U.S. GOVERNMENT PUBLISHING OFFICE

25–435 WASHINGTON : 

" ! COMMITTEE PRINT 114th Congress 

2d Session 

S. PRT. 

2017

114–36 

SMALL BUSINESS ACT AND SMALL 

BUSINESS INVESTMENT ACT OF 1958 

COMPILATION 

DAVID VITTER, Chair 

COMMITTEE ON SMALL BUSINESS 

AND ENTREPRENEURSHIP 

UNITED STATES SENATE 

Printed under the authority of S. Res. 73, 114th Congress 

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CONGRESS.#13
SMALL BUSINESS ACT AND SMALL BUSINESS INVESTMENT ACT OF 1958 COMPILATION 

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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

DAVID VITTER, Louisiana, Chairman 

JEANNE SHAHEEN, New Hampshire, Ranking Member 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RAND PAUL, Kentucky 

TIM SCOTT, South Carolina 

DEB FISCHER, Nebraska 

CORY GARDNER, Colorado 

JONI ERNST, Iowa 

KELLY AYOTTE, New Hampshire 

MICHAEL B. ENZI, Wyoming 

MARIA CANTWELL, Washington 

BENJAMIN L. CARDIN, Maryland 

HEIDI HEITKAMP, North Dakota 

EDWARD J. MARKEY, Massachusetts 

CORY A. BOOKER, New Jersey 

CHRISTOPHER A. COONS, Delaware 

MAZIE K. HIRONO, Hawaii 

GARY C. PETERS, Michigan 

MEREDITH WEST, Republican Staff Director 

ROBERT DIZNOFF, Democratic Staff Director 

(II) 

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SMALL BUSINESS ACT 

[The Act of July 18, 1958] 

[15 U.S.C. 631 et seq.; 72 Stat. 384 et seq.] 

[As Amended Through P.L. 114-328, Enacted December 23, 2016] 

AN ACT To amend the Small Business Act of 1953, as amended. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, That title II of the 

Act of July 30, 1953 (Public Law 163, Eighty-third Congress), as 

amended, is hereby withdrawn as a part of that Act and is made 

a separate Act to be known as the "Small Business Act". 

SEc. 1. [15 U.S.C. 631 note] This Act may be cited as the 

"Small Business Act". 

SEC. 2. [15 U.S.C. 631] (a) The essence of the American economic system of private enterprise is free competition. Only 

through full and free competition can free markets, free entry into 

business, and opportunities for the expression and growth of personal initiative and individual judgment be assured. The preservation and expansion of such competition is basic not only to the economic well-being but to the security of this Nation. Such security 

and well-being cannot be realized unless the actual and potential 

capacity of small business is encouraged and developed. It is the 

declared policy of the Congress that the Government should aid, 

counsel, assist, and protect, insofar as is possible, the interests of 

small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and 

contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for 

maintenance, repair, and construction) be placed with small-business enterprises, to insure that a fair proportion of the total sales 

of Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation. 

(b)(l) It is the declared policy of the Congress that the Federal 

Government, through the Administrator of the Small Business Administration, acting through the Associate Administrator for International Trade, and in cooperation with the Department of Commerce and other relevant State and Federal agencies, should aid 

and assist small businesses, as defined under this Act, to increase 

their ability to compete in international markets by-

(A) enhancing their ability to export; 

(B) facilitating technology transfers; 

(C) enhancing their ability to compete effectively and efficiently against imports; 

1 
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Sec. 2 SMALL BUSINESS ACT 2 

(D) increasing the access of small businesses to long-term 

capital for the purchase of new plant and equipment used in 

the production of goods and services involved in international 

trade; 

(E) disseminating information concerning State, Federal, 

and private programs and initiatives to enhance the ability of 

small businesses to compete in international markets; and 

(F) ensuring that the interests of small businesses are adequately represented in bilateral and multilateral trade negotiations. 

(2) The Congress recognizes that the Department of Commerce 

is the principal Federal agency for trade development and export 

promotion and that the Department of Commerce and the Small 

Business Administration work together to advance joint interests. 

It is the purpose of this Act to enhance, not alter, their respective 

roles. 

(c) It is the declared policy of the Congress that the Government, through the Small Business Administration, should aid and 

assist small business concerns which are engaged in the production 

of food and fiber, ranching, and raising of livestock, aquaculture, 

and all other farming and agricultural related industries; and the 

financial assistance programs authorized by this Act are also to be 

used to assist such concerns. 

(d)(l) The assistance programs authorized by sections 7(i) and 

7(j) of this Act are to be utilized to assist in the establishment, 

preservation, and strengthening of small business concerns and improve the managerial skills employed in such enterprises, with special attention to small business concerns (1) located in urban or 

rural areas with high proportions of unemployed or low-income individuals; or (2) owned by low-income individuals; and to mobilize 

for these objectives private as well as public managerial skills and 

resources. 

(2)(A) With respect to the programs authorized by section 7(j) 

of this Act, the Congress finds-

(i) that ownership and control of productive capital is concentrated in the economy of the United States and certain 

groups, therefore, own and control little productive capital' 

(ii) that certain groups in the United States own and control little productive capital because they have limited opportunities for small business ownership; 

(iii) that the broadening of small business ownership 

among groups that presently own and control little productive 

capital is essential to provide for the well-being of this Nation 

by promoting their increased participation in the free enterprise system of the United States; 

(iv) that such development of business ownership among 

groups that presently own and control little productive capital 

will be greatly facilitated through the creation of a small business ownership development program, which shall provide 

services, including, but not limited to, financial, management, 

and technical assistance. 1 

1 So in original. The period probably should be a semicolon. 
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3 SMALL BUSINESS ACT Sec. 2 

(v) that the power to let2 Federal contracts pursuant to 

section 8(a) of the Small Business Act can be an effective procurement assistance tool for development of business ownership among that own control little productive capital; and 

(vi) that the procurement authority under section 8(a) of 

the Small Business Act shall be used only as a tool for developing business ownership among groups that own and control 

little productive capital. 

(B) It is therefore the purpose of the programs authorized by 

section 7(j) of this Act to-

(i) foster business ownership and development by individuals in groups that own and control little productive capital; 

and 

(ii) promote the competitive viability of such firms in the 

marketplace by creating a small business and capital ownership development program to provide such available financial, 

technical, and management assistance as may be necessary. 

(e) Further, it is the declared policy of the Congress that the 

Government should aid and assist victims of floods and other catastrophes, and small-business concerns which are displaced as a result of federally aided construction programs. 

(t)(l) with a respect to the Administration's business development programs the Congress finds-

(A) that the opportunity for full participation in our free 

enterprise system by socially and economically disadvantaged 

persons is essential if we are to obtain social and economic 

equality for such persons and improve the functioning of our 

national economy; 

(B) that many such persons are socially disadvantaged because of their identification as members of certain groups that 

have suffered the effects of discriminatory practices or similar 

invidious circumstances over which they have no control; 

(C) that such groups include, but are not limited to, Black 

Americans, Hispanic Americans, Native Americans, Indian 

tribes, Asian Pacific Americans, Native Hawaiian Organizations, and other minorities; 

(D) that it is in the national interest to expeditiously ameliorate the conditions of socially and economically disadvantaged groups; 

(E) that such conditions can be improved by providing the 

maximum practicable opportunity for the development of small 

business concerns owned by members of socially economically 

disadvantaged groups; 

(F) that such development can be materially advantaged 

through the procurement by the United States of articles, 

equipment, supplies, services, materials, and construction work 

from such concerns; and 

(G) that such procurements also benefit the United States 

by encouraging the expansion of suppliers for such procure2 Section 204(a) of Public Law 100-656, 102 Stat. 3859 amended section 2(cX2l(A)(v), but 

should have referred to section 2(d)(2)(B), as it was redesignated by section 8002 of Public Law 

100-418. 3 So in original. Probably should be "With". 
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Sec. 2 SMALL BUSINESS ACT 4 

ments, thereby encouraging competition among such suppliers 

and promoting economy in such procurements. 

(2) 4 It is therefore the purpose of section 8(a) to-

(A) promote the business development of small business 

concerns owned and controlled by socially and economically 

disadvantaged individuals so that such concerns can compete 

on an equal basis in the American economy; 

(B) promote the competitive viability of such concerns in 

the marketplace by providing such available contract, financial, 

technical, and mangement 5 assistance as may be necessary; 

and 

(C) clarify and expand the program for the procurement by 

the United States of articles, supplies, services, materials, and 

construction work from small business concerns owned by socially and economically disadvantaged individuals. 

(g) In administering the disaster loan program authorized by 

section 7 of this Act, to the maximum extent possible, the Administration shall provide assistance and counseling to disaster victims 

in filing applications, providing information relevant to loan processing, and in loan closing and prompt disbursement of loan proceeds and shall give the disaster program a high priority in allocating funds for administrative expenses. 

(hXl) With respect to the programs and activities authorized 

by this Act, the Congress finds that-

(A) women owned business has become a major contributor 

to the American economy by providing goods and services, revenues, and jobs; 

(B) over the past two decades there have been substantial 

gains in the social and economic status of women as they have 

sought economic equality and independence; 

(C) despite such progress, women, as a group, are subjected to discrimination in entrepreneurial endeavors due to 

their gender; 

(D) such discrimination takes many overt and subtle forms 

adversely impacting the ability to raise or secure capital, to acquire managerial talents, and to capture market opportunities; 

(E) it is in the national interest to expeditiously remove 

discriminatory barriers to the creation and development of 

small business concerns owned and controlled by women; 

(F) the removal of such barriers is essential to provide a 

fair opportunity for full participation in the free enterprise system by women and to further increase the economic vitality of 

the Nation; 

(G) increased numbers of small business concerns owned 

and controlled by women will directly benefit the United States 

Government by expanding the potential number of suppliers of 

goods and services to the Government; and 

(H) programs and activities designed to assist small business concerns owned and controlled by women must be imple4 Section 8002 of Public Law 100-418 (102 Stat. 1553) redesignates subsection (e) as (f) of sec- tion 2. Section 204(a)(2) of Public Law 100~56 (102 Stat. 3859) subsequently amended "2(e)(2) 

of the Act is amended to reads as follows: ... ". This latter amendment was executed to subsection 

(f)(2) as redesignated by Public Law 100-418. 5 So in original. Probably should be "management". 
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5 SMALL BUSINESS ACT Sec. 3 

mented in such a way as to remove such discriminatory barriers while not adversely affecting the rights of socially and 

economically disadvantaged individuals. 

(2) It is, therefore, the purpose of those programs and activities 

conducted under the authority of this Act that assist women entrepreneurs to-

(A) vigorously promote the legitimate interests of small 

business concerns owned and controlled by women; 

(B) remove, insofar as possible, the discriminatory barriers 

that are encountered by women in accessing capital and other 

factors of production; and 

(C) require that the Government engage in a systematic 

and sustained effort to identify, define and analyze those discriminatory barriers facing women and that such effort directly 

involve the participation of women business owners in the publidprivate sector partnership. 

(i) PROHIBITION ON THE USE OF FUNDS FOR INDIVIDUALS NOT 

LAWFULLY WITHIN THE UNITED STATES.-None of the funds made 

available pursuant to this Act may be used to provide any direct 

benefit or assistance to any individual in the United States if the 

Administrator or the official to which the funds are made available 

receives notification that the individual is not lawfully within the 

United States. 

(j) CONTRACT BUNDLING.-ln complying with the statement of 

congressional policy expressed in subsection (a), relating to fostering the participation of small business concerns in the contracting opportunities of the Government, each Federal agency, to 

the maximum extent practicable, shall-

(1) comply with congressional intent to foster the participation of small business concerns as prime contractors, subcontractors, and suppliers; 

(2) structure its contracting requirements to facilitate competition by and among small business concerns, taking all reasonable steps to eliminate obstacles to their participation; and 

(3) avoid unnecessary and unjustified bundling of contract 

requirements that precludes small business participation in 

procurements as prime contractors. 

SEC. 3. [15 U.S.C. 632] DEFINITIONS. 

(a) SMALL BUSINESS CONCERNS.-

(!) IN GENERAL.-For the purposes of this Act, a smallbusiness 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.-ln 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. 
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(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-

(!) 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; 

(Ill) 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 
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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.-ln 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. 
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(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. 
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(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, 
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(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-

(!) 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-

(!) 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; 
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( 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. 

(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) 6 the term "computer crime" means"-

(A) any crime committed against a small business concern by means of the use of a computer; and 

6 So in original. Subsection enacted without a paragraph (2). 
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Sec. 3 SMALL BUSINESS ACT 12 

(B) any crime involving the illegal use of, or tampering 

with, a computer owned or utilized by a small business 

concern. 

(m) For purposes of this Act, the term "simplified acquisition 

threshold" has the meaning given such term in section 4(11) of the 

Office of Federal Procurement Policy Act (41 U.S. C. 403(11)). 

(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.-ln 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-
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13 SMALL BUSINESS ACT Sec. 3 

(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)(l) of the Alaska Native Claims Settlement Act 

(43 U.S.C. 1626(e)(l))); or 

(ii) a direct or indirect subsidiary corporation, 

joint venture, or partnership of an Alaska Native Corporation qualifying pursuant to section 29(e)(l) of the 

Alaska Native Claims Settlement Act (43 U.S.C. 

1626(e)(l)), 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.-
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Sec. 3 SMALL BUSINESS ACT 14 

(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-

(1) 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-

(1) 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 

(Ill) 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 
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15 SMALL BUSINESS ACT Sec. 3 

(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-

(!) 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; 

(Ill) a census tract or nonmetropolitan county 

the boundaries of which intersect the area described in subclause (I); and 

(N) a census tract or nonmetropolitan county 

the boundaries of which are contiguous to the area 

described in subclause (II) or subclause (Ill). 

(ii) LIMITATION.-A base closure area shall be 

treated as a HUBZone-

(l) 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 des-
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Sec. 3 SMALL BUSINESS ACT 16 

ignation 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-

(!) 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.-
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17 SMALL BUSINESS ACT Sec. 3 

(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-

(!) 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 

3l(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)(l)-

(l) 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-
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Sec. 3 SMALL BUSINESS ACT 18 

(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· 

Cii) 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-

(l) 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-

(l) 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). 
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19 SMALL BUSINESS ACT Sec. 3 

(q) DEFINITIONS RELATING TO VETERANS.-ln 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. 

[Note: Section 1832(a)(1) of division A of Public Law 114-328 

amends paragraph (2) to read as follows. Subsection (e) of such section provides: "The amendments made by subsections (a), (b), (c), 

and (d) shall take effect on the date on which the Administrator 

of the Small Business Administration and the Secretary of Veterans Affairs jointly issue regulations implementing such sections.". Upon such effective date, paragraph (2) is amended to read 

as follows:] 

(2) SMALL BUSINESS CONCERN OWNED AND CONTROLLED BY 

SERVICE-DISABLED VETERANS.-The term "small business con- cern owned and controlled by service-disabled veterans" means any of the following: 

(A) A small business concern- (i) 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 (not including any stock owned by an ESOP) of which is owned by one or more service-disabled veterans; and 

(ii) 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 care- giver of such veteran. 

(B) A small business concern- (i) not less than 51 percent of which is owned by one or more service-disabled veterans with a disability 

that is rated by the Secretary of Veterans Affairs as a permanent and total disability who are unable to man- age the daily business operations of such concern; or (ii) in the case of a publicly owned business, not 

less than 51 percent of the stock (not including any 
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Sec. 3 SMALL BUSINESS ACT 20 

stock owned by an ESOP) of which is owned by one or 

more such veterans. 

(C)(i) During the time period described in clause (ii), a 

small business concern that was a small business concern 

described in subparagraph (A) or (B) immediately prior to 

the death of a service-disabled veteran who was the owner 

of the concern, the death of whom causes the concern to be 

less than 51 percent owned by one or more service-disabled 

veterans, if-

(1) the surviving spouse of the deceased veteran acquires such veteran's ownership interest in such concern; 

(ll) such veteran had a service-connected disability 

(as defined in section 101(16) of title 38, United States 

Code) rated as 100 percent disabling under the laws 

administered by the Secretary of Veterans Affairs or 

such veteran died as a result of a service-connected disability; and 

(Ill) immediately prior to the death of such veteran, and during the period described in clause (ii), the 

small business concern is included in the database described in section 8127(/) of title 38, United States 

Code. 

(ii) The time period described in this clause is the time 

period beginning on the date of the veteran's death and 

ending on the earlier of-

(1) the date on which the surviving spouse remarries; 

(ll) the date on which the surviving spouse relinquishes an ownership interest in the small business concern; or 

(Ill) the date that is 10 years after the date of 

the death of the 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-

(1) a veteran who was called or ordered to active duty under a provision of law specified in sec-
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21 SMALL BUSINESS ACT Sec. 3 

tion 101(a)(13)(B) of title 10, United States Code, 

on or after September 11, 2001; or 

(Il) 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 (1) 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.). 

[Note: Section 1832(a)(2) of division A of Public Law 114-328 

amends subsection (q) by adding at the end new paragraphs. Subsection (e) of such section provides: "The amendments made by subsections (a), (b), (c), and (d) shall take effect on the date on which 

the Administrator of the Small Business Administration and the 

Secretary of Veterans Affairs jointly issue regulations implementing such sections.". Upon such effective date, paragraphs (6) 

and (7) (as added) read as follows:] 

(6) ESOP.-The term "ESOP" has the meaning given the 

term "employee stock ownership plan" in section 4975(e)(7) of 

the Internal Revenue Code of 1986 (26 U.S.C. 4975(e)(7)). 

(7) SURVIVING SPOUSE.-The term "surviving spouse" has 

the meaning given such term in section 101(3) of title 38, 

United States Code. 

(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" 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 
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Sec. 3 SMALL BUSINESS ACT 22 

(C) the lending activities of such concern are not regulated by any Federal banking authority. 

(s) MAJOR DISASTER.-ln 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.-ln this Act, the 

term "small business development center" means a small business 

development center described in section 21. 

(u) REGION OF THE ADMINISTRATION.-ln 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.-ln 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.-

(!) IN GENERAL.-ln 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.-
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23 SMALL BUSINESS ACT Sec. 3 

(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)). 
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Sec. 4 SMAll BUSINESS ACT 24 

(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. 185l(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. 4. [15 U.S.C. 633] (a) In order to carry out the policies 

of this Act there is hereby created an agency under the name 

"Small Business Administration" (herein referred to as the Administration), which Administration shall be under the general direction and supervision of the President and shall not be affiliated 

with or be within any other agency or department of the Federal 

GDvernment. The principal office of the Administration shall be located in the District of Columbia. The Administration may establish such branch and regional offices in other places in the United 

States as may be determined by the Administrator of the Administration. As used in this Act, the term "United States" includes the 

several States, the Territories and possessions of the United States, 

the Commonwealth of Puerto Rico, the Trust territory of the Pacific 

Islands, and the District of Columbia. 

(b)(1) The management of the Administration shall be vested 

in an Administrator who shall be appointed from civilian life by the 

President, by and with the advice and consent of the Senate, and 

who shall be a person of outstanding qualifications known to be familiar and sympathetic with small business needs and problems. 

The Administrator shall not engage in any other business, vocation, or employment than that of serving as Administrator. In carrying out the programs administered by the Small Business Administration including its lending and guaranteeing functions, the 

Administrator shall not discriminate on the basis of sex or marital 

status against any person or small business concern applying for 

or receiving assistance from the Small Business Administration, 

and the Small Business Administration shall give special consideration to veterans of the Armed Forces of the United States and 

their survivors or dependents. The President also may appoint a 

Deputy Administrator, by and with the advice and consent of the 

Senate. The Administrator is authorized to appoint Associate Administrators (including the Associate Administrator specified in 

section 201 of the Small Business Investment Act of 1958) to assist 

in the execution of the functions vested in the Administration. One 

such Associate Administrator shall be the Associate Administrator 

for Veterans Business Development, who shall administer the Of-
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25 SMALL BUSINESS ACT Sec. 4 

fice of Veterans Business Development established under section 

32. One of the Associate Administrators shall be designated at the 

time of his appointment as the Associate Administrator for Minority Small Business and Capital Ownership Development who shall 

be an employee in the competitive service or in the Senior Executive Service and a career appointee and shall be responsible to the 

Administrator for the formulation and execution of the policies and 

programs under sections 7(j) and 8(a) of this Act which provide assistance to minority small business concerns. 7 One such Associate 

Administrator shall be the Associate Administrator for International Trade, who shall be the head of the Office of International 

Trade established under section 22. One such Associate Administrator shall be the Chief Hearing Officer, who shall administer the 

Office of Hearings and Appeals established under section 5(i). 

(2) the Administrator also shall be responsible for-

(A) establishing and maintaining an external small business economic data base for the purpose of providing the Congress and the Administration information on the economic condition and the expansion or contraction of the small business 

sector. To that end, the Administrator shall publish on a regular basis national small business economic indices and, to the 

extent feasible, regional small business economic indices, 

which shall include, but need not be limited to, data on-

(i) employment layoffs, and new hires; 

(ii) number of business establishments and the types 

of such establishments such as sole proprietorships, corporations, and partnerships; 

(iii) number of business formation and failures; 

(iv) sales and new orders; 

(v) back orders; 

(vi) investment in plant and equipment; 

(vii) changes in inventory and rate of inventory turnover; 

(viii) sources and amounts of capital investment, mcluding debt, equity, and internally generated funds; 

(ix) debt to equity ratios; 

(x) exports; 

(xi) number and dollar amount of mergers and acquisitions by size of acquiring and acquired firm; and 

(xii) concentration ratios; and 

(B) publishing annually a report giving a comparative 

analysis and interpretation of the historical trends of the small 

business sector as reflected by the data acquired pursuant to 

subparagraph (A) of this subsection. 

7 Section 103 of Public Law 96-481 (94 Stat. 2321) amended section 4(b) of the Small Business 

Act by "striking all after the phrase 'Capital Ownership Development' through the period and 

inserting in lieu thereof 'and shall be responsible to the Administrator for the formulation and 

execution of the policies and programs under sections 7Ul and 8(a) of this Act which provide 

assistance to minority small business concerns.'". 

There is uncertainty as to the correct manner in which to carry out this amendment. The 

version shown above was carried as if the amendment instruction stated " ... through the periodal 

the end ... " of the subsection as opposed to the end of the penultimate sentence. 

The last sentence of section 4(b), prior to the enactment of the amendment made by section 

103 of Public Law 96-481, reads as follows: ''The Deputy Administrator shall be Acting Adminis- trator of the Administration during the absence or disability of the Administrator or in the event of a vacancy in the office of the Administrator.". 
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Sec. 4 SMALL BUSINESS ACT 26 

(3) RISK MANAGEMENT DATABASE.-

(A) ESTABLISHMENT.-The Administration shall establish, within the management system for the loan programs 

authorized by subsections (a) and (b) of section 7 of this 

Act and title V of the Small Business Investment Act of 

1958, a management information system that will generate a database capable of providing timely and accurate 

information in order to identify loan underwriting, collections, recovery, and liquidation problems. 

(B) INFORMATION TO BE MAINTAINED.-In addition to 

such other information as the Administration considers appropriate, the database established under subparagraph 

(A) shall, with respect to each loan program described in 

subparagraph (A), include information relating to--

(i) the identity of the institution making the guaranteed loan or issuing the debenture; 

(ii) the identity of the borrower; 

(iii) the total dollar amount of the loan or debenture; 

(iv) the total dollar amount of government exposure in each loan; 

(v) the district of the Administration in which the 

borrower has its principal office; 

(vi) the principal line of business of the borrower, 

as identified by Standard Industrial Classification 

Code (or any successor to that system); 

(vii) the delinquency rate for each program (including number of instances and days overdue); 

(viii) the number and amount of repurchases, 

losses, and recoveries in each program; 

(ix) the number of deferrals or forbearances in 

each program (including days and number of instances); 

(x) comparisons on the basis of loan program, 

lender, district and region of the Administration, for 

all the data elements maintained; and 

(xi) underwriting characteristics of each loan that 

has entered into default, including term, amount and 

type of collateral, loan-to-value and other actual and 

projected ratios, line of business, credit history, and 

type of loan. 

(C) DEADLINE FOR OPERATIONAL CAPABILITY.-The 

database established under subparagraph (A) shall-

(i) be operational not later than June 30, 1997; 

and 

(ii) capture data beginning on the first day of the 

second quarter of fiscal year 1997 beginning after such 

date and thereafter. 

(4)(A) The Administrator shall establish a small business computer security and education program to-

(i) provide small business concerns information regarding-

(I) utilization and management of computer technology; 
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27 SMALL BUSINESS ACT Sec. 4 

(II) computer crimes committed against small business 

concerns; and 

(III) security for computers owned or utilized by small 

business concerns; 

(ii) provide for periodic forums for small business concerns 

to improve their knowledge of the matters described in clause 

(i); and 

(iii) provide training opportunities to educate small business users on computer security techniques. 

(B) The Administrator, after consultation with the Director of 

Institute of Computer Sciences and Technology within the Department of Commerce, shall develop information and materials to 

carry out the activities described in subparagraph (A) of this paragraph. 

(c)(1) There are hereby established in the Treasury the following revolving funds; (A) a disaster loan fund which shall be 

available for financing functions performed under section 7(b)(1), 

7(b)(2), 7(b)(3), 7(b)(4), 7(d)(2), and 7(m) of this Act; and (B) a business loan and investment fund which shall be available for financing functions performed under sections 5(g), 7(a), and 8(a) of this 

Act, and titles III, IV and V of the Small Business Investment Act 

of 1958. 

(2) All repayments of loans and debentures, payments of interest and other receipts arising out of transactions heretofore or 

hereafter entered into by the Administration (A) pursuant to sections 7(b)(1), 7(b)(2), 7(b)(3), 7(b)(4), 7(b)(5), 7(b)(6), (7(b)(7), 7(b)(8), 

7(d)(2), and 7(g) of this Act shall be paid into a disaster loan fund; 

and (B) pursuant to sections 5(g), 7(a), 7(h), 7(i), 7(1), 7(m), and 8(a) 

of this Act, and titles III, IV and V of the Small Business Investment Act of 1958, shall be paid into the business loan and investment fund. 

(3) Unexpended balances of appropriations made to the fund 

pursuant to this subsection, as in effect immediately prior to the 

effective date of this paragraph, shall be allocated, together with 

related assets and liabilities, to the funds established by paragraph 

(1) in such amounts as the Administrator shall determine. 

(4) The Administration shall submit to the Committees on Appropriations. Senate Select Committee on Small Business, and the 

Committee on Small Business of the House of Representatives, as 

soon as possible after the beginning of each calendar quarter, a full 

and complete report on the status of each of the funds established 

by paragraph (1). Business-type budgets for each of the funds established by paragraph (1) shall be prepared, transmitted to the 

Committees on Appropriations, the Senate Select Committee on 

Small Business, and the Committee on Small Business of the 

House of Representatives, and considered, and enacted in the manner prescribed by law (sections 102, 103, and 104 of the Government Corporation Control Act (31 U.S.C. 847-849)) for wholly 

owned Government corporations. 

(5)(A) The Administration is authorized to make and issue 

notes to the Secretary of the Treasury for the purpose of obtaining 

funds necessary for discharging obligations under the revolving 

funds created by section 4(c)(1) of this Act and for authorized expenditures out of the funds. Such notes shall be in such form and 
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Sec. 4 SMALL BUSINESS ACT 28 

denominations and have such maturities and be subject to such 

terms and conditions as may be prescribed by the Administration 

with the approval of the Secretary of the Treasury. Such notes 

shall bear interest at a rate fixed by the Secretary of the Treasury, 

taking into consideration the current average market yield of outstanding marketable obligations of the United States having maturities comparable to the notes issued by the Administration under 

this paragraph. The Secretary of the Treasury is authorized and directed to purchase any notes of the Administration issued hereunder, and, for that purpose, the Secretary of the Treasury is authorized to use as a public debt transaction the proceeds from the 

sale of any securities issued under the Second Liberty Bond Act, 

as amended, and the purposes for which such securities may be 

issued under such Act, as amended, are extended to include the 

purchase of notes issued by the Administration. All redemptions, 

purchases, and sales by the Secretary of the Treasury of such notes 

shall be treated as public debt transactions of the United States. 

All borrowing authority contained herein shall be effective only to 

such extent or in such amounts as are provided in advance in appropriation Acts. 

(B)(i) Moneys in the funds established in subsection (c)(l) not 

needed for current operations may be paid into miscellaneous receipts of the Treasury. 

(ii) Following the close of each fiscal year, the Administration 

shall pay into the miscellaneous receipts of the United States 

Treasury the actual interest that the Administration collects during that fiscal year on all financings made under this Act. 

(C) Except on those loan disbursements on which interest is 

paid under subsection (B)(ii), the Administration shall pay into 

miscellaneous receipts of the Treasury, following the close of each 

fiscal year, interest received by the Administration on financing 

functions performed under this Act and titles III and V of the 

Small business Investment Act of 1958 providing the capital used 

to perform such functions originated from appropriated funds. Such 

payments shall be treated by the Department of the Treasury as 

interest income, not as retirement of indebtedness. 

(0) There are authorized to be appropriated, in any fiscal year, 

such sums as may be necessary for losses and interest subsidies incurred by the funds established by subsection (c)(l), but not previously reimbursed. 

(d) There is hereby created the Loan Policy Board of the Small 

Business Administration, which shall consist of the following members, all ex officio: The Administration, as Chairman, the Secretary 

of the Treasury, and the Secretary of Commerce. Either of the said 

Secretaries may designate an officer of his Department, who has 

been appointed by the President by and with the advice and consent of the Senate, to act in his stead as a member of the Loan Policy Board with respect to any matter or matters. The Loan Policy 

Board shall establish general policies (particularly with reference 

to the public interest involved in the granting and denial of applications for financial assistance by the Administration and with reference to the coordination of the functions of the Administration 

with other activities and policies of the Government), which shall 
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29 SMALL BUSINESS ACT Sec. 4 

govern the granting and denial of applications for financial assistance by the Administration. 

(e) PROHIBITION ON THE PROVISION OF AsSISTANCE.-Notwithstanding any other provision of law, the Administration is prohibited from providing any financial or other assistance to any business concern or other person engaged in the production or distribution of any product or service that has been determined to be obscene by a court of competent jurisdiction. 

(f) CERTIFICATION OF COMPLIANCE WITH CHILD SUPPORT OBLIGATIONS.-

(1) IN GENERAL.-For financial assistance approved after 

the promulgation of final regulations to implement this section, 

each recipient of financial assistance under this Act, including 

a recipient of a direct loan or a loan guarantee, shall certify 

that the recipient is not more than 60 days delinquent under 

the terms of any-

(A) administrative order; 

(B) court order; or 

(C) repayment agreement entered into between therecipient and the custodial parent or State agency providing 

child support enforcement services, 

that requires the recipient to pay child support, as such term 

is defined in section 462(b) of the Social Security Act. 

(2) ENFORCEMENT.-Not later than 6 months after the date 

of enactment of this subsection, the Administration shall promulgate such regulations as may be necessary to enforce compliance with the requirements of this subsection. 

(g) CERTIFICATION REQUIREMENTS FOR BUSINESS OPPORTUNITY 

SPECIALISTS.-

(1) IN GENERAL.-Consistent with the requirements of 

paragraph (2), a Business Opportunity Specialist described 

under section 7(j)(l0)(D) shall have a Level I Federal Acquisition Certification in Contracting (or any successor certification) 

or the equivalent Department of Defense certification, except 

that a Business Opportunity Specialist who was serving on or 

before January 3, 2013, may continue to serve as a Business 

Opportunity Specialist for a period of 5 years beginning on 

such date without such a certification. 

(2) DELAY OF CERTIFICATION REQUIREMENT.-

(A) TIMING.-The certification described in paragraph 

(1) is not required for any person serving as a Business 

Opportunity Specialist until the date that is one calendar 

year after the date such person is appointed as a Business 

Opportunity Specialist. 

(B) APPLICATION.-The requirements of subparagraph 

(A) shall-

(i) be included in any initial job posting for the position of a Business Opportunity Specialist; and 

(ii) apply to any person appointed as a Business 

Opportunity Specialist after January 3, 2013. 

(h) CERTIFICATION REQUIREMENTS FOR COMMERCIAL MARKET 

REPRESENTATIVES.-

(!) IN GENERAL.-Consistent with the requirements of 

paragraph (2), a commercial market representative referred to 
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Sec. 5 SMALL BUSINESS ACT 30 

in section 15(q)(3) shall have a Level I Federal Acquisition Certification in Contracting (or any successor certification) or the 

equivalent Department of Defense certification, except that a 

commercial market representative who was serving on or before the date of the enactment of the National Defense Authorization Act for Fiscal Year 2016 may continue to serve as a 

commercial market representative for a period of 5 years beginning on such date without such a certification. 

(2) DELAY OF CERTIFICATION REQUIREMENT.-

(A) TIMING.-The certification described in paragraph 

(1) is not required for any person serving as a commercial 

market representative until the date that is one calendar 

year after the date such person is appointed as a commercial market representative. 

(B) APPLICATION.-The requirements of subparagraph 

(A) shall-

(i) be included in any initial job posting for the position of a commercial market representative; and 

(ii) apply to any person appointed as a commercial 

market representative after the date of the enactment 

of the National Defense Authorization Act for Fiscal 

Year 2016. 

SEC. 5. [15 U.S.C. 634] (a) The Administration shall have 

power to adopt, alter, and use a seal, which shall be judicially noticed. The Administrator is authorized, subject to the civil-service 

and classification laws, to select, employ, appoint, and fix the compensation of such officers, employees, attorneys, and agents as 

shall be necessary to carry out the provisions of this Act; to define 

their authority and duties; and to pay the costs of qualification of 

certain authority and duties; and to pay the costs of qualification 

of certain of them as notaries public. The Administration, with the 

consent of any board, commission, independent establishment, or 

executive department of the Government, may avail itself on a reimbursable or nonreimbursable basis of the use of information, 

services, facilities (including any field service thereof), officers, and 

employees thereof, in carrying out the provisions of this Act. 

(b) In the performance of, and with respect to, the functions, 

powers, and duties vested in him by this Act the Administrator 

may-

(1) sue and be sued in any court of record of a State having general jurisdiction, or in any United States district court, 

and jurisdiction is conferred upon such district court to determine such controversies without regard to the amount in controversy; but no attachment, injunction, garnishment, or other 

similar process, mesne or final, shall be issued against the Administrator or his property; 

(2) under regulations prescribed by him, assign or sell at 

public or private sale, or otherwise dispose of for cash or credit, 

in his discretion and upon such terms and conditions and for 

such consideration as the Administrator shall determine to be 

reasonable, any evidence of debt, contract claim, personal property, or security assigned to or held by him in connection with 

the payment of loans granted under this Act, and to collect or 

compromise all obligations assigned to or held by him and all 
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31 SMALL BUSINESS ACT Sec. 5 

legal or equitable rights accruing to him in connection with the 

payment of such loans until such time as such obligations may 

be referred to the Attorney General for suit or collection; 

(3) deal with, complete, renovate, improve, modernize, insure, or rent, or sell for cash or credit upon such terms and 

conditions and for such consideration as the Administrator 

shall determine to be reasonable, any real property conveyed 

to or otherwise acquired by him in connection with the payment of loans granted under this Act; 

(4) pursue to final collection, by way of compromise or otherwise, all claims against third parties assigned to the Administrator in connection with loans made by him. This shall include authority to obtain deficiency judgments or otherwise in 

the case of mortgages assigned to the Administrator. Section 

3709 of the Revised Statutes, as amended (41 U.S.C., sec 5), 

shall not be construed to apply to any contract of hazard insurance or to any purchase or contract for services or supplies on 

account of property obtained by the Administrator as a result 

of loans made under this Act if the premium therefor or the 

amount thereof does not exceed $1,000. The power to convey 

and to execute in the name of the Administrator deeds of conveyance, deeds of release, assignments and satisfactions of 

mortgages and any other written instrument relating to real 

property or any interest therein acquired by the Administrator 

pursuant to the provisions of this Act may be exercised by the 

Administrator or by any officer or agent appointed by him 

without the execution of any express delegation of power or 

power of attorney. Nothing in this section shall be construed 

to prevent the Administrator form delegating such power by 

order or by power of attorney, in his discretion, to any officer 

or agent he may appoint; 

(5) acquire, in any lawful manner, any property (real, personal, or mixed, tangible or intangible), whenever deemed necessary or appropriate to the conduct of the activities authorized 

in sections 7(a) and 7(b); 

(6) make such rules and regulations as he deems necessary 

to carry out the authority vested in him by or pursuant to this 

Act· 

'(7) in addition to any powers, functions, privileges and immunities otherwise vested in him, take any and all actions (including the procurement of the services of attorneys by contract in any office where an attorney or attorneys are not or 

cannot be economically employed full time to render such services) when he determines such actions are necessary or desirable in making, servicing, compromising, modifying, liquidating, or otherwise dealing with or realizing on loans made 

under the provisions of this Act: Provided 

8 , That with respect 

to deferred participation loans, the Administrator may, in the 

discretion of and pursuant to regulations promulgated by the 

Administrator, authorize participating lending institutions to 

take actions relating to loan servicing on behalf of the Admin8 So in law. Probably should read "Proui<kd,". 
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Sec. 5 SMALL BUSINESS ACT 32 

istrator, including determining eligibility and creditworthiness 

and loan monitoring, collection, and liquidation. 

(8) pay the transportation expenses and per diem in lieu 

of subsistence expenses, in accordance with the Travel Expense 

Act of 1949, for travel of any person employed by the Administration to render temporary services not in excess of six 

months in connection with any disaster referred to in section 

7(b) from place of appointment to, and while at, the disaster 

area and any other temporary posts of duty and return upon 

completion of the assignment: Provided, That the Administrator may extend the six-month limitation for an additional 

six months if the Administrator determines the extension is 

necessary to continue efficient disaster loan making activities; 

(9) accept the service and facilities of Federal, State, and 

local agencies and groups, both public and private, and utilize 

such gratuitous services and facilities as may, from time to 

time, be necessary, to further the objectives of section 7(b); 

(10) upon purchase by the Administration of any deferred 

participation entered into under section 7 of this Act, continue 

to charge a rate of interest not to exceed that initially charged 

by the participating institution on the amount so purchased for 

the remaining term of the indebtedness; 

(11) make sure such investigations as he deems necessary 

to determine whether a recipient of or participant in any assistance under this Act or any other person has engaged or is 

about to engage in any acts or practices which constitute or 

will constitute a violation of any provision of this Act, or of any 

rule or regulation under this Act, or of any order issued under 

this Act. The Administration shall permit any person to file 

with it a statement in writing, under oath or otherwise as the 

Administration shall determine, as to all the facts and circumstances concerning the matter to be investigated. For the 

purpose of any investigation, the Administration is empowered 

to administer oaths and affirmations, subpena witnesses, compel their attendance, take evidence, and require the production 

of any books, papers, and documents which are relevant to the 

inquiry. Such attendance of witnesses and the production of 

any such records may be required from any place in the United 

States. In case of contumacy by, or refusal to obey a subpena issued to, any person, including a recipient or participant, the 

Administration may invoke the aid of any court of the United 

States within the jurisdiction of which such investigation or 

proceeding is carried on, or where such person resides or carries on business, in requiring the attendance and testimony of 

witnesses and the production of books, papers, and documents; 

and such court may issue an order requiring such person to appear before the Administration, there to produce records, if so 

ordered, or to give testimony touching the matter under investigation. Any failure to obey such order of the court may be 

punished by such court as a contempt thereof. All process in 

any such case may be served in the judicial district whereof 

such person is an inhabitant or wherever he may be found; 

(12) impose, retain, and use only those fees which are specifically authorized by law or which are in effect on September 
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33 SMALL BUSINESS ACT Sec. 5 

30, 1994, and in the amounts and at the rates in effect on such 

date, except that the Administrator may, subject to approval in 

appropriations Acts, impose, retain, and utilize, additional 

fees-

(A) not to exceed $100 for each loan servicing action 

(other than a loan assumption) requested after disbursement of the loan, including any substitution of collateral, 

release or substitution of a guarantor, reamortization, or 

similar action; 

(B) not to exceed $300 for loan assumptions; 

(C) not to exceed 1 percent of the amount of requested 

financings under title III of the Small Business Investment 

Act of 1958 for which the applicant requests a commitment 

from the Administration for funding during the following 

year; and 

(D) to recover the direct, incremental cost involved in 

the production and dissemination of compilations of information produced by the Administration under the authority of this Act and the Small Business Investment Act of 

1958; 

(13) collect, retain and utilize, subject to approval in appropriations Acts, any amounts collected by fiscal transfer agents 

and not used by such agent as payment of the cost of loan pooling or debenture servicing operations, except that amounts collected under this paragraph and paragraph (12) shall be utilized solely to facilitate the administration of the program that 

generated the excess amounts; and 

(14) require any lender authorized to make loans under 

section 7 of this Act to pay examination and review fees, which 

shall be deposited in the account for salaries and expenses of 

the Administration, and shall be available for the costs of examinations, reviews, and other lender oversight activities. 

(c) To such extent as he finds necessary to carry out the provisions of this Act, the Administrator is authorized to procure the 

temporary (not in excess of one year) or intermittent services of experts or consultants or organizations thereof, including stenographic reporting services, by contract or appointment, and in such 

cases such services shall be without regard to the civil-service and 

classification laws and, except in the case of stenographic reporting services by organizations, without regard to the civil-service and 

classification laws and, except in the case of stenographic reporting 

services by organizations, without regard to section 3709 of the Revised Statutes, as amended (41 U.S.C., sec. 5). Any individual so 

employed may be compensated at a rate not in excess of the daily 

equivalent of the highest rate payable under section 5332 of title 

5, United States Code, including traveltime, and, while such individual is away from his or her home or regular place of business, 

he or she may be allowed travel expenses (including per diem in 

lieu of subsistence) as authorized by section 5703 of title 5, United 

States Code. 

(d) Section 3648 of the Revised Statutes (31 U.S.C. 529) shall 

not apply to prepayments of rentals made by the Administration on 

safety deposit boxes used by the Administration for the safe-
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Sec. 5 SMALL BUSINESS ACT 34 

guarding of instruments held as security for loans or for the safeguarding of other documents. 

(e)(l) Subject to the requirements and conditions contained in 

this subsection, upon application by a small business concern 

which is the recipient of a loan made under this Act, the Administration may undertake the small business concern's obligation to 

make the required payments under such loan or may suspend such 

obligation if the loan was a direct loan made by the Administration. While such payments are being made by the Administration 

pursuant to the undertaking of such obligation or while such obligation is suspended, no such payment with respect to the loan may 

be required from the small business concern. 

(2) The Administration may undertake or suspend for a period 

of not to exceed 5 years any small business concern's obligation 

under this subsection only if-

(A) without such undertaking or suspension of the obligation, the small business concern would, in the sole discretion 

of the Administration, become insolvent or remain insolvent; 

(B) with the undertaking or suspension of the obligation, 

the small business concern would, in the sole discretion of the 

Administration, become or remain a viable small business entity; and 

(C) the small business concern executes an agreement in 

writing satisfactory to the Administration as provided by paragraph (4). 

(3) Notwithstanding the provisions of sections 7(a)(4)(C) and 

7(i)(l) of this Act, the Administration may extend the maturity of 

any loan on which the Administration undertakes or suspends the 

obligation pursuant to this subsection for a corresponding period of 

time. 

(4)(A) Prior to the undertaking or suspension by the Administration of any small business concern's obligation under this subsection, the Administration, consistent with the purposes sought to 

be achieved herein, small require the small business concern to 

agree in writing to repay to it the aggregate amount of the payments which were required under the loan during the period for 

which such obligation was undertaken or suspended, either-

(i) by periodic payments not less in amount or less frequently falling due than those which were due under the loan 

during such period, or 

(ii) pursuant to a repayment schedule agreed upon by the 

Administration and the small business concern, or 

(iii) by a combination of the payments described in clause 

(i) and clause (ii). 

(B) In addition to requiring the small business concern to execute the agreement described in subparagraph (A), the Administration shall, prior to the undertaking or suspension of the obligation, 

take such action, and require the small business concern to take 

such action as the Administration deems appropriate in the circumstances, including the provision of such security as the Administration deems necessary or appropriate to insure that the rights 

and interests of the lender (Small Business Administration or participant) will be safeguarded adequately during and after the period in which such obligation is so undertaken or suspended. 
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35 SMALL BUSINESS ACT Sec. 5 

(f)(1) The guaranteed portion of any loan made pursuant to 

this Act may be sold by the lender, and by any subsequent holder, 

consistent with regulations on such sales as the Administration 

shall establish, subject to the following limitations: 

(A) prior to the Administration's approval of the sale, or 

upon any subsequent resale, of any loan guaranteed by the Administration, if the lender certifies that such loan has been 

property closed and that the lender has substantially complied 

with the provisions of the guarantee agreement and the regulations of the Administration, the Administration shall review 

and approve only materials not previously approved; 

(B) all fees due the Administration on a guaranteed loan 

shall have been paid in full prior to any sale; and 

(C) each loan, except each loan made under section 

7(a)(14), shall have been fully disbursed to the borrower prior 

to any sale. 

(2) After a loan is sold in the secondary market, the lender 

shall remain obligated under its guarantee agreement with the Administration, and shall continue to service the loan in a manner 

consistent with the terms and conditions of such agreement. 

(3) The Administration shall develop such procedures as are 

necessary for the facilitation, administration, and promotion of secondary market operations, and for assessing the increase of small 

business access to capital at reasonable rates and terms as a result 

of secondary market operations. Beginning on March 31, 1997, the 

sale of the unguaranteed portion of any loan made under section 

7(a) shall not be permitted until a final regulation that applies uniformly to both depository institutions and other lenders is promulgated by the Administration setting forth the terms and conditions 

under which such sales can be permitted, including maintenance of 

appropriate reserve requirements and other safeguards to protect 

the safety and soundness of the program. 

(4) Nothing in this subsection or subsection (g) of this section 

shall be interpreted to impede or extinguish the right of the borrower or the successor in interest to such borrower to prepay (in 

whole or in part) any loan made pursuant to section 7(a) of this 

Act, the guaranteed portion of which may be included in such trust 

or pool, or to impede or extinguish the rights of any party pursuant 

to section 7(a)(6)(C) or subsection (e) of this section. 

(g)(1) The Administration is authorized to issue trust certificates representing ownership of all or a fractional part of the guaranteed portion of one or more loans which have been guaranteed 

by the Administration under this Act, or under section 502 of the 

Small Business Investment Act of 1958 (15 U.S.C. 660): Provided, 

That such trust certificates shall be based on and backed by a trust 

or pool approved by the Administration and composed solely of the 

entire guaranteed portion of such loans. 

(2) The Administration is authorized, upon such terms and 

conditions as are deemed appropriate, to guarantee the timely payment of the principal of and interest on trust certificates issued by 

the Administration or its agent for purposes of this subsection. 

Such guarantee shall be limited to the extent of principal and interest on the guaranteed portions of loans which compose the trust 

or pool. In the event that a loan in such trust or pool is prepaid, 
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Sec. 5 SMALL BUSINESS ACT 36 

either voluntarily or in the event of default, the guarantee of timely 

payment of principal and interest on the trust certificates shall be 

reduced in proportion to the amount of principal and interest such 

prepaid loan represents in the trust or pool. Interest on prepaid or 

defaulted loans shall accrue and be guaranteed by the Administration only through the date of payment on the guarantee. During 

the term of the trust default of all loans constituting the pool. 

