or other
guidance shall be considered timely if filed
within 30 days of such effective date.
(b) For purposes of this Act, any reference to an agency or
department of the United States, and the term ``Federal
agency,'' shall have the meaning given the term ``agency'' by
section 551(1) of title 5, United States Code, but does not
include the United States Postal Service or the General
Accounting Office.
(c)(1) For purposes of this Act, a qualified employee trust
shall be eligible for any loan guarantee under section 7(a)
with respect to a small business concern on the same basis as
if such trust were the same legal entity as such concern.
(2) For purposes of this Act, the term ``qualified employee
trust'' means, with respect to a small business concern, a
trust--
(A) which forms part of an employee stock ownership
plan (as defined in section 4975(e)(7) of the Internal
Revenue Code of 1954)--
(i) which is maintained by such concern, and
(ii) which provides that each participant in
the plan is entitle to direct the plan as to
the manner in which voting rights under
qualifying employer securities (as defined in
section 4975(e)(8) of such Code) which are
allocated to the account of such participant
are to be exercised with respect to a corporate
matter which (by law or charter) must be
decided by a majority vote of outstanding
common shares voted; and
(B) in the case of any loan guarantee under section
7(a), the trustee of which enters into an agreement
with the Administrator of which enters into an
agreement with the Administrator which is binding on
the trust and no such small business concern and which
provides that--
(i) the loan guaranteed under section 7(a)
shall be used solely for the purchase of
qualifying employer securities of such concern.
(ii) all funds acquired by the concern in
such purchase shall be used by such concern
solely for the purposes for which such loan was
guaranteed,
(iii) such concern will provide such funds as
may be necessary for the timely repayment of
such loan, and the property of such concern
shall be available as security for repayment of
such loan, and
(iv) all qualifying employer securities
acquired by such trust in such purchase shall
be allocated to the accounts of participants in
such plan who are entitled to share in such
allocation, and each participant has a
nonforfeitable right, not later than the date
such loan is repaid, to all such qualifying
employer securities which are so allocated to
the participant's account.
(3) Under regulations which may be prescribed by the
Administrator, a trust may be treated as a qualified employee
trust with respect to a small business concern if--
(A) the trust is maintained by an employee
organization which represents at least 51 percent of
the employee of such concern, and
(B) such concern maintains a plan--
(i) which is an employee benefit plan which
is designed to invest primarily in qualifying
employer securities (as defined in section
4975(e)(8) of the Internal Revenue Code of
1954).
(ii) which provides that each participant in
the plan is entitled to direct the plan as to
the manner in which voting rights under
qualifying employer securities which are
allocated to the account of such participant
are to be exercised with respect to a corporate
matter which (by law or charter) must be
decided by a majority vote of the outstanding
common shares voted,
(iii) which provides that each participant
who is entitled to distribution from the plan
has a right, in the case of qualifying employer
securities which are not readily tradable on an
established market, to require that the concern
repurchase such securities under a fair
valuation formula, and
(iv) which meets such other requirements
(similar to requirements applicable to employee
ownership plans as defined in section
4975(e)(7) of the Internal Revenue Code of
1954) as the Administrator may prescribe, and
(C) in the case of a loan guarantee under section
7(a), such organization enters into an agreement with
the Administration which is described in paragraph
(2)(B).
(d) For purposes of section 7 of this Act, the term
``qualified Indian tribe'' means an Indian tribe as defined in
section 4(a) of the Indian Self-Determination and Education
Assistance Act, which owns and controls 100 per centum of a
small business concern.
(e) For purposes of section 7 of this Act, the term ``public
or private organization for the handicapped'' means one--
(1) which is organized under the laws of the United
States or of any State, operated in the interest of
handicapped individuals, the net income of which does
not insure in whole or in part to the benefit of any
shareholder or other individual;
(2) which complies with any applicable occupational
health and safety standard prescribed by the Secretary
of Labor; and
(3) which, in the production of commodities and in
the provision of services during any fiscal year in
which it received financial assistance under this
subsection, employs handicapped individuals for not
less than 75 per centum of the man-hours required for
the production or provision of the commodities or
services.
(f) For purposes of section 7 of this Act, the term
``handicapped individual'' means an individual--
(1) who has a physical, mental, or emotional
impairment, defect, ailment, disease, or disability of
a permanent nature which in any way limits the
selection of any type of employment for which the
person would otherwise be qualified or qualifiable; or
(2) who is a service-disabled veteran.
(g) For purposes of section 7 of this Act, the term ``energy
measures'' includes--
(1) solar thermal energy equipment which is either of
the active type based upon mechanically forced energy
transfer or of the passive type based on convective,
conductive, or radiant energy transfer or some
combination equipment;
(2) photovoltaic cells and related equipment;
(3) a product or service the primary purpose of which
is conservation of energy through devices or techniques
which increase the energy through devices or techniques
which increase the energy efficiency of existing
equipment, methods of operation, or systems which use
fossil fuels, and which is on the Energy Conservation
Measures list of the Secretary of Energy or which the
Administrator determines to be consistent with the
intent of this subsection;
(4) equipment the primary purpose of which is
production of energy from wood, biological waste,
grain, or other biomass source of energy;
(5) equipment the primary purpose of which is
industrial cogeneration of energy, district heating, or
production of energy from industrial waste;
(6) hydroelectric power equipment;
(7) wind energy conversion equipment; and
(8) engineering, architectural, consulting, or other
professional services which are necessary or
appropriate to aid citizens in using any of the
measures described in paragraph (1) through (7).
[(h) For purposes of this Act, the term ``credit elsewhere''
means the availability of credit from non-Federal sources on
reasonable terms and conditions taking into consideration the
prevailing rates and terms in the community in or near where
the concern transacts business, or the homeowner resides, for
similar purposes and periods of time.]
(h) The term ``credit elsewhere'' means--
(1) for the purposes of this Act (except as used in
section 7(b)), the availability of credit on reasonable
terms and conditions to the individual loan applicant
from non-Federal, non-State, or non-local government
sources, considering factors associated with
conventional lending practices, including--
(A) the business industry in which the loan
applicant operates;
(B) whether the loan applicant is an
enterprise that has been in operation for a
period of not more than 2 years;
(C) the adequacy of the collateral available
to secure the requested loan;
(D) the loan term necessary to reasonably
assure the ability of the loan applicant to
repay the debt from the actual or projected
cash flow of the business; and
(E) any other factor relating to the
particular credit application, as documented in
detail by the lender, that cannot be overcome
except through obtaining a Federal loan
guarantee under prudent lending standards; and
(2) for the purposes of section 7(b), the
availability of credit on reasonable terms and
conditions from non-Federal sources taking into
consideration the prevailing rates and terms in the
community in or near where the applicant business
concern transacts business, or the applicant homeowner
resides, for similar purposes and periods of time.
(i) For purposes of section 7 of this Act, the term
``homeowners'' includes owners and lessees of residential
property and also includes personal property.
(j) For the purposes of this Act, the term ``small
agricultural cooperative'' means an association (corporate or
otherwise) acting pursuant to the provisions of the
Agricultural Marketing Act (12 U.S.C. 1141j), whose size does
not exceed the size standard established by the Administration
for other similar agricultural small business concerns. In
determining such size, the Administration shall regard the
association as a business concern and shall not include the
income or employees of any member shareholder of such
cooperative.
(k)(1) For the purposes of this Act, the term ``disaster''
means a sudden event which causes severe damage including, but
not limited to, floods, hurricanes, tornadoes, earthquakes,
fires, explosions, volcanoes, windstorms, landslides or
mudslides, tidal waves, commercial fishery failures or fishery
resource disasters (as determined by the Secretary of Commerce
under section 308(b) of the Interjurisdictional Fisheries Act
of 1986), ocean conditions resulting in the closure of
customary fishing waters, riots, civil disorders or other
catastrophes, except it does not include economic dislocations.
(2) For purposes of section 7(b)(2), the term ``disaster''
includes--
(A) drought;
(B) below average water levels in the Great Lakes, or
on any body of water in the United States that supports
commerce by small business concerns; and
(C) ice storms and blizzards.
(l) For purposes of this Act--
(1) the term ``computer crime'' means''--
(A) any crime committed against a small
business concern by means of the use of a
computer; and
(B) any crime involving the illegal use of,
or tampering with, a computer owned or utilized
by a small business concern.
(m) Definitions Relating to Contracting.--In this Act:
(1) Prime contract.--The term ``prime contract'' has
the meaning given such term in section 8701(4) of title
41, United States Code.
(2) Prime contractor.--The term ``prime contractor''
has the meaning given such term in section 8701(5) of
title 41, United States Code.
(3) Simplified acquisition threshold.--The term
``simplified acquisition threshold'' has the meaning
given such term in section 134 of title 41, United
States Code.
(4) Micro-purchase threshold.--The term ``micro-
purchase threshold'' has the meaning given such term in
section 1902 of title 41, United States Code.
(5) Total purchases and contracts for property and
services.--The term ``total purchases and contracts for
property and services'' shall mean total number and
total dollar amount of contracts and orders for
property and services.
(n) For the purposes of this Act, a small business concern is
a small business concern owned and controlled by women if--
(1) at least 51 percent of small business concern is
owned by one or more women or, in the case of any
publicly owned business, at least 51 percent of the
stock of which is owned by one or more women; and
(2) the management and daily business operations of
the business are controlled by one or more women.
(o) Definitions of Bundling of Contract Requirements and
Related Terms.--In this Act:
(1) Bundled contract.--The term ``bundled contract''
means a contract that is entered into to meet
requirements that are consolidated in a bundling of
contract requirements.
(2) Bundling of contract requirements.--The term
``bundling of contract requirements'' means
consolidating 2 or more procurement requirements for
goods or services previously provided or performed
under separate smaller contracts into a solicitation of
offers for a single contract that is likely to be
unsuitable for award to a small-business concern due
to--
(A) the diversity, size, or specialized
nature of the elements of the performance
specified;
(B) the aggregate dollar value of the
anticipated award;
(C) the geographical dispersion of the
contract performance sites; or
(D) any combination of the factors described
in subparagraphs (A), (B), and (C).
(3) Separate smaller contract.--The term ``separate
smaller contract'', with respect to a bundling of
contract requirements, means a contract that has been
performed by 1 or more small business concerns or was
suitable for award to 1 or more small business
concerns.
(p) Definitions Relating to HUBZones.--In this Act:
(1) Historically underutilized business zone.--The
term ``historically underutilized business zone'' means
any area located within 1 or more--
(A) qualified census tracts;
(B) qualified nonmetropolitan counties;
(C) lands within the external boundaries of
an Indian reservation;
(D) redesignated areas;
(E) base closure areas; or
(F) qualified disaster areas.
(2) HUBZone.--The term ``HUBZone'' means a
historically underutilized business zone.
(3) Hubzone small business concern.--The term
``HUBZone small business concern'' means--
(A) a small business concern that is at least
51 percent owned and controlled by United
States citizens;
(B) a small business concern that is--
(i) an Alaska Native Corporation
owned and controlled by Natives (as
determined pursuant to section 29(e)(1)
of the Alaska Native Claims Settlement
Act (43 U.S.C. 1626(e)(1))); or
(ii) a direct or indirect subsidiary
corporation, joint venture, or
partnership of an Alaska Native
Corporation qualifying pursuant to
section 29(e)(1) of the Alaska Native
Claims Settlement Act (43 U.S.C.
1626(e)(1)), if that subsidiary, joint
venture, or partnership is owned and
controlled by Natives (as determined
pursuant to section 29(e)(2)) of the
Alaska Native Claims Settlement Act (43
U.S.C. 1626(e)(2)));
(C) a small business concern--
(i) that is wholly owned by one or
more Indian tribal governments, or by a
corporation that is wholly owned by one
or more Indian tribal governments; or
(ii) that is owned in part by one or
more Indian tribal governments, or by a
corporation that is wholly owned by one
or more Indian tribal governments, if
all other owners are either United
States citizens or small business
concerns;
(D) a small business concern--
(i) that is wholly owned by one or
more Native Hawaiian Organizations (as
defined in section 8(a)(15)), or by a
corporation that is wholly owned by one
or more Native Hawaiian Organizations;
or
(ii) that is owned in part by one or
more Native Hawaiian Organizations, or
by a corporation that is wholly owned
by one or more Native Hawaiian
Organizations, if all other owners are
either United States citizens or small
business concerns;
(E) a small business concern that is--
(i) wholly owned by a community
development corporation that has
received financial assistance under
part 1 of subchapter A of the Community
Economic Development Act of 1981 (42
U.S.C. 9805 et seq.); or
(ii) owned in part by one or more
community development corporations, if
all other owners are either United
States citizens or small business
concerns; or
(F) a small business concern that is--
(i) a small agricultural cooperative
organized or incorporated in the United
States;
(ii) wholly owned by 1 or more small
agricultural cooperatives organized or
incorporated in the United States; or
(iii) owned in part by 1 or more
small agricultural cooperatives
organized or incorporated in the United
States, if all owners are small
business concerns or United States
citizens.
(4) Qualified areas.--
(A) Qualified census tract.--
(i) In general.--The term ``qualified
census tract'' has the meaning given
that term in section 42(d)(5)(B)(ii) of
the Internal Revenue Code of 1986.
(ii) Exception.--For any metropolitan
statistical area in the Commonwealth of
Puerto Rico, the term ``qualified
census tract'' has the meaning given
that term in section 42(d)(5)(B)(ii) of
the Internal Revenue Code of 1986 as
applied without regard to subclause
(II) of such section, except that this
clause shall only apply--
(I) 10 years after the date
that the Administrator
implements this clause, or
(II) the date on which the
Financial Oversight and
Management Board for the
Commonwealth of Puerto Rico
created by the Puerto Rico
Oversight, Management, and
Economic Stability Act ceases
to exist,
whichever event occurs first.
(B) Qualified nonmetropolitan county.--The
term ``qualified nonmetropolitan county'' means
any county--
(i) that was not located in a
metropolitan statistical area (as
defined in section 143(k)(2)(B) of the
Internal Revenue Code of 1986) at the
time of the most recent census taken
for purposes of selecting qualified
census tracts under section
42(d)(5)(C)(ii) of the Internal Revenue
Code of 1986; and
(ii) in which--
(I) the median household
income is less than 80 percent
of the nonmetropolitan State
median household income, based
on the most recent data
available from the Bureau of
the Census of the Department of
Commerce;
(II) the unemployment rate is
not less than 140 percent of
the average unemployment rate
for the United States or for
the State in which such county
is located, whichever is less,
based on the most recent data
available from the Secretary of
Labor; or
(III) there is located a
difficult development area, as
designated by the Secretary of
Housing and Urban Development
in accordance with section
42(d)(5)(C)(iii) of the
Internal Revenue Code of 1986,
within Alaska, Hawaii, or any
territory or possession of the
United States outside the 48
contiguous States.
(C) Redesignated area.--The term
``redesignated area'' means any census tract
that ceases to be qualified under subparagraph
(A) and any nonmetropolitan county that ceases
to be qualified under subparagraph (B), except
that a census tract or a nonmetropolitan county
may be a ``redesignated area'' only until the
later of--
(i) the date on which the Census
Bureau publicly releases the first
results from the 2010 decennial census;
or
(ii) 3 years after the date on which
the census tract or nonmetropolitan
county ceased to be so qualified.
(D) Base closure area.--
(i) In general.--Subject to clause
(ii), the term ``base closure area''
means--
(I) lands within the external
boundaries of a military
installation that were closed
through a privatization process
under the authority of--
(aa) the Defense Base
Closure and Realignment
Act of 1990 (part A of
title XXIX of division
B of Public Law 101-
510; 10 U.S.C. 2687
note);
(bb) title II of the
Defense Authorization
Amendments and Base
Closure and Realignment
Act (Public Law 100-
526; 10 U.S.C. 2687
note);
(cc) section 2687 of
title 10, United States
Code; or
(dd) any other
provision of law
authorizing or
directing the Secretary
of Defense or the
Secretary of a military
department to dispose
of real property at the
military installation
for purposes relating
to base closures of
redevelopment, while
retaining the authority
to enter into a
leaseback of all or a
portion of the property
for military use;
(II) the census tract or
nonmetropolitan county in which
the lands described in
subclause (I) are wholly
contained;
(III) a census tract or
nonmetropolitan county the
boundaries of which intersect
the area described in subclause
(I); and
(IV) a census tract or
nonmetropolitan county the
boundaries of which are
contiguous to the area
described in subclause (II) or
subclause (III).
(ii) Limitation.--A base closure area
shall be treated as a HUBZone--
(I) with respect to a census
tract or nonmetropolitan county
described in clause (i), for a
period of not less than 8
years, beginning on the date
the military installation
undergoes final closure and
ending on the date the
Administrator makes a final
determination as to whether or
not to implement the applicable
designation described in
subparagraph (A) or (B) in
accordance with the results of
the decennial census conducted
after the area was initially
designated as a base closure
area; and
(II) if such area was treated
as a HUBZone at any time after
2010, until such time as the
Administrator makes a final
determination as to whether or
not to implement the applicable
designation described in
subparagraph (A) or (B), after
the 2020 decennial census.
(iii) Definitions.--In this
subparagraph:
(I) Census tract.--The term
``census tract'' means a census
tract delineated by the United
States Bureau of the Census in
the most recent decennial
census that is not located in a
nonmetropolitan county and does
not otherwise qualify as a
qualified census tract.
(II) Nonmetropolitan
county.--The term
``nonmetropolitan county''
means a county that was not
located in a metropolitan
statistical area (as defined in
section 143(k)(2)(B) of the
Internal Revenue Code of 1986)
at the time of the most recent
census taken for purposes of
selecting qualified census
tracts and does not otherwise
qualify as a qualified
nonmetropolitan county.
(E) Qualified disaster area.--
(i) In general.--Subject to clause
(ii), the term ``qualified disaster
area'' means any census tract or
nonmetropolitan county located in an
area for which the President has
declared a major disaster under section
401 of the Robert T. Stafford Disaster
Relief and Emergency Assistance Act (42
U.S.C. 5170) or located in an area in
which a catastrophic incident has
occurred if such census tract or
nonmetropolitan county ceased to be
qualified under subparagraph (A) or
(B), as applicable, during the period
beginning 5 years before the date on
which the President declared the major
disaster or the catastrophic incident
occurred and ending 2 years after such
date, except that such census tract or
nonmetropolitan county may be a
``qualified disaster area'' only--
(I) in the case of a major
disaster declared by the
President, during the 5-year
period beginning on the date on
which the President declared
the major disaster for the area
in which the census tract or
nonmetropolitan county, as
applicable, is located; and
(II) in the case of a
catastrophic incident, during
the 10-year period beginning on
the date on which the
catastrophic incident occurred
in the area in which the census
tract or nonmetropolitan
county, as applicable, is
located.
(ii) Limitation.--A qualified
disaster area described in clause (i)
shall be treated as a HUBZone for a
period of not less than 8 years,
beginning on the date the Administrator
makes a final determination as to
whether or not to implement the
designations described in subparagraphs
(A) and (B) in accordance with the
results of the decennial census
conducted after the area was initially
designated as a qualified disaster
area.
(5) Qualified hubzone small business concern.--
(A) In general.--A HUBZone small business
concern is ``qualified'', if--
(i) the small business concern has
certified in writing to the
Administrator (or the Administrator
otherwise determines, based on
information submitted to the
Administrator by the small business
concern, or based on certification
procedures, which shall be established
by the Administration by regulation)
that--
(I) it is a HUBZone small
business concern--
(aa) pursuant to
subparagraph (A), (B),
(C), (D), (E), or (F)
of paragraph (3), and
that its principal
office is located in a
HUBZone and not fewer
than 35 percent of its
employees reside in a
HUBZone;
(bb) pursuant to
subparagraph (A), (B),
(C), (D), (E), or (F)
of paragraph (3), that
its principal office is
located within a base
closure area and that
not fewer than 35
percent of its
employees reside in
such base closure area
or in another HUBZone;
or
(cc) pursuant to
paragraph (3)(C), and
not fewer than 35
percent of its
employees engaged in
performing a contract
awarded to the small
business concern on the
basis of a preference
provided under section
31(b) reside within any
Indian reservation
governed by one or more
of the tribal
government owners, or
reside within any
HUBZone adjoining any
such Indian
reservation;
(II) the small business
concern will attempt to
maintain the applicable
employment percentage under
subclause (I) during the
performance of any contract
awarded to the small business
concern on the basis of a
preference provided under
section 31(b); and
(III) with respect to any
subcontract entered into by the
small business concern pursuant
to a contract awarded to the
small business concern under
section 31, the small business
concern will ensure that the
requirements of section 46 are
satisfied; and
(ii) no certification made or
information provided by the small
business concern under clause (i) has
been, in accordance with the procedures
established under section 31(c)(1)--
(I) successfully challenged
by an interested party; or
(II) otherwise determined by
the Administrator to be
materially false.
(B) List of qualified small business
concerns.--The Administrator shall establish
and maintain a list of qualified HUBZone small
business concerns, which list shall, to the
extent practicable--
(i) once the Administrator has made
the certification required by
subparagraph (A)(i) regarding a
qualified HUBZone small business
concern and has determined that
subparagraph (A)(ii) does not apply to
that concern, include the name,
address, and type of business with
respect to each such small business
concern;
(ii) be updated by the Administrator
not less than annually; and
(iii) be provided upon request to any
Federal agency or other entity.
(6) Native american small business concerns.--
(A) Alaska native corporation.--The term
``Alaska Native Corporation'' has the same
meaning as the term ``Native Corporation'' in
section 3 of the Alaska Native Claims
Settlement Act (43 U.S.C. 1602).
(B) Alaska native village.--The term ``Alaska
Native Village'' has the same meaning as the
term ``Native village'' in section 3 of the
Alaska Native Claims Settlement Act (43 U.S.C.
1602).
(C) Indian reservation.--The term ``Indian
reservation''--
(i) has the same meaning as the term
``Indian country'' in section 1151 of
title 18, United States Code, except
that such term does not include--
(I) any lands that are
located within a State in which
a tribe did not exercise
governmental jurisdiction on
the date of the enactment of
this paragraph, unless that
tribe is recognized after that
date of the enactment by either
an Act of Congress or pursuant
to regulations of the Secretary
of the Interior for the
administrative recognition that
an Indian group exists as an
Indian tribe (part 83 of title
25, Code of Federal
Regulations); and
(II) lands taken into trust
or acquired by an Indian tribe
after the date of the enactment
of this paragraph if such lands
are not located within the
external boundaries of an
Indian reservation or former
reservation or are not
contiguous to the lands held in
trust or restricted status on
that date of the enactment; and
(ii) in the State of Oklahoma, means
lands that--
(I) are within the
jurisdictional areas of an
Oklahoma Indian tribe (as
determined by the Secretary of
the Interior); and
(II) are recognized by the
Secretary of the Interior as
eligible for trust land status
under part 151 of title 25,
Code of Federal Regulations (as
in effect on the date of the
enactment of this paragraph).
(7) Agricultural commodity.--The term ``agricultural
commodity'' has the same meaning as in section 102 of
the Agricultural Trade Act of 1978 (7 U.S.C. 5602).
(q) Definitions Relating to Veterans.--In this Act, the
following definitions apply:
(1) Service-disabled veteran.--The term ``service-
disabled veteran'' means a veteran with a disability
that is service-connected (as defined in section
101(16) of title 38, United States Code).
(2) Small business concern owned and controlled by
service-disabled veterans.--The term ``small business
concern owned and controlled by service-disabled
veterans'' means a small business concern--
(A) not less than 51 percent of which is
owned by one or more service-disabled veterans
or, in the case of any publicly owned business,
not less than 51 percent of the stock of which
is owned by one or more service-disabled
veterans; and
(B) the management and daily business
operations of which are controlled by one or
more service-disabled veterans or, in the case
of a veteran with permanent and severe
disability, the spouse or permanent caregiver
of such veteran.
(3) Small business concern owned and controlled by
veterans.--The term ``small business concern owned and
controlled by veterans'' means a small business
concern--
(A) not less than 51 percent of which is
owned by one or more veterans or, in the case
of any publicly owned business, not less than
51 percent of the stock of which is owned by
one or more veterans; and
(B) the management and daily business
operations of which are controlled by one or
more veterans.
