A bill to amend the Small Business Investment Act of 1958 to permit prepayment of debentures issued by State and local development companies.

SECTION 1. PREPAYMENT OF DEVELOPMENT COMPANY 0DEBENTURES.

    (a) In General.--Title V of the Small Business Investment Act of 
1958 (15 U.S.C. 695, et seq.) is amended by adding at the end the 
following new section:

``SEC. 507. PREPAYMENT OF DEVELOPMENT COMPANY DEBENTURES.

    ``(a) In General.--(1) If the requirements of subsection (b) are 
met and subject to the availability of appropriations, the issuer of a 
debenture purchased by the Federal Financing Bank and guaranteed by the 
Administration under section 503 may, at the election of the borrower 
whose loan secures such debenture and with the approval of the 
Administration, prepay such debenture by paying to the Federal 
Financing Bank the amount that is equal to the sum of the unpaid 
principal balance due on the debenture on the date of the prepayment 
(plus accrued interest at the coupon rate on the debenture) and the 
amount of the repurchase premium described in paragraph (2)(A). The 
Administration shall pay to the Federal Financing Bank the difference 
between the repurchase premium paid by the issuer of the debenture 
under this subsection and the repurchase premium that the Federal 
Financing Bank would otherwise have received.
    ``(2)(A) The amount of the repurchase premium described in this 
paragraph is the product of--
            ``(i) the unpaid principal balance due on the debenture on 
        the date of prepayment;
            ``(ii) the interest rate of the debenture; and
            ``(iii) the factor `P', as determined under subparagraph 
        (B).
    ``(B) for purposes of subparagraph (A)(iii), the factor `P' means 
the applicable percent determined in accordance with the following 
table:
      


------------------------------------------------------------------------
                                            Applicable percent          
  ``Year in which prepayment of  ---------------------------------------
 debenture is made (from date of   10-year   15-year   20-year   25-year
       original issuance)           term      term      term      term  
                                    loan      loan      loan      loan  
------------------------------------------------------------------------
1...............................      1.00      1.00      1.00      1.00
2...............................       .80       .85       .90       .92
3...............................       .60       .70       .80       .84
4...............................       .40       .55       .70       .76
5...............................       .20       .40       .60       .68
6...............................         0       .25       .50       .60
7...............................         0       .10       .40       .52
8...............................         0         0       .30       .44
9...............................         0         0       .20       .36
10..............................         0         0       .10       .28
11..............................         0         0         0       .20
12..............................         0         0         0       .12
13..............................         0         0         0       .04
14 through 25...................         0         0         0         0
------------------------------------------------------------------------

    ``(b) Requirements.--The requirements of this subsection are met 
if--
            ``(1) the debenture is outstanding and neither the loan 
        that secures the debenture nor the debenture is in default on 
        the date the prepayment is made;
            ``(2) State or personal funds, which may include 
        refinancing under the programs authorized by sections 504 and 
        505 of this Act, are used to prepay the debenture; and
            ``(3) the issuer certifies that the benefits, net of fees 
        and expenses authorized herein, associated with prepayment of 
        the debenture are entirely passed through to the borrower.
    ``(c) No fees or penalties other than those specified in this 
section may be imposed as a condition of such prepayment against the 
issuer or the borrower, or the Administration or any fund or account 
administered by the Administration, except as provided in this Act.
    ``(d) The refinancing of debentures authorized by paragraph (b)(2) 
of this section under section 504 of this Act shall be limited to only 
such amounts as are needed to prepay existing debentures and shall be 
subject to all of the other provisions of sections 504 and 505 of this 
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 a requisite number 
of jobs will be created with the proceeds of such refinancing.''
    Sec. 2. (a) The provisions of this Act are exercisable at the 
option of the borrower.
    (b) Any new credit or spending authority provided for in this Act 
is subject to amounts provided in advance in appropriations Acts.
    (c) There are authorized to be appropriated such sums as may be 
necessary to carry out the provisions of this Act.
    (d) Within 30 days of the effective date of this Act, the 
Administration shall promulgate such regulations as are necessary, 
including establishing an order of priority to accomplish the 
provisions of this Act.
    (e) Subsection 504(b) of this Act is hereby repealed, subsection 
504(a) is renumbered as section 504, and paragraphs (1) through (3) of 
subsection 504(a) are renumbered as subsections 504 (a) through (c).

Summary: Amends the Small Business Investment Act of 1958 to permit a qualified State or local development company that issues a debenture purchased by the Federal Financing Bank and guaranteed by the Small Business Administration, at the election of the small business borrower whose loan secures such debenture and with the Administrators approval, to prepay the debenture by payment to the Bank of the unpaid principal balance, accrued interest, and repurchase premium amount . Prohibits any fees or penalties from being imposed against the issuer, borrower, or the Administration as a condition of prepayment under this Act. Authorizes appropriations.