(3) The full faith and credit of the United States is pledged to 

the payment of all amounts which may be required to be paid 

under any guarantee of such trust certificates issued by the Administration or its agent pursuant to this subsection. 

( 4)(A) 9 The Administration may collect a fee for any loan 

guarantee sold into the secondary market under subsection (f) 

in an amount equal to not more than 50 percent of the portion 

of the sale price that exceeds 110 percent of the outstanding 

principal amount of the portion of the loan guaranteed by the 

Administration. Any such fee imposed by the Administration 

shall be collected by the Administration or by the agent which 

carries out on behalf of the Administration the central registration functions required by subsection (h) of this section and 

shall be paid to the Administration and used solely to reduce 

the subsidy on loans guaranteed under section 7(a) of this Act: 

Provided, That such fee shall not be charged to the borrower 

whose loan is guaranteed: and, Provided further, That nothing 

herein shall preclude any agent of the Administration from collecting a fee approved by the Administration for the functions 

described in subsection (h)(2). 

(B) The Administration is authorized to impose and collect, 

either directly or through a fiscal and transfer agent, a reasonable penalty on late payments of the fee authorized under subparagraph (A) in an amount not to exceed 5 percent of such fee 

per month plus interest. 

(C) 1° The Administration may contract with an agent 

to carry out, on behalf of the Administration, the assessment and collection of the annual fee established under 

section 7(a)(23). The agent may receive, as compensation 

for services, any interest earned on the fee while in the 

control of the agent before the time at which the agent is 

contractually required to remit the fee to the Administration. 

(5)(A) In the event the Administration pays a claim under a 

guarantee issued under this subsection, it shall be subrogated fully 

to the rights satisfied by such payment. 

(B) No State or local law, and no Federal law, shall preclude 

or limit the exercise by the Administration of its ownership rights 

in the portions of loans constituting the trust or pool against which 

the trust certificates are issued. 

9 Section 7 of the Small Business Guaranteed Credit Enhancement Act of 1993, Public Law 

103-81, 107 Stat. 782, repeals section 3 of such Act, which amended this paragraph, effective 

September 30, 1996. The repeal probably should have included a provision to amend the text of this paragraph on the effective date so as to read as it did before the date of enactment. With- out this provision, however, the repeal does not repeal the amendment. Indentation so in law. 

Section 4(b) of the Small Business Lending Enhancement Act of 1995, Public Law 104--36, 109 

Stat. 297, subsequently amends this paragraph. 10 Indentation so in law. See section 3(1) of Public Law 108-306 (118 Stat. 1131). 
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37 SMALL BUSINESS ACT Sec. 5 

(6) If the amount of the guaranteed portion of any loan under 

section 7(a) is more than $500,000, the Administrator shall, upon 

request of a pool assembler, divide the loan guarantee into increments of $500,000 and 1 increment of any remaining amount less 

than $500,000, in order to permit the maximum amount of any 

loan in a pool to be not more than $500,000. Only 1 increment of 

any loan guarantee divided under this paragraph may be included 

in the same pool. Increments of loan guarantees to different borrowers that are divided under this paragraph may be included in 

the same pool. 

(h)(1) Upon the adoption of final rules and regulations, the Administration shall-

(A) provide for a central registration of all loans and 

trust certificates sold pursuant to subsections (f) and (g) of 

this section; 

(B) contract with an agent to carry out on behalf of the 

Administration the central registration functions of this 

section and the issuance of trust certificates to facilitate 

pooling. Such agent shall provide a fidelity bond or insurance in such amounts as the Administration determines to 

be necessary to fully protect the interest of the Government; 

(C) prior to any sale, require the seller to disclose to 

a purchaser of the guaranteed portion of a loan guaranteed 

under this Act and to the purchaser of a trust certificate 

issued pursuant to subsection (g), information on the 

terms, conditions, and yield of such instrument. As used in 

this paragraph, if the instrument being sold is a loan, the 

term "seller" does not include (A) an entity which made 

the loan or (B) any individual or entity which sells three 

or fewer guaranteed loans per year; and 

(D) have the authority to regulate brokers and dealers 

in guaranteed loans and trust certificates sold pursuant to 

subsection (D and (g) of this section. 

(2) The agent described in paragraph (1)(B) may be compensated through any of the fees assessed under this section 

and any interest earned on any funds collected by the agent 

while such funds are in the control of the agent and before the 

time at which the agent is contractually required to transfer 

such funds to the Administration or to the holders of the trust 

certificates, as appropriate. 

(3) Nothing in this subsection shall prohibit the utilization 

of a book-entry or other electronic form of registration for trust 

certificates. The Administration may, with the consent of the 

Secretary of the Treasury, use the book-entry system of the 

Federal Reserve System. 

(i) OFFICE OF HEARINGS AND APPEALS.-

(1) ESTABLISHMENT.-

(A) OFFICE.-There is established in the Administration an Office of Hearings and Appeals-

(i) to impartially decide matters relating to program decisions of the Administrator-

(!) for which Congress requires a hearing on 

the record; or 
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Sec. 5 SMALL BUSINESS ACT 38 

(II) that the Administrator designates for 

hearing by regulation; and 

(ii) which shall contain the office of the Administration that handles requests submitted pursuant to 

sections 552 of title 5, United States Code (commonly 

referred to as the "Freedom of Information Act") and 

maintains records pursuant to section 552a of title 5, 

United States Code (commonly referred to as the "Privacy Act of 1974"). 

(B) JURISDICTION.-

(i) IN GENERAL.-Except as provided in clause (ii), 

the Office of Hearings and Appeals shall hear appeals 

of agency actions under or pursuant to this Act, the 

Small Business Investment Act of 1958 (15 U.S.C. 661 

et seq.), and title 13 of the Code of Federal Regulations, and shall hear such other matters as the Administrator may determine appropriate. 

(ii) ExcEPTION.-The Office of Hearings and Appeals shall not adjudicate disputes that require a 

hearing on the record, except disputes pertaining to 

the small business programs described in this Act. 

(C) AsSOCIATE ADMINISTRATOR.-The head of the Office of Hearings and Appeals shall be the Chief Hearing 

Officer appointed under section 4(b)(1), who shall be responsible to the Administrator. 

(2) CHIEF HEARING OFFICER DUTIES.-

(A) IN GENERAL.-The Chief Hearing Officer shall-

(i) be a career appointee in the Senior Executive 

Service and an attorney licensed by a State, commonwealth, territory or possession of the United States, or 

the District of Columbia; and 

(ii) be responsible for the operation and management of the Office of Hearings and Appeals. 

(B) ALTERNATIVE DISPUTE RESOLUTION.-The Chief 

Hearing Officer may assign a matter for mediation or 

other means of alternative dispute resolution. 

(3) HEARING OFFICERS.-

(A) IN GENERAL.-The Office of Hearings and Appeals 

shall appoint Hearing Officers to carry out the duties described in paragraph (1)(A)(i). 

(B) CONDITIONS OF EMPLOYMENT.-A Hearing Officer 

appointed under this paragraph-

(i) shall serve in the excepted service as an employee of the Administration under section 2103 of 

title 5, United States Code, and under the supervision 

of the Chief Hearing Officer; 

(ii) shall be classified at a position to which section 5376 of title 5, United States Code, applies; and 

(iii) shall be compensated at a rate not exceeding 

the maximum rate payable under such section. 

(C) AUTHORITY; POWERS.-Notwithstanding section 

556(b) of title 5, United States Code-

(i) a Hearing Officer may hear cases arising under 

section 554 of such title; 
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39 SMALL BUSINESS ACT Sec. 7 

(ii) a Hearing Officer shall have the powers described in section 556(c) of such title; and 

(iii) the relevant provisions of subchapter II of 

chapter 5 of such title (except for section 556(b) of 

such title) shall apply to such Hearing Officer. 

(D) TREATMENT OF CURRENT PERSONNEL.-An individual serving as a Judge in the Office of Hearings and 

Appeals (as that position and office are designated in section 134.101 of title 13, Code of Federal Regulations) on 

the effective date of this subsection shall be considered as 

qualified to be, and redesignated as, a Hearing Officer. 

(4) HEARING OFFICER DEFINED.-In this subsection, the 

term "Hearing Officer" means an individual appointed or redesignated under this subsection who is an attorney licensed 

by a State, commonwealth, territory or possession of the 

United States, or the District of Columbia. 

SEC. 6. [15 U.S.C. 635] (a) All moneys of the Administration 

not otherwise employed may be deposited with the Treasury of the 

United States subject to check by authority of the Administration. 

The Federal Reserve banks are authorized and directed to act as 

depositaries, custodians, and fiscal agents for the Administration in 

the general performance of its powers conferred by this Act. Any 

banks insured by the Federal Deposit Insurance Corporation, when 

designated by the Secretary of the Treasury, shall act as custodians 

and financial agents for the Administration. Each Federal Reserve 

bank, when designated by the Administration as fiscal agents for 

the Administration, shall be entitled to be reimbursed for all expenses incurred as such fiscal agent. 

(b) The Administrator shall contribute to the employees' compensation fund, on the basis of annual billings as determined by 

the Secretary of Labor, for the benefit payments made from such 

fund on account of employees engaged in carrying out functions financed by the revolving fund established by section 4(c) of this Act. 

The annual billings shall also include a statement of the fair portion of the cost of the administration of such fund, which shall be 

paid by the Administrator into the Treasury as miscellaneous receipts. 

SEC. 7. [15 U.S.C. 636] (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.-No financial assistance shall be 

extended pursuant to this subsection if the applicant 
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Sec. 7 SMALL BUSINESS ACT 40 

can obtain credit elsewhere. No immediate participation may be purchased unless it is shown that a deferred participation is not available; and no direct fi. 

nancing 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) u 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) 12 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.-

11 Section 202 of the Small Business Loan Improvement Act of 2000 (114 Stat. 2763A-679), as enacted into law by section l(a)(9) of P.L. 106-554, amended "paragraph (i)" and "paragraph 

(ii)". The amendments were carried out in clauses (i) and (ii) in order to reflect the probable 

intent of Congress. 12 See footnote on previous page. 
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41 SMALL BUSINESS ACT Sec. 7 

(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-

(!) 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.-ln 

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 
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Sec. 7 SMALL BUSINESS ACT 42 

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-

(l) 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-
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43 SMALL BUSINESS ACT Sec. 7 

(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 13 

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 14 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 re13 See amendments made by sections 1902 and 1910 of Public Law 97-35 (95 Stat. 767 and 

778). 14 The reference in the continuation text for paragraph (6) to "this subparagraph" probably 

should be to "this paragraph". 
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Sec. 7 SMALL BUSINESS ACT 44 

habilitation 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. 

(12XA) 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) 15 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.-

(1) 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. 

15 So in law. Probably should be "(B)". Section lll(c)(2) of Public Law 100-590 added this 

"new subparagraph", but in the subparagraph designation probably should be capitalized, and 

indention probably should be moved two ems to right. 
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45 SMALL BUSINESS ACT Sec. 7 

(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 40l(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.-
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Sec. 7 SMALL BUSINESS ACT 46 

(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-
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47 SMALL BUSINESS ACT Sec. 7 

(!) this paragraph; 

(II) paragraph (14); or 

(Ill) paragraph (34). 

(ii) AVAILABILITY OF LIST.-The Administrator 

shall-

(!) 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 
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Sec. 7 SMALL BUSINESS ACT 48 

allow participating lenders to solely utilize a uniform and simplified loan form for such loans. 

(C) Authority to liquidate loans 16,-

(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 17.-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)(lO) 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 18 a wellbalanced 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: 

16 So in law. Probably should be "AUTHORITY TO LIQUIDATE LOANS". 17 So in Jaw. Probably should be "AUTOMATIC APPROVAL". 18 So in original. Probably should be "ensure". 
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49 SMALL BUSINESS ACT Sec. 7 

(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. 

(2l)(A) 

19 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-

(1) 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 

19 So in law. All of section 7(a)(21) indentions probably should be moved two ems to right. 
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Sec. 7 SMALL BUSINESS ACT 50 

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) 20 JOB CREATION AND COMMUNITY BENEFIT.-ln 

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-

(l) 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) 

2n Margin so in law. 
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51 SMALL BUSINESS ACT Sec. 7 

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 

21, 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) 22 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, 

2 1 So in original. Probably should read "paragraph". 22 Paragraph (27) was repealed. 
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Sec. 7 SMALL BUSINESS ACT 52 

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 RENEW ABLE ENERGY AND ENERGY EFFICIENCY.-

(i) DEFINITIONS.-ln this subparagraph-

(!) the term "biomass"-
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53 SMALL BUSINESS ACT Sec. 7 

(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 

(Ill) 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-

(1) 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 para- graph 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.-ln this subparagraph, the term 

"veteran or spouse of a veteran" means-

(!) 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; 
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Sec. 7 SMALL BUSINESS ACT 54 

(Ill) 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 (1), (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 (1), (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)-

(1) 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.-

(!) 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 

ofthe 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.-

(1) IN GENERAL.-Unless the Administrator 

has waived the guarantee fee that would otherwise be collected by the Administrator under 
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55 SMALL BUSINESS ACT Sec. 7 

paragraph (18) for a loan guaranteed under clause 

(i), and except as provided in subclause (11), 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.-ln 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-

(!) 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-

(!) 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 
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Sec. 7 SMALL BUSINESS ACT 56 

(Ill) 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-

(!) 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; 

(Ill) 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 Admin-
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57 SMALL BUSINESS ACT Sec. 7 

istrator 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-

(1) 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 

(Ill) 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-

(1) 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-
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Sec. 7 SMALL BUSINESS ACT 58 

(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; 

(Ill) 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; 

(Ill) 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. 
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59 SMALL BUSINESS ACT Sec. 7 

(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)(l) of this Act, the Administration also is empowered to the 

extent and in such amounts as provided in advance in appropriation Acts-

(l)(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 
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Sec. 7 SMALL BUSINESS ACT 60 

Administration finds that the small business is otherwise unable to obtain credit for the purposes described in this subparagraph; 

(2) to make sure 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-
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61 SMALL BUSINESS ACT Sec. 7 

(I) to meet its obligations as they mature; 

(II) to pay its ordinary and necessary operating 

expenses; or 

(Ill) 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 23 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) 24 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) 24 The Administrator shall give priority to any application for a loan under this paragraph and shall process 

and make a determination regarding such applications 

23 The word "have" probably should be "has". 24 Margins for subparagraphs (G) and (H) of paragraph (3) so in law. 
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Sec. 7 SMALL BUSINESS ACT 62 

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.-lf 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 infor-
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63 SMALL BUSINESS ACT Sec. 7 

mation 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.-ln 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.-
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Sec. 7 SMALL BUSINESS ACT 64 

(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-

(!) 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 disasterrelated 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.-

(1) IN GENERAL.-If the Administrator determines that the average processing time for appli-
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65 SMALL BUSINESS ACT Sec. 7 

cations 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.-lf 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.-ln 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-

(l) 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-

(!) 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 
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Sec. 7 SMALL BUSINESS ACT 66 

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 longterm 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. 
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67 SMALL BUSINESS ACT Sec. 7 

(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-
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Sec. 7 SMALL BUSINESS ACT 68 

(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 interestbearing 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 
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69 SMALL BUSINESS ACT Sec. 7 

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 
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Sec. 7 SMALL BUSINESS ACT 70 

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 Act25 to a disaster loan under paragraph (1) 

(2) 26of this subsection. 

(c) PRIVATE DISASTER LOANS.-

(1) DEFINITIONS.-ln 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)(l) 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 is25 Section 109(d) of the Disaster Relief and Emergency Assistance Amendments of 1988, Public 

Law 100--707, 102 Stat. 4708, amended this paragraph by striking out "section 302(a) of the 

Disaster Relief Act of 1974" and inserting in lieu thereof "sections 402 and 502 of the Disaster 

Relief and Emergency Assistance Act". Reference to "Disaster Relief and Emergency Assistance 

Act" was so in originaL In light of sec. 102(a) Public Law 100-707, probably should read "Robert 

T. Stafford Disaster Relief and Emergency Assistance Act". 26 So in Jaw. Section 12078(c)(2)(B) of Public Law 110-246 amends "the undesignated matter at the end" at the end of subsection (b) by striking", (2), or (4)" and inserting "(2)". 
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71 SMALL BUSINESS ACT Sec. 7 

(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. 
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Sec. 7 SMALL BUSINESS ACT 72 

(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. 
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73 SMALL BUSINESS ACT Sec. 7 

(d)(l) 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) 27 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 28 effective date of this Act, on the Administration's share of loans made pursuant to paragraph (1) 

of subsection (b}-

(A) 29 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) 

2 9 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 

27 So in law. Section 7(c)(2) and (3) indentations probably should be moved two ems to left. •• So in original. Probably should be preceded by "to". 29 Subparagraphs (A) and (B) of section 7(c)(3) should be moved 4 ems to the left. 
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Sec. 7 SMALL BUSINESS ACT 74 

sources 30 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) 3I Notwithstanding the provisions of any other law, the 

interest rate on the Federal share of any loan made under subao So in originaL Should be "source". 31 So in law. All of section 7(d)(5) indentions probably should be moved two ems to left. 
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75 SMALL BUSINESS ACT Sec. 7 

section (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) 32 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 

32 So in law. All of section 7(c)(6) indentions probably should be moved two ems to left. 
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Sec. 7 SMALL BUSINESS ACT 76 

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) 33 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. 

[Note: Effective on November 25, 2018, section 2102(b) of Public 

Law 114-88 provides for amendments to the third proviso of section 7(d)(6). Upon such date, paragraph (6) will read as follows:] 

(6) Notwithstanding the provisions of any other law, such 

loans, subject to the reductions required by subparagraphs (A) 

and (B) of paragraph 7(b)(l), shall be in amounts equal to 100 

per centum of loss. The interest rate for loans made under paragraphs 7(b)(l) 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 

32 So in law. All of section 7(c)(6) indentions probably should be moved two ems to left. 
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11 SMALL BUSINESS ACT Sec. 7 

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 $14,000 or less (or such higher amount as the Administrator determines appropriate in the event of a major 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 para- graph (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 pre- ceding 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 Agri- culture 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-
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Sec. 7 SMALL BUSINESS ACT 78 

(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)34 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]. 35 

(f) [RESERVED]. 35 

(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 re34 So in law. No paragraph (2) was enacted into law by section l2068(a)(2) of Public Law 110-

246. 35 So in law. Section 7 has two subsections designated as subsections (e) and (D. See section 

l07(b) and (c) of division D of Iitle I of Public Law 104-208, 110 Stat. 3009. 
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79 SMALL BUSINESS ACT Sec. 7 

ceives 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)(l)(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)(l) 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 pri-
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Sec. 7 SMALL BUSINESS ACT 80 

vate 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 
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81 SMALL BUSINESS ACT Sec. 7 

if such relocation would result in an increase in unemployment in 

the area of original location. 

(j)(l) 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) 3

6 , 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, 

36 So in law. Probably should be "7(j)(l0)" (Public Law 95-507, section 204, 92 Stat. 1963). 
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Sec. 7 SMALL BUSINESS ACT 82 

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. 

[Paragraph (8) of section 7(j) repealed by Public Law 101-

574.] 

(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) 37 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). 38 

(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 

37 So in law. Section 7(j)(lO)(A)(i) indentions probably should be moved two ems to left. 38 So in original. The period should probably be a semicolon. 
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83 SMALL BUSINESS ACT Sec. 7 

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 

(Ill) 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 thereoD 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) 39 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 per39 So in law. All of section 7(j)(lO)(DXi) indentions probably should be moved two ems to left. 
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Insert offset folio 400 here 25435.400

Sec. 7 SMALL BUSINESS ACT 84 

sonnel conditions which are likely to impede the small 

business concern from receiving contracts other than 

those awarded under section 8(a). 

(Ill) 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-

(!) 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 ef-
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85 SMALL BUSINESS ACT Sec. 7 

fective 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 S(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 S(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 
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Insert offset folio 402 here 25435.402

Sec. 7 SMALL BUSINESS ACT 86 

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). 

(l)(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 
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Insert offset folio 403 here 25435.403

87 SMALL BUSINESS ACT Sec. 7 

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)(l) 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. 

(Ill) 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). 

(ll)(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) 

4 0 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) 

40 So in law. All of section 7(b)(ll)(B) indentions probably should be moved two ems to left. 
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Insert offset folio 404 here 25435.404

Sec. 7 SMALL BUSINESS ACT 88 

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-

(1) 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 

(11) 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; 
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Insert offset folio 405 here 25435.405

89 SMALL BUSINESS ACT Sec. 7 

(vi) 

4 1 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) 42 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 

41 So in law. All of section 7(jXll)(F)(vi) indentions probably should be moved two ems to left. 42 So in law. All of section 7(j)(ll)(H) indentions probably should be moved two ems to left. 
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Insert offset folio 406 here 25435.406

Sec. 7 SMALL BUSINESS ACT 90 

(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: 43 

(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 exemp- tions shall apply only to contracts awarded pursuant to section 

8(a), except that, such exemptions may be granted under this 

subparagraph only if43 So in original. Probably should be "(12)". 
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Insert offset folio 407 here 25435.407

91 SMALL BUSINESS ACT Sec. 7 

(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 N 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 Op- portunity 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 an)' 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 up- graded employee has provided a similar assurance to remain within the employ of such concern for such period; if 
LAP51NQ082 with DISTILLER


Insert offset folio 408 here 25435.408

Sec. 7 SMALL BUSINESS ACT 92 

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)(l) 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. 

(Ill) 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. 
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Insert offset folio 409 here 25435.409

93 SMALL BUSINESS ACT Sec. 7 

(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 

(Ill), 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 (lO)(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 pre-
LAP51NQ082 with DISTILLER


Insert offset folio 410 here 25435.410

Sec. 7 SMALL BUSINESS ACT 94 

ceding 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-

(!) 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; 
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Insert offset folio 411 here 25435.411

95 SMALL BUSINESS ACT Sec. 7 

(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-

(1) 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-

(!) 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 
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Sec. 7 SMALL BUSINESS ACT 96 

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 
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97 SMALL BUSINESS ACT Sec. 7 

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-

(!) 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 
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Sec. 7 SMAll BUSINESS ACT 98 

(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-

(1) 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-

(l) 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; 
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99 SMALL BUSINESS ACT Sec. 7 

(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.-Jn 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 (Ill), 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.-Mter 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 
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Sec. 7 SMALL BUSINESS ACT 100 

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. 
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101 SMALL BUSINESS ACT Sec. 7 

(v) RATE BASIS.-The applicable rate of interest 

under this paragraph shall-

(!) 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)

44 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) 

45 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 nonFederal 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. 

44 So in law. Probably should be redesignated as clause (vi). 45 Section 113(a)(4XAJ of Public Law 102-366 instructed in paragraph (4)(A) of this subsection 

by striking "Subject to" and inserting "Except as otherwise provided in subparagraph (C) and 

subject to". Section 113(a)(4)(B) of Public Law 102-366 struck existing subparagraph (A) and 

inserted a new subparagraph (A) shown above. 
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Sec. 7 SMALL BUSINESS ACT 102 

(C) ADDITIONAL TECHNICAL ASSISTANCE GRANTS FOR 

MAKING CERTAIN LOANS.-

(i) 4 6 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 (l)(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 (l)(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 de46 Section 208(aX2l of the Small Business Administration Reauthorization and Amendments 

Act of 1994 (P.L. 103-403; 108 Stat. 4182) strikes subparagraph (C)(i), and inserts this new clause (i). Subsection (c) of such section provides the amendments made by this section shall 

remain in effect until October 1, 1997. 
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103 SMALL BUSINESS ACT Sec. 7 

scribed in paragraph (1)(A)(iv) at the time they initially apply for assistance under this subparagraph. 

(ii) ELIGIBLE RECIPIENTS; GRANT AMOUNTS.-ln 

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-

(!) 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 N 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-

(1) 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). 
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Sec. 7 SMALL BUSINESS ACT 104 

(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 inkind 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 
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105 SMALL BUSINESS ACT Sec. 7 

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-

(1) the lesser of-

(aa) $800,000; or 

(bb) Vss 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. 47 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 (l)(A)(iv) in any fiscal year, the Administration may use not more than 5 percent to provide technical assistance, either directly or 

47 So in Jaw. This period was inserted by section 604(2) of the Small Business Administration 

Reauthorization and Amendments Act of 1994 (P.L. 103-403; 108 Stat. 4203). 
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Sec. 7 SMALL BUSINESS ACT 106 

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 31!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-

(1) 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-
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107 SMALL BUSINESS ACT Sec. 7 

(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 

48 

(D)

4B 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.-ln lieu of making direct loans to intermediaries as authorized in paragraph 

(l)(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.-ln 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.-

(!) DEFINITIONS.-ln 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. 

48 Section 208(b) of the Small Business Administration Reauthorization and Amendments Act 

of 1994 (P.L. 103--403; 108 Stat. 4182) amends subparagraph (C) by striking the period and in· 

serting "; and" and adds this new subparagraph to the end of paragraph (11). Subsection (c) 

of such section provides the amendments made by this section shall remain in effect until Octo· 

her 1, 1997. 
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Sec. 7 SMALL BUSINESS ACT 108 

(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 
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109 SMALL BUSINESS ACT Sec. 8 

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. 8. [15 U.S.C. 637] (a)(l) It shall be the duty of the Administration and it is hereby empowered, whenever it determines 

such action is necessary or appropriate---

(A) to enter into contracts with the United States Government and any department, agency, or officer thereof having 

procurement powers obligating the Administration to furnish 

articles, equipment, supplies, services, or materials to the Government or to perform construction work for the Government. 

In any case in which the Administration certifies to any officer 

of the Government having procurement powers that the Administration is competent and responsible to perform any specific Government procurement contract to be let by any such 

officer, such officer shall be authorized in his discretion to let 

such procurement contract to the Administration upon such 

terms and conditions as may be agreed upon between the Administration and the procurement officer. Whenever the Administration and such procurement officer fail to agree, the 

matter shall be submitted for determination to the Secretary 

or the head of the appropriate department or agency by the 

Administrator. Not later than 5 days from the date the Administration is notified of a procurement officer's adverse decision, 

the Administration may notify the contracting officer of the intent to appeal such adverse decision, and within 15 days of 

such date the Administrator shall file a written request for a 

reconsideration of the adverse decision with the Secretary of 

the department or agency head. For the purposes of this subparagraph, a procurement officer's adverse decision includes a 

decision not to make available for award pursuant to this subsection a particular procurement requirement or the failure to 

agree on the terms and conditions of a contract to be awarded 

noncompetitively under the authority of this subsection. Upon 

receipt of the notice of intent to appeal, the Secretary of the 

department or the agency head shall suspend further action regarding the procurement until a written decision on the Administrator's request for reconsideration has been issued by 

such Secretary or agency head, unless such officer makes a 

written determination that urgent and compelling circumstances which significantly affect interests of the United 

States will not permit waiting for a reconsideration of the adverse decision. If the Administrator's request for reconsideration is denied, the Secretary of the department or agency 

head shall specify the reasons why the selected firm was determined to be incapable to perform the procurement requirement, and the findings supporting such determination, which 

shall be made a part of the contract file for the requirement. 

A contract may not be awarded under this subsection if the 

award of the contract would result in a cost to the awarding 

agency which exceeds a fair market price; 
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Insert offset folio 426 here 25435.426

Sec. 8 SMALL BUSINESS ACT 110 

(B) to arrange for the performance of such procurement 

contracts by negotiating or otherwise letting subcontracts to socially and economically disadvantaged small business concerns 

for construction work, services, or the manufacture, supply, assembly of such articles, equipment, supplies, materials, or 

parts thereof, or servicing or processing in connection therewith, or such management services as may be necessary to enable the Administration to perform such contracts; 

(C) 49 to make an award to a small business concern 

owned and controlled by socially and economically disadvantaged individuals which has completed its period of 

Program Participation as prescribed by section 7(j)(15), if-

(i) the contract will be awarded as a result of an 

offer (including price) submitted in response to a published solicitation relating to a competition conducted 

pursuant to subparagraph (D); and 

(ii) the prospective contract awardee was a Program Participant eligible for award of the contract on 

the date specified for receipt of offers contained in the 

contract solicitation; and 

(D)(i) A contract opportunity offered for award pursuant to 

this subsection shall be awarded on the basis of competition restricted to eligible Program Participants if-

(I) there is a reasonable expectation that at least two 

eligible Program Participants will submit offers and that 

award can be made at a fair market price, and 

(II) the anticipated award price of the contract (including options) will exceed $5,000,000 in the case of a contract 

opportunity assigned a standard industrial classification 

code for manufacturing and $3,000,000 (including options) 

in the case of all other contract opportunities. 

(ii) The Associate Administrator for Minority Small Business and Capital Ownership Development, on a nondelegable 

basis, is authorized to approve a request from an agency to 

award a contract opportunity under this subsection on the 

basis of a competition restricted to eligible Program Participants even if the anticipated award price is not expected to exceed the dollar amounts specified in clause (i)(Il). Such approvals shall be granted only on a limited basis. 

(2) Notwithstanding subsections (a) and (c) of the first section 

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 additional bond for the protection of persons furnishing material and labor for the construction, alteration, 

or repair of said public buildings or public work," approved August 

24, 1935 (49 Stat. 793), no small business concern shall be required 

to provide any amount of any bond as a condition or receiving any 

subcontract under this subsection if the Administrator determines 

that such amount is inappropriate for such concern in performing 

such contract: Provided, That the Administrator shall exercise the 

authority granted by the paragraph only if49 So in law. Paragraphs (a)(l)(C) should probably be moved two ems to the left. 
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111 SMALL BUSINESS ACT Sec. 8 

(A) the Administration takes such measures as it deems 

appropriate for the protection of persons furnishing materials 

and labor to a small business receiving any benefit pursuant 

to this paragraph; 

(B) the Administration assists, insofar as practicable, a 

small business receiving the benefits of this paragraph to develop, within a reasonable period of time, such financial and 

other capability as may be needed to obtain such bonds as the 

Administration may subsequently require for the successful 

completion of any program conducted under the authority of 

this subsection; 

(C) the Administration finds that such small business is 

unable to obtain the requisite bond or bonds from a surety and 

that no surety is willing to issue such bond or bonds subject 

to the guarantee provisions of Title IV of the Small Business 

Investment Act of 1958; and 

(D) that small business is determined to be a start-up concern and such concern has not been participating in any program conducted under the authority of this subsection for a period exceeding one year. 

The authority to waive bonds provided in this paragraph (2) may 

not be exercised after September 30, 1988. 

(3)(A) Any Program Participant selected by the Administration 

to perform a contract to be let noncompetitively pursuant to this 

subsection shall, when practicable, participate in any negotiation of 

the terms and conditions of such contract. 

(B)(i) For purposes of paragraph (1) a "fair market price" shall 

be determined by the agency offering the procurement requirement 

to the Administration, in accordance with clauses (ii) and (iii). 

(ii) The estimate of a current fair market price for a new procurement requirement, or a requirement that does not have a satisfactory procurement history, shall be derived from a price or cost 

analysis. Such analysis may take into account prevailing market 

conditions, commercial prices for similar products or services, or 

data obtained from any other agency. Such analysis shall consider 

such cost or pricing data as may be timely submitted by the Administration. 

(iii) The estimate of a current fair market price for a procurement requirement that has a satisfactory procurement history shall 

be based on recent award prices adjusted to insure so comparability. Such adjustments shall take into account differences in 

quantities, performance times, plans, specifications, transportation 

costs, packaging and packing costs, labor and materials costs, overhead costs, and any other additional costs which may be deemed 

appropriate. 

(C) An agency offering a procurement requirement for potential 

award pursuant to this subsection shall, upon the request of the 

Administration, promptly submit to the Administration a written 

statement detailing the method used by the agency to estimate the 

current fair market price for such contract, identifying the information, studies, analyses, and other data used by such agency. The 

agency's estimate of the current fair market price (and any sup50 So in original. Probably should be "ensure". 
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Sec. 8 SMALL BUSINESS ACT 112 

porting data furnished to the Administration) shall not be disclosed 

to any potential offeror (other than the Administration). 

(D) A small business concern selected by the Administration to 

perform or negotiate a contract to be let pursuant to this subsection may request the Administration to protest the agency's estimate of the fair market price for such contract pursuant to para- graph (1)(A). 

( 4)(A) For purposes of this section, the term "socially and economically disadvantaged small business concern" means any small 

business concern which meets the requirements of subparagraph 

(B) and-

(i) which is at least 51 per centum unconditionally owned 

by- en one or more socially and economically disadvantaged individuals, 

(II) an economically disadvantaged Indian tribe (or a 

wholly owned business entity of such tribe), or 

(Ill) an economically disadvantaged Native Hawaiian 

organization, or 

(ii) in the case of any publicly owned business, at least 51 

per centum of the stock of which is unconditionally owned by-

(1) one or more socially and economically disadvantaged individuals, 

(II) an economically disadvantaged Indian tribe (or a 

wholly owned business entity of such tribe), or 

(III) an economically disadvantaged Native Hawaiian 

organization. 

(B) A small business concern meets the requirements of this 

subparagraph if the management and daily business operations of 

such small business concern are controlled by one or more--

(i) socially and economically disadvantaged individuals described in subparagraph (A)(i)(l) or subparagraph (A)(ii)(l), 

(ii) members of an economically disadvantaged Indian tribe 

described in subparagraph (A)(i)(Il) or subparagraph (A)(ii)(Il), 

or 

(iii) Native Hawaiian organizations described in subpara- graph (A)(i)(III) or subparagraph (A)(ii)(III). 

(C) Each Program Participant shall certify, on an annual basis, 

that it meets the requirements of this paragraph regarding ownership and control. 

(5) Socially disadvantaged individuals are those who have been 

subjected to racial or ethnic prejudice or cultural bias because of 

their identity as a member of a group without regard to their individual qualities. 

(6)(A) Economically disadvantaged individuals are those socially disadvantaged individuals whose ability to compete in the 

free enterprise system has been impaired due to diminished capital 

and credit opportunities as compared to others in the same business area who are not socially disadvantaged. In determining the 

degree of diminished credit and capital opportunities the Administration shall consider, but not be limited to, the assets and net 

worth of such socially disadvantaged individual. In determining the 

economic disadvantage of an Indian tribe, the Administration shall 

consider, where available, information such as the following: the 
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113 SMAll BUSINESS ACT Sec. 8 

per capita income of members of the tribe excluding judgment awards, the percentage of the local Indian population below the 

poverty level, and the tribe's access to capital markets. 

(B) Each Program Participant shall annually submit to the Administration-

(i) a personal financial statement for each disadvantaged 

owner; 

(ii) a record of all payments made by the Program Participant to each of its disadvantaged owners or to any person or 

entity affiliated with such owners; and 

(iii) such other information as the Administration may deem necessary to make the determinations required by this 

paragraph. 

(C)(i) Whenever, on the basis of information provided by a Program Participant pursuant to subparagraph (B) or otherwise, the 

Administration has reason to believe that the standards to establish economic disadvantage pursuant to subparagraph (A) have not 

been met, the Administration shall conduct a review to determine 

whether such Program Participant and its disadvantaged owners 

continue to be impaired in their ability to compete in the free enterprise system due to diminished capital and credit opportunities when compared to other concerns in the same business area, which 

are not socially disadvantaged. 

(ii) If the Administration determines, pursuant to such review, 

that a Program Participant and its disadvantaged owners are no 

longer economically disadvantaged for the purpose of receiving assistance under this subsection, the Program Participant shall be 

graduated pursuant to section 7(j)(lO)(G) subject to the right to a 

hearing as provided for under paragraph (9). 

(D)(i) Whenever, on the basis of information provided by a Program Participant pursuant to subparagraph (B) or otherwise, the 

Administration has reason to believe that the amount of funds or 

other assets withdrawn from a Program Participant for the personal benefit of its disadvantaged owners or any person or entity affiliated with such owners may have been unduly excessive, the 

Administration shall conduct a review to determine whether such 

withdrawal of funds or other assets was detrimental to the achievement of the targets, objectives, and goals contained in such Program Participant's business plan. 

(ii) If the Administration determines, pursuant to such review, 

that funds or other assets have been withdrawn to the detriment 

of the Program Participant's business, the Administration shall-

(!) initiate a proceeding to terminate the Program Participant pursuant to section 7(j)(10)(F), subject to the right to a 

hearing under paragraph (9); or 

(II) require an appropriate reinvestment of funds or other 

assets and such other steps as the Administration may deem 

necessary to ensure the protection of the concern. 

(E) Whenever the Administration computes personal net worth 

for any purpose under this paragraph, it shall exclude from such 

computation-

(i) the value of investments that disadvantaged owners 

have in their concerns, except that such value shall be taken 

into account under this paragraph when comparing such con-
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Sec. 8 SMALL BUSINESS ACT 114 

cerns to other concerns in the same business area that are 

owned by other than socially disadvantaged persons; 

(ii) the equity that disadvantaged owners have in their primary personal residences, except that any portion of such eq- uity that is attributable to unduly excessive withdrawals from 

a Program Participant or a concern applying for program participation shall be taken into account. 

(7)(A) No small business concern shall be deemed eligible for 

any assistance pursuant to this subsection unless the Administration determines that with contract, financial, technical, and management support the small business concern will be able to perform 

contracts which may be awarded to such concern under paragraph 

(l)(C) and has reasonable prospects for success in competing in the 

private sector. 

(B) Limitations established by the Administration in its regula- tions and procedures restricting the award of contracts pursuant to 

this subsection to a limited number of standard industrial classification codes in an approved business plan shall not be applied in 

a manner that inhibits the logical business progression by a par- ticipating small business concern into areas of industrial endeavor 

where such concern has the potential for success. 

(8) All determinations made pursuant to paragraph (5) with respect to whether a group has been subjected to prejudice or bias 

shall be made by the Administrator after consultation with the Associate Administrator for Minority Small Business and Capital 

Ownership Development. All other determinations made pursuant 

to paragraphs (4), (5), (6), and (7) shall be made by the Associate 

Administrator for Minority Small Business and Capital Ownership 

Development under the supervision of, and responsible to, the Administrator. 

(9)(A) Subject to the provisions of subparagraph (E), the Administration, prior to taking any action described in subparagraph 

(B), shall provide the small business concern that is the subject of 

such action, an opportunity for a hearing on the record, in accordance with chapter 5 of title 5, United States Code. 

(B) The actions referred to in subparagraph (A) are-

(i) denial of program admission based upon a negative determination pursuant to paragraph (4), (5), or (6); 

(ii) a termination pursuant to section 7(j)(lO)(F); 

(iii) a graduation pursuant to section 7(j)(lO)(G); and 

(iv) the denial of a request to issue a waiver pursuant to 

paragraph (21)(B). 

(C) The Administration's proposed action, in any proceeding 

conducted under the authority of this paragraph, shall be sustained 

unless it is found to be arbitrary, capricious, or contrary to law. 

(D) A decision rendered pursuant to this paragraph shall be 

the final decision of the Administration and shall be binding upon 

the Administration and those within its employ. 

(E) The adjudicator selected to preside over a proceeding conducted under the authority of this paragraph shall decline to accept 

jurisdiction over any matter that-

(i) does not, on its face, allege facts that, if proven to be 

true, would warrant reversal or modification of the Administration's position; 
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115 SMALL BUSINESS ACT Sec. 8 

(ii) is untimely filed; 

(iii) is not filed in accordance with the rules of procedure 

governing such proceedings; or 

(iv) has been decided by or is the subject of an adjudication before a court of competent jurisdiction over such matters. 

(F) Proceedings conducted pursuant to the authority of this 

paragraph shall be completed and a decision rendered, insofar as 

practicable, within ninety days after a petition for a hearing is filed 

with the adjudicating office. 

(10) The Administration shall develop and implement an outreach program to inform and recruit small business concerns to 

apply for eligibility for assistance under this subsection. Such program shall make a sustained and substantial effort to solicit appli- cations for certification from small business concerns located in 

areas of concentrated unemployment or underemployment or within labor surplus areas and within States having relatively few Program Participants and from small disadvantaged business concerns 

in industry categories that have not substantially participated in 

the award of contracts let under the authority of this subsection. 

(11) To the maximum extent practicable, construction subcontracts awarded by the Administration pursuant to this subsection shall be awarded within the county or State where the 

work is to be performed. 

(12)(A) The Administration shall require each concern eligible 

to receive subcontracts pursuant to this subsection to annually prepare and submit to the Administration a capability statement. 

Such statement shall briefly describe such concern's various contract performance capabilities and shall contain the name and telephone number of the Business Opportunity Specialist assigned such concern. The Administration shall separate such statements 

by those primarily dependent upon local contract support and those 

primarily requiring a national marketing effort. Statements primarily dependent upon local contract support shall be disseminated 

to appropriate buying activities in the marketing area of the concern. The remaining statements shall be disseminated to the Directors of Small and Disadvantaged Business Utilization for the ap- propriate agencies who shall further distribute such statements to 

buying activities with such agencies that may purchase the types of items or services described on the capability statements. 

(B) Contracting activities receiving capability statements shall, 

within 60 days after receipt, contact the relevant Business Oppor- tunity Specialist to indicate the number, type, and approximate dollar value of contract opportunities that such activities may be 

awarding over the succeeding 12-month period and which may be 

appropriate to consider for award to those concerns for which it has 

received capability statements. 

(C) Each executive agency reporting to the Federal Procurement Data System contract actions with an aggregate value in excess of $50,000,000 in fiscal year 1988, or in any succeeding fiscal 

year, shall prepare a forecast of expected contract opportunities or 

classes of contract opportunities for the next and succeeding fiscal 

years that small business concerns, including those owned and controlled by socially and economically disadvantaged individuals, are 

capable of performing. Such forecast shall be periodically revised 
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Sec. 8 SMALL BUSINESS ACT 116 

during such year. To the extent such information is available, the 

agency forecasts shall specify: 

(i) The approximate number of individual contract opportu- nities (and the number of opportunities within a class). 

(ii) The approximate dollar value, or range of dollar values, 

for each contract opportunity or class of contract opportunities. (iii) The anticipated time (by fiscal year quarter) for the 

issuance of a procurement request. (iv) The activity responsible for the award and administration of the contract. 

(D) The head of each executive agency subject to the provisions of subparagraph (C) shall within 10 days of completion furnish 

such forecasts to-

(i) the Director of the Office of Small and Disadvantaged Business Utilization established pursuant to section 15(k) for 

such agency; and 

(ii) the Administrator. 

(E) The information reported pursuant to subparagraph (D) 

may be limited to classes of items and services for which there are 

substantial annual purchases. 

(F) Such forecasts shall be available to small business concerns. 

(13) For purposes of this subsection, the term "Indian tribe" 

means any Indian tribe, band, nation, or other organized group or 

community of Indians, including any Alaska Native village or regional or village corporation (within the meaning of the Alaska N ative Claims Settlement Act) which-

(A) is recognized as eligible for the special programs and 

services provided by the United States to Indians because of 

their status as Indians, or 

(B) is recognized as such by the State in which such tribe, 

band, nation, group, or community resides. 

(14) LIMITATIONS ON SUBCONTRACTING.-A concern may 

not be awarded a contract under this subsection as a small 

business concern unless the concern agrees to satisfy the requirements of section 46. 

(15) For purposes of this subsection, the term "Native Hawaiian Organization" means any community service organization serving Native Hawaiians in the State of Hawaii which-

(A) is a nonprofit corporation that has filed articles of incorporation with the director (or the designee thereof) of the 

Hawaii Department of Commerce and Consumer Affairs, or 

any successor agency, 

(B) is controlled by Native Hawaiians, and 

(C) whose business activities will principally benefit such 

Native Hawaiians. 

(16)(A) The Administration shall award sole source contracts 

under this section to any small business concern recommended by the procuring agency offering the contract opportunity if-

(i) the Program Participant is determined to be a respon- sible contractor with respect to performance of such contract 

opportunity; 

(ii) the award of such contract would be consistent with 

the Program Participant's business plan; and 
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117 SMALL BUSINESS ACT Sec. 8 

(iii) the award of the contract would not result in the Program Participant exceeding the requirements established by 

section 7(j)(10)(1). 

(B) To the maximum extent practicable, the Administration 

shall promote the equitable geographic distribution of sole source 

contracts awarded pursuant to this subsection. 

(17)(A) An otherwise responsible business concem that is in 

compliance with the requirements of subparagraph (B) shall not be 

denied the opportunity to submit and have considered its offer for 

any procurement contract, which contract has as its principal purpose the supply of a product to be let pursuant to this subsection, 

subsection (m), section 15(a), section 31, or section 36, solely because such concern is other than the actual manufacturer or processor of the product to be supplied under the contract. 

(B) To be in compliance with the requirements referred to in 

subparagraph (A), such a business concern shall-

(i) be primarily engaged in the wholesale or retail trade; 

(ii) be a small business concem under the numerical size 

standard for the Standard Industrial Classification Code assigned to the contract solicitation on which the offer is being 

made; 

(iii) be a regular dealer, as defined pursuant to section 

35(a) of title 41, United States Code (popularly referred to as 

the Walsh-Healey Public Contracts Act), in the product to be 

offered the Government or be specifically exempted from such 

section by section 7(j)(13)(C); and 

(iv) represent that it will supply the product of a domestic 

small business manufacturer or processor, unless a waiver of 

such requirement is granted-

(!) by the Administrator, after reviewing a determination by the contracting officer that no small business manufacturer or processor can reasonably be expected to offer 

a product meeting the specifications (including period for 

performance) required of an offeror by the solicitation; or 

(II) by the Administrator for a product (or class of 

products), after determining that no small business manufacturer or processor is available to participate in the Federal procurement market. 

(C) LIMITATION.-This paragraph shall not apply to a contract that has as its principal purpose the acquisition of services or construction. 

(18)(A) No person within the employ of the Administration 

shall, during the term of such employment and for a period of two 

years after such employment has been terminated, engage in any 

activity or transaction specified in subparagraph (B) with respect 

to any Program Participant during such person's term of employment, if such person participated personally (either directly or indirectly) in decision-making responsibilities relating to such Program 

Participant or with respect to the administration of any assistance 

provided to Program Participants generally under this subsection, 

section 7(j)(10), or section 7(a)(20). 

(B) The activities and transactions prohibited by subparagraph (A) include-
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Sec. 8 SMALL BUSINESS ACT 118 

(i) the buying, selling, or receiving (except by inheritance) 

of any legal or beneficial ownership of stock or any other ownership interest or the right to acquire any such interest; 

(ii) the entering into or execution of any written or oral 

agreement (whether or not legally enforceable) to purchase or 

otherwise obtain any right or interest described in clause (i); 

or 

(iii) the receipt of any other benefit or right that may be 

an incident of ownership. 

(C)(i) The employees designated in clause (ii) shall annually submit a written certification to the Administration regarding compliance with the requirements of this paragraph. (ii) The employees referred to in clause (i) are-

(!) regional administrators; 

(II) district directors; 

(III) the Associate Administrator for Minority Small Business and Capital Ownership Development; 

(IV) employees whose principal duties relate to the award 

of contracts or the provision of other assistance pursuant to 

this subsection or section 7(j)(10); and 

(V) such other employees as the Administrator may deem 

appropriate. 