(4) Veteran.--The term ``veteran'' has the meaning
given the term in section 101(2) of title 38, United
States Code.
(5) Relief from time limitations.--
(A) In general.--Any time limitation on any
qualification, certification, or period of
participation imposed under this Act on any
program that is available to small business
concerns shall be extended for a small business
concern that--
(i) is owned and controlled by--
(I) a veteran who was called
or ordered to active duty under
a provision of law specified in
section 101(a)(13)(B) of title
10, United States Code, on or
after September 11, 2001; or
(II) a service-disabled
veteran who became such a
veteran due to an injury or
illness incurred or aggravated
in the active military, naval,
or air service during a period
of active duty pursuant to a
call or order to active duty
under a provision of law
referred to in subclause (I) on
or after September 11, 2001;
and
(ii) was subject to the time
limitation during such period of active
duty.
(B) Duration.--Upon submission of proper
documentation to the Administrator, the
extension of a time limitation under
subparagraph (A) shall be equal to the period
of time that such veteran who owned or
controlled such a concern was on active duty as
described in that subparagraph.
(C) Exception for programs subject to federal
credit reform act of 1990.--The provisions of
subparagraphs (A) and (B) shall not apply to
any programs subject to the Federal Credit
Reform Act of 1990 (2 U.S.C. 661 et seq.).
(r) Definitions Relating to Small Business Lending
Companies.--As used in section 23 of this Act:
(1) Small business lending company.--The term ``small
business lending company'' means a business concern
that is authorized by the Administrator to make loans
pursuant to section 7(a) and whose lending activities
are not subject to regulation by any Federal or State
regulatory agency.
(2) Non-federally regulated [sba] lender.--The term
``non-Federally [regulated SBA lender] regulated
lender'' means a business concern if--
(A) such concern is authorized by the
Administrator to make loans under section 7;
(B) such concern is subject to regulation by
a State; and
(C) the lending activities of such concern
are not regulated by any Federal banking
authority.
(s) Major Disaster.--In this Act, the term ``major disaster''
has the meaning given that term in section 102 of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act (42
U.S.C. 5122).
(t) Small Business Development Center.--In this Act, the term
``small business development center'' means a small business
development center described in section 21.
(u) Region of the Administration.--In this Act, the term
``region of the Administration'' means the geographic area
served by a regional office of the Administration established
under section 4(a).
(v) Multiple Award Contract.--In this Act, the term
``multiple award contract'' means--
(1) a multiple award task order contract or delivery
order contract that is entered into under the authority
of sections 303H through 303K of the Federal Property
and Administrative Services Act of 1949 (41 U.S.C. 253h
through 253k); and
(2) any other indefinite delivery, indefinite
quantity contract that is entered into by the head of a
Federal agency with 2 or more sources pursuant to the
same solicitation.
(w) Presumption.--
(1) In general.--In every contract, subcontract,
cooperative agreement, cooperative research and
development agreement, or grant which is set aside,
reserved, or otherwise classified as intended for award
to small business concerns, there shall be a
presumption of loss to the United States based on the
total amount expended on the contract, subcontract,
cooperative agreement, cooperative research and
development agreement, or grant whenever it is
established that a business concern other than a small
business concern willfully sought and received the
award by misrepresentation.
(2) Deemed certifications.--The following actions
shall be deemed affirmative, willful, and intentional
certifications of small business size and status:
(A) Submission of a bid or proposal for a
Federal grant, contract, subcontract,
cooperative agreement, or cooperative research
and development agreement reserved, set aside,
or otherwise classified as intended for award
to small business concerns.
(B) Submission of a bid or proposal for a
Federal grant, contract, subcontract,
cooperative agreement, or cooperative research
and development agreement which in any way
encourages a Federal agency to classify the bid
or proposal, if awarded, as an award to a small
business concern.
(C) Registration on any Federal electronic
database for the purpose of being considered
for award of a Federal grant, contract,
subcontract, cooperative agreement, or
cooperative research agreement, as a small
business concern.
(3) Certification by signature of responsible
official.--
(A) In general.--Each solicitation, bid, or
application for a Federal contract,
subcontract, or grant shall contain a
certification concerning the small business
size and status of a business concern seeking
the Federal contract, subcontract, or grant.
(B) Content of certifications.--A
certification that a business concern qualifies
as a small business concern of the exact size
and status claimed by the business concern for
purposes of bidding on a Federal contract or
subcontract, or applying for a Federal grant,
shall contain the signature of an authorized
official on the same page on which the
certification is contained.
(4) Regulations.--The Administrator shall promulgate
regulations to provide adequate protections to
individuals and business concerns from liability under
this subsection in cases of unintentional errors,
technical malfunctions, and other similar situations.
(x) Annual Certification.--
(1) In general.--Each business certified as a small
business concern under this Act shall annually certify
its small business size and, if appropriate, its small
business status, by means of a confirming entry on the
Online Representations and Certifications Application
database of the Administration, or any successor
thereto.
(2) Regulations.--Not later than 1 year after the
date of enactment of this subsection, the
Administrator, in consultation with the Inspector
General and the Chief Counsel for Advocacy of the
Administration, shall promulgate regulations to ensure
that--
(A) no business concern continues to be
certified as a small business concern on the
Online Representations and Certifications
Application database of the Administration, or
any successor thereto, without fulfilling the
requirements for annual certification under
this subsection; and
(B) the requirements of this subsection are
implemented in a manner presenting the least
possible regulatory burden on small business
concerns.
(y) Policy on Prosecutions of Small Business Size and Status
Fraud.--Not later than 1 year after the date of enactment of
this subsection, the Administrator, in consultation with the
Attorney General, shall issue a Government-wide policy on
prosecution of small business size and status fraud, which
shall direct Federal agencies to appropriately publicize the
policy.
(z) Aquaculture Business Disaster Assistance.--Subject to
section 18(a) and notwithstanding section 18(b)(1), the
Administrator may provide disaster assistance under section
7(b)(2) to aquaculture enterprises that are small businesses.
(aa) Venture Capital Operating Company.--In this Act, the
term ``venture capital operating company'' means an entity
described in clause (i), (v), or (vi) of section 121.103(b)(5)
of title 13, Code of Federal Regulations (or any successor
thereto).
(bb) Hedge Fund.--In this Act, the term ``hedge fund'' has
the meaning given that term in section 13(h)(2) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1851(h)(2)).
(cc) Private Equity Firm.--In this Act, the term ``private
equity firm'' has the meaning given the term ``private equity
fund'' in section 13(h)(2) of the Bank Holding Company Act of
1956 (12 U.S.C. 1851(h)(2)).
(dd) Definitions Pertaining to Subcontracting.--In this Act:
(1) Subcontract.--The term ``subcontract'' means a
legally binding agreement between a contractor that is
already under contract to another party to perform
work, and a third party, hereinafter referred to as the
subcontractor, for the subcontractor to perform a part,
or all, of the work that the contractor has undertaken.
(2) First tier subcontractor.--The term ``first tier
subcontractor'' means a subcontractor who has a
subcontract directly with the prime contractor.
(3) At any tier.--The term ``at any tier'' means any
subcontractor other than a subcontractor who is a first
tier subcontractor.
* * * * * * *
Sec. 7. (a) Loans to Small Business Concerns; Allowable
Purposes; Qualified Business; Restrictions and Limitations.--
The Administration is empowered to the extent and in such
amounts as provided in advance in appropriation Acts to make
loans for plant acquisition, construction, conversion, or
expansion, including the acquisition of land, material,
supplies, equipment, and working capital, and to make loans to
any qualified small business concern, including those owned by
qualified Indian tribes, for purposes of this Act. Such
financings may be made either directly or in cooperation with
banks or other financial institutions through agreements to
participate on an immediate or deferred (guaranteed) basis.
These powers shall be subject, however, to the following
restrictions, limitations, and provisions:
(1) In general.--
(A) Credit elsewhere.--
(i) In general.--The Administrator
has the authority to direct, and
conduct oversight for, the methods by
which lenders determine whether a
borrower is able to obtain credit
elsewhere. No financial assistance
shall be extended pursuant to this
subsection if the applicant can obtain
credit elsewhere. No immediate
participation may be purchased unless
it is shown that a deferred
participation is not available; and no
direct financing may be made unless it
is shown that a participation is not
available.
(ii) Liquidity.--On and after October
1, 2015, the Administrator may not
guarantee a loan under this subsection
if the lender determines that the
borrower is unable to obtain credit
elsewhere solely because the liquidity
of the lender depends upon the
guaranteed portion of the loan being
sold on the secondary market.
(B) Background checks.--Prior to the approval
of any loan made pursuant to this subsection,
or section 503 of the Small Business Investment
Act of 1958, the Administrator may verify the
applicant's criminal background, or lack
thereof, through the best available means,
including, if possible, use of the National
Crime Information Center computer system at the
Federal Bureau of Investigation.
(C) Lending limits of lenders.--On and after
October 1, 2015, the Administrator may not
guarantee a loan under this subsection if the
sole purpose for requesting the guarantee is to
allow the lender to exceed the legal lending
limit of the lender.
(2) Level of participation in guaranteed loans.--
(A) In general.--Except as provided in
subparagraphs (B), (D), and (E), in an
agreement to participate in a loan on a
deferred basis under this subsection (including
a loan made under the Preferred Lenders
Program), such participation by the
Administration shall be equal to--
(i) 75 percent of the balance of the
financing outstanding at the time of
disbursement of the loan, if such
balance exceeds $150,000; or
(ii) 85 percent of the balance of the
financing outstanding at the time of
disbursement of the loan, if such
balance is less than or equal to
$150,000.
(B) Reduced participation upon request.--
(i) In general.--The guarantee
percentage specified by subparagraph
(A) for any loan under this subsection
may be reduced upon the request of the
participating lender.
(ii) Prohibition.--The Administration
shall not use the guarantee percentage
requested by a participating lender
under clause (i) as a criterion for
establishing priorities in approving
loan guarantee requests under this
subsection.
(C) Interest rate under preferred lenders
program.--
(i) In general.--The maximum interest
rate for a loan guaranteed under the
Preferred Lenders Program shall not
exceed the maximum interest rate, as
determined by the Administration,
applicable to other loans guaranteed
under this subsection.
(ii) Export-import bank lenders.--Any
lender that is participating in the
Delegated Authority Lender Program of
the Export-Import Bank of the United
States (or any successor to the
Program) shall be eligible to
participate in the Preferred Lenders
Program.
(iii) Preferred lenders program
defined.--For purposes of this
subparagraph, the term ``Preferred
Lenders Program'' means any program
established by the Administrator, as
authorized under the proviso in section
5(b)(7), under which a written
agreement between the lender and the
Administration delegates to the
lender--
(I) complete authority to
make and close loans with a
guarantee from the
Administration without
obtaining the prior specific
approval of the Administration;
and
(II) complete authority to
service and liquidate such
loans without obtaining the
prior specific approval of the
Administration for routine
servicing and liquidation
activities, but shall not take
any actions creating an actual
or apparent conflict of
interest.
(D) Participation under export working
capital program.--In an agreement to
participate in a loan on a deferred basis under
the Export Working Capital Program established
pursuant to paragraph (14)(A), such
participation by the Administration shall be 90
percent.
(E) Participation in international trade
loan.--In an agreement to participate in a loan
on a deferred basis under paragraph (16), the
participation by the Administration may not
exceed 90 percent.
(3) No loan shall be made under this subsection--
(A) if the total amount outstanding and
committed (by participation or otherwise) to
the borrower from the business loan and
investment fund established by this Act would
exceed $3,750,000 (or if the gross loan amount
would exceed $5,000,000), except as provided in
subparagraph (B);
(B) if the total amount outstanding and
committed (on a deferred basis) solely for the
purposes provided in paragraph (16) to the
borrower from the business loan and investment
fund established by this Act would exceed
$4,500,000 (or if the gross loan amount would
exceed $5,000,000), of which not more than
$4,000,000 may be used for working capital,
supplies, or financings under section 7(a)(14)
for export purposes; and
(C) if effected either directly or in
cooperation with banks or other lending
institutions through agreements to participate
on an immediate basis if the amount would
exceed $350,000.
(4) Interest rates and prepayment charges.--
(A) Interest rates.--Notwithstanding the
provisions of the constitution of any State or
the laws of any State limiting the rate or
amount of interest which may be charged, taken,
received, or reserved, the maximum legal rate
of interest on any financing made on a deferred
basis pursuant to this subsection shall not
exceed a rate prescribed by the Administration,
and the rate of interest for the
Administration's share of any direct or
immediate participation loan shall not exceed
the current average market yield on outstanding
marketable obligations of the United States
with remaining periods to maturity comparable
to the average maturities of such loans and
adjusted to the nearest one-eighth of 1 per
centum, and an additional amount as determined
by the Administration, but not to exceed 1 per
centum per annum: Provided, That for those
loans to assist any public or private
organization for the handicapped or to assist
any handicapped individual as provided in
paragraph (10) of this subsection, the interest
rate shall be 3 per centum per annum.
(B) Payment of accrued interest.--
(i) In general.--Any bank or other
lending institution making a claim for
payment on the guaranteed portion of a
loan made under this subsection shall
be paid the accrued interest due on the
loan from the earliest date of default
to the date of payment of the claim at
a rate not to exceed the rate of
interest on the loan on the date of
default, minus one percent.
(ii) Loans sold on secondary
market.--If a loan described in clause
(i) is sold on the secondary market,
the amount of interest paid to a bank
or other lending institution described
in that clause from the earliest date
of default to the date of payment of
the claim shall be no more than the
agreed upon rate, minus one percent.
(iii) Applicability.--Clauses (i) and
(ii) shall not apply to loans made on
or after October 1, 2000.
(C) Prepayment charges.--
(i) In general.--A borrower who
prepays any loan guaranteed under this
subsection shall remit to the
Administration a subsidy recoupment fee
calculated in accordance with clause
(ii) if--
(I) the loan is for a term of
not less than 15 years;
(II) the prepayment is
voluntary;
(III) the amount of
prepayment in any calendar year
is more than 25 percent of the
outstanding balance of the
loan; and
(IV) the prepayment is made
within the first 3 years after
disbursement of the loan
proceeds.
(ii) Subsidy recoupment fee.--The
subsidy recoupment fee charged under
clause (i) shall be--
(I) 5 percent of the amount
of prepayment, if the borrower
prepays during the first year
after disbursement;
(II) 3 percent of the amount
of prepayment, if the borrower
prepays during the second year
after disbursement; and
(III) 1 percent of the amount
of prepayment, if the borrower
prepays during the third year
after disbursement.
(5) No such loans including renewals and extensions
thereof may be made for a period or periods exceeding
twenty-five years, except that such portion of a loan
made for the purpose of acquiring real property or
constructing, converting, or expanding facilities may
have a maturity of twenty-five years plus such
additional period as is estimated may be required to
complete such construction, conversion, or expansion.
(6) All loans made under this subsection shall be of
such sound value or so secured as reasonably to assure
repayment: Provided, however, That--
(A) for loans to assist any public or private
organization or to assist any handicapped
individual as provided in paragraph (10) of
this subsection any reasonable doubt shall be
resolved in favor of the applicant;
(B) recognizing that greater risk may be
associated with loans for energy measures as
provided in paragraph (12) of this subsection,
factors in determining ``sound value'' shall
include, but not be limited to, quality of the
product or service; technical qualifications of
the applicant or his employees; sales
projections; and the financial status of the
business concern: Provided further, That such
status need not be as sound as that required
for general loans under this subsection; and
On that portion of the loan used to refinance existing
indebtedness held by a bank or other lending
institution, the Administration shall limit the amount
of deferred participation to 80 per centum of the
amount of the loan at the time of disbursement:
Provided further, That any authority conferred by this
subparagraph on the Administration shall be exercised
solely by the Administration and shall not be delegated
to other than Administration personnel.
(7) The Administration may defer payments on the
principal of such loans for a grace period and use such
other methods as it deems necessary and appropriate to
assure the successful establishment and operation of
such concern.
(8) The Administration may make loans under this
subsection to small business concerns owned and
controlled by disabled veterans (as defined in section
4211(3) of title 38, United States Code).
(9) The Administration may provide loans under this
subsection to finance residential or commercial
construction or rehabilitation for sale: Provided,
however, That such loans shall not be used primarily
for the acquisition of land.
(10) The Administration may provide guaranteed loans
under this subsection to assist any public or private
organization for the handicapped or to assist any
handicapped individual, including service-disabled
veterans, in establishing, acquiring, or operating a
small business concern.
(11) The Administration may provide loans under this
subsection to any small business concern, or to any
qualified person seeking to establish such a concern
when it determines that such loan will further the
policies established in section 2(c) of this Act, with
particular emphasis on the preservation or
establishment of small business concerns located in
urban or rural areas with high proportions of
unemployed or low-income individuals or owned by low-
income individuals.
(12)(A) The Administration may provide loans under
this subsection to assist any small business concern,
including start up, to enable such concern to design
architecturally or engineer, manufacture, distribute,
market, install, or service energy measures: Provided,
however, That such loan proceeds shall not be used
primarily for research and development.
(b) The Administration may provide deferred participation
loans under this subsection to finance the planning, design, or
installation of pollution control facilities for the purposes
set forth in section 404 of the Small Business Investment Act
of 1958. Notwithstanding the limitation expressed in paragraph
(3) of this subsection, a loan made under this paragraph may
not result in a total amount outstanding and committed to a
borrower from the business loan and investment fund of more
than $1,000,000.
(13) The Administration may provide financing under
this subsection to State and local development
companies for the purposes of, and subject to the
restrictions in, title V of the Small Business
Investment Act of 1958.
(14) Export working capital program.--
(A) In general.--The Administrator may
provide extensions of credit, standby letters
of credit, revolving lines of credit for export
purposes, and other financing to enable small
business concerns, including small business
export trading companies and small business
export management companies, to develop foreign
markets. A bank or participating lending
institution may establish the rate of interest
on such financings as may be legal and
reasonable.
(B) Terms.--
(i) Loan amount.--The Administrator
may not guarantee a loan under this
paragraph of more than $5,000,000.
(ii) Fees.--
(I) In general.--For a loan
under this paragraph, the
Administrator shall collect the
fee assessed under paragraph
(23) not more frequently than
once each year.
(II) Untapped credit.--The
Administrator may not assess a
fee on capital that is not
accessed by the small business
concern.
(C) Considerations.--When considering loan or
guarantee applications, the Administration
shall give weight to export-related benefits,
including opening new markets for United States
goods and services abroad and encouraging the
involvement of small businesses, including
agricultural concerns, in the export market.
(D) Marketing.--The Administrator shall
aggressively market its export financing
program to small businesses.
(15)(A) The Administration may guarantee loans under
this subsection to qualified employee trusts with
respect to a small business concern for the purpose of
purchasing stock of the concern under a plan approved
by the Administrator which, when carried out, results
in the qualified employee trust owning at least 51 per
centum of the stock of the concern.
(B) The plan requiring the Administrator's approval
under subparagraph (A) shall be submitted to the
Administration by the trustee of such trust with its
application for the guarantee. Such plan shall include
an agreement with the Administrator which is binding on
such trust and on the small business concern and which
provides that--
(i) not later than the date the loan
guaranteed under subparagraph (A) is repaid (or
as soon thereafter as is consistent with the
requirements of section 401(a) of the Internal
Revenue Code of 1954), at least 51 per centum
of the total stock of such concern shall be
allocated to the accounts of at least 51 per
centum of the employees of such concern who are
entitled to share in such allocation,
(ii) there will be periodic reviews of the
role in the management of such concern of
employees to whose accounts stock is allocated,
and
(iii) there will be adequate management to
assure management expertise and continuity.
(C) In determining whether to guarantee any loan
under this paragraph, the individual business
experience or personal assets of employee-owners shall
not be used as criteria, except inasmuch as certain
employee-owners may assume managerial responsibilities,
in which case business experience may be considered.
(D) For purposes of this paragraph, a corporation
which is controlled by any other person shall be
treated as a small business concern if such corporation
would, after the plan described in subparagraph (B) is
carried out, be treated as a small business concern.
(E) The Administration shall compile a separate list
of applications for assistance under this paragraph,
indicating which applications were accepted and which
were denied, and shall report periodically to the
Congress on the status of employee-owned firms assisted
by the Administration.
(16) International trade.--
(A) In general.--If the Administrator
determines that a loan guaranteed under this
subsection will allow an eligible small
business concern that is engaged in or
adversely affected by international trade to
improve its competitive position, the
Administrator may make such loan to assist such
concern--
(i) in the financing of the
acquisition, construction, renovation,
modernization, improvement, or
expansion of productive facilities or
equipment to be used in the United
States in the production of goods and
services involved in international
trade;
(ii) in the refinancing of existing
indebtedness that is not structured
with reasonable terms and conditions,
including any debt that qualifies for
refinancing under any other provision
of this subsection; or
(iii) by providing working capital.
(B) Security.--
(i) In general.--Except as provided
in clause (ii), each loan made under
this paragraph shall be secured by a
first lien position or first mortgage
on the property or equipment financed
by the loan or on other assets of the
small business concern.
(ii) Exception.--A loan under this
paragraph may be secured by a second
lien position on the property or
equipment financed by the loan or on
other assets of the small business
concern, if the Administrator
determines the lien provides adequate
assurance of the payment of the loan.
(C) Engaged in international trade.--For
purposes of this paragraph, a small business
concern is engaged in international trade if,
as determined by the Administrator, the small
business concern is in a position to expand
existing export markets or develop new export
markets.
(D) Adversely affected by international
trade.--For purposes of this paragraph, a small
business concern is adversely affected by
international trade if, as determined by the
Administrator, the small business concern--
(i) is confronting increased
competition with foreign firms in the
relevant market; and
(ii) is injured by such competition.
(E) Findings by certain federal agencies.--
For purposes of subparagraph (D)(ii) the
Administrator shall accept any finding of
injury by the International Trade Commission or
any finding of injury by the Secretary of
Commerce pursuant to chapter 3 of title II of
the Trade Act of 1974.
(F) List of export finance lenders.--
(i) Publication of list required.--
The Administrator shall publish an
annual list of the banks and
participating lending institutions
that, during the 1-year period ending
on the date of publication of the list,
have made loans guaranteed by the
Administration under--
(I) this paragraph;
(II) paragraph (14); or
(III) paragraph (34).
(ii) Availability of list.--The
Administrator shall--
(I) post the list published
under clause (i) on the website
of the Administration; and
(II) make the list published
under clause (i) available,
upon request, at each district
office of the Administration.
(17) The Administration shall authorize lending
institutions and other entities in addition to banks to
make loans authorized under this subsection.
(18) Guarantee fees.--
(A) In general.--With respect to each loan
guaranteed under this subsection (other than a
loan that is repayable in 1 year or less), the
Administration shall collect a guarantee fee,
which shall be payable by the participating
lender, and may be charged to the borrower, as
follows:
(i) A guarantee fee not to exceed 2
percent of the deferred participation
share of a total loan amount that is
not more than $150,000.
(ii) A guarantee fee not to exceed 3
percent of the deferred participation
share of a total loan amount that is
more than $150,000, but not more than
$700,000.
(iii) A guarantee fee not to exceed
3.5 percent of the deferred
participation share of a total loan
amount that is more than $700,000.
(iv) In addition to the fee under
clause (iii), a guarantee fee equal to
0.25 percent of any portion of the
deferred participation share that is
more than $1,000,000.
(B) Retention of certain fees.--Lenders
participating in the programs established under
this subsection may retain not more than 25
percent of a fee collected under subparagraph
(A)(i).
(19)(A) In addition to the Preferred Lenders Program
authorized by the proviso in section 5(b)(7), the
Administration is authorized to establish a Certified
Lenders Program for lenders who establish their
knowledge of Administration laws and regulations
concerning the guaranteed loan program and their
proficiency in program requirements. The designation of
a lender as a certified lender shall be suspended or
revoked at any time that the Administration determines
that the lender is not adhering to its rules and
regulations or that the loss experience of the lender
is excessive as compared to other lenders, but such
suspension or revocation shall not affect any
outstanding guarantee.
(B) In order to encourage all lending institutions
and other entities making loans authorized under this
subsection to provide loans of $50,000 or less in
guarantees to eligible small business loan applicants,
the Administration shall develop and allow
participating lenders to solely utilize a uniform and
simplified loan form for such loans.
