Small Business Prepayment Penalty Relief Act of 1994

Summary: Small Business Prepayment Penalty Relief Act of 1994 - Authorizes the Small Business Administration (SBA), upon the request of the issuer and the concurrence of the borrower, to transfer to the Federal Financing Bank such sums as necessary to reduce the interest rate on a debenture issued by a certified development company. Requires the Bank, upon receipt of such payment, to modify the interest rate for such debentures. 
Permits debentures authorized under provisions of the Small Business Investment Act of 1958 (the Act) regarding private debenture sales and pooling to be used to refinance debentures issued by State or local development companies if the amount of the new financing is limited to amounts necessary to repay the existing debentures, including any prepayment penalty imposed by the Bank. 
Authorizes the SBA, upon the request of the issuer, to transfer to the Bank such sums as necessary to reduce the interest rate on a debenture issued by a small business investment company under title III of the Act.  Requires the Bank, upon receipt of such payment, to modify the interest rate for such debentures. 
Authorizes the SBA, upon the request of the issuer, to modify the interest rate on a debenture issued by a small business investment company financing disadvantaged small business concerns. 
Requires the SBA, upon enactment of an appropriations Act providing funds to carry out this Act, to evaluate the outstanding portfolio of debentures which are eligible for interest rate relief under this Act. 
Authorizes appropriations.

That this Act may be 
cited as the ``Small Business Prepayment Penalty Relief Act of 1994''.

SEC. 2. MODIFICATION OF DEVELOPMENT COMPANY DEBENTURE INTEREST RATES.

    (a) In General.--Upon the request of the issuer and the concurrence 
of the borrower, the Small Business Administration is authorized to 
transfer to the Federal Financing Bank such sums as may be necessary to 
carry out the provisions of this section in order to reduce the 
interest rate on a debenture issued by a certified development company. 
The reduction shall be effective January 2, 1995 and shall apply for 
the remainder of the term of the debenture.
    (b) Interest Rate Modification.--Upon receipt of such payment, the 
Federal Financing Bank shall modify the interest rate of each debenture 
for which the payment is made. No other change shall be made in the 
terms and conditions of the debenture, and the modification in the 
interest rate shall not be construed as new budget authority nor 
require any additional appropriation for credit subsidy on account of 
the modification.
    (c) Definitions.--For the purposes of this section--
            (1) the term ``issuer'' means the issuer of a debenture 
        pursuant to section 503 of the Small Business Investment Act of 
        1958 which has been purchased by the Federal Financing Bank if 
        the debenture is outstanding on the date of enactment of this 
        Act, and neither the loan that secures the debenture nor the 
        debenture is in default on such date; and
            (2) the term ``borrower'' means the small business concern 
        whose loan secures a debenture issued pursuant to such section.
    (d) Other Rights.--A modification of the interest rate on a 
debenture as authorized in this section shall not affect any rights or 
options of the issuer or borrower which are otherwise authorized by 
contract or by law.
    (e) Refinancing.--Debentures authorized by sections 504 and 505 of 
the Small Business Investment Act of 1958 may be used to refinance 
debentures issued under section 503 of such Act if the amount of the 
new financing is limited to such amounts as are needed to repay the 
existing debenture, including any prepayment penalty imposed by the 
Federal Financing Bank. Any such refinancing shall be subject to all of 
the other provisions of sections 504 and 505 of such Act and the rules 
and regulations of the Administration promulgated thereunder, 
including, but not limited to, rules and regulations governing payment 
of authorized expenses and commissions, fees and discounts to brokers 
and dealers in trust certificates issued pursuant to section 505: 
Provided, however, That no applicant for refinancing under section 504 
of this Act need demonstrate that the requisite number of jobs will be 
created or preserved with the proceeds of such refinancing: And 
provided further, That a development company which provides refinancing 
under this subsection shall be limited to a loan processing fee not to 
exceed one-half of one percent to cover the cost of packaging, 
processing and other nonlegal staff functions.

SEC. 3. MODIFICATION OF SMALL BUSINESS INVESTMENT COMPANY DEBENTURE 
              INTEREST RATES.

    (a) In General.--Upon the request of the issuer, the Small Business 
Administration is authorized to transfer to the Federal Financing Bank 
such sums as may be necessary to carry out the provisions of this 
section in order to reduce the interest rate on a debenture issued by a 
Small Business Investment Company under the provisions of title III of 
the Small Business Investment Act of 1958. The reduction shall be 
effective January 2, 1995 and shall apply for the remainder of the term 
of the debenture.
    (b) Interest Rate Modification.--Upon receipt of such payment, the 
Federal Financing Bank shall modify the interest rate of each debenture 
for which the payment is made. No other change shall be made in the 
terms and conditions of the debenture, and the modification in the 
interest rate shall not be construed as new budget authority nor 
require any additional appropriation for credit subsidy on account of 
the modification.
    (c) Definitions.--For the purposes of this section, the term 
``issuer'' means the issuer of a debenture pursuant to section 303 of 
the Small Business Investment Act of 1958 which has been purchased by 
the Federal Financing Bank if the debenture is outstanding on the date 
of enactment of this Act, and is not in default on such date.
    (d) Other Rights.--A modification of the interest rate on a 
debenture as authorized in this section shall not affect any rights or 
options of the issuer which are otherwise authorized by contract or by 
law.

SEC. 4. MODIFICATION OF SPECIALIZED SMALL BUSINESS INVESTMENT COMPANY 
              DEBENTURE INTEREST RATES.

    (a) Interest Rate Modification.--Upon the request of the issuer, 
the Small Business Administration is authorized to modify the interest 
rate on a debenture issued by a Small Business Investment Company 
licensed under the provisions of section 301(d) of the Small Business 
Investment Act of 1958. The reduction shall be effective January 2, 
1995 and shall apply for the remainder of the term of the debenture. No 
other change shall be made in the terms and conditions of the 
debenture, and the modification in the interest rate shall not be 
construed as new budget authority nor require any additional 
appropriation for credit subsidy on account of the modification.
    (b) Definitions.--For the purposes of this section, the term 
``issuer'' means a Specialized Small Business Investment Company 
licensed under the provisions of section 301(d) of the Small Business 
Investment Act of 1958 which has issued a debenture which has been 
funded by the Small Business Administration providing the debenture is 
outstanding on the date of enactment of this Act and is not in default 
on such date.
    (c) Other Rights.--A modification of the interest rate on a 
debenture as authorized in this section shall not affect any rights or 
options of the issuer which are otherwise authorized by contract or by 
law.

SEC. 5. INTEREST RATE REDUCTIONS.

    (a) In General.--Upon enactment of an Appropriations Act providing 
funds to carry out the provisions of this Act and limited to amounts 
specifically provided in advance in Appropriations Acts, the Small 
Business Administration shall evaluate the outstanding portfolio of 
debentures which are eligible for interest rate relief under this Act. 
The Administration shall apply the funds appropriated to carry out this 
Act in order to reduce the highest interest rate on all eligible 
debentures to a uniform rate.
    (b) Authorization.--There are authorized to be appropriated 
$30,000,000 to carry out the provisions of this Act in fiscal year 
1995.