To amend title 10, United States Code, to restore the Department of Defense loan guarantee program for small and medium-sized business concerns that are economically dependent on defense expenditures.

SECTION 1. RESTORATION OF LOAN GUARANTEE PROGRAM FOR DEFENSE DEPENDENT 
              SMALL AND MEDIUM-SIZED BUSINESS CONCERNS.

    (a) DELTA Loan Guarantee Program.--(1) Chapter 148 of title 10, 
United States Code, is amended by inserting before section 2525 the 
following new section:
``Sec. 2524. Loan guarantees for defense dependent small and medium-
              sized business concerns
    ``(a) Loan Guarantees Authorized.--The Secretary of Defense may 
provide support under this section for programs sponsored by the 
Federal Government, regional entities, States, local governments, and 
private entities and nonprofit organizations that assist small business 
concerns and medium-sized business concerns that are economically 
dependent on defense expenditures to acquire dual-use capabilities 
through the provision of loan guarantees to such business concerns 
under the terms and conditions specified under this section and other 
applicable law.
    ``(b) Transfer of Administration.--(1) The Secretary of Defense may 
enter into a memorandum of understanding with the Administrator of the 
Small Business Administration, the Administrator of the Economic 
Development Administration of the Department of Commerce, or the head 
of any other Federal agency having expertise regarding the provision of 
loan guarantees, under which the agency may--
            ``(A) process applications for loan guarantees under this 
        section;
            ``(B) guarantee repayment of the resulting loans; and
            ``(C) provide any other services to the Secretary to 
        administer the loan guarantee program under this section.
    ``(2) From funds made available for the loan guarantee program 
under this section, the Secretary of Defense may transfer to the agency 
or agencies that are parties to the memorandum of understanding such 
sums as may be necessary for the agency or agencies to carry out 
activities under the loan guarantee program.
    ``(3) The Secretary of Defense shall enter into the memorandum of 
understanding authorized by paragraph (1) within 60 days after the date 
of the enactment of this section.
    ``(c) Condition on Operation.--The Secretary shall carry out the 
loan guarantee program authorized under this section during any fiscal 
year for which funds are specifically made available to cover the costs 
of loan guarantees to be issued pursuant to such section.
    ``(d) Special Requirements Regarding Loan Guarantees.--(1) 
Competitive procedures shall be used in the selection of small business 
concerns and medium-sized business concerns to receive loan guarantees 
under this section.
    ``(2) The criteria used for the selection of a small business 
concern or medium-sized business concern to receive a loan guarantee 
under this section shall include the following:
            ``(A) The extent to which the loans to be guaranteed would 
        support the retention of defense workers whose employment would 
        otherwise be permanently or temporarily terminated as a result 
        of reductions in expenditures by the United States for defense, 
        the termination or cancellation of a defense contract, the 
        failure to proceed with an approved major weapon system, the 
        merger or consolidation of the operations of a defense 
        contractor, or the closure or realignment of a military 
        installation.
            ``(B) The extent to which the loans to be guaranteed would 
        stimulate job creation and new economic activities in 
        communities most adversely affected by reductions in 
        expenditures by the United States for defense, the termination 
        or cancellation of a defense contract, the failure to proceed 
        with an approved major weapon system, the merger or 
        consolidation of the operations of a defense contractor, or the 
        closure or realignment of a military installation.
            ``(C) The extent to which the loans to be guaranteed would 
        be used to acquire (or permit the use of other funds to 
        acquire) capital equipment to modernize or expand the 
        facilities of the borrower to enable the borrower to remain in 
the national technology and industrial base available to the Department 
of Defense.
    ``(3) Except as provided in paragraph (4), to be eligible for a 
loan guarantee under this section, a borrower must demonstrate to the 
satisfaction of the Secretary that, during any one of the seven 
preceding operating years of the borrower, at least 25 percent of the 
value of the borrower's sales were derived from--
            ``(A) contracts with the Department of Defense or the 
        defense-related activities of the Department of Energy; or
            ``(B) subcontracts in support of defense-related prime 
        contracts.
    ``(4)(A) An individual described in subparagraph (B) shall be 
eligible for a loan guarantee under this section to establish, or 
acquire and operate, a small business concern in an area that the 
Secretary determines is (or reasonably can be expected to be) 
detrimentally affected by reductions in defense spending, the 
termination or cancellation of a defense contract, the failure to 
proceed with an approved major weapon system, the merger or 
consolidation of the operations of a defense contractor, or the closure 
or realignment of a military installation.
    ``(B) An individual referred to in subparagraph (A) is an 
individual--
            ``(i) who is a former employee of the Department of Defense 
        or a defense contractor; and
            ``(ii) whose employment was terminated as a result of 
        reductions in defense spending, the termination or cancellation 
        of a defense contract, the failure to proceed with an approved 
        major weapon system, the merger or consolidation of the 
        operations of a defense contractor, or the closure or 
        realignment of a military installation.
    ``(e) Maximum Amount of Loan Principal.--The maximum amount of loan 
principal for which the Secretary may provide a guarantee under this 
section during a fiscal year may not exceed--
            ``(1) $1,250,000, with respect to a small business concern; 
        and
            ``(2) $10,000,000 with respect to a medium-sized business 
        concern.
    ``(f) Loan Guaranty Rate.--The maximum allowable guarantee 
percentage for loans guaranteed under this section may not exceed 90 
percent.
    ``(g) Allocation of Funds Between Small and Medium Businesses.--The 
total amount available for a fiscal year to cover the costs of loan 
guarantees under this section shall be divided between small business 
concerns and medium-sized business concerns as follows:
            ``(A) 60 percent for small business concerns.
            ``(B) 40 percent for medium-sized business concerns.
    ``(h) Medium-Sized Business Concern Defined.--In this section, the 
term `medium-sized business concern' means a business concern that is 
not more than two times the maximum size specified by the Administrator 
of the Small Business Administration for purposes of determining 
whether a business concern furnishing a product or service is a small 
business concern.''.
    (2) The table of sections at the beginning of subchapter IV of such 
chapter is amended by inserting before the item relating to section 
2525 the following new item:

``2524. Loan guarantees for defense dependent small- and medium-sized 
                            business concerns.''.
    (b) Continued Availability of Existing Funds.--The funds made 
available under the second proviso under the heading ``Research, 
Development, Test and Evaluation, Defense-Wide'' in Public Law 103-335 
(108 Stat. 2613) shall be available until September 30, 1999--
            (1) to cover the costs (as defined in section 502(5) of the 
        Federal Credit Reform Act of 1990 (2 U.S.C. 661a(5))) of loan 
        guarantees issued under section 2524 of title 10, United States 
        Code, as added by subsection (a); and
            (2) to cover the reasonable costs of the administration of 
        loan guarantees referred to in such section.

Summary: Authorizes the Secretary of Defense to support through the provision of loan guarantees programs sponsored by the Federal Government, regional entities, State and local governments, private entities, and nonprofit organizations that assist small and medium-sized businesses that are economically dependent on defense expenditures to acquire dual-use capabilities. Provides for the transfer of such loan guarantee authority and funding from the Secretary to the appropriate Federal agency by way of a memorandum of understanding. Authorizes the Secretary to carry out the loan guarantee program during any fiscal year for which funds are specifically made available for such purpose. Requires competitive procedures to be used in the selection of appropriate businesses for the loan program, under specified criteria. Requires a borrower to demonstrate that, during any one of the past seven years, at least 25 percent of the borrower's sales were derived from: (1) contracts with the Department of Defense or defense-related activities of the Department of Energy. Or (2) subcontracts in support of defense-related prime contracts. Provides for: (1) a maximum loan amount and a loan guaranty rate. And (2) a 60-40 allocation of loan funds to small and medium-sized businesses, respectively. Provides for the continued availability through FY 1999 of current funding for the loan guarantee program.