(C) Authority to liquidate loans.--
(i) In general.--The Administrator
may permit lenders participating in the
Certified Lenders Program to liquidate
loans made with a guarantee from the
Administration pursuant to a
liquidation plan approved by the
Administrator.
(ii) Automatic approval.--If the
Administrator does not approve or deny
a request for approval of a liquidation
plan within 10 business days of the
date on which the request is made (or
with respect to any routine liquidation
activity under such a plan, within 5
business days) such request shall be
deemed to be approved.
(20)(A) The Administration is empowered to make loans
either directly or in cooperation with banks or other
financial institutions through agreements to
participate on an immediate or deferred (guaranteed)
basis to small business concerns eligible for
assistance under subsection (j)(10) and section 8(a).
Such assistance may be provided only if the
Administration determines that--
(i) the type and amount of such assistance
requested by such concern is not otherwise
available on reasonable terms from other
sources;
(ii) with such assistance such concern has a
reasonable prospect for operating soundly and
profitably within a reasonable period of time;
(iii) the proceeds of such assistance will be
used within a reasonable time for plant
construction, conversion, or expansion,
including the acquisition of equipment,
facilities, machinery, supplies, or material or
to supply such concern with working capital to
be used in the manufacture of articles,
equipment, supplies, or material for defense or
civilian production or as may be necessary to
insure a well-balanced national economy; and
(iv) such assistance is of such sound value
as reasonably to assure that the terms under
which it is provided will not be breached by
the small business concern.
(B)(i) No loan shall be made under this paragraph if
the total amount outstanding and committed (by
participation or otherwise) to the borrower would
exceed $750,000.
(ii) Subject to the provisions of clause (i), in
agreements to participate in loans on a deferred
(guaranteed) basis, participation by the Administration
shall be not less than 85 per centum of the balance of
the financing outstanding at the time of disbursement.
(iii) The rate of interest on financings made on a
deferred (guaranteed) basis shall be legal and
reasonable.
(iv) Financings made pursuant to this paragraph shall
be subject to the following limitations:
(I) No immediate participation may be
purchased unless it is shown that a deferred
participation is not available.
(II) No direct financing may be made unless
it is shown that a participation is
unavailable.
(C) A direct loan or the Administration's share of an
immediate participation loan made pursuant to this
paragraph shall be any secured debt instrument--
(i) that is subordinated by its terms to all
other borrowings of the issuer;
(ii) the rate of interest on which shall not
exceed the current average market yield on
outstanding marketable obligations of the
United States with remaining periods to
maturity comparable to the average maturities
of such loan and adjusted to the nearest one-
eighth of 1 per centum;
(iii) the term of which is not more than
twenty-five years; and
(iv) the principal on which is amortized at
such rate as may be deemed appropriate by the
Administration, and the interest on which is
payable not less often than annually.
(21)(A) The Administration may make loans on a guaranteed
basis under the authority of this subsection--
(i) to a small business concern that has been (or can
reasonably be expected to be) detrimentally affected
by--
(I) the closure (or substantial reduction) of
a Department of Defense installation; or
(II) the termination (or substantial
reduction) of a Department of Defense program
on which such small business was a prime
contractor or subcontractor (or supplier) at
any tier; or
(ii) to a qualified individual or a veteran seeking
to establish (or acquire) and operate a small business
concern.
(B) Recognizing that greater risk may be associated with a
loan to a small business concern described in subparagraph
(A)(i), any reasonable doubts concerning the firm's proposed
business plan for transition to nondefense-related markets
shall be resolved in favor of the loan applicant when making
any determination regarding the sound value of the proposed
loan in accordance with paragraph (6).
(C) Loans pursuant to this paragraph shall be authorized in
such amounts as provided in advance in appropriation Acts for
the purposes of loans under this paragraph.
(D) For purposes of this paragraph a qualified individual
is--
(i) a member of the Armed Forces of the United
States, honorably discharged from active duty
involuntarily or pursuant to a program providing
bonuses or other inducements to encourage voluntary
separation or early retirement;
(ii) a civilian employee of the Department of Defense
involuntarily separated from Federal service or retired
pursuant to a program offering inducements to encourage
early retirement; or
(iii) an employee of a prime contractor,
subcontractor, or supplier at any tier of a Department
of Defense program whose employment is involuntarily
terminated (or voluntarily terminated pursuant to a
program offering inducements to encourage voluntary
separation or early retirement) due to the termination
(or substantial reduction) of a Department of Defense
program.
(E) Job creation and community benefit.--In providing
assistance under this paragraph, the Administration
shall develop procedures to ensure, to the maximum
extent practicable, that such assistance is used for
projects that--
(i) have the greatest potential for--
(I) creating new jobs for individuals
whose employment is involuntarily
terminated due to reductions in Federal
defense expenditures; or
(II) preventing the loss of jobs by
employees of small business concerns
described in subparagraph (A)(i); and
(ii) have substantial potential for
stimulating new economic activity in
communities most affected by reductions in
Federal defense expenditures.
(22) The Administration is authorized to permit
participating lenders to impose and collect a
reasonable penalty fee on late payments of loans
guaranteed under this subsection in an amount not to
exceed 5 percent of the monthly loan payment per month
plus interest.
(23) Yearly fee.--
(A) In general.--With respect to each loan
approved under this subsection, the
Administration shall assess, collect, and
retain a fee, not to exceed 0.55 percent per
year of the outstanding balance of the deferred
participation share of the loan, in an amount
established once annually by the Administration
in the Administration's annual budget request
to Congress, as necessary to reduce to zero the
cost to the Administration of making guarantees
under this subsection. As used in this
paragraph, the term ``cost'' has the meaning
given that term in section 502 of the Federal
Credit Reform Act of 1990 (2 U.S.C. 661a).
(B) Payer.--The yearly fee assessed under
subparagraph (A) shall be payable by the
participating lender and shall not be charged
to the borrower.
(C) Lowering of borrower fees.--If the
Administration determines that fees paid by
lenders and by small business borrowers for
guarantees under this subsection may be
reduced, consistent with reducing to zero the
cost to the Administration of making such
guarantees--
(i) the Administration shall first
consider reducing fees paid by small
business borrowers under clauses (i)
through (iii) of paragraph (18)(A), to
the maximum extent possible; and
(ii) fees paid by small business
borrowers shall not be increased above
the levels in effect on the date of
enactment of this subparagraph.
(24) Notification requirement.--The Administration
shall notify the Committees on Small Business of the
Senate and the House of Representatives not later than
15 days before making any significant policy or
administrative change affecting the operation of the
loan program under this subsection.
(25) Limitation on conducting pilot projects.--
(A) In general.--Not more than 10 percent of
the total number of loans guaranteed in any
fiscal year under this subsection may be
awarded as part of a pilot program which is
commenced by the Administrator on or after
October 1, 1996.
(B) Pilot program defined.--In this
paragraph, the term ``pilot program'' means any
lending program initiative, project,
innovation, or other activity not specifically
authorized by law.
(C) Low documentation loan program.--The
Administrator may carry out the low
documentation loan program for loans of
$100,000 or less only through lenders with
significant experience in making small business
loans. Not later than 90 days after the date of
enactment of this subsection, the Administrator
shall promulgate regulations defining the
experience necessary for participation as a
lender in the low documentation loan program.
(26) Calculation of subsidy rate.--All fees,
interest, and profits received and retained by the
Administration under this subsection shall be included
in the calculations made by the Director of the Office
of Management and Budget to offset the cost (as that
term is defined in section 502 of the Federal Credit
Reform Act of 1990) to the Administration of purchasing
and guaranteeing loans under this Act.
(28) Leasing.--In addition to such other lease
arrangements as may be authorized by the
Administration, a borrower may permanently lease to one
or more tenants not more than 20 percent of any
property constructed with the proceeds of a loan
guaranteed under this subsection, if the borrower
permanently occupies and uses not less than 60 percent
of the total business space in the property.
(29) Real estate appraisals.--With respect to a loan
under this subsection that is secured by commercial
real property, an appraisal of such property by a State
licensed or certified appraiser--
(A) shall be required by the Administration
in connection with any such loan for more than
$250,000; or
(B) may be required by the Administration or
the lender in connection with any such loan for
$250,000 or less, if such appraisal is
necessary for appropriate evaluation of
creditworthiness.
(30) Ownership requirements.--Ownership requirements
to determine the eligibility of a small business
concern that applies for assistance under any credit
program under this Act shall be determined without
regard to any ownership interest of a spouse arising
solely from the application of the community property
laws of a State for purposes of determining marital
interests.
(31) Express loans.--
(A) Definitions.--As used in this paragraph:
(i) The term ``disaster area'' means
the area for which the President has
declared a major disaster, during the
5-year period beginning on the date of
the declaration.
(ii) The term ``express lender''
means any lender authorized by the
Administration to participate in the
Express Loan Program.
(iii) The term ``express loan'' means
any loan made pursuant to this
paragraph in which a lender utilizes to
the maximum extent practicable its own
loan analyses, procedures, and
documentation.
(iv) The term ``Express Loan
Program'' means the program for express
loans established by the Administration
under paragraph (25)(B), as in
existence on April 5, 2004, with a
guaranty rate of not more than 50
percent.
(B) Restriction to express lender.--The
authority to make an express loan shall be
limited to those lenders deemed qualified to
make such loans by the Administration.
Designation as an express lender for purposes
of making an express loan shall not prohibit
such lender from taking any other action
authorized by the Administration for that
lender pursuant to this subsection.
(C) Grandfathering of existing lenders.--Any
express lender shall retain such designation
unless the Administration determines that the
express lender has violated the law or
regulations promulgated by the Administration
or modifies the requirements to be an express
lender and the lender no longer satisfies those
requirements.
(D) Maximum loan amount.--The maximum loan
amount under the Express Loan Program is
$350,000.
(E) Option to participate.--Except as
otherwise provided in this paragraph, the
Administration shall take no regulatory,
policy, or administrative action, without
regard to whether such action requires
notification pursuant to paragraph (24), that
has the effect of requiring a lender to make an
express loan pursuant to subparagraph (D).
(F) Express loans for renewable energy and
energy efficiency.--
(i) Definitions.--In this
subparagraph--
(I) the term ``biomass''--
(aa) means any
organic material that
is available on a
renewable or recurring
basis, including--
(AA)
agricultural
crops;
(BB) trees
grown for
energy
production;
(CC) wood
waste and wood
residues;
(DD) plants
(including
aquatic plants
and grasses);
(EE)
residues;
(FF) fibers;
(GG) animal
wastes and
other waste
materials; and
(HH) fats,
oils, and
greases
(including
recycled fats,
oils, and
greases); and
(bb) does not
include--
(AA) paper
that is
commonly
recycled; or
(BB)
unsegregated
solid waste;
(II) the term ``energy
efficiency project'' means the
installation or upgrading of
equipment that results in a
significant reduction in energy
usage; and
(III) the term ``renewable
energy system'' means a system
of energy derived from--
(aa) a wind, solar,
biomass (including
biodiesel), or
geothermal source; or
(bb) hydrogen derived
from biomass or water
using an energy source
described in item (aa).
(ii) Loans.--The Administrator may
make a loan under the Express Loan
Program for the purpose of--
(I) purchasing a renewable
energy system; or
(II) carrying out an energy
efficiency project for a small
business concern.
(G) Guarantee fee waiver for veterans.--
(i) Guarantee fee waiver.--The
Administrator may not collect a
guarantee fee described in paragraph
(18) in connection with a loan made
under this paragraph to a veteran or
spouse of a veteran on or after October
1, 2015.
(ii) Exception.--If the President's
budget for the upcoming fiscal year,
submitted to Congress pursuant to
section 1105(a) of title 31, United
States Code, includes a cost for the
program established under this
subsection that is above zero, the
requirements of clause (i) shall not
apply to loans made during such
upcoming fiscal year.
(iii) Definition.--In this
subparagraph, the term ``veteran or
spouse of a veteran'' means--
(I) a veteran, as defined in
section 3(q)(4);
(II) an individual who is
eligible to participate in the
Transition Assistance Program
established under section 1144
of title 10, United States
Code;
(III) a member of a reserve
component of the Armed Forces
named in section 10101 of title
10, United States Code;
(IV) the spouse of an
individual described in
subclause (I), (II), or (III);
or
(V) the surviving spouse (as
defined in section 101 of title
38, United States Code) of an
individual described in
subclause (I), (II), or (III)
who died while serving on
active duty or as a result of a
disability that is service-
connected (as defined in such
section).
(H) Recovery opportunity loans.--
(i) In general.--The Administrator
may guarantee an express loan to a
small business concern located in a
disaster area in accordance with this
subparagraph.
(ii) Maximums.--For a loan guaranteed
under clause (i)--
(I) the maximum loan amount
is $150,000; and
(II) the guarantee rate shall
be not more than 85 percent.
(iii) Overall cap.--A loan guaranteed
under clause (i) shall not be counted
in determining the amount of loans made
to a borrower for purposes of
subparagraph (D).
(iv) Operations.--A small business
concern receiving a loan guaranteed
under clause (i) shall certify that the
small business concern was in operation
on the date on which the applicable
major disaster occurred as a condition
of receiving the loan.
(v) Repayment ability.--A loan
guaranteed under clause (i) may only be
made to a small business concern that
demonstrates, to the satisfaction of
the Administrator, sufficient capacity
to repay the loan.
(vi) Timing of payment of
guarantees.--
(I) In general.--Not later
than 90 days after the date on
which a request for purchase is
filed with the Administrator,
the Administrator shall
determine whether to pay the
guaranteed portion of the loan.
(II) Recapture.--
Notwithstanding any other
provision of law, unless there
is a subsequent finding of
fraud by a court of competent
jurisdiction relating to a loan
guaranteed under clause (i), on
and after the date that is 6
months after the date on which
the Administrator determines to
pay the guaranteed portion of
the loan, the Administrator may
not attempt to recapture the
paid guarantee.
(vii) Fees.--
(I) In general.--Unless the
Administrator has waived the
guarantee fee that would
otherwise be collected by the
Administrator under paragraph
(18) for a loan guaranteed
under clause (i), and except as
provided in subclause (II), the
guarantee fee for the loan
shall be equal to the guarantee
fee that the Administrator
would collect if the guarantee
rate for the loan was 50
percent.
(II) Exception.--Subclause
(I) shall not apply if the cost
of carrying out the program
under this subsection in a
fiscal year is more than zero
and such cost is directly
attributable to the cost of
guaranteeing loans under clause
(i).
(viii) Rules.--Not later than 270
days after the date of enactment of
this subparagraph, the Administrator
shall promulgate rules to carry out
this subparagraph.
(32) Loans for energy efficient technologies.--
(A) Definitions.--In this paragraph--
(i) the term ``cost'' has the meaning
given that term in section 502 of the
Federal Credit Reform Act of 1990 (2
U.S.C. 661a);
(ii) the term ``covered energy
efficiency loan'' means a loan--
(I) made under this
subsection; and
(II) the proceeds of which
are used to purchase energy
efficient designs, equipment,
or fixtures, or to reduce the
energy consumption of the
borrower by 10 percent or more;
and
(iii) the term ``pilot program''
means the pilot program established
under subparagraph (B)
(B) Establishment.--The Administrator shall
establish and carry out a pilot program under
which the Administrator shall reduce the fees
for covered energy efficiency loans.
(C) Duration.--The pilot program shall
terminate at the end of the second full fiscal
year after the date that the Administrator
establishes the pilot program.
(D) Maximum participation.--A covered energy
efficiency loan shall include the maximum
participation levels by the Administrator
permitted for loans made under this subsection.
(E) Fees.--
(i) In general.--The fee on a covered
energy efficiency loan shall be equal
to 50 percent of the fee otherwise
applicable to that loan under paragraph
(18).
(ii) Waiver.--The Administrator may
waive clause (i) for a fiscal year if--
(I) for the fiscal year
before that fiscal year, the
annual rate of default of
covered energy efficiency loans
exceeds that of loans made
under this subsection that are
not covered energy efficiency
loans;
(II) the cost to the
Administration of making loans
under this subsection is
greater than zero and such cost
is directly attributable to the
cost of making covered energy
efficiency loans; and
(III) no additional sources
of revenue authority are
available to reduce the cost of
making loans under this
subsection to zero.
(iii) Effect of waiver.--If the
Administrator waives the reduction of
fees under clause (ii), the
Administrator--
(I) shall not assess or
collect fees in an amount
greater than necessary to
ensure that the cost of the
program under this subsection
is not greater than zero; and
(II) shall reinstate the fee
reductions under clause (i)
when the conditions in clause
(ii) no longer apply.
(iv) No increase of fees.--The
Administrator shall not increase the
fees under paragraph (18) on loans made
under this subsection that are not
covered energy efficiency loans as a
direct result of the pilot program.
(F) GAO report.--
(i) In general.--Not later than 1
year after the date that the pilot
program terminates, the Comptroller
General of the United States shall
submit to the Committee on Small
Business of the House of
Representatives and the Committee on
Small Business and Entrepreneurship of
the Senate a report on the pilot
program.
(ii) Contents.--The report submitted
under clause (i) shall include--
(I) the number of covered
energy efficiency loans for
which fees were reduced under
the pilot program;
(II) a description of the
energy efficiency savings with
the pilot program;
(III) a description of the
impact of the pilot program on
the program under this
subsection;
(IV) an evaluation of the
efficacy and potential fraud
and abuse of the pilot program;
and
(V) recommendations for
improving the pilot program.
(33) Increased veteran participation program.--
(A) Definitions.--In this paragraph--
(i) the term ``cost'' has the meaning
given that term in section 502 of the
Federal Credit Reform Act of 1990 (2
U.S.C. 661a);
(ii) the term ``pilot program'' means
the pilot program established under
subparagraph (B); and
(iii) the term ``veteran
participation loan'' means a loan made
under this subsection to a small
business concern owned and controlled
by veterans of the Armed Forces or
members of the reserve components of
the Armed Forces.
(B) Establishment.--The Administrator shall
establish and carry out a pilot program under
which the Administrator shall reduce the fees
for veteran participation loans.
(C) Duration.--The pilot program shall
terminate at the end of the second full fiscal
year after the date that the Administrator
establishes the pilot program.
(D) Maximum participation.--A veteran
participation loan shall include the maximum
participation levels by the Administrator
permitted for loans made under this subsection.
(E) Fees.--
(i) In general.--The fee on a veteran
participation loan shall be equal to 50
percent of the fee otherwise applicable
to that loan under paragraph (18).
(ii) Waiver.--The Administrator may
waive clause (i) for a fiscal year if--
(I) for the fiscal year
before that fiscal year, the
annual estimated rate of
default of veteran
participation loans exceeds
that of loans made under this
subsection that are not veteran
participation loans;
(II) the cost to the
Administration of making loans
under this subsection is
greater than zero and such cost
is directly attributable to the
cost of making veteran
participation loans; and
(III) no additional sources
of revenue authority are
available to reduce the cost of
making loans under this
subsection to zero.
(iii) Effect of waiver.--If the
Administrator waives the reduction of
fees under clause (ii), the
Administrator--
(I) shall not assess or
collect fees in an amount
greater than necessary to
ensure that the cost of the
program under this subsection
is not greater than zero; and
(II) shall reinstate the fee
reductions under clause (i)
when the conditions in clause
(ii) no longer apply.
(iv) No increase of fees.--The
Administrator shall not increase the
fees under paragraph (18) on loans made
under this subsection that are not
veteran participation loans as a direct
result of the pilot program.
(F) GAO report.--
(i) In general.--Not later than 1
year after the date that the pilot
program terminates, the Comptroller
General of the United States shall
submit to the Committee on Small
Business of the House of
Representatives and the Committee on
Small Business and Entrepreneurship of
the Senate a report on the pilot
program.
(ii) Contents.--The report submitted
under clause (i) shall include--
(I) the number of veteran
participation loans for which
fees were reduced under the
pilot program;
(II) a description of the
impact of the pilot program on
the program under this
subsection;
(III) an evaluation of the
efficacy and potential fraud
and abuse of the pilot program;
and
(IV) recommendations for
improving the pilot program.
(34) Export express program.--
(A) Definitions.--In this paragraph--
(i) the term ``export development
activity'' includes--
(I) obtaining a standby
letter of credit when required
as a bid bond, performance
bond, or advance payment
guarantee;
(II) participation in a trade
show that takes place outside
the United States;
(III) translation of product
brochures or catalogues for use
in markets outside the United
States;
(IV) obtaining a general line
of credit for export purposes;
(V) performing a service
contract from buyers located
outside the United States;
(VI) obtaining transaction-
specific financing associated
with completing export orders;
(VII) purchasing real estate
or equipment to be used in the
production of goods or services
for export;
(VIII) providing term loans
or other financing to enable a
small business concern,
including an export trading
company and an export
management company, to develop
a market outside the United
States; and
(IX) acquiring, constructing,
renovating, modernizing,
improving, or expanding a
production facility or
equipment to be used in the
United States in the production
of goods or services for
export; and
(ii) the term ``express loan'' means
a loan in which a lender uses to the
maximum extent practicable the loan
analyses, procedures, and documentation
of the lender to provide expedited
processing of the loan application.
(B) Authority.--The Administrator may
guarantee the timely payment of an express loan
to a small business concern made for an export
development activity.
(C) Level of participation.--
(i) Maximum amount.--The maximum
amount of an express loan guaranteed
under this paragraph shall be $500,000.
(ii) Percentage.--For an express loan
guaranteed under this paragraph, the
Administrator shall guarantee--
(I) 90 percent of a loan that
is not more than $350,000; and
(II) 75 percent of a loan
that is more than $350,000 and
not more than $500,000.
(b) Except as to agricultural enterprises as defined in
section 18(b)(1) of this Act, the Administration also is
empowered to the extent and in such amounts as provided in
advance in appropriation Acts--
(1)(A) to make such loans (either directly or in
cooperation with banks or other lending institutions
through agreements to participate on an immediate or
deferred (guaranteed) basis) as the Administration may
determine to be necessary or appropriate to repair,
rehabilitate or replace property, real or personal,
damaged or destroyed by or as a result of natural or
other disasters: Provided, That such damage or
destruction is not compensated for by insurance or
otherwise: And provided further, That the
Administration may increase the amount of the loan by
up to an additional 20 per centum of the aggregate
costs of such damage or destruction (whether or not
compensated for by insurance or otherwise) if it
determines such increase to be necessary or appropriate
in order to protect the damaged or destroyed property
from possible future disasters by taking mitigating
measures, including--
(i) construction of retaining walls and sea
walls;
(ii) grading and contouring land; and
(iii) relocating utilities and modifying
structures, including construction of a safe
room or similar storm shelter designed to
protect property and occupants from tornadoes
or other natural disasters, if such safe room
or similar storm shelter is constructed in
accordance with applicable standards issued by
the Federal Emergency Management Agency;
(B) to refinance any mortgage or other lien against a
totally destroyed or substantially damaged home or
business concern: Provided, That no loan or guarantee
shall be extended unless the Administration finds that
(i) the applicant is not able to obtain credit
elsewhere; (ii) such property is to be repaired,
rehabilitated, or replaced; (iii) the amount refinanced
shall not exceed the amount of physical loss sustained;
and (iv) such amount shall be reduced to the extent
such mortgage or lien is satisfied by insurance or
otherwise; and
(C) during fiscal years 2000 through 2004, to
establish a predisaster mitigation program to make such
loans (either directly or in cooperation with banks or
other lending institutions through agreements to
participate on an immediate or deferred (guaranteed)
basis), as the Administrator may determine to be
necessary or appropriate, to enable small businesses to
use mitigation techniques in support of a formal
mitigation program established by the Federal Emergency
Management Agency, except that no loan or guarantee may
be extended to a small business under this subparagraph
unless the Administration finds that the small business
is otherwise unable to obtain credit for the purposes
described in this subparagraph;
(2) to make such loans (either directly or in
cooperation with banks or other lending institutions
through agreements to participate on an immediate or
deferred (guaranteed) basis) as the Administration may
determine to be necessary or appropriate to any small
business concern, private nonprofit organization, or
small agricultural cooperative located in an area
affected by a disaster, (including drought), with
respect to both farm-related and nonfarm-related small
business concerns, if the Administration determines
that the concern, the organization, or the cooperative
has suffered a substantial economic injury as a result
of such disaster and if such disaster constitutes--
(A) a major disaster, as determined by the
President under the Robert T. Stafford Disaster
Relief and Emergency Assistance Act (42 U.S.C.