(iii) Any present or former employee of the Administration who 

violates this paragraph shall be subject to a civil penalty, assessed 

by the Attorney General, that shall not exceed 300 per centum of 

the maximum amount of gain such employee realized or could have 

realized as a result of engaging in those activities and transactions 

prescribed by subparagraph (B). 

(iv) In addition to any other remedy or sanction provided for 

under law or regulation, any person who falsely certifies pursuant 

to clause (i) shall be subject to a civil penalty under the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. 3801-3812). 

(19)(A) Any employee of the Administration who has authority 

to take, direct others to take, recommend, or approve any action 

with respect to any program or activity conducted pursuant to this 

subsection or section 7(j), shall not, with respect to any such action, 

exercise or threaten to exercise such authority on the basis of the 

political activity or affiliation of any party. Employees of the Administration shall expeditiously report to the Inspector General of 

the Administration any such action for which such employee's par- ticipation has been solicitated 5 1 or directed. 

(B) Any employee who willfully and knowingly violates subparagraph (A) shall be subject to disciplinary action, which may consist of separation from service, reduction in grade, suspension, 

or reprimand. 

(C) Subparagraph (A) shall not apply to any action taken as a 

penalty or other enforcement of a violation of any law, rule, or reg- ulation prohibiting or restricting political activity. 

(D) The prohibitions of subparagraph (A), and remedial measures provided for under subparagraphs (B) and (C) with regard to 

such prohibitions, shall be in addition to, and not in lieu of, any 

51 So in original. Probably should be "solicited", 
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119 SMALL BUSINESS ACT Sec. 8 

other prohibitions, measures or liabilities that may arise under any 

other provision of law. 

(20)(A) Small business concerns participating in the Program 

under section 7(j)(l0) and eligible to receive contracts pursuant to 

this section shall semiannually report to their assigned Business 

Opportunity Specialist the following: 

(i) A listing of any agents, representatives, attorneys, accountants, consultants, and other parties (other than employees) receiving compensation to assist in obtaining a Federal 

contract for such Program Participant. 

(ii) The amount of compensation received by any person 

listed under clause (i) during the relevant reporting period and 

a description of the activities performed in return for such compensation. 

(B) The Business Opportunity Specialist shall promptly review 

and forward such report to the Associate Administrator for Minority Small Business and Capital Ownership Development. Any report that raises a suspicion of improper activity shall be reported 

immediately to the Inspector General of the Administration. 

(C) The failure to submit a report pursuant to the requirements of this subsection and applicable regulations shall be considered "good cause" for the initiation of a termination proceeding pursuant to section 7(j)(l0)(F). 

(2l)(A) Subject to the provisions of subparagraph (B), a contract (including options) awarded pursuant to this subsection shall 

be performed by the concern that initially received such contract. 

Notwithstanding the provisions of the preceding sentence, if the 

owner or owners upon whom eligibility was based relinquish ownership or control of such concern, or enter into any agreement to 

relinquish such ownership or control, such contract or option shall 

be terminated for the convenience of the Government, except that 

no repurchase costs or other damages may be assessed against 

such concerns due solely to the provisions of this subparagraph. 

(B) The Administrator may, on a nondelegable basis, waive the 

requirements of subparagraph (A) only if one of the following conditions exist: 

(i) When it is necessary for the owners of the concern to 

surrender partial control of such concern on a temporary basis 

in order to obtain equity financing. 

(ii) The head of the contracting agency for which the contract is being performed certifies that termination of the contract would severely impair attainment of the agency's program objectives or missions; 

(iii) Ownership and control of the concern that is performing the contract will pass to another small business concern that is a program participant, but only if the acquiring 

firm would otherwise be eligible to receive the award directly 

pursuant to subsection (a); 

(iv) The individuals upon whom eligibility was based are 

no longer able to exercise control of the concern due to incapacity or death; or 

(v) When, in order to raise equity capital, it is necessary 

for the disadvantaged owners of the concern to relinquish own-
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Sec. 8 SMALL BUSINESS ACT 120 

ership of a majority of the voting stock of such concern, but 

only if-

(I) such concern has exited the Capital Ownership Development Program; 

(II) the disadvantaged owners will maintain ownership 

of the largest single outstanding block of voting stock (including stock held by affiliated parties); and 

(Ill) the disadvantaged owners will maintain control of 

daily business operations. 

(C) 52 The Administrator may waive the requirements 

of subparagraph (A) if-

(i) in the case of subparagraph (B) (i), (ii) and (iv), 

he is requested to do so prior to the actual relinquishment of ownership or control; and 

(ii) in the case of subparagraph CB)(iii), he is requested to do so as soon as possible after the incapacity or death occurs. 

(D) Concerns performing contracts awarded pursuant to this 

subsection shall be required to notify the Administration immediately upon entering an agreement (either oral or in writing) to 

transfer all or part of its stock or other ownership interest to any 

other party. 

(E) Notwithstanding any other provision of law, for the purposes of determining ownership and control of a concern under this 

section, any potential ownership interests held by investment companies licensed under the Small Business Investment Act of 1958 

shall be treated in the same manner as interests held by the individuals upon whom eligibility is based. 

(b) It shall also be the duty of the Administration and it is 

hereby empowered, whenever it determines such action is necessary-

(l)(A) to provide-

(i) technical, managerial, and informational aids to 

small business concerns-

(!) by advising and counseling on matters in connection with Government procurement and policies, 

principles, and practices of good management; 

(II) by cooperating and advising with-

(aa) voluntary business, professional, educational, and other nonprofit organizations, associations, and institutions (except that the Administration shall take such actions as it determines 

necessary to ensure that such cooperation does not 

constitute or imply an endorsement by the Administration of the organization or its products or 

services, and shall ensure that it receives appropriate recognition in all printed materials); and 

(bb) other Federal and State agencies; 

(Ill) by maintaining a clearinghouse for information on managing, financing, and operating small business enterprises; and 

52 So in law. Section 8(2l)(A)(C) should probably be moved two ems to the left. 
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121 SMAll BUSINESS ACT Sec. 8 

(IV) by disseminating such information, including through recognition events, and by other activities 

that the Administration determines to be appropriate; 

and 

(ii) through cooperation with a profit-making concern 

(referred to in this paragraph as a "cosponsor"), training, information, and education to small business concerns, except that the Administration shall-

(!) take such actions as it determines to be appro- priate to ensure that-

(aa) the Administration receives appropriate recognition and publicity; 

(bb) the cooperation does not constitute or 

imply an endorsement by the Administration of 

any product or service of the cosponsor; 

(cc) unnecessary promotion of the products or 

services of the cosponsor is avoided; and 

(dd) utilization of any one cosponsor in a marketing area is minimized; and 

(II) develop an agreement, executed on behalf of 

the Administration by an employee of the Administration in Washington, the District of Columbia, that pro- vides, at a minimum, that-

(aa) any printed material to announce the cosponsorship or to be distributed at the cospon- sored activity, shall be approved in advance by the 

Administration; 

(bb) the terms and conditions of the coopera- tion shall be specified; 

(cc) only minimal charges may be imposed on 

any small business concern to cover the direct 

costs of providing the assistance; 

(dd) the Administration may provide to the 

cosponsorship mailing labels, but not lists of 

names and addresses of small business concerns 

compiled by the Administration; 

(ee) all printed materials containing the 

names of both the Administration and the cosponsor shall include a prominent disclaimer that the 

cooperation does not constitute or imply an endorsement by the Administration of any product 

or service of the cosponsor; and 

(ffl the Administration shall ensure that it receives appropriate recognition in all cosponsorship printed materials. 

(B) To establish, conduct, and publicize, and to recruit, select, and train volunteers for (and to enter into contracts, 

grants, or cooperative agreements therefor), volunteer programs, including a Service Corps of Retired Executives 

(SCORE) and an Active Corps of Executive (ACE) for the purposes of section 8(b)(l)(A) of this Act. To facilitate the imple- mentation of such volunteer programs the Administration shall 

maintain at its headquarters and pay the salaries, benefits, 

and expenses of a volunteer and professional staff to manage 
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Sec. 8 SMALL BUSINESS ACT 122 

and oversee the program. Any such payments made pursuant 

to this subparagraph shall be effective only to such extent or 

in such amounts as are provided in advance in appropriation 

Acts. Notwithstanding any other provision of law, SCORE may 

solicit cash and in-kind contributions from the private sector to 

be used to carry out its functions under this Act, and may use 

payments made by the Administration pursuant to this subparagraph for such solicitation and the management of the 

contributions received. 

(C) To allow any individual or group of fersons participating with it in furtherance of the purposes o subparagraphs 

(A) and (B) to use the Administration's office facilities and related material and services as the Administration deems appropriate, including clerical and stenographic service: 

(i) such volunteers, while carrying out activities under 

section 8(b)(1) of this Act shall be deemed Federal employees for the purposes of the Federal tort claims provisions 

in title 28, United States Code; and for the purposes of 

subchapter I of chapter 81 of title 5, United States Code 

(relative to compensation to Federal employees for work 

injuries) shall be deemed civil employees of the United 

States within the meaning of the term "employee" as defined in section 8101 of title 5, United States Code, and 

the provisions of that subchapter shall apply except that 

in computing compensation benefits for disability or death, 

the monthly pay of a volunteer shall be deemed that received under the entrance salary for a grade GS-11 employee: 

(ii) the Administrator is authorized to reimburse such 

volunteers for all necessary out-of-pocket expenses incident 

to their provision of services under this Act, or in connection with attendance at meetings sponsored by the Administration, or for the cost of malpractice insurance, as the 

Administrator shall determine, in accordance with regulations which he or she shall prescribe, and, while they are 

carrying out such activities away from their homes or regular places of business, for travel expenses (including per 

diem in lieu of subsistence) as authorized by section 5703 

of title 5, United States Code, for individuals serving without pay; and 

(iii) such volunteers shall in no way provide services 

to a client of such Administration with a delinquent loan 

outstanding, except upon a specific request signed by such 

client for assistance in connection with such matter. 

(D) Notwithstanding any other provision of law, no payment for supportive services or reimbursement of out-of-pocket 

expenses made to persons serving pursuant to section 8(b)(1) 

of this Act shall be subject to any tax or charge or be treated 

as wages or compensation for the purposes of unemployment, 

disability, retirement, public assistance, or similar benefit payments, or minimum wage laws. 

(E) In carrying out its functions under subparagraph (A), 

to make grants (including contracts and cooperative agreements) to any public or private institution of higher education 
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123 SMALL BUSINESS ACT Sec. 8 

for the establishment and operation of a small business institute, which shall be used to provide business counseling and 

assistance to small business concerns through the activities of 

students enrolled at the institution, which students shall be 

entitled to receive educational credits for their activities. 

(F) Notwithstanding any other provision of law and pursuant to regulations which the Administrator shall provide, counsel may be employed and counsel fees, court costs, bail, and 

other expenses incidental to the defense of volunteers may be 

paid in judicial or Administrative proceedings arising directly 

out of the performance of activities pursuant to section 8(b)(l) 

of this Act, as amended (15 U.S.C. 637(b)(l)) to which volunteers have been made parties. 

(G) In carrying out its functions under this Act and to 

carry out the activities authorized by title IV of the Women's 

Business Ownership Act of 1988, the Administration is authorized 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, devise, bequest, or otherwise; and, further, to accept gratuitous services and facilities. 

(2) to make a complete inventory of all productive facilities 

of small-business concerns or to arrange for such inventory to 

be made by any other governmental agency which has the facilities. In making any such inventory, the appropriate agencies in the several States may be requested to furnish an inventory of the productive facilities of small-business concerns 

in each respective State if such an inventory is available or in 

prospect; 

(3) to coordinate and to ascertain the means by which the 

productive capacity of small-business concerns can be most effectively utilized; 

(4) to consult and cooperative with officers of the Government having procurement or property disposal powers, in order 

to utilize the potential productive capacity of plants operated 

by small-business concerns; 

(5) to obtain information as to methods and practices 

which Government prime contractors utilize in letting subcontracts and to take action to encourage the letting of subcontracts by prime contractors to small-business concerns at 

prices and on conditions and terms which are fair and equi- table; 

(6) to determine within any industry the concerns, firms, 

persons, corporations, partnerships, cooperatives, or other business enterprises which are to be designated "small-business 

concerns" for the purpose of effectuating the provisions of this 

Act. To carry out this purpose the Administrator, when requested to do so, shall issue in response to each such request 

an appropriate certificate certifying an individual concern as a 

"small-business concern" in accordance with the criteria expressed in this Act. Any such certificate shall be subject to revocation when the concern covered thereby ceases to be a 

"small-business concern." Offices of the Government having 

procurement or lending powers, or engaging in the disposal of 
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Sec. 8 SMALL BUSINESS ACT 124 

Federal property or allocating materials or supplies, or promulgating regulations affecting the distribution of materials or 

supplies, shall accept as conclusive the Administration's determination as to which enterprises are to be designated "smallbusiness concerns", as authorized and directed under this paragraph; 

(7)(A) to certify to Government procurement officers, and 

officers engaged in the sale and disposal of Federal property, 

with respect to all elements of responsibility, including, but not 

limited to, capability, competency, capacity, credit, integrity, 

perseverance, and tenacity, of any small business concern or 

group of such concerns to receive and perform a specific Government contract. A Government procurement officer or an officer engaged in the sale and disposal of Federal property may 

not, for any reason specified in the preceding sentence, preclude any small business concern or group of such concerns 

from being awarded such contract without referring the matter 

for a final disposition to the Administration. 53 

(B) if a Government procurement officer finds that an otherwise qualified small business concern may be ineligible due 

to the provisions of section 35(a) of title 41, United States Code 

(the Walsh-Healey Public Contracts Act), he shall notify the 

Administration in writing of such finding. The Administration 

shall review such finding and shall either dismiss it and certify 

the small business concern to be an eligible Government contractor for a specific Government contract or if it concurs in the 

finding, forward the matter to the Secretary of Labor for final 

disposition, in which case the Administration may certify the 

small business concern only if the Secretary of Labor finds the 

small business concern not to be in violation. 

(C) in any case in which a small business concern or group 

of such concerns has been certified by the Administration pursuant to (A) or (B) to be a responsible or eligible Government 

contractor as to a specific Government contract, the officers of 

the Government having procurement or property disposal powers are directed to accept such certification as conclusive, and 

shall let such Government contract to such concern or group of 

concerns without requiring it to meet any other requirement of 

responsibility or eligibility. Notwithstanding the first sentence 

of this subparagraph, the Administration may not establish an 

exemption from referral or notification or refuse to accept a referral or notification from a Government procurement officer 

made pursuant to subparagraph (A) or (B) of this paragraph, 

but nothing in this paragraph shall require the processing of 

an application for certification if the small business concern to 

which the referral pertains declines to have the application 

processed. 

(8) to obtain from any Federal department, establishment, 

or agency engaged in procurement or in the financing of procurement or production such reports concerning the letting of 

contracts and subcontracts and the making of loans to business 

53 So in original. Should be semicolon. 
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125 SMAll BUSINESS ACT Sec. 8 

concerns as it may deem pertinent in carrying out its functions 

under this Act; 

(9) to obtain from any Federal department, establishment, 

or agency engaged in the disposal of Federal property such reports concerning the solicitation of bids, time of sale, or otherwise as it may deem pertinent in carrying out its functions 

under this Act; 

(10) to obtain from suppliers of materials information pertaining to the method of filling orders and the bases for allocating their supply, whenever it appears that any small business is unable to obtain materials from its normal sources; 

(11) to make studies and recommendations to the appro- priate Federal agencies to insure that a fair proportion of the 

total purchases and contracts for property and services for the 

Government be placed with small-business enterprises, to insure that a fair proportion of Government contacts for research 

and development be placed with small-business concerns, to insure that a fair proportion of the total sales of Government 

property be made to small-business concerns, and to insure a 

fair and equitable share of materials, supplies, and equipment 

to small-business concerns; 

(12) to consult and cooperate with all Government agencies 

for the purpose of insuring that small-business concerns shall 

receive fair and reasonable treatment from such agencies; 

(13) to establish such advisory boards and committees as 

may be necessary to achieve the purposes of this Act and of the 

Small Business Investment Act of 1958; to call meetings of 

such boards and committees from time to time; to pay the 

transportation expenses and a per diem allowance in accordance with section 5703 of title 5, United States Code, to the 

members of such boards and committees for travel and subsistence expenses incurred at the request of the Administration in 

connection with travel to points more than fifty miles distant 

from the homes of such members in attending the meetings of 

such boards and committees; and to rent temporarily, within 

the District of Columbia or elsewhere, such hotel or other accommodations as are needed to facilitate the conduct of such 

meetings; 

(14) to provide at the earliest practicable time such information and assistance as may be appropriate, including information concerning eligibility for loans under section 7(b)(3), to 

local public agencies (as defined in section llO(h) of the Housing Act of 1949) and to small-business concerns to be displaced by federally aided urban renewal projects in order to assist 

such small-business concerns in reestablishing their oper- ations; 

(15) to disseminate, without regard to the provisions of 

section 3204 of title 39, United States Code, data and information, in such form as it shall deem appropriate, to public agencies, private organizations, and the general public; 

(16) to make studies of matters materially affecting the 

competitive strength of small business, and of the effect on 

small business of Federal laws, programs, and regulations, and 

to make recommendations to the appropriate Federal agency or 
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Sec. 8 SMALL BUSINESS ACT 126 

agencies for the adjustment of such programs and regulations 

to the needs of small business; and 

(17) to make grants to, and enter into contracts and cooperative agreements with, educational institutions, private businesses, veterans' nonprofit community-based organizations, 

and Federal, State, and local departments and agencies for the 

establishment and implementation of outreach programs for 

disabled veterans (as defined in section 4211(3) of title 38, 

United States Code), veterans, and members of a reserve component of the Armed Forces. 

(c) 54 [Reserved.] 

(d)(l) It is the policy of the United States that small business 

concerns, small business concerns owned and controlled by veterans, small business concerns owned and controlled by service-disabled veterans, qualified HUBZone small business concerns, small 

business concerns owned and controlled by socially and economically disadvantaged individuals, and small business concerns 

owned and controlled by women, shall have the maximum practicable opportunity to participate in the performance of contracts 

let by any Federal agency, including contracts and subcontracts for 

subsystems, assemblies, components, and related services for major 

systems. It is further the policy of the United States that its prime 

contractors establish procedures to ensure the timely payment of 

amounts due pursuant to the terms of their subcontracts with 

small business concerns, small business concerns owned and controlled by veterans, small business concerns owned and controlled 

by service-disabled veterans, qualified HUBZone small business 

concerns, small business concerns owned and controlled by socially 

and economically disadvantaged individuals, and small business 

concerns owned and controlled by women. 

(2) The clause stated in paragraph (3) shall be included in all 

contracts let by any Federal agency except any contract which-

(A) does not exceed the simplified acquisition threshold; 

(B) including all subcontracts under such contracts will be 

performed entirely outside of any State, territory, or possession 

of the United States, the District of Columbia, or the Commonwealth of Puerto Rico; or 

(C) is for services which are personal in nature. 

(3) The clause required by paragraph (2) shall be as follows: 

(A) It is the policy of the United States that small business 

concerns, small business concerns owned and controlled by veterans, small business concerns owned and controlled by service-disabled veterans, qualified HUBZone small business concerns, small business concerns owned and controlled by socially 

and economically disadvantaged individuals, and small business concerns owned and controlled by women shall have the 

maximum practicable opportunity to participate in the performance of contracts let by any Federal agency, including contracts and subcontracts for subsystems, assemblies, components, and related services for major systems. It is further the 

54 Section 3 of Public Law 102-191 repealed old subsection (c) and redesignated subsections 

(d) through (j) as (c) through (k). Probably should have redesignated subsections (d) through (j) 

as (c) through (i). Section 232(a)(6) and (7) of Public Law 102-366 redesignated subsections (c) 

through (i) as (d) through (j) and inserted the above subsection (c). 
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127 SMALL BUSINESS ACT Sec. 8 

policy of the United States that its prime contractors establish 

procedures to ensure the timely payment of amounts due pursuant to the terms of their subcontracts with small business 

concerns, small business concerns owned and controlled by veterans, small business concerns owned and controlled by service-disabled veterans, qualified HUBZone small business concerns, small business concerns owned and controlled by socially 

and economically disadvantaged individuals, and small business concerns owned and controlled by women. 

(B) The contractor hereby agrees to carry out this policy in 

the awarding of subcontracts to the fullest extent consistent 

with the efficient performance of this contract. The contractor 

further agrees to cooperate in any studies or surveys as may 

be conducted by the United States Small Business Administration or the awarding agency of the United States as may be 

necessary to determine the extent of the contractor's compliance with this clause. 

(C) As used in this contract, the term "small business concern" shall mean a small business as defined pursuant to section 3 of the Small Business Act and relevant regulations promulgated pursuant thereto. The term "small business concern 

owned and controlled by socially and economically disadvantaged individuals" shall mean a small business concern-

(i) which is at least 51 per centum owned by one or 

more socially and economically disadvantaged individuals; 

or, in the case of any publicly owned business, at least 51 

per centum of the stock of which is owned by one or more 

socially and economically disadvantaged individuals; and 

(ii) whose management and daily business operations 

are controlled by one or more of such individuals. 

The contractor shall presume that socially and economically 

disadvantaged individuals include Black Americans, Hispanic 

Americans, Native Americans, Asian Pacific Americans, and 

other minorities, or any other individual found to be disadvantaged by the Administration pursuant to section 8(a) of the 

Small Business Act. 

(D) The term "small business concern owned and controlled by women" shall mean a small business concern-

(i) which is at least 51 per centum owned by one or 

more women; or, in the case of any publicly owned business, at least 51 per centum of the stock of which is owned 

by one or more women; and 

(ii) whose management and daily business operations 

are controlled by one or more women. 

(E) The term "small business concern owned and controlled by veterans" shall mean a small business concern-

(i) which is at least 51 per centum owned by one or 

more eligible veterans; or, in the case of any publicly 

owned business, at least 51 per centum of the stock of 

which is owned by one or more veterans; and 

(ii) whose management and daily business operations 

are controlled by such veterans. The contractor shall treat 

as veterans all individuals who are veterans within the 
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Sec. 8 SMALL BUSINESS ACT 128 

meaning of the term under section 3(q) of the Small Business Act. 

(F) Contractors acting in good faith may rely on written 

representations by their subcontractors regarding their status 

as either a small business concern, small business concern 

owned and controlled by veterans, small business concern 

owned and controlled by service-disabled veterans, a small 

business concern owned and controlled by socially and economically disadvantaged individuals, or a small business concern owned and controlled by women. 

(G) In this contract, the term "qualified HUBZone small 

business concern" has the meaning given that term in section 

3(p) of the Small Business Act. 

[Note: Section 1832(c) of division A of Public Law 114-328 amends 

paragraph (3) by adding at the end a new subparagraph (H). Subsection (e) of such section provides: "The amendments made by subsections (a), (b), (c), and (d) shall take effect on the date on which 

the Administrator of the Small Business Administration and the 

Secretary of Veterans Affairs jointly issue regulations implementing such sections.". Upon such effective date, subparagraph 

(H) (as added) reads as follows:] 

(H) In this contract, the term "small business concern 

owned and controlled by service-disabled veterans" has the 

meaning given that term in section 3(q). 

(4)(A) Each solicitation of an offer for a contract to be let by 

a Federal agency which is to be awarded pursuant to the negotiated method of procurement and which may exceed $1,000,000, in 

the case of a contract for the construction of any public facility, or 

$500,000, in the case of all other contracts, shall contain a clause 

notifying potential offering companies of the provisions of this subsection relating to contracts awarded pursuant to the negotiated 

method of procurement. 

(B) Before the award of any contract to be let, or any amendment or modification to any contract let, by any Federal agency 

which-

(i) is to be awarded, or was let, pursuant to the negotiated 

method of procurement, 

(ii) is required to include the clause stated in paragraph 

(3), 

(iii) may exceed $1,000,000 in the case of a contract for the 

construction of any public facility, or $500,000 in the case of 

all other contracts, and 

(iv) which offers subcontracting possibilities, 

the apparent successful offeror shall negotiate with the procurement authority a subcontracting plan which incorporates the information prescribed in paragraph (6). The subcontracting plan shall 

be included in and made a material part of the contract. 

(C) If, within the time limit prescribed in regulations of the 

Federal agency concerned, the apparent successful offeror fails to 

negotiate the subcontracting plan required by this paragraph, such 

offeror shall become ineligible to be awarded the contract. Prior 
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129 SMALL BUSINESS ACT Sec. a 

compliance of the offeror with other such subcontracting plans 

shall be considered by the Federal agency in determining the responsibility of that offeror for the award of the contract. 

(D) No contract shall be awarded to any offeror unless the procurement authority determines that the plan to be negotiated by 

the offeror pursuant to this paragraph provides the maximum practicable opportunity for small business concerns, qualified HUBZone 

small business concerns, small business concerns owned and controlled by veterans, small business concerns owned and controlled 

by service-disabled veterans, small business concerns owned and 

controlled by socially and economically disadvantaged individuals, 

and small business concerns owned and controlled by women to 

participate in the performance of the contract. 

(E) Notwithstanding any other provisions of law, every Federal 

agency, in order to encourage subcontracting opportunities for 

small business concerns, small business concerns owned and controlled by veterans, small business concerns owned and controlled 

by service-disabled veterans, qualified HUBZone small business 

concerns, and small business concerns owned and controlled by the 

socially and economically disadvantaged individuals as defined in 

paragraph (3) of this subsection and for small business concerns 

owned and controlled by women, is hereby authorized to provide 

such incentives as such Federal agency may deem appropriate in 

order to encourage such subcontracting opportunities as may be 

commensurate with the efficient and economical performance of the 

contact: Provided, That, this subparagraph shall apply only to contracts let pursuant to the negotiated method of procurement. 

(F)(i) Each contract subject to the requirements of this paragraph or paragraph (5) shall contain a clause for the payment of 

liquidated damages upon a finding that a prime contractor has 

failed to make a good faith effort to comply with the requirements 

imposed on such contractor by this subsection. 

(ii) The contractor shall be afforded an opportunity to demonstrate a good faith effort regarding compliance prior to the contracting officer's final decision regarding the impositon 55 of damages and the amount thereof. The final decision of a contracting officer regarding the contractor's obligation to pay such damages, or 

the amounts thereof, shall be subject to the Contract Disputes Act 

of 1978 (41 U.S.C. 601-613). 

(iii) Each agency shall ensure that the goals offered by the apparent successful bidder or offeror are attainable in relation to-

(1) the subcontracting opportunities available to the contractor, commensurate with the efficient and economical performance of the contract; 

(II) the pool of eligible subcontractors available to fulfill 

the subcontracting opportunities; and 

(III) the actual performance of such contractor in fulfilling 

the subcontracting goals specified in prior plans. 

(G) The following factors shall be designated by the Federal agency as significant factors for purposes of evaluating offers for a bundled contract where the head of the agency deter-

• 5 So in original. Should be "imposition". 
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Sec. 8 SMALL BUSINESS ACT 130 

mines that the contract offers a significant opportunity for subcontracting: 

(i) A factor that is based on the rate provided under 

the subcontracting plan for small business participation in 

the performance of the contract. 

(ii) For the evaluation of past performance of an offeror, a factor that is based on the extent to which the offeror 

attained applicable goals for small business participation 

in the performance of contracts. 

(5)(A) Each solicitation of a bid for any contract to be let, or 

any amendment or modification to any contract let, by any Federal 

agency which-

(i) is to be awarded pursuant to the formal advertising 

method of procurement, 

(ii) is required to contain the clause stated in paragraph 

(3) of this subsection, 

(iii) may exceed $1,000,000 in the case of a contract for the 

construction of any public facility, or $500,000, in the case of 

all other contracts, and 

(iv) offers subcontracting possibilities, 

shall contain a clause requiring any bidder who is selected to be 

awarded a contract to submit to the Federal agency concerned a 

subcontracting plan which incorporates the information prescribed 

in paragraph (6). 

(B) If, within the time limit prescribed in regulations of the 

Federal agency concerned, the bidder selected to be awarded the 

contract fails to submit the subcontracting plan required by this 

paragraph, such bidder shall become ineligible to be awarded the 

contract. Prior compliance of the bidder with other such subcontracting plans shall be considered by the Federal agency in determining the responsibility of such bidder for the award of the contract. The subcontracting plan of the bidder awarded the contract 

shall be included in and made a material part of the contract. 

(6) Each subcontracting plan required under paragraph (4) or 

(5) shall include-

(A) percentage goals for the utilization as subcontractors of 

small business concerns, small business concerns owned and 

controlled by veterans, small business concerns owned and controlled by service-disabled veterans, qualified HUBZone small 

business concerns, small business concerns owned and controlled by socially and economically disadvantaged individuals, 

and small business concerns owned and controlled by women; 

(B) the name of an individual within the employ of the offeror or bidder who will administer the subcontracting program 

of the offeror or bidder and a description of the duties of such 

individual; 

(C) a description of the efforts the offeror or bidder will 

take to assure that small business concerns, small business 

concerns owned and controlled by veterans, small business concerns owned and controlled by service-disabled veterans, qualified HUBZone small business concerns, small business concerns owned and controlled by socially and economically disadvantaged individuals, and small business concerns owned 
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131 SMALL BUSINESS ACT Sec. 8 

and controlled by women will have an equitable opportunity to 

compete for subcontracts; 

(D) assurances that the offeror or bidder will include the 

clause required by paragraph (2) of this subsection in all subcontracts which offer further subcontracting opportunities, and 

that the offeror or bidder will require all subcontractors (except small business concerns) who receive subcontracts in excess of 

$1,000,000 in the case of a contract for the construction of any public facility, or in excess of $500,000 in the case of all other 

contracts, to adopt a plan similar to the plan required under 

paragraph (4) or (5), and assurances at a minimum that the offeror or bidder, and all subcontractors required to maintain 

subcontracting plans pursuant to this paragraph, will-

(i) review and approve subcontracting plans submitted 

by their subcontractors; 

(ii) monitor subcontractor compliance with their approved subcontracting plans; 

(iii) ensure that subcontracting reports are submitted 

by their subcontractors when required; 

(iv) acknowledge receipt of their subcontractors' reports; 

(v) compare the performance of their subcontractors to 

subcontracting plans and goals; and 

(vi) discuss performance with subcontractors when 

necessary to ensure their subcontractors make a good faith 

effort to comply with their subcontracting plans; 

(E) assurances that the offeror or bidder will submit such 

periodic reports and cooperate in any studies or surveys as 

may be required by the Federal agency or the Administration 

in order to determine the extent of compliance by the offeror 

or bidder with the subcontracting plan; 

(F) a recitation of the types of records the successful offeror or bidder will maintain to demonstrate procedures which 

have been adopted to comply with the requirements and goals 

set forth in this plan, including the establishment of source 

lists of small business concerns, small business concerns owned 

and controlled by veterans, small business concerns owned and 

controlled by service-disabled veterans, qualified HUBZone 

small business concerns, small business concerns owned and 

controlled by socially and economically disadvantaged individuals, and small business concerns owned and controlled by 

women; and efforts to identify and award subcontracts to such 

small business concerns; 

(G) a recitation of the types of records the successful offeror or bidder will maintain to demonstrate procedures which 

have been adopted to ensure subcontractors at all tiers comply with the requirements and goals set forth in the plan established in accordance with subparagraph (D) of this paragraph, including-

(i) the establishment of source lists of small business 

concerns, small business concerns owned and controlled by 

veterans, small business concerns owned and controlled by 

service-disabled veterans, qualified HUBZone small business concerns, small business concerns owned and con-
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Sec. 8 SMALL BUSINESS ACT 132 

trolled by socially and economically disadvantaged individuals, and small business concerns owned and controlled by 

women; and 

(ii) efforts to identify and award subcontracts to such 

small business concerns; and 

(H) 56 a representation that the offeror or bidder will-

(i) make a good faith effort to acquire articles, 

equipment, supplies, services, or materials, or obtain 

the performance of construction work from the small 

business concerns used in preparing and submitting to 

the contracting agency the bid or proposal, in the 

same amount and quality used in preparing and submitting the bid or proposal; and 

(ii) provide to the contracting officer a written explanation if the offeror or bidder fails to acquire articles, equipment, supplies, services, or materials or obtain the performance of construction work as described 

in clause (i). 

(7) The head of the contracting agency shall ensure that-

(A) the agency collects and reports data on the extent 

to which contractors of the agency meet the goals and objectives set forth in subcontracting plans submitted pursuant to this subsection; and 

(B) the agency periodically reviews data collected and 

reported pursuant to subparagraph (A) for the purpose of 

ensuring that such contractors comply in good faith with 

the requirements of this subsection and subcontracting 

plans submitted by the contractors pursuant to this subsection. 

(8) The provisions of paragraphs (4), (5), and (6) shall not apply 

to offerors or bidders who are small business concerns. 

(9) MATERIAL BREACH.-The failure of any contractor or 

subcontractor to comply in good faith with-

(A) the clause contained in paragraph (3) of this subsection, 

(B) any plan required of such contractor pursuant to 

the authority of this subsection to be included in its contract or subcontract, or 

(C) assurances provided under paragraph (6)(E), 

shall be a material breach of such contract or subcontract and 

may be considered in any past performance evaluation of the 

contractor. 

(10) Nothing contained in this subsection shall be construed to 

supersede the requirements of Defense Manpower Policy Number 

4A (32A CFR Chap. 1) or any successor policy. 

(11) In the case of contracts within the provisions of paragraphs (4), (5), and (6), the Administration is authorized to-

(A) assist Federal agencies and businesses in complying 

with their responsibilities under the provisions of this subsection, including the formulation of subcontracting plans pursuant to paragraph (4); 

66 Margin so in law. 
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133 SMALL BUSINESS ACT Sec. 8 

(B) review any solicitation for any contract to be let pursuant to paragraphs (4) and (5) to determine the maximum practicable opportunity for small business concerns, small business 

concerns owned and controlled by veterans, small business concerns owned and controlled by service-disabled veterans, qualified HUBZone small business concerns, small business concerns owned and controlled by socially and economically disadvantaged individuals, and small business concerns owned 

and controlled by women to participate as subcontractors in 

the performance of any contract resulting from any solicitation, 

and to submit its findings, which shall be advisory in nature, 

to the appropriate Federal agency; and 

(C) evaluate compliance with subcontracting plans as a 

supplement to evaluations performed by the contracting agency, either on a contract-by-contract basis or, in the case of contractors having multiple contracts, on an aggregate basis. 

(12) For purposes of determining the attainment of a subcontract utilization goal under any subcontracting plan entered 

into with any executive agency pursuant to this subsection, a mentor firm providing development assistance to a protege firm under 

the pilot Mentor-Protege Program established pursuant to section 

831 of the National Defense Authorization Act for Fiscal Year 1991 

(Public Law 101-510; 10 U.S.C. 2301 note) shall be granted credit 

for such assistance in accordance with subsection (g) of such section. 

(13) PAYMENT OF SUBCONTRACTORS.-

(A) DEFINITION.-In this paragraph, the term "covered contract" means a contract relating to which a prime contractor is 

required to develop a subcontracting plan under paragraph ( 4) 

or (5). 

(B) NOTICE.-

(i) IN GENERAL.-A prime contractor for a covered contract shall notify in writing the contracting officer for the 

covered contract if the prime contractor pays a reduced 

price to a subcontractor for goods and services upon completion of the responsibilities of the subcontractor or the 

payment to a subcontractor is more than 90 days past due 

for goods or services provided for the covered contract for 

which the Federal agency has paid the prime contractor. 

(ii) CONTENTS.-A prime contractor shall include the 

reason for the reduction in a payment to or failure to pay 

a subcontractor in any notice made under clause (i). 

(C) PERFORMANCE.-A contracting officer for a covered contract shall consider the unjustified failure by a prime contractor to make a full or timely payment to a subcontractor in 

evaluating the performance of the prime contractor. 

(D) CONTROL OF FUNDS.-lf the contracting officer for a 

covered contract determines that a prime contractor has a history of unjustified, untimely payments to contractors, the contracting officer shall record the identity of the contractor in accordance with the regulations promulgated under subparagraph (E). 

(E) REGULATIONS.-Not later than 1 year after the date of 

enactment of this paragraph, the Federal Acquisition Regu-
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Sec. 8 SMALL BUSINESS ACT 134 

latory Council established under section 25(a) of the Office of 

Federal Procurement Policy Act (41 U.S.C. 421(a)) shall amend 

the Federal Acquisition Regulation issued under section 25 of 

such Act to-

(i) describe the circumstances under which a contractor may be determined to have a history of unjustified, 

untimely payments to subcontractors; 

(ii) establish a process for contracting officers to record 

the identity of a contractor described in clause (i); and 

(iii) require the identity of a contractor described in 

clause (i) to be incorporated in, and made publicly available through, the Federal Awardee Performance and Integrity Information System, or any successor thereto. 

(14) An offeror for a covered contract that intends to identify a small business concern as a potential subcontractor in a 

bid or proposal for the contract, or in a plan submitted pursuant to this subsection in connection with the contract, shall notify the small business concern prior to making such identification. 

(15) The Administrator shall establish a reporting mechanism that allows a subcontractor or potential subcontractor to 

report fraudulent activity or bad faith by a contractor with respect to a subcontracting plan submitted pursuant to this subsection. 

(16) CREDIT FOR CERTAIN SUBCONTRACTORS.-

(A) For purposes of determining whether or not a prime 

contractor has attained the percentage goals specified in paragraph (6)-

(i) if the subcontracting goals pertain only to a single 

contract with the executive agency, the prime contractor 

shall receive credit for small business concerns performing 

as first tier subcontractors or subcontractors at any tier 

pursuant to the subcontracting plans required under paragraph (6)(D) in an amount equal to the dollar value of 

work awarded to such small business concerns; and 

(ii) if the subcontracting goals pertain to more than 

one contract with one or more executive agencies, or to one 

contract with more than one executive agency, the prime 

contractor may only count first tier subcontractors that are 

small business concerns. 

(B) Nothing in this paragraph shall abrogate the responsibility of a prime contractor to make a good-faith effort to 

achieve the first tier small business subcontracting goals negotiated under paragraph (6)(A), or the requirement for subcontractors with further opportunities for subcontracting to 

make a good-faith effort to achieve the goals established under 

paragraph (6)(D). 

(17) PILOT PROGRAM PROVIDING PAST PERFORMANCE RATINGS 

FOR OTHER SMALL BUSINESS SUBCONTRACTORS.-

(A) ESTABLISHMENT.-The Administrator shall establish a 

pilot program for a small business concern without a past performance rating as a prime contractor performing as a first tier 

subcontractor for a covered contract (as defined in paragraph 

13(A)) to request a past performance rating in the system used 
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135 SMALL BUSINESS ACT Sec. 8 

by the Federal Government to monitor or record contractor 

past performance. 

(B) APPLICATION.-A small business concern described in 

subparagraph (A) shall submit an application to the appropriate official for a past performance rating no later than 270 

days after the small business concern completed the work for 

which it seeks a past performance rating or 180 days after the 

prime contractor completes work on the covered contract, 

whichever is earlier. Such application shall include written evidence of the past performance factors for which the small business concern seeks a rating and a suggested rating. 

(C) DETERMINATION.-The appropriate official shall submit 

the application from the small business concern to the Office 

of Small and Disadvantaged Business Utilization for the covered contract and to the prime contractor for review. The Office 

of Small and Disadvantaged Business Utilization and the 

prime contractor shall, not later than 30 days after receipt of 

the application, submit to the appropriate official a response 

regarding the application. 

(i) AGREEMENT ON RATING.-lf the Office of Small and 

Disadvantaged Business Utilization and the prime contractor agree on a past performance rating, or if either the 

Office of Small and Disadvantaged Business Utilization or 

the prime contractor fail to respond and the responding 

person agrees with the rating of the applicant small business concern, the appropriate official shall enter the 

agreed-upon past performance rating in the system described in subparagraph (A). 

(ii) DISAGREEMENT ON RATING.-lf the Office of Small 

and Disadvantaged Business Utilization and the prime 

contractor fail to respond within 30 days or if they disagree about the rating, or if either the Office of Small and 

Disadvantaged Business Utilization or the prime contractor fail to respond and the responding person disagrees 

with the rating of the applicant small business concern, 

the Office of Small and Disadvantaged Business Utilization or the prime contractor shall submit a notice contesting the application to the appropriate official. The appropriate official shall follow the requirements of subparagraph (D). 

(D) PROCEDURE FOR RATING.-Not later than 14 calendar 

days after receipt of a notice under subparagraph (C)(ii), the 

appropriate official shall submit such notice to the applicant 

small business concern. Such concern may submit comments, 

rebuttals, or additional information relating to the past performance of such concern not later 14 calendar days after receipt of such notice. The appropriate official shall enter into 

the system described in subparagraph (A) a rating that is neither favorable nor unfavorable along with the initial application from such concern, any responses of the Office of Small 

and Disadvantaged Business Utilization and the prime contractor, and any additional information provided by such concern. A copy of the information submitted shall be provided to 
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Sec. 8 SMALL BUSINESS ACT 136 

the contracting officer (or designee of such officer) for the covered contract. 

(E) UsE OF INFORMATION.-A small business subcontractor 

may use a past performance rating given under this paragraph 

to establish its past performance for a prime contract. 

(F) DURATION.-The pilot program established under this 

paragraph shall terminate 3 years after the date on which the 

first applicant small business concern receives a past performance rating for performance as a first tier subcontractor. 

(G) REPORT.-The Comptroller General of the United 

States shall begin an assessment of the pilot program 1 year 

after the establishment of such program. Not later than 6 

months after beginning such assessment, the Comptroller General 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, which shall 

include--

(i) the number of small business concerns that have 

received past performance ratings under the pilot program; 

(ii) the number of applications in which the contracting officer (or designee) or the prime contractor contested the application of the small business concern; 

(iii) any suggestions or recommendations the Comptroller General or the small business concerns participating in the program have to address disputes between 

the small business concern, the contracting officer (or designee), and the prime contractor on past performance ratings; 

(iv) the number of small business concerns awarded 

prime contracts after receiving a past performance rating 

under this pilot program; and 

(v) any suggestions or recommendation the Comptroller General has to improve the operation of the pilot 

program. 

(H) APPROPRIATE OFFICIAL DEFINED.-ln this paragraph, 

the term "appropriate official" means-

(i) a commercial market representative; 

(ii) another individual designated by the senior official 

appointed by the Administrator with responsibilities under 

sections 8, 15, 31, and 36; or 

(iii) the Office of Small and Disadvantaged Business 

Utilization of a Federal agency, if the head of the Federal 

agency and the Administrator agree. 

(e)(l) Except as provided in subsection (g)-

(A) an executive agency intending to-

(i) solicit bids or proposals for a contract for property 

or services for a price expected to exceed $25,000; or 

(ii) place an order, expected to exceed $25,000, under 

a basic agreement, basis ordering agreement, or similar arrangement, 

shall publish a notice described in subsection (f); 

(B) an executive agency intending to solicit bids or proposals for a contract for property or services shall post, for a 

period of not less than ten days, in a public place at the con-
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137 SMALL BUSINESS ACT Sec. 8 

tracting office issuing the solicitation a notice of solicitation described in subsection (f)-

(i) in the case of an executive agency other than the 

Department of Defense, if the contract is for a price expected to exceed $10,000, but not to exceed $25,000; and 

(ii) in the case of the Department of Defense, if the 

contract is for a price expected to exceed $5,000, but not 

to exceed $25,000; and 

(C) an executive agency awarding a contract for property 

or services for a price exceeding $100,000, or placing an order 

referred to in clause (A)(ii) exceeding $100,000, shall furnish 

for publication by the Secretary of Commerce a notice announcing the award or order if there is likely to be any subcontract 

under such contract or order. 

(2)(A) A notice of solicitation required to be published under 

paragraph (1) may be published-

(i) by electronic means that meet the accessibilitf requirements under section 18(a)(7) of the Office of Federa Procurement Policy Act (41 U.S.C. 416(a)(7)); or 

(ii) by the Secretary of Commerce in the Commerce Business Daily. 

(B) The Secretary of Commerce shall promptly publish in the 

Commerce Business Daily each notice or announcement received 

under this subsection for publication by that means. 

(3) Whenever an executive agency is required by paragraph 

(1)(A) to publish a notice of solicitation, such executive agency may 

not-

(A) issue the solicitation earlier than 15 days after the 

date on which the notice is published; or 

(B) in the case of a contract or order estimated to be greater than the simplified acquisition threshold, establish a deadline for the submission of all bids or proposals in response to 

the notice required by paragraph (1)(A) that-

(i) in the case of an order under a basic agreement, 

basic ordering agreement, or similar arrangement, is earlier than the date 30 days after the date the notice required by paragraph (l)(A)(ii) is published; 

(ii) in the case of a solicitation for research and development, is earlier than the date 45 days after the date the 

notice required by paragraph (1)(A)(i) is published; or 

(iii) in any other case, is earlier than the date 30 days 

after the date the solicitation is issued. 

(0 Each notice of solicitation required by subparagraph (A) or 

(B) of subsection (e)(1) shall include-

(I) an accurate description of the property or services to be 

contracted for, which description (A) shall not be unnecessarily 

restrictive of competition, and (B) shall include, as appropriate, 

the agency nomenclature, National Stock Number or other part 

number, and a brief description of the item's form, fit, or function, physical dimensions, predominant material of manufacture, or similar information that will assist a prospective contractor to make an informed business judgment as to whether 

a copy of the solicitation should be requested; 

(2) provisions that-
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Sec. 8 SMALL BUSINESS ACT 138 

(A) state whether the technical data required to respond to the solicitation will not be furnished as part of 

such solicitation, and identify the source in the Government, if any, from which the technical data may be obtained; and 

(B) state whether an offeror, its product, or service 

must meet a qualification requirement in order to be eligible for award, and, if so, identify the office from which a 

qualification requirement may be obtained; 

(3) the name, business address, and telephone number of 

the contracting officer; 

( 4) a statement that all responsible sources may submit a 

bid, proposal, or quotation (as appropriate) which shall be considered by the agency; 

(5) in the case of a procurement using procedures other 

than competitive procedures, a statement of the reason justifying the use of such procedures and the identity of the intended source; and 

(6) in the case of a contract in an amount estimated to be 

greater than $25,000 but not greater than the simplified acquisition thresholdCA) a description of the procedures to be used in 

awarding the contract; and 

(B) a statement specifying the periods for prospective 

offerors and the contracting officer to take the necessary 

preaward and award actions. 

(g)(l) A notice is not required under subsection (e)(l) if-

(A) the proposed procurement is for an amount not greater 

than the simplified acquisition threshold and is to be conducted by-

(i) using widespread electronic public notice of the solicitation in a form that allows convenient and universal 

user access through a single, Government-wide point of 

entry; and 

(ii) permitting the public to respond to the solicitation 

electronically. 

(B) the notice would disclose the executive agency's needs 

and the disclosure of such needs would compromise the national security; 

(C) the proposed procurement would result from acceptance of-

(i) any unsolicited proposal that demonstrates a 

unique and innovative research concept and the publication of any notice of such unsolicited research proposal 

would disclose the originality of thought or innovativeness 

of the proposal or would disclose proprietary information 

associated with the proposal; or 

(ii) a proposal submitted under section 9 of this Act; 

(D) the procurement is made against an order placed 

under a requirements contract; 

(E) the procurement is made for perishable subsistence 

supplies; 

(F) the procurement is for utility services, other than telecommunication services, and only one source is available; or 
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139 SMALL BUSINESS ACT Sec. 8 

(G) the procurement is for the services of an expert for use 

in any litigation or dispute (including preparation for any foreseeable litigation or dispute) that involves or could involve the 

Federal Government in any trial, hearing, or proceeding before 

any court, administrative tribunal, or agency, or in any part of 

an alternative dispute resolution process, whether or not the 

expert is expected to testify. 

(2) The requirements of subsection (a)(1)(A) do not apply to any 

procurement under conditions described in paragraph (2), (3), (4), 

(5), or (7) of section 303(c) of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 253(c)) or paragraph (2), (3), 

(4), (5), and (7) of section 2304(c) of title 10, United States Code. 

(3) The requirements of subsection (a)(1)(A) shall not apply in 

the case of any procurement for which the head of the executive 

agency makes a determination in writing, after consultation with 

the Administrator for Federal Procurement Policy and the Administrator of the Small Business Administration, that it is not appropriate or reasonable to publish a notice before issuing a solicitation. 

(h)(1) An executive agency may not award a contract using procedures other than competitive procedures unless-

(A) except as provided in paragraph (2), a written justification for the use of such procedures has been approved-

(i) in the case of a contract for an amount exceeding 

$100,000 (but equal to or less than $1,000,000), by the advocate for competition for the procuring activity (without 

further delegation); 

(ii) in the case of a contract for an amount exceeding 

$1,000,000 (but equal to or less than $10,000,000), by the 

head of the procuring activity or a delegate who, if a member of the Armed Forces, is a general or flag officer, or, if 

a civilian, is serving in a position in grade GS-16 or above 

under the General Schedule (or in a comparable or higher 

position under another schedule); or 

(iii) in the case of a contract for an amount exceeding 

$10,000,000, by the senior procurement executive of the 

agency designated pursuant to section 16(3) of the Office 

of Federal Procurement Policy Act (41 U.S.C. 414(3)) (without further delegation); and 

(B) all other requirements applicable to the use of such 

procedures under title III of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 251 et sq.) or chapter 

137 of title 10, United States Code, as appropriate, have been 

satisfied. 

(2) The same exceptions as are provided in section 303(£)(2) of 

the Federal Property and Administrative Services Act of 1949 (41 

U.S.C. 253(£)(2)) or section 2304(£)(2) of title 10, United States 

Code, shall apply with respect to the requirements of paragraph 

(1)(A) of this subsection in the same manner as such exceptions 

apply to the requirements of section 303(£)(1) of such Act or section 

2304(£)(1) of such title, as appropriate. 

(i) An executive agency shall make available to any business 

concern, or the authorized representative of such concern, the complete solicitation package for any on-going procurement announced 

pursuant to a notice under subsection (e). An executive agency may 
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Sec. 8 SMALL BUSINESS ACT 140 

require the payment of a fee, not exceeding the actual cost of duplication, for a copy of such package. 

(j) For purposes of this section, the term "executive agency" has 

the meaning provided such term in section 4(1) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(1)). 

(k) NOTICES OF SUBCONTRACTING OPPORTUNITIES.-

(!) IN GENERAL.-Notices of subcontracting opportunities 

may be submitted for publication on the appropriate Federal 

Web site (as determined by the Administrator) by-

(A) a business concern awarded a contract by an executive agency subject to subsection (e)(l)(C); and 

(B) a business concern that is a subcontractor or supplier (at any tier) to such contractor having a subcontracting opportunity in excess of $10,000. 

(2) CoNTENT OF NOTICE.-The notice of a subcontracting 

opportunity shall include-

(A) a description of the business opportunity that is 

comparable to the description specified in paragraphs (1), 

(2), (3), and (4) of subsection (f); and 

(B) the due date for receipt of offers. 

(I) MANAGEMENT ASSISTANCE FOR SMALL BUSINESSES AFFECTED BY MILITARY 0PERATIONS.-The Administration shall utilize, as appropriate, its entrepreneurial development and management assistance programs, including programs involving State or 

private sector partners, to provide business counseling and training 

to any small business concern adversely affected by the deployment 

of units of the Armed Forces of the United States in support of a 

period of military conflict (as defined in section 7(n)(l)). 

(m) PROCUREMENT PROGRAM FOR WOMEN-OWNED SMALL BUSINESS CONCERNS.-

(1) DEFINITIONS.-In this subsection, the following definitions apply: 

(A) CONTRACTING OFFICER.-The term "contracting officer" has the meaning given such term in section 27(f)(5) 

of the Office of Federal Procurement Policy Act (41 U.S.C. 

423(f)(5)). 

(B) SMALL BUSINESS CONCERN OWNED AND CONTROLLED BY WOMEN.-The term "small business concern 

owned and controlled by women" has the meaning given 

such term in section 3(n), except that ownership shall be 

determined without regard to any community property 

law. 

(2) AUTHORITY TO RESTRICT COMPETITION.-In accordance 

with this subsection, a contracting officer may restrict competition for any contract for the procurement of goods or services 

by the Federal Government to small business concerns owned 

and controlled by women, if-

(A) each of the concerns is not less than 51 percent 

owned by one or more women who are economically disadvantaged (and such ownership is determined without regard to any community property law); 

(B) the contracting officer has a reasonable expectation that two or more small business concerns owned and 

controlled by women will submit offers for the contract; 
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141 SMAll BUSINESS ACT Sec. 8 

(C) the contract is for the procurement of goods or 

services with respect to an industry identified by the Administrator pursuant to parafaph (3); 

(D) in the estimation o the contracting officer, the 

contract award can be made at a fair and reasonable price; 

and 

(E) each of the concerns is certified by a Federal agency, a State government, the Administrator, or a national 

certifying entity approved by the Administrator as a small 

business concern owned and controlled by women. 

(3) WAIVER.-With respect to a small business concern 

owned and controlled by women, the Administrator may waive 

subparagraph (2)(A) if the Administrator determines that the 

concern is in an industry in which small business concerns 

owned and controlled by women are substantially underrepresented. 

(4) IDENTIFICATION OF INDUSTRIES.-The Administrator 

shall conduct a study to identify industries in which small 

business concerns owned and controlled by women are underrepresented with respect to Federal procurement contracting. 

(5) ENFORCEMENT; PENALTIES.-

(A) VERIFICATION OF ELIGIBILITY.-In carrying out this 

subsection, the Administrator shall establish procedures 

relating to-

(i) the filing, investigation, and disposition by the 

Administration of any challenge to the eligibility of a 

small business concern to receive assistance under this 

subsection (including a challenge, filed by an interested party, relating to the veracity of a certification 

made or information provided to the Administration 

by a small business concern under paragraph (2)(E)); 

and 

(ii) verification by the Administrator of the accuracy of any certification made or information provided 

to the Administration by a small business concern 

under paragraph (2)(E). 

(B) EXAMINATIONS.-The procedures established under 

subparagraph (A) may provide for program examinations 

(including random program examinations) by the Administrator of any small business concern making a certification 

or providing information to the Administrator under para- graph (2)(E). 

(C) PENALTIES.-In addition to the penalties described 

in section 16(d), any small business concern that is determined by the Administrator to have misrepresented the 

status of that concern as a small business concern owned 

and controlled by women for purposes of this subsection, 

shall be subject to-

(i) section 1001 of title 18, United States Code; 

and 

(ii) sections 3729 through 3733 of title 31, United 

States Code. 

(6) PROVISION OF DATA.-Upon the request of the Administrator, the head of any Federal department or agency shall 
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Sec. 8 SMALL BUSINESS ACT 142 

promptly provide to the Administrator such information as the 

Administrator determines to be necessary to carry out this subsection. 

(7) AUTHORITY FOR SOLE SOURCE CONTRACTS FOR ECONOMICALLY DISADVANTAGED SMALL BUSINESS CONCERNS OWNED AND 

CONTROLLED BY WOMEN.-A contracting officer may award a 

sole source contract under this subsection to any small business concern owned and controlled by women described in 

paragraph (2)(A) and certified under paragraph (2)(E) if-

(A) such concern is determined to be a responsible contractor with respect to performance of the contract opportunity and the contracting officer does not have a reasonable expectation that 2 or more businesses described in 

paragraph (2)(A) will submit offers; 

(B) the anticipated award price of the contract (including options) will not exceed-

(i) $6,500,000, in the case of a contract opportunity assigned a standard industrial classification 

code for manufacturing; or 

(ii) $4,000,000, in the case of any other contract 

opportunity; and 

(C) in the estimation of the contracting officer, the 

contract award can be made at a fair and reasonable price. 

(8) AUTHORITY FOR SOLE SOURCE CONTRACTS FOR SMALL 

BUSINESS CONCERNS OWNED AND CONTROLLED BY WOMEN IN 

SUBSTANTIALLY UNDERREPRESENTED INDUSTRIES.-A contracting officer may award a sole source contract under this 

subsection to any small business concern owned and controlled 

by women certified under paragraph (2)(E) that is in an industry in which small business concerns owned and controlled by 

women are substantially underrepresented (as determined by 

the Administrator under paragraph (3)) if-

(A) such concern is determined to be a responsible contractor with respect to performance of the contract opportunity and the contracting officer does not have a reasonable expectation that 2 or more businesses in an industry 

that has received a waiver under paragraph (3) will submit offers; 

(B) the anticipated award price of the contract (including options) will not exceed-

(i) $6,500,000, in the case of a contract opportunity assigned a standard industrial classification 

code for manufacturing; or 

(ii) $4,000,000, in the case of any other contract 

opportunity; and 

(C) in the estimation of the contracting officer, the 

contract award can be made at a fair and reasonable price. 

(n) BUSINESS GRANTS AND COOPERATIVE AGREEMENTS.-

(!) IN GENERAL.-In accordance with this subsection, the 

Administrator may make grants to and enter into cooperative 

agreements with any coalition of private entities, public entities, or any combination of private and public entities-

(A) to expand business-to-business relationships between large and small businesses; and 
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143 SMALL BUSINESS ACT Sec. 9 

(B) to provide businesses, directly or indirectly, with 

online information and a database of companies that are 

interested in mentor-protege programs or communitybased, statewide, or local business development programs. 

(2) MATCHING REQUIREMENT.-Subject to subparagraph 

(B), the Administrator may make a grant to a coalition under 

paragraph (1) only if the coalition provides for activities described in paragraph (l)(A) or (l)(B) an amount, either in kind 

or in cash, equal to the grant amount. 

(3) AUTHORIZATION OF APPROPRIATIONS.-There is authorized to be appropriated to carry out this subsection $6,600,000, 

to remain available until expended, for each of fiscal years 

2001 through 2006. 

SEC. 9. [15 U.S.C. 638] (a) Research and development are 

major factors in the growth and progress of industry and the national economy. The expense of carrying on research and development programs is beyond the means of many small-business concerns, and such concerns are handicapped in obtaining the benefits 

of research and development programs conducted at Government 

expense. These small-business concerns are thereby placed at a 

competitive disadvantage. This weakens the competitive free enterprise system and prevents the orderly development of the national 

economy. It is the policy of the Congress that assistance be given 

to small-business concerns to enable them to undertake and to obtain the benefits of research and development in order to maintain 

and strengthen the competitive free enterprise system and the national economy. 

(b) It shall be the duty of the Administration, and it is hereby 

empowered-

( 1) to assist small-business concerns to obtain Government 

contracts for research and development; 

(2) to assist small-business concerns to obtain the benefits 

of research and development performed under Government 

contracts or at Government expense; 

(3) to provide technical assistance to small-business concerns to accomplish the purposes of this section; and 57 

(4) to develop and maintain a source file and an information program to assure each qualified and interested small 

business concern the opportunity to participate in Federal 

agency small business innovation research programs and small 

business technology transfer programs; 

(5) to coordinate with participating agencies a schedule for 

release of SBIR and STTR solicitations, and to prepare a master release schedule so as to maximize small business' opportunities to respond to solicitations; 

(6) to independently survey and monitor the operation of 

SBIR and STTR programs within participating Federal agencies; 

(7) to report not less than annually to the Committee on 

Small Business of the Senate, and to the Committee on Science 

and the Committee on Small Business of the House of Representatives, on the SBIR and STTR programs of the Federal 

57 So in original. The word "and" probably should not appear. 
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Sec. 9 SMALL BUSINESS ACT 144 

agencies and the Administration's information and monitoring 

efforts related to the SBIR and STTR programs, including-

(A) the data on output and outcomes collected pursuant to subsections (g)(8) and (o)(9); 

(B) the number of proposals received from, and the 

number and total amount of awards to, HUBZone small 

business concerns and firms with venture capital, hedge 

fund, or private equity firm investment (including those 

majority-owned by multiple venture capital operating companies, hedge funds, or private equity firms) under each of 

the SBIR and STTR programs; 

(C) a description of the extent to which each Federal 

agency is increasing outreach and awards to firms owned 

and controlled by women or by socially or economically disadvantaged individuals under each of the SBIR and STTR 

programs; 

(D) general information about the implementation of, 

and compliance with the allocation of funds required 

under, subsection (dd) for firms owned in majority part by 

venture capital operating companies, hedge funds, or private equity firms and participating in the SBIR program; 

(E) a detailed description of appeals of Phase III 

awards and notices of noncompliance with the SBIR Policy 

Directive and the STTR Policy Directive filed by the Administrator with Federal agencies; 

(F) an accounting of funds, initiatives, and outcomes 

under the Commercialization Readiness Program; and 

(G) a description of the extent to which Federal agencies are providing in a timely manner information needed 

to maintain the database described in subsection (k); 

(8) to provide for and fully implement the tenets of Executive Order No. 13329 (Encouraging Innovation in Manufacturing); and 

(9) to coordinate the implementation of electronic databases at each of the Federal agencies participating in the SBIR 

program or the STTR program, including the technical ability 

of the participating agencies to electronically share data. 

(c) The Administration is authorized to consult and cooperate 

with all Government agencies and to make studies and recommendations to such agencies, and such agencies are authorized 

and directed to cooperate with the Administration in order to carry 

out and to accomplish the purposes of this section. 

(d)(l) The Administrator is authorized to consult with representatives of small-business concerns with a view to assisting 

and encouraging such firms to undertake joint programs for research and development carried out through such corporate or 

other mechanism as may be most appropriate for the purpose. Such 

joint programs may, among other things, include the following purposes: 

(A) to construct, acquire, or establish laboratories and 

other facilities for the conduct of research; 

(B) to undertake and utilize applied research; 

(C) to collect research information related to a particular 

industry and disseminate it to participating members; 
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145 SMALL BUSINESS ACT Sec. 9 

(D) to conduct applied research on a protected, proprietary, 

and contractual basis with member or nonmember firms, Government agencies, and others; 

(E) to prosecute applications for patents and render patent 

services for participating members; and 

(F) to negotiate and grant licenses under patents held 

under the point program, and to establish corporations designed to exploit particular patents obtained by it. 

(2) The Administrator may, after consultation with the Attorney General and the Chairman of the Federal Trade Commission, 

and with the prior written approval of the Attorney General, approve any agreement between small-business firms providing for a 

joint program of research and development, if the Administrator 

finds that the joint program proposed will maintain and strengthen 

the free enterprise system and the economy of the Nation. The Administrator or the Attorney General may at any time withdraw his 

approval of the agreement and the joint program of research and 

development covered thereby, if he finds that the agreement or the 

joint program carried on under it is no longer in the best interests 

of the competitive free enterprise system and the economy of the 

Nation. A copy of the statement of any such finding and approval 

intended to be within the coverage of this subsection, and a copy 

of any modification or withdrawal of approval, shall be published 

in the Federal Register. The authority conferred by this subsection 

on the Administrator shall not be delegated by him. 

(3) No act or omission to act pursuant to and within the scope 

of any joint program for research and development, under an 

agreement approved by the Administrator under this subsection, 

shall be construed to be within the prohibitions of the antitrust 

laws or the Federal Trade Commission Act. Upon publication in the 

Federal Register of the notice of withdrawal of his approval of the 

agreement granted under this subsection, either by the Administrator or by the Attorney General, the provisions of this subsection 

shall not apply to any subsequent act or omission to act by reason 

of such agreement or approval. 

(e) For the purpose of this section-

(1) the term "extramural budget" means the sum of the 

total obligations minus amounts obligated for such activities by 

employees of the agency in or through Government-owned, 

Government-operated facilities, except that for the Agency for 

International Development it shall not include amounts obligated solely for general institutional support of international 

research centers or for grants to foreign countries, and except 

that for the Department of Energy it shall not include amounts 

obligated for atomic energy defense programs for weapons and 

weapons-related activities or for naval reactor programs 

58; 

(2) the term "Federal agency" means an executive agency 

as defined in section 105 of title 5, United States Code, or a 

military department as defined in section 102 of such title, except that it does not include any agency within the Intelligence 

58 Amendment made by section 103(c) of the Small Business Research and Development Enhancement Act of 1992 is unexecutable. This is probably a result of an amendment made by 

P.L. 102-484 which added text similar to this unexecutable amendment. 
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Sec. 9 SMALL BUSINESS ACT 146 

Community (as the term is defined in section 3.4(f) of Executive Order 12333 or its successor orders); 

(3) the term "funding agreement" means any contract, 

grant, or cooperative agreement entered into between any Federal agency and any small business for the performance of experimental, developmental, or research work funded in whole 

or in part by the Federal Government; 

( 4) the term "Small Business Innovation Research Program" or "SBIR" means a program under which a portion of a 

Federal agency's research or research and development effort 

is reserved for award to small business concerns through a uniform process having-

(A) a first phase for determining, insofar as possible, 

the scientific and technical merit and feasibility of ideas 

that appear to have commercial potential, as described in 

subparagraph (B), submitted pursuant to SBIR program 

solicitations; 

(B) a second phase, which shall not include any invitation, pre-screening, or pre-selection process for eligibility 

for Phase II, that will further develop proposals which 

meet particular program needs, in which awards shall be 

made based on the scientific and technical merit and feasibility of the proposals, as evidenced by the first phase, considering, among other things, the proposal's commercial 

potential, as evidenced by-

(i) the small business concern's record of successfully commercializing SBIR or other research; 

(ii) the existence of second phase funding commitments from private sector or non-SBIR funding 

sources; 

(iii) the existence of third phase, follow-on commitments for the subject of the research; and 

(iv) the presence of other indicators of the commercial potential of the idea; and 

(C) where appropriate, a third phase for work that derives from, extends, or completes efforts made under prior 

funding agreements under the SBIR program-

(i) in which commercial applications of SBIR-funded research or research and development are funded 

by non-Federal sources of capital or, for products or 

services intended for use by the Federal Government, 

by follow-on non-SBIR Federal funding awards; or 

(ii) for which awards from non-SBIR Federal funding sources are used for the continuation of research 

or research and development that has been competitively selected using peer review or merit-based selection procedures; 

(5) the term "research" or "research and development" 

means any activity which is (A) a systematic, intensive study 

directed toward greater knowledge or understanding of the 

subject studied; (B) a systematic study directed specifically toward applying new knowledge to meet a recognized need; or 

(C) a systematic application of knowledge toward the production of useful materials, devices, and systems or methods, in-
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147 SMALL BUSINESS ACT Sec. 9 

eluding design, development, and improvement of prototypes 

and new processes to meet specific requirements; 

( 6) the term "Small Business Technology Transfer Program" or "STTR" means a program under which a portion of 

a Federal agency's extramural research or research and development effort is reserved for award to small business concerns 

for cooperative research and development through a uniform 

process having-

(A) a first phase, to determine, to the extent possible, 

the scientific, technical, and commercial merit and feasibility of ideas submitted pursuant to STTR program solicitations; 

(B) a second phase, which shall not include any invitation, pre-screening, or pre-selection process for eligibility 

for Phase II, that will further develop proposals that meet 

particular program needs, in which awards shall be made 

based on the scientific, technical, and commercial merit 

and feasibility of the idea, as evidenced by the first phase 

and by other relevant information; and 

(C) where appropriate, a third phase for work that derives from, extends, or completes efforts made under prior 

funding agreements under the STTR program-

(i) in which commercial applications of STTRfunded research or research and development are 

funded by non-Federal sources of capital or, for products or services intended for use by the Federal Government, by follow-on non-STTR Federal funding 

awards; and 

(ii) for which awards from non-STTR Federal 

funding sources are used for the continuation of research or research and development that has been 

competitively selected using peer review or scientific 

review criteria; 

(7) the term "cooperative research and development" 

means research or research and development conducted jointly 

by a small business concern and a research institution in 

which not less than 40 percent of the work is performed by the 

small business concern, and not less than 30 percent of the 

work is performed by the research institution; 

(8) the term "research institution" means a nonprofit institution, as defmed in section 4(5) of the Stevenson-Wydler Technology Innovation Act of 1980, and includes federally funded 

research and development centers, as identified by the National Scientific Foundation in accordance with the governmentwide Federal Acquisition Regulation issued in accordance 

with section 35(c)(l) of the Office of Federal Procurement Policy Act (or any successor regulation thereto); 

(9) the term "commercial applications" shall not be construed to exclude testing and evaluation of products, services, 

or technologies for use in technical or weapons systems, and 

further, awards for testing and evaluation of products, services, 

or technologies for use in technical or weapons systems may be 

made in either Phase II or Phase III of the Small Business In-
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Sec. 9 SMALL BUSINESS ACT 148 

novation Research Program and of the Small Business Technology Transfer Program, as defined in this subsection; 

(10) the term "commercialization" means-

(A) the process of developing products, processes, technologies, or services; and 

(B) the production and delivery (whether by the originating party or by others) of products, processes, technologies, or services for sale to or use by the Federal Government or commercial markets; 

(11) the term "Phase I" means-

(A) with respect to the SBIR program, the first phase 

described in paragraph (4)(A); and 

(B) with respect to the STTR program, the first phase 

described in paragraph (6)(A); 

(12) the term "Phase II" means-

(A) with respect to the SBIR program, the second 

phase described in paragraph (4)(B); and 

(B) with respect to the STTR program, the second 

phase described in paragraph (6)(B); and 

(13) the term "Phase III" means-

(A) with respect to the SBIR program, the third phase 

described in paragraph (4)(C); and 

(B) with respect to the STTR program, the third phase 

described in paragraph (6)(C). 

(f) FEDERAL AGENCY EXPENDITURES FOR THE SBJR PROGRAM.-

(1) REQUIRED EXPENDITURE AMOUNTS.-Except as provided 

in paragraph (2)(B), each Federal agency which has an extramural budget for research or research and development in excess of $100,000,000 for fiscal year 1992, or any fiscal year 

thereafter, shall expend with small business concerns-

(A) not less than 1.5 percent of such budget in each of 

fiscal years 1993 and 1994; 

(B) not less than 2.0 percent of such budget in each of 

fiscal years 1995 and 1996; 

(C) not less than 2.5 percent of such budget in each of 

fiscal years 1997 through 2011; 

(D) not less than 2.6 percent of such budget in fiscal 

year 2012; 

(E) not less than 2.7 percent of such budget in fiscal 

year 2013; 

(F) not less than 2.8 percent of such budget in fiscal 

year 2014; 

(G) not less than 2.9 percent of such budget in fiscal 

year 2015; 

(H) not less than 3.0 percent of such budget in fiscal 

year 2016; and 

(I) not less than 3.2 percent of such budget in fiscal 

year 2017 and each fiscal year thereafter, 

specifically in connection with SBIR programs which meet the 

requirements of this section, policy directives, and regulations 

issued under this section. 

(2) LIMITATIONS.-A Federal agency shall not-

(A) use any of its SBIR budget established pursuant to 

paragraph (1) for the purpose of funding administrative 
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149 SMALL BUSINESS ACT Sec. 9 

costs of the program, including costs associated with salaries and expenses; or 

(B) make available for the purpose of meeting the requirements of paragraph (1) an amount of its extramural 

budget for basic research which exceeds the percentages 

specified in paragraph (1). 

(3) EXCLUSION OF CERTAIN FUNDING AGREEMENTS.-Funding agreements with small business concerns for research or 

research and development which result from competitive or 

single source selections other than an SBIR program shall not 

be considered to meet any portion of the percentage requirements of paragraph (1). 

(4) RULE OF CONSTRUCTION.-Nothing in this subsection 

may be construed to prohibit a Federal agency from expending with small business concerns an amount of the extramural 

budget for research or research and development of the agency 

that exceeds the amount required under paragraph (1). 

(g) Each Federal agency required by subsection (f) to establish 

a small business innovation research program shall, in accordance 

with this Act and regulations issued hereunder-

( I) unilaterally determine categories of projects to be in its 

SBIR program; 

(2) issue small business innovation research solicitations 

in accordance with a schedule determined cooperatively with 

the Small Business Administration; 

(3) unilaterally determine research topics within the agency's SBIR solicitations, giving special consideration to broad research topics and to topics that further 1 or more critical technologies, as identified by-

{A) the National Critical Technologies Panel (or its 

successor) in the 1991 report required under section 603 of 

the National Science and Technology Policy, Organization, 

and Priorities Act of 1976, and in subsequent reports 

issued under that authority; or 

(B) the Secretary of Defense, in the 1992 report issued 

in accordance with section 2522 of title 10, United States 

Code, and in subsequent reports issued under that authority; 

(4)(A) unilaterally receive and evaluate proposals resulting 

from SBIR proposals; and 

(B) make a final decision on each proposal submitted 

under the SBIR program-

(i) not later than 1 year after the date on which the 

applicable solicitation closes, if with respect to the National Institutes of Health or the National Science Foundation, or 90 days after the date on which the applicable solicitation closes, if with respect to any other participating 

agency; or 

(ii) if the Administrator authorizes an extension with 

respect to a solicitation, not later than 90 days after the 

date that would otherwise be applicable to the agency under clause {i); 

(5) subject to subsection (l), unilaterally select awardees 

for the SBIR funding agreements and inform each awardee 
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Sec. 9 SMALL BUSINESS ACT 150 

under such an agreement, to the extent possible, of the expenses of the awardee that will be allowable under the funding 

agreement; 

(6) administer its own SBIR funding agreements (or delegate such administration to another agency); 

(7) make payments to recipients of SBIR funding agreements on the basis of progress toward or completion of the 

funding agreement requirements and, in all cases, make payment to recipients under such agreements in full, subject to 

audit, on or before the last day of the 12-month period beginning on the date of completion of such requirements; 

(8) collect annually, and maintain in a common format in 

accordance with the simplified reporting requirements under 

subsection (v), such .information from awardees as is necessary 

to assess the SBIR program, including information necessary 

to maintain the database described in subsection (k), including-

(A) whether an awardee-

(i) has venture capital, hedge fund, or private equity firm investment or is majority-owned by multiple 

venture capital operating companies, hedge funds, or 

private equity firms and, if so-

(1) the amount of venture capital, hedge fund, 

or private equity firm investment that the awardee has received as of the date of the award; and 

(II) the amount of additional capital that the 

awardee has invested in the SBIR technology; 

(ii) has an investor that-

(!) is an individual who is not a citizen of the 

United States or a lawful permanent resident of 

the United States and, if so, the name of any such 

individual; or 

(II) is a person that is not an individual and 

is not organized under the laws of a State or the 

United States and, if so, the name of any such 

person; 

(iii) is owned by a woman or has a woman as a 

principal investigator; 

(iv) is owned by a socially or economically disadvantaged individual or has a socially or economically disadvantaged individual as a principal investigator; 

(v) is a faculty member or a student of an institution of higher education, as that term is defined in section 101 of the Higher Education Act of 1965 (20 

U.S.C. 1001); or 

(vi) is located in a State described in subsection 

(u)(3); 

(B) a justification statement from the agency, if an 

awardee receives an award in an amount that is more 

than the award guidelines under this section; and 

(C) data with respect to the Federal and State Technology Partnership Program (FAST Program); 
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151 SMALL BUSINESS ACT Sec. 9 

(9) make an annual report on the SBIR program to the 

Small Business Administration and the Office of Science and 

Technology Policy; 

(10) include, as part of its annual performance plan as required by subsections (a) and (b) of section 1115 of title 31, 

United States Code, a section on its SBIR program, and shall 

submit such section to the Committee on Small Business of the 

Senate, and the Committee on Science and the Committee on 

Small Business of the House of Representatives; 

(11) provide for and fully implement the tenets of Executive Order No. 13329 (Encouraging Innovation in Manufacturing); and 

(12) provide timely notice to the Administrator of any case 

or controversy before any Federal judicial or administrative tribunal concerning the SBIR program of the Federal agency. 

(h) In addition to the requirements of subsection (f), each Federal agency which has a budget for research or research and development in excess of $20,000,000 for any fiscal year beginning with 

fiscal year 1983 or subsequent fiscal year shall establish goals specifically for funding agreements for research or research and development to small business concerns, and no goal established under 

this subsection shall be less than the percentage of the agency's research or research and development budget expended under funding agreements with small business concerns in the immediately 

preceding fiscal year. 

(i) ANNUAL REPORTING.-

(1) IN GENERAL.-Each Federal agency required by this 

section to have an SBIR program or to establish goals shall report annually to the Small Business Administration the number of awards (including awards under subsection (y)) pursuant 

to grants, contracts, or cooperative agreements over $10,000 in 

amount and the dollar value of all such awards, identifying 

SBIR awards and comparing the number and amount of such 

awards with awards to other than small business concerns. 

(2) CALCULATION OF EXTRAMURAL BUDGET.-

(A) METHODOLOGY.-Not later than 4 months after the 

date of the enactment of each appropriations Act for a Federal agency required by this section to have an SBIR program, the Federal agency shall submit to the Administrator a report, which shall include a description of the 

methodology used for calculating the amount of the extramural budget of that Federal agency. 

(B) ADMINISTRATOR'S ANALYSIS.-The Administrator 

shall include an analysis of the methodology received from 

each Federal agency referred to in subparagraph (A) in the 

report required by subsection (b)(7). 

(j)(1) POLICY DIRECTIVES.-The Small Business Administration, 

after consultation with the Administrator of the Office of Federal 

Procurement Policy, the Director of the Office of Science and Technology Policy, and the Intergovernmental Affairs Division of the Office of Management and Budget, shall, within one hundred and 

twenty days of the enactment of the Small Business Innovation Development Act of 1982, issue policy directives for the general con-
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Sec. 9 SMALL BUSINESS ACT 152 

duct of the SBIR programs within the Federal Government, including providing for-

(A) simplified, standardized, and timely SBIR solicitations; 

(B) a simplified, standardized funding process which provides for (i) the timely receipt and review of proposals; (ii) outside peer review for at least Phase II proposals, if appropriate; 

(iii) protection of proprietary information provided in proposals; 

(iv) selection of awardees; (v) retention of rights in data generated in the performance of the contract by the small business 

concern; (vi) transfer of title to property provided by the agency 

to the small business concern if such a transfer would be more 

cost effective than recovery of the property by the agency; (vii) 

cost sharing; and (viii) cost principles and payment schedules; 

(C) exemptions from the regulations under paragraph (2) 

if national security or intelligence functions clearly would be 

jeopardized; 

(D) minimizing regulatory burden associated with participation in the SBIR program for the small business concern 

which will stimulate the cost-effective conduct of Federal research and development and the likelihood of commercialization of the results of research and development conducted 

under the SBIR program; 

(E) simplified, standardized, and timely annual report on 

the SBIR program to the Small Business Administration and 

the Office of Science and Technology Policy; 

(F) standardized and orderly withdrawal from program 

participation by an agency having a SBIR program; at the discretion of the Administration, such directives may require a 

phased withdrawal over a period of time sufficient in duration 

to minimize any adverse impact on small business concerns; 

and 

(G) the voluntary participation in a SBIR program by a 

Federal agency not required to establish such a program pursuant to subsection (f). 

(2)59 MODIFICATIONS.-Not later than 90 days after the 

date of enactment of the Small Business Research and Development Enhancement Act of 1992, the Administrator shall 

modify the policy directives issued pursuant to this subsection 

to provide for-

(A) retention by a small business concern of the rights 

to data generated by the concern in the performance of an 

SBIR award for a period of not less than 4 years; 

(B) continued use by a small business concern participating in Phase III of the SBIR program, as a directed 

bailment, of any property transferred by a Federal agency 

to the small business concern in Phase II of an SBIR program for a period of not less than 2 years, beginning on 

the initial date of the concern's participation in Phase III 

of such program; 

(C) procedures to ensure, to the extent practicable, 

that an agency which intends to pursue research, development, or production of a technology developed by a small 

•• Margin so in law. 
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153 SMALL BUSINESS ACT Sec. 9 

business concern under an SBIR program enters into follow-on, non-SBIR funding agreements with the small business concern for such research, development, or production; 

(D) an increase to $150,000 in the amount of funds 

which an agency may award in Phase I of an SBIR program, and to $1,000,000 in Phase II of an SBIR program, 

and an adjustment of such amounts every year for inflation; 

(E) a process for notifying the participating SBIR 

agencies and potential SBIR participants of the 1991, 

1992, and the current critical technologies, as identified-

(i) by the National Critical Technologies Panel (or 

its successor), in accordance with section 603 of the 

National Science and Technology Policy, Organization, 

and Priorities Act of 1976; or 

(ii) by the Secretary of Defense, in accordance 

with section 2522 of title 10, United States Code; 

(F) enhanced outreach efforts to increase the participation of socially and economically disadvantaged small business concerns, as defined in section 8(a)(4), and the participation of small businesses that are 51 percent owned and 

controlled by women in technological innovation and in 

SBIR programs, including Phase III of such programs, and 

the collection of data to document such participation; 

(G) technical and programmatic guidance to encourage 

agencies to develop gap-funding programs to address the 

delay between an award for Phase I of an SBIR program 

and the application for and extension of an award for 

Phase II of such program; 

(H) procedures to ensure that a small business concern 

that submits a proposal for a funding agreement for Phase 

I of an SBIR program and that has received more than 15 

Phase II SBIR awards during the preceding 5 fiscal years 

is able to demonstrate the extent to which it was able to 

secure Phase III funding to develop concepts resulting 

from previous Phase II SBIR awards; and 

(!) procedures to ensure that agencies participating in 

the SBIR program retain the information submitted under 

subparagraph (H) at least until the General Accounting 

Office submits the report required under section 105 of the 

Small Business Research and Development Enhancement 

Act of 1992. 

(3) 60 ADDITIONAL MODIFICATIONS.-Not later than 120 

days after the date of the enactment of the Small Business Innovation Research Program Reauthorization Act of 2000, the 

Administrator shall modify the policy directives issued pursuant to this subsection-

(A) to clarify that the rights provided for under paragraph (2)(A) apply to all Federal funding awards under 

this section, including Phase I, Phase II, and Phase III; 

oo Margin so in law, 
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Sec. 9 SMALL BUSINESS ACT 154 

(B) to provide for the requirement of a succinct commercialization plan with each application for a Phase II 

award that is moving toward commercialization; 

(C) to require agencies to report to the Administration, 

not less frequently than annually, all instances in which 

an agency pursued research, development, or production of 

a technology developed by a small business concern using 

an award made under the SBIR program of that agency, 

and determined that it was not practicable to enter into a 

follow-on non-SBIR program funding agreement with the 

small business concern, which report shall include, at a 

minimum-

(i) the reasons why the follow-on funding agreement with the small business concern was not practicable; 

(ii) the identity of the entity with which the agency contracted to perform the research, development, or 

production; and 

(iii) a description of the type of funding agreement 

under which the research, development, or production 

was obtained; and 

(D) to implement subsection (v), including establishing 

standardized procedures for the provision of information 

pursuant to subsection (k)(3). 

(k) DATABASE.-

(1) PUBLIC DATABASE.-Not later than 180 days after the 

date of the enactment of the Small Business Innovation Research Program Reauthorization Act of 2000, the Administrator shall develop, maintain, and make available to the public a searchable, up-to-date, electronic database that includes-

(A) the name, size, location, and an identifYing number assigned by the Administrator, of each small business 

concern that has received a Phase I or Phase II SBIR or 

STTR award from a Federal agency; 

(B) a description of each Phase I or Phase II SBIR or 

STTR award received by that small business concern, including-

(i) an abstract of the project funded by the award, 

excluding any proprietary information so identified by 

the small business concern; 

(ii) the Federal agency making the award; and 

(iii) the date and amount of the award; 

(C) an identification of any business concern or subsidiary established for the commercial application of a 

product or service for which an SBIR or STTR award is 

made; 

(D) information regarding mentors and Mentoring 

Networks, as required by section 35(d); 

(E) with respect to assistance under the STTR program only-

(i) whether the small business concern or the research institution initiated their collaboration on each 

assisted STTR project; 
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155 SMALL BUSINESS ACT Sec. 9 

(ii) whether the small business concern or the research institution originated any technology relating 

to the assisted STTR project; 

(iii) the length of time it took to negotiate any licensing agreement between the small business concern 

and the research institution under each assisted STTR 

project; and 

(iv) how the proceeds from commercialization, 

marketing, or sale of technology resulting from each 

assisted STTR project were allocated (by percentage) 

between the small business concern and the research 

institution; and 

(F) for each small business concern that has received 

a Phase I or Phase II SBIR or STTR award from a Federal 

agency, whether the small business concern-

(i) has venture capital, hedge fund, or private equity firm investment and, if so, whether the small 

business concern is registered as majority-owned by 

multiple venture capital operating companies, hedge 

funds, or private equity firms as required under subsection (dd)(3); 

(ii) is owned by a woman or has a woman as a 

principal investigator; 

(iii) is owned by a socially or economically disadvantaged individual or has a socially or economically disadvantaged individual as a principal investigator; 

(iv) is owned by a faculty member or a student of 

an institution of higher education, as that term is defined in section 101 of the Higher Education Act of 

1965 (20 U.S.C. 1001); or 

(v) received assistance under the Federal and 

State Technology Partnership Program (FAST Program). 

(2) GOVERNMENT DATABASE.-Not later than 90 days after 

the date of enactment of the SBIR/STTR Reauthorization Act 

of 2011, the Administrator, in consultation with Federal agencies required to have an SBIR program pursuant to subsection 

(f)(l) or an STTR program pursuant to subsection (n)(1), shall 

develop and maintain a database to be used exclusively for 

SBIR and STTR program evaluation that-

(A) contains for each small business concern that applies for, submits a proposal for, or receives an award 

under Phase I or Phase II of the SBIR program or the 

STTR program-

(i) the name, size, and location of, and the identifying number assigned by the Administration to, the 

small business concern; 

(ii) an abstract of the applicable project; 

(iii) the specific aims of the project; 

(iv) the number of employees of the small business 

concern; 

(v) the names and titles of the key individuals 

that will carry out the project, the position each key 
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Sec. 9 SMALL BUSINESS ACT 156 

individual holds in the small business concern, and 

contact information for each key individual; 

(vi) the percentage of effort each individual described in clause (v) will contribute to the project; 

(vii) whether the small business concern is majority-owned by multiple venture capital operating companies, hedge funds, or private equity firms; and 

(viii) the Federal agency to which the application 

is made and contact information for the person or office within the Federal agency that is responsible for 

reviewing applications and making awards under the 

SBIR program or the STTR program; 

(B) contains for each Phase II award made by a Federal agency-

(i) information collected in accordance with paragraph (3) on revenue from the sale of new products or 

services resulting from the research conducted under 

the award; 

(ii) information collected in accordance with paragraph (3) on additional investment from any source, 

other than Phase I or Phase II SBIR or STTR awards, 

to further the research and development conducted 

under the award; and 

(iii) any other information received in connection 

with the award that the Administrator, in conjunction 

with the SBIR and STTR program managers of Federal agencies, considers relevant and appropriate; 

(C) includes any narrative information that a small 

business concern receiving a Phase II award voluntarily 

submits to further describe the outputs and outcomes of its 

awards; 

(D) includes, for each awardee-

(i) the name, size, and location of, and any identifying number assigned by the Administrator to, the 

awardee; 

(ii) whether the awardee has venture capital, 

hedge fund, or private equity firm investment and, if 

so--

(I) the amount of venture capital, hedge fund, 

or private equity firm investment as of the date of 

the award; 

(II) the percentage of ownership of the awardee held by a venture capital operating company, 

hedge fund, or private equity firm, including 

whether the awardee is majority-owned by multiple venture capital operating companies, hedge 

funds, or private equity firms; and 

(Ill) the amount of additional capital that the 

awardee has invested in the SBIR or STTR technology, which information shall be collected on an 

annual basis; 

(iii) the names and locations of any affiliates of 

the awardee; 

(iv) the number of employees of the awardee; 
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157 SMALL BUSINESS ACT Sec. 9 

(v) the number of employees of the affiliates of the 

awardee; and 

(vi) the names of, and the percentage of ownership 

of the awardee held by-

(I) any individual who is not a citizen of the 

United States or a lawful permanent resident of 

the United States; or 

(II) any person that is not an individual and 

is not organized under the laws of a State or the 

United States; 

(E) includes any other data collected by or available to 

any Federal agency that such agency considers may be 

useful for SBIR or STTR program evaluation; 

(F) is available for use solely for program evaluation 

purposes by the Federal Government or, in accordance 

with policy directives issued by the Administration, by 

other authorized persons who are subject to a use and nondisclosure agreement with the Federal Government covering the use of the database; and 

(G) includes a timely and accurate list of any individual or small business concern that has participated in 

the SBIR program or STTR program that has been-

(i) convicted of a fraud-related crime involving 

funding received under the SBIR program or STTR 

program; or 

(ii) found civilly liable for a fraud-related violation 

involving funding received under the SBIR program or 

STTR program. 

(3) UPDATING INFORMATION FOR DATABASE.-

(A) IN GENERAL.-A small business concern applying 

for a Phase II award under this section shall be required 

to update information in the database established under 

this subsection for any prior Phase II award received by 

that small business concern. In complying with this paragraph, a small business concern may apportion sales or additional investment information relating to more than one 

Phase II award among those awards, if it notes the apportionment for each award. 

(B) ANNUAL UPDATES UPON TERMINATION.-A small 

business concern receiving a Phase II award under this 

section shall-

(i) update information in the database concerning 

that award at the termination of the award period; 

and 

(ii) be requested to voluntarily update such information annually thereafter for a period of 5 years. 

(C) GoVERNMENT DATABASE.-Not later than 60 days 

after the date established by a Federal agency for submitting applications or proposals for a Phase I or Phase II 

award under the SBIR program or STTR program, the 

head of the Federal agency shall submit to the Administrator the data required under paragraph (2) with respect 

to each small business concern that applies or submits a 

proposal for the Phase I or Phase II award. 
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Sec. 9 SMALL BUSINESS ACT 158 

(4) PROTECTION OF INFORMATION.-Information provided 

under paragraph (2) shall be considered privileged and confidential and not subject to disclosure pursuant to section 552 

of title 5, United States Code. 

(5) RULE OF CONSTRUCTION.-Inclusion of information in 

the database under this subsection shall not be considered to 

be publication for purposes of subsection (a) or (b) of section 

102 of title 35, United States Code. 

(l) REPORTING OF AWARDS MADE FROM SINGLE PROPOSAL, TO 

MULTIPLE AWARD WINNERS, OR TO CRITICAL TECHNOLOGY TOPICS.-

(1) SINGLE PROPOSAL.-If a Federal agency required to establish an SBIR program under subsection (f) makes an award 

with respect to an SBIR solicitation topic or subtopic for which 

the agency received only 1 proposal, the agency shall provide 

written justification for making the award in its next quarterly 

report to the Administration and in the agency's next annual 

report required under subsection (g)(8). 

(2) MuLTIPLE AWARDS.-An agency referred to in paragraph (1) shall include in its next annual report required under 

subsection (g)(8) an accounting of the awards the agency has 

made for Phase I of an SBIR program during the reporting period to entities that have received more than 15 awards for the 

Phase II of an SBIR program during the preceding 5 fiscal 

years. 

(3) CRITICAL TECHNOLOGY AWARDS.-An agency referred to 

in paragraph (1) shall include in its next annual report required under subsection (g)(8), an accounting of the number of 

awards it has made to critical technology topics, as defined in 

subsection (g)(3), including an identification of the specific critical technologies topics, and the percentage by number and dollar amount of the agency's total SBIR awards to such critical 

technology topics. 

(m) TERMINATION.-The authorization to carry out the Small 

Business Innovation Research Program established under this section shall terminate on September 30, 2022. 

(n) REQUIRED EXPENDITURES FOR STTR BY FEDERAL AGENCIES.-

(1) REQUIRED EXPENDITURE AMOUNTS.-

(A) IN GENERAL.-With respect to each fiscal year 

through fiscal year 2022, each Federal agency that has an 

extramural budget for research, or research and development, in excess of $1,000,000,000 for that fiscal year, shall 

expend with small business concerns not less than the percentage of that extramural budget specified in subparagraph (B), specifically in connection with STTR programs 

that meet the requirements of this section and any policy 

directives and regulations issued under this section. 

(B) EXPENDITURE AMOUNTS.-The percentage of the 

extramural budget required to be expended by an agency 

in accordance with subparagraph (A) shall be-

(i) 0.15 percent for each fiscal year through fiscal 

year 2003; 
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159 SMALL BUSINESS ACT Sec. 9 

(ii) 0.3 percent for each of fiscal years 2004 

through 2011; 

(iii) 0.35 percent for each of fiscal years 2012 and 

2013; 

(iv) 0.40 percent for each of fiscal years 2014 and 

2015;and 

(v) 0.45 percent for fiscal year 2016 and each fiscal year thereafter. 

(2) LIMITATIONS.-A Federal agency shall not-

(A) use any of its STTR budget established pursuant 

to paragraph (1) for the purpose of funding administrative 

costs of the program, including costs associated with salaries and expenses, or, in the case of a small business concern or a research institution, costs associated with salaries, expenses, and administrative overhead (other than 

those direct or indirect costs allowable under guidelines of 

the Office of Management and Budget and the governmentwide Federal Acquisition Regulation issued in accordance with section 25(c)(1) of the Office of Federal Procurement Policy Act); or 

(B) make available for the purpose of meeting the requirements of paragraph (1) an amount of its extramural 

budget for basic research which exceeds the percentage 

specified in paragraph (1). 

(3) EXCLUSION OF CERTAIN FUNDING AGREEMENTS.-Funding agreements with small business concerns for research or 

research and development which result from competitive or 

single source selections other than an STTR program shall not 

be considered to meet any portion of the percentage requirements of paragraph (1). 

(o) FEDERAL AGENCY STTR AUTHORITY.-Each Federal agency 

required to establish an STTR program in accordance with subsection (n) and regulations issued under this Act, shall-

(1) unilaterally determine categories of projects to be included in its STTR program; 

(2) issue STTR solicitations in accordance with a schedule 

determined cooperatively with the Administration; 

(3) unilaterally determine research topics within the agency's STTR solicitations, giving special consideration to broad 

research topics and to topics that further 1 or more critical 

technologies, as identified-

(A) by the National Critical Technologies Panel (or its 

successor) in reports required under section 603 of the National Science and Technology Policy, Organization, and 

Priorities Act of 1976; or 

(B) by the Secretary of Defense, in accordance with 

section 2522 of title 10, United States Code; 

( 4)(A) unilaterally receive and evaluate proposals resulting 

from STTR solicitations; and 

(B) make a final decision on each proposal submitted 

under the STTR program-

(i) not later than 1 year after the date on which the 

applicable solicitation closes, if with respect to the National Institutes of Health or the National Science Founda-
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Sec. 9 SMALL BUSINESS ACT 160 

tion, or 90 days after the date on which the applicable solicitation closes, if with respect to any other participating 

agency; or 

(ii) if the Administrator authorizes an extension for a 

solicitation, not later than 90 days after the date that 

would be applicable to the agency under clause (i); 

(5) unilaterally select awardees for its STTR funding 

agreements and inform each awardee under such an agreement, to the extent possible, of the expenses of the awardee 

that will be allowable under the funding agreement; 

(6) administer its own STTR funding agreements (or delegate such administration to another agency); 

(7) make payments to recipients of STTR funding agreements on the basis of progress toward or completion of the 

funding agreement requirements and, in all cases, make payment to recipients under such agreements in full, subject to 

audit, on or before the last day of the 12-month period beginning on the date of the completion of such requirements; 

(8) include, as part of its annual performance plan as required by subsections (a) and (b) of section 1115 of title 31, 

United States Code, a section on its STTR program, and shall 

submit such section to the Committee on Small Business of the 

Senate, and the Committee on Science and the Committee on 

Small Business of the House of Representatives; 

(9) collect annually, and maintain in a common format in 

accordance with the simplified reporting requirements under 

subsection (v), such information from applicants and awardees 

as is necessary to assess the STTR program outputs and outcomes, including information necessary to maintain the database described in subsection (k), including-

(A) whether an applicant or awardee-

(i) has venture capital, hedge fund, or private equity firm investment or is majority-owned by multiple 

venture capital operating companies, hedge funds, or 

private equity firms and, if so-

(l) the amount of venture capital, hedge fund, 

or private equity firm investment that the applicant or awardee has received as of the date of the 

application or award, as applicable; and 

(II) the amount of additional capital that the 

applicant or awardee has invested in the STTR 

technology; 

(ii) has an investor that-

(!) is an individual who is not a citizen of the 

United States or a lawful permanent resident of 

the United States and, if so, the name of any such 

individual; or 

(II) is a person that is not an individual and 

is not organized under the laws of a State or the 

United States and, if so, the name of any such 

person; 

(iii) is owned by a woman or has a woman as a 

principal investigator; 
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161 SMALL BUSINESS ACT Sec. 9 

(iv) is owned by a socially or economically disadvantaged individual or has a socially or economically disadvantaged individual as a principal investigator; 

(v) is a faculty member or a student of an institution of higher education, as that term is defined in section 101 of the Higher Education Act of 1965 (20 

U.S.C. 1001); or 

(vi) is located in a State in which the total value 

of contracts awarded to small business concerns under 

all STTR programs is less than the total value of contracts awarded to small business concerns in a majority of other States, as determined by the Administrator in biennial fiscal years, beginning with fiscal 

year 2008, based on the most recent statistics compiled by the Administrator; 

(B) if an awardee receives an award in an amount that 

is more than the award guidelines under this section, a 

statement from the agency that justifies the award 

amount; and 

(C) data with respect to the Federal and State Technology Partnership Program (FAST Program); 

(10) submit an annual report on the STTR program to the 

Administration and the Office of Science and Technology Policy; 

(11) adopt the agreement developed by the Administrator 

under subsection (w) as the agency's model agreement for allocating between small business concerns and research institutions intellectual property rights and rights, if any, to carry out 

follow-on research, development, or commercialization; 

(12) develop, in consultation with the Office of Federal Procurement Policy and the Office of Government Ethics, procedures to ensure that federally funded research and development centers (as defined in subsection (e)(8)) that participate 

in STTR agreements-

(A) are free from organizational conflicts of interests 

relative to the STTR program; 

(B) do not use privileged information gained through 

work performed for an STTR agency or private access to 

STTR agency personnel in the development of an STTR 

proposal; and 

(C) use outside peer review, as appropriate; 

(13) not later than July 31, 1993, develop procedures for 

assessing the commercial merit and feasibility of STTR proposals, as evidenced by-

(A) the small business concern's record of successfully 

commercializing STTR or other research; 

(B) the existence of Phase II funding commitments 

from private sector or non-STTR funding sources; 

(C) the existence of Phase III follow-on commitments 

for the subject of the research; and 

(D) the presence of other indicators of the commercial 

potential of the idea; 
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Sec. 9 SMALL BUSINESS ACT 162 

(14) implement an outreach program to research institutions and small business concerns for the purpose of enhancing 

its STTR program, in conjunction with any such outreach done 

for purposes of the SBIR program; 

(15) provide for and fully implement the tenets of Executive Order No. 13329 (Encouraging Innovation in Manufacturing); and 

(16) provide timely notice to the Administrator of any case 

or controversy before any Federal judicial or administrative tribunal concerning the STTR program of the Federal agency. 

(p) STTR POLICY DIRECTIVE.-

(!) ISSUANCE.-The Administrator shall issue a policy directive for the general conduct of the STTR programs within 

the Federal Government. Such policy directive shall be issued 

after consultation with-

(A) the heads of each of the Federal agencies required 

by subsection (n) to establish an STTR program; 

(B) the Under Secretary of Commerce for Intellectual 

Property and Director of the United States Patent and 

Trademark Office; and 

(C) the Director of the Office of Federal Procurement 

Policy. 

(2) CONTENTS.-The policy directive required by paragraph 

(1) shall provide for-

(A) simplified, standardized, and timely STTR solicitations; 

(B) a simplified, standardized funding process that 

provides for-

(i) the timely receipt and review of proposals; 

(ii) outside peer review, if appropriate; 

(iii) protection of proprietary information provided 

in proposals; 

(iv) selection of awardees; 

(v) retention by a small business concern of the 

rights to data generated by the concern in the performance of an STTR award for a period of not less 

than 4 years; 

(vi) continued use by a small business concern, as 

a directed bailment, of any property transferred by a 

Federal agency to the small business concern in Phase 

II of the STTR program for a period of not less than 

2 years, beginning on the initial date of the concern's 

participation in Phase III of such program; 

(vii) cost sharing; 

(viii) cost principles and payment schedules; and 

(ix) 1-year awards for Phase I of an STTR program, generally not to exceed $150,000, and 2-year 

awards for Phase II of an STTR program, generally 

not to exceed $1,000,000, (each of which the Administrator shall adjust for inflation annually) greater or 

lesser amounts to be awarded at the discretion of the 

awarding agency, and shorter or longer periods of time 

to be approved at the discretion of the awarding agency where appropriate for a particular project; 
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163 SMALL BUSINESS ACT Sec. 9 

(C) minimizing regulatory burdens associated with 

participation in STTR programs; 

(D) guidelines for a model agreement, to be used by all 

agencies, for allocating between small business concerns 

and research institutions intellectual property rights and 

rights, if any, to carry out follow-on research, development, 

or commercialization; 

(E) procedures to ensure that-

(i) a recipient of an STTR award is a small business concern, as defined in section 3 and the regulations promulgated thereunder; and 

(ii) such small business concern exercises management and control of the performance of the STTR 

funding agreement pursuant to a business plan providing for the commercialization of the technology that 

is the subject matter of the award; and 

(F) procedures to ensure, to the extent practicable, 

that an agency which intends to pursue research, development, or production of a technology developed by a small 

business concern under an STTR program enters into follow-on, non-STTR funding agreements with the small business concern for such research, development, or production. 

(3) MODIFICATIONS.-Not later than 120 days after the 

date of enactment of this paragraph, the Administrator shall 

modify the policy directive issued pursuant to this subsection 

to clarify that the rights provided for under paragraph (2)(B)(v) 

apply to all Federal funding awards under this section, including Phase I, Phase II, and Phase III. 

(q) DISCRETIONARY TECHNICAL ASSISTANCE.-

(1) IN GENERAL.-Each Federal agency required by this 

section to conduct an SBIR program or STTR program may 

enter into an agreement with a vendor selected under paragraph (2) to provide small business concerns engaged in SBIR 

or STTR projects with technical assistance services, such as access to a network of scientists and engineers engaged in a wide 

range of technologies, or access to technical and business literature available through on-line data bases, for the purpose 

of assisting such concerns in-

(A) making better technical decisions concerning such 

projects; 

(B) solving technical problems which arise during the 

conduct of such projects; 

(C) minimizing technical risks associated with such 

projects; and 

(D) developing and commercializing new commercial 

products and processes resulting from such projects. 

(2) VENDOR SELECTION.-Each agency may select a vendor 

to assist small business concerns to meet the goals listed in 

paragraph (1) for a term not to exceed 5 years. Such selection 

shall be competitive and shall utilize merit-based criteria. 

(3) ADDITIONAL TECHNICAL ASSISTANCE.-

(A) PHASE I.-A Federal agency described in paragraph (1) may-
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Sec. 9 SMALL BUSINESS ACT 164 

(i) provide to the recipient of a Phase I SBIR or 

STTR award, through a vendor selected under paragraph (2), the services described in paragraph (1), in 

an amount equal to not more than $5,000 per year; or 

(ii) authorize the recipient of a Phase I SBIR or 

STTR award to purchase the services described in 

:{>aragraph (1), in an amount equal to not more than 

$5,000 per year, which shall be in addition to the 

amount of the recipient's award. 

(B) PHASE 11.-A Federal agency described in paragraph (1) may-

(i) provide to the recipient of a Phase II SBIR or 

STTR award, through a vendor selected under paragraph (2), the services described in paragraph (1), in 

an amount equal to not more than $5,000 per year; or 

(ii) authorize the recipient of a Phase II SBIR or 

STTR award to purchase the services described in 

paragraph (1), in an amount equal to not more than 

$5,000 per year, which shall be in addition to the 

amount of the recipient's award. 

(C) FLEXIBILITY.-In carrying out subparagraphs (A) 

and (B), each Federal agency shall provide the allowable 

amounts to a recipient that meets the eligibility requirements under the applicable subparagraph, if the recipient 

requests to seek technical assistance from an individual or 

entity other than the vendor selected under paragraph (2) 

by the Federal agency. 

(D) LIMITATION.-A Federal agency may not-

(i) use the amounts authorized under subparagraph (A) or (B) unless the vendor selected under 

paragraph (2) provides the technical assistance to the 

recipient; or 

(ii) enter a contract with a vendor under paragraph (2) under which the amount provided for technical assistance is based on total number of Phase I or 

Phase II awards. 

(r) PHASE III AGREEMENTS.-

{!) IN GENERAL.-In the case of a small business concern 

that is awarded a funding agreement for Phase II of an SBIR 

or STTR program, a Federal agency may enter into a Phase III 

agreement with that business concern for additional work to be 

performed during or after the Phase II period. The Phase II 

funding agreement with the small business concern may, at 

the discretion of the agency awarding the agreement, set out 

the procedures applicable to Phase III agreements with that 

agency or any other agency. 

(2) DEFINITION.-In this subsection, the term "Phase III 

agreement" means a follow-on, non-SBIR or non-STTR funded 

contract as described in paragraph (4)(C) or paragraph (6)(C) 

of subsection (e). 

(3) INTELLECTUAL PROPERTY RIGHTS.-Each funding agreement under an SBIR or STTR program shall include provisions 

setting forth the respective rights of the United States and the 

small business concern with respect to intellectual property 
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165 SMALL BUSINESS ACT Sec. 9 

rights and with respect to any right to carry out follow-on research. 

(4) PHASE III AWARDS.-To the greatest extent practicable, 

Federal agencies and Federal prime contractors shall issue 

Phase III awards relating to technology, including sole source 

awards, to the SBIR and STTR award recipients that developed the technology. 

(s) COMPETITIVE SELECTION PROCEDURES FOR SBIR AND STTR 

PROGRAMS.-All funds awarded, appropriated, or otherwise made 

available in accordance with subsection (f) or (n) must be awarded 

pursuant to competitive and merit-based selection procedures. 

(t) INCLUSION IN STRATEGIC PLANS.-Program information relating to the SBIR and STTR programs shall be included by each 

Federal agency in any update or revision required of the Federal 

agency under section 306(b) of title 5, United States Code. 

(u) COORDINATION OF TECHNOLOGY DEVELOPMENT PROGRAMS.-

(1) DEFINITION OF TECHNOLOGY DEVELOPMENT PROGRAM.-

In this subsection, the term "technology development program" 

means-

(A) the Experimental Program to Stimulate Competitive Research of the National Science Foundation, as established under section 113 of the National Science Foundation Authorization Act of 1988 (42 U.S.C. 1862g); 

(B) the Defense Experimental Program to Stimulate 

Competitive Research of the Department of Defense; 

(C) the Experimental Program to Stimulate Competitive Research of the Department of Energy; 

(D) the Experimental Program to Stimulate Competitive Research of the Environmental Protection Agency; 

(E) the Experimental Program to Stimulate Competitive Research of the National Aeronautics and Space Administration; 

(F) the Institutional Development Award Program of 

the National Institutes of Health; and 

(G) the National Research Initiative Competitive 

Grants Program of the Department of Agriculture. 

(2) COORDINATION REQUIREMENTS.-Each Federal agency 

that is subject to subsection CD and that has established a technology development program may, in each fiscal year, review 

for funding under that technology development program-

(A) any proposal to provide outreach and assistance to 

one or more small business concerns interested in participating in the SBIR program, including any proposal to 

make a grant or loan to a company to pay a portion or all 

of the cost of developing an SBIR proposal, from an entity, 

organization, or individual located in-

(i) a State that is eligible to participate in that 

program; or 

(ii) a State described in paragraph (3); or 

(B) any proposal for Phase I of the SBIR program, if 

the proposal, though meritorious, is not funded through 

the SBIR program for that fiscal year due to funding restraints, from a small business concern located in-
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Sec. 9 SMALL BUSINESS ACT 166 

(i) a State that is eligible to participate in a technology development program; or 

(ii) a State described in paragraph (3). 

(3) ADDITIONALLY ELIGIBLE STATE.-A State referred to in 

subparagraph (A)(ii) or (B)(ii) of paragraph (2) is a State in 

which the total value of contracts awarded to small business 

concerns under all SBIR programs is less than the total value 

of contracts awarded to small business concerns in a majority 

of other States, as determined by the Administrator in biennial 

fiscal years, beginning with fiscal year 2000, based on the most 

recent statistics compiled by the Administrator. 

(v) REDUCING PAPERWORK AND COMPLIANCE EURDEN.-

(1) STANDARDIZATION OF REPORTING REQUIREMENTS.-The 

Administrator shall work with the Federal agencies required 

by this section to have an SBIR or STTR program to standardize reporting requirements for the collection of data from 

SBIR or STTR applicants and awardees, including data for inclusion in the database under subsection (k), taking into consideration the unique needs of each agency, and to the extent 

possible, permitting the updating of previously reported information by electronic means. Such requirements shall be designed to minimize the burden on small businesses. 

(2) SIMPLIFICATION OF APPLICATION AND AWARD PROCESS.-

Not later than 1 year after the date of enactment of this paragraph, and after a period of public comment, the Administrator 

shall issue regulations or guidelines, taking into consideration 

the unique needs of each Federal agency, to ensure that each 

Federal agency required to carry out an SBIR program or 

STTR program simplifies and standardizes the program proposal, selection, contracting, compliance, and audit procedures 

for the SBIR program or STTR program of the Federal agency 

(including procedures relating to overhead rates for applicants 

and documentation requirements) to reduce the paperwork and 

regulatory compliance burden on small business concerns applying to and participating in the SBIR program or STTR program. 

(w) STTR MODEL AGREEMENT FOR INTELLECTUAL PROPERTY 

RIGHTS.-

(1) IN GENERAL.-The Administrator shall promulgate regulations establishing a single model agreement for use in the 

STTR program that allocates between small business concerns 

and research institutions intellectual property rights and 

rights, if any, to carry out follow-on research, development, or 

commercialization. 

(2) OPPORTUNITY FOR COMMENT.-ln promulgating regulations under paragraph (1), the Administrator shall provide to 

affected agencies, small business concerns, research institutions, and other interested parties the opportunity to submit 

written comments. 

(x) RESEARCH AND DEVELOPMENT Focus.-

(1) REVISION AND UPDATE OF CRITERIA AND PROCEDURES OF 

IDENTIFICATION.-In carrying out subsection (g), the Secretary 

of Defense shall, not less often than once every 4 years, revise 

and update the criteria and procedures utilized to identifY 
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167 SMALL BUSINESS ACT Sec. 9 

areas of the research and development efforts of the Department of Defense which are suitable for the provision of funds 

under the Small Business Innovation Research Program and 

the Small Business Technology Transfer Program. 

(2) UTILIZATION OF PLANS.-The criteria and procedures 

described in paragraph (1) shall be developed through the use 

of the most current versions of the following plans: 

(A) The Joint Warfighting Science and Technology 

Plan required under section 270 of the National Defense 

Authorization Act for Fiscal Year 1997 (Public Law 104-

201; 10 U.S.C. 2501 note). 

(B) The Defense Technology Area Plan of the Department of Defense. 

(C) The Basic Research Plan of the Department of Defense. 

(3) INPUT IN IDENTIFICATION OF AREAS OF EFFORT.-The 

criteria and procedures described in paragraph (1) shall include input in the identification of areas of research and development efforts described in that paragraph from Department of 

Defense program managers (PMs) and program executive officers (PEOs). 

(y) COMMERCIALIZATION READINESS PROGRAM.-

(1) IN GENERAL.-The Secretary of Defense and the Secretary of each military department is authorized to create and 

administer a "Commercialization Readiness Program" to accelerate the transition of technologies, products, and services developed under the Small Business Innovation Research Program or Small Business Technology Transfer Program to 

Phase III, including the acquisition process. The authority to 

create and administer a Commercialization Readiness Program 

under this subsection may not be construed to eliminate or replace any other SBIR program or STTR program that enhances 

the insertion or transition of SBIR or STTR technologies, including any such program in effect on the date of enactment 

of the National Defense Authorization Act for Fiscal Year 2006 

(Public Law 109-163; 119 Stat. 3136). 

(2) IDENTIFICATION OF RESEARCH PROGRAMS FOR ACCELERATED TRANSITION TO ACQUISITION PROCESS.-In carrying out 

the Commercialization Readiness Program, the Secretary of 

Defense and the Secretary of each military department shall 

identify research programs of the Small Business Innovation 

Research Program or Small Business Technology Transfer Program that have the potential for rapid transitioning to Phase 

III and into the acquisition process. 

(3) LIMITATION.-No research program may be identified 

under paragraph (2) unless the Secretary of the military department concerned certifies in writing that the successful 

transition of the program to Phase III and into the acquisition 

process is expected to meet high priority military requirements 

of such military department. 

(4) FUNDING.-

(A) IN GENERAL.-The Secretary of Defense and each 

Secretary of a military department may use not more than 

an amount equal to 1 percent of the funds available to the 
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Sec. 9 SMALL BUSINESS ACT 168 

Department of Defense or the military department pursuant to the Small Business Innovation Research Program 

for payment of expenses incurred to administer the Commercialization Readiness Program under this subsection. 

(B) LIMITATIONS.-The funds described in subparagraph (A)-

(i) shall not be subject to the limitations on the 

use of funds in subsection (f)(2); and 

(ii) shall not be used to make Phase III awards. 

(5) INSERTION INCENTIVES.-For any contract with a value 

of not less than $100,000,000, the Secretary of Defense is authorized to-

(A) establish goals for the transition of Phase III technologies in subcontracting plans; and 

(B) require a prime contractor on such a contract to report the number and dollar amount of contracts entered 

into by that prime contractor for Phase III SBIR or STTR 

projects. 

(6) GOAL FOR SBIR AND STTR TECHNOLOGY INSERTION.-The 

Secretary of Defense shall-

(A) set a goal to increase the number of Phase II SBIR 

contracts and the number of Phase II STTR contracts 

awarded by the Secretary that lead to technology transition into programs of record or fielded systems; 

(B) use incentives in effect on the date of enactment 

of the SBIR/STTR Reauthorization Act of 2011, or create 

new incentives, to encourage agency program managers 

and prime contractors to meet the goal under subparagraph (A); and 

(C) submit to the Administrator for inclusion in the 

annual report under subsection (b)(7)-

(i) the number and percentage of Phase II SBIR 

and STTR contracts awarded by the Secretary that led 

to technology transition into programs of record or 

fielded systems; 

(ii) information on the status of each project that 

received funding through the Commercialization Readiness Program and efforts to transition those projects 

into programs of record or fielded systems; and 

(iii) a description of each incentive that has been 

used by the Secretary under subparagraph (B) and the 

effectiveness of that incentive with respect to meeting 

the goal under subparagraph (A). 

(z) ENCOURAGING INNOVATION IN ENERGY EFFICIENCY.-

(1) FEDERAL AGENCY ENERGY-RELATED PRIORITY.-ln carrying out its duties under this section relating to SBIR and 

STTR solicitations by Federal departments and agencies, the 

Administrator shall-

(A) ensure that such departments and agencies give 

high priority to small business concerns that participate in 

or conduct energy efficiency or renewable energy system 

research and development projects; and 
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169 SMALL BUSINESS ACT Sec. 9 

(B) include in the annual report to Congress under 

subsection (b)(7) a determination of whether the priority 

described in subparagraph (A) is being carried out. 

(2) CONSULTATION REQUIRED.-The Administrator shall 

consult with the heads of other Federal departments and agencies in determining whether priority has been given to small 

business concerns that participate in or conduct energy efficiency or renewable energy system research and development 

projects, as required by this subsection. 

(3) GUIDELINES.-The Administrator shall, as soon as is 

practicable after the date of enactment of this subsection, issue 

guidelines and directives to assist Federal agencies in meeting 

the requirements of this subsection. 

(4) DEFINITIONS.-ln this subsection-

(A) the term "biomass"-

(i) means any organic material that is available on 

a renewable or recurring basis, including-

(!) agricultural crops; 

(II) trees grown for energy production; 

(Ill) wood waste and wood residues; 

(IV) plants (including aquatic plants and 

grasses); 

(V) residues; 

(VI) fibers; 

(VII) animal wastes and other waste materials; and 

(VIII) fats, oils, and greases (including recycled fats, oils, and greases); and 

(ii) does not include-

(!) paper that is commonly recycled; or 

(II) unsegregated solid waste; 

(B) the term "energy efficiency project" means the installation or upgrading of equipment that results in a significant reduction in energy usage; and 

(C) the term "renewable energy system" means a system of energy derived from-

(i) a wind, solar, biomass (including biodiesel), or 

geothermal source; or 

(ii) hydrogen derived from biomass or water using 

an energy source described in clause (i). 

(aa) LIMITATION ON SIZE OF AWARDS.-

(!) LIMITATION.-No Federal agency may issue an award 

under the SBIR program or the STTR program if the size of 

the award exceeds the award guidelines established under this 

section by more than 50 percent. 

(2) MAINTENANCE OF INFORMATION.-Participating agencies shall maintain information on awards exceeding the guidelines established under this section, including-

(A) the amount of each award; 

(B) a justification for exceeding the guidelines for each 

award; 

(C) the identity and location of each award recipient; 

and 
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Sec. 9 SMALL BUSINESS ACT 170 

(D) whether an award recipient has received any venture capital, hedge fund, or private equity firm investment 

and, if so, whether the recipient is majority-owned by multiple venture capital operating companies, hedge funds, or 

private equity firms. 

(3) REPORTS.-The Administrator shall include the information described in paragraph (2) in the annual report of the 

Administrator to Congress. 

(4) WAIVER FOR SPECIFIC TOPIC.-Upon the receipt of an 

application from a Federal agency, the Administrator may 

grant a waiver from the requirement under paragraph (1) with 

respect to a specific topic (but not for the agency as a whole) 

for a fiscal year if the Administrator determines, based on the 

information contained in the application from the agency, that-

(A) the requirement under paragraph (1) will interfere 

with the ability of the agency to fulfill its research mission 

through the SBIR program or the STTR program; and 

(B) the agency will minimize, to the maximum extent 

possible, the number of awards that do not satisfy the requirement under paragraph (1) to preserve the nature and 

intent of the SBIR program and the STTR program. 

(5) RULE OF CONSTRUCTION.-Nothing in this subsection 

shall be construed to prevent a Federal agency from 

supplementing an award under the SBIR program or the STTR 

program using funds of the Federal agency that are not part 

of the SBIR program or the STTR program of the Federal 

agency. 

(bb) SUBSEQUENT PHASE II AWARDS.-

(1) AGENCY FLEXIBILITY.-A small business concern that 

received a Phase I award from a Federal agency under this 

section shall be eligible to receive a subsequent Phase II award 

from another Federal agency, if the head of each relevant Federal agency or the relevant component of the Federal agency 

makes a written determination that the topics of the relevant 

awards are the same and both agencies report the awards to 

the Administrator for inclusion in the public database under 

subsection (k). 

(2) SBIR AND STTR PROGRAM FLEXIBILITY.-A small business concern that received a Phase I award under this section 

under the SBIR program or the STTR program may receive a 

subsequent Phase II award in either the SBIR program or the 

STTR program and the participating agency or agencies shall 

report the awards to the Administrator for inclusion in the 

public database under subsection (k). 

(3) PREVENTING DUPLICATIVE AWARDS.-The head of a Federal agency shall verify that any activity to be performed with 

respect to a project with a Phase I or Phase II SBIR or STTR 

award has not been funded under the SBIR program or STTR 

program of another Federal agency. 

(cc) PHASE FLEXIBILITY.-During fiscal years 2012 through 

2017, the National Institutes of Health, the Department of Defense, and the Department of Education may each provide to a 

small business concern an award under Phase II of the SBIR pro-
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171 SMALL BUSINESS ACT Sec. 9 

gram with respect to a project, without regard to whether the small 

business concern was provided an award under Phase I of an SBIR 

program with respect to such project, if the head of the applicable 

agency determines that the small business concern has completed 

the determinations described in subsection (e)(4)(A) with respect to 

such project despite not having been provided a Phase I award. 

(dd) PARTICIPATION OF SMALL BUSINESS CONCERNS MAJORITYOWNED BY VENTURE CAPITAL OPERATING COMPANIES, HEDGE 

FUNDS, OR PRIVATE EQUITY FIRMS IN THE SBIR PROGRAM.-

(1) AUTHORITY.-Upon providing a written determination 

described in paragraph (2) to the Administrator, the Committee on Small Business and Entrepreneurship of the Senate, 

and the Committee on Small Business and the Committee on 

Science, Space, and Technology of the House of Representatives, not later than 30 days before the date on which any such 

award is made-

(A) the Director of the National Institutes of Health, 

the Secretary of Energy, and the Director of the National 

Science Foundation may award not more than 25 percent 

of the funds allocated for the SBIR program of the applicable Federal agency to small business concerns that are 

owned in majority part by multiple venture capital operating companies, hedge funds, or private equity firms 

through competitive, merit-based procedures that are open 

to all eligible small business concerns; and 

(B) the head of a Federal agency other than a Federal 

agency described in subparagraph (A) that participates in 

the SBIR program may award not more than 15 percent 

of the funds allocated for the SBIR program of the Federal 

agency to small business concerns that are owned in majority part by multiple venture capital operating companies, hedge funds, or private equity firms through competitive, merit-based procedures that are open to all eligible 

small business concerns. 

(2) DETERMINATION.-A written determination described in 

this paragraph is a written determination by the head of a 

Federal agency that explains how the use of the authority 

under paragraph (1) will-

(A) induce additional venture capital, hedge fund, or 

private equity firm funding of small business innovations; 

(B) substantially contribute to the mission of the Federal agency; 

(C) demonstrate a need for public research; and 

(D) otherwise fulfill the capital needs of small business 

concerns for additional financing for SBIR projects. 

(3) REGISTRATION.-A small business concern that is majority-owned by multiple venture capital operating companies, 

hedge funds, or private equity firms and qualified for participation in the program authorized under paragraph (1) shall-

(A) register with the Administrator on the date that 

the small business concern submits an application for an 

award under the SBIR program; and 

(B) indicate in any SBIR proposal that the small business concern is registered under subparagraph (A) as rna-
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Sec. 9 SMALL BUSINESS ACT 172 

jority-owned by multiple venture capital operating companies, hedge funds, or private equity firms. 

(4) COMPLIANCE.-

(A) IN GENERAL.-The head of a Federal agency that 

makes an award under this subsection during a fiscal year 

shall collect and submit to the Administrator data relating 

to the number and dollar amount of Phase I awards, Phase 

II awards, and any other category of awards by the Federal agency under the SBIR program during that fiscal 

year. 

(B) ANNUAL REPORTING.-The Administrator shall include as part of each annual report by the Administration 

under subsection (b)(7) any data submitted under subparagraph (A) and a discussion of the compliance of each Federal agency that makes an award under this subsection 

during the fiscal year with the maximum percentages 

under paragraph (1). 

(5) ENFORCEMENT.-If a Federal agency awards more than 

the percent of the funds allocated for the SBIR program of the 

Federal agency authorized under paragraph (1) for a purpose 

described in paragraph (1), the head of the Federal agency 

shall transfer an amount equal to the amount awarded in excess of the amount authorized under paragraph (1) to the 

funds for general SBIR programs from the non-SBIR and nonSTTR research and development funds of the Federal agency 

not later than 180 days after the date on which the Federal 

agency made the award that caused the total awarded under 

paragraph (1) to be more than the amount authorized under 

paragraph (1) for a purpose described in paragraph (1). 

(6) FINAL DECISIONS ON APPLICATIONS UNDER THE SBIR 

PROGRAM.-

(A) DEFINITION.-In this paragraph, the term "covered 

small business concern" means a small business concern 

that-

(i) was not majority-owned by multiple venture 

capital operating companies, hedge funds, or private 

equity firms on the date on which the small business 

concern submitted an application in response to a solicitation under the SBIR programs; and 

(ii) on the date of the award under the SBIR program is majority-owned by multiple venture capital 

operating companies, hedge funds, or private equity 

firms. 

(B) IN GENERAL.-If a Federal agency does not make 

an award under a solicitation under the SBIR program before the date that is 9 months after the date on which the 

period for submitting applications under the solicitation 

ends-

(i) a covered small business concern is eligible to 

receive the award, without regard to whether the covered small business concern meets the requirements 

for receiving an award under the SBIR program for a 

small business concern that is majority-owned by multiple venture capital operating companies, hedge 
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173 SMALL BUSINESS ACT Sec. 9 

funds, or private equity firms, if the covered small 

business concern meets all other requirements for 

such an award; and 

(ii) the head of the Federal agency shall transfer 

an amount equal to any amount awarded to a covered 

small business concern under the solicitation to the 

funds for general SBIR programs from the non-SBIR 

and non-STTR research and development funds of the 

Federal agency, not later than 90 days after the date 

on which the Federal agency makes the award. 

(7) EVALUATION CRITERIA.-A Federal agency may not use 

investment of venture capital or investment from hedge funds 

or private equity firms as a criterion for the award of contracts 

under the SBIR program or STTR program. 

(ee) COLLABORATING WITH FEDERAL LABORATORIES AND RESEARCH AND DEVELOPMENT CENTERS.-

(!) AUTHORIZATION.-Subject to the limitations under this 

section, the head of each participating Federal agency may 

make SBIR and STTR awards to any eligible small business 

concern that-

(A) intends to enter into an agreement with a Federal 

laboratory or federally funded research and development 

center for portions of the activities to be performed under 

that award; or 

(B) has entered into a cooperative research and development agreement (as defined in section 12(d) of the Stevenson-Wydler Technology Innovation Act of 1980 (15 

U.S.C. 3710a(d))) with a Federal laboratory. 

(2) PROHIBITION.-No Federal agency shall-

(A) condition an SBIR or STTR award upon entering 

into agreement with any Federal laboratory or any federally funded laboratory or research and development center 

for any portion of the activities to be performed under that 

award; 

(B) approve an agreement between a small business 

concern receiving an SBIR or STTR award and a Federal 

laboratory or federally funded laboratory or research and 

development center, if the small business concern performs 

a lesser portion of the activities to be performed under 

that award than required by this section and by the SBIR 

Policy Directive and the STTR Policy Directive of the Administrator; or 

(C) approve an agreement that violates any provision, 

including any data rights protections provision, of this section or the SBIR and the STTR Policy Directives. 

(3) IMPLEMENTATION.-Not later than 180 days after the 

date of enactment of this subsection, the Administrator shall 

modify the SBIR Policy Directive and the STTR Policy Directive issued under this section to ensure that small business 

concerns-

( A) have the flexibility to use the resources of the Federal laboratories or federally funded research and development centers; and 
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Sec. 9 SMALL BUSINESS ACT 174 

(B) are not mandated to enter into agreement with 

any Federal laboratory or any federally funded laboratory 

or research and development center as a condition of an 

award. 

(4) ADVANCE PAYMENT.-If a small business concem receiving an award under this section enters into an agreement with 

a Federal laboratory or federally funded research and development center for portions of the activities to be performed under 

that award, the Federal laboratory or federally funded research and development center may not require advance payment from the small business concern in an amount greater 

than the amount necessary to pay for 30 days of such activities. 

(ffi ADDITIONAL SBIR AND STTR AWARDS.-

(1) EXPRESS AUTHORITY FOR AWARDING A SEQUENTIAL 

PHASE II AWARD.-A small business concern that receives a 

Phase II SBIR award or a Phase II STTR award for a project 

remains eligible to receive 1 additional Phase II SBIR award 

or Phase II STTR award for continued work on that project. 

(2) PREVENTING DUPLICATIVE AWARDS.-The head of a Federal agency shall verifY that any activity to be performed with 

respect to a project with a Phase I or Phase II SBIR or STTR 

award has not been funded under the SBIR program or STTR 

program of another Federal agency. 

(gg) PILOT PROGRAJvi.-

(1) AUTHORIZATION.-The head of each covered Federal 

agency may allocate not more than 10 percent of the funds allocated to the SBIR program and the STTR program of the covered Federal agency-

(A) for awards for technology development, testing, 

evaluation, and commercialization assistance for SBIR and 

STTR Phase II technologies; or 

(B) to support the progress of research, research and 

development, and commercialization conducted under the 

SBIR or STTR programs to Phase III. 

(2) APPLICATION BY FEDERAL AGENCY.-

(A) IN GENERAL.-A covered Federal agency may not 

establish a pilot program unless the covered Federal agency makes a written application to the Administrator, not 

later than 90 days before the first day of the fiscal year in 

which the pilot program is to be established, that describes 

a compelling reason that additional investment in SBIR or 

STTR technologies is necessary, including unusually high 

regulatory, systems integration, or other costs relating to 

development or manufacturing of identifiable, highly promising small business technologies or a class of such technologies expected to substantially advance the mission of 

the agency. 

(B) DETERMINATION.-The Administrator shall-

(i) make a determination regarding an application 

submitted under subparagraph (A) not later than 30 

days before the first day of the fiscal year for which 

the application is submitted; 
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115 SMALL BUSINESS ACT Sec. 9 

(ii) publish the determination in the Federal Register; and 

(iii) make a copy of the determination and any related materials available to the Committee on Small 

Business and Entrepreneurship of the Senate and the 

Committee on Small Business and the Committee on 

Science, Space, and Technology of the House of Representatives. 

(3) MAXIMUM AMOUNT OF AWARD.-The head of a covered 

Federal agency may not make an award under a pilot program 

in excess of 3 times the dollar amounts generally established 

for Phase II awards under subsection (j)(2)(0) or (p)(2)(B)(ix). 

(4) REGISTRATION.-Any applicant that receives an award 

under a pilot program shall register with the Administrator in 

a registry that is available to the public. 

(5) AWARD CRITERIA OR CONSIDERATION.-When making an 

award under this section, the head of a covered Federal agency 

shall give consideration to whether the technology to be supported by the award is likely to be manufactured in the United 

States. 

(6) REPORT.-The head of each covered Federal agency 

shall include in the annual report of the covered Federal agency to the Administrator an analysis of the various activities 

considered for inclusion in the pilot program of the covered 

Federal agency and a statement of the reasons why each activity considered was included or not included, as the case may 

be. 

(7) TERMINATION.-The authority to establish a pilot program under this section expires at the end of fiscal year 2017. 

(8) DEFINITIONS.-In this subsection-

(A) the term "covered Federal agency"-

(i) means a Federal agency participating in the 

SBIR program or the STTR program; and 

(ii) does not include the Department of Defense; 

and 

(B) the term "pilot program" means each program established under paragraph (1). 

(hh) TIMING OF RELEASE OF FUNDING.-Federal agencies participating in the SBIR program or STTR program shall, to the extent possible, attempt to shorten the amount of time between the 

provision of notice of an award under the SBIR program or STTR 

program and the subsequent release of funding with respect to the 

award. 

(ii) REPORTING ON TIMING.-Federal agencies participating in 

the SBIR program or STTR program shall provide to the Administrator, for the annual report on the SBIR and STTR program under 

subsection (b)(7), the average amount of time the agency takes to 

make a final decision on proposals submitted under such programs, 

the average amount of time the agency takes to release funding 

with respect to an award under such programs, and the goals established to reduce such amounts. 

(jj) PHASE 0 PROOF OF CONCEPT PARTNERSHIP PILOT PROGRAM.-
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Sec. 9 SMALL BUSINESS ACT 176 

(1) IN GENERAL.-The Director of the National Institutes of 

Health may use $5,000,000 of the funds allocated under subsection (n)(1) for a Proof of Concept Partnership pilot program 

to accelerate the creation of small businesses and the commercialization of research innovations from qualifYing institutions. 

To implement this program, the Director shall award, through 

a competitive, merit-based process, grants to qualifYing institutions. These grants shall only be used to administer Proof of 

Concept Partnership awards in conformity with this subsection. 

(2) DEFINITIONS.-In this subsection-

(A) the term "Director" means the Director of the N ationa! Institutes of Health; 

(B) the term "pilot program" refers to the Proof of Concept Partnership pilot program; and 

(C) the terms "qualifying institution" and "institution" 

mean a university or other research institution that participates in the National Institutes of Health's STTR program. 

(3) PROOF OF CONCEPT PARTNERSHIPS.-

(A) IN GENERAL.-A Proof of Concept Partnership shall 

be set up by a qualifying institution to award grants to individual researchers. These grants should provide researchers with the initial investment and the resources to 

support the proof of concept work and commercialization 

mentoring needed to translate promising research projects 

and technologies into a viable company. This work may include technical validations, market research, clarifying intellectual property rights position and strategy, and investigating commercial or business opportunities. 

(B) AWARD GUIDELINES.-The administrator of a Proof 

of Concept Partnership program shall award grants in accordance with the following guidelines: 

(i) The Proof of Concept Partnership shall use a 

market-focused project management oversight process, 

including-

(!) a rigorous, diverse review board comprised 

of local experts in translational and proof of concept research, including industry, start-up, venture capital, technical, financial, and business experts and university technology transfer officials; 

(II) technology validation milestones focused 

on market feasibility; 

(III) simple reporting effective at redirecting 

projects; and 

(IV) the willingness to reallocate funding from 

failing projects to those with more potential. 

(ii) Not more than $100,000 shall be awarded towards an individual proposal. 

(C) EDUCATIONAL RESOURCES AND GUIDANCE.-The administrator of a Proof of Concept Partnership program 

shall make educational resources and guidance available 

to researchers attempting to commercialize their innovations. 
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(4) AWARDS.-

(A) SIZE OF AWARD.-The Director may make awards 

to a qualifying institution for up to $1,000,000 per year for 

up to 3 years. 

(B) AWARD CRITERIA.-ln determining which qualifying institutions receive pilot program grants, the Director shall consider, in addition to any other criteria the Director determines necessary, the extent to which qualifying 

institutions-

(i) have an established and proven technology 

transfer or commercialization office and have a plan 

for engaging that office in the program's implementation; 

(ii) have demonstrated a commitment to local and 

regional economic development; 

(iii) are located in diverse geographies and are of 

diverse sizes; 

(iv) can assemble project management boards comprised of industry, start-up, venture capital, technical, 

financial, and business experts; 

(v) have an intellectual property rights strategy or 

office; and 

(vi) demonstrate a plan for sustainability beyond 

the duration of the funding award. 

(5) LIMITATIONS.-The funds for the pilot program shall 

not be used-

(A) for basic research, but to evaluate the commercial 

potential of existing discoveries, including-

(i) proof of concept research or prototype development; and 

(ii) activities that contribute to determining a 

project's commercialization path, to include technical 

validations, market research, clarifying intellectual 

property rights, and investigating commercial and 

business opportunities; or 

(B) to fund the acquisition of research equipment or 

supplies unrelated to commercialization activities. 

(6) EVALUATIVE REPORT.-The Director shall submit to the 

Committee on Science, Space, and Technology and the Committee on Small Business of the House of Representatives and 

the Committee on Small Business and Entrepreneurship of the 

Senate an evaluative report regarding the activities of the pilot 

program. The report shall include-

(A) a detailed description of the institutional and proposal selection process; 

(B) an accounting of the funds used in the pilot program; 

(C) a detailed description of the pilot program, including incentives and activities undertaken by review board 

experts; 

(D) a detailed compilation of results achieved by the 

pilot program, including the number of small business concerns included and the number of business packages devel-
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Sec. 9 SMALL BUSINESS ACT 178 

oped, and the number of projects that progressed into subsequent STTR phases; and 

(E) an analysis of the program's effectiveness with 

supporting data. 

(7) SUNSET.-The pilot program under this subsection 

shall terminate at the end of fiscal year 2017. 

(kk) PHASE III REPORTING.-The annual SBIR or STTR report 

to Congress by the Administration under subsection (b)(7) shall include, for each Phase III award-

(1) the name of the agency or component of the agency or 

the non-Federal source of capital making the Phase III award; 

(2) the name of the small business concern or individual 

receiving the Phase III award; and 

(3) the dollar amount of the Phase III award. 

(ll) CONSENT To RELEASE CONTACT INFORMATION TO ORGANIZATIONS.-

(1) ENABLING CONCERN TO GIVE CONSENT.-Each Federal 

agency required by this section to conduct an SBIR program or 

an STTR program shall enable a small business concern that 

is an SBIR applicant or an STTR applicant to indicate to the 

Federal agency whether the Federal agency has the consent of 

the concern to--

(A) identify the concern to appropriate local and Statelevel economic development organizations as an SBIR applicant or an STTR applicant; and 

(B) release the contact information of the concern to 

such organizations. 

(2) RULES.-The Administrator shall establish rules to implement this subsection. The rules shall include a requirement 

that a Federal agency include in the SBIR and STTR application a provision through which the applicant can indicate consent for purposes of paragraph (1). 

(mm) ASSISTANCE FOR ADMINISTRATIVE, OVERSIGHT, AND CONTRACT PROCESSING COSTS.-

(1) IN GENERAL.-Subject to paragraph (3) and until September 30, 2017, the Administrator shall allow each Federal 

agency required to conduct an SBIR program to use not more 

than 3 percent of the funds allocated to the SBIR program of 

the Federal agency for-

(A) the administration of the SBIR program or the 

STTR program of the Federal agency; 

(B) the provision of outreach and technical assistance 

relating to the SBIR program or STTR program of the Federal agency, including technical assistance site visits, personnel interviews, and national conferences; 

(C) the implementation of commercialization and outreach initiatives that were not in effect on the date of enactment of this subsection; 

(D) carrying out the program under subsection (y); 

(E) activities relating to oversight and congressional 

reporting, including waste, fraud, and abuse prevention activities; 

(F) targeted reviews of recipients of awards under the 

SBIR program or STTR program of the Federal agency 
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179 SMALL BUSINESS ACT Sec. 9 

that the head of the Federal agency determines are at high 

risk for fraud, waste, or abuse to ensure compliance with 

requirements of the SBIR program or STTR program, respectively; 

(G) the implementation of oversight and quality control measures, including verification of reports and invoices and cost reviews; 

(H) carrying out subsection (dd); 

(I) contract processing costs relating to the SBIR program or STTR program of the Federal agency; and 

(J) funding for additional personnel and assistance 

with application reviews. 

(2) OUTREACH AND TECHNICAL ASSISTANCE.-

(A) IN GENERAL.-Except as provided in subparagraph 

(B), a Federal agency participating in the program under 

this subsection shall use a portion of the funds authorized 

for uses under paragraph (1) to carry out the policy directive required under subsection (j)(2)(F) and to increase the 

participation of States with respect to which a low level of 

SBIR awards have historically been awarded. 

(B) W AIVER.-A Federal agency may request the Administrator to waive the requirement contained in subparagraph (A). Such request shall include an explanation 

of why the waiver is necessary. The Administrator may 

grant the waiver based on a determination that the agency 

has demonstrated a sufficient need for the waiver, that the 

outreach objectives of the agency are being met, and that 

there is increased participation by States with respect to 

which a low level of SBIR awards have historically been 

awarded. 

(3) PERFORMANCE CRITERIA.-A Federal agency may not 

use funds as authorized under paragraph (1) until after the effective date of performance criteria, which the Administrator 

shall establish, to measure any benefits of using funds as authorized under paragraph (1) and to assess continuation of the 

authority under paragraph (1). 

(4) RULES.-Not later than 180 days after the date of enactment of this subsection, the Administrator shall issue rules 

to carry out this subsection. 

(5) CoORDINATION WITH IG.-Each Federal agency shall coordinate the activities funded under subparagraph (E), (F), or 

(G) of paragraph (1) with their respective Inspectors General, 

when appropriate, and each Federal agency that allocates more 

than $50,000,000 to the SBIR program of the Federal agency 

for a fiscal year may share such funding with its Inspector 

General when the Inspector General performs such activities. 

(6) REPORTING.-The Administrator shall collect data and 

provide to the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business, 

the Committee on Science, Space, and Technology, and the 

Committee on Appropriations of the House of Representatives 

a report on the use of funds under this subsection, including 

funds used to achieve the objectives of paragraph (2)(A) and 

any use of the waiver authority under paragraph (2)(B). 
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Sec. 9 SMALL BUSINESS ACT 180 

(nn) ANNUAL REPORT ON SBIR AND STTR PROGRAM GOALS.-

(1) DEVELOPMENT OF METRICS.-The head of each Federal 

agency required to participate in the SBIR program or the 

STTR program shall develop metrics to evaluate the effectiveness and the benefit to the people of the United States of the 

SBIR program and the STTR program of the Federal agency 

that-

(A) are science-based and statistically driven; 

(B) reflect the mission of the Federal agency; and 

(C) include factors relating to the economic impact of 

the programs. 

(2) EVALUATION.-The head of each Federal agency described in paragraph (1) shall conduct an annual evaluation 

using the metrics developed under paragraph (1) of-

(A) the SBIR program and the STTR program of the 

Federal agency; and 

(B) the benefits to the people of the United States of 

the SBIR program and the STTR program of the Federal 

agency. 

(3) REPORT.-

(A) IN GENERAL.-The head of each Federal agency described in paragraph (1) shall submit to the appropriate 

committees of Congress and the Administrator an annual 

report describing in detail the results of an evaluation conducted under paragraph (2). 

(B) PUBLIC AVAILABILITY OF REPORT.-The head of 

each Federal agency described in paragraph (1) shall make 

each report submitted under subparagraph (A) available to 

the public online. 

(C) DEFINITION.-In this paragraph, the term "appropriate committees of Congress" means-

(i) the Committee on Small Business and Entrepreneurship of the Senate; and 

(ii) the Committee on Small Business and the 

Committee on Science, Space, and Technology of the 

House of Representatives. 

(oo) COMPETITIVE SELECTION PROCEDURES FOR SBIR AND 

STTR PROGRAMS.-All funds awarded, appropriated, or otherwise 

made available in accordance with subsection (f) or (n) must be 

awarded pursuant to competitive and merit-based selection procedures. 

(pp) LIMITATION ON PILOT PROGRAMS.-

(1) EXISTING PILOT PROGRAMS.-The Administrator may 

only carry out a covered pilot program that is in operation on 

the date of enactment of this subsection during the 3-year period beginning on such date of enactment. 

(2) NEW PILOT PROGRAMS.-The Administrator may only 

carry out a covered pilot program established after the date of 

enactment of this subsection-

(A) during the 3-year period beginning on the date on 

which such program is established; and 

(B) if such program does not continue and is not based 

on, in any manner, a previously established covered pilot 

program. 
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181 SMALL BUSINESS ACT Sec. 9 

(3) COVERED PILOT PROGRAM DEFINED.-ln this subsection, 

the term "covered pilot program" means any initiative, project, 

innovation, or other activity-

(A) established by the Administrator; 

(B) relating to an SBIR or STTR program; and 

(C) not specifically authorized by law. 

(qq) MINIMUM STANDARDS FOR PARTICIPATION.-

(!) PROGRESS TO PHASE II SUCCESS.-

(A) ESTABLISHMENT OF SYSTEM AND MINIMUM COMMERCIALIZATION RATE.-Not later than 1 year after the date of 

enactment of this subsection, the head of each Federal 

agency participating in the SBIR or STTR program shall-

(i) establish a system to measure, where appropriate, the success of small business concerns with respect to the receipt of Phase II SBIR or STTR awards 

for projects that have received Phase I SBIR or STTR 

awards; 

(ii) establish a minimum performance standard for 

small business concerns with respect to the receipt of 

Phase II SBIR or STTR awards for projects that have 

received Phase I SBIR or STTR awards; and 

(iii) begin evaluating, each fiscal year, whether 

each small business concern that received a Phase I 

SBIR or STTR award from the agency meets the minimum performance standard established under clause 

(ii). 

(B) CONSEQUENCE OF FAILURE TO MEET MINIMUM COMMERCIALIZATION RATE.-If the head of a Federal agency determines that a small business concern that received a 

Phase I SBIR or STTR award from the agency is not meeting the minimum performance standard established under 

subparagraph (A)(ii), such concern may not participate in 

Phase I (or Phase II if under the authority of subsection 

(cc)) of the SBIR or STTR program of that agency during 

the 1-year period beginning on the date on which such determination is made. 

(2) PROGRESS TO PHASE III SUCCESS.-

(A) ESTABLISHMENT OF SYSTEM AND MINIMUM COMMERCIALIZATION RATE.-Not later than 2 years after the date 

of enactment of this subsection, the head of each Federal 

agency participating in the SBIR or STTR program shall-

(i) establish a system to measure, where appropriate, the success of small business concerns with respect to the receipt of Phase III SBIR or STTR awards 

for projects that have received Phase I SBIR or STTR 

awards; 

(ii) establish a minimum performance standard for 

small business concerns with respect to the receipt of 

Phase III SBIR or STTR awards for projects that have 

received Phase I SBIR or STTR awards; and 

(iii) begin evaluating, each fiscal year, whether 

each small business concern that received a Phase I 

SBIR or STTR award from the agency meets the min-
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Sec. 9 SMALL BUSINESS ACT 182 

imum performance standard established under clause 

(ii). 

(B) CONSEQUENCE OF FAILURE TO MEET MINIMUM COMMERCIALIZATION RATE.-If the head of a Federal agency determines that a small business concern that received a 

Phase I SBIR or STTR award from the agency is not meeting the minimum performance standard established under 

subparagraph (A)(ii), such concern may not participate in 

Phase I (or Phase II if under the authority of subsection 

(cc)) of the SBIR or STTR program of that agency during 

the 1-year period beginning on the date on which such determination is made. 

(3) .ADMINISTRATION OVERSIGHT.-

(A) APPROVAL AND PUBLICATION OF SYSTEMS AND MINIMUM PERFORMANCE STANDARDS.-Each system and minimum performance standard established under paragraph 

(1) or paragraph (2) shall be submitted by the head of the 

applicable Federal agency to the Administrator and shall 

be subject to the approval of the Administrator. In making 

a determination with respect to approval, the Administrator shall ensure that the minimum performance standard exceeds a de minimis level. The Administrator shall 

publish on the Internet Web site of the Administration the 

systems and minimum performance standards approved. 

(B) SUBMISSION OF EVALUATION RESULTS BY AGENCY.-

The head of each covered Federal agency shall submit to 

the Administrator the results of each evaluation conducted 

under paragraph (1) or paragraph (2). 

(4) REQUIREMENT OF NOTICE AND COMMENT.-Each system 

and minimum performance standard established under paragraph (1) or paragraph (2) and each approval provided by the 

Administrator under paragraph (3)(A), at least 60 days before 

becoming effective, shall be preceded by the provision of notice 

of and an opportunity for public comment on such system, 

standard, or approval. 

(rr) PUBLICATION OF CERTAIN INFORMATION.-In order to increase the number of small businesses receiving awards under the 

SBIR or STTR programs of participating agencies, and to simplify 

the application process for such awards, the Administrator shall establish and maintain a public Internet Web site on which the Administrator shall publish such information relating to notice of and 

application for awards under the SBIR program and STTR program 

of each participating Federal agency as the Administrator determines appropriate. 

(ss) REPORT ON ENHANCEMENT OF MANUFACTURING ACTIVITIES.-Not later than October 1, 2013, and annually thereafter, the 

head of each Federal agency that makes more than $50,000,000 in 

awards under the SBIR and STTR programs of the agency combined shall submit to the Administrator, for inclusion in the annual 

report required under subsection (b)(7), information that includes-

(1) a description of efforts undertaken by the head of the 

Federal agency to enhance United States manufacturing activities; 
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183 SMALL BUSINESS ACT Sec. 10 

(2) a comprehensive description of the actions undertaken 

each year by the head of the Federal agency in carrying out 

the SBIR or STTR program of the agency in support of Executive Order 13329 (69 Fed. Reg. 9181; relating to encouraging 

innovation in manufacturing); 

(3) an assessment of the effectiveness of the actions described in paragraph (2) at enhancing the research and development of United States manufacturing technologies and processes; 

(4) a description of efforts by vendors selected to provide 

discretionary technical assistance under subsection (q)(1) to 

help SBIR and STTR concerns manufacture in the United 

States; and 

(5) recommendations that the program managers of the 

SBIR or STTR program of the agency consider appropriate for 

additional actions to increase the effectiveness of enhancing 

manufacturing activities. 

SEC. 10. [15 U.S.C. 639] (a) The Administration shall, as soon 

as practicable each fiscal year make a comprehensive annual report 

to the President, the President of the Senate, the Senate Select 

Committee on Small Business, and the Speaker of the House of 

Representatives. Such report shall include a description of the state 

of small business in the Nation and the several States, and a description of the operations of the Administration under this chapter, including, but not limited to, the general lending, disaster relief, Government regulation relief, procurement and property disposal, research and development, technical assistance, dissemination of data and information, and other functions under the jurisdiction of the Administration during the previous fiscal year. Such 

report shall contain recommendations for strengthening or improving such programs, or, when necessary or desirable to implement 

more effectively congressional policies and proposals, for establishing new or alternative programs. In addition, such report shall 

include the names of the business concerns to whom contracts are 

let and for whom financing is arranged by the Administration, together with the amounts involved. With respect to minority small 

business concerns, the report shall include the proportion of loans 

and other assistance under this Act provided to such concerns, the 

goals of the Administration for the next fiscal year with respect to 

such concerns, and recommendations for improving assistance to 

minority small business concerns under this Act. 

(b) The Administration shall make a report to the President, 

the President of the Senate, and the Speaker of the House of Representatives, to the Senate Select Committee on Small Business, 

and to the Committee on Small Business of the House of Representatives, as soon as practicable each fiscal year, showing as accurately as possible for each such period the amount of funds appropriated to it that it has expended in the conduct of each of its 

principal activities such as lending, procurement, contracting, and 

providing technical and managerial aids. Such report shall contain 

the number and amount of loans, the number of applications, the 

total amount applied for, and the number and amount of defaults 

for each type of equipment or service for which loans are author-
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Sec. 10 SMALL BUSINESS ACT 184 

ized by this 61 this Act. Such report shall provide such information 

separately on each type of loan made under paragraphs (10) 

through (15) of section 7(a) and separately for all other loan programs. In addition, the information on loans shall be supplied on 

a monthly basis to the Committee on Small Business of the Senate 

and the Committee on Small Business of the House of Representatives. 

(c) [Repealed by section 1091(±) of Public Law 104-66 (109 

Stat. 722).] 

(d) For the purpose of aiding in carrying out the national policy 

to insure that a fair proportion of the total purchases and contracts 

for property and services for the Government be placed with small 

business enterprises, and to maintain and strengthen the overall 

economy of the Nation, the Department of Defense shall make an 

annual report to the Committees on Small Business of the Senate 

and the House of Representatives, showing the amount of funds appropriated to the Department of Defense which have been expended, obligated, or contracted to be spent with small business 

concerns and the amount of such funds expended, obligated, or contracted to be spent with firms other than small business in the 

same fields of operation; and such reports shall show separately 

the funds expended, obligated, or contracted to be spent for basic 

and applied scientific research and development. 

(e) The Administration and the Inspector General of the Administration shall retain all correspondence, records of inquiries, 

memoranda, reports, books, and records, including memoranda as 

to all investigations conducted by or for the Administration, for a 

period of at least one year from the date of each thereof, and shall 

at all times keep the same available for inspection and examination 

by the Senate Select Committee on Small Business and the Committee on Small Business of the House of Representatives or their 

duly authorized representatives. 

(2) 

62 The Committee on Small Business of either the Senate 

or the House of Representatives may request that the Office of the 

Inspector General of the Administration conduct an investigation of 

any program or activity conducted under the authority of section 

7G) or 8(a). Not later than thirty days after the receipt of such a 

request, the Inspector General shall inform the committee, in writing, of the disposition of the request by such office. 

(f) To the extent deemed necessary by the Administrator to 

protect and preserve small-business interests, the Administration 

shall consult and cooperate with other departments and agencies of 

the Federal Government in the formulation by the Administration 

of policies affecting small-business concerns. When requested by 

the Administrator, each department and agency of the Federal 

Government shall consult and cooperate with the Administration in 

the formulation by such department or agency of policies affecting 

small-business concerns, in order to insure that small-business interests will be recognized, protected, and preserved. This subsection shall not require any department or agency to consult or cooperate with the Administration in any case where the head of 

61 So in original. 62 Section 406(e) of Public Law 100-656, 102 Stat. 3876, added a new paragraph (2) without 

designating a paragraph (1). 
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185 SMALL BUSINESS ACT Sec. 11 

such department or agency determines that such consultation or 

cooperation would unduly delay action which must be taken by 

such department or agency to protect the national interest in an 

emergency. 

(g) The Administration shall transmit, not later than December 

31 of each year, to the Senate Select Committee on Small Business 

and Committee on Small Business of the House of Representatives 

a sealed report with respect to-

(1) complaints alleging illegal conduct by employees of the 

Administration which were received or acted upon by the Administration during the preceding fiscal year; and 

(2) investigations undertaken by the Administration, including external and internal audits and security and investigation reports. 

(h) The Administration shall transmit, not later than March 31 

of each year, to the Committees on Small Business of the Senate 

and House of Representatives a report on the secondary market operations during the preceding calendar year. This report shall include, but not be limited to, (1) the number and the total dollar 

amount of loans sold into the secondary market and the distribution of such loans by size of loan, size of lender, geographic location 

of lender, interest rate, maturity, lender servicing fees, whether the 

rate is fixed or variable, and premium paid; (2) the number and 

dollar amount of loans resold in the secondary market with a distribution by size of loan, interest rate, and premiums; (3) the number and total dollar amount of pools formed; (4) the number and 

total dollar amount of loans in each pool; (5) the dollar amount, interest rate, and terms on each loan in each pool and whether the 

rate is fixed or variable; (6) the number, face value, interest rate, 

and terms of the trust certificates issued for each pool; (7) to the 

maximum extent possible, the use by the lender of the proceeds of 

sales of loans in the secondary market for additional lending to 

small business concerns; and (8) an analysis of the information reported in (1) through (7) to assess small businesses' access to capital at reasonable rates and terms as a result of secondary market 

operations. 

SEC. 11. [15 U.S.C. 640] (a) The President is authorized to 

consult with representatives of small-business concerns with a view 

to encouraging the making by such persons with the approval of 

the President of voluntary agreements and programs to further the 

objectives of this Act. 

(b) No act or omission to act pursuant to this Act which occurs 

while this Act is in effect, if requested by the President pursuant 

to a voluntary agreement or program approved under subsection (a) 

of this section and found by the President to be in the public interest as contributing to the national defense, shall be construed to be 

within the prohibitions of the antitrust laws or the Federal Trade 

Commission Act of the United States. A copy of each such request 

intended to be within the coverage of this section, and any modification or withdrawal thereof, shall be furnished to the Attorney 

General and the Chairman of the Federal Trade Commission when 

made, and it shall be published in the Federal Register unless publication thereof would, in the opinion of the President, endanger 

the national security. 
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Sec. 12 SMALL BUSINESS ACT 186 

(c) The authority granted in subsection (b) of this section shall 

be delegated only (1) to an official who shall for the purpose of such 

delegation be required to be appointed by the President by and 

with the advice and consent of the Senate, (2) upon the condition 

that such official consult with the Attorney General and the Chairman of the Federal Trade Commission not less than ten days before making any request or finding thereunder, and (3) upon the 

condition that such official obtain the approval of the Attorney 

General to any request thereunder before making the request. 

(d) Upon withdrawal of any request or finding hereunder, or 

upon withdrawal by the Attorney General of his approval of the 

voluntary agreement or program on which the request or finding 

is based, the provisions of this section shall not apply to any subsequent act, or omission to act, by reason of such finding or request. 

SEC. 12. (15 U.S.C. 641] The President may transfer to the 

Administration any functions, powers, and duties of any department or agency which relate primarily to small-business problems. 

In connection with any such transfer, the President may provide 

for appropriate transfers of records, property, necessary personnel, 

and unexpended balances of appropriations and other funds available to the department or agency from which the transfer is made. 

SEC. 13. [15 U.S.C. 642] No loan shall be made or equipment, 

facilities, or services furnished by the Administration under this 

Act to any business enterprise unless the owners, partners, or officers of such business enterprise (1) certify to the Administration 

the names of any attorneys, agents, or other persons engaged by 

or on behalf of such business enterprise for the purpose of expediting applications made to the Administration for assistance of 

any sort, and the fees paid or to be paid to any such persons; (2) 

execute an agreement binding any such business enterprise for a 

period of two years after any assistance is rendered by the Administration to such business enterprise, to refrain from employing, 

tendering any office or employment to, or retaining for professional 

services, any person who, on the date such assistance or any part 

thereof was rendered, or within one year prior thereto, shall have 

served as an officer, attorney, agent, or employee of the Administration occupying a position or engaging in activities which the Administration shall have determined involve discretion with respect 

to the granting of assistance under this Act; and (3) furnish the 

names of lending institutions to which such business enterprise has 

applied for loans together with dates, amounts, terms, and proof of 

refusal. 

SEC. 14. [15 U.S.C. 643] To the fullest extent the Administration deems practicable, it shall make a fair charge for the use of 

Government-owned property and make and let contracts on a basis 

that will result in a recovery of the direct costs incurred by the Administration. 

SEC. 15. (15 U.S.C. 644] 

(a) SMALL BUSINESS PROCUREMENTS.-

(!) IN GENERAL.-For purposes of this Act, small business 

concerns shall receive any award or contract if such award or 

contract is, in the determination of the Administrator and the 

contracting agency, in the interest of-
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187 SMALL BUSINESS ACT Sec. 15 

(A) maintaining or mobilizing the full productive capacity of the United States; 

(B) war or national defense programs; or 

(C) assuring that a fair proportion of the total pur- chase and contracts for goods and services of the Government in each industry category (as defined under para- graph (2)) are awarded to small business concerns. 

(2) INDUSTRY CATEGORY DEFINED.-

(A) IN GENERAL.-In this subsection, the term "industry category" means a discrete group of similar goods and 

services, as determined by the Administrator in accordance 

with the North American Industry Classification System codes used to establish small business size standards, except that the Administrator shall limit an industry category to a greater extent than provided under the North 

American Industry Classification System codes if the Administrator receives evidence indicating that further seg- mentation of the industry category is warranted-

(i) due to special capital equipment needs; 

(ii) due to special labor requirements; (iii) due to special geographic requirements, except 

as provided in subparagraph (B); 

(iv) due to unique Federal buying patterns or requirements; or 

(v) to recognize a new industry. 

(B) EXCEPTION FOR GEOGRAPHIC REQUIREMENTS.-The 

Administrator may not further segment an industry category based on geographic requirements unless-

(i) the Government typically designates the geo- graphic area where work for contracts for goods or 

services is to be performed; (ii) Government purchases comprise the major portion of the entire domestic market for such goods or 

services; and 

(iii) it is unreasonable to expect competition from 

business concerns located outside of the general geo- graphic area due to the fixed location of facilities, high mobilization costs, or similar economic factors. 

(3) DETERMINATIONS WITH RESPECT TO AWARDS OR CONTRACTS.-Determinations made pursuant to paragraph (1) may be made for individual awards or contracts, any part of an 

award or contract or task order, or for classes of awards or contracts or task orders. 

(4) INCREASING PRIME CONTRACTING OPPORTUNITIES FOR 

SMALL BUSINESS CONCERNS.-

(A) DESCRIPTION OF COVERED PROPOSED PROCUREMENTS.-The requirements of this paragraph shall apply to 

a proposed procurement that includes in its statement of 

work goods or services currently being supplied or per- formed by a small business concern and, as determined by the Administrator-

(i) is in a quantity or of an estimated dollar value 

which makes the participation of a small business concern as a prime contractor unlikely; 
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Sec. 15 SMALL BUSINESS ACT 188 

(ii) in the case of a proposed procurement for construction, seeks to bundle or consolidate discrete construction projects; or 

(iii) is a solicitation that involves an unnecessary 

or unjustified bundling of contract requirements. 

(B) NOTICE TO PROCUREMENT CENTER REPRESENTATIVES.-With respect to proposed procurements described 

in subparagraph (A), at least 30 days before issuing a solicitation and concurrent with other processing steps required before issuing the solicitation, the contracting agency shall provide a copy of the proposed procurement to the 

procurement center representative of the contracting agency (as described in subsection (l)) along with a statement 

explaining-

(i) why the proposed procurement cannot be divided into reasonably small lots (not less than economic production runs) to permit offers on quantities 

less than the total requirement; 

(ii) why delivery schedules cannot be established 

on a realistic basis that will encourage the participation of small business concerns in a manner consistent 

with the actual requirements of the Government; 

(iii) why the proposed procurement cannot be offered to increase the likelihood of the participation of 

small business concerns; 

(iv) in the case of a proposed procurement for construction, why the proposed procurement cannot be offered as separate discrete projects; or 

(v) why the contracting agency has determined 

that the bundling of contract requirements is necessary and justified. 

(C) ALTERNATIVES TO INCREASE PRIME CONTRACTING 

OPPORTUNITIES FOR SMALL BUSINESS CONCERNS.-If the 

procurement center representative believes that the proposed procurement will make the participation of small 

business concerns as prime contractors unlikely, the procurement center representative, within 15 days after receiving the statement described in subparagraph (B), shall 

recommend to the contracting agency alternative procurement methods for increasing prime contracting opportunities for small business concerns. 

(D) FAILURE TO AGREE ON AN ALTERNATIVE PROCUREMENT METHOD.-lf the procurement center representative 

and the contracting agency fail to agree on an alternative 

procurement method, the Administrator shall submit the 

matter to the head of the appropriate department or agency for a determination. 

(5) CONTRACTS FOR SALE OF GOVERNMENT PROPERTY.-

With respect to a contract for the sale of Government property, 

small business concerns shall receive any such contract if, in 

the determination of the Administrator and the disposal agency, the award of such contract is in the interest of assuring 

that a fair proportion of the total sales of Government property 

be made to small business concerns. 
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189 SMALL BUSINESS ACT Sec. 15 

(6) SALE OF ELECTRICAL POWER OR OTHER PROPERTY.-

Nothing in this subsection shall be construed to change any 

preferences or priorities established by law with respect to the 

sale of electrical power or other property by the Federal Government. 

(7) COSTS EXCEEDING FAIR MARKET PRICE.-A contract may 

not be awarded under this subsection if the cost of the contract 

to the awarding agency exceeds a fair market price. 

(b) With respect to any work to be performed the amount of 

which would exceed the maximum amount of any contract for 

which a surety may be guaranteed against loss under section 411 

of the Small Business Investment Act of 1958 (15 U.S.C. 694(b)), 

the contracting procurement agency shall, to the extent practicable, 

place contracts so as to allow more than one small business concern 

to perform such work. 

(c)(1) As used in this subsection: 

(A) The term "Committee" means the Committee for Purchase from the Blind and Other Severely Handicapped established under the first section of the Act entitled "An Act to create a Committee on Purchases of Blind-made Products, and for 

other purposes", approved June 25, 1938 (41 U.S.C. 46). 

(B) The term "public or private organization for the handicapped" has the same meaning given such term in section 3(e). 

(C) The term "handicapped individual" has the same 

meaning given such term in section 3(f). 

(2)(A) During fiscal year 1995, public or private organizations 

for the handicapped shall be eligible to participate in programs authorized under this section in an aggregate amount not to exceed 

$40,000,000. 

(B) None of the amounts authorized for participation by subparagraph (A) may be placed on the procurement list maintained 

by the Committee pursuant to section 2 of the Act entitled "An Act 

to create a Committee on Purchases of Blind-made Products, and 

for other purposes", approved June 25, 1938 (41 U.S.C. 47). 

(3) The Administrator shall monitor and evaluate such participation. 

(4)(A) Not later than ten days after the announcement of a proposed award of a contract by an agency or department to a public 

or private organization for the handicapped, a for-profit small business concern that has experienced or is likely to experience severe 

economic injury as the result of the proposed award may file an appeal of the proposed award with the Administrator. 

(B) If such a concern files an appeal of a proposed award under 

subparagraph (A) and the Administrator, after consultation with 

the Executive Director of the Committee, finds that the concern has 

experienced or is likely to experience severe economic injury as the 

result of the proposed award, not later than thirty days after the 

filing of the appeal, the Administration shall require each agency 

and department having procurement powers to take such action as 

may be appropriate to alleviate economic injury sustained or likely 

to be sustained by the concern. 

(5) Each agency and department having procurement powers 

shall report to the Office of Federal Procurement Policy each time 

a contract subject to paragraph (2)(A) is entered into, and shall in-
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Sec. 15 SMALL BUSINESS ACT 190 

elude in its report the amount of the next higher bid submitted by 

a for-profit small business concern. The Office of Federal Procurement Policy shall collect data reported under the preceding sentence through the Federal procurement data system and shall report to the Administration which shall notify all such agencies and 

departments when the maximum amount of awards authorized 

under paragraph (2)(A) has been made during any fiscal year. 

(6) For the purpose of this subsection, a contract may be 

awarded only if at least 75 per centum of the direct labor performed on each item being produced under the contract in the sheltered workshop or performed in providing each type of service 

under the contract by the sheltered workshop is performed by 

handicapped individuals. 

(7) Agencies awarding one or more contracts to such an organization pursuant to the provisions of this subsection may use 

multiyear contracts, if appropriate. 

(d) For purposes of this section priority shall be given to the 

awarding of contracts and the placement of subcontracts to small 

business concerns which shall perform a substantial proportion of 

the production on those contracts and subcontracts within areas of 

concentrated unemployment or underemployment or within labor 

surplus areas. Notwithstanding any other provison of law, total 

labor surplus area set-asides pursuant to Defense Manpower Policy 

Number 4 (32A C.F.R. Chapter 1) or any successor policy shall be 

authorized if the Secretary or his designee specifically determines 

that there is a reasonable expectation that offers will be obtained 

from a sufficient number of eligible concerns so that awards will be 

made at reasonable prices. As soon as practicable and to the extent 

possible, in determining labor surplus areas, consideration shall be 

given to those persons who would be available for employment 

were suitable employment available. Until such definition reflects 

such number, the present criteria of such policy shall govern. 

(e) PROCUREMENT STRATEGIES; CONTRACT EUNDLING.-

(1) IN GENERAL.-To the maximum extent practicable, procurement strategies used by a Federal department or agency 

having contracting authority shall facilitate the maximum participation of small business concerns as prime contractors, subcontractors, and suppliers, and each such Federal department 

or agency shall-

(A) provide opportunities for the participation of small 

business concerns during acquisition planning processes 

and in acquisition plans; and 

(B) invite the participation of the appropriate Director 

of Small and Disadvantaged Business Utilization in acquisition planning processes and provide that Director access 

to acquisition plans. 

(2) MARKET RESEARCH.-

(A) IN GENERAL-Before proceeding with an acquisition strategy that could lead to a contract containing consolidated procurement requirements, the head of an agency shall conduct market research to determine whether 

consolidation of the requirements is necessary and justified. 
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191 SMALL BUSINESS ACT Sec. 15 

(B) FACTORS.-For purposes of subparagraph (A), consolidation of the requirements may be determined as being 

necessary and justified if, as compared to the benefits that 

would be derived from contracting to meet those requirements if not consolidated, the Federal Government would 

derive from the consolidation measurably substantial benefits, including any combination of benefits that, in combination, are measurably substantial. Benefits described in 

the preceding sentence may include the following: 

(i) Cost savings. 

(ii) Quality improvements. 

(iii) Reduction in acquisition cycle times. 

(iv) Better terms and conditions. 

(v) Any other benefits. 

(C) REDUCTION OF COSTS NOT DETERMINATIVE.-The 

reduction of administrative or personnel costs alone shall 

not be a justification for bundling of contract requirements 

unless the cost savings are expected to be substantial in 

relation to the dollar value of the procurement requirements to be consolidated. 

(3) STRATEGY SPECIFICATIONS.-If the head of a contracting 

agency determines that an acquisition plan for a procurement 

involves a substantial bundling of contract requirements, the 

head of a contracting agency shall publish a notice on a public 

website that such determination has been made not later than 

7 days after making such determination. Any solicitation for a 

procurement related to the acquisition plan may not be published earlier than 7 days after such notice is published. Along 

with the publication of the solicitation, the head of a contracting agency shall publish a justification for the determination, which shall include the following information: 

(A) The specific benefits anticipated to be derived from 

the bundling of contract requirements and a determination 

that such benefits justify the bundling. 

(B) An identification of any alternative contracting approaches that would involve a lesser degree of bundling of 

contract requirements. 

(C) An assessment of-

(i) the specific impediments to participation by 

small business concerns as prime contractors that result from the bundling of contract requirements; and 

(ii) the specific actions designed to maximize participation of small business concerns as subcontractors 

(including suppliers) at various tiers under the contract or contracts that are awarded to meet the requirements. 

(4) CONTRACT TEAMING.-

(A) IN GENERAL.-In the case of a solicitation of offers 

for a bundled or consolidated contract that is issued by the 

head of an agency, a small business concern that provides 

for use of a particular team of subcontractors or a joint 

venture of small business concerns may submit an offer for 

the performance of the contract. 
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Sec. 15 SMALL BUSINESS ACT 192 

(B) EVALUATION OF OFFERS.-The head of the agency 

shall evaluate an offer described in subparagraph (A) in 

the same manner as other offers, with due consideration to 

the capabilities of all of the proposed subcontractors or 

members of the joint venture as follows: 

(i) TEAMS.-When evaluating an offer of a small 

business prime contractor that includes a proposed 

team of small business subcontractors, the head of the 

agency shall consider the capabilities and past performance of each first tier subcontractor that is part of 

the team as the capabilities and past performance of 

the small business prime contractor. 

(ii) JOINT VENTURES.-When evaluating an offer of 

a joint venture of small business concerns, if the joint 

venture does not demonstrate sufficient capabilities or 

past performance to be considered for award of a contract opportunity, the head of the agency shall consider the capabilities and past performance of each 

member of the joint venture as the capabilities and 

past performance of the joint venture. 

(C) STATUS AS A SMALL BUSINESS CONCERN.-Participation of a small business concern in a team or a joint venture under this paragraph shall not affect the status of 

that concern as a small business concern for any other 

purpose. 

(f) CONTRACTING PREFERENCE FOR SMALL BUSINESS CONCERNS 

IN A MAJOR DISASTER AREA.-

(1) DEFINITION.-In this subsection, the term "disaster 

area" means the area for which the President has declared a 

major disaster, during the period of the declaration. 

(2) CONTRACTING PREFERENCE.-An agency shall provide a 

contracting preference for a small business concern located in 

a disaster area if the small business concern will perform the 

work required under the contract in the disaster area. 

(3) CREDIT FOR MEETING CONTRACTING GOALS.-lf an agency awards a contract to a small business concern under the circumstances described in paragraph (2), the value of the contract shall be doubled for purposes of determining compliance 

with the goals for procurement contracts under subsection 

(g)(1)(A). 

(g)63 

(1) GOVERNMENTWIDE GOALS.-

(A) ESTABLISHMENT.-The President shall annually establish Governmentwide goals for procurement contracts 

awarded to small business concerns, small business concerns owned and controlled by service-disabled veterans, 

qualified HUBZone small business concerns, small business concerns owned and controlled by socially and economically disadvantaged individuals, and small business 

concerns owned and controlled by women in accordance 

with the following: 

63 So in law. Paragraph (1) used to run into the subsection designation prior to an amendment 

that was enacted to revise such paragraph in its entirety. 
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193 SMALL BUSINESS ACT Sec. 15 

(i) The Governmentwide goal for participation by 

small business concerns shall be established at not 

less than 23 percent of the total value of all prime contract awards for each fiscal year. In meeting this goal, 

the Government shall ensure the participation of 

small business concerns from a wide variety of industries and from a broad spectrum of small business concerns within each industry. 

(ii) The Governmentwide goal for participation by 

small business concerns owned and controlled by service-disabled veterans shall be established at not less 

than 3 percent of the total value of all prime contract 

and subcontract awards for each fiscal year. 

(iii) The Governmentwide goal for participation by 

qualified HUBZone small business concerns shall be 

established at not less than 3 percent of the total 

value of all prime contract and subcontract awards for 

each fiscal year. 

(iv) The Governmentwide goal for participation by 

small business concerns owned and controlled by socially and economically disadvantaged individuals 

shall be established at not less than 5 percent of the 

total value of all prime contract and subcontract 

awards for each fiscal year. 

(v) The Governmentwide goal for participation by 

small business concerns owned and controlled by 

women shall be established at not less than 5 percent 

of the total value of all prime contract and subcontract 

awards for each fiscal year. 

(B) ACHIEVEMENT OF GOVERNMENTWIDE GOALS.-Each 

agency shall have an annual goal that presents, for that 

agency, the maximum practicable opportunity for small 

business concerns, small business concerns owned and controlled by service-disabled veterans, qualified HUBZone 

small business concerns, small business concerns owned 

and controlled by socially and economically disadvantaged 

individuals, and small business concerns owned and controlled by women to participate in the performance of contracts let by such agency. The Small Business Administration and the Administrator for Federal Procurement Policy 

shall, when exercising their authority pursuant to paragraph (2), insure that the cumulative annual prime contract goals for all agencies meet or exceed the annual Governmentwide prime contract goal established by the President pursuant to this paragraph. 

(2)(A) The head of each Federal agency shall, after consultation 

with the Administration, establish goals for the participation by 

small business concerns, by small business concerns owned and 

controlled by service-disabled veterans, by qualified HUBZone 

small business concerns, by small business concerns owned and 

controlled by socially and economically disadvantaged individuals, 

and by small business concerns owned and controlled by women in 

procurement contracts of such agency. Such goals shall separately 
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Sec. 15 SMALL BUSINESS ACT 194 

address prime contract awards and subcontract awards for each 

category of small business covered. 

(B) Goals established under this subsection shall be jointly established by the Administration and the head of each Federal agency and shall realistically reflect the potential of small business concerns, small business concerns owned and controlled by service-disabled veterans, 64 qualified HUBZone small business concerns, 

small business concerns owned and controlled by socially and economically disadvantaged individuals, and small business concerns 

owned and controlled by women to perform such contracts and to 

perform subcontracts under such contracts. 

(C) Whenever the Administration and the head of any Federal 

agency fail to agree on established goals, the disagreement shall be 

submitted to the Administrator for Federal Procurement Policy for 

final determination. 

(D) After establishing goals under this paragraph for a fiscal 

year, the head of each Federal agency shall develop a plan for 

achieving such goals at both the prime contract and the subcontract level, which shall apportion responsibilities among the 

agency's acquisition executives and officials. In establishing goals 

under this paragraph, the head of each Federal agency shall make 

a consistent effort to annually expand participation by small business concerns from each industry category in procurement contracts and subcontracts of such agency, including participation by 

small business concerns owned and controlled by service-disabled 

veterans, qualified HUBZone small business concerns, small business concerns owned and controlled by socially and economically 

disadvantaged individuals, and small business concerns owned and 

controlled by women. 

(E) The head of each Federal agency, in attempting to 

attain expanded participation under subparagraph (D), 

shall consider-

(i) contracts awarded as the result of unrestricted 

competition; and 

(ii) contracts awarded after competition restricted 

to eligible small business concerns under this section 

and under the program established under section 8(a). 

(F)(i) Each procurement employee or program manager described in clause (ii) shall communicate to the subordinates of the procurement employee or program manager the importance of achieving goals established under 

subparagraph (A). 

(ii) A procurement employee or program manager described in this clause is a senior procurement executive, 

senior program manager, or Director of Small and Disadvantaged Business Utilization of a Federal agency having contracting authority. 

(3) 65 First tier subcontracts that are awarded by Management 

and Operating contractors sponsored by the Department of Energy 

64 The amendments made by section 502(b) of Public Law 106-50 (113 Stat. 247) were exe- cuted as to the probable intent of the Congress. The reference to "section 15" should have been to "section 15(g)(2)". 65 The margin (and placement) of paragraph (3) reflects the probable intent of Congress. 
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195 SMALL BUSINESS ACT Sec. 15 

to small business concerns, small businesses concerns owned and 

controlled by service disabled veterans, qualified HUBZone small 

business concerns, small business concerns owned and controlled 

by socially and economically disadvantaged individuals, and small 

business concerns owned and controlled by women, shall be considered toward the annually established agency and Government-wide 

goals for procurement contracts awarded. 

(h) REPORTING ON GOALS FOR PROCUREMENT CONTRACTS 

AWARDED TO SMALL BUSINESS CoNCERNS.-

(1) AGENCY REPORTS.-At the conclusion of each fiscal 

year, the head of each Federal agency shall submit to the Administrator a report describing-

(A) the extent of the participation by small business 

concerns, small business concerns owned and controlled by 

veterans (including service-disabled veterans), qualified 

HUBZone small business concerns, small business concerns owned and controlled by socially and economically 

disadvantaged individuals, and small business concerns 

owned and controlled by women in the procurement contracts of such agency during such fiscal year; 

(B) whether the agency achieved the goals established 

for the agency under subsection (g)(2) with respect to such 

fiscal year; 

(C) any justifications for a failure to achieve such 

goals; and 

(D) a remediation plan with proposed new practices to 

better meet such goals, including analysis of factors leading to any failure to achieve such goals. 

(2) REPORTS BY ADMINISTRATOR.-Not later than 60 days 

after receiving a report from each Federal agency under paragraph (1) with respect to a fiscal year, the Administrator shall 

submit to the President and Congress, and to make available 

on a public Web site, a report that includes-

(A) a copy of each report submitted to the Administrator under paragraph (1); 

(B) a determination of whether each goal established 

by the President under subsection (g)(1) for such fiscal 

year was achieved; 

(C) a determination of whether each goal established 

by the head of a Federal agency under subsection (g)(2) for 

such fiscal year was achieved; 

(D) the reasons for any failure to achieve a goal established under paragraph (1) or (2) of subsection (g) for such 

fiscal year and a description of actions planned by the applicable agency to address such failure, including the Administrator's comments and recommendations on the proposed remediation plan; and 

Section 318, title III of Division D of Public Law 113-76 provides for an amendment to Public 

Law 85-536 by adding a paragraph (3) at the end of subsection (g). Such amendment (as en- acted into law) did not set this new paragraph (3) on it's own margin and therefore would tech· 

nica!ly run into clause (ii) of paragraph (2)(F). However, the version above does reflect the prop- er margin. 
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Sec. 15 SMALL BUSINESS ACT 196 

(E) for the Federal Government and each Federal 

agency, an analysis of the number and dollar amount of 

prime contracts awarded during such fiscal year to-

(i) small business concerns-

(!) in the aggregate; 

(II) through sole source contracts; 

(Ill) through competitions restricted to small 

business concerns; and 

(IV) through unrestricted competition; 

(ii) small business concerns owned and controlled 

by service-disabled veterans-

(!) in the aggregate; 

(II) through sole source contracts; 

(Ill) through competitions restricted to small 

business concerns; 

(IV) through competitions restricted to small 

business concerns owned and controlled by service-disabled veterans; and 

(V) through unrestricted competition; 

(iii) qualified HUBZone small business concerns-

(!) in the aggregate; 

(II) through sole source contracts; 

(III) through competitions restricted to small 

business concerns; 

(IV) through competitions restricted to qualified HUBZone small business concerns; 

(V) through unrestricted competition where a 

price evaluation preference was used; and 

(VI) through unrestricted competition where a 

price evaluation preference was not used; 

(iv) small business concerns owned and controlled 

by socially and economically disadvantaged individuals-

(I) in the aggregate; 

(II) through sole source contracts; 

(Ill) through competitions restricted to small 

business concerns; 

(IV) through competitions restricted to small 

business concerns owned and controlled by socially and economically disadvantaged individuals; 

(V) through unrestricted competition; and 

(VI) by reason of that concern's certification 

as a small business owned and controlled by socially and economically disadvantaged individuals; 

(v) small business concerns owned by an Indian 

tribe (as such term is defined in section 8(a)(13)) other 

than an Alaska Native Corporation-

(!) in the aggregate; 

(II) through sole source contracts; 

(III) through competitions restricted to small 

business concerns; 

(IV) through competitions restricted to small 

business concerns owned and controlled by so-
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197 SMALL BUSINESS ACT Sec. 15 

cially and economically disadvantaged individuals; 

and 

(V) through unrestricted competition; 

(vi) small business concerns owned by a Native 

Hawaiian Organization-

(!) in the aggregate; 

(II) through sole source contracts; 

(III) through competitions restricted to small 

business concerns; 

(N) through competitions restricted to small 

business concerns owned and controlled by socially and economically disadvantaged individuals; 

and 

(V) through unrestricted competition; 

(vii) small business concerns owned by an Alaska 

Native Corporation-

(!) in the aggregate; 

(II) through sole source contracts; 

(III) through competitions restricted to small 

business concerns; 

(IV) through competitions restricted to small 

business concerns owned and controlled by socially and economically disadvantaged individuals; 

and 

(V) through unrestricted competition; and 

(viii) small business concerns owned and controlled by women-

(1) in the aggregate; 

(II) through competitions restricted to small 

business concerns; 

(III) through competitions restricted using the 

authority under section 8(m)(2); 

(IV) through competitions restricted using the 

authority under section 8(m)(2) and in which the 

waiver authority under section 8(m)(3) was used; 

(V) through sole source contracts awarded 

using the authority under subsection 8(m)(7); 

(VI) through sole source contracts awarded 

using the authority under section 8(m)(8); 

(VII) by industry for contracts described in 

subclause (III), (N), (V), or (VI); and 

(VIII) through unrestricted competition; and 

(F) for the Federal Government, the number, dollar 

amount, and distribution with respect to the North American Industry Classification System of subcontracts awarded during such fiscal year to small business concerns, 

small business concerns owned and controlled by servicedisabled veterans, qualified HUBZone small business concerns, small business concerns owned and controlled by socially and economically disadvantaged individuals, and 

small business concerns owned and controlled by women, 

provided that such information is publicly available 

through data systems developed pursuant to the Federal 

Funding Accountability and Transparency Act of 2006 
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Sec. 15 SMALL BUSINESS ACT 198 

(Public Law 109-282), or otherwise available as provided 

in paragraph (3). 

(3) PROCUREMENT DATA.-

(A) FEDERAL PROCUREMENT DATA SYSTEM.-

(i) IN GENERAL.-To assist in the implementation 

of this section, the Administrator shall have access to 

information collected through the Federal Procurement Data System, Federal Subcontracting Reporting 

System, or any new or successor system. 

(ii) GSA REPORT.-On the date that the Administrator makes available the report required under paragraph (2), the Administrator of the General Services 

Administration shall submit to the President and Congress, and shall make available on a public website, a 

report in the same form and manner, and including 

the same information, as the report required under 

paragraph (2). The report shall include all procurements made for the period covered by the report and 

may not exclude any contract awarded. 

(B) AGENCY PROCUREMENT DATA SOURCES.-To assist 

in the implementation of this section, the head of each contracting agency shall provide, upon request of the Administrator, procurement information collected through agency 

data collection sources in existence at the time of the request. Contracting agencies shall not be required to establish new data collection systems to provide such data. 

(i) Nothing in this Act or any other provision of law precludes 

exclusive small business set-asides for procurements of architectural and engineering services, research, development, test and 

evaluation, and each Federal agency is authorized to develop such 

set-asides to further the interests of small business in those areas. 

(j)(1) Each contract for the purchase of goods and services that 

has an anticipated value greater than $2,500 but not greater than 

$100,000 shall be reserved exclusively for small business concerns 

unless the contracting officer is unable to obtain offers from two or 

more small business concerns that are competitive with market 

prices and are competitive with regard to the quality and delivery 

of the goods or services being purchased. 

(2) In carrying out paragraph (1), a contracting officer shall 

consider a responsive offer timely received from an eligible small 

business offeror. 

(3) Nothing in paragraph (1) shall be construed as precluding 

an award of a contract with a value not greater than $100,000 

under the authority of subsection (a) of section 8 of this Act, section 

2323 of title 10, United States Code, section 712 of the Business 

Opportunity Development Reform Act of 1988 (Public Law 100-

656; 15 U.S.C. 644 note), or section 7102 of the Federal Acquisition 

Streamlining Act of 1994. 

(k) There is hereby established in each Federal agency having 

procurement powers an office to be known as the "Office of Small 

and Disadvantaged Business Utilization". The management of each 

such office shall be vested in an officer or employee of such agency, 

with experience serving in any combination of the following roles: 

program manager, deputy program manager, or assistant program 
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199 SMALL BUSINESS ACT Sec. 15 

manager for Federal acquisition program; chief engineer, systems 

engineer, assistant engineer, or product support manager for Federal acquisition program; Federal contracting officer; small business technical advisor; contracts administrator for Federal Government contracts; attorney specializing in Federal procurement law; 

small business liaison officer; officer or employee who managed 

Federal Government contracts for a small business; or individual 

whose primary responsibilities were for the functions and duties of 

section 8, 15, 31, 36, or 44 of this Act. Such officer or employee-

(I) shall be known as the "Director of Small and Disadvantaged Business Utilization" for such agency; 

(2) shall be appointed by the head of such agency to a position that is a Senior Executive Service position (as such term 

is defined under section 3132(a) of title 5, United States Code), 

except that, for any agency in which the positions of Chief Acquisition Officer and senior procurement executive (as such 

terms are defined under section 44(a) of this Act) are not Senior Executive Service positions, the Director of Small and Disadvantaged Business Utilization may be appointed to a position compensated at not less than the minimum rate of basic 

pay payable for grade GS-15 of the General Schedule under 

section 5332 of such title (including comparability payments 

under section 5304 of such title); 

(3) shall be responsible only to (including with respect to 

performance appraisals), and report directly and exclusively to, 

the head of such agency or to the deputy of such head, except 

that the Director for the Office of the Secretary of Defense 

shall be responsible only to (including with respect to performance appraisals), and report directly and exclusively to, such 

Secretary or the Secretary's designee; 

(4) shall be responsible for the implementation and execution of the functions and duties under sections 8, 15, 31, 36, 

and 44 of this Act which relate to such agency; 

(5) shall identify proposed solicitations that involve significant bundling of contract requirements, and work with the 

agency acquisition officials and the Administration to revise 

the procurement strategies for such proposed solicitations 

where appropriate to increase the probability of participation 

by small businesses as prime contractors, or to facilitate small 

business participation as subcontractors and suppliers, if a solicitation for a bundled contract is to be issued; 

(6) shall assist small business concerns to obtain payments, required late payment interest penalties, or information 

regarding payments due to such concerns from an executive 

agency or a contractor, in conformity with chapter 39 of title 

31, United States Code, or any other protection for contractors 

or subcontractors (including suppliers) that is included in the 

Federal Acquisition Regulation or any individual agency supplement to such Government-wide regulation; 

(7) shall have supervisory authority over personnel of such 

agency to the extent that the functions and duties of such personnel relate to functions and duties under sections 8, 15, 31, 

36, and 44 of this Act; 
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Sec. 15 SMALL BUSINESS ACT 200 

(8) shall assign a small business technical adviser to each 

office to which the Administration has assigned a procurement 

center representative-

(A) who shall be a full-time employee of the procuring 

activity and shall be well qualified, technically trained and 

familiar with the supplies or services purchased at the activity; and 

(B) whose principal duty shall be to assist the Administration procurement center representative in his duties 

and functions relating to sections 8, 15, 31, 36, and 44 of 

this Act, 

(9) shall cooperate, and consult on a regular basis, with 

the Administration with respect to carrying out the functions 

and duties described in paragraph ( 4) of this subsection; 

(10) shall make recommendations to contracting officers as 

to whether a particular contract requirement should be awarded pursuant to subsection (a), section 8, 15, 31, or 36 of this 

Act, or section 2323 of title 10, United States Code, which shall 

be made with due regard to the requirements of subsection 

(m), and the failure of the contracting officer to accept any 

such recommendations shall be documented and included within the appropriate contract file; 

(11) shall review and advise such agency on any decision 

to convert an activity performed by a small business concern 

to an activity performed by a Federal employee; 

(12) shall provide to the Chief Acquisition Officer and senior procurement executive of such agency advice and comments 

on acquisition strategies, market research, and justifications 

related to section 44 of this Act; 

(13) may provide training to small business concerns and 

contract specialists, except that such training may only be provided to the extent that the training does not interfere with 

the Director carrying out other responsibilities under this subsection; 

(14) shall receive unsolicited proposals and, when appropriate, forward such proposals to personnel of the activity responsible for reviewing such proposals; 

(15) shall carry out exclusively the duties enumerated in 

this Act, and shall, while the Director, not hold any other title, 

position, or responsibility, except as necessary to carry out responsibilities under this subsection; 

(16) shall submit, each fiscal year, to the Committee on 

Small Business of the House of Representatives and the Committee on Small Business and Entrepreneurship of the Senate 

a report describing-

(A) the training provided by the Director under paragraph (13) in the most recently completed fiscal year; 

(B) the percentage of the budget of the Director used 

for such training in the most recently completed fiscal 

year; 

(C) the percentage of the budget of the Director used 

for travel in the most recently completed fiscal year; and 

(D) any failure of the agency to comply with section 8, 

15, 31, or 36; 
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201 SMALL BUSINESS ACT Sec. 15 

(17) shall, when notified by a small business concern prior 

to the award of a contract that the small business concern believes that a solicitation, request for proposal, or request for 

quotation unduly restricts the ability of the small business concern to compete for the award-

(A) submit the notice of the small business concern to 

the contracting officer and, if necessary, recommend ways 

in which the solicitation, request for proposal, or request 

for quotation may be altered to increase the opportunity 

for competition; 

(B) inform the advocate for competition of such agency 

(as established under section 1705 of title 41, United 

States Code, or section 2318 of title 10, United States 

Code) of such notice; and 

(C) ensure that the small business concern is aware of 

other resources and processes available to address unduly 

restrictive provisions in a solicitation, request for proposal, 

or request for quotation, even if such resources and processes are provided by such agency, the Administration, the 

Comptroller General, or a procurement technical assistance program established under chapter 142 of title 10, 

United States Code; 

(18) shall review summary data provided by purchase card 

issuers of purchases made by the agency greater than the 

micro-purchase threshold (as defined under section 1902 of 

title 41, United Stated Code) and less than the simplified acquisition threshold to ensure that the purchases have been 

made in compliance with the provisions of this Act and have 

been properly recorded in the Federal Procurement Data System, if the method of payment is a purchase card issued by the 

Department of Defense pursuant to section 2784 of title 10, 

United States Code, or by the head of an executive agency pursuant to section 1909 of title 41, United States Code; 

(19) shall provide assistance to a small business concern 

awarded a contract or subcontract under this Act or under title 

10 or title 41, United States Code, in finding resources for education and training on compliance with contracting regulations 

(including the Federal Acquisition Regulation) after award of 

such a contract or subcontract; and 

(20) shall review all subcontracting plans required by 

paragraph (4) or (5) of section 8(d) to ensure that the plan provides maximum practicable opportunity for small business concerns to participate in the performance of the contract to which 

the plan applies. 

This subsection shall not apply to the Administration. 

(l) PROCUREMENT CENTER REPRESENTATIVES.-

(!) ASSIGNMENT AND ROLE.-The Administrator shall assign to each major procurement center a procurement center 

representative with such assistance as may be appropriate. 

(2) ACTIVITIES.-A procurement center representative is 

authorized to-

(A) attend any provisioning conference or similar evaluation session during which determinations are made as to 

whether requirements are to be procured through other than 
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Sec. 15 SMALL BUSINESS ACT 202 

full and open competition and make recommendations with respect to such requirements to the members of such conference 

or session; 

(B) review, at any time, barriers to small business participation in Federal contracting previously imposed on 

goods and services through acquisition method coding or 

similar procedures, and recommend to personnel of the appropriate activity the prompt reevaluation of such barriers; 

(C) review barriers to small business participation in 

Federal contracting arising out of restrictions on the rights 

of the United States in technical data, and, when appropriate, recommend that personnel of the appropriate activity initiate a review of the validity of such an asserted restriction; 

(D) review any bundled or consolidated solicitation or 

contract in accordance with this Act; 

(E) have access to procurement records and other data 

of the procurement center commensurate with the level of 

such representative's approved security clearance classification, with such data provided upon request in electronic format, when available; 

(F) receive unsolicited proposals from small business 

concerns and transmit such proposals to personnel of the 

activity responsible for reviewing such proposals, who shall 

furnish the procurement center representative with information regarding the disposition of any such proposal; 

(G) consult with the Director the Office of Small and 

Disadvantaged Business Utilization of that agency and the 

agency personnel described in paragraph (7) and (8) of subsection (k) with regard to agency insourcing decisions covered by subsection (k)(ll); 

(H) be an advocate for the maximum practicable utilization of small business concerns in Federal contracting, 

including by advocating against the consolidation or bundling of contract requirements when not justified; 

(I) assist small business concerns with finding resources for education and training on compliance with contracting regulations (including the Federal Acquisition Regulation) after award of a contract or subcontract; and 

(J) carry out any other responsibility assigned by the 

Administrator. 

(3) APPEALS.-A procurement center representative is authorized to appeal the failure to act favorably on any recommendation made pursuant to paragraph (2). Such appeal shall be filed and processed in the same manner and subject 

to the same conditions and limitations as an appeal filed by the Administrator pursuant to subsection (a). 

(4) The Administration shall assign and co-locate at least two 

small business technical advisers to each major procurement center 

in addition to such other advisers as may be authorized from time 

to time. The sole duties of such advisers shall be to assist the procurement center representative for the center to which such advisers are assigned in carrying out the functions described in paragraph (2) and the representatives referred to in subsection (k)(6). 
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203 SMALL BUSINESS ACT Sec. 15 

(5) POSITION REQUIREMENTS.-

(A) IN GENERAL.-A procurement center representative 

assigned under this subsection shall-

(i) be a full-time employee of the Administration; 

(ii) be fully qualified, technically trained, and familiar with the goods and services procured by the 

major procurement center to which that representative 

is assigned; and 

(iii) have the certification described in subparagraph (C). 

(B) COMPENSATION.-The Administrator shall establish personnel positions for procurement center representatives assigned under this subsection, which are classified 

at a grade level of the General Schedule sufficient to attract and retain highly qualified personnel. 

(C) CERTIFICATION REQUIREMENTS.-

(i) IN GENERAL.-Consistent with the requirements of clause (ii), a procurement center representative shall have a Level III Federal Acquisition Certification in Contracting (or any successor certification) or 

the equivalent Department of Defense certification, except that any person serving in such a position on or 

before January 3, 2013, may continue to serve in that 

position for a period of 5 years without the required 

certification. 

(ii) DELAY OF CERTIFICATION REQUIREMENTS.-

(!) TIMING.-The certification described in 

clause (i) is not required for any person serving as 

a procurement center representative until the 

date that is one calendar year after the date such 

person is appointed as a procurement center representative. 

(II) APPLICATION.-The requirements of subclause (I) shall-

(aa) be included in any initial job posting 

for the position of a procurement center representative; and 

(bb) apply to any person appointed as a 

procurement center representative after January 3, 2013. 

(6) MAJOR PROCUREMENT CENTER DEFINED.-For purposes 

of this subsection, the term "major procurement center" means 

a procurement center that, in the opinion of the Administrator, 

purchases substantial dollar amounts of goods or services, including goods or services that are commercially available. 

(7) TRAINING.-

(A) AUTHORIZATION.-At such times as the Administrator deems appropriate, the breakout procurement center 

representative shall conduct familiarization sessions for 

contracting officers and other appropriate personnel of the 

procurement center to which such representative is assigned. Such sessions shall acquaint the participants with 

the provisions of this subsection and shall instruct them in 
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Sec. 15 SMALL BUSINESS ACT 204 

methods designed to further the purposes of such subsection. 

(B) LIMITATION.-A procurement center representative 

may provide training under subparagraph (A) only to the 

extent that the training does not interfere with the representative carrying out other activities under this subsection. 

(8) ANNUAL BRIEFING AND REPORT.-A procurement center 

representative shall prepare and personally deliver an annual 

briefing and report to the head of the procurement center to 

which such representative is assigned. Such briefing and report shall detail the past and planned activities of the representative and shall contain such recommendations for improvement in the operation of the center as may be appropriate. The head of such center shall personally receive such 

briefing and report and shall, within 60 calendar days after receipt, respond, in writing, to each recommendation made by 

such representative. 

(9) SCOPE OF REVIEW.-The Administrator-

(A) may not limit the scope of review by the procurement center representative for any solicitation of a contract or task order without regard to whether the contract 

or task order or part of the contract or task order is set 

aside for small business concerns, whether 1 or more contracts or task order awards are reserved for small business 

concerns under a multiple award contract, or whether or 

not the solicitation would result in a bundled or consolidated contract (as defined in subsection (s)) or a bundled 

or consolidated task order; and 

(B) shall, unless the contracting agency requests a review, limit the scope of review by the procurement center 

representative for any solicitation of a contract or task 

order if such solicitation is awarded by or for the Department of Defense and-

(i) is conducted pursuant to section 22 of the Arms 

Export Control Act (22 U.S.C. 2762); 

(ii) is a humanitarian operation as defined in section 401(e) of title 10, United States Code; 

(iii) is for a contingency operation, as defined in 

section 101(a)(13) of title 10, United States Code; 

(iv) is to be awarded pursuant to an agreement 

with the government of a foreign country in which 

Armed Forces of the United States are deployed; or 

(v) both the place of award and the place of performance are outside of the United States and its territories. 

(m)(1) Each agency subject to the requirements of section 2323 

of title 10, United States Code, shall, when implementing such requirements-

(A) establish policies and procedures that insure 66 that 

there will be no reduction in the number of dollar value of con66 So in original. Probably should be "ensure". 
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205 SMALL BUSINESS ACT Sec. 15 

tracts awarded pursuant to this section and section 8(a) in 

order to achieve any goal or other program objective; and 

(B) assure that such requirements will not alter or change 

the procurement process used to implement this section or section 8(a). 

(2) All procurement center representatives (including those referred to in subsection (k)(6)), in addition to such other duties as 

may be assigned by the Administrator, shall-

(A) monitor the performance of the procurement activities 

to which they are assigned to ascertain the degree of compliance with the requirements of paragraph ( 1); 

(B) report to their immediate supervisors all instances of 

noncompliance with such requirements; and 

(C) increase, insofar as possible, the number and dollar 

value of procurements that may be used for the programs established under this section, section 8(a), and section 2323 of 

title 10, United States Code. 

(n) For purposes of this section, the determination of labor surplus areas shall be made on the basis of the criteria in effect at 

the time of the determination, except that any minimum population criteria shall not exceed twenty-five thousand. Such determination, as modified by the preceding sentence, shall be made by 

the Secretary of Labor. 

(o) LIMITATIONS ON SUBCONTRACTING.-A concern may not be 

awarded a contract under subsection (a) as a small business concern unless the concern agrees to satisfy the requirements of section 46. 

(p) ACCESS TO DATA.-

(1) BUNDLED CONTRACT DEFINED.-In this subsection, the 

term "bundled contract" has the meaning given such term in 

section 3(o)(1). 

(2) DATABASE.-

(A) IN GENERAL.-Not later than 180 days after the 

date of the enactment of this subsection, the Administrator 

of the Small Business Administration shall develop and 

shall thereafter maintain a database containing data and 

information regarding-

(i) each bundled contract awarded by a Federal 

agency; and 

(ii) each small business concern that has been displaced as a prime contractor as a result of the award 

of such a contract. 

(3) ANALYSIS.-For each bundled contract that is to be recompeted as a bundled contract, the Administrator shall determine-

(A) the amount of savings and benefits (in accordance 

with subsection (e)) achieved under the bundling of contract requirements; and 

(B) whether such savings and benefits will continue to 

be realized if the contract remains bundled, and whether 

such savings and benefits would be greater if the procurement requirements were divided into separate solicitations 

suitable for award to small business concerns. 

( 4) ANNUAL REPORT ON CONTRACT BUNDLING.-
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Sec. 15 SMALL BUSINESS ACT 206 

(A) IN GENERAL.-Not later than 1 year after the date 

of the enactment of this paragraph, and annually in March 

thereafter, the Administration shall transmit a report on 

contract bundling to the Committees on Small Business of 

the House of Representatives and the Senate. 

(B) CONTENTS.-Each report transmitted under subparagraph (A) shall include-

(i) data on the number, arranged by industrial 

classification, of small business concerns displaced as 

prime contractors as a result of the award of bundled 

contracts by Federal agencies; and 

(ii) a description of the activities with respect to 

previously bundled contracts of each Federal agency 

during the preceding year, including-

(!) data on the number and total dollar 

amount of all contract requirements that were 

bundled; and 

(II) with respect to each bundled contract, 

data or information on-

(aa) the justification for the bundling of 

contract requirements; 

(bb) the cost savings realized by bundling 

the contract requirements over the life of the 

contract; 

(cc) the extent to which maintaining the 

bundled status of contract requirements is 

projected to result in continued cost savings; 

(dd) the extent to which the bundling of 

contract requirements complied with the contracting agency's small business subcontracting plan, including the total dollar value 

awarded to small business concerns as subcontractors and the total dollar value previously awarded to small business concerns as 

prime contractors; and 

(ee) the impact of the bundling of contract 

requirements on small business concerns unable to compete as prime contractors for the 

consolidated requirements and on the industries of such small business concerns, including a description of any changes to the proportion of any such industry that is composed of 

small business concerns. 

(5) ACCESS TO DATA.-

(A) FEDERAL PROCUREMENT DATA SYSTEM.-To assist 

in the implementation of this section, the Administration 

shall have access to information collected through the Federal Procurement Data System. 

(B) AGENCY PROCUREMENT DATA SOURCES.-To assist 

in the implementation of this section, the head of each contracting agency shall provide, upon request of the Administration, procurement information collected through existing agency data collection sources. 
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207 SMALL BUSINESS ACT Sec. 15 

(q) REPORTS RELATED TO PROCUREMENT CENTER REPRESENTATIVES.-

(1) TEAMING AND JOINT VENTURE REQUIREMENTS.-

(A) IN GENERAL.-Each Federal agency shall include in 

each solicitation for any multiple award contract above the 

substantial bundling threshold of the Federal agency a 

provision soliciting bids from any responsible source, including responsible small business concerns and teams or 

joint ventures of small business concerns. 

(B) TEAMS.-When evaluating an offer of a small business prime contractor that includes a proposed team of 

small business subcontractors for any multiple award contract above the substantial bundling threshold of the Federal agency, the head of the agency shall consider the capabilities and past performance of each first tier subcontractor that is part of the team as the capabilities and past 

performance of the small business prime contractor. 

(C) JOINT VENTURES.-When evaluating an offer of a 

joint venture of small business concerns for any multiple 

award contract above the substantial bundling threshold of 

the Federal agency, if the joint venture does not demonstrate sufficient capabilities or past performance to be 

considered for award of a contract opportunity, the head of 

the agency shall consider the capabilities and past per- formance of each member of the joint venture as the capabilities and past performance of the joint venture. 

(2) POLICIES ON REDUCTION OF CONTRACT BUNDLING.-

(A) IN GENERAL.-Not later than 1 year after the date 

of enactment of this subsection, the Federal Acquisition Regulatory Council established under section 25(a) of the 

Office of Federal Procurement Policy Act (41 U.S.C. 

4219(a)) shall amend the Federal Acquisition Regulation issued under section 25 of such Act to-

(i) establish a Government-wide policy regarding 

contract bundling, including regarding the solicitation 

of teaming and joint ventures under paragraph (1); 

and 

(ii) require that the policy established under 

clause (i) be published on the website of each Federal 

agency. 

(B) RATIONALE FOR CONTRACT BUNDLING.-Not later 

than 30 days after the date on which the head of a Federal 

agency submits data certifications to the Administrator for 

Federal Procurement Policy, the head of the Federal agency shall publish on the website of the Federal agency a list 

and rationale for any bundled contract for which the Federal agency solicited bids or that was awarded by the Federal agency. 

(3) REPORTING.-Not later than 90 days after the date of 

enactment of this subsection, and every 3 years thereafter, the 

Administrator 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 re-
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Sec. 15 SMALL BUSINESS ACT 208 

garding procurement center representatives and commercial 

market representatives, which shall-

(A) identify each area for which the Administration 

has assigned a procurement center representative or a 

commercial market representative; 

(B) explain why the Administration selected the areas 

identified under subparagraph (A); and 

(C) describe the activities performed by procurement 

center representatives and commercial market representatives. 

(r) MULTIPLE AWARD CONTRACTS.-Not later than 1 year after 

the date of enactment of this subsection, the Administrator for Federal Procurement Policy and the Administrator, in consultation 

with the Administrator of General Services, shall, by regulation, establish guidance under which Federal agencies may, at their discretion-

(1) set aside part or parts of a multiple award contract for 

small business concerns, including the subcategories of small 

business concerns identified in subsection (g)(2); 

(2) notwithstanding the fair opportunity requirements 

under section 2304c(b) of title 10, United States Code, and section 303J(b) of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 253j(b)), set aside orders placed 

against multiple award contracts for small business concerns, 

including the subcategories of small business concerns identified in subsection (g)(2); and 

(3) reserve 1 or more contract awards for small business 

concerns under full and open multiple award procurements, including the subcategories of small business concerns identified 

in subsection (g)(2). 

(s) DATA QUALITY IMPROVEMENT PLAN.-

(1) IN GENERAL.-Not later than October 1, 2015, the Administrator of the Small Business Administration, in consultation with the Small Business Procurement Advisory Council, 

the Administrator for Federal Procurement Policy, and the Administrator of General Services, shall develop a plan to improve the quality of data reported on bundled or consolidated 

contracts in the Federal procurement data system (described in 

section 1122(a)(4)(A) of title 41, United States Code). 

(2) PLAN REQUIREMENTS.-The plan shall-

(A) describe the roles and responsibilities of the Administrator of the Small Business Administration, each Director of Small and Disadvantaged Business Utilization, 

the Administrator for Federal Procurement Policy, the Administrator of General Services, senior procurement executives, and Chief Acquisition Officers in-

(i) improving the quality of data reported on bundled or consolidated contracts in the Federal procurement data system; and 

(ii) contributing to the annual report required by 

subsection (p)(4); 

(B) recommend changes to policies and procedures, including training procedures of relevant personnel, to prop-
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209 SMALL BUSINESS ACT Sec. 15 

erly identify and mitigate the effects of bundled or consolidated contracts; 

(C) recommend requirements for periodic and statistically valid data verification and validation; and 

(D) recommend clear data verification responsibilities. 

(3) PLAN SUBMISSION.-The Administrator of the Small 

Business Administration shall submit the plan to the Committee on Small Business of the House of Representatives and 

the Committee on Small Business and Entrepreneurship of the 

Senate not later than December 1, 2016. 

(4) IMPLEMENTATION.-Not later than October 1, 2016, the 

Administrator of the Small Business Administration shall implement the plan described in this subsection. 

(5) CERTIFICATION.-The Administrator shall annuallf provide to the Committee on Small Business of the House o Representatives and the Committee on Small Business and Entrepreneurship of the Senate a certification of the accuracy and 

completeness of data reported on bundled and consolidated 

contracts. 

(6) DEFINITIONS.-ln this subsection, the following definitions apply: 

(A) CHIEF ACQUISITION OFFICER; SENIOR PROCUREMENT 

EXECUTIVE.-The terms "Chief Acquisition Officer" and 

"senior procurement executive" have the meanings given 

such terms in section 44(a) of this Act. 

(B) BUNDLED OR CONSOLIDATED CONTRACT.-The term 

"bundled or consolidated contract" means a bundled contract (as defined in section 3(o)) or a contract resulting 

from the consolidation of contracting requirements (as defined in section 44(a)(2)). 

(t) GAO REPORT ON SMALL BUSINESS ADMINISTRATION PROGRAMS IN PuERTO RICO.-Not later than one year after the date of 

enactment of this subsection, 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 application and utilization of contracting activities of the Administration 

(including contracting activities relating to HUBZone small business concerns) in Puerto Rico. The report shall also identify any 

provisions of Federal law that may create an obstacle to the efficient implementation of such contracting activities. 

(u) PosT-AWARD COMPLIANCE RESOURCES.-The Administrator 

shall provide to small business development centers and entities 

participating in the Procurement Technical Assistance Cooperative 

Agreement Program under chapter 142 of title 10, United States 

Code, and shall make available on the website of the Administration, a list of resources for small business concerns seeking education and assistance on compliance with contracting regulations 

(including the Federal Acquisition Regulation) after award of a contract or subcontract. 

(v) REGULATORY CHANGES AND TRAINING MATERIALS.-Not less 

than annually, the Administrator shall provide to the Defense Acquisition University (established under section 1746 of title 10, 

United States Code), the Federal Acquisition Institute (established 
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Sec. 16 SMALL BUSINESS ACT 210 

under section 1201 of title 41, United States Code), the individual 

responsible for mandatory training and education of the acquisition 

workforce of each agency (described under section 1703(f)(1)(C) of 

title 41, United States Code), small business development centers, 

and entities participating in the Procurement Technical Assistance 

Cooperative Agreement Program under chapter 142 of title 10, 

United States Code-

(1) a list of all changes made in the prior year to regulations promulgated-

(A) by the Administrator that affect Federal acquisition; and 

(B) by the Federal Acquisition Council that implement 

amendments to this Act; and 

(2) any materials the Administrator has developed that explain, train, or assist Federal agencies or departments or small 

business concerns with compliance with the regulations described in paragraph (1). 

SEC. 16. [15 U.S.C. 645] (a) Whoever makes any statement 

knowing it to be false, or whoever willfully overvalues any security, 

for the purpose of obtaining for himself or for any applicant any 

loan, or extension thereof by renewal, deferment of action, or otherwise, or the acceptance, release, or substitution of security therefor, 

or for the purpose of influencing in any way the action of the Administration, or for the purpose of obtaining money, property, or 

anything of value, under this Act, shall be punished by a fine of 

not more than $5,000 or by imprisonment for not more than two 

years, or both. 

(b) Whoever, being connected in any capacity with the Administration, (1) embezzles, abstracts, purloins, or willfully misapplies 

any moneys, funds, securities, or other things of value, whether belonging to it or pledged or otherwise entrusted to it, or (2) with intent to defrand the Administration or any other body politic or corporate, or any individual, or to deceive any officer, auditor, or examiner of the Administration, makes any false entry in any book, 

report, or statement of or to the Administration, or, without being 

duly authorized, draws any order or issues, puts forth, or assigns 

any note, debenture, bond, or other obligation, or draft, bill of exchange, mortgage, judgment, or decree thereof, or (3) with intent 

to defraud participates or shares in or receives directly or indirectly 

any money, profit, property, or benefit through any transaction, 

loan, commission, contract, or any other part of the Administration, 

or (4) gives any unauthorized information concerning any future action or plan of the Administration which might affect the value of 

securities, or, having such knowledge, invests or speculates, directly or indirectly, in the securities or property of any company or 

corporation receiving loans or other assistance from the Administration, shall be punished by a fine of not more than $10,000 or by 

imprisonment for not more than five years, or both. 

(c) Whoever, with intent to defraud, knowingly conceals, removes, disposes of, or converts to his own use or that of another, 

any property mortgaged or pledged to, or held by, the Administration, shall be fined not more than $5,000 or imprisoned not more 

than five years, or both; but if the value of such property does not 
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211 SMALL BUSINESS ACT Sec. 16 

exceed $100, he shall be fined not more than $1,000 or imprisoned 

not more than one year, or both. 

(d)(1) Whoever misrepresents the status of any concern or person as a "small business concern", 67 a "qualified HUBZone small 

business concern", a "small business concern owned and controlled 

by socially and economically disadvantaged individuals", or a 

"small business concern owned and controlled by women", in order 

to obtain for oneself or another any-

(A) prime contract to be awarded pursuant to section 9, 15, 

or 31; 

(B) subcontract to be awarded pursuant to section 8(a); 

(C) subcontract that is to be included as part or all of a 

goal contained in a subcontracting plan required pursuant to 

section 8(d); or 

(D) prime or subcontract to be awarded as a result, or in 

furtherance, of any other provision of Federal law that specifically references section 8(d) for a definition of program eligibility, 68 shall be subject to the penalties and remedies described in paragraph (2). 

(2) Any person who violates paragraph (1) shall-

(A) be punished by a fine of not more than $500,000 or by 

imprisonment for not more than 10 years, or both; 

(B) be subject to the administrative remedies prescribed by 

the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. 

3801-3812); 

(C) be subject to suspension and debarment as specified in 

subpart 9.4 of title 48, Code of Federal Regulations (or any successor regulation); and 

(D) be ineligible for participation in any program or activity conducted under the authority of this Act or the Small 

Business Investment Act of 1958 (15 U.S.C. 661 et seq.) for a 

period not to exceed 3 years. 

(3) LIMITATION ON LIABILITY.-This subsection shall not 

apply to any conduct in violation of subsection (a) if the defendant acted in good faith reliance on a written advisory opinion 

from a Small Business Development Center (as defined in this 

Act), or an entity participating in the Procurement Technical 

Assistance Cooperative Agreement Program defined in chapter 

142 of title 10, United States Code; however nothing in this 

Act shall obligate either entity to provide such a letter nor 

shall the provision of such a letter in any way render the providing entity liable to the business concern should the Administrator later determine that the concern is not a small business concern. Upon issuance of an advisory opinion under this 

paragraph, the entity issuing the advisory opinion shall remit 

a copy of the opinion to the General Counsel of the Administration, who may reject the advisory opinion. If the General Counsel of the Administration rejects the advisory opinion, the Administration shall notify the entity issuing the advisory opinion 

and the recipient of the opinion, after which time the business 

concern may not rely upon the opinion. 

67 So in original. 68 So in original. Provisions following probably should be set flush with paragraph (1). 
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Sec. 17 SMALL BUSINESS ACT 212 

(e) Any representation of the status of any concern or person 

as a "small business concern", 69 a "HUBZone small business concern", a "small business concern owned and controlled by socially 

and economically disadvantaged individuals", or a "small business 

concern owned and controlled by women" in order to obtain any 

prime contract or subcontract enumerated in subection (d) of this 

section shall be in writing. 

(f) Whoever falsely certifies past compliance with the requirements of section 7(j)(10)(I) of this Act shall be subject to the penalties prescribed in subsection (d). 

(g) SUBCONTRACTING LIMITATIONS.-

(1) IN GENERAL.-Whoever violates a requirement established under section 46 shall be subject to the penalties prescribed in subsection (d), except that, for an entity that exceeded a limitation on subcontracting under such section, the fine 

described in subsection (d)(2)(A) shall be treated as the greater 

of-

(A) $500,000; or 

(B) the dollar amount expended, in excess of permitted 

levels, by the entity on subcontractors. 

(2) MONITORING.-Not later than 1 year after the date of 

enactment of this subsection, the Administrator shall take 

such actions as are necessary to ensure that an existing Federal subcontracting reporting system is modified to notify the 

Administrator, the appropriate Director of the Office of Small 

and Disadvantaged Business Utilization, and the appropriate 

contracting officer if a requirement established under section 

46 is violated. 

SEc. 17. [15 U.S.C. 646] Any interest held by the Administration in property, as security for a loan, shall be subordinate to any 

lien on such property for taxes due on the property to a State, or 

political subdivision thereof, in any case where such lien would, 

under applicable State law, be superior to such interest if such interest were held by any party other than the United States. 

SEC. 18. [15 U.S.C. 647] (a) The Administration shall not duplicate the work or activity of any other department or agency of 

the Federal Government, 7° 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, 

69 So in originaL 70 So in original. 
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213 SMALL BUSINESS ACT Sec. 20 

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. 

SEC. 19. [15 U.S.C. 631 note) If any provision of this Act, or 

the application thereof to any person or circumstances, is held invalid, the remainder of this Act, and the application of such provision to other persons or circumstances, shall not be affected thereby. 

SEC. 20. [15 U.S.C. 631 note) (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) 71 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 section71 Margin so in law. 
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Sec. 20 SMALL BUSINESS ACT 214 

(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 Admin-
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215 SMALL BUSINESS ACT Sec. 20 

istration 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)(l). 

(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 
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Sec. 20 SMAll BUSINESS ACT 216 

(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 N 

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) 

72 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. 

72 There are no subsections (f)-(i) in section 20. 
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217 SMALL BUSINESS ACT Sec. 21 

SEC. 21. [15 U.S.C. 648] (a)(1) The Administration is authorized to make grants (including contracts and cooperative agreements) to any State government or any agency thereof, any regional entity, any State-chartered development, credit or finance 

corporation, any women's business center operating pursuant to 

section 29, any public or private institution of higher education, including but not limited to any land-grant college or university, any 

college or school of business, engineering, commerce, or agriculture, 

community college or junior college, or to any entity formed by two 

or more of the above entities (herein referred to as "applicants") to 

assist in establishing small business development centers and to 

any such labor for: small business oriented employment or natural 

resources development programs; studies, research, and counseling 

concerning the managing, financing, and operation of small business enterprises, management and technical assistance regarding 

small business participation in international markets, export promotion and technology transfer; delivery or distribution of such 

services and information; providing access to business analysts who 

can refer small business concerns to available experts; and, to the 

extent practicable, providing assistance in furtherance of the Small 

Business Development Center Cyber Strategy developed under section 1841(a) of the National Defense Authorization Act for Fiscal 

Year 2017: Provided, That after December 31, 1990, the Administration shall not make a grant to any applicant other than an institution of higher education or a women's business center operating 

pursuant to section 29 as a Small Business Development Center 

unless the applicant was receiving a grant (including a contract or 

cooperative agreement) on such date. The Administration shall require any applicant for a small business development center grant 

with performance commencing on or after January 1, 1992 to have 

its own budget and to primarily utilize institutions of higher education and women's business centers operating pursuant to section 

29 to provide services to the small business community. The term 

of such grants shall be made on a calendar year basis or to coincide 

with the Federal fiscal year. 

(2) COOPERATION TO PROVIDE INTERNATIONAL TRADE SERVICES.-

(A) INFORMATION AND SERVICES.-The small business 

development centers shall work in close cooperation with 

the Administration's regional and local offices, the Department of Commerce, appropriate Federal, State and local 

agencies (including State trade agencies), and the small 

business community to serve as an active information dissemination and service delivery mechanism for existing 

trade promotion, trade finance, trade adjustment, trade 

remedy and trade data collection programs of particular 

utility for small businesses. 

(B) COOPERATION WITH STATE TRADE AGENCIES AND EXPORT ASSISTANCE CENTERS.-A small business development 

center that counsels a small business concern on issues relating to international trade shall-

(i) consult with State trade agencies and Export 

Assistance Centers to provide appropriate services to 

the small business concern; and 
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Sec. 21 SMALL BUSINESS ACT 218 

(ii) as necessary, refer the small business concern 

to a State trade agency or an Export Assistance Center for further counseling or assistance. 

(C) DEFINITION.-ln this paragraph, the term "Export 

Assistance Center" has the same meaning as in section 22. 

(3) The Small Business Development Center Program shall be 

under the general management and oversight of the Administration for the delivery of programs and services to the small business 

community. Such programs and services shall be jointly developed, 

negotiated, and agreed upon, with full participation of both parties, 

pursuant to an executed cooperative agreement between the Small 

Business Development Center applicant and the Administration. 

(A) Small business development centers are authorized to form 

an association to pursue matters of common concern. If more than 

a majority of the small business development centers which are operating pursuant to agreements with the Administration are members of such an association, the Administration is authorized and 

directed to recognize the existence and activities of such an association and to consult with it and develop documents (i) announcing 

the annual scope of activities pursuant to this section, (ii) requesting proposals to deliver assistance as provided in this section and 

(iii) governing the general operations and administration of the 

Small Business Development Center Program, specifically including the development of regulations and a uniform negotiated cooperative agreement for use on an annual basis when entering into 

individual negotiated agreements with small business development 

centers. 

(B) Provisions governing audits, cost principles and administrative requirements for Federal grants, contracts and cooperative 

agreements which are included in uniform requirements of Office 

of Management and Budget (OMB) Circulars shall be incorporated 

by reference and shall not be set forth in summary or other form 

in regulations. 

(C) 73 Whereas On an annual basis, the Small Business 

Development Center shall review and coordinate public and 

private partnerships and cosponsorships with the Administration for the purpose of more efficiently leveraging available resources on a National 74 and a State basis. 

( 4) SMALL BUSINESS DEVELOPMENT CENTER PROGRAM LEVEL.-

(A) IN GENERAL.-The Administration shall require as a 

condition of any grant (or amendment or modification thereof) 

made to an applicant under this section, that a matching 

amount (excluding any fees collected from recipients of such 

assistance) equal to the amount of such grant be provided from 

sources other than the Federal Government, to be comprised of 

not less than 50 percent cash and not more than 50 percent 

of indirect costs and in-kind contributions. 

(B) RESTRICTION.-The matching amount described in subparagraph (A) shall not include any indirect costs or in-kind 

contributions derived from any Federal program. 

(C) FUNDING FORMULA.-

73 Margin so in law. Section 2l(a)(3)(C) indention probably should be moved two ems to left. 74 So in law. Probably should be "national". 
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219 SMALL BUSINESS ACT Sec. 21 

(i) IN GENERAL.-Subject to clause (iii), the amount of 

a formula grant received by a State under this subpara- graph shall be equal to an amount determined in accordance with the following formula: 

(I) The annual amount made available under section 20(a) for the Small Business Development Center 

Program, less any reductions made for expenses authorized by clause (v) of this subparagraph, shall be 

divided on a pro rata basis, based on the percentage of the population of each State, as compared to the 

population of the United States. 

(II) If the pro rata amount calculated under subclause (I) for any State is less than the minimum 

funding level under clause (iii), the Administration 

shall determine the aggregate amount necessary to 

achieve that minimum funding level for each such 

State. 

(III) The aggregate amount calculated under subclause (II) shall be deducted from the amount calculated under subclause (I) for States eligible to receive more than the minimum funding level. The deductions shall be made on a pro rata basis, based on 

the population of each such State, as compared to the 

total population of all such States. 

(IV) The aggregate amount deducted under subclause (Ill) shall be added to the grants of those States 

that are not eligible to receive more than the minimum funding level in order to achieve the minimum 

funding level for each such State, except that the eligi- ble amount of a grant to any State shall not be reduced to an amount below the minimum funding level. 

(ii) GRANT DETERMINATION.-The amount of a grant 

that a State is eligible to apply for under this subpara- graph shall be the amount determined under clause (i), 

subject to any modifications required under clause (iii), 

and shall be based on the amount available for the fiscal 

year in which performance of the grant commences, but 

not including amounts distributed in accordance with 

clause (iv). The amount of a grant received by a State 

under any provision of this subparagraph shall not exceed 

the amount of matching funds from sources other than the 

Federal Government, as required under subparagraph (A). (iii) MINIMUM FUNDING LEVEL.-The amount of the 

minimum funding level for each State shall be determined 

for each fiscal year based on the amount made available 

for that fiscal year to carry out this section, as follows: 

(I) If the amount made available is not less than 

$81,500,000 and not more than $90,000,000, the minimum funding level shall be $500,000. 

(II) If the amount made available is less than 

$81,500,000, the minimum funding level shall be the 

remainder of $500,000 minus a percentage of $500,000 

equal to the percentage amount by which the amount 

made available is less than $81,500,000. 
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Sec. 21 SMALL BUSINESS ACT 220 

(III) If the amount made available is more than 

$90,000,000, the minimum funding level shall be the 

sum of $500,000 plus a percentage of $500,000 equal 

to the percentage amount by which the amount made 

available exceeds $90,000,000. 

(iv) DISTRIBUTIONS.-Subject to clause (iii), if any 

State does not apply for, or use, its full funding eligibility 

for a fiscal year, the Administration shall distribute the remaining funds as follows: 

(I) If the grant to any State is less than the 

amount received by that State in fiscal year 2000, the 

Administration shall distribute such remaining funds, 

on a pro rata basis, based on the percentage of shortage of each such State, as compared to the total 

amount of such remaining funds available, to the extent necessary in order to increase the amount of the 

grant to the amount received by that State in fiscal 

year 2000, or until such funds are exhausted, whichever first occurs. 

(II) If any funds remain after the application of 

subclause (1), the remaining amount may be distributed as supplemental grants to any State, as the Administration determines, in its discretion, to be appropriate, after consultation with the association referred 

to in subsection (a)(3)(A). 

(v) USE OF AMOUNTS.-

(!) IN GENERAL.-Of the amounts made available 

in any fiscal year to carry out this section-

(aa) not more than $500,000 may be used by 

the Administration to pay expenses enumerated in 

subparagraphs (B) through (D) of section 20(a)(l); 

and 

(bb) not more than $500,000 may be used by 

the Administration to pay the examination expenses enumerated in section 20(a)(l)(E). 

(II) LIMITATION.-No funds described in subclause 

(I) may be used for examination expenses under section 20(a)(l)(E) if the usage would reduce the amount 

of grants made available under clause (i)(l) of this subparagraph to less than $85,000,000 (after excluding 

any amounts provided in appropriations Acts, or accompanying report language, for specific institutions 

or for purposes other than the general small business 

development center program) or would further reduce 

the amount of such grants below such amount. 

(vi) EXCLUSIONS.-Grants provided to a State by the 

Administration or another Federal agency to carry out subsection (a)(6) or (c)(3)(G), or for supplemental grants set 

forth in clause (iv)(II) of this subparagraph, shall not be 

included in the calculation of maximum funding for a 

State under clause (ii) of this subparagraph. 

(vii) AUTHORIZATION OF APPROPRIATIONS.-There are 

authorized to be appropriated to carry out this subparagraph-
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221 SMALL BUSINESS ACT 

(!) $130,000,000 for fiscal year 2005; and 

(II) $135,000,000 for fiscal year 2006. 

Sec. 21 

(viii) LIMITATION.-From the funds appropriated pursuant to clause (vii), the Administration shall reserve not 

less than $1,000,000 in each fiscal year to develop portable 

assistance for startup and sustainability non-matching 

grant programs to be conducted by eligible small business 

development centers in communities that are economically 

challenged as a result of a business or government facility 

down sizing or closing, which has resulted in the loss of 

jobs or small business instability. A non-matching grant 

under this clause shall not exceed $100,000, and shall be 

used for small business development center personnel expenses and related small business programs and services. 

(ix) STATE DEFINED.-In this subparagraph, the term 

"State" means each of the several States, the District of 

Columbia, the Commonwealth of Puerto Rico, the Virgin 

Islands, Guam, and American Samoa. 

(5) FEDERAL CONTRACTS WITH SMALL BUSINESS DEVELOPMENT 

CENTERS.-

(A) IN GENERAL.-Subject to the conditions set forth in 

subparagraph (B), a small business development center may 

enter into a contract with a Federal department or agency to 

provide specific assistance to small business concerns. 

(B) CONTRACT PREREQUISITES.-Before bidding on a contract described in subparagraph (A), a small business development center shall receive approval from the Associate Administrator of the small business development center program of the 

subject and general scope of the contract. Each approval under 

subparagraph (A) shall be based upon a determination that the 

contract will provide assistance to small business concerns and 

that performance of the contract will not hinder the small business development center in carrying out the terms of the grant 

received by the small business development center from the 

Administration. 

(C) EXEMPTION FROM MATCHING REQUIREMENT.-A contract 

under this paragraph shall not be subject to the matching 

funds or eligibility requirements of paragraph (4). 

(D) ADDITIONAL PROVISION.-Notwithstanding any other 

provision of law, a contract for assistance under this paragraph shall not be applied to any Federal department or agency's 

small business, woman-owned business, or socially and economically disadvantaged business contracting goal under section 15(g). 

(6) 75 Any applicant which is funded by the Administration 

as a Small Business Development Center may apply for an additional grant to be used solely to assist-

(A) with the development and enhancement of exports 

by small business concerns; 

(B) in technology transfer; and 

(C) with outreach, development, and enhancement of 

minority-owned small business startups or expansions, 

75 So in law. Section 2l(a)(6) indention probably should be moved two ems to left. 
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Sec. 21 SMALL BUSINESS ACT 222 

HUBZone small business concerns, veteran-owned small 

business startups or expansions, and women-owned small 

business startups or expansions, in communities impacted 

by base closings or military or corporate downsizing, or in 

rural or underserved communities; 

as provided under subparagraphs (B) through (G) of subsection 

(c)(3). Applicants for such additional grants shall comply with 

all of the provisions of this section, including providing matching funds, except that funding under this paragraph shall be 

effective for any fiscal year to the extent provided in advance 

in appropriations Acts and shall be in addition to the dollar 

program limitations specified in paragraphs (4) and (5). No recipient of funds under this paragraph shall receive a grant 

which would exceed its pro rata share of a $15,000,000 program based upon the populations to be served by the Small 

Business Development Center as compared to the total population of the United States. The minimum amount of eligibility 

for any State shall be $100,000. 

(7) PRIVACY REQUIREMENTS.-

(A) IN GENERAL.-A small business development center, consortium of small business development centers, or 

contractor or agent of a small business development center 

may not disclose the name, address, or telephone number 

of any individual or small business concern receiving assistance under this section without the consent of such individual or small business concern, unless-

(i) the Administrator is ordered to make such a 

disclosure by a court in any civil or criminal enforcement action initiated by a Federal or State agency; or 

(ii) the Administrator considers such a disclosure 

to be necessary for the purpose of conducting a financial audit of a small business development center, but 

a disclosure under this clause shall be limited to the 

information necessary for such audit. 

(B) ADMINISTRATOR USE OF INFORMATION.-This section shall not-

(i) restrict Administrator access to program activity data; or 

(ii) prevent the Administrator from using client 

information to conduct client surveys. 

(C) REGULATIONS.-

(i) IN GENERAL.-The Administrator shall issue 

regulations to establish standards-

(!) for disclosures with respect to financial audits under subparagraph (A)(ii); and 

(II) for client surveys under subparagraph 

(B)(ii), including standards for oversight of such 

surveys and for dissemination and use of client information. 

(ii) MAxiMUM PRIVACY PROTECTION.-Regulations 

under this subparagraph, shall, to the extent practicable, provide for the maximum amount of privacy 

protection. 
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223 SMALL BUSINESS ACT Sec. 21 

(iii) INSPECTOR GENERAL.-Until the effective date 

of regulations under this subparagraph, any client survey and the use of such information shall be approved 

by the Inspector General who shall include such approval in his semi-annual report. 

(8) CYBERSECURITY ASSISTANCE.-

(A) IN GENERAL.-The Department of Homeland Security, and any other Federal department or agency in coordination with the Department of Homeland Security, 

may leverage small business development centers to provide assistance to small business concerns by disseminating information relating to cybersecurity risks and 

other homeland security matters to help small business 

concerns in developing or enhancing cybersecurity infrastructure, awareness of cyber threat indicators, and cyber 

training programs for employees. 

(B) DEFINITIONS.-In this paragraph, the terms "cybersecurity risk" and "cyber threat indicator" have the 

meanings given such terms, respectively, under section 

227(a) of the Homeland Security Act of 2002 (6 U.S.C. 

148(a)). 

(b)(l) Financial assistance shall not be made available to any 

applicant if approving such assistance would be inconsistent with 

a plan for the area involved which has been adopted by an agency 

recognized by the State government as authorized to do so and approved by the Administration in accordance with the standards and 

requirements established pursuant to this section. 

(2) An applicant may apply to participate in the program by 

submitting to the Administration for approval a plan naming those 

authorized in subsection (a) to participate in the program, the geographic area to be served, the services that it would provide, the 

method for delivering services, a budget, and any other information 

and assurances the Administration may require to insure that the 

applicant will carry out the activities eligible for assistance. The 

Administration is authorized to approve, conditionally approve or 

reject a plan or combination of plans submitted. In all cases, the 

Administration shall review plans for conformity with the plan submitted pursuant to paragraph (1) of this subsection, and with a 

view toward providing small business with the most comprehensive 

and coordinated assistance in the State or part thereof to be 

served. 

(3) ASSISTANCE TO OUT-OF-STATE SMALL BUSINESS CONCERNS.-

(A) IN GENERAL.-At the discretion of the Administration, the Administration is authorized to permit a small 

business development center to provide advice, information 

and assistance, as described in subsection (c), to small 

businesses located outside the State, but only to the extent 

such businesses are located within close geographical proximity to the small business development center, as determined by the Administration. 

(B) DISASTER RECOVERY ASSISTANCE.-

(i) IN GENERAL.-At the discretion of the Administrator, the Administrator may authorize a small busi-
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Sec. 21 SMALL BUSINESS ACT 224 

ness development center to provide advice, information, and assistance, as described in subsection (c), to 

a small business concern located outside of the State, 

without regard to geographic proximity to the small 

business development center, if the small business 

concern is located in an area for which the President 

has declared a major disaster. 

(ii) TERM.-

(1) IN GENERAL.-A small business development center may provide advice, information, and 

assistance to a small business concern under 

clause (i) for a period of not more than 2 years 

after the date on which the President declared a 

major disaster for the area in which the small 

business concern is located. 

(II) EXTENSION.-The Administrator may, at 

the discretion of the Administrator, extend the period described in subclause (1). 

(iii) CONTINUITY OF SERVICES.-A small business 

development center that provides counselors to an 

area described in clause (i) shall, to the maximum extent practicable, ensure continuity of services in any 

State in which the small business development center 

otherwise provides services. 

(iv) ACCESS TO DISASTER RECOVERY FACILITIES.-

For purposes of this subparagraph, the Administrator 

shall, to the maximum extent practicable, permit the 

personnel of a small business development center to 

use any site or facility designated by the Administrator for use to provide disaster recovery assistance. 

(c)(l) Applicants receiving grants under this section shall assist 

small businesses in solving problems concerning operations, manufacturing, engineering, technology exchange and development, personnel administration, marketing, sales, merchandising, finance, 

accounting, business strategy development, and other disciplines 

required for small business growth and expansion, innovation, increased productivity, and management improvement, and for decreasing industry economic concentrations. Applicants receiving 

grants under this section may also assist small businesses by providing, where appropriate, education on the requirements applicable to small businesses under the regulations issued under section 

38 of the Arms Export Control Act (22 U.S.C. 2778) and on compliance with those requirements. 

(2) A small business development center shall provide services 

as close as possible to small businesses by providing extension 

services and utilizing satellite locations when necessary. The facilities and staff of each Small Business Development Center shall be 

located in such places as to provide maximum accessibility and 

benefits to the small businesses which the center is intended to 

serve. To the extent possible, it also shall make full use of other 

Federal and State government programs that are concerned with 

aiding small business. A small business development center shall 

have-
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225 SMALL BUSINESS ACT Sec. 21 

(A) a full-time staff, including a full-time director who 

shall have the authority to make expenditures under the center's budget and who shall manage the program activities; 

(B) access to business analysts to counsel, assist, and inform small business clients; 

(C) access to technology transfer agent to provide state or 

art technology to small businesses through coupling with national and regional technology data sources; 

(D) access to information specialists to assist in providing 

information searches and referrals to small business; 

(E) access to part-time professional specialists to conduct 

research or to provide counseling assistance whenever the need 

arises; 

(F) access to laboratory and adaptive engineering facilities; 

and 

(G) access to cybersecurity specialists to counsel, assist, 

and inform small business concem clients, in furtherance of 

the Small Business Development Center Cyber Strategy developed under section 184l(a) of the National Defense Authorization Act for Fiscal Year 2017. 

(3) Services provided by a small business development center 

shall include, but shall not be limited to-

(A) fumishing one-to-one individual counseling to small 

businesses, including-

(i) working with individuals to increase awareness of 

basic credit practices and credit requirements; 

(ii) working with individuals to develop business 

plans, financial packages, credit applications, and contract 

proposals; 

(iii) working with the Administration to develop and 

provide informational tools for use in working with individuals on pre-business startup planning, existing business 

expansion, and export planning; and 

(iv) working with individuals referred by the local offices of the Administration and Administration participating lenders; 

(B) assisting in technology transfer, research and development, including applied research, and coupling from existing 

sources to small businesses, including-

(i) working to increase the access of small businesses 

to the capabilities of automated flexible manufacturing 

systems; 

(ii) working through existing networks and developing 

new networks for technology transfer that encourage partnership between the small business and academic communities to help commercialize university-based research and 

development and introduce university-based engineers and 

scientists to their counterparts in small technology-based 

firms; and 

(iii) exploring the viability of developing shared production facilities, under appropriate circumstances; 

(C) in cooperation with the Department of Commerce and 

other relevant Federal agencies, actively assisting small businesses in exporting by identifying and developing potential ex-
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Sec. 21 SMALL BUSINESS ACT 226 

port markets, facilitating export transactions, developing linkages between United States small business firms and 

prescreened foreign buyers, assisting small businesses to participate in international trade shows, assisting small businesses in obtaining export financing, and facilitating the development or reorientation of marketing and production strategies; where appropriate, the Small Business Development Center and the Administration may work in cooperation with the 

State to establish a State international trade center for these 

purposes; 

(D) developing a program in conjunction with the ExportImport Bank and local and regional Administration offices that 

will enable Small Business Development Centers to serve as 

an information network and to assist small business applicants 

for Export-Import Bank financing programs, and otherwise 

identify and help to make available export financing programs 

to small businesses; 

(E) working closely with the small business community, 

small business consultants, State agencies, universities and 

other appropriate groups to make translation services more 

readily available to small business firms doing business, or attempting to develop business, in foreign markets; 

(F) in providing assistance under this subsection, applicants shall cooperate with the Department of Commerce and 

other relevant Federal agencies to increase access to available 

export market information systems, including the CIMS system· 

'(G) assisting small businesses to develop and implement 

strategic business plans to timely and effectively respond to 

the planned closure (or reduction) of a Department of Defense 

facility within the community, or actual or projected reductions 

in such firms' business base due to the actual or projected termination (or reduction) of a Department of Defense program or 

a contract in support of such program-

(i) by developing broad economic assessments of the 

adverse impacts of-

(!) the closure (or reduction) of the Department of 

Defense facility on the small business concerns providing goods or services to such facility or to the military and civilian personnel currently stationed or 

working at such facility; and 

(II) the termination (or reduction) of a Department of Defense program (or contracts under such program) on the small business concerns participating in 

such program as a prime contractor, subcontractor or 

supplier at any tier; 

(ii) by developing, in conjunction with appropriate Federal, State, and local governmental entities and other private sector organizations, the parameters of a transition 

adjustment program adaptable to the needs of individual 

small business concerns; 

(iii) by conducting appropriate programs to inform the 

affected small business community regarding the anticipated adverse impacts identified under clause (i) and the 
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227 SMALL BUSINESS ACT Sec. 21 

economic adjustment assistance available to such finns; 

and 

(iv) by assisting small business concerns to develop 

and implement an individualized transition business plan. 

(H) maintaining current information concerning Federal, 

State, and local regulations that affect small businesses and 

counsel small businesses on methods of compliance. Counseling 

and technology development shall be provided when necessary 

to help small businesses find solutions for complying with environmental, energy, health, safety, and other Federal, State, 

and local regulations; 

(I) coordinating and conducting research into technical and 

general small business problems for which there are no ready 

solutions; 

(J) providing and maintaining a comprehensive library 

that contains current infonnation and statistical data needed 

by small businesses; 

(K) maintaining a working relationship and open communications with the financial and investment communities, legal 

associations, local and regional private consultants, and local 

and regional small business groups and associations in order 

to help address the various needs of the small business community; 

(L) conducting in-depth surveys for local small business 

groups in order to develop general infonnation regarding the 

local economy and general small businesses strengths and 

weaknesses in the locality; 

(M) in cooperation with the Department of Commerce, the 

Administration and other relevant Federal agencies, actively 

assisting rural small businesses in exporting by identifying 

and developing potential export markets for rural small businesses, facilitating export transactions for rural small businesses, developing linkages between United States' rural small 

businesses and prescreened foreign buyers, assisting rural 

small businesses to participate in international trade shows, 

assisting rural small businesses in obtaining export financing 

and developing marketing and production strategies; 

(N) assisting rural small businesses-

(i) in developing marketing and production strategies 

that will enable them to better compete in the domestic 

market-

(ii) by providing technical assistance needed by rural 

small businesses; 

(iii) by making available managerial assistance to 

rural small business concerns; and 

(iv) by providing information and assistance in obtaining financing for business startups and expansion; 

(0) in conjunction with the United States Travel and Tourism Administration, assist rural small business in developing 

the tourism potential of rural communities by-

(i) identifying the cultural, historic, recreational, and 

scenic resources of such communities; 
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Sec. 21 SMALL BUSINESS ACT 228 

(ii) providing assistance to small businesses in developing tourism marketing and promotion plans relating to 

tourism in rural areas; and 

(iii) assisting small business concerns to obtain capital 

for starting or expanding businesses primarily serving 

tourists; 

(P) maintaining lists of local and regional private consultants to whom small business can be referred; 

(Q) providing information to small business concerns regarding compliance with regulatory requirements; 

(R) developing informational publications, establishing resource centers of reference materials, and distributing compliance guides published under section 312(a) of the Small Business Regulatory Enforcement Fairness Act of 1996; 

(S) providing small business owners with access to a wide 

variety of export-related information by establishing on-line 

computer linkages between small business development centers and an international trade data information network with 

ties to the Export Assistance Center program; and 

(T) providing information and assistance to small business 

concerns with respect to establishing drug-free workplace programs on or before October 1, 2006. 

(4) A small business development center shall continue to upgrade and modify its services, as needed, in order to meet the 

changing and evolving needs of the small business community. 

(5) In addition to the methods prescribed in section 21(c)(2), a 

small business development center shall utilize and compensate as 

one of its resources qualified small business vendors, including but 

not limited to, private management consultants, private consulting 

engineers and private testing laboratories, to provide services as 

described in this subsection to small businesses on behalf of such 

small business development center. 

(6) In any State (A) in which the Administration has not made 

a grant pursuant to paragraph (1) of subsection (a), or (B) in which 

no application for a grant has been made by a Small Business Development Center pursuant to paragraph (6) of such subsection 

within 60 days after the effective date of any grant under subsection (a)(l) to such center or the date the Administration notifies 

the grantee funded under subsection (a)(l) that funds are available 

for grant applications pursuant to subsection (a)(6), whichever date 

occurs last, the Administration may make grants to a non-profit 

entity in that State to carry out the activities specified in paragraph (6) of subsection (a). Any such applicants shall comply with 

the matching funds requirement of paragraph (4) of subsection (a). 

Such grants shall be effective for any fiscal year only to the extent 

provided in advance in appropriations Acts, and each State shall be 

limited to the pro rata share provisions of paragraph (6) of subsection (a). 

(7) In performing the services identified in paragraph (3), 

the Small Business Development Centers shall work in close 

cooperation with the Administration's regional and local offices, the local small business community, and appropriate 

State and local agencies. 
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229 SMALL BUSINESS ACT Sec. 21 

(8) The Associate Administrator for Small Business Development Centers, in consultation with the Small Business Development Centers, shall develop and implement an information sharing system. Subject to amounts approved in advance 

in appropriations Acts, the Administration may make grants or 

enter cooperative agreements with one or more centers to carry 

out the provisions of this paragraph. Said grants or cooperative 

agreements shall be awarded for periods of no more than five 

years duration. The matching funds provisions of subsection (a) 

shall not be applicable to grants or cooperative agreements under this paragraph. The system shall-

(A) allow Small Business Development Centers partici- pating in the program to exchange information about their 

programs; and 

(B) provide information central to technology transfer. 

(d) Where appropriate, the Small Business Development Centers shall work in conjunction with the relevant State agency and 

the Department of Commerce to develop a comprehensive plan for 

enhancing the export potential of small businesses located within 

the State. This plan may involve the cofunding and staffing of a 

State Office of International Trade within the State Small Business 

Development Center, using joint State and Federal funding, and 

any other appropriate measures directed at improving the export 

performance of small businesses within the State. 

(e) Laboratories operated and funded by the Federal Government are authorized and directed to cooperate with the Administration in developing and establishing programs to support small 

business development centers by making facilities and equipment available; providing experiment station capabilities in adaptive engineering; providing library and technical information processing capabilities; and providing professional staff for consulting. The Administration is authorized to reimburse the laboratories for such 

services. 

(f) The National Science Foundation is authorized and directed 

to cooperate with the Administration and with the Small Business 

Development Centers in developing and establishing programs to 

support the centers. 

(g) NATIONAL AERONAUTICS AND SPACE ADMINISTRATION AND 

REGIONAL TECHNOLOGY TRANSFER CENTERS.-The National Aeronautics and Space Administration and regional technology transfer 

centers supported by the National Aeronautics and Space Administration are authorized and directed to cooperate with small business development centers participating in the program. (h) ASSOCIATE ADMINISTRATOR FOR SMALL BUSINESS DEVELOPMENT CENTERS.-

(!) APPOINTMENT AND COMPENSATION.-The Administrator 

shall appoint an Associate Administrator for Small Business 

Development Centers who shall report to an official who is not 

more than one level below the Office of the Administrator and 

who shall serve without regard to the provisions of title 5, gov- erning appointments in the competitive service, and without 

regard to chapter 51, and subchapter III of chapter 53 of such 

title relating to classification and General Schedule pay rates, 
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Sec. 21 SMALL BUSINESS ACT 230 

but at a rate not less than the rate of GS-17 of the General 

Schedule. 

(2) DUTIES.-

(A) IN GENERAL.-The sole responsibility of the Associate Administrator for Small Business Development Centers shall be to administer the small business development 

center program. Duties of the position shall include recommending the annual program budget, reviewing the annual 

budgets submitted by each applicant, establishing appropriate funding levels therefore, selecting applicants to participate in this program, implementing the provisions of 

this section, maintaining a clearinghouse to provide for the 

dissemination and exchange of information between small 

business development centers and conducting audits of recipients of grants under this section. 

(B) CONSULTATION REQUIREMENTS.-ln carrying out 

the duties described in this subsection, the Associate Administrator shall confer with and seek the advice of the 

Board established by subsection (i) and Administration officials in areas served by the small business development 

centers; however, the Associate Administrator shall be responsible for the management and administration of the 

program and shall not be subject to the approval or concurrence of such Administration officials. 

(i)(1) There is established a National Small Business Development Center Advisory Board (herein referred to as "Board") which 

shall consist of nine members appointed from civilian life by the 

Administrator and who shall be persons of outstanding qualifications known to be familiar and sympathetic with small business 

needs and problems. No more than three members shall be from 

universities or their affiliates and six shall be from small businesses or associations representing small businesses. At the time 

of the appointment of the Board, the Administrator shall designate 

one-third of the members and at least one from each category 

whose term shall end in two years from the date of appointment, 

a second third whose term shall end in three years from the date 

of appointment, and the final third whose term shall end in four 

years from the date of appointment. Succeeding Boards shall have 

three-year terms, with one-third of the Board changing each year. 

(2) The Board shall elect a Chairman and advise, counsel, and 

confer with the Associate Administrator for Small Business Development Centers in carrying out the duties described in this section. 

The Board shall meet at least semiannually and at the call of the 

Chairman of the Board. Each member of the Board shall be entitled to be compensated at the rate not in excess of the per diem 

equivalent of the highest rate of pay for individuals occupying the 

position under GS-18 of the General Schedule for each day engaged in activities of the Board and shall be entitled to be reimbursed for expenses as a member of the Board. 

(j)(1) Each small business development center shall establish 

an advisory board. 

(2) Each small business development center advisory board 

shall elect a chairman and advise, counsel, and confer with the director of the small business development center on all policy mat-
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231 SMALL BUSINESS ACT Sec. 21 

ters pertaining to the operation of the small business development 

center, including who may be eligible to receive assistance from, 

and how local and regional private consultants may participate 

with the small business development center. 

(k) PROGRAM EXAMINATION AND ACCREDITATION.-

(1) EXAMINATION.-Not later than 180 days after the date 

of enactment of this subsection, the Administration shall develop and implement a biennial programmatic and financial 

examination of each small business development center established pursuant to this section. 

(2) ACCREDITATION.-The Administration may provide financial support, by contract or otherwise, to the association authorized by subsection (a)(3)(A) for the purpose of developing a 

small business development center accreditation program. 

(3) EXTENSION OR RENEWAL OF COOPERATIVE AGREEMENTS.-

(A) IN GENERAL.-In extending or renewing a cooperative agreement of a small business development center, the 

Administration shall consider the results of the examination and accreditation program conducted pursuant to 

paragraphs (1) and (2). 

(B) ACCREDITATION REQUIREMENT.-After September 

30, 2000, the Administration may not renew or extend any 

cooperative agreement with a small business development 

center unless the center has been approved under the accreditation program conducted pursuant to this subsection, 

except that the Associate Administrator for Small Business 

Development Centers may waive such accreditation requirement, in the discretion of the Associate Administrator, upon a showing that the center is making a good 

faith effort to obtain accreditation. 

(1) CONTRACT AUTHORITY.-The authority to enter into contracts shall be in effect for each fiscal year only to the extent and 

in the amounts as are provided in advance in appropriations Acts. 

After the administration has entered a contract, either as a grant 

or a cooperative agreement, with any applicant under this section, 

it shall not suspend, terminate, or fail to renew or extend any such 

contract unless the Administration provides the applicant with 

written notification setting forth the reasons therefore and affording the applicant an opportunity for a hearing, appeal, or other administrative proceeding under the provisions of chapter 5 of title 5, 

United States Code. If any contract or cooperative agreement under 

this section with an entity that is covered by this section is not renewed or extended, any award of a successor contract or cooperative agreement under this section to another entity shall be made 

on a competitive basis. 

(m) PROHIBITION ON CERTAIN FEES.-A small business development center shall not impose or otherwise collect a fee or other 

compensation in connection with the provision of counseling services under this section. 

(n) VETERANS ASSISTANCE AND SERVICES PROGRAM.-

(1) IN GENERAL.-A small business development center 

may apply for a grant under this subsection to carry out a veterans assistance and services program. 
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Sec. 22 SMALL BUSINESS ACT 232 

(2) ELEMENTS OF PROGRAM.-Under a program carried out 

with a grant under this subsection, a small business development center shall-

(A) create a marketing campaign to promote awareness and education of the services of the center that are 

available to veterans, and to target the campaign toward 

veterans, service-disabled veterans, military units, Federal 

agencies, and veterans organizations; 

(B) use technology-assisted online counseling and distance learning technology to overcome the impediments to 

entrepreneurship faced by veterans and members of the 

Armed Forces; and 

(C) increase coordination among organizations that assist veterans, including by establishing virtual integration 

of service providers and offerings for a one-stop point of 

contact for veterans who are entrepreneurs or owners of 

small business concerns. 

(3) AMOUNT OF GRANTS.-A grant under this subsection 

shall be for not less than $75,000 and not more than $250,000. 

(4) FUNDING.-Subject to amounts approved in advance in 

appropriations Acts, the Administration may make grants or 

enter into cooperative agreements to carry out the provisions 

of this subsection. 

SEC. 22. [15 U.S.C. 649] OFFICE OF INTERNATIONAL TRADE. 

(a) ESTABLISHMENT.-

(1) OFFICE.-There is established within the Administration an Office of International Trade which shall implement 

the programs pursuant to this section for the primary purposes 

of increasing-

(A) the number of small business concerns that export; 

and 

(B) the volume of exports by small business concerns. 

(2) ASSOCIATE ADMINISTRATOR.-The head of the Office 

shall be the Associate Administrator for International Trade, 

who shall be responsible to the Administrator. 

(b) TRADE DISTRIBUTION NETWORK.-The Associate Administrator, working in close cooperation with the Secretary of Commerce, the United States Trade Representative, the Secretary of 

Agriculture, the Secretary of State, the President of the Export-Import Bank of the United States, the President of the Overseas Private Investment Corporation, Director of the United States Trade 

and Development Agency, and other relevant Federal agencies, 

small business development centers engaged in export promotion 

efforts, Export Assistance Centers, regional and district offices of 

the Administration, the small business community, and relevant 

State and local export promotion programs, shall-

(1) maintain a distribution network, using regional and 

district offices of the Administration, the small business development center network, networks of women's business centers, 

the Service Corps of Retired Executives authorized by section 

8(b)(l), and Export Assistance Centers, for programs relating 

to-

(A) trade promotion; 
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233 SMALL BUSINESS ACT 

(B) trade finance; 

(C) trade adjustment assistance; 

(D) trade remedy assistance; and 

(E) trade data collection; 

Sec. 22 

(2) aggressively market the programs described in paragraph (1) and disseminate information, including computerized 

marketing data, to small business concerns on exporting 

trends, market-specific growth, industry trends, and international prospects for exports; 

(3) promote export assistance programs through the district and regional offices of the Administration, the small business development center network, Export Assistance Centers, 

the network of women's business centers, chapters of the Service Corps of Retired Executives, State and local export promotion programs, and partners in the private sector; and 

(4) give preference in hiring or approving the transfer of 

any employee into the Office or to a position described in subsection (c)(9) to otherwise qualified applicants who are fluent 

in a language in addition to English, to-

(A) accompany small business concerns on foreign 

trade missions; and 

(B) translate documents, interpret conversations, and 

facilitate multilingual transactions, including by providing 

referral lists for translation services, if required. 

(c) PROMOTION 01'' SALES 0PPORTUNITIES.-The Associate Administrator shall promote sales opportunities for small business 

goods and services abroad. To accomplish this objective the office 

shall-

(1) establish annual goals for the Office relating to-

(A) enhancing the exporting capability of small business concerns and small manufacturers; 

(B) facilitating technology transfers; 

(C) enhancing programs and services to assist small 

business concerns and small manufacturers to compete effectively and efficiently in foreign markets; 

(D) increasing the ability of small business concerns to 

access capital; and 

(E) disseminating information concerning Federal, 

State, and private programs and initiatives; 

(2) in cooperation with the Department of Commerce, other 

relevant agencies, regional and local Administration offices, the 

Small Business Development Center network, and State programs, develop a mechanism for-

(A) identifying subsectors of the small business community with strong export potential; 

(B) identifying areas of demand in foreign markets; 

(C) prescreening foreign buyers for commercial and 

credit purposes; and 

(D) assisting in increasing international marketing by 

disseminating relevant information regarding market 

leads, linking potential sellers and buyers, and catalyzing 

the formation of joint ventures, where appropriate; 

(3) in cooperation with the Department of Commerce, actively assist small business concerns in forming and using ex-
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Sec. 22 SMALL BUSINESS ACT 234 

port trading companies, export management companies and research and development pools authorized under section 9 of 

this Act; 

(4) work in conjunction with other Federal agencies, regional and district offices of the Administration, the small business development center network, and the private sector to 

identify and publicize translation services, including those 

available through colleges and universities participating in the 

small business development center program; 

(5) work closely with the Department of Commerce and 

other relevant Federal agencies to-

(A) collect, analyze and periodically update relevant 

data regarding the small business share of United States 

exports and the nature of State exports (including the production of Gross State Product figures) and disseminate 

that data to the public and to Congress; 

(B) make recommendations to the Secretary of Commerce and to Congress regarding revision of the North 

American Industry Classification System codes to encompass industries currently overlooked and to create North 

American Industry Classification System codes for export 

trading companies and export management companies; 

(C) improve the utility and accessibility of existing export promotion programs for small business concerns; and 

(D) increase the accessibility of the Export Trading 

Company contact facilitation service; 

(6) make available to the small business community information regarding conferences on exporting and international 

trade sponsored by the public and private sector; 

(7) provide small business concerns with access to up to 

date and complete export information by-

(A) making available, at the regional and district offices of the Administration through cooperation with the 

Department of Commerce, export information, including, 

but not limited to, the worldwide information and trade 

system and world trade data reports; 

(B) maintaining a list of financial institutions that finance export operations; 

(C) maintaining a directory of all Federal, regional, 

State and private sector programs that provide export information and assistance to small business concerns; and 

(D) preparing and publishing such reports as it determines to be necessary concerning market conditions, 

sources of financing, export promotion programs, and other 

information pertaining to the needs of small business export firms so as to insure that the maximum information 

is made available to small business concerns in a readily 

usable form; 

(8) encourage through cooperation with the Department of 

Commerce, greater small business participation in trade fairs, 

shows, missions, and other domestic and overseas export development activities of the Department of Commerce; 

(9) facilitate decentralized delivery of export information 

and assistance to small business concerns by assigning pri-
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235 SMAll BUSINESS ACT Sec. 22 

mary responsibility for export development to one individual in 

each district office and providing each Administration regional 

office with a full-time export development specialist, who 

shall-

(A) assist small business concerns in obtaining export 

information and assistance from other Federal departments and agencies; 

(B) maintain a directory of all programs which provide 

export information and assistance to small business concerns in the region; 

(C) encourage financial institutions to develop and expand programs for export financing; 

(D) provide advice to personnel of the Administration 

involved in making loans, loan guarantees, and extensions 

and revolving lines of credit, and providing other forms of 

assistance to small business concerns engaged in exports; 

(E) within one hundred and eighty days of their appointment, participate in training programs designed by 

the Administrator, in conjunction with the Department of 

Commerce and other Federal departments and agencies, to 

study export programs and to examine the needs of small 

business concerns for export information and assistance; 

(F) participate, jointly with employees of the Office, in 

an annual training program that focuses on current small 

business needs for exporting; and 

(G) develop and conduct training programs for exporters and lenders, in cooperation with the Export Assistance 

Centers, the Department of Commerce, the Department of 

Agriculture, small business development centers, women's 

business centers, the Export-Import Bank of the United 

States, the Overseas Private Investment Corporation, and 

other relevant Federal agencies; 

(10) make available on the website of the Administration 

the name and contact information of each individual described 

in paragraph (9); 

(11) carry out a nationwide marketing effort using technology, online resources, training, and other strategies to promote exporting as a business development opportunity for 

small business concerns; 

(12) disseminate information to the small business community through regional and district offices of the Administration, 

the small business development center network, Export Assistance Centers, the network of women's business centers, chapters of the Service Corps of Retired Executives authorized by 

section 8(b)(1), State and local export promotion programs, and 

partners in the private sector regarding exporting trends, market-specific growth, industry trends, and prospects for exporting; and 

(13) establish and carry out training programs for the staff 

of the regional and district offices of the Administration and 

resource partners of the Administration on export promotion 

and providing assistance relating to exports. 

(d) EXPORT FINANCING PROGRAMS.-
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Sec. 22 SMAll BUSINESS ACT 236 

(1) IN GENERAL.-The Associate Administrator shall work 

in cooperation with the Export-Import Bank of the United 

States, the Department of Commerce, other relevant Federal 

agencies, and the States to develop a program through which 

export specialists in the regional offices of the Administration, 

regional and local loan officers, and Small Business Development Center personnel can facilitate the access of small businesses to relevant export financing programs of the Export-Import Bank of the United States and to export and pre-export 

financing programs available from the Administration and the 

private sector. 

(2) TRADE FINANCE SPECIALIST.-To accomplish the goal established under paragraph (1), the Associate Administrator 

shall-

(A) designate at least 1 individual within the Administration as a trade finance specialist to oversee international loan programs and assist Administration employees with trade finance issues; and 

(B) work in cooperation with the Export-Import Bank 

and the small business community, including small business trade associations, to-

(i) aggressively market existing Administration 

export financing and pre-export financing programs; 

(ii) identify financing available under various Export-Import Bank programs, and aggressively market 

those programs to small businesses; 

(iii) assist in the development of financial intermediaries and facilitate the access of those intermediaries to existing financing programs; 

(iv) promote greater participation by private financial institutions, particularly those institutions already participating in loan programs under this Act, 

in export finance; and 

(v) provide for the participation of appropriate Administration personnel in training programs conducted 

by the Export-Import Bank. 

(e) TRADE REMEDIES.-The Associate Administrator shall-

(1) work in cooperation with other Federal agencies and 

the private sector to counsel small businesses with respect to 

initiating and participating in any proceedings relating to the 

administration of the United States trade laws; and 

(2) work with the Department of Commerce, the Office of 

the United States Trade Representative, and the International 

Trade Commission to increase access to trade remedy proceedings for small businesses. 

(f) REPORTING REQUIREMENT.-The Associate Administrator 

shall submit an annual report to the Committee on Small Business 

and Entrepreneurship of the Senate and the Committee on Small 

Business of the House of Representatives that contains-

(1) a description of the progress of the Office in implementing the requirements of this section; 

(2) a detailed account of the results of export growth activities of the Administration, including the activities of each dis-
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237 SMALL BUSINESS ACT Sec. 22 

trict and regional office of the Administration, based on the 

performance measures described in subsection (i); 

(3) an estimate of the total number of jobs created or retained as a result of export assistance provided by the Administration and resource partners of the Administration; 

(4) for any travel by the staff of the Office, the destination 

of such travel and the benefits to the Administration and to 

small business concerns resulting from such travel; and 

(5) a description of the participation by the Office in trade 

negotiations. 

(g) STUDIES.-The Associate Administrator, in cooperation, 

where appropriate, with the Division of Economic Research of the 

Office of Advocacy, and with other Federal agencies, shall undertake studies regarding the following issues and shall report to the 

Committees on Small Business of the House of Representatives and 

the Senate, and to other relevant Committees of the House and 

Senate within 6 months after the date of enactment of the Small 

Business International Trade and Competitiveness Act with specific recommendations on-

(1) the viability and cost of establishing an annual, competitive small business export incentive program similar to the 

Small Business Innovation Research program and alternative 

methods of structuring such a program; 

(2) methods of streamlining trade remedy proceedings to 

increase access for, and reduce expenses incurred by, smaller 

firms; 

(3) methods of improving the current small business foreign sales corporation tax incentives and providing small businesses with greater benefits from this initiative; 

(4) methods of identifying potential export markets for 

United States small businesses; maintaining and disseminating current foreign market data; and devising a comprehensive export marketing strategy for United States small business goods and services, and shall include data on the volume 

and dollar amount of goods and services, identified by type, imported by United States trading partners over the past 10 

years; and 

(5) the results of a survey of major United States trading 

partners to identify the domestic policies, programs and incentives, and the private sector initiatives, which exist to encourage the formation and growth of small business. 

(h) DISCHARGE OF INTERNATIONAL TRADE RESPONSIBILITIES OF 

ADMINISTRATION.-The Administrator shall ensure that-

(1) the responsibilities of the Administration regarding 

international trade are carried out by the Associate Administrator; 

(2) the Associate Administrator has sufficient resources to 

carry out such responsibilities; and 

(3) the Associate Administrator has direct supervision and 

control over-

(A) the staff of the Office; and 

(B) any employee of the Administration whose principal duty station is an Export Assistance Center, or any 

successor entity. 
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Sec. 22 SMALL BUSINESS ACT 238 

(i) EXPORT AND TRADE COUNSELING.-

(1) DEFINITION.-In this subsection-

(A) the term "lead small business development center" 

means a small business development center that has received a grant from the Administration; and 

(B) the term "lead women's business center" means a 

women's business center that has received a grant from 

the Administration. 

(2) CERTIFICATION PROGRAM.-The Administrator shall establish an export and trade counseling certification program to 

certify employees of lead small business development centers 

and lead women's business centers in providing export assistance to small business concerns. 

(3) NUMBER OF CERTIFIED EMPLOYEES.-The Administrator 

shall ensure that the number of employees of each lead small 

business development center who are certified in providing export assistance is not less than the lesser of-

(A) 5; or 

(B) 10 percent of the total number of employees of the 

lead small business development center. 

(4) REIMBURSEMENT FOR CERTIFICATION.-

(A) IN GENERAL.-Subject to the availability of appropriations, the Administrator shall reimburse a lead small 

business development center or a lead women's business 

center for costs relating to the certification of an employee 

of the lead small business center or lead women's business 

center in providing export assistance under the program 

established under paragraph (2). 

(B) LIMITATION.-The total amount reimbursed by the 

Administrator under subparagraph (A) may not exceed 

$350,000 in any fiscal year. 

(j) PERFORMANCE MEASURES.-

(1) IN GENERAL.-The Associate Administrator shall develop performance measures for the Administration to support 

export growth goals for the activities of the Office under this 

section that include-

(A) the number of small business concerns that-

(i) receive assistance from the Administration; 

(ii) had not exported goods or services before receiving the assistance described in clause (i); and 

(iii) export goods or services; 

(B) the number of small business concerns receiving 

assistance from the Administration that export goods or 

services to a market outside the United States into which 

the small business concern did not export before receiving 

the assistance; 

(C) export revenues by small business concerns assisted by programs of the Administration; 

(D) the number of small business concerns referred to 

an Export Assistance Center or a small business development center by the staff of the Office; 

(E) the number of small business concerns referred to 

the Administration by an Export Assistance Center or a 

small business development center; and 
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239 SMALL BUSINESS ACT Sec. 22 

(F) the number of small business concerns referred to 

the Department of Commerce, the Department of Agriculture, the Department of State, the Export-Import Bank 

of the United States, the Overseas Private Investment 

Corporation, or the United States Trade and Development 

Agency by the staff of the Office, an Export Assistance 

Center, or a small business development center. 

(2) JOINT PERFORMANCE MEASURES.-The Associate Administrator shall develop joint performance measures for the district offices of the Administration and the Export Assistance 

Centers that include the number of export loans made under-

(A) section 7(a)(16); 

(B) the Export Working Capital Program established 

under section 7(a)(14); 

(C) the Preferred Lenders Program, as defined in section 7(a)(2)(C)(ii); and 

(D) the export express program established under section 7(a)(34). 

(3) CONSISTENCY OF TRACKING.-The Associate Administrator, in coordination with the departments and agencies that 

are represented on the Trade Promotion Coordinating Committee established under section 2312 of the Export Enhancement Act of 1988 (15 U.S.C. 4727) and the small business development center network, shall develop a system to track exports by small business concerns, including information relating to the performance measures developed under paragraph 

(1), that is consistent with systems used by the departments 

and agencies and the network. 

(k) EXPORT ASSISTANCE CENTERS.-

(1) EXPORT FINANCE SPECIALISTS.-

(A) MINIMUM NUMBER OF EXPORT FINANCE SPECIALISTS.-On and after the date that is 90 days after the date 

of enactment of this subsection, the Administrator, in coordination with the Secretary of Commerce, shall ensure 

that the number of export finance specialists is not less 

than the number of such employees so assigned on January 1, 2003. 

(B) EXPORT FINANCE SPECIALISTS ASSIGNED TO EACH 

REGION OF THE ADMINISTRATION.-On and after the date 

that is 2 years after the date of enactment of this subsection, the Administrator, in coordination with the Secretary of Commerce, shall ensure that there are not fewer 

than 3 export finance specialists in each region of the Administration. 

(2) PLACEMENT OF EXPORT FINANCE SPECIALISTS.-

(A) PRIORITY.-The Administrator shall give priority, 

to the maximum extent practicable, to placing employees 

of the Administration at any Export Assistance Center 

that-

(i) had an Administration employee assigned to 

the Export Assistance Center before January 2003; 

and 

(ii) has not had an Administration employee assigned to the Export Assistance Center during the pe-
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Sec. 22 SMALL BUSINESS ACT 240 

riod beginning January 2003, and ending on the date 

of enactment of this subsection, either through retirement or reassignment. 

(B) NEEDS OF EXPORTERS.-The Administrator shall, to 

the maximum extent practicable, strategically assign Administration employees to Export Assistance Centers, 

based on the needs of exporters. 

(C) RULE OF CONSTRUCTION.-Nothing in this subsection may be construed to require the Administrator to 

reassign or remove an export finance specialist who is assigned to an Export Assistance Center on the date of enactment of this subsection. 

(3) GOALS.-The Associate Administrator shall work with 

the Department of Commerce, the Export-Import Bank of the 

United States, and the Overseas Private Investment Corporation to establish shared annual goals for the Export Assistance 

Centers. 

(4) OVERSIGHT.-The Associate Administrator shall designate an individual within the Administration to oversee all 

activities conducted by Administration employees assigned to 

Export Assistance Centers. 

(l) STATE TRADE EXPANSION PROGRAM.-

(1) DEFINITIONS.-In this subsection-

(A) the term "eligible small business concern" means 

a business concern that-

(i) is organized or incorporated in the United 

States; 

(ii) is operating in the United States; 

(iii) meets-

(1) the applicable industry-based small business size standard established under section 3; or 

(II) the alternate size standard applicable to 

the program under section 7(a) of this Act and the 

loan programs under title V of the Small Business 

Investment Act of 1958 (15 U.S.C. 695 et seq.); 

(iv) has been in business for not less than 1 year, 

as of the date on which assistance using a grant under 

this subsection commences; and 

(v) has access to sufficient resources to bear the 

costs associated with trade, including the costs of 

packing, shipping, freight forwarding, and customs 

brokers; 

(B) the term "program" means the State Trade Expansion Program established under paragraph (2); 

(C) the term "rural small business concern" means an 

eligible small business concern located in a rural area, as 

that term is defined in section 1393(a)(2) of the Internal 

Revenue Code of 1986; 

(D) the term "socially and economically disadvantaged 

small business concern" has the meaning given that term 

in section 8(a)(4)(A) of the Small Business Act (15 U.S.C. 

637(a)(4)(A)); and 

(E) the term "State" means each of the several States, 

the District of Columbia, the Commonwealth of Puerto 
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241 SMALL BUSINESS ACT Sec. 22 

Rico, the Virgin Islands, Guam, the Commonwealth of the 

Northern Mariana Islands, and American Samoa. 

(2) ESTABLISHMENT OF PROGRAM.-The Associate Administrator shall establish a trade expansion program, to be known 

as the "State Trade Expansion Program", to make grants to 

States to carry out programs that assist eligible small business 

concerns in-

(A) participation in foreign trade missions; 

(B) a subscription to services provided by the Department of Commerce; 

(C) the payment of website fees; 

(D) the design of marketing media; 

(E) a trade show exhibition; 

(F) participation in training workshops; 

(G) a reverse trade mission; 

(H) procurement of consultancy services (after consultation with the Department of Commerce to avoid duplication); or 

(I) any other initiative determined appropriate by the 

Associate Administrator. 

(3) GRANTS.-

(A) JOINT REVIEW.-In carrying out the program, the 

Associate Administrator may make a grant to a State to 

increase the number of eligible small business concerns in 

the State exploring significant new trade opportunities. 

(B) CONSIDERATIONS.-In making grants under this 

subsection, the Associate Administrator may give priority 

to an application by a State that proposes a program 

that-

(i) focuses on eligible small business concerns as 

part of a trade expansion program; 

(ii) demonstrates intent to promote trade expansion by-

(l) socially and economically disadvantaged 

small business concerns; 

(II) small business concerns owned or controlled by women; and 

(III) rural small business concerns; 

(iii) promotes trade facilitation from a State that 

is not 1 of the 10 States with the highest percentage 

of eligible small business concerns that are engaged in 

international trade, based upon the most recent data 

from the Department of Commerce; and 

(iv) includes-

(!) activities which have resulted in the highest return on investment based on the most recent 

year; and 

(II) the adoption of shared best practices included in the annual report of the Administration. 

(C) LIMITATIONS.-

(i) SINGLE APPLICATION.-A State may not submit 

more than 1 application for a grant under the program 

in any 1 fiscal year. 
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Sec. 22 SMALL BUSINESS ACT 242 

(ii) PROPORTION OF AMOUNTS.-The total value of 

grants made under the program during a fiscal year to 

the 10 States with the highest percentage of eligible 

small business concerns, based upon the most recent 

data available from the Department of Commerce, 

shall be not more than 40 percent of the amounts appropriated for the program for that fiscal year. 

(iii) DURATION.-The Associate Administrator 

shall award a grant under this program for a period 

of not more than 2 years. 

(D) APPLICATION.-

(i) IN GENERAL.-A State desiring a grant under 

the program shall submit an application at such time, 

in such manner, and accompanied by such information 

as the Associate Administrator may establish. 

(ii) CONSULTATION TO REDUCE DUPLICATION.-A 

State desiring a grant under the program shall-

(1) before submitting an application under 

clause (i), consult with applicable trade agencies 

of the Federal Government on the scope and mission of the activities the State proposes to carry 

out using the grant, to ensure proper coordination 

and reduce duplication in services; and 

(II) document the consultation conducted 

under subclause (I) in the application submitted 

under clause (i). 

(4) COMPETITIVE BASIS.-The Associate Administrator shall 

award grants under the program on a competitive basis. 

(5) FEDERAL SHARE.-The Federal share of the cost of a 

trade expansion program carried out using a grant under the 

program shall be-

(A) for a State that has a high trade volume, as determined by the Associate Administrator, not more than 65 

percent; and 

(B) for a State that does not have a high trade volume, 

as determined by the Associate Administrator, not more 

than 75 percent. 

(6) NON-FEDERAL SHARE.-The non-Federal share of the 

cost of a trade expansion program carried out using a grant 

under the program shall be comprised of not less than 50 percent cash and not more than 50 percent of indirect costs and 

in-kind contributions, except that no such costs or contributions may be derived from funds from any other Federal program. 

(7) REPORTS.-

(A) INITIAL REPORT.-Not later than 120 days after the 

date of enactment of this subsection, the Associate Administrator 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, 

which shall include-

(i) a description of the structure of and procedures 

for the program; 

(ii) a management plan for the program; and 
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243 SMALL BUSINESS ACT Sec. 22 

(iii) a description of the merit-based review process to be used in the program. 

(B) ANNUAL REPORTS.-

(i) IN GENERAL.-The Associate Administrator 

shall publish on the website of the Administration an 

annual report regarding the program, which shall include-

(I) the number and amount of grants made 

under the program during the preceding year; 

(II) a list of the States receiving a grant under 

the program during the preceding year, including 

the activities being performed with each grant; 

(Ill) the effect of each grant on the eligible 

small business concerns in the State receiving the 

grant; 

(IV) the total return on investment for each 

State; and 

(V) a description of best practices by States 

that showed high returns on investment and significant progress in helping more eligible small 

business concerns. 

(ii) NOTICE TO CONGRESS.-On the date on which 

the Associate Administrator publishes a report under 

clause (i), the Associate Administrator shall notify the 

Committee on Small Business and Entrepreneurship 

of the Senate and the Committee on Small Business of 

the House of Representatives that the report has been 

published. 

(8) REVIEWS BY INSPECTOR GENERAL.-

(A) IN GENERAL.-The Inspector General of the Administration shall conduct a review of-

(i) the extent to which recipients of grants under 

the program are measuring the performance of the activities being conducted and the results of the measurements; and 

(ii) the overall management and effectiveness of 

the program. 

(B) REPORTS.-

(i) PILOT PROGRAM.-Not later than 6 months 

after the date of enactment of this subsection, the Inspector General of the Administration 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 regarding the use of amounts made available under the State 

Trade and Export Promotion Grant Program under 

section 1207 of the Small Business Jobs Act of 2010 

(15 U.S.C. 649b note). 

(ii) NEW STEP PROGRAM.-Not later than 18 

months after the date on which the first grant is 

awarded under this subsection, the Inspector General 

of the Administration shall submit to the Committee 

on Small Business and Entrepreneurship of the Senate and the Committee on Small Business of the 
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Sec. 23 SMALL BUSINESS ACT 244 

House of Representatives a report regarding the review conducted under subparagraph (A). 

(9) AUTHORIZATION OF APPROPRIATIONS.-There is authorized to be appropriated to carry out the program $30,000,000 

for each of fiscal years 2016 through 2020. 

(m) DEFINITIONS.-In this section-

(!) the term "Associate Administrator" means the Associate Administrator for International Trade described in subsection (a)(2); 

(2) the term "Export Assistance Center" means a one-stop 

shop for United States exporters established by the United 

States and Foreign Commercial Service of the Department of 

Commerce pursuant to section 2301(b)(8) of the Omnibus 

Trade and Competitiveness Act of 1988 (15 U.S.C. 4721(b)(8)); 

(3) the term "export finance specialist" means a full-time 

equivalent employee of the Office assigned to an Export Assistance Center to carry out the duties described in subsection (e); 

and 

(4) the term "Office" means the Office of International 

Trade established under subsection (a)(l). 

SEC. 23. [15 U.S.C. 650] SUPERVISORY AND ENFORCEMENT AUTHORITY 

FOR SMALL BUSINESS LENDING COMPANIES. 

(a) IN GENERAL.-The Administrator is authorized-

( 1) to supervise the safety and soundness of small business 

lending companies and non-Federally regulated lenders; 

(2) with respect to small business lending companies to set 

capital standards to regulate, to examine, and to enforce laws 

governing such companies, in accordance with the purposes of 

this Act; and 

(3) with respect to non-Federally regulated lenders to regulate, to examine, and to enforce laws governing the lending activities of such lenders under section 7(a) in accordance with 

the purposes of this Act. 

(b) CAPITAL DIRECTIVE.-

( I) IN GENERAL.-If the Administrator determines that a 

small business lending company is being operated in an imprudent manner, the Administrator may, in addition to any other 

action authorized by law, issue a directive to such company to 

increase capital to such level as the Administrator determines 

will result in the safe and sound operation of such company. 

(2) DELEGATION.-The Administrator may not delegate the 

authority granted under paragraph (1) except to an Associate 

Deputy Administrator. 

(3) REGULATIONS.-The Administrator shall issue regulations outlining the conditions under which the Administrator 

may determine the level of capital pursuant to paragraph (1). 

(c) CIVIL ACTION.-If a small business lending company violates this Act, the Administrator may institute a civil action in an 

appropriate district court to terminate the rights, privileges, and 

franchises of the company under this Act. 

(d) REVOCATION OR SUSPENSION OF LOAN AUTHORITY.-

( I) The Administrator may revoke or suspend the authority of a small business lending company or a non-Federally reg-
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245 SMALL BUSINESS ACT Sec. 23 

ulated lender to make, service or liquidate business loans authorized by section 7(a) of this Act-

(A) for false statements knowingly made in any written submission required under this Act; 

(B) for omission of a material fact from any written 

submission required under this Act; 

(C) for willful or repeated violation of this Act; 

(D) for willful or repeated violation of any condition 

imposed by the Administrator with respect to any application, request, or agreement under this Act; or 

(E) for violation of any cease and desist order of the 

Administrator under this section. 

(2) The Administrator may revoke or suspend authority 

under paragraph (1) only after a hearing under subsection (f). 

The Administrator may delegate power to revoke or suspend 

authority under paragraph (1) only to the Deputy Administrator and only if the Administrator is unavailable to take such 

action. 

(A) The Administrator, after finding extraordinary circumstances and in order to protect the financial or legal 

position of the United States, may issue a suspension 

order without conducting a hearing pursuant to subsection 

(f). If the Administrator issues a suspension under the preceding sentence, the Administrator shall within two business days follow the procedures set forth in subsection (f). 

(B) Any suspension under paragraph (1) shall remain 

in effect until the Administrator makes a decision pursuant to subparagraph (4) to permanently revoke the authority of the small business lending company or non-Federally 

regulated lender, suspend the authority for a time certain, 

or terminate the suspension. 

(3) The small business lending company or non-Federally 

regulated lender must notify borrowers of a revocation and 

that a new entity has been appointed to service their loans. 

The Administrator or an employee of the Administration designated by the Administrator may provide such notice to the 

borrower. 

(4) Any revocation or suspension under paragraph (1) shall 

be made by the Administrator except that the Administrator 

shall delegate to an administrative law judge as that term is 

used in section 3105 of title 5, United States Code, the authority to conduct any hearing required under subsection (f). The 

Administrator shall base the decision to revoke on the record 

of the hearing. 

(e) CEASE AND DESIST ORDER.-

(1) Where a small business lending company, a non-Federally regulated lender, or other person violates this Act or is engaging or is about to engage in any acts or practices which constitute or will constitute a violation of this Act, the Administrator may order, after the opportunity for hearing pursuant to 

subsection (f), the company, lender, or other person to cease 

and desist from such action or failure to act. The Administrator may delegate the authority under the preceding sen-
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Sec. 23 SMALL BUSINESS ACT 246 

tence only to the Deputy Administrator and only if the Administrator is unavailable to take such action. 

(2) The Administrator, after finding extraordinary circumstances and in order to protect the financial or legal position of the United States, may issue a cease and desist order 

without conducting a hearing pursuant to subsection <D. If the 

Administrator issues a cease and desist order under the preceding sentence, the Administrator shall within two business 

days follow the procedures set forth in subsection (f). 

(3) The Administrator may further order such small business lending company or non-Federally regulated lender or 

other person to take such action or to refrain from such action 

as the Administrator deems necessary to insure compliance 

with this Act. 

( 4) A cease and desist order under this subsection may also 

provide for the suspension of authority to lend in subsection 

(d). 

(D PROCEDURE FOR REVOCATION OR SUSPENSION OF LOAN AUTHORITY AND FOR CEASE AND DESIST 0RDER.-

(1) Before revoking or suspending authority under subsection (d) or issuing a cease and desist order under subsection 

(e), the Administrator shall serve an order to show cause upon 

the small business lending company, non-Federally regulated 

lender, or other person why an order revoking or suspending 

the authority or a cease and desist order should not be issued. 

The order to show cause shall contain a statement of the matters of fact and law asserted by the Administrator and the 

legal authority and jurisdiction under which a hearing is to be 

held, and shall set forth that a hearing will be held before an 

administrative law judge at a time and place stated in the 

order. Such hearing shall be conducted pursuant to the provisions of sections 554, 556, and 557 of title 5, United States 

Code. If after hearing, or a waiver thereof, the Administrator 

determines that an order revoking or suspending the authority 

or a cease and desist order should be issued, the Administrator 

shall promptly issue such order, which shall include a statement of the findings of the Administrator and the grounds and 

reasons therefor and specify the effective date of the order, and 

shall cause the order to be served on the small business lending company, non-Federally regulated lender, or other person 

involved. 

(2) Witnesses summoned before the Administrator shall be 

paid by the party at whose instance they were called the same 

fees and mileage that are paid witnesses in the courts of the 

United States. 

(3) A cease and desist order, suspension or revocation 

issued by the Administrator, after the hearing under this subsection is final agency action for purposes of chapter 7 of title 

5, United States Code. An adversely aggrieved party shall have 

20 days from the date of issuance of the cease and desist order, 

suspension or revocation, to seek judicial review in an appropriate district court. 

(g) REMOVAL OR SUSPENSION OF MANAGEMENT OFFICIAL.-
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247 SMALL BUSINESS ACT Sec. 23 

(1) DEFINITION.-In this section, the term "management official" means, with respect to a small business lending company or a non-Federally regulated lender, an officer, director, 

general partner, manager, employee, agent, or other participant in the management of the affairs of the company's or 

lender's activities under section 7(a) of this Act. 

(2) REMOVAL OF MANAGEMENT OFