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co.mments
S 1256
To amend the Small Business Act to reauthorize loan programs under that Act, and for other purposes.
May 1, 2007
Mr. KERRY (for himself, Ms. SNOWE,
September 12, 2007
Reported by Mr. KERRY, with an amendment
[Strike out all after the enacting clause and insert the part printed in italic]
To amend the Small Business Act to reauthorize loan programs under that Act, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Small Business Lending Reauthorization and Improvements Act of 2007'.
SEC. 2. TABLE OF CONTENTS.
The table of contents of this Act is as follows:
Sec. 1. Short title.
Sec. 2. Table of contents.
Sec. 3. Definitions.
Sec. 4. Authorization of appropriations.
TITLE I--MICROLOAN PROGRAMS
Sec. 101. Conforming technical change in average smaller loan size.
Sec. 102. Inclusion of persons with disabilities.
Sec. 103. Microloan
Sec. 104. PRIME reauthorization and transfer to the Small Business Act.
Sec. 105. Report to Congress on the Microloan Program.
TITLE II--INTERMEDIARY LENDING PILOT PROGRAM
Sec. 201. Findings.
Sec. 202. Small business intermediary lending pilot program.
TITLE III--7(a) LOAN PROGRAM
Sec. 301. Preferred
Sec. 302. Maximum loan amount.
Sec. 303. Maximum 504 and 7(a) loan eligibility.
Sec. 304. Loan pooling.
Sec. 305. Alternative size standard.
Sec. 306. Alternative variable interest rate.
Sec. 307. Minority small business development.
Sec. 308. Lowering of fees.
Sec. 309. International trade loans.
Sec. 310. Rural lending outreach program.
TITLE IV--CERTIFIED DEVELOPMENT COMPANIES; 504 LOAN PROGRAM
Sec. 401. Development company loan programs.
Sec. 402. Loan liquidations.
Sec. 403. Additional equity injections.
Sec. 404.
Sec. 40
Sec. 40
Sec. 40
Sec. 40
Sec. 4
Sec. 41
Sec. 41
Sec. 41
Sec. 41
Sec. 41
Sec. 41
Sec. 41
Sec. 418. Debenture repayment.
Sec. 419. Real estate appraisals.
SEC. 3. DEFINITIONS.
In this Act--
(1) the terms `Administration' and `Administrator' mean the Small Business Administration and the Administrator thereof, respectively;
(2) the term `504 Loan Program' means the program to provide financing to small business concerns by guarantees of loans under title V of the Small Business Investment Act of 1958 (
(3) the term `small business concern' has the meaning given that term in section 3 of the Small Business Act (
SEC. 4. AUTHORIZATION OF APPROPRIATIONS.
Section 20 of the Small Business Act (
(1) by redesignating subsection (j) as subsection (f); and
(2) by adding at the end the following:
`(g) Microloan- For each of fiscal years 2007 through 2010, the Administration is authorized to make, as provided in section 7(m)--
`(1) $80,000,000 in technical assistance grants;
`(2) $110,000,000 in direct loans; and
`(3) $50,000,000 in deferred participation loans.
`(h) General Business Loans- The Administration is authorized to make, as provided in section 7(a)--
`(1) $18,000,000,000 in general business loans in fiscal year 2007;
`(2) $19,000,000,000 in general business loans in fiscal year 2008;
`(3) $20,000,000,000 in general business loans in fiscal year 2009; and
`(4) $21,000,000,000 in general business loans in fiscal year 2010.
`(i) Certified Development Company Financings- The Administration is authorized to make, as provided in section 7(a)(13) and as provided in section 504 of the Small Business Investment Act of 1958 (
`(1) $8,000,000,000 in certified development company financings in fiscal year 2007;
`(2) $8,500,000,000 in certified development company financings in fiscal year 2008;
`(3) $9,000,000,000 in certified development company financings in fiscal year 2009; and
`(4) $9,500,000,000 in certified development company financings in fiscal year 2010.
`(j) Department of Defense- For each of fiscal years 2007 through 2010, the Administration is authorized to make $500,000,000 in loans as provided in section 7(a)(21).
`(k) PRIME Program-
`(1) IN GENERAL- There are authorized to be appropriated to the Administrator $15,000,000 for each of fiscal years 2007 through 2010 to carry out section 37, which shall remain available until expended.
`(2) CERTAIN PROGRAMS- In addition to the amount authorized under paragraph (1), there are authorized to be appropriated to the Administrator $2,000,000 each of fiscal years 2007 through 2010 to carry out section 37(c)(4), which shall remain available until expended.
`(l) Additional Authorizations and Limitations-
`(1) IN GENERAL- There are authorized to be appropriated to the Administration for each of fiscal years 2007 through 2010 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.
`(2) LIMITATIONS- Notwithstanding any other provision of this section, for each of fiscal years 2007 through 2010--
`(A) no funds are authorized to be used as loan capital for the loan program authorized by section 7(a)(21) in any such fiscal year, except by transfer from another Federal department or agency to the Administration, unless the program level authorized for general business loans under subsection (h) is fully funded for that fiscal year; and
`(B) 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.'.
TITLE I--MICROLOAN PROGRAMS
SEC. 101. CONFORMING TECHNICAL CHANGE IN AVERAGE SMALLER LOAN SIZE.
Section 7(m) of the Small Business Act (
(1) in paragraph (3)(F)(iii), by striking `$7,500' and inserting `$10,000'; and
(2) in paragraph (6)(C), by striking `$7,500' each place that term appears and inserting `$10,000'.
SEC. 102. INCLUSION OF PERSONS WITH DISABILITIES.
Section 7(m)(1)(A)(i) of the Small Business Act (
SEC. 103. MICROLOAN PROGRAM IMPROVEMENTS.
(a) Intermediary Eligibility Requirements- Section 7(m)(2) of the Small Business Act (
(1) in subparagraph (A), by striking `in paragraph (10); and' and inserting `of the term `intermediary' under paragraph (11);'; and
(2) in subparagraph (B)--
(A) by striking `(B) has at least' and inserting the following:
`(B) has--
`(i) at least'; and
(B) by striking the period at the end and inserting the following: `; or
`(ii) a full-time employee who has not less than 3 years experience making microloans to startup, newly established, or growing small business concerns; and
`(C) has at least 1 year experience providing, as an integral part of its microloan program, intensive marketing, management, and technical assistance to its borrowers.'.
(b) Limitation on Third Party Technical Assistance- Section 7(m)(4)(E)(ii) of the Small Business Act (
(1) in the clause heading, by striking `TECHNICAL ASSISTANCE' and inserting `THIRD PARTY TECHNICAL ASSISTANCE'; and
(2) by striking `25 percent' and inserting `30 percent'.
SEC. 104. PRIME REAUTHORIZATION AND TRANSFER TO THE SMALL BUSINESS ACT.
(a) Program Reauthorization- The Small Business Act (
(1) by redesignating section 37 as section 39; and
(2) by inserting after section 36 the following:
`SEC. 37. PROGRAM FOR INVESTMENT IN MICROENTREPRENEURS.
`(a) Definitions- In this section:
`(1) CAPACITY BUILDING SERVICES- The term `capacity building services' means services provided to an organization that is, or that is in the process of becoming, a microenterprise development organization or program, for the purpose of enhancing its ability to provide training and services to disadvantaged entrepreneurs.
`(2) COLLABORATIVE- The term `collaborative' means 2 or more nonprofit entities that agree to act jointly as a qualified organization under this section.
`(3) DISADVANTAGED ENTREPRENEUR- The term `disadvantaged entrepreneur' means a microentrepreneur that--
`(A) is a low-income person;
`(B) is a very low-income person; or
`(C) lacks adequate access to capital or other resources essential for business success, or is economically disadvantaged, as determined by the Administrator.
`(4) DISADVANTAGED NATIVE AMERICAN ENTREPRENEUR- The term `disadvantaged Native American entrepreneur' means a disadvantaged entrepreneur who is also a member of an Indian Tribe.
`(5) INDIAN TRIBE- The term `Indian tribe' has the meaning given that term in section 4(a) of the Indian Self-Determination and Education Assistance Act.
`(6) INTERMEDIARY- The term `intermediary' means a private, nonprofit entity that seeks to serve microenterprise development organizations and programs, as authorized under subsection (d).
`(7) LOW-INCOME PERSON- The term `low-income person' means having an income, adjusted for family size, of not more than--
`(A) for metropolitan areas, 80 percent of the area median income; and
`(B) for nonmetropolitan areas, the greater of--
`(i) 80 percent of the area median income; or
`(ii) 80 percent of the statewide nonmetropolitan area median income.
`(8) MICROENTREPRENEUR- The term `microentrepreneur' means the owner or developer of a microenterprise.
`(9) MICROENTERPRISE- The term `microenterprise' means a sole proprietorship, partnership, or corporation that--
`(A) has fewer than 5 employees; and
`(B) generally lacks access to conventional loans, equity, or other banking services.
`(10) MICROENTERPRISE DEVELOPMENT ORGANIZATION OR PROGRAM- The term `microenterprise development organization or program' means a nonprofit entity, or a program administered by such an entity, including community development corporations or other nonprofit development organizations and social service organizations, that provides services to disadvantaged entrepreneurs.
`(11) TRAINING AND TECHNICAL ASSISTANCE- The term `training and technical assistance' means services and support provided to disadvantaged entrepreneurs, such as assistance for the purpose of enhancing business planning, marketing, management, financial management skills, and assistance for the purpose of accessing financial services.
`(12) VERY LOW-INCOME PERSON- The term `very low-income person' means having an income, adjusted for family size, of not more than 150 percent of the poverty line (as defined in section 673(2) of the Community Services Block Grant Act (
`(b) Establishment of Program- The Administrator shall establish a microenterprise technical assistance and capacity building grant program to provide assistance from the Administration in the form of grants to qualified organizations in accordance with this section.
`(c) Uses of Assistance- A qualified organization shall use grants made under this section--
`(1) to provide training and technical assistance to disadvantaged entrepreneurs;
`(2) to provide training and capacity building services to microenterprise development organizations and programs and groups of such organizations to assist such organizations and programs in developing microenterprise training and services;
`(3) to aid in researching and developing the best practices in the field of microenterprise and technical assistance programs for disadvantaged entrepreneurs;
`(4) to provide training and technical assistance to disadvantaged Native American entrepreneurs and prospective entrepreneurs; and
`(5) for such other activities as the Administrator determines are consistent with the purposes of this section.
`(d) Qualified Organizations- For purposes of eligibility for assistance under this section, a qualified organization shall be--
`(1) a nonprofit microenterprise development organization or program (or a group or collaborative thereof) that has a demonstrated record of delivering microenterprise services to disadvantaged entrepreneurs;
`(2) an intermediary;
`(3) a microenterprise development organization or program that is accountable to a local community, working in conjunction with a State or local government or Indian tribe; or
`(4) an Indian tribe acting on its own, if the Indian tribe certifies that no private organization or program referred to in this subsection exists within its jurisdiction.
`(e) Allocation of Assistance; Subgrants-
`(1) ALLOCATION OF ASSISTANCE-
`(A) IN GENERAL- The Administrator shall allocate assistance from the Administration under this section to ensure that--
`(i) activities described in subsection (c)(1) are funded using not less than 75 percent of amounts made available for such assistance; and
`(ii) activities described in subsection (c)(2) are funded using not less than 15 percent of amounts made available for such assistance.
`(B) LIMIT ON INDIVIDUAL ASSISTANCE- No single person may receive more than 10 percent of the total funds appropriated under this section in a single fiscal year.
`(2) TARGETED ASSISTANCE- The Administrator shall ensure that not less than 50 percent of the grants made under this section are used to benefit very low-income persons, including those residing on Indian reservations.
`(3) SUBGRANTS AUTHORIZED-
`(A) IN GENERAL- A qualified organization receiving assistance under this section may provide grants using that assistance to qualified small and emerging microenterprise organizations and programs, subject to such rules and regulations as the Administrator determines to be appropriate.
`(B) LIMIT ON ADMINISTRATIVE EXPENSES- Not more than 7.5 percent of assistance received by a qualified organization under this section may be used for administrative expenses in connection with the making of subgrants under subparagraph (A).
`(4) DIVERSITY- In making grants under this section, the Administrator shall ensure that grant recipients include both large and small microenterprise organizations, serving urban, rural, and Indian tribal communities serving diverse populations.
`(5) PROHIBITION ON PREFERENTIAL CONSIDERATION OF CERTAIN ADMINISTRATION PROGRAM PARTICIPANTS- In making grants under this section, the Administrator shall ensure that any application made by a qualified organization that is a participant in the program established under section 7(m) does not receive preferential consideration over applications from other qualified organizations that are not participants in such program.
`(f) Matching Requirements-
`(1) IN GENERAL- Financial assistance under this section shall be matched with funds from sources other than the Federal Government on the basis of not less than 50 percent of each dollar provided by the Administration.
`(2) SOURCES OF MATCHING FUNDS- Fees, grants, gifts, funds from loan sources, and in-kind resources of a grant recipient from public or private sources may be used to comply with the matching requirement in paragraph (1).
`(3) EXCEPTION-
`(A) IN GENERAL- In the case of an applicant for assistance under this section with severe constraints on available sources of matching funds, the Administrator may reduce or eliminate the matching requirements of paragraph (1).
`(B) LIMITATION- Not more than 10 percent of the total funds made available from the Administration in any fiscal year to carry out this section may be excepted from the matching requirements of paragraph (1), as authorized by subparagraph (A) of this paragraph.
`(g) Applications for Assistance- An application for assistance under this section shall be submitted in such form and in accordance with such procedures as the Administrator shall establish.
`(h) Recordkeeping and Reporting-
`(1) IN GENERAL- Each organization that receives assistance from the Administration under this section shall--
`(A) submit to the Administration not less than once in every 18-month period, financial statements audited by an independent certified public accountant;
`(B) submit an annual report to the Administration on its activities; and
`(C) keep such records as may be necessary to disclose the manner in which any assistance under this section is used.
`(2) ACCESS- The Administration shall have access upon request, for the purposes of determining compliance with this section, to any records of any organization that receives assistance from the Administration under this section.
`(3) DATA COLLECTION- Each organization that receives assistance from the Administration under this section shall collect information relating to, as applicable--
`(A) the number of individuals counseled or trained;
`(B) the number of hours of counseling provided;
`(C) the number of startup small business concerns formed;
`(D) the number of small business concerns expanded;
`(E) the number of low-income individuals counseled or trained; and
`(F) the number of very low-income individuals counseled or trained.'.
(b) Conforming Repeal- Subtitle C of title I of the Riegle Community Development and Regulatory Improvement Act of 1994 (
(c) References- All references in Federal law, other than subsection (d) of this section, to the `Program for Investment in Microentrepreneurs Act of 1999' or the `PRIME Act' shall be deemed to be references to section 37 of the Small Business Act, as added by this section.
(d) Rule of Construction- Nothing in this section or the amendments made by this section shall affect any grant or assistance provided under the Program for Investment in Microentrepreneurs Act of 1999, before the date of enactment of this Act, and any such grant or assistance shall be subject to the Program for Investment in Microentrepreneurs Act of 1999, as in effect on the day before the date of enactment of this Act.
SEC. 105. REPORT TO CONGRESS ON THE MICROLOAN PROGRAM.
- Section 7(m)(10) of the Small Business Act (
TITLE II--INTERMEDIARY LENDING PILOT PROGRAM
SEC. 201. FINDINGS.
Congress finds the following:
(1) Small and emerging businesses, particularly startups and businesses that lack sufficient or conventional collateral, continue to face barriers accessing midsized loans in amounts between $35,000 and $200,000, with affordable terms and conditions.
(2) Consolidation in the banking industry has resulted in a decrease in the number of small, locally controlled banks with not more than $100,000,000 in assets and has changed the method by which banks make small business credit decisions with--
(A) credit scoring techniques replacing relationship-based lending, which often works to the disadvantage of small or start-up businesses that do not conform with a bank's standardized credit formulas; and
(B) less flexible terms and conditions, which are often necessary for small and emerging businesses.
(3) In the environment described in paragraphs (1) and (2), nonprofit intermediary lenders, including community development corporations, provide financial resources that supplement the small business lending and investments of a bank by--
(A) providing riskier, up front, or subordinated capital;
(B) offering flexible terms and underwriting procedures; and
(C) providing technical assistance to businesses in order to reduce the transaction costs and risk exposure of banks.
(4) Several Federal programs, including the Microloan Program under section 7(m) of the Small Business Act (
(5) More than 1,000 nonprofit intermediary lenders in the United States are--
(A) successfully providing financial and technical assistance to small and emerging businesses;
(B) working with banks and other lenders to leverage additional capital for their business borrowers; and
(C) creating employment opportunities for low-income individuals through their lending and business development activities.
SEC. 202. SMALL BUSINESS INTERMEDIARY LENDING PILOT PROGRAM.
(a) In General- Section 7 of the Small Business Act (
`(l) Small Business Intermediary Lending Program-
`(1) DEFINITIONS- In this subsection--
`(A) the term `intermediary' means a private, nonprofit entity that seeks to borrow, or has borrowed, funds from the Administration to provide midsize loans to small business concerns under this subsection, including--
`(i) a private, nonprofit community development corporation;
`(ii) a consortium of private, nonprofit organizations or nonprofit community development corporations;
`(iii) a quasi-governmental economic development entity (such as a planning and development district), other than a State, county, or municipal government; and
`(iv) an agency of or nonprofit entity established by a Native American Tribal Government; and
`(B) the term `midsize loan' means a fixed rate loan of not less than $35,000 and not more than $200,000, made by an intermediary to a startup, newly established, or growing small business concern.
`(2) ESTABLISHMENT- There is established a 3-year pilot program to be know as the `Small Business Intermediary Lending Pilot Program' (referred to in this subsection as the `Program'), under which the Administrator may provide direct loans to eligible intermediaries, for the purpose of making fixed interest rate midsize 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 those areas suffering from a lack of credit due to poor economic conditions;
`(B) to create employment opportunities for low-income individuals;
`(C) to establish a midsize loan program to be administered by the Administrator to provide loans to eligible intermediaries to enable such intermediaries to provide midsize loans, particularly loans in amounts averaging not more than $150,000, to startup, newly established, or growing small business concerns for working capital or the acquisition of materials, supplies, or equipment;
`(D) to test the effectiveness of nonprofit intermediaries--
`(i) as a delivery system for a midsize loan program; and
`(ii) in addressing the credit needs of small business concerns and leveraging other sources of credit; and
`(E) to determine the advisability and feasibility of implementing a midsize loan program nationwide.
`(4) ELIGIBILITY FOR PARTICIPATION- An intermediary shall be eligible to receive loans under the Program if the intermediary has not less than 1 year of experience making loans to startup, newly established, or growing small business concerns.
`(5) LOANS TO INTERMEDIARIES-
`(A) APPLICATION- Each 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 geographic area to be served and its economic, poverty, and unemployment characteristics;
`(iv) the status of small business concerns in the area to be served and an analysis of the availability of credit; and
`(v) the qualifications of the applicant to carry out this subsection.
`(B) LOAN LIMITS- Notwithstanding subsection (a)(3), no loan may be made to an intermediary under this subsection if the total amount outstanding and committed to the intermediary from the business loan and investment fund established by this Act would, as a result of such loan, exceed $1,000,000 during the participation of the intermediary in the Program.
`(C) LOAN DURATION- Loans made by the Administrator under this subsection shall be for a maximum term of 20 years.
`(D) APPLICABLE INTEREST RATES- Loans made by the Administrator to an 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 intermediary under this subsection.
`(F) LEVERAGE- Any loan to a small business concern under this subsection shall not exceed 75 percent of the total cost of the project funded by such loan, with the remaining funds being leveraged from other sources, including--
`(i) banks or credit unions;
`(ii) community development financial institutions; and
`(iii) other sources with funds available to the intermediary lender.
`(G) DELAYED PAYMENTS- The Administrator shall not require the repayment of principal or interest on a loan made to an intermediary under the Program during the first 2 years of the loan.
`(6) PROGRAM FUNDING FOR MIDSIZE LOANS-
`(A) NUMBER OF PARTICIPANTS- Under the Program, the Administrator may provide loans, on a competitive basis, to not more than 20 intermediaries.
`(B) EQUITABLE DISTRIBUTION OF INTERMEDIARIES- The Administrator shall select and provide funding under the Program to such intermediaries as will ensure geographic diversity and representation of urban and rural communities.
`(7) REPORT TO CONGRESS-
`(A) ANNUAL REPORT- Not later than 12 months after the date of enactment of the Small Business Lending Reauthorization and Improvements Act of 2007, and annually thereafter, the Administrator shall submit a report containing an evaluation of the effectiveness of the Program to--
`(i) the Committee on Small Business and Entrepreneurship of the Senate; and
`(ii) the Committee on Small Business of the House of Representatives.
`(B) CONTENTS- Each report submitted under subparagraph (A) shall include, for the 12-month period before the date of that report--
`(i) the numbers and locations of the intermediaries receiving funds to provide midsize loans;
`(ii) the amounts of each loan to an intermediary;
`(iii) the numbers and amounts of midsize loans made by intermediaries to small business concerns;
`(iv) the repayment history of each intermediary;
`(v) a description of the loan portfolio of each intermediary, including the extent to which it provides midsize loans to small business concerns in rural and economically depressed areas;
`(vi) an estimate of the number of low-income individuals who have been employed as a direct result of the Program; and
`(vii) any recommendations for legislative changes that would improve the operation of the Program.
`(8) TERMINATION- The authority to make loans under this subsection shall terminate 3 years after the date of enactment of the Small Business Lending Reauthorization and Improvements Act of 2007.'.
(b) Rulemaking Authority- Not later than 180 days after the date of enactment of this Act, the Administrator shall issue regulations to carry out section 7(l) of the Small Business Act, as added by subsection (a).
(c) Authorization of Appropriations-
(1) IN GENERAL- There are authorized to be appropriated to the Administrator such sums as may be necessary for each of fiscal years 2008 through 2010 to provide $20,000,000 in loans under section 7(l) of the Small Business Act, as added by subsection (a).
(2) AVAILABILITY- Any amounts appropriated pursuant to paragraph (1) shall remain available until expended.
TITLE III--7(a) LOAN PROGRAM
SEC. 301. PREFERRED LENDERS PROGRAM.
(a) In General- Section 7(a) of the Small Business Act (
`(32) PREFERRED LENDERS PROGRAM-
`(A) DEFINITIONS- In this paragraph--
`(i) the term `national preferred lender' means a preferred lender authorized to operate in any area served by an office of the Administration under subparagraph (G);
`(ii) the term `preferred lender' means a qualified lender participating in the program;
`(iii) the term `program' means the Preferred Lenders Program established under subparagraph (B); and
`(iv) the term `qualified lender' means a lender that demonstrates--
`(I) knowledge of and proficiency in the requirements of the program under this subsection;
`(II) the ability to process, close, service, and liquidate loans;
`(III) the ability to develop and analyze complete loan packages; and
`(IV) a satisfactory performance history of participation in the program under this subsection.
`(B) ESTABLISHMENT- There is established a Preferred Lenders Program under which the Administrator may authorize qualified lenders to make and service loans.
`(C) APPLICATION- A qualified lender desiring to participate in the program shall submit an application at such time, in such manner, and accompanied by such information as the Administrator shall establish.
`(D) DELEGATED AUTHORITY- The Administrator shall authorize a preferred lender to take actions relating to loan servicing on behalf of the Administrator, including--
`(i) determining eligibility and creditworthiness and loan monitoring, collection, and liquidation;
`(ii) authority to make and close loans with a guarantee from the Administrator without obtaining the prior specific approval of the Administrator; and
`(iii) authority to service and liquidate such loans without obtaining the prior specific approval of the Administrator for routine servicing and liquidation activities.
`(E) AREA OF OPERATIONS- The Administrator shall designate the area for which a preferred lender may exercise the authority under subparagraph (D).
`(F) CONFLICT- A preferred lender shall not take any action creating an actual or apparent conflict of interest.
`(G) NATIONAL OPERATION-
`(i) IN GENERAL- A preferred lender may request designation as a national preferred lender by the Administrator, and, upon such designation, shall have the authority to operate in any area served by an office of the Administration.
`(ii) ELIGIBILITY- The Administration shall designate a preferred lender as a national preferred lender if the Administrator determines that preferred lender has--
`(I) satisfactorily operated as a preferred lender in areas encompassing all or part of the territory in not fewer than 5 district offices of the Administration for a minimum of 3 years in each territory;
`(II) centralized loan approval, servicing, and liquidation functions and processes that are satisfactory to the Administration;
`(III) uniform written policies and procedures;
`(IV) a currency rate that is not less than the Administration's national average currency rate for all loans under this subsection;
`(V) a currency rate for loans made under this subsection that is not less than the Administration's national average currency rate for loans made under this subsection;
`(VI) a default rate that is not more than the Administration's national average default rate for loans made under this subsection; and
`(VII) received, in the most recent audit and review as a preferred lender conducted by the Administrator, a rating that is acceptable or acceptable with corrective actions required.
`(H) CORRECTIVE ACTION- If a national preferred lender fails to continue to meet the eligibility criteria under subparagraph (G)(ii), the Administrator shall notify that national preferred lender of the deficiency and allow a reasonable period of time for that national preferred lender to meet such criteria.
`(I) SUSPENSION OR REVOCATION-
`(i) IN GENERAL- The designation of a lender as a national preferred lender shall be suspended or revoked at any time that the Administration determines that the lender--
`(I) is not adhering to the rules or regulations established by the Administrator for the program; or
`(II) has failed to continue to meet the eligibility criteria specified in paragraph (G) or take corrective action under subparagraph (H).
`(ii) EFFECT- A suspension or revocation under clause (i) shall not affect any outstanding guarantee of a national preferred lender.'.
(b) Clerical Amendment- Section 7(a)(2)(C) of the Small Business Act (
`(C) INTEREST RATE UNDER PREFERRED LENDERS PROGRAM- The maximum interest rate for a loan guaranteed under the Preferred Lenders Program under paragraph (32) shall not exceed the maximum interest rate as determined by the Administration, applicable to other loans guaranteed under this subsection.'.
(c) Conforming Amendment- Section 7(a)(19) of the Small Business Act (
SEC. 302. MAXIMUM LOAN AMOUNT.
Section 7(a)(3)(A) of the Small Business Act (
SEC. 303. MAXIMUM 504 AND 7(a A
(a) Combination Financing-
(1) IN GENERAL- Section 502(2) of the Small Business Investment Act of 1958 (
`(C) COMBINATION FINANCING UNDER SMALL BUSINESS ACT- Notwithstanding any other provision of law, financing under this title may be provided to a borrower in the maximum amount provided in this subsection, and a loan guarantee under section 7(a) of the Small Business Act may be provided to the same borrower in the maximum amount provided in section 7(a)(3)(A) of such Act, to the extent that the borrower otherwise qualifies for such assistance.'.
(2) CONFORMING AMENDMENT- Section 7(a)(1) of the Small Business Act (
`(C) COMBINATION FINANCING UNDER SMALL BUSINESS INVESTMENT ACT OF 1958- Financing under this subsection may be provided to a borrower in the maximum amount as provided in subsection (b)(2) of section 502 of the Small Business Investment Act of 1958 (
(b) Reporting- Not later than 90 days after the date of enactment of this Act, and annually thereafter, the Administrator shall submit a report to the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business of the House of Representatives that--
(1) includes the number of small business concerns that have financings under both section 7(a) of the Small Business Act (
(2) describes the total amount and general performance of the financings described in paragraph (1).
SEC. 304. LOAN POOLING.
Section 5(g)(1) of the Small Business Act (
(1) by inserting `(A)' before `The Administration';
(2) by striking the colon and all that follows and inserting a period; and
(3) by adding at the end the following:
`(B) A trust certificate issued under subparagraph (A) shall be based on, and backed by, a trust or pool approved by the Administrator and composed solely of the guaranteed portion of such loans.
`(C) The interest rate on a trust certificate issued under subparagraph (A) shall be either--
`(i) the lowest interest rate on any individual loan in the pool; or
`(ii) the weighted average interest rate of all loans in the pool, subject to such limited variations in loan characteristics as the Administrator determines appropriate to enhance marketability of the pool certificates.'.
SEC. 305. ALTERNATIVE SIZE STANDARD.
Section 3(a) of the Small Business Act (
`(5) Optional Size Standard-
`(A) IN GENERAL- The Administrator shall establish an optional size standard for business loan applicants under section 7(a) and development company loan applicants under title V of the Small Business Investment Act of 1958, which 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 optional size standards established under subparagraph (A) are in effect, the alternative size standard in section 121.301(b) of title 13, Code of Federal Regulations, or any successor thereto, may be used by business loan applicants under section 7(a) and development company loan applicants under title V of the Small Business Investment Act of 1958.'.
SEC. 306. ALTERNATIVE VARIABLE INTEREST RATE.
(a) In General- Section 7(a)(4)(A) of the Small Business Act (
(b) Applicability- Not later than 180 days after the date of enactment of this Act, the Administrator of the Small Business Administration shall select not less than 1 alternative index under section 7(a)(4)(A) of the Small Business Act, as amended by subsection (a), and make such index available for use by participating lenders.
SEC. 307. MINORITY SMALL BUSINESS DEVELOPMENT.
(a) In General- The Small Business Act (
`SEC. 38. MINORITY SMALL BUSINESS DEVELOPMENT.
`(a) Office of Minority Small Business Development- There is established in the Administration an Office of Minority Small Business Development, which shall be administered by the Associate Administrator for Minority Small Business Development (in this section referred to as the `Associate Administrator') appointed under section 4(b)(1).
`(b) Associate Administrator for Minority Small Business Development- The Associate Administrator--
`(1) shall be either--
`(A) an appointee in the Senior Executive Service who is a career appointee; or
`(B) an employee in the competitive service;
`(2) shall be responsible for the formulation, execution, and promotion of policies and programs of the Administration that provide assistance to small business concerns owned and controlled by minorities;
`(3) shall act as an ombudsman for full consideration of minorities in all programs of the Administration (including those under sections 7(j) and 8(a));
`(4) shall work with the Associate Deputy Administrator for Capital Access to increase the proportion of loans and loan dollars, and investments and investment dollars, going to minorities through the finance programs under this Act and the Small Business Investment Act of 1958 (including subsections (a), (b), and (m) of section 7 of this Act and the programs under part A and B of title III and title V of the Small Business Investment Act of 1958);
`(5) shall work with the Associate Deputy Administrator for Entrepreneurial Development to increase the proportion of counseling and training that goes to minorities through the entrepreneurial development programs of the Administration;
`(6) shall work with the Associate Deputy Administrator for Government Contracting and Minority Enterprise Development to increase the proportion of contracts, including through the Small Business Innovation Research Program and the Small Business Technology Transfer Program, to minorities;
`(7) shall work with the partners of the Administration, trade associations, and business groups to identify and carry out policies and procedures to more effectively market the resources of the Administration to minorities;
`(8) shall work with the Office of Field Operations to ensure that district offices and regional offices have adequate staff, funding, and other resources to market the programs of the Administration to meet the objectives described in paragraphs (4) through (7); and
`(9) shall report to and be responsible directly to the Administrator.
`(c) Authorization of Appropriations- There are authorized to be appropriated to carry out this section--
`(1) $5,000,000 for fiscal year 2007;
`(2) $5,000,000 for fiscal year 2008;
`(3) $5,000,000 for fiscal year 2009; and
`(4) $5,000,000 for fiscal year 2010.'.
(b) Conforming Amendments- Section 4(b)(1) of the Small Business Act (
SEC. 308. LOWERING OF FEES.
Section 7(a)(23) of the Small Business Act (
`(C) LOWERING OF FEES-
`(i) IN GENERAL-
`(ii) MAXIMUM
SEC. 309. INTERNATIONAL TRADE LOANS.
(a) In General- Section 7(a)(3)(B) of the Small Business Act (
(b) Working Capital- Section 7(a)(16)(A) of the Small Business Act (
(1) in the matter preceding clause (i), by striking `in--' and inserting `--';
(2) in clause (i)--
(A) by inserting `in' after `(i)'; and
(B) by striking `or' at the end;
(3) in clause (ii)--
(A) by inserting `in' after `(ii)'; and
(B) by striking the period and inserting `; or'; and
(4) by adding at the end the following:
`(iii) by providing working capital.'.
(c) Collateral- Section 7(a)(16)(B) of the Small Business Act (
(1) by striking `Each loan' and inserting the following:
`(i) IN GENERAL- Except as provided in clause (ii), each loan'; and
(2) by adding at the end the following:
`(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 such lien provides adequate assurance of the payment of such loan.'.
(d) Refinancing- Section 7(a)(16)(A)(ii) of the Small Business Act (
SEC. 310. RURAL LENDING OUTREACH PROGRAM.
Section 7(a) of the Small Business Act (
(1) by striking paragraph (25)(C); and
(2) by adding at the end the following:
`(33) RURAL LENDING OUTREACH PROGRAM-
`(A) IN GENERAL- The Administrator shall carry out a rural lending outreach program to provide not more than an 85 percent guaranty for loans of not more than $250,000. The program shall be carried out only through lenders located in rural areas (as the term `rural' is defined in section 501(f) of the Small Business Investment Act of 1958 (
`(B) LOAN TERMS- For a loan made through the program under this paragraph--
`(i) the Administrator shall approve or disapprove the loan within 36 hours of the time the Administrator receives the application;
`(ii) the program shall use abbreviated application and documentation requirements; and
`(iii) minimum credit standards, as the Administrator considers necessary to limit the rate of default on loans made under the program, shall apply.'.
TITLE IV--CERTIFIED DEVELOPMENT COMPANIES; 504 LOAN PROGRAM
SEC. 401. DEVELOPMENT COMPANY LOAN PROGRAMS.
(a) Title of Program- Title V of the Small Business Investment Act of 1958 (
`SEC. 511. PROGRAM TITLE.
`(a) In General- Except as provided in subsection (b), the programs authorized by this title shall be known collectively as the `Local Development Business Loan Program'. The Administrator may refer to such program as the `504 Loan Program', until such usage is no longer necessary.
`(b) Existing Name- Participants in the Local Development Business Loan Program may continue to refer to such program as `the 504 Loan Program'.'.
(b) Existing Materials- The Administrator may use informational materials created, or that were in the process of being created, before the date of enactment of this Act that do not refer to a program under title V of the Small Business Investment Act of 1958 (
(c) New Materials- Any informational materials created by the Administrator on or after the date of enactment of this Act shall refer to any program under title V of the Small Business Investment Act of 1958 (
SEC. 402. LOAN LIQUIDATIONS.
Section 510 of the Small Business Investment Act of 1958 (
(1) by redesignating subsection (e) as subsection (g); and
(2) by inserting after subsection (d) the following:
`(e) Participation-
`(1) IN GENERAL- Any qualified State or local development company which elects not to apply for authority to foreclose and liquidate defaulted loans under this section, or which the Administrator determines to be ineligible for such authority, shall contract with a qualified third-party to perform foreclosure and liquidation of defaulted loans in its portfolio. The contract shall be contingent upon approval by the Administrator with respect to the qualifications of the contractor and the terms and conditions of liquidation activities.
`(2) COMMENCEMENT- This subsection does not require any development company to liquidate defaulted loans until the Administrator has adopted and implemented a program to compensate and reimburse development companies, as provided under subsection (f).
`(f) Compensation and Reimbursement-
`(1) REIMBURSEMENT OF EXPENSES- The Administrator shall reimburse each qualified State or local development company for all expenses paid by such company as part of the foreclosure and liquidation activities, if the expenses--
`(A) were--
`(i) approved in advance by the Administrator, either specifically or generally; or
`(ii) incurred by the development company on an emergency basis without prior approval from the Administrator, if the Administrator determines that the expenses were reasonable and appropriate; and
`(B) are submitted by the development company to the Administrator not later than 3 years after the date of the purchase of the debenture by the Administrator.
`(2) COMPENSATION FOR RESULTS-
`(A) DEVELOPMENT- The Administrator shall develop a schedule to compensate and provide an incentive to qualified State or local development companies that foreclose and liquidate defaulted loans.
`(B) CRITERIA- The schedule required under this paragraph shall--
`(i) be based on a percentage of the net amount recovered, but shall not exceed a maximum amount; and
`(ii) not apply to any foreclosure which is conducted under a contract between a development company and a qualified third party to perform the foreclosure and liquidation.'.
SEC. 403. ADDITIONAL EQUITY INJECTIONS.
Section 502(3)(B)(ii) of the Small Business Investment Act of 1958 (
`(ii) FUNDING FROM INSTITUTIONS- If a small business concern--
`(I) provides the minimum contribution required under subparagraph (C), not less than 50 percent of the total cost of any project financed under clause (i), (ii), or (iii) of subparagraph (C) shall come from the institutions described in subclauses (I), (II), and (III) of clause (i); and
`(II) provides more than the minimum contribution required under subparagraph (C), any excess contribution may be used to reduce the amount required from the institutions described in subclauses (I), (II), and (III) of clause (i), except that the amount from such institutions may not be reduced to an amount that is less than the amount of the loan made by the Administrator.'.
SEC. 404. UNIFORM LEASING POLICY.
- (a) In General- Section 502 of the Small Business Investment Act of 1958 (
SEC. 405. BUSINESSES IN LOW-INCOME AREAS. COMMUNITIES.
(a) Goals- Section 501(d)(3)(A) of the Small Business Investment Act of 1958 (
(b)
`(B) SIZE STANDARDS- For purposes of determining eligibility for a loan under this section for use in a low-income community (as that term is used in section 501(d)(3)(A)), the size standards established under section 3 of the Small Business Act (
`(C) PERSONAL LIQUIDITY-
`(i) IN GENERAL- For any loan under this section for use in a low-income community (as that term is used in section 501(d)(3)(A)), the amount of personal resources of an owner that are excluded from the amount required to be provided to reduce the portion of the project funded by the Administration shall be not less than 25 percent more than that required for other loans under this section.
SEC. 405 6
Section 501(e) of the Small Business Investment Act of 1958 (
`(7) A small business concern that is unconditionally owned by more than 1 individual, or a corporation, the stock of which is owned by more than 1 individual, shall be deemed to have achieved a public policy goal required under subsection (d)(3) if a combined ownership share of not less than 51 percent is held by individuals who are in 1 of, or a combination of, the groups described in subparagraph (C) or (E) of subsection (d)(3).'.
SEC. 406 7
Section 502 of the Small Business Investment Act of 1958 (
`(7) PERMISSIBLE DEBT REFINANCING-
`(A) IN GENERAL- Any financing approved under this title may include a limited amount of debt refinancing.
`(B) EXPANSIONS- If the project involves expansion of a small business concern which has existing indebtedness collateralized by fixed assets, any amount of existing indebtedness that does not exceed 1/2 of the project cost of the expansion may be refinanced and added to the expansion cost, if--
`(i) the proceeds of the indebtedness were used to acquire land, including a building situated thereon, to construct a building thereon, or to purchase equipment;
`(ii) the borrower has been current on all payments due on the existing debt for not less than 1 year preceding the date of refinancing; and
`(iii) the financing under section 504 will provide better terms or rate of interest than exists on the debt at the time of refinancing.'.
SEC. 407 8
Section 501(e)(2) of the Small Business Investment Act of 1958 (
SEC. 408 9
Section 103 of the Small Business Investment Act of 1958 (
(1) by striking paragraph (6) and inserting the following:
`(6) the term `development company' means an entity incorporated under State law with the authority to promote and assist the growth and development of small business concerns in the areas in which it is authorized to operate by the Administrator;';
(2) in paragraph (16), by striking `and' at the end;
(3) in paragraph (17), by striking the period at the end and inserting `; and'; and
(4) by adding at the end the following:
`(18) the term `certified development company' means a development company that the Administrator has certified meets the criteria of section 506.'.
SEC. 409 10
Section 508(c)(6)(B) of the Small Business Investment Act of 1958 (
(1) in the subparagraph heading, by striking `TEMPORARY REDUCTION' and inserting `REDUCTION'; and
(2) by striking `Notwithstanding subparagraph (A), during the 2-year period beginning on the date that is 90 days after the date of enactment of this subparagraph, the' and inserting `The'.
SEC. 410 1
Section 506 of the Small Business Investment Act of 1958 (
(1) in the section heading, by striking `restrictions on development company assistance' and inserting `certified development companies'; and
(2) by inserting before `Notwithstanding any other provision of law' the following:
`(a) Authority To Issue Debentures- A development company may issue debentures under this title if the Administrator certifies that the company meets the following criteria:
`(1) SIZE-
`(A) IN GENERAL- Except as provided in subparagraph (B), the development company shall be a small business concern with fewer than 500 employees, and shall not be under the control of any entity that does not meet the size standards established by the Administrator for a small business concern.
`(B) EXCEPTION- Any development company that was certified by the Administrator before December 31, 2005, may continue to issue debentures under this title.
`(2) PRIMARY PURPOSE- The primary purpose of the development company shall be to benefit the community by fostering economic development to create and preserve jobs and stimulate private investment.
`(3) PRIMARY FUNCTION- A primary function of the development company shall be to accomplish its purpose by providing long-term financing to small business concerns under the Local Development Business Loan Program. The development company shall also provide or support other community and local economic development activities to assist the community.
`(4) NONPROFIT STATUS-
`(A) IN GENERAL- Except as provided in subparagraph (B), the development company shall be a nonprofit corporation.
`(B) EXCEPTION- A development company certified by the Administrator before January 1, 1987, may continue to issue debentures under this title and retain its status as a for-profit enterprise.
`(5) GOOD STANDING- The development company--
`(A) shall be in good standing in the State in which such company is incorporated and in any other State in which it conducts business; and
`(B) shall be in compliance with all laws, including taxation requirements, in the State in which such company is incorporated and in any other State in which it conducts business.
`(6) MEMBERSHIP OF DEVELOPMENT COMPANY- There shall be--
`(A) not fewer than 25 members of the development company (or owners or stockholders, if the corporation is a for-profit entity), none of whom may own or control more than 10 percent of the voting membership of the company; and
`(B) at least 1 member of the development company (none of whom is in a position to control the development company) from each of the following:
`(i) Government organizations that are responsible for economic development.
`(ii) Financial institutions that provide commercial long-term fixed asset financing.
`(iii) Community organizations that are dedicated to economic development.
`(iv) Businesses.
`(7) BOARD OF DIRECTORS-
`(A) IN GENERAL- The development company shall have a board of directors.
`(B) MEMBERS OF BOARD- Each member of the board of directors shall be--
`(i) a member of the development company; and
`(ii) elected by a majority of the members of the development company.
`(C) REPRESENTATION OF ORGANIZATIONS AND INSTITUTIONS-
`(i) IN GENERAL- There shall be at least 1 member of the board of directors from not fewer than 3 of the 4 organizations and institutions described in paragraph (6)(B), none of whom is in a position to control the development company.
`(ii) MAXIMUM PERCENTAGE- Not more than 50 percent of the members of the board of directors shall be from any 1 of the organizations and institutions described in paragraph (6)(B).
`(D) MEETINGS- The board of directors of the development company shall meet on a regular basis to make policy decisions for such company.
`(8) PROFESSIONAL MANAGEMENT AND STAFF-
`(A) IN GENERAL- The development company shall have full-time professional management, including a chief executive officer to manage daily operations and a full-time professional staff qualified to market the Local Development Business Loan Program and handle all aspects of loan approval and servicing, including liquidation, if appropriate.
`(B) INDEPENDENT MANAGEMENT AND OPERATION- Except as provided in paragraph (9), the development company shall be independently managed and operated to pursue the economic development purpose of the company and shall employ directly the chief executive officer.
`(9) MANAGEMENT AND OPERATION EXCEPTIONS-
`(A) AFFILIATION- A development company may be an affiliate of another local nonprofit service corporation (other than a development company), a purpose of which is to support economic development in the area in which the development company operates.
`(B) STAFFING- A development company may satisfy the requirement for full-time professional staff under paragraph (8)(A) by contracting for the required staffing with--
`(i) a local nonprofit service corporation;
`(ii) a nonprofit affiliate of a local nonprofit service corporation;
`(iii) an entity wholly or partially operated by a governmental agency; or
`(iv) another entity approved by the Administrator.
`(C) DIRECTORS- A development company and a local nonprofit service corporation with which it is affiliated may have in common some, but not a
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