5121 et seq.); or
(B) a natural disaster, as determined by the
Secretary of Agriculture pursuant to section
321 of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1961), in which case,
assistance under this paragraph may be provided
to farm-related and nonfarm-related small
business concerns, subject to the other
applicable requirements of this paragraph; or
(C) a disaster, as determined by the
Administrator of the Small Business
Administration; or
(D) if no disaster declaration has been
issued pursuant to subparagraph (A), (B), or
(C), the Governor of a State in which a
disaster has occurred may certify to the Small
Business Administration that small business
concerns, private nonprofit organizations, or
small agricultural cooperatives (1) have
suffered economic injury as a result of such
disaster, and (2) are in need of financial
assistance which is not available on reasonable
terms in the disaster stricken area. Not later
than 30 days after the date of receipt of such
certification by a Governor of a State, the
Administration shall respond in writing to that
Governor on its determination and the reasons
therefore, and may then make such loans as
would have been available under this paragraph
if a disaster declaration had been issued.
Provided, That no loan or guarantee shall be extended
pursuant to this paragraph (2) unless the
Administration finds that the applicant is not able to
obtain credit elsewhere.
(3)(A) In this paragraph--
(i) the term ``essential employee'' means an
individual who is employed by a small business
concern and whose managerial or technical
expertise is critical to the successful day-to-
day operations of that small business concern;
(ii) the term ``period of military conflict''
has the meaning given the term in subsection
(n)(1); and
(iii) the term ``substantial economic
injury'' means an economic harm to a business
concern that results in the inability of the
business concern--
(I) to meet its obligations as they
mature;
(II) to pay its ordinary and
necessary operating expenses; or
(III) to market, produce, or provide
a product or service ordinarily
marketed, produced, or provided by the
business concern.
(B) The Administration may make such disaster loans
(either directly or in cooperation with banks or other
lending institutions through agreements to participate
on an immediate or deferred basis) to assist a small
business concern that has suffered or that is likely to
suffer substantial economic injury as the result of an
essential employee of such small business concern being
ordered to active military duty during a period of
military conflict.
(C) A small business concern described in
subparagraph (B) shall be eligible to apply for
assistance under this paragraph during the period
beginning on the date on which the essential employee
is ordered to active duty and ending on the date that
is 1 year after the date on which such essential
employee is discharged or released from active duty.
The Administrator may, when appropriate (as determined
by the Administrator), extend the ending date specified
in the preceding sentence by not more than 1 year.
(D) Any loan or guarantee extended pursuant to this
paragraph shall be made at the same interest rate as
economic injury loans under paragraph (2).
(E) No loan may be made under this paragraph, either
directly or in cooperation with banks or other lending
institutions through agreements to participate on an
immediate or deferred basis, if the total amount
outstanding and committed to the borrower under this
subsection would exceed $1,500,000, unless such
applicant constitutes, or have become due to changed
economic circumstances, a major source of employment in
its surrounding area, as determined by the
Administration, in which case the Administration, in
its discretion, may waive the $1,500,000 limitation.
(F) For purposes of assistance under this paragraph,
no declaration of a disaster area shall be required.
(G)(i) Notwithstanding any other provision of
law, the Administrator may make a loan under
this paragraph of not more than $50,000 without
collateral.
(ii) The Administrator may defer payment of
principal and interest on a loan described in
clause (i) during the longer of--
(I) the 1-year period beginning on
the date of the initial disbursement of
the loan; and
(II) the period during which the
relevant essential employee is on
active duty.
(H) The Administrator shall give priority to
any application for a loan under this paragraph
and shall process and make a determination
regarding such applications prior to processing
or making a determination on other loan
applications under this subsection, on a
rolling basis.
(4) Coordination with fema.--
(A) In general.--Notwithstanding any other
provision of law, for any disaster declared
under this subsection or major disaster
(including any major disaster relating to which
the Administrator declares eligibility for
additional disaster assistance under paragraph
(9)), the Administrator, in consultation with
the Administrator of the Federal Emergency
Management Agency, shall ensure, to the maximum
extent practicable, that all application
periods for disaster relief under this Act
correspond with application deadlines
established under the Robert T. Stafford
Disaster Relief and Emergency Assistance Act
(42 U.S.C. 5121 et seq.), or as extended by the
President.
(B) Deadlines.--Notwithstanding any other
provision of law, not later than 10 days before
the closing date of an application period for a
major disaster (including any major disaster
relating to which the Administrator declares
eligibility for additional disaster assistance
under paragraph (9)), the Administrator, in
consultation with the Administrator of the
Federal Emergency Management Agency, shall
submit to the Committee on Small Business and
Entrepreneurship of the Senate and the
Committee on Small Business of the House of
Representatives a report that includes--
(i) the deadline for submitting
applications for assistance under this
Act relating to that major disaster;
(ii) information regarding the number
of loan applications and disbursements
processed by the Administrator relating
to that major disaster for each day
during the period beginning on the date
on which that major disaster was
declared and ending on the date of that
report; and
(iii) an estimate of the number of
potential applicants that have not
submitted an application relating to
that major disaster.
(5) Public awareness of disasters.--If a disaster is
declared under this subsection or the Administrator
declares eligibility for additional disaster assistance
under paragraph (9), the Administrator shall make every
effort to communicate through radio, television, print,
and web-based outlets, all relevant information needed
by disaster loan applicants, including--
(A) the date of such declaration;
(B) cities and towns within the area of such
declaration;
(C) loan application deadlines related to
such disaster;
(D) all relevant contact information for
victim services available through the
Administration (including links to small
business development center websites);
(E) links to relevant Federal and State
disaster assistance websites, including links
to websites providing information regarding
assistance available from the Federal Emergency
Management Agency;
(F) information on eligibility criteria for
Administration loan programs, including where
such applications can be found; and
(G) application materials that clearly state
the function of the Administration as the
Federal source of disaster loans for homeowners
and renters.
(6) Authority for qualified private contractors.--
(A) Disaster loan processing.--The
Administrator may enter into an agreement with
a qualified private contractor, as determined
by the Administrator, to process loans under
this subsection in the event of a major
disaster (including any major disaster relating
to which the Administrator declares eligibility
for additional disaster assistance under
paragraph (9)), under which the Administrator
shall pay the contractor a fee for each loan
processed.
(B) Loan loss verification services.--The
Administrator may enter into an agreement with
a qualified lender or loss verification
professional, as determined by the
Administrator, to verify losses for loans under
this subsection in the event of a major
disaster (including any major disaster relating
to which the Administrator declares eligibility
for additional disaster assistance under
paragraph (9)), under which the Administrator
shall pay the lender or verification
professional a fee for each loan for which such
lender or verification professional verifies
losses.
(7) Disaster assistance employees.--
(A) In general.--In carrying out this
section, the Administrator may, where
practicable, ensure that the number of full-
time equivalent employees--
(i) in the Office of the Disaster
Assistance is not fewer than 800; and
(ii) in the Disaster Cadre of the
Administration is not fewer than 1,000.
(B) Report.--In carrying out this subsection,
if the number of full-time employees for either
the Office of Disaster Assistance or the
Disaster Cadre of the Administration is below
the level described in subparagraph (A) for
that office, not later than 21 days after the
date on which that staffing level decreased
below the level described in subparagraph (A),
the Administrator shall submit to the Committee
on Appropriations and the Committee on Small
Business and Entrepreneurship of the Senate and
the Committee on Appropriations and Committee
on Small Business of the House of
Representatives, a report--
(i) detailing staffing levels on that
date;
(ii) requesting, if practicable and
determined appropriate by the
Administrator, additional funds for
additional employees; and
(iii) containing such additional
information, as determined appropriate
by the Administrator.
(8) Increased loan caps.--
(A) Aggregate loan amounts.--Except as
provided in subparagraph (B), and
notwithstanding any other provision of law, the
aggregate loan amount outstanding and committed
to a borrower under this subsection may not
exceed $2,000,000.
(B) Waiver authority.--The Administrator may,
at the discretion of the Administrator,
increase the aggregate loan amount under
subparagraph (A) for loans relating to a
disaster to a level established by the
Administrator, based on appropriate economic
indicators for the region in which that
disaster occurred.
(9) Declaration of eligibility for additional
disaster assistance.--
(A) In general.--If the President declares a
major disaster, the Administrator may declare
eligibility for additional disaster assistance
in accordance with this paragraph.
(B) Threshold.--A major disaster for which
the Administrator declares eligibility for
additional disaster assistance under this
paragraph shall--
(i) have resulted in extraordinary
levels of casualties or damage or
disruption severely affecting the
population (including mass
evacuations), infrastructure,
environment, economy, national morale,
or government functions in an area;
(ii) be comparable to the description
of a catastrophic incident in the
National Response Plan of the
Administration, or any successor
thereto, unless there is no successor
to such plan, in which case this clause
shall have no force or effect; and
(iii) be of such size and scope
that--
(I) the disaster assistance
programs under the other
paragraphs under this
subsection are incapable of
providing adequate and timely
assistance to individuals or
business concerns located
within the disaster area; or
(II) a significant number of
business concerns outside the
disaster area have suffered
disaster-related substantial
economic injury as a result of
the incident.
(C) Additional economic injury disaster loan
assistance.--
(i) In general.--If the Administrator
declares eligibility for additional
disaster assistance under this
paragraph, the Administrator may make
such loans under this subparagraph
(either directly or in cooperation with
banks or other lending institutions
through agreements to participate on an
immediate or deferred basis) as the
Administrator determines appropriate to
eligible small business concerns
located anywhere in the United States.
(ii) Processing time.--
(I) In general.--If the
Administrator determines that
the average processing time for
applications for disaster loans
under this subparagraph
relating to a specific major
disaster is more than 15 days,
the Administrator shall give
priority to the processing of
such applications submitted by
eligible small business
concerns located inside the
disaster area, until the
Administrator determines that
the average processing time for
such applications is not more
than 15 days.
(II) Suspension of
applications from outside
disaster area.--If the
Administrator determines that
the average processing time for
applications for disaster loans
under this subparagraph
relating to a specific major
disaster is more than 30 days,
the Administrator shall suspend
the processing of such
applications submitted by
eligible small business
concerns located outside the
disaster area, until the
Administrator determines that
the average processing time for
such applications is not more
than 15 days.
(iii) Loan terms.--A loan under this
subparagraph shall be made on the same
terms as a loan under paragraph (2).
(D) Definitions.--In this paragraph--
(i) the term ``disaster area'' means
the area for which the applicable major
disaster was declared;
(ii) the term ``disaster-related
substantial economic injury'' means
economic harm to a business concern
that results in the inability of the
business concern to--
(I) meet its obligations as
it matures;
(II) meet its ordinary and
necessary operating expenses;
or
(III) market, produce, or
provide a product or service
ordinarily marketed, produced,
or provided by the business
concern because the business
concern relies on materials
from the disaster area or sells
or markets in the disaster
area; and
(iii) the term ``eligible small
business concern'' means a small
business concern--
(I) that has suffered
disaster-related substantial
economic injury as a result of
the applicable major disaster;
and
(II)(aa) for which not less
than 25 percent of the market
share of that small business
concern is from business
transacted in the disaster
area;
(bb) for which not less than
25 percent of an input into a
production process of that
small business concern is from
the disaster area; or
(cc) that relies on a
provider located in the
disaster area for a service
that is not readily available
elsewhere.
(10) Reducing closing and disbursement delays.--The
Administrator shall provide a clear and concise
notification on all application materials for loans
made under this subsection and on relevant websites
notifying an applicant that the applicant may submit
all documentation necessary for the approval of the
loan at the time of application and that failure to
submit all documentation could delay the approval and
disbursement of the loan.
(11) Increasing transparency in loan approvals.--The
Administrator shall establish and implement clear,
written policies and procedures for analyzing the
ability of a loan applicant to repay a loan made under
this subsection.
(12) Additional awards to small business development
centers, women's business centers, and score for
disaster recovery.--
(A) In general.--The Administration may
provide financial assistance to a small
business development center, a women's business
center described in section 29, the Service
Corps of Retired Executives, or any proposed
consortium of such individuals or entities to
spur disaster recovery and growth of small
business concerns located in an area for which
the President has declared a major disaster.
(B) Form of financial assistance.--Financial
assistance provided under this paragraph shall
be in the form of a grant, contract, or
cooperative agreement.
(C) No matching funds required.--Matching
funds shall not be required for any grant,
contract, or cooperative agreement under this
paragraph.
(D) Requirements.--A recipient of financial
assistance under this paragraph shall provide
counseling, training, and other related
services, such as promoting long-term
resiliency, to small business concerns and
entrepreneurs impacted by a major disaster.
(E) Performance.--
(i) In general.--The Administrator,
in cooperation with the recipients of
financial assistance under this
paragraph, shall establish metrics and
goals for performance of grants,
contracts, and cooperative agreements
under this paragraph, which shall
include recovery of sales, recovery of
employment, reestablishment of business
premises, and establishment of new
small business concerns.
(ii) Use of estimates.--The
Administrator shall base the goals and
metrics for performance established
under clause (i), in part, on the
estimates of disaster impact prepared
by the Office of Disaster Assistance
for purposes of estimating loan-making
requirements.
(F) Term.--
(i) In general.--The term of any
grant, contract, or cooperative
agreement under this paragraph shall be
for not more than 2 years.
(ii) Extension.--The Administrator
may make 1 extension of a grant,
contract, or cooperative agreement
under this paragraph for a period of
not more than 1 year, upon a showing of
good cause and need for the extension.
(G) Exemption from other program
requirements.--Financial assistance provided
under this paragraph is in addition to, and
wholly separate from, any other form of
assistance provided by the Administrator under
this Act.
(H) Competitive basis.--The Administration
shall award financial assistance under this
paragraph on a competitive basis.
(13) Supplemental assistance for contractor
malfeasance.--
(A) In general.--If a contractor or other
person engages in malfeasance in connection
with repairs to, rehabilitation of, or
replacement of real or personal property
relating to which a loan was made under this
subsection and the malfeasance results in
substantial economic damage to the recipient of
the loan or substantial risks to health or
safety, upon receiving documentation of the
substantial economic damage or the substantial
risk to health and safety from an independent
loss verifier, and subject to subparagraph (B),
the Administrator may increase the amount of
the loan under this subsection, as necessary
for the cost of repairs, rehabilitation, or
replacement needed to address the cause of the
economic damage or health or safety risk.
(B) Requirements.--The Administrator may only
increase the amount of a loan under
subparagraph (A) upon receiving an appropriate
certification from the borrower and person
performing the mitigation attesting to the
reasonableness of the mitigation costs and an
assignment of any proceeds received from the
person engaging in the malfeasance. The
assignment of proceeds recovered from the
person engaging in the malfeasance shall be
equal to the amount of the loan under this
section. Any mitigation activities shall be
subject to audit and independent verification
of completeness and cost reasonableness.
(14) Business recovery centers.--
(A) In general.--The Administrator, acting
through the district offices of the
Administration, shall identify locations that
may be used as recovery centers by the
Administration in the event of a disaster
declared under this subsection or a major
disaster.
(B) Requirements for identification.--Each
district office of the Administration shall--
(i) identify a location described in
subparagraph (A) in each county,
parish, or similar unit of general
local government in the area served by
the district office; and
(ii) ensure that the locations
identified under subparagraph (A) may
be used as a recovery center without
cost to the Government, to the extent
practicable.
(15) Increased oversight of economic injury disaster
loans.--The Administrator shall increase oversight of
entities receiving loans under paragraph (2), and may
consider--
(A) scheduled site visits to ensure borrower
eligibility and compliance with requirements
established by the Administrator; and
(B) reviews of the use of the loan proceeds
by an entity described in paragraph (2) to
ensure compliance with requirements established
by the Administrator.
No loan under this subsection, including renewals and
extensions thereof, may be made for a period or periods
exceeding thirty years: Provided, That the Administrator may
consent to a suspension in the payment of principal and
interest charges on, and to an extension in the maturity of,
the Federal share of any loan under this subsection for a
period not to exceed five years, if (A) the borrower under such
loan is a homeowner or a small business concern, (B) the loan
was made to enable (i) such homeowner to repair or replace his
home, or (ii) such concern to repair or replace plant or
equipment which was damaged or destroyed as the result of a
disaster meeting the requirements of clause (A) or (B) of
paragraph (2) of this subsection, and (C) the Administrator
determines such action is necessary to avoid severe financial
hardship: Provided further, That the provisions of paragraph
(1) of subsection (d) of this section shall not be applicable
to any such loan having a maturity in excess of twenty years.
Notwithstanding any other provision of law, and except as
provided in subsection (d), the interest rate on the
Administration's share of any loan made under subsection (b),
shall not exceed the average annual interest rate on all
interest-bearing obligations of the United States then forming
a part of the public debt as computed at the end of the fiscal
year next preceding the date of the loan and adjusted to the
nearest one-eight of 1 per centum plus one-quarter of 1 per
centum: Provided, however, That the interest rate for loans
made under paragraphs (1) and (2) hereof shall not exceed the
rate of interest which is in effect at the time of the
occurrence of the disaster. In agreements to participate in
loans on a deferred basis under this subsection, such
participation by the Administration shall not be in excess of
90 per centum of the balance of the loan outstanding at the
time of disbursement. Notwithstanding any other provision of
law, the interest rate on the Administration's share of any
loan made pursuant to paragraph (1) of this subsection to
repair or replace a primary residence and/or replace or repair
damaged or destroyed personal property, less the amount of
compensation by insurance or otherwise, with respect to a
disaster occurring on or after July 1, 1976, and prior to
October 1, 1978, shall be: 1 per centum on the amount of such
loan not exceeding $10,000, and 3 per centum on the amount of
such loan over $10,000 but not exceeding $40,000. The interest
rate on the Administration's share of the first $250,000 of all
other loans made pursuant to paragraph (1) of this subsection,
with respect to a disaster occurring on or after July 1, 1976,
and prior to October 1, 1978, shall be 3 per centum. All
repayments of principal on the Administration's share of any
loan made under the above provisions shall first be applied to
reduce the principal sum of such loan which bears interest at
the lower rates provided in this paragraph. The principal
amount of any loan made pursuant to paragraph (1) in connection
with a disaster which occurs on or after April 1, 1977, but
prior to January 1, 1978, may be increased by such amount, but
not more than $2,000, as the Administration determines to be
reasonable in light of the amount and nature of loss, damage,
or injury sustained in order to finance the installation of
insulation in the property which was lost, damaged, or injured,
if the uninsured, damaged portion of the property is 10 per
centum or more of the market value of the property at the time
of the disaster. No later than June 1, 1978, the Administration
shall prepare and transmit to the Select Committee on Small
Business of the Senate, the Committee on Small Business of the
House of Representatives, and the Committee of the Senate and
House of Representatives having jurisdiction over measures
relating to energy conservation, a report on its activities
under this paragraph, including therein an evaluation of the
effect of such activities on encouraging the installation of
insulation in property which is repaired or replaced after a
disaster which is subject to this paragraph, and its
recommendations with respect to the continuation, modification,
or termination of such activities.
In the administration of the disaster loan program under
paragraphs (1) and (2) of this subsection, in the case of
property loss or damage or injury resulting from a major
disaster as determined by the President or a disaster as
determined by the Administrator which occurs on or after
January 1, 1971, and prior to July 1, 1973, the Small Business
Administration, to the extent such loss or damage or injury is
not compensated for by insurance or otherwise--
(A) may make any loan for repair, rehabilitation, or
replacement of property damaged or destroyed without
regard to whether the required financial assistance is
otherwise available from private sources;
(B) may, in the case of the total destruction or
substantial property damage of a home or business
concern, refinance any mortgage or other liens
outstanding against the destroyed or damaged property
if such project is to be repaired, rehabilitated, or
replaced, except that (1) in the case of a business
concern, the amount refinanced shall not exceed the
amount of the physical loss sustained, and (2) in the
case of a home, the amount of each monthly payment of
principal and interest on the loan after refinancing
under this clause shall be not less than the amount of
each such payment made prior to such refinancing;
(C) may, in the case of a loan made under clause (A)
or a mortgage or other lien refinanced under clause (B)
in connection with the destruction of, or substantial
damage to, property owned and used as a residence by an
individual who by reason of retirement, disability, or
other similar circumstances relies for support on
survivor, disability, or retirement benefits under a
pension, insurance, or other program, consent to the
suspension of the payments of the principal of that
loan, mortgage, or lien during the lifetime of that
individual and his souse for so long as the
Administration determines that making such payments
would constitute a substantial hardship;
(D) shall, notwithstanding the provisions of any
other law and upon presentation by the applicant of
proof of loss or damage or injury and a bona fide
estimate of cost of repair, rehabilitation, or
replacement, cancel the principal of any loan made to
cover a loss or damage or injury resulting from such
disaster, except that--
(i) with respect to a loan made in connection
with a disaster occurring on or after January
1, 1971 but prior to January 1, 1972, the total
amount so canceled shall not exceed $2,500, and
the interest on the balance of the loan shall
be at a rate of 3 per centum per annum; and
(ii) with respect to a loan made in
connection with a disaster occurring on or
after January 1, 1972 but prior to July 1,
1973, the total amount so canceled shall not
exceed $5,000, and the interest on the balance
of the loan shall be at a rate of 1 per centum
per annum.
With respect to any loan referred to in clause (D) which is
outstanding on the date of enactment of this paragraph, the
Administrator shall--
(i) make sure change in the interest rate on the
balance of such loan as is required under that clause
effective as of such date of enactment; and
(ii) in applying the limitation set forth in that
clause with respect to the total amount of such loan
which may be canceled, consider as part of the amount
so canceled any part of such loan which was previously
canceled pursuant to section 231 of the Disaster Relief
Act of 1970.
Whoever wrongfully misapplies the proceeds of a loan obtained
under this subsection shall be civilly liable to the
Administrator in an amount equal to one-and-one-half times the
original principal amount of the loan.
(E) A State grant made on or prior to July 1, 1979,
shall not be considered compensation for the purpose of
applying the provisions of section 312(a) of the
Disaster Relief and Emergency Assistance Act to a
disaster loan under paragraph (1) (2)of this
subsection.
(c) Private Disaster Loans.--
(1) Definitions.--In this subsection--
(A) the term ``disaster area'' means any area
for which the President declared a major
disaster relating to which the Administrator
declares eligibility for additional disaster
assistance under subsection (b)(9), during the
period of that major disaster declaration;
(B) the term ``eligible individual'' means an
individual who is eligible for disaster
assistance under subsection (b)(1) relating to
a major disaster relating to which the
Administrator declares eligibility for
additional disaster assistance under subsection
(b)(9);
(C) the term ``eligible small business
concern'' means a business concern that is--
(i) a small business concern, as
defined under this Act; or
(ii) a small business concern, as
defined in section 103 of the Small
Business Investment Act of 1958;
(D) the term ``preferred lender'' means a
lender participating in the Preferred Lender
Program;
(E) the term ``Preferred Lender Program'' has
the meaning given that term in subsection
(a)(2)(C)(ii); and
(F) the term ``qualified private lender''
means any privately-owned bank or other lending
institution that--
(i) is not a preferred lender; and
(ii) the Administrator determines
meets the criteria established under
paragraph (10).
(2) Program required.--The Administrator shall carry
out a program, to be known as the Private Disaster
Assistance program, under which the Administration may
guarantee timely payment of principal and interest, as
scheduled, on any loan made to an eligible small
business concern located in a disaster area and to an
eligible individual.
(3) Use of loans.--A loan guaranteed by the
Administrator under this subsection may be used for any
purpose authorized under subsection (b).
(4) Online applications.--
(A) Establishment.--The Administrator may
establish, directly or through an agreement
with another entity, an online application
process for loans guaranteed under this
subsection.
(B) Other federal assistance.--The
Administrator may coordinate with the head of
any other appropriate Federal agency so that
any application submitted through an online
application process established under this
paragraph may be considered for any other
Federal assistance program for disaster relief.
(C) Consultation.--In establishing an online
application process under this paragraph, the
Administrator shall consult with appropriate
persons from the public and private sectors,
including private lenders.
(5) Maximum amounts.--
(A) Guarantee percentage.--The Administrator
may guarantee not more than 85 percent of a
loan under this subsection.
(B) Loan amount.--The maximum amount of a
loan guaranteed under this subsection shall be
$2,000,000.
(6) Terms and conditions.--A loan guaranteed under
this subsection shall be made under the same terms and
conditions as a loan under subsection (b).
(7) Lenders.--
(A) In general.--A loan guaranteed under this
subsection made to--
(i) a qualified individual may be
made by a preferred lender; and
(ii) a qualified small business
concern may be made by a qualified
private lender or by a preferred lender
that also makes loans to qualified
individuals.
(B) Compliance.--If the Administrator
determines that a preferred lender knowingly
failed to comply with the underwriting
standards for loans guaranteed under this
subsection or violated the terms of the
standard operating procedure agreement between
that preferred lender and the Administration,
the Administrator shall do 1 or more of the
following:
(i) Exclude the preferred lender from
participating in the program under this
subsection.
(ii) Exclude the preferred lender
from participating in the Preferred
Lender Program for a period of not more
than 5 years.
(8) Fees.--
(A) In general.--The Administrator may not
collect a guarantee fee under this subsection.
(B) Origination fee.--The Administrator may
pay a qualified private lender or preferred
lender an origination fee for a loan guaranteed
under this subsection in an amount agreed upon
in advance between the qualified private lender
or preferred lender and the Administrator.
(9) Documentation.--A qualified private lender or
preferred lender may use its own loan documentation for
a loan guaranteed by the Administrator under this
subsection, to the extent authorized by the
Administrator. The ability of a lender to use its own
loan documentation for a loan guaranteed under this
subsection shall not be considered part of the criteria
for becoming a qualified private lender under the
regulations promulgated under paragraph (10).
(10) Implementation regulations.--
(A) In general.--Not later than 1 year after
the date of enactment of the Small Business
Disaster Response and Loan Improvements Act of
2008, the Administrator shall issue final
regulations establishing permanent criteria for
qualified private lenders.
(B) Report to congress.--Not later than 6
months after the date of enactment of the Small
Business Disaster Response and Loan
Improvements Act of 2008, the Administrator
shall submit a report on the progress of the
regulations required by subparagraph (A) to the
Committee on Small Business and
Entrepreneurship of the Senate and the
Committee on Small Business of the House of
Representatives.
(11) Authorization of appropriations.--
(A) In general.--Amounts necessary to carry
out this subsection shall be made available
from amounts appropriated to the Administration
to carry out subsection (b).
(B) Authority to reduce interest rates and
other terms and conditions.--Funds appropriated
to the Administration to carry out this
subsection, may be used by the Administrator to
meet the loan terms and conditions specified in
paragraph (6).
(12) Purchase of loans.--The Administrator may enter
into an agreement with a qualified private lender or
preferred lender to purchase any loan guaranteed under
this subsection.
(d)(1) The Administration may further extend the maturity of
or renew any loan made pursuant to this section, or any loan
transferred to the Administration pursuant to Reorganization
Plan Numbered 2 of 1954, or Reorganization Plan Numbered 1 of
1957, for additional periods not to exceed ten years beyond the
period stated therein, if such extension or renewal will aid in
the orderly liquidation of such loan.
(2) During any period in which principal and interest
charges are suspended on the Federal share of any loan,
as provided in subsection (b), the Administrator shall,
upon the request of any person, firm, or corporation
having a participation in such loan, purchase such
participation, or assume the obligation of the
borrower, for the balance of such period, to make
principal and interest payments on the non-Federal
share of such loan: Provided, That no such payments
shall be made by the Administrator in behalf of any
borrower unless (i) the Administrator determines that
such action is necessary in order to avoid a default,
and (ii) the borrower agrees to make payments to the
Administration in an agreegate amount equal to the
amount paid in its behalf by the Administrator, in such
manner and at such time (during or after the term of
the loan) as the Administrator shall determine having
due regard to the purposes sought to be achieved by
this paragraph.
(3) With respect to a disaster occurring on or after
October 1, 1978, and prior the effective date of this
Act, on the Administration's share of loans made
pursuant to paragraph (1) of subsection (b)--
(A) if the loan proceeds are to
repair or replace a primary residence
and/or repair or replace damaged or
destroyed personal property, the
interest rate shall be 3 percent on the
first $55,000 of such loan;
(B) if the loan proceeds are to
repair or replace property damaged or
destroyed and if the applicant is a
business concern which is unable to
obtain sufficient credit elsewhere, the
interest rate shall be as determined by
the Administration, but not in excess
of 5 percent per annum; and
(C) if the loan proceeds are to repair or
replace property damaged or destroyed and if
the applicant is a business concern which is
able to obtain sufficient credit elsewhere, the
interest rate shall not exceed the current
average market yield on outstanding marketable
obligations of the United States with remaining
periods to maturity comparable to the average
maturities of such loans and adjusted to the
nearest one-eight of 1 percent, and an
additional amount as determined by the
Administration, but not to exceed 1 percent:
Provided, That three years after such loan is
fully disbursed and every two years thereafter
for the term of the loan, if the Administration
determines that the borrower is able to obtain
a loan from one-Federal sources at reasonable
rates and terms for loans of similar purposes
and periods of time, the borrower shall, upon
request by the Administration, apply for and
accept such a loan in sufficient amount to
repay the Administration: Provided further,
That no loan under subsection (b)(1) shall be
made, either directly or in cooperation with
banks or other lending institutions through
agreements to participate on an immediate or
deferred basis, if the total amount outstanding
and committed to the borrower under such
subsection would exceed $500,000 for each
disaster, unless an applicant constitutes a
major source of employment in an area suffering
a disaster, in which case the Administration,
in its discretion, may waive the $500,000
limitation.
(4) Notwithstanding the provisions of any other law,
the interest rate on the Federal share of any loan made
under subsection (b) shall be--
(A) in the case of a homeowner unable to
secure credit elsewhere, the rate prescribed by
the Administration but not more than one-half
the rate determined by the Secretary of the
Treasury taking into consideration the current
average market yield on outstanding marketable
obligations of the United States with remaining
periods to maturity comparable to the average
maturities of such loans plus an additional
charge of not to exceed 1 per centum per annum
as determined by the Administrator, and
adjusted to the nearest one-eight of 1 per
centum but not to exceed 8 per centum per
annum;
(B) in the case of a homeowner able to secure
credit elsewhere, the rate prescribed by the
Administration but not more than the rate
determined by the Secretary of the Treasury
taking into consideration the current average
market yield on outstanding marketable
obligations of the United States with remaining
periods to maturity comparable to the average
maturities of such loans plus an additional
charge of not to exceed 1 per centum per annum
as determined by the Administrator, and
adjusted to the nearest one-eighth of 1 per
centum;
(C) in the case of a business concern unable
to obtain credit elsewhere, not to exceed 8 per
centum per annum;
(D) in the case of a business concern able to
obtain credit elsewhere, the rate prescribed by
the Administration but not in excess of the
rate prevailing in private market for similar
loans and not more than the rate prescribed by
the Administration as the maximum interest rate
for deferred participation (guaranteed) loans
under section 7(a) of this Act. Loans under
this subparagraph shall be limited to a maximum
term of three years.
(5) Notwithstanding the provisions of any other law,
the interest rate on the Federal share of any loan made
under subsection (b)(1) and (b)(2) on account of a
disaster commencing on or after October 1, 1982, shall
be--
(A) in the case of a homeowner unable to
secure credit elsewhere, the rate prescribed by
the Administration but not more than one-half
the rate determined by the Secretary of the
Treasury taking into consideration the current
average market yield on outstanding marketable
obligations of the United States with remaining
periods to maturity comparable to the average
maturities of such loan plus an additional
charge of not to exceed 1 per centum per annum
as determined by the Administrator, and
adjusted to the nearest one-eighth of 1 per
centum, but not to exceed 4 per centum per
annum;
(B) in the case of a homeowner, able to
secure credit elsewhere, the rate prescribed by
the Administration but not more than the rate
determined by the Secretary of the Treasury
taking into consideration the current average
market yield on outstanding marketable
obligations of the United States with remaining
periods to maturity comparable to the average
maturities of such loans plus an additional
charge of not to exceed 1 per centum per annum
as determined by the Administrator, and
adjusted to the nearest one-eighth of 1 per
centum, but not to exceed 8 per centum per
annum;
(C) in the case of a business, private
nonprofit organization, or other concern,
including agricultural cooperatives, unable to
obtain credit elsewhere, not to exceed 4 per
centum per annum;
(D) in the case of a business concern able to
obtain credit elsewhere, the rate prescribed by
the Administration but not in excess of the
lowest of (i) the rate prevailing in the
private market for similar loans, (ii) the rate
prescribed by the Administration as the maximum
interest rate for deferred participation
(guaranteed) loans under section 7(a) of this
Act, or (iii) 8 per centum per annum. Loans
under this subparagraph shall be limited to a
maximum term of 7 years.
(6) Notwithstanding the provisions of any other law,
such loans, subject to the reductions required by
subparagraphs (A) and (B) of paragraph 7(b)(1), shall
be in amounts equal to 100 per centum of loss. The
interest rate for loans made under paragraphs 7(b)(1)
and (2), as determined pursuant to paragraph (5), shall
be the rate of interest which is in effect on the date
of the disaster commenced: Provided, That no loan under
paragraphs 7(b) (1) and (2) shall be made, either
directly or in cooperation with banks or other lending
institutions through agreements to participate on an
immediate or deferred (guaranteed) basis, if the total
amount outstanding and committed to the borrower under
subsection 7(b) would exceed $500,000 for each disaster
unless an applicant constitutes a major source of
employment in an area suffering a disaster, in which
case the Administration, in its discretion, may waive
the $500,000 limitation: Provided further, That the
Administration, subject to the reductions required by
subparagraphs (A) and (B) of paragraph 7(b)(1), shall
not reduce the amount of eligibility for any homeowner
on account of loss of real estate to less than $100,000
for each disaster nor for any homeowner or lessee on
account of loss of personal property to less than
$20,000 for each disaster, such sums being in addition
to any eligible refinancing: Provided further, That the
Administration shall not require collateral for loans
of $25,000 or less (or such higher amount as the
Administrator determines appropriate in the event of a
disaster) which are made under paragraph (1) of
subsection (b): Provided further, That the
Administrator, in obtaining the best available
collateral for a loan of not more than $200,000 under
paragraph (1) or (2) of subsection (b) relating to
damage to or destruction of the property of, or
economic injury to, a small business concern, shall not
require the owner of the small business concern to use
the primary residence of the owner as collateral if the
Administrator determines that the owner has other
assets of equal quality and with a value equal to or
greater than the amount of the loan that could be used
as collateral for the loan: Provided further, That
nothing in the preceding proviso may be construed to
reduce the amount of collateral required by the
Administrator in connection with a loan described in
the preceding proviso or to modify the standards used
to evaluate the quality (rather than the type) of such
collateral. Employees of concerns sharing a common
business premises shall be aggregated in determining
``major source of employment'' status for nonprofit
applicants owning such premises.
With respect to any loan which is outstanding on the date of
enactment of this paragraph and which was made on account of a
disaster commencing on or after October 1, 1982, the
Administrator shall made such change in the interest rate on
the balance of such loan as is required herein effective as of
the date of enactment.
(7) The Administration shall not withhold disaster assistance
pursuant to this paragraph to nurseries who are victims of
drought disasters. As used in section 7(b)(2) the term ``an
area affected by a disaster'' includes any county, or county
contiguous thereto, determined to be a disaster by the
President, the Secretary of Agriculture or the Administrator of
the Small Business Administration.
(8) Disaster loans for superstorm sandy.--
(A) In general.--Notwithstanding any other
provision of law, and subject to the same
requirements and procedures that are used to
make loans pursuant to subsection (b), a small
business concern, homeowner, nonprofit entity,
or renter that was located within an area and
during the time period with respect to which a
major disaster was declared by the President
under section 401 of the Robert T. Stafford
Disaster Relief and Emergency Assistance Act
(42 U.S.C. 5170) by reason of Superstorm Sandy
may apply to the Administrator--
(i) for a loan to repair,
rehabilitate, or replace property
damaged or destroyed by reason of
Superstorm Sandy; or
(ii) if such a small business concern
has suffered substantial economic
injury by reason of Superstorm Sandy,
for a loan to assist such a small
business concern.
(B) Timing.--The Administrator shall select
loan recipients and make available loans for a
period of not less than 1 year after the date
on which the Administrator carries out this
authority.
(C) Inspector general review.--Not later than
6 months after the date on which the
Administrator begins carrying out this
authority, the Inspector General of the
Administration shall initiate a review of the
controls for ensuring applicant eligibility for
loans made under this paragraph.
(e) The Administration shall not fund any Small Business
Development Center or any variation thereof, except as
authorized in section 21 of this Act.
(f) Additional Requirements for 7(b) Loans.--
(1) Increased deferment authorized.--
(A) In general.--In making loans under
subsection (b), the Administrator may provide,
to the person receiving the loan, an option to
defer repayment on the loan.
(B) Period.--The period of a deferment under
subparagraph (A) may not exceed 4 years.
(g) Net Earnings Clauses Prohibited for 7(b) Loans.--In
making loans under subsection (b), the Administrator shall not
require the borrower to pay any non-amortized amount for the
first five years after repayment begins.
(e) [RESERVED].
(f) [RESERVED].
(h)(1) The Administration also is empowered, where other
financial assistance is not available on reasonable terms, to
make such loans (either directly or in cooperation with Banks
or other lending institutions through agreements to participate
on an immediate or deferred basis) as the Administration may
determine to be necessary or appropriate--
(A) to assist any public or private organization--
(i) which is organized under the laws of the
United States or of any State, operated in the
interest of handicapped individuals, the net
income of which does not inure in whole or in
part to the benefit of any shareholder or other
individual;
(ii) which complies with any applicable
occupational health and safety standard
prescribed by the Secretary of Labor; and
(iii) which, in the production of commodities
and in the provision of services during any
fiscal year in which it receives financial
assistance under this subsection, employs
handicapped individuals for not less than 75
per centum of the man-hours required for the
production or provision of the commodities or
services; or
(B) to assist any handicapped individual in
establishing, acquiring, or operating a small business
concern.
(2) The Administration's share of any loan made under this
subsection shall not exceed $350,000, nor may any such loan be
made if the total amount outstanding and committed (by
participation or otherwise) to the borrower from the business
loan and investment fund established by section 4(c)(1)(B) of
this Act would exceed $350,000. In agreements to participate in
loans on a deferred basis under this subsection, the
Administration's participation may total 100 per centum of the
balance of the loan at the time of disbursement. The
Administration's share of any loan made under this subsection
shall bear interest at the rate of 3 per centum per annum. The
maximum term of any such loan, including extensions and
renewals thereof, may not exceed fifteen years. All loans made
under this subsection shall be of such sound value or so
secured as reasonably to assure repayment: Provided, however,
That any reasonable doubt shall be resolved in favor of the
applicant.
(3) For purposes of this subsection, the term ``handicapped
individual'' means a person who has a physical, mental, or
emotional impairment, defect, ailment, disease, or disability
of a permanent nature which in any way limits the selection of
any type of employment for which the person would otherwise be
qualified or qualifiable.
(i)(1) The Administration also is empowered to make,
participate (on an immediate basis) in, or guarantee loans,
repayable in not more than fifteen years, to any small business
concern, or to any qualified person seeking to establish such a
concern, when it determines that such loans will further the
policies established in section 2(b) of this Act, with
particular emphasis on the preservation or establishment of
small business concerns located in urban or rural areas with
high proportions of unemployed or low-income individuals, or
owned by low-income individuals: Provided, however, That no
such loans shall be made, participated in, or guaranteed if the
total of such Federal assistance to a single borrower
outstanding at any one time would exceed $100,000. The
Administration may defer payments on the principal of such
loans for a grace period and use such other methods as it deems
necessary and appropriate to assure the successful
establishment and operation of such concern. The Administration
may, in its discretion, as a condition of such financial
assistance, require that the borrower take steps to improve his
management skills by participating in a management training
program approved by the Administration: Provided, however, That
any management training program so approved must be of
sufficient scope and duration to provide reasonable opportunity
for the individuals served to develop entrepreneurial and
managerial self-sufficiency.
(2) The Administration shall encourage, as far as possible,
the participation of the private business community in the
program of assistance to such concerns, and shall seek to
stimulate new private lending activities to such concerns
through the use of the loan guarantees, participations in
loans, and pooling arrangements authorized by this subsection.
(3) To insure an equitable distribution between urban and
rural areas for loans between $3,500 and $100,000 made under
this subsection, the Administration is authorized to use the
agencies and agreements and delegations developed under title
III of the Economic Opportunity Act of 1964, as amended, as it
shall determine necessary.
(4) The Administration shall provide for the continuing
evaluation of programs under this subsection, including full
information on the location, income characteristics, and types
of businesses and individuals assisted, and on new private
lending activity stimulated, and the results of such evaluation
together with recommendations shall be included in the report
required by section 10(a) of this Act.
(5) Loans made pursuant to this subsection (including
immediate participation in and guarantees of such loans) shall
have such terms and conditions as the Administration shall
determine, subject to the following limitations--
(A) there is reasonable assurance of repayment of the
loan;
(B) the financial assistance is not otherwise
available on reasonable terms from private sources or
other Federal, State, or local programs;
(C) the amount of the loan, together with other funds
available, is adequate to assure completion of the
project or achievement of the purposes for which the
loan is made;
(D) the loan bears interest at a rate not less than
(i) a rate determined by the Secretary of the Treasury,
taking into consideration the average market yield on
outstanding Treasury obligations of comparable
maturity, plus (ii) such additional charge, if any,
toward covering other costs of the program as the
Administration may determine to be consistent with its
purposes: Provided, however, That the rate of interest
charged on loans made in redevelopment areas designated
under the Public Works and Economic Development Act of
1965 (42 U.S.C. 3108 et seq.) shall not exceed the rate
currently applicable to new loans made under section
201 of that Act (42 U.S.C. 3142); and
(E) fees not in excess of amounts necessary to cover
administrative expenses and probable losses may be
required on loan guarantees.
(6) The Administration shall take such steps as may be
necessary to insure that, in any fiscal year, at least 50 per
centum of the amounts loaned or guaranteed pursuant to this
subsection are allotted to small business concerns located in
urban areas identified by the Administration as having high
concentrations of unemployed or low-income individuals or to
small business concerns owned by low-income individuals. The
Administration shall define the meaning of low income as it
applies to owners of small business concerns eligible to be
assisted under this subsection.
(7) No financial assistance shall be extended pursuant to
this subsection when the Administration determines that the
assistance will be used in relocating establishments from one
area to another if such relocation would result in an increase
in unemployment in the area of original location.
(j)(1) the Administration shall provide financial assistance
to public or private organizations to pay all or part of the
cost of projects designated to provide technical or management
assistance to individuals or enterprises eligible for
assistance under sections 7(i), 7(j)(10), and 8(a) of this Act,
with special attention to small businesses located in areas of
high concentration of unemployed or low-income individuals, to
small businesses eligible to receive contracts pursuant to
section 8(a) of this Act.
(2) Financial assistance under this subsection may be
provided for projects, including, but not limited to--
(A) planning and research, including feasibility
studies and market research;
(B) the identification and development of new
business opportunities;
(C) the furnishing of centralized services with
regard to public services and Federal Government
programs including programs authorized under sections
7(i), (7)(j)(10), and 8(a) of this Act;
(D) the establishment and strengthening of business
service agencies, including trade associations and
cooperative; and
(E) the furnishing of business counseling, management
training, and legal and other related services, with
special emphasis on the development of management
training programs using the resources of the business
community, including the development of management
training opportunities in existing business, and with
emphasis in all cases upon providing management
training of sufficient scope and duration to develop
entrepreneurial and managerial self-sufficiency on the
part of the individuals served.
(3) The Administration shall encourage the placement of
subcontracts by businesses with small business concerns located
in area of high concentration of unemployed or low-income
individuals, with small businesses owned by low-income
individuals, and with small businesses eligible to receive
contracts pursuant to section 8(a) of this Act. The
Administration may provide incentives and assistance to such
businesses that will aid in the training and upgrading of
potential subcontractors or other small business concerns
eligible for assistance under section 7(i), 7(j), and 8(a), of
this Act.
(4) The Administration shall give preference to projects
which promote the ownership, participation in ownership, or
management of small businesses owned by low-income individuals
and small businesses eligible to receive contracts pursuant to
section 8(a) of this Act.
(5) The financial assistance authorized for projects under
this subsection includes assistance advanced by grant,
agreement, or contract.
(6) The Administration is authorized to make payments under
grants and contracts entered into under this subsection in lump
sum or installments, and in advance or by way of reimbursement,
and in the case of grants, with necessary adjustments on
account of overpayments or underpayments.
(7) To the extent feasible, services under this subsection
shall be provided in a location which is easily accessible to
the individuals and small business concerns served.
(9) The Administration shall take such steps as may be
necessary and appropriate, in coordination and cooperation with
the heads of other Federal departments and agencies, to insure
that contracts, subcontracts, and deposits made by the Federal
Government or with programs aided with Federal funds are placed
in such way as to further the purposes of sections 7(i), 7(j),
and 8(a) of this Act.
(10) There is established with the Administration a small
business and capital ownership development program (hereinafter
referred to as the ``Program'') which shall provide assistance
exclusively for small business concerns eligible to receive
contracts pursuant to section 8(a) of this Act. The program,
and all other services and activities authorized under section
7(j) and 8(a) of this Act, shall be managed by the Associate
Administrator for Minority Small Business and Capital Ownership
Development under the supervision of, and responsible to, the
Administrator.
(A) The Program shall--
(i) assist small business concerns
participating in the Program (either through
public or private organizations) to develop and
maintain comprehensive business plans which set
forth the Program Participant's specific
business targets, objectives, and goals
developed and maintained in conformity with
subparagraph (D).
(ii) provide for such other nonfinancial
services as deemed necessary for the
establishment, preservation, and growth of
small business concerns participating in the
Program, including but not limited to (I) loan
packaging, (II) financing counseling, (III)
accounting and bookkeeping assistance, (IV)
marketing assistance, and (V) management
assistance;
(iii) assist small business concerns
participating in the Program to obtain equity
and debt financing;
(iv) establish regular performance monitoring
and reporting systems for small business
concerns participating in the Program to assure
compliance with their business plans;
(v) analyze and report the causes of success
and failure of small business concerns
participating in the Program; and
(vi) provide assistance necessary to help
small business concerns participating in the
Program to procure surety bonds, with such
assistance including, but not limited to, (I)
the preparation of application forms required
to receive a surety bond, (II) special
management and technical assistance designed to
meet the specific needs of small business
concerns participating in the Program and which
have received or are applying to receive a
surety bond, and (III) guarantee from the
Administration pursuant to title IV, part B of
the Small Business Investment Act of 1958.
(B) Small business concerns eligible to receive
contracts pursuant to section 8(a) of this Act shall
participate in the Program.
(C)(i) A small business concern participating in any
program or activity conducted under the authority of
this paragraph or eligible for the award of contracts
pursuant to section 8(a) on September 1, 1988, shall be
permitted continued participation and eligibility in
such program or activity for a period of time which is
the greater of--
(I) 9 years less the number of years since
the award of its first contract pursuant to
section 8(a); or
(II) its original fixed program participation
term (plus any extension thereof) assigned
prior to the effective date of this paragraph
plus eighteen months.
(ii) Nothing contained in this subparagraph shall be
deemed to prevent the Administration from instituting a
termination or graduation pursuant to subparagraph (F)
or (H) for issues unrelated to the expiration of any
time period limitation.
(D)(i) Promptly after certification under paragraph
(11) a Program Participant shall submit a business plan
(hereinafter referred to as the plan'') as described in
clause (ii) of this subparagraph for review by the
Business Opportunity Specialist assigned to assist such
Program Participant. The plan may be a revision of a
preliminary business plan submitted by the Program
Participant or required by the Administration as a part
of the application for certification under this section
and shall be designed to result in the Program
Participant eliminating the conditions or circumstances
upon which the Administration determined eligibility
pursuant to section 8(a)(6). Such plan, and subsequent
modifications submitted under clause (iii) of this
subparagraph, shall be approved by the business
opportunity specialist prior to the Program Participant
being eligible for award of a contract pursuant to
section 8(a).
(ii) The plans submitted under this
subparagraph shall include the following:
(I) An analysis of market potential,
competitive environment, and other
business analyses estimating the
Program Participant's prospects for
profitable operations during the term
of program participation and after
graduation.
(II) An analysis of the Program
Participant's strengths and weaknesses
with particular attention to correcting
any financial, managerial, technical,
or personnel conditions which are
likely to impede the small business
concern from receiving contracts other
than those awarded under section 8(a).
(III) Specific targets, objectives,
and goals, for the business development
of the Program Participant during the
next and succeeding years utilizing the
results of the analyses conducted
pursuant to subclauses (I) and (II).
(IV) A transition management plan
outlining specific steps to assure
profitable business operations after
graduation (to be incorporated into the
Program Participant's plan during the
first year of the transitional stage of
Program participation).
(V) Estimates of contract awards
pursuant to section 8(a) and from other
sources, which the Program Participant
will require to meet the specific
targets, objectives, and goals for the
years covered by its plan. The
estimates established shall be
consistent with the provisions of
subparagraph (I) and section 8(a).
(iii) Each Program Participant shall annually
review its currently approved plan with its
Business Opportunity Specialist and modify such
plan as may be appropriate. Any modified plan
shall be submitted to the Administration for
approval. The currently approved plan shall be
considered valid until such time as a modified
plan is approved by the Business Opportunity
Specialist. Annual reviews pertaining to years
in the transitional stage of program
participation shall require, as appropriate, a
written verification that such Program
Participant has complied with the requirements
of subparagraph (I) relating to attaining
business activity from sources other than
contracts awarded pursuant to section 8(a).
(iv) Each Program Participant shall annually
forecast its needs for contract awards under
section 8(a) for the next program year and the
succeeding program year during the review of
its business plan, conducted pursuant to clause
(iii). Such forecast shall be known as the
section 8(a) contract support level and shall
be included in the Program Participant's
business plan. Such forecast shall include--
(I) the aggregate dollar value of
contract support to be sought on a
noncompetitive basis under section
8(a), reflecting compliance with the
requirements of subparagraph (I)
relating to attaining business activity
from sources other than contracts
awarded pursuant to section 8(a),
(II) the types of contract
opportunities being sought, identified
by Standard Industrial Classification
(SIC) Code or otherwise,
(III) an estimate of the dollar value
of contract support to be sought on a
competitive basis, and
(IV) such other information as may be
requested by the Business Opportunity
Specialist to provide effective
business development assistance to the
Program Participant.
(E) A small business concern participating in the
program conducted under the authority of this paragraph
and eligible for the award of contracts pursuant to
section 8(a) shall be denied all such assistance if
such concern--
(i) voluntarily elects not to continue
participation;
(ii) completes the period of Program
participation as prescribed by paragraph (15);
(iii) is terminated pursuant to a termination
proceeding conducted in accordance with section
8(a)(9); or
(iv) is graduated pursuant to a graduation
proceeding conducted in accordance with section
8(a)(9).
(F) For the purposes of section and 8(a), the terms
``terminated'' or ``termination'' means the total
denial or suspension of assistance under this paragraph
or under section 8(a) prior to the graduation of the
participating small business concern or prior to the
expiration of the maximum program participation in
term. An action for termination shall be based upon
good cause, including--
(i) the failure by such concern to maintain
its eligibility for Program participation;
(ii) the failure of the concern to engage in
business practices that will promote its
competitiveness within a reasonable period of
time as evidenced by, among other indicators, a
pattern of unjustified delinquent performance
or terminations for default with respect to
contracts awarded under the authority of
section 8(a);
(iii) a demonstrated pattern of failing to
make required submissions or responses to the
Administration in a timely manner;
(iv) the willful violation of any rule or
regulation of the Administration pertaining to
material issues;
(v) the debarment of the concern or its
disadvantaged owners by any agency pursuant to
subpart 9.4 of title 48, Code of Federal
Regulations (or any successor regulation); or
(vi) the conviction of the disadvantaged
owner or an officer of the concern for any
offense indicating a lack of business integrity
including any conviction for embezzlement,
theft, forgery, bribery, falsification or
violation of section 16. For purposes of this
clause, no termination action shall be taken
with respect to a disadvantaged owner solely
because of the conviction of an officer of the
concern (who is other than a disadvantaged
owner) unless such owner conspired with,
abetted, or otherwise knowingly acquiesced in
the activity or omission that was the basis of
such officer's conviction.
(G) The Director of the Division may initiate a
termination proceeding by recommending such action to
the Associate Administrator for Minority Small Business
and Capital Ownership Development. Whenever the
Associate Administrator, or a designee of such officer,
determines such termination is appropriate, within 15
days after making such a determination the Program
Participant shall be provided a written notice of
intent to terminate, specifying the reasons for such
action. No Program Participant shall be terminated from
the Program pursuant to subparagraph (F) without first
being afforded an opportunity for a hearing in
accordance with section 8(a)(9).
(H) For the purposes of sections 7(j) and 8(a) the
term ``graduated'' or ``graduation'' means that the
Program Participant is recognized as successfully
completing the program by substantially achieving the
targets, objectives, and goals contained in the
concern's business plan thereby demonstrating its
ability to compete in the marketplace without
assistance under this section or section 8(a).
(I)(i) During the developmental stage of its
participation in the Program, a Program Participant
shall take all reasonable efforts within its control to
attain the targets contained in its business plan for
contracts awarded other than pursuant to section 8(a)
(hereinafter referred to as ``business activity
targets.''). Such efforts shall be made a part of the
business plan and shall be sufficient in scope and
duration to satisfy the Administration that the Program
Participant will engage a reasonable marketing strategy
that will maximize its potential to achieve its
business activity targets.
(ii) During the transitional stage of the Program a
Program Participant shall be subject to regulations
regarding business activity targets that are
promulgated by the Administration pursuant to clause
(iii);
(iii) The regulations referred to in clause (ii)
shall:
(I) establish business activity targets
applicable to Program Participants during the
fifth year and each succeeding year of Program
Participation; such targets, for such period of
time, shall reflect a reasonably consistent
increase in contracts awarded other than
pursuant to section 8(a), expressed as a
percentage of total sales; when promulgating
business activity targets the Administration
may establish modified targets for Program
Participants that have participated in the
Program for a period of longer than four years
on the effective date of this subparagraph;
(II) require a Program Participant to attain
its business activity targets;
(III) provide that, before the receipt of any
contract to be awarded pursuant to section
8(a), the Program Participant (if it is in the
transitional stage) must certify that it has
complied with the regulations promulgated
pursuant to subclause (II), or that it is in
compliance with such remedial measures as may
have been ordered pursuant to regulations
issued under subclause (V);
(IV) require the Administration to review
each Program Participant's performance
regarding attainment of business activity
targets during periodic reviews of such
Participant's business plan; and
(V) authorize the Administration to take
appropriate remedial measures with respect to a
Program Participant that has failed to attain a
required business activity target for the
purpose of reducing such Participant's
dependence on contracts awarded pursuant to
section 8(a); such remedial actions may
include, but are not limited to assisting the
Program Participant to expand the dollar volume
of its competitive business activity or
limiting the dollar volume of contracts awarded
to the Program Participant pursuant to section
8(a); except for actions that would constitute
a termination, remedial measures taken pursuant
to this subclause shall not be reviewable
pursuant to section 8(a)(9).
(J)(i) The Administration shall conduct an evaluation
of a Program Participant's eligibility for continued
participation in the Program whenever it receives
specific and credible information alleging that such
Program Participant no longer meets the requirements
for Program eligibility. Upon making a finding that a
Program Participant is no longer eligible, the
Administration shall initiate a termination proceeding
in accordance with subparagraph (F). A Program
Participant's eligibility for award of any contract
under the authority of section 8(a) may be suspended
pursuant to subpart 9.4 of title 48, Code of Federal
Regulations (or any successor regulation).
(ii)(I) Except as authorized by subclauses (II) or
(III), no award shall be made pursuant to section 8(a)
to a concern other than a small business concern.
(II) In determining the size of a small business
concern owned by a socially and economically
disadvantaged Indian tribe (or a wholly owned business
entity of such tribe), each firm's size shall be
independently determined without regard to its
affiliation with the tribe, any entity of the tribal
government, or any other business enterprise owned by
the tribe, unless the Administrator determines that one
or more such tribally owned business concerns have
obtained, or are likely to obtain, a substantial unfair
competitive advantage within an industry category.
(III) Any joint venture established under the
authority of section 602(b) of Public Law 100-656, the
``Business Opportunity Development Reform Act of
1988'', shall be eligible for award of a contract
pursuant to section 8(a).
(11)(A) The Associate Administrator for Minority Small
Business and Capital Ownership Development shall be responsible
for coordinating and formulating policies relating to Federal
assistance to small business concerns eligible for assistance
under section 7(i) of this Act and small business concerns
eligible to receive contracts pursuant to section 8(a) of this
Act.
(B)(i) Except as provided in clause (iii), no
individual who was determined pursuant to section 8(a)
to be socially and economically disadvantaged before
the effective date of this subparagraph shall be
permitted to assert such disadvantage with respect to
any other concern making application for certification
after such effective date.
(ii) Except as provided in clause (iii), any
individual upon whom eligibility is based
pursuant to section 8(a)(4) shall be permitted
to assert such eligibility for only one small
business concern.
(iii) A socially and economically
disadvantaged Indian tribe may own more than
one small business concern eligible for
assistance pursuant to section 7(j)(10) and
section 8(a) if--
(I) the Indian tribe does not own
another firm in the same industry which
has been determined to be eligible to
receive contracts under this program,
and
(II) the individuals responsible for
the management and daily operations of
the concern do not manage more than two
Program Participants.
(C) No concern, previously eligible for the award of
contracts pursuant to section 8(a), shall be subsequently
recertified for program participation if its prior
participation in the program was concluded for any of the
reasons described in paragraph (10)(E).
(D) A concern eligible for the award of contracts pursuant to
this subsection shall remain eligible for such contracts if
there is a transfer of ownership and control (as defined
pursuant to section 8(a)(4)) to individuals who are determined
to be socially and economically disadvantaged pursuant to
section 8(a). In the event of such a transfer, the concern, if
not terminated or graduated, shall be eligible for a period of
continued participation in the program not to exceed the time
limitations prescribed in paragraph (15).
(E) There is established a Division of Program Certification
and Eligibility (hereinafter referred to in this paragraph as
the Division'') that shall be made part of the Office of
Minority Small Business and Capital Ownership Development. The
Division shall be headed by a Director who shall report
directly to the Associate Administrator for Minority Small
Business and Capital Ownership Development. The Division shall
establish field offices within such regional offices of the
Administration as may be necessary to perform efficiently its
functions and responsibilities.
(F) Subject to the provisions of section 8(a)(9), the
functions and responsibility of the Division are to--
(i) receive, review and evaluate applications for
certification pursuant to paragraphs (4), (5), (6) and
(7) of section 8(a);
(ii) advise each program applicant within 15 days
after the receipt of an application as to whether such
application is complete and suitable for evaluation
and, if not, what matters must be rectified;
(iii) render recommendations on such applications to
the Associate Administrator for Minority Small Business
and Capital Ownership Development;
(iv) review and evaluate financial statements and
other submissions from concerns participating in the
program established by paragraph (10) to ascertain
continued eligibility to receive subcontracts pursuant
to section 8(a);
(v) make a request for the initiation of termination
or graduation proceedings, as appropriate, to the
Associate Administrator for Minority Small Business and
Capital Ownership Development;
(vi) make recommendations to the Associate
Administrator for Minority Small Business and Capital
Ownership Development concerning protests from
applicants that have been denied program admission;
(vii) decide protests regarding the status of a
concern as a disadvantaged concern for purposes of any
program or activity conducted under the authority of
subsection (d) of section 8, or any other provision of
Federal law that references such subsection for a
definition of program eligibility; and
(vii) implement such policy directives as may be
issued by the Associate Administrator for Minority
Small Business and Capital Ownership Development
pursuant to subparagraph (I) regarding, among other
things, the geographic distribution of concerns to be
admitted to the program and the industrial make-up of
such concerns.
(G) An applicant shall not be denied admission into the
program established by paragraph (10) due solely to a
determination by the Division that specific contract
opportunities are unavailable to assist in the development of
such concern unless--
(i) the Government has not previously procured and is
unlikely to procure the types of products or services
offered by the concern; or
(ii) the purchases of such products or services by
the Federal Government will not be in quantities
sufficient to support the developmental needs of the
applicant and other Program Participants providing the
same or similar items or services.
(H) Not later than 90 days after receipt of a
completed application for Program certification, the
Associate Administrator for Minority Small Business and
Capital Ownership Development shall certify a small
business concern as a Program Participant or shall deny
such application.
(I) Thirty days before the conclusion of each fiscal year,
the Director of the Division shall review all concerns that
have been admitted into the Program during the preceding 12-
month period. The review shall ascertain the number of
entrants, their geographic distribution and industrial
classification. The Director shall also estimate the expected
growth of the Program during the next fiscal year and the
number of additional Business Opportunity Specialists, if any,
that will be needed to meet the anticipated demand for the
Program. The findings and conclusions of the Director shall be
reported to the Associate Administrator for Minority Small
Business and Capital Ownership Development by September 30 of
each year. Based on such report and such additional data as may
be relevant, the Associate Administrator shall, by October 31
of each year, issue policy and program directives applicable to
such fiscal year that--
(i) establish priorities for the solicitation of
program applications from underrepresented regions and
industry categories;
(ii) assign staffing levels and allocate other
program resources as necessary to meet program needs;
and
(iii) establish priorities in the processing and
admission of new Program Participants as may be
necessary to achieve an equitable geographic
distribution of concerns and a distribution of concerns
across all industry categories in proportions needed to
increase significantly contract awards to small
business concerns owned and controlled by socially and
economically disadvantaged individuals. When
considering such increase the Administration shall give
due consideration to those industrial categories where
Federal purchases have been substantial but where the
participation rate of such concerns has been limited.
(12)(A) The Administration shall segment the Capital
Ownership Development Program into two stages: a developmental
stage; and a transitional stage.
(B) The developmental stage of program participation shall be
designed to assist the concern in its effort to overcome its
economic disadvantage by providing such assistance as may be
necessary and appropriate to access its markets and to
strengthen its financial and managerial skills.
(C) The transitional stage of program participation shall be
designed to overcome, insofar as practicable, the remaining
elements of economic disadvantage and to prepare such concern
for graduation from the program.
(13) A Program Participant, if otherwise eligible, shall be
qualified to receive the following assistance during the stages
of program participation specified in paragraph 12:
(A) Contract support pursuant to section 8(a).
(B) Financial assistance pursuant to section
7(a)(20).
(C) A maximum of two exemptions from the requirements
of section 1(a) of the Act entitled ``An Act providing
conditions for the purchase of supplies and the making
of contracts by the United States, and for other
purposes'', approved June 30, 1936 (49 Stat. 2036),
which exemptions shall apply only to contracts awarded
pursuant to section (8)(a) and shall only be used to
allow for contingent agreements by a small business
concern to acquire the machinery, equipment,
facilities, or labor needed to perform such contracts.
No exemption shall be made pursuant to this
subparagraph if the contract to which it pertains has
an anticipated value in excess of $10,000,000. This
subparagraph shall cease to be effective on October 1,
1992.
(D) A maximum of five exemptions from the
requirements of the Act entitled ``An Act requiring
contracts for the construction, alteration and repair
of any public building or public work of the United
States to be accompanied by a performance bond
protecting the United States and by an additional bond
for the protection of persons furnishing material and
labor for the construction, alteration, or repair of
said public buildings or public works'', approved
August 24, 1935 (49 Stat. 793), which exemptions shall
apply only to contracts awarded pursuant to section
8(a), except that, such exemptions may be granted under
this subparagraph only if--
(i) the Administration finds that such
concern is unable to obtain the requisite bond
or bonds from a surety and that no surety is
willing to issue a bond subject to the
guarantee provision of title IV of the Small
Business Investment Act of 1958 (15 U.S.C. 692
et seq.);
(ii) the Administration and the agency
providing the contracting opportunity have
provided for the protection of persons
furnishing materials or labor to the Program
Participant by arranging for the direct
disbursement of funds due to such persons by
the procuring agency or through any bank the
deposits of which are insured by the Federal
Deposit Insurance Corporation; and
(iii) the contract to which it pertains does
not exceed $3,000,000 in amount. This
subparagraph shall cease to be effective on
October 1, 1994.
(E) Financial assistance whereby the Administration
may purchase in whole or in part, and on behalf of such
concerns, skills training or upgrading for employees or
potential employees of such concerns. Such assistance
may be made without regard to section 18(a). Assistance
may be made by direct payment to the training provider
or by reimbursing the Program Participant or the
Participant's employee, if such reimbursement is found
to be reasonable and appropriate. For purposes of this
subparagraph the term ``training provider'' shall mean
an institution of higher education, a community or
vocational college, or an institution eligible to
provide skills training or upgrading under title I of
the Workforce Innovation and Opportunity Act. The
Administration shall, in consultation with the
Secretary of Labor, promulgate rules and regulations to
implement this subparagraph that establish acceptable
training and upgrading performance standards and
provide for such monitoring or audit requirements as
may be necessary to ensure the integrity of the
training effort. No financial assistance shall be
granted under the subparagraph unless the Administrator
determines that--
(i) such concern has documented that it has
first explored the use of existing cost-free or
cost-subsidized training programs offered by
public and private sector agencies working with
programs of employment and training and
economic development;
(ii) no more than five employees or potential
employees of such concern are recipients of any
benefits under this subparagraph at any one
time;
(iii) no more than $2,500 shall be made
available for any one employee or potential
employee;
(iv) the length of training or upgrading
financed by this subparagraph shall be no less
than one month nor more than six months;
(v) such concern has given adequate assurance
it will employ the trainee or upgraded employee
for at least six months after the training or
upgrading financed by this subparagraph has
been completed and each trainee or upgraded
employee has provided a similar assurance to
remain within the employ of such concern for
such period; if such concern, trainee, or
upgraded employee breaches this agreement, the
Administration shall be entitled to and shall
make diligent efforts to obtain from the
violating party the repayment of all funds
expended on behalf of the violating party, such
repayment shall be made to the Administration
together with such interest and costs of
collection as may be reasonable; the violating
party shall be barred from receiving any
further assistance under this subparagraph;
(vi) the training to be financed may take
place either at such concern's facilities or at
those of the training provider; and
(vii) such concern will maintain such records
as the Administration deems appropriate to
ensure that the provisions of this paragraph
and any other applicable law have not been
violated.
(F)(i) The transfer of technology or surplus property
owned by the United States to such a concern.
Activities designed to effect such transfer shall be
developed in cooperation with the heads of Federal
agencies and shall include the transfer by grant,
license, or sale of such technology or property to such
a concern. Such property may be transferred to Program
Participants on a priority basis. Technology or
property transferred under this subparagraph shall be
used by the concern during the normal conduct of its
business operation and shall not be sold or transferred
to any other party (other than the Government) during
such concern's term of participation in the Program and
for one year thereafter.
(ii)(I) In this clause--
(aa) the term ``covered period''
means the 2-year period beginning on
the date on which the President
declared the applicable major disaster;
and
(bb) the term ``disaster area'' means
the area for which the President has
declared a major disaster, during the
covered period.
(II) The Administrator may transfer
technology or surplus property under clause (i)
on a priority basis to a small business concern
located in a disaster area if--
(aa) the small business concern meets
the requirements for such a transfer,
without regard to whether the small
business concern is a Program
Participant; and
(bb) for a small business concern
that is a Program Participant, on and
after the date on which the President
declared the applicable major disaster,
the small business concern has not
received property under this
subparagraph on the basis of the status
of the small business concern as a
Program Participant.
(III) For any transfer of property under this
clause to a small business concern, the terms
and conditions shall be the same as a transfer
to a Program Participant, except that the small
business concern shall agree not to sell or
transfer the property to any party other than
the Federal Government during the covered
period.
(IV) A small business concern that receives a
transfer of property under this clause may not
receive a transfer of property under clause (i)
during the covered period.
(V) If a small business concern sells or
transfers property in violation of the
agreement described in subclause (III), the
Administrator may initiate proceedings to
prohibit the small business concern from
receiving a transfer of property under this
clause or clause (i), in addition to any other
remedy available to the Administrator.
(G) Training assistance whereby the Administration
shall conduct training sessions to assist individuals
and enterprises eligible to receive contracts under
section 8(a) in the development of business principles
and strategies to enhance their ability to successfully
compete for contracts in the marketplace.
(H) Joint ventures, leader-follower arrangements, and
teaming agreements between the Program Participant and
other Program Participants and other business concerns
with respect to contracting opportunities for the
research, development, full-scale engineering or
production of major systems. Such activities shall be
undertaken on the basis of programs developed by the
agency responsible for the procurement of the major
system, with the assistance of the Administration.
(I) Transitional management business planning
training and technical assistance.
(J) Program Participants in the developmental stage
of Program participation shall be eligible for the
assistance provided by subparagraphs (A), (B), (C),
(D), (E), (F), and (G).
(14) Program Participants in the transitional stage of
Program participation shall be eligible for the assistance
provided by subparagraphs (A), (B), (F), (G), (H), and (I) of
paragraph (13).
(15) Subject to the provisions of paragraph (10)(C), a small
business concern may receive developmental assistance under the
Program and contracts under section 8(a) for a total period of
not longer than nine years, measured from the date of its
certification under the authority of such section, of which--
(A) no more than four years may be spent in the
developmental stage of Program Participation; and
(B) no more than five years may be spent in the
transitional stage of Program Participation.
(16)(A) The Administrator shall develop and implement a
process for the systematic collection of data on the operations
of the Program established pursuant to paragraph (10).
(B) Not later than April 30 of each year, the Administrator
shall submit a report to the Congress on the Program that shall
include the following:
(i) The average personal net worth of individuals who
own and control concerns that were initially certified
for participation in the Program during the immediately
preceding fiscal year. The Administrator shall also
indicate the dollar distribution of net worths, at
$50,000 increments, of all such individuals found to be
socially and economically disadvantaged. For the first
report required pursuant to this paragraph the
Administrator shall also provide the data specified in
the preceding sentence for all eligible individuals in
the Program as of the effective date of this paragraph.
(ii) A description and estimate of the benefits and
costs that have accrued to the economy and the
Government in the immediately preceding fiscal year due
to the operations of those business concerns that were
performing contracts awarded pursuant to section 8(a).
(iii) A compilation and evaluation of those business
concerns that have exited the Program during the
immediately preceding three fiscal years. Such
compilation and evaluation shall detail the number of
concerns actively engaged in business operations, those
that have ceased or substantially curtailed such
operations, including the reasons for such actions, and
those concerns that have been acquired by other firms
or organizations owned and controlled by other than
socially and economically disadvantaged individuals.
For those businesses that have continued operations
after they exited from the Program, the Administrator
shall also separately detail the benefits and costs
that have accrued to the economy during the immediately
preceding fiscal year due to the operations of such
concerns.
(iv) A listing of all participants in the Program
during the preceding fiscal year identifying, by State
and by Region, for each firm: the name of the concern,
the race or ethnicity, and gender of the disadvantaged
owners, the dollar value of all contracts received in
the preceding year, the dollar amount of advance
payments received by each concern pursuant to contracts
awarded under section 8(a), and a description including
(if appropriate) an estimate of the dollar value of all
benefits received pursuant to paragraphs (13) and (14)
and section 7(a)(20) during such year.
(v) The total dollar value of contracts and options
awarded during the preceding fiscal year pursuant to
section 8(a) and such amount expressed as a percentage
of total sales of (I) all firms participating in the
Program during such year; and (II) of firms in each of
the nine years of program participation.
(vi) A description of such additional resources or
program authorities as may be required to provide the
types of services needed over the next two-year period
to service the expected portfolio of firms certified
pursuant to section 8(a).
(vii) The total dollar value of contracts and options
awarded pursuant to section 8(a), at such dollar
increments as the Administrator deems appropriate, for
each four digit standard industrial classification code
under which such contracts and options were classified.
(C) The first report required by subparagraph (B) shall
pertain to fiscal year 1990.
(k) In carrying out its functions under subsections 7(i),
7(j), and 8(a) of this Act, the Administration is authorized--
(1) to utilize, with their consent, the services and
facilities of Federal agencies without reimbursement,
and, with the consent of any State or political
subdivision of a State, accept and utilize the services
and facilities of such State or subdivision without
reimbursement;
(2) to accept, in the name of the Administration, and
employ or dispose of in furtherance of the purposes of
this Act, any money or property, real, personal, or
mixed, tangible, or intangible, received by gift,
device, bequest, or otherwise;
(3) to accept voluntary and uncompensated services,
notwithstanding the provisions of section 3679(b) of
the Revised Statutes (31 U.S.C. 655(b)); and
(4) to employ experts and consultants or
organizations thereof as authorized by section 15 of
the Administrative Expenses Act of 1946 (5 U.S.C. 55a),
except that no individual may be employed under the
authority of this subsection for more than one hundred
days in any fiscal year; to compensate individuals so
employed at rates not in excess of the daily equivalent
of the highest rate payable under section 5332 of title
5, United States Code, including traveltime; and to
allow them, while away from their homes or regular
places of business, travel expenses (including per diem
in lieu of subsistence) a authorized by section 5 of
such Act (5 U.S.C. 73b-2) for persons in the Government
service employed intermittently, while so employed:
Provided, however, That contracts for such employment
may be renewed annually.
(l) Small Business Intermediary Lending Pilot Program.--
(1) Definitions.--In this subsection--
(A) the term ``eligible intermediary''--
(i) means a private, nonprofit entity
that--
(I) seeks or has been awarded
a loan from the Administrator
to make loans to small business
concerns under this subsection;
and
(II) has not less than 1 year
of experience making loans to
startup, newly established, or
growing small business
concerns; and
(ii) includes--
(I) a private, nonprofit
community development
corporation;
(II) a consortium of private,
nonprofit organizations or
nonprofit community development
corporations; and
(III) an agency of or
nonprofit entity established by
a Native American Tribal
Government; and
(B) the term ``Program'' means the small
business intermediary lending pilot program
established under paragraph (2).
(2) Establishment.--There is established a 3-year
small business intermediary lending pilot program,
under which the Administrator may make direct loans to
eligible intermediaries, for the purpose of making
loans to startup, newly established, and growing small
business concerns.
(3) Purposes.--The purposes of the Program are--
(A) to assist small business concerns in
areas suffering from a lack of credit due to
poor economic conditions or changes in the
financial market; and
(B) to establish a loan program under which
the Administrator may provide loans to eligible
intermediaries to enable the eligible
intermediaries to provide loans to startup,
newly established, and growing small business
concerns for working capital, real estate, or
the acquisition of materials, supplies, or
equipment.
(4) Loans to eligible intermediaries.--
(A) Application.--Each eligible intermediary
desiring a loan under this subsection shall
submit an application to the Administrator that
describes--
(i) the type of small business
concerns to be assisted;
(ii) the size and range of loans to
be made;
(iii) the interest rate and terms of
loans to be made;
(iv) the geographic area to be served
and the economic, poverty, and
unemployment characteristics of the
area;
(v) the status of small business
concerns in the area to be served and
an analysis of the availability of
credit; and
(vi) the qualifications of the
applicant to carry out this subsection.
(B) Loan limits.--No loan may be made to an
eligible intermediary under this subsection if
the total amount outstanding and committed to
the eligible intermediary by the Administrator
would, as a result of such loan, exceed
$1,000,000 during the participation of the
eligible intermediary in the Program.
(C) Loan duration.--Loans made by the
Administrator under this subsection shall be
for a term of 20 years.
(D) Applicable interest rates.--Loans made by
the Administrator to an eligible intermediary
under the Program shall bear an annual interest
rate equal to 1.00 percent.
(E) Fees; collateral.--The Administrator may
not charge any fees or require collateral with
respect to any loan made to an eligible
intermediary under this subsection.
(F) Delayed payments.--The Administrator
shall not require the repayment of principal or
interest on a loan made to an eligible
intermediary under the Program during the 2-
year period beginning on the date of the
initial disbursement of funds under that loan.
(G) Maximum participants and amounts.--During
each of fiscal years 2011, 2012, and 2013, the
Administrator may make loans under the
Program--
(i) to not more than 20 eligible
intermediaries; and
(ii) in a total amount of not more
than $20,000,000.
(5) Loans to small business concerns.--
(A) In general.--The Administrator, through
an eligible intermediary, shall make loans to
startup, newly established, and growing small
business concerns for working capital, real
estate, and the acquisition of materials,
supplies, furniture, fixtures, and equipment.
(B) Maximum loan.--An eligible intermediary
may not make a loan under this subsection of
more than $200,000 to any 1 small business
concern.
(C) Applicable interest rates.--A loan made
by an eligible intermediary to a small business
concern under this subsection, may have a fixed
or a variable interest rate, and shall bear an
interest rate specified by the eligible
intermediary in the application of the eligible
intermediary for a loan under this subsection.
(D) Review restrictions.--The Administrator
may not review individual loans made by an
eligible intermediary to a small business
concern before approval of the loan by the
eligible intermediary.
(6) Termination.--The authority of the Administrator
to make loans under the Program shall terminate 3 years
after the date of enactment of the Small Business Job
Creation and Access to Capital Act of 2010.
(m) Microloan Program.--
(1)(A) Purposes.--The purposes of the Microloan
Program are--
(i) to assist women, low-income, veteran
(within the meaning of such term under section
3(q)), and minority entrepreneurs and business
owners and other individuals possessing the
capability to operate successful business
concerns;
(ii) to assist small business concerns in
those areas suffering from a lack of credit due
to economic downturns;
(iii) to establish a microloan program to be
administered by the Small Business
Administration--
(I) to make loans to eligible
intermediaries to enable such
intermediaries to provide small-scale
loans, particularly loans in amounts
averaging not more than $10,000, to
startup, newly established, or growing
small business concerns for working
capital or the acquisition of
materials, supplies, or equipment;
(II) to make grants to eligible
intermediaries that, together with non-
Federal matching funds, will enable
such intermediaries to provide
intensive marketing, management, and
technical assistance to microloan
borrowers;
(III) to make grants to eligible
nonprofit entities that, together with
non-Federal matching funds, will enable
such entities to provide intensive
marketing, management, and technical
assistance to assist low-income
entrepreneurs and other low-income
individuals obtain private sector
financing for their businesses, with or
without loan guarantees; and
(IV) to report to the Committees on
Small Business of the Senate and the
House of Representatives on the
effectiveness of the microloan program
and the advisability and feasibility of
implementing such a program nationwide;
and
(iv) to establish a welfare-to-work microloan
initiative, which shall be administered by the
Administration, in order to test the
feasibility of supplementing the technical
assistance grants provided under clauses (ii)
and (iii) of subparagraph (B) to individuals
who are receiving assistance under the State
program funded under part A of title IV of the
Social Security Act (42 U.S.C. 601 et seq.), or
under any comparable State funded means tested
program of assistance for low-income
individuals, in order to adequately assist
those individuals in--
(I) establishing small businesses;
and
(II) eliminating their dependence on
that assistance.
(B) Establishment.--There is established a microloan
program, under which the Administration may--
(i) make direct loans to eligible
intermediaries, as provided under paragraph
(3), for the purpose of making short-term,
fixed interest rate microloans to startup,
newly established, and growing small business
concerns under paragraph (6);
(ii) in conjunction with such loans and
subject to the requirements of paragraph (4),
make grants to such intermediaries for the
purpose of providing intensive marketing,
management, and technical assistance to small
business concerns that are borrowers under this
subsection; and
(iii) subject to the requirements of
paragraph (5), make grants to nonprofit
entities for the purpose of providing
marketing, management, and technical assistance
to low-income individuals seeking to start or
enlarge their own businesses, if such
assistance includes working with the grant
recipient to secure loans in amounts not to
exceed $50,000 from private sector lending
institutions, with or without a loan guarantee
from the nonprofit entity.
(2) Eligibility for participation.--An intermediary
shall be eligible to receive loans and grants under
subparagraphs (B)(i) and (B)(ii) of paragraph (1) if
it--
(A) meets the definition in paragraph (10);
and
(B) has at least 1 year of experience making
microloans to startup, newly established, or
growing small business concerns and providing,
as an integral part of its microloan program,
intensive marketing, management, and technical
assistance to its borrowers.
(3) Loans to intermediaries.--
(A) Intermediary applications.--(i) In
general.--As part of its application for a
loan, each intermediary shall submit a
description to the Administration of--
(I) the type of businesses to be
assisted;
(II) the size and range of loans to
be made;
(III) the geographic area to be
served and its economic, proverty, and
unemployment characteristics;
(IV) the status of small business
concerns in the area to be served and
an analysis of their credit and
technical assistance needs;
(V) any marketing, management, and
technical assistance to be provided in
connection with a loan made under this
subsection;
(VI) the local economic credit
markets, including the costs associated
with obtaining credit locally;
(VII) the qualifications of the
applicant to carry out the purpose of
this subsection; and
(VIII) any plan to involve other
technical assistance providers (such as
counselors from the Service Corps of
Retired Executives or small business
development centers) or private sector
lenders in assisting selected business
concerns.
(ii) Selection of intermediaries.--In
selecting intermediaries to participate in the
program established under this subsection, the
Administration shall give priority to those
applicants that provide loans in amounts
averaging not more than $10,000.
(B) Intermediary contribution.--As a
condition of any loan made to an intermediary
under subparagraph (B)(i) of paragraph (1), the
Administrator shall require the intermediary to
contribute not less than 15 percent of the loan
amount in cash from non-Federal sources.
(C) Loan limits.--Notwithstanding subsection
(a)(3), no loan shall be made under this
subsection if the total amount outstanding and
committed to one intermediary (excluding
outstanding grants) from the business loan and
investment fund established by this Act would,
as a result of such loan, exceed $750,000 in
the first year of such intermediary's
participation in the program, and $5,000,000 in
the remaining years of the intermediary's
participation in the program.
(D)(i) In general.--The Administrator shall,
by regulation, require each intermediary to
establish a loan loss reserve fund, and to
maintain such reserve fund until all
obligations owed to the Administration under
this subsection are repaid.
(ii) Level of loan loss reserve fund.--
(I) In general.--Subject to subclause
(III), the Administrator shall require
the loan loss reserve fund of an
intermediary to be maintained at a
level equal to 15 percent of the
outstanding balance of the notes
receivable owed to the intermediary.
(II) Review of loan loss reserve.--
After the initial 5 years of an
intermediary's participation in the
program authorized by this subsection,
the Administrator shall, at the request
of the intermediary, conduct a review
of the annual loss rate of the
intermediary. Any intermediary in
operation under this subsection prior
to October 1, 1994, that requests a
reduction in its loan loss reserve
shall be reviewed based on the most
recent 5-year period preceding the
request.
(III) Reduction of loan loss
reserve.--Subject to the requirements
of clause IV, the Administrator may
reduce the annual loan loss reserve
requirement of an intermediary to
reflect the actual average loan loss
rate for the intermediary during the
preceding 5-year period, except that in
no case shall the loan loss reserve be
reduced to less than 10 percent of the
outstanding balance of the notes
receivable owed to the intermediary.
(IV) Requirements.--The Administrator
may reduce the annual loan loss reserve
requirement of an intermediary only if
the intermediary demonstrates to the
satisfaction of the Administrator
that--
(aa) the average annual loss
rate for the intermediary
during the preceding 5-year
period is less than 15 percent;
and
(bb) that no other factors
exist that may impair the
ability of the intermediary to
repay all obligations owed to
the Administration under this
subsection.
(E) Unavailability of comparable credit.--An
intermediary may make a loan under this
subsection of more than $20,000 to a small
business concern only if such small business
concern demonstrates that it is unable to
obtain credit elsewhere at comparable interest
rates and that it has good prospects for
success. In no case shall an intermediary make
a loan under this subsection of more than
$50,000, or have outstanding or committed to
any 1 borrower more than $50,000.
(F) Loan duration; interest rates.--
(i) Loan duration.--Loans made by the
Administration under this subsection
shall be for a term of 10 years.
(ii) Applicable interest rates.--
Except as provided in clause (iii),
loans made by the Administration under
this subsection to an intermediary
shall bear an interest rate equal to
1.25 percentage points below the rate
determined by the Secretary of the
Treasury for obligations of the United
States with a period of maturity of 5
years, adjusted to the nearest one-
eighth of 1 percent.
(iii) Rates applicable to certain
small loans.--Loans made by the
Administration to an intermediary that
makes loans to small business concerns
and entrepreneurs averaging not more
than $7,500, shall bear an interest
rate that is 2 percentage points below
the rate determined by the Secretary of
the Treasury for obligations of the
United States with a period of maturity
of 5 years, adjusted to the nearest
one-eighth of 1 percent.
(iv) Rates applicable to multiple
sites or offices.--The interest rate
prescribed in clause (ii) or (iii)
shall apply to each separate loan-
making site or office of 1 intermediary
only if such site or office meets the
requirements of that clause.
(v) Rate basis.--The applicable rate
of interest under this paragraph
shall--
(I) be applied retroactively
for the first year of an
intermediary's participation in
the program, based upon the
actual lending practices of the
intermediary as determined by
the Administration prior to the
end of such year; and
(II) be based in the second
and subsequent years of an
intermediary's participation in
the program, upon the actual
lending practices of the
intermediary during the term of
the intermediary's
participation in the program.
(vii) Covered intermediaries.--The
interest rates prescribed in this
subparagraph shall apply to all loans
made to intermediaries under this
subsection on or after October 28,
1991.
(G) Delayed payments.--The Administration
shall not require repayment of interest or
principal of a loan made to an intermediary
under this subsection during the first year of
the loan.
(H) Fees; collateral.--Except as provided in
subparagraphs (B) and (D), the Administration
shall not charge any fees or require collateral
other than an assignment of the notes
receivable of the microloans with respect to
any loan made to an intermediary under this
subsection.
(4) Marketing, management and technical assistance
grants to intermediaries.--Grants made in accordance
with subparagraph (B)(ii) of paragraph (1) shall be
subject to the following requirements:
(A) Grant amounts.--Except as otherwise
provided in subparagraph (C) and subject to
subparagraph (B), each intermediary that
receives a loan under subparagraph (B)(i) of
paragraph (1) shall be eligible to receive a
grant to provide marketing, management, and
technical assistance to small business concerns
that are borrowers under this subsection.
Except as provided in subparagraph (C), each
intermediary meeting the requirements of
subparagraph (B) may receive a grant of not
more than 25 percent of the total outstanding
balance of loans made to it under this
subsection.
(B) Contribution.--As a condition of a grant
made under subparagraph (A), the Administrator
shall require the intermediary to contribute an
amount equal to 25 percent of the amount of the
grant, obtained solely from non-Federal
sources. In addition to cash or other direct
funding, the contribution may include indirect
costs or in-kind contributions paid for under
non-Federal programs.
(C) Additional technical assistance grants
for making certain loans.--
(i) In general.--In addition to
grants made under subparagraph (A),
each intermediary shall be eligible to
receive a grant equal to 5 percent of
the total outstanding balance of loans
made to the intermediary under this
subsection if--
(I) the intermediary provides
not less than 25 percent of its
loans to small business
concerns located in or owned by
one or more residents of an
economically distressed area;
or
(II) the intermediary has a
portfolio of loans made under
this subsection that averages
not more than $10,000 during
the period of the
intermediary's participation in
the program.
(ii) Purposes.--A grant awarded under
clause (i) may be used to provide
marketing, management, and technical
assistance to small business concerns
that are borrowers under this
subsection.
(iii) Contribution exception.--The
contribution requirements in
subparagraph (B) do not apply to grants
made under this subparagraph.
(D) Eligibility for multiple sites or
offices.--The eligibility for a grant described
in subparagraph (A) or (C) shall be determined
separately for each loan-making site or office
of 1 intermediary.
(E) Assistance to certain small business
concerns.--
(i) In general.--Each intermediary
may expend an amount not to exceed 25
percent of the grant funds received
under paragraph (1)(B)(ii) to provide
information and technical assistance to
small business concerns that are
prospective borrowers under this
subsection.
(ii) Technical assistance.--An
intermediary may expend not more than
25 percent of the funds received under
paragraph (1)(B)(ii) to enter into
third party contracts for the provision
of technical assistance.
(F) Supplemental grant.--
(i) In general.--The Administration
may accept any funds transferred to the
Administration from other departments
or agencies of the Federal Government
to make grants in accordance with this
subparagraph and section 202(b) of the
Small Business Reauthorization Act of
1997 to participating intermediaries
and technical assistance providers
under paragraph (5), for use in
accordance with clause (iii) to provide
additional technical assistance and
related services to recipients of
assistance under a State program
described in paragraph (1)(A)(iv) at
the time they initially apply for
assistance under this subparagraph.
(ii) Eligible recipients; grant
amounts.--In making grants under this
subparagraph, the Administration may
select, from among participating
intermediaries and technical assistance
providers described in clause (i), not
more than 20 grantees in fiscal year
1998, not more than 25 grantees in
fiscal year 1999, and not more than 30
grantees in fiscal year 2000, each of
whom may receive a grant under this
subparagraph in an amount not to exceed
$200,000 per year.
(iii) Use of grant amounts.--Grants
under this subparagraph--
(I) are in addition to other
grants provided under this
subsection and shall not
require the contribution of
matching amounts as a condition
of eligibility; and
(II) may be used by a
grantee--
(aa) to pay or
reimburse a portion of
child care and
transportation costs of
recipients of
assistance described in
clause (i), to the
extent such costs are
not otherwise paid by
State block grants
under the Child Care
Development Block Grant
Act of 1990 (42 U.S.C.
9858 et seq.) or under
part A of title IV of
the Social Security Act
(42 U.S.C. 601 et
seq.); and
(bb) for marketing,
management, and
technical assistance to
recipients of
assistance described in
clause (i).
(iv) Memorandum of understanding.--
Prior to accepting any transfer of
funds under clause (i) from a
department or agency of the Federal
Government, the Administration shall
enter into a Memorandum of
Understanding with the department or
agency, which shall--
(I) specify the terms and
conditions of the grants under
this subparagraph; and
(II) provide for appropriate
monitoring of expenditures by
each grantee under this
subparagraph and each recipient
of assistance described in
clause (i) who receives
assistance from a grantee under
this subparagraph, in order to
ensure compliance with this
subparagraph by those grantees
and recipients of assistance.
(5) Private sector borrowing technical assistance
grants.--Grants made in accordance with subparagraph
(B)(iii) of paragraph (1) shall be subject to the
following requirements:
(A) Grant amounts.--Subject to the
requirements of subparagraph (B), the
Administration may make not more than 55 grants
annually, each in amounts not to exceed
$200,000 for the purposes specified in
subparagraph (B)(iii) of paragraph (1).
(B) Contribution.--As a condition of any
grant made under subparagraph (A), the
Administration shall require the grant
recipient to contribute an amount equal to 20
percent of the amount of the grant, obtained
solely from non-Federal sources. In addition to
cash or other direct funding, the contribution
may include indirect costs or in-kind
contributions paid for under non-Federal
programs.
(6) Loans to small business concerns from eligible
intermediaries.--
(A) In general.--An eligible intermediary
shall make short-term, fixed rate loans to
startup, newly established, and growing small
business concerns from the funds made available
to it under subparagraph (B)(i) of paragraph
(1) for working capital and the acquisition of
materials, supplies, furniture, fixtures, and
equipment.
(B) Portfolio requirement.--To the extent
practicable, each intermediary that operates a
microloan program under this subsection shall
maintain a microloan portfolio with an average
loan size of not more than $15,000.
(C) Interest limit.--Notwithstanding any
provision of the laws of any State or the
constitution of any State pertaining to the
rate or amount of interest that may be charged,
taken, received, or reserved on a loan, the
maximum rate of interest to be charged on a
microloan funded under this subsection shall
not exceed the rate of interest applicable to a
loan made to an intermediary by the
Administration--
(i) in the case of a loan of more
than $7,500 made by the intermediary to
a small business concern or
entrepreneur by more than 7.75
percentage points; and
(ii) in the case of a loan of not
more than $7,500 made by the
intermediary to a small business
concern or entrepreneur by more than
8.5 percentage points.
(D) Review restriction.--The Administration
shall not review individual microloans made by
intermediaries prior to approval.
(E) Establishment of child care or
transportation businesses.--In addition to
other eligible small businesses concerns,
borrowers under any program under this
subsection may include individuals who will use
the loan proceeds to establish for-profit or
nonprofit child care establishments or
businesses providing for-profit transportation
services.
(7) Program funding for microloans.--
(A) Number of participants.--Under the
program authorized by this subsection, the
Administration may fund, on a competitive
basis, not more than 300 intermediaries.
(B) Allocation.--
(i) Minimum allocation.--Subject to
the availability of appropriations, of
the total amount of new loan funds made
available for award under this
subsection in each fiscal year, the
Administration shall make available for
award in each State (including the
District of Columbia, the Commonwealth
of Puerto Rico, the United States
Virgin Islands, Guam, and American
Samoa) an amount equal to the sum of--
(I) the lesser of--
(aa) $800,000; or
(bb) \1/55\ of the
total amount of new
loan funds made
available for award
under this subsection
for that fiscal year;
and
(II) any additional amount,
as determined by the
Administration.
(ii) Redistribution.--If, at the
beginning of the third quarter of a
fiscal year, the Administration
determines that any portion of the
amount made available to carry out this
subsection is unlikely to be made
available under clause (i) during that
fiscal year, the Administration may
make that portion available for award
in any one or more States (including
the District of Columbia, the
Commonwealth of Puerto Rico, the United
States Virgin Islands, Guam, and
American Samoa) without regard to
clause (i).
(8) Equitable distribution of intermediaries.--In
approving microloan program applicants and providing
funding to intermediaries under this subsection, the
Administration shall select and provide funding to such
intermediaries as will ensure appropriate availability
of loans for small businesses in all industries located
throughout each State, particularly those located in
urban and in rural areas.
(9) Grants for management, marketing, technical
assistance, and related services.--
(A) In general.--The Administration may
procure technical assistance for intermediaries
participating in the Microloan Program to
ensure that such intermediaries have the
knowledge, skills, and understanding of
microlending practices necessary to operate
successful microloan programs.
(B) Assistance amount.--The Administration
shall transfer 7 percent of its annual
appropriation for loans and loan guarantees
under this subsection to the Administration's
Salaries and Expense Account for the specific
purpose of providing 1 or more technical
assistance grants to experienced microlending
organizations and national and regional
nonprofit organizations that have demonstrated
experience in providing training support for
microenterprise development and financing. to
achieve the purpose set forth in subparagraph
(A).
(C) Welfare-to-work microloan initiative.--Of
amounts made available to carry out the
welfare-to-work microloan initiative under
paragraph (1)(A)(iv) in any fiscal year, the
Administration may use not more than 5 percent
to provide technical assistance, either
directly or through contractors, to welfare-to-
work microloan initiative grantees, to ensure
that, as grantees, they have the knowledge,
skills, and understanding of microlending and
welfare-to-work transition, and other related
issues, to operate a successful welfare-to-work
microloan initiative.
(10) Report to congress.--On November 1, 1995, the
Administration shall submit to the Committees on Small
Business of the Senate and the House of Representatives
a report, including the Administration's evaluation of
the effectiveness of the first 3\1/2\ years of the
microloan program and the following:
(A) the numbers and locations of the
intermediaries funded to conduct microloan
programs;
(B) the amounts of each loan and each grant
to intermediaries;
(C) a description of the matching
contributions of each intermediary;
(D) the numbers and amounts of microloans
made by the intermediaries to small business
concern borrowers;
(E) the repayment history of each
intermediary;
(F) a description of the loan portfolio of
each intermediary including the extent to which
it provides microloans to small business
concerns in rural areas; and
(G) any recommendations for legislative
changes that would improve program operations.
(11) Definitions.--For purposes of this subsection--
(A) the term ``intermediary'' means--
(i) a private, nonprofit entity;
(ii) a private, nonprofit community
development corporation;
(iii) a consortium of private,
nonprofit organizations or nonprofit
community development corporations;
(iv) a quasi-governmental economic
development entity (such as a planning
and development district), other than a
State, county, municipal government, or
any agency thereof, if--
(I) no application is
received from an eligible
nonprofit organization; or
(II) the Administration
determines that the needs of a
region or geographic area are
not adequately served by an
existing, eligible nonprofit
organization that has submitted
an application; or
(v) an agency of or nonprofit entity
established by a Native American Tribal
Government,
that seeks to borrow or has borrowed funds from
the Administration to make microloans to small
business concerns under this subsection;
(B) the term ``microloan'' means a short-
term, fixed rate loan of not more than $50,000,
made by an intermediary to a startup, newly
established, or growing small business concern;
(C) the term ``rural area'' means any
political subdivision or unincorporated area--
(i) in a nonmetropolitan county (as
defined by the Secretary of
Agriculture) or its equivalent thereof;
or
(ii) in a metropolitan county or its
equivalent that has a resident
population of less than 20,000 if the
Small Business Administration has
determined such political subdivision
or area to be rural; and
(D) the term ``economically distressed
area'', as used in paragraph (4), means a
county or equivalent division of local
government of a State in which the small
business concern is located, in which,
according to the most recent data available
from the Bureau of the Census, Department of
Commerce, not less than 40 percent of residents
have an annual income that is at or below the
poverty level.
(12) Deferred participation loan pilot.--In lieu of
making direct loans to intermediaries as authorized in
paragraph (1)(B), during fiscal years 1998 through
2000, the Administration may, on a pilot program basis,
participate on a deferred basis of not less than 90
percent and not more than 100 percent on loans made to
intermediaries by a for-profit or nonprofit entity or
by alliances of such entities, subject to the following
conditions:
(A) Number of loans.--In carrying out this
paragraph, the Administration shall not
participate in providing financing on a
deferred basis to more than 10 intermediaries
in urban areas or more than 10 intermediaries
in rural areas.
(B) Term of loans.--The term of each loan
shall be 10 years. During the first year of the
loan, the intermediary shall not be required to
repay any interest or principal. During the
second through fifth years of the loan, the
intermediary shall be required to pay interest
only. During the sixth through tenth years of
the loan, the intermediary shall be required to
make interest payments and fully amortize the
principal.
(C) Interest rate.--The interest rate on each
loan shall be the rate specified by paragraph
(3)(F) for direct loans.
(13) Evaluation of welfare-to-work microloan
initiative.--On January 31, 1999, and annually
thereafter, the Administration shall submit to the
Committees on Small Business of the House of
Representatives and the Senate a report on any monies
distributed pursuant to paragraph (4)(F).
(n) Repayment Deferred for Active Duty Reservists.--
(1) Definitions.--In this subsection:
(A) Eligible reservist.--The term ``eligible
reservist'' means a member of a reserve
component of the Armed Forces ordered to active
duty during a period of military conflict.
(B) Essential employee.--The term ``essential
employee'' means an individual who is employed
by a small business concern and whose
managerial or technical expertise is critical
to the successful day-to-day operations of that
small business concern.
(C) Period of military conflict.--The term
``period of military conflict'' means--
(i) a period of war declared by the
Congress;
(ii) a period of national emergency
declared by the Congress or by the
President; or
(iii) a period of a contingency
operation, as defined in section 101(a)
of title 10, United States Code.
(D) Qualified borrower.--The term ``qualified
borrower'' means--
(i) an individual who is an eligible
reservist and who received a direct
loan under subsection (a) or (b) before
being ordered to active duty; or
(ii) a small business concern that
received a direct loan under subsection
(a) or (b) before an eligible
reservist, who is an essential
employee, was ordered to active duty.
(2) Deferral of direct loans.--
(A) In general.--The Administration shall,
upon written request, defer repayment of
principal and interest due on a direct loan
made under subsection (a) or (b), if such loan
was incurred by a qualified borrower.
(B) Period of deferral.--The period of
deferral for repayment under this paragraph
shall begin on the date on which the eligible
reservist is ordered to active duty and shall
terminate on the date that is 180 days after
the date such eligible reservist is discharged
or released from active duty.
(C) Interest rate reduction during
deferral.--Notwithstanding any other provision
of law, during the period of deferral described
in subparagraph (B), the Administration may, in
its discretion, reduce the interest rate on any
loan qualifying for a deferral under this
paragraph.
(3) Deferral of loan guarantees and other
financings.--The Administration shall--
(A) encourage intermediaries participating in
the program under subsection (m) to defer
repayment of a loan made with proceeds made
available under that subsection, if such loan
was incurred by a small business concern that
is eligible to apply for assistance under
subsection (b)(3); and
(B) not later than 30 days after the date of
the enactment of this subsection, establish
guidelines to--
(i) encourage lenders and other
intermediaries to defer repayment of,
or provide other relief relating to,
loan guarantees under subsection (a)
and financings under section 504 of the
Small Business Investment Act of 1958
that were incurred by small business
concerns that are eligible to apply for
assistance under subsection (b)(3), and
loan guarantees provided under
subsection (m) if the intermediary
provides relief to a small business
concern under this paragraph; and
(ii) implement a program to provide
for the deferral of repayment or other
relief to any intermediary providing
relief to a small business borrower
under this paragraph.
* * * * * * *
Sec. 18. (a) The Administration shall not duplicate the work
or activity of any other department or agency of the Federal
Government,, and nothing contained in this Act shall be
construed to authorize any such duplication unless such work or
activity is expressly provided for in this Act. If loan
applications are being refused or loans denied by such other
department or agency responsible for such work or activity due
to administrative withholding from obligation or withholding
from apportionment, or due to administratively declared
moratorium, then, for purposes of this section, no duplication
shall be deemed to have occurred.
[(b) As used in this Act--
[(1) ``agricultural enterprises'' means those small
business concerns engaged in the production of food and
fiber, ranching, and raising of livestock, aquaculture,
and all other farming and agricultural related
industries; and
[(2) ``credit elsewhere'' means the availability of
sufficient credit from non-Federal sources at
reasonable rates and terms, taking into consideration
prevailing private rates and terms in the community in
or near where the concern transacts business for
similar purposes and periods of time.]
(b) As used in this Act, the term ``agricultural
enterprises'' means those small business concerns engaged in
the production of food and fiber, ranching, and raising of
livestock, aquaculture, and all other farming and agricultural-
related industries.
* * * * * * *
Sec. 20. (a)(1) For fiscal year 2000 and each fiscal year
thereafter, there are authorized to be appropriated such sums
as may be necessary and appropriate, to remain available until
expended, and to be available solely--
(A) to carry out the Small Business Development
Center Program under section 21, but not to exceed the
annual funding level, as specified in section 21(a);
(B) to pay the expenses of the National Small
Business Development Center Advisory Board, as provided
in section 21(i);
(C) to pay the expenses of the information sharing
system, as provided in section 21(c)(8);
(D) to pay the expenses of the association referred
to in section 21(a)(3)(A) for conducting the
accreditation program, as provided in section 21(k)(2);
(E) to pay the expenses of the Administration,
including salaries of examiners, for conducting
examinations as part of the accreditation program
conducted by the association referred to in section
21(a)(3)(A); and
(F) to pay for small business development
center grants as mandated or directed by
Congress.
(2) Notwithstanding any other provision of law, the
Administration shall enter into commitments for direct loans
and to guarantee loans, debentures, payment of rentals, or
other amounts due under qualified contracts and other types of
financial assistance and enter into commitments to purchase
debentures and preferred securities and to guarantee sureties
against loss pursuant to programs under this Act and the Small
Business Investment Act of 1958, in the full amounts provided
by law subject only to (A) the availability of qualified
applications, and (B) limitations contained in appropriations
Acts. Nothing in this paragraph authorizes the Administration
to reduce or limit its authority to enter into such
commitments. Subject to approval in appropriations Acts,
amounts authorized for preferred securities, debentures or
participating securities under title III of the Small Business
Investment Act of 1958 may be obligated in one fiscal year and
disbursed or guaranteed in any 1 or more of the 4 subsequent
fiscal years.
(3) There are authorized to be transferred from the disaster
loan revolving fund such sums as may be necessary and
appropriate for administrative expenses of the Administration.
(4) Except as may be otherwise specifically provided by law,
the amount of deferred participation loans authorized in this
section--
(A) shall mean the net amount of the loan principal
guaranteed by the Small Business Administration (and
does not include any amount which is not guaranteed);
and
(B) shall be available for a national program, except
that the Administration may use not more than an amount
equal to 10 percent of the amount authorized each year
for any special or pilot program directed to identified
sectors of the small business community or to specific
geographic regions of the United States.
(b) There are authorized to be appropriated to the
Administration for fiscal year 1991 such sums as may be
necessary to carry out the provisions of this Act and the Small
Business Investment Act of 1958. There also are hereby
authorized to be appropriated such sums as may be necessary and
appropriate for the carrying out of the provisions and
purposes, including administrative expenses, of sections
7(b)(1) and 7(b)(2) of this Act; and there are authorized to be
transferred from the disaster loan revolving fund such sums as
may be necessary and appropriate for such administrative
expenses.
(c) Disaster Mitigation Pilot Program.--The following program
levels are authorized for loans under section 7(b)(1)(C):
(1) $15,000,000 for fiscal year 2005.
(2) $15,000,000 for fiscal year 2006.
(d) Fiscal Year 2005.--
(1) Program levels.--The following program levels are
authorized for fiscal year 2005:
(A) For the programs authorized by this Act,
the Administration is authorized to make--
(i) $75,000,000 in technical
assistance grants, as provided in
section 7(m); and
(ii) $105,000,000 in direct loans, as
provided in 7(m).
(B) For the programs authorized by this Act,
the Administration is authorized to make
$23,050,000,000 in deferred participation loans
and other financings. Of such sum, the
Administration is authorized to make--
(i) $16,500,000,000 in general
business loans, as provided in section
7(a);
(ii) $6,000,000,000 in certified
development company financings, as
provided in section 7(a)(13) and as
provided in section 504 of the Small
Business Investment Act of 1958;
(iii) $500,000,000 in loans, as
provided in section 7(a)(21); and
(iv) $50,000,000 in loans, as
provided in section 7(m).
(C) For the programs authorized by title III
of the Small Business Investment Act of 1958,
the Administration is authorized to make--
(i) $4,250,000,000 in purchases of
participating securities; and
(ii) $3,250,000,000 in guarantees of
debentures.
(D) For the programs authorized by part B of
title IV of the Small Business Investment Act
of 1958, the Administration is authorized to
enter into guarantees not to exceed
$6,000,000,000, of which not more than 50
percent may be in bonds approved pursuant to
section 411(a)(3) of that Act.
(E) The Administration is authorized to make
grants or enter into cooperative agreements for
a total amount of $7,000,000 for the Service
Corps of Retired Executives program authorized
by section 8(b)(1).
(2) Additional authorizations.--
(A) There are authorized to be appropriated
to the Administration for fiscal year 2005 such
sums as may be necessary to carry out the
provisions of this Act not elsewhere provided
for, including administrative expenses and
necessary loan capital for disaster loans
pursuant to section 7(b), and to carry out the
Small Business Investment Act of 1958,
including salaries and expenses of the
Administration.
(B) Notwithstanding any other provision of
this paragraph, for fiscal year 2005--
(i) no funds are authorized to be
used as loan capital for the loan
program authorized by section 7(a)(21)
except by transfer from another Federal
department or agency to the
Administration, unless the program
level authorized for general business
loans under paragraph (1)(B)(i) is
fully funded; and
(ii) the Administration may not
approve loans on its own behalf or on
behalf of any other Federal department
or agency, by contract or otherwise,
under terms and conditions other than
those specifically authorized under
this Act or the Small Business
Investment Act of 1958, except that it
may approve loans under section
7(a)(21) of this Act in gross amounts
of not more than $2,000,000.
(e) Fiscal Year 2006.--
(1) Program levels.--The following program levels are
authorized for fiscal year 2006:
(A) For the programs authorized by this Act,
the Administration is authorized to make--
(i) $80,000,000 in technical
assistance grants, as provided in
section 7(m); and
(ii) $110,000,000 in direct loans, as
provided in 7(m).
(B) For the programs authorized by this Act,
the Administration is authorized to make
$25,050,000,000 in deferred participation loans
and other financings. Of such sum, the
Administration is authorized to make--
(i) $17,000,000,000 in general
business loans, as provided in section
7(a);
(ii) $7,500,000,000 in certified
development company financings, as
provided in section 7(a)(13) and as
provided in section 504 of the Small
Business Investment Act of 1958;
(iii) $500,000,000 in loans, as
provided in section 7(a)(21); and
(iv) $50,000,000 in loans, as
provided in section 7(m).
(C) For the programs authorized by title III
of the Small Business Investment Act of 1958,
the Administration is authorized to make--
(i) $4,500,000,000 in purchases of
participating securities; and
(ii) $3,500,000,000 in guarantees of
debentures.
(D) For the programs authorized by part B of
title IV of the Small Business Investment Act
of 1958, the Administration is authorized to
enter into guarantees not to exceed
$6,000,000,000, of which not more than 50
percent may be in bonds approved pursuant to
section 411(a)(3) of that Act.
(E) The Administration is authorized to make
grants or enter into cooperative agreements for
a total amount of $7,000,000 for the Service
Corps of Retired Executives program authorized
by section 8(b)(1).
(2) Additional authorizations.--
(A) There are authorized to be appropriated
to the Administration for fiscal year 2006 such
sums as may be necessary to carry out the
provisions of this Act not elsewhere provided
for, including administrative expenses and
necessary loan capital for disaster loans
pursuant to section 7(b), and to carry out the
Small Business Investment Act of 1958,
including salaries and expenses of the
Administration.
(B) Notwithstanding any other provision of
this paragraph, for fiscal year 2006--
(i) no funds are authorized to be
used as loan capital for the loan
program authorized by section 7(a)(21)
except by transfer from another Federal
department or agency to the
Administration, unless the program
level authorized for general business
loans under paragraph (1)(B)(i) is
fully funded; and
(ii) the Administration may not
approve loans on its own behalf or on
behalf of any other Federal department
or agency, by contract or otherwise,
under terms and conditions other than
those specifically authorized under
this Act or the Small Business
Investment Act of 1958, except that it
may approve loans under section
7(a)(21) of this Act in gross amounts
of not more than $2,000,000.
[(j)] (f) Fiscal Year 2004 Purchase and Guarantee Authority
Under Title III of Small Business Investment Act of 1958.--For
fiscal year 2004, for the programs authorized by title III of
the Small Business Investment Act of 1958 (15 U.S.C. 681 et
seq.), the Administration is authorized to make--
(1) $4,000,000,000 in purchases of participating
securities; and
(2) $3,000,000,000 in guarantees of debentures.
(g) Authority To Increase Amount of General Business Loans.--
(1) In general.--With respect to fiscal year 2018 and
each fiscal year thereafter, if the Administrator
determines that the amount of commitments by the
Administrator for general business loans authorized
under section 7(a) for a fiscal year could exceed the
limit on the total amount of commitments the
Administrator may make for those loans under this Act,
an appropriations Act, or any other provision of law,
the Administrator may make commitments for those loans
for that fiscal year in an aggregate amount equal to
not more than 115 percent of that limit.
(2) Approval required before exercising authority.--
(A) In general.--Not later than 15 days
before the date on which the Administrator
intends to exercise the authority under
paragraph (1), the Administrator shall submit
notice of intent to exercise the authority to--
(i) the Committee on Small Business
and Entrepreneurship and the
Subcommittee on Financial Services and
General Government of the Committee on
Appropriations of the Senate; and
(ii) the Committee on Small Business
and the Subcommittee on Financial
Services and General Government of the
Committee on Appropriations of the
House of Representatives.
(B) Approval.--The Administrator may not
exercise the authority under paragraph (1)
unless such exercise of authority has been
approved, in writing, by the Committee on
Appropriations and the Committee on Small
Business and Entrepreneurship of the Senate and
the Committee on Appropriations and the
Committee on Small Business of the House of
Representatives.
(3) Limitation.--The Administrator shall not exercise
the authority under paragraph (1) more than once during
any fiscal year.
* * * * * * *
SEC. 47. OFFICE OF CREDIT RISK MANAGEMENT.
(a) Establishment.--There is established within the
Administration the Office of Credit Risk Management (in this
section referred to as the ``Office'').
(b) Duties.--The Office shall be responsible for
supervising--
(1) any lender making loans under section 7(a) (in
this section referred to as a ``7(a) lender'');
(2) any Lending Partner or Intermediary participant
of the Administration in a lending program of the
Office of Capital Access of the Administration; and
(3) any small business lending company or a non-
Federally regulated lender without regard to the
requirements of section 23.
(c) Director.--
(1) In general.--The Office shall be headed by the
Director of the Office of Credit Risk Management (in
this section referred to as the ``Director''), who
shall be a career appointee in the Senior Executive
Service (as defined in section 3132 of title 5, United
States Code).
(2) Duties.--The Director shall be responsible for
oversight of the lenders and participants described in
subsection (b), including by conducting periodic
reviews of the compliance and performance of such
lenders and participants.
(d) Supervision duties for 7(a) lenders.--With respect to
7(a) lenders, an employee of the Office shall--
(1) be present for and supervise any such review that
is conducted by a contractor of the Office on the
premise of the 7(a) lender; and
(2) supervise any such review that is not conducted
on the premise of the 7(a) lender.
[Effective January 1, 2019, subsection (d) of section 47 (as
added by subsection 3(a)(2) and amended by subsection 3(b) of
HR 4743 as reported) is amended to read as follows:]
(d) Supervision duties for 7(a) lenders.--
(1) Reviews.--With respect to 7(a) lenders, an
employee of the Office shall--
(A) be present for and supervise any such
review that is conducted by a contractor of the
Office on the premise of the 7(a) lender; and
(B) supervise any such review that is not
conducted on the premise of the 7(a) lender.
(2) Review report timeline.--
(A) In general.--Notwithstanding any other
requirements of the Office or the
Administrator, the Administrator shall develop
and implement a review report timeline which
shall--
(i) require the Administrator to--
(I) deliver a written report
of the review to the 7(a)
lender not later than 60
business days after the date on
which the review is concluded;
or
(II) if the Administrator
expects to submit the report
after the end of the 60-day
period described in clause (i),
notify the 7(a) lender of the
expected date of submission of
the report and the reason for
the delay; and
(ii) if a response by the 7(a) lender
is requested in a report submitted
under subparagraph (A), require the
7(a) lender to submit responses to the
Administrator not later than 45
business days after the date on which
the 7(a) lender receives the report.
(B) Extension.--The Administrator may extend
the time frame described in subparagraph
(A)(i)(II) with respect to a 7(a) lender as the
Administrator determines necessary.
(e) Enforcement Authority Against 7(a) Lenders.--
(1) Informal enforcement authority.--The Director may
take an informal enforcement action against a 7(a)
lender if the Director finds that the 7(a) lender has
violated a statutory or regulatory requirement under
section 7(a) or any requirement in a Standard Operating
Procedures Manual or Policy Notice related to a program
or function of the Office of Capital Access.
(2) Formal enforcement authority.--
(A) In general.--With the approval of the
Lender Oversight Committee established under
section 48, the Director may take a formal
enforcement action against any 7(a) lender if
the Director finds that the 7(a) lender has
violated--
(i) a statutory or regulatory
requirement under section 7(a),
including a requirement relating to
credit elsewhere; or
(ii) any requirement described in a
Standard Operating Procedures Manual or
Policy Notice, related to a program or
function of the Office of Capital
Access.
(B) Enforcement actions.--An enforcement
action imposed on a 7(a) lender by the Director
under subparagraph (A) shall be based on the
severity or frequency of the violation and may
include assessing a civil monetary penalty
against the 7(a) lender in an amount that is
not greater than $250,000.
(3) Appeal by lender.--A 7(a) lender may appeal an
enforcement action imposed by the Director described in
this subsection to the Office of Hearings and Appeals
established under section 5(i) or to an appropriate
district court of the United States.
(f) Regulations.--Not later than 1 year after the date of the
enactment of this section, the Administrator shall issue
regulations, after opportunity for notice and comment, to carry
out subsection (e).
(g) Servicing and Liquidation Responsibilities.--During any
period during which a 7(a) lender is suspended or otherwise
prohibited from making loans under section 7(a), the 7(a)
lender shall remain obligated to maintain all servicing and
liquidation activities delegated to the lender by the
Administrator, unless otherwise specified by the Director.
(h) Portfolio Risk Analysis of 7(a) Loans.--
(1) In general.--The Director shall annually conduct
a risk analysis of the portfolio of the Administration
with respect to all loans guaranteed under section
7(a).
(2) Report to congress.--On December 1, 2018, and
every December 1 thereafter, the Director shall submit
to Congress a report containing the results of each
portfolio risk analysis conducted under paragraph (1)
during the fiscal year preceding the submission of the
report, which shall include--
(A) an analysis of the overall program risk
of loans guaranteed under section 7(a);
(B) an analysis of the program risk, set
forth separately by industry concentration;
(C) without identifying individual 7(a)
lenders by name, a consolidated analysis of the
risk created by the individual 7(a) lenders
responsible for not less than 1 percent of the
gross loan approvals set forth separately for
the year covered by the report by--
(i) the dollar value of the loans
made by such 7(a) lenders; and
(ii) the number of loans made by such
7(a) lenders;
(D) steps taken by the Administrator to
mitigate the risks identified in subparagraphs
(A), (B), and (C);
(E) the number of 7(a) lenders, the number of
loans made, and the gross and net dollar amount
of loans made;
(F) the number and dollar amount of total
losses, the number and dollar amount of total
purchases, and the percentage and dollar amount
of recoveries at the Administration;
(G) the number and type of enforcement
actions recommended by the Director;
(H) the number and type of enforcement
actions approved by the Lender Oversight
Committee established under section 48;
(I) the number and type of enforcement
actions disapproved by the Lender Oversight
Committee; and
(J) the number and dollar amount of civil
monetary penalties assessed.
(i) Budget Submission and Justification.--The Director shall
annually provide, in writing, a fiscal year budget submission
for the Office and a justification for such submission to the
Administrator. Such submission and justification shall--
(1) include salaries and expenses of the Office and
the charge for the lender oversight fees;
(2) be submitted at or about the time of the budget
submission by the President under section 1105(a) of
title 31; and
(3) be maintained in an indexed form and made
available for public review for a period of not less
than 5 years beginning on the date of submission and
justification.
SEC. 48. LENDER OVERSIGHT COMMITTEE.
(a) Establishment.--There is established within the
Administration the Lender Oversight Committee (in this section
referred to as the ``Committee'').
(b) Membership.--The Committee shall consist of at least 8
members selected by the Administrator, of which--
(1) 3 members shall be voting members, 2 of whom
shall be career appointees in the Senior Executive
Service (as defined in section 3132 of title 5, United
States Code); and
(2) the remaining members shall be nonvoting members
who shall serve in an advisory capacity on the
Committee.
(c) Duties.--The Committee shall--
(1) review reports on lender oversight activities;
(2) review formal enforcement action recommendations
of the Director of the Office of Credit Risk Management
with respect to any lender making loans under section
7(a) and any Lending Partner or Intermediary
participant of the Administration in a lending program
of the Office of Capital Access of the Administration;
(3) in carrying out paragraph (2) with respect to
formal enforcement actions taken under subsection (d)
or (e) of section 23, vote to recommend or not
recommend action to the Administrator or a designee of
the Administrator;
(4) in carrying out paragraph (2) with respect to any
formal enforcement action not specified under
subsection (d) or (e) of section 23, vote to approve,
disapprove, or modify the action;
(5) review, in an advisory capacity, any lender
oversight, portfolio risk management, or program
integrity matters brought by the Director; and
(6) take such other actions and perform such other
functions as may be delegated to the Committee by the
Administrator.
(d) Meetings.--
(1) In general.--The Committee shall meet as
necessary, but not less frequently than on a quarterly
basis.
(2) Reports.--The Committee shall submit to the
Administrator a report detailing each meeting of the
Committee, including if the Committee does or does not
vote to approve a formal enforcement action of the
Director of the Office of Credit Risk Management with
respect to a lender.
Sec. [47] 49. All laws and parts of laws inconsistent with
this Act are hereby repealed to the extent of such
inconsistency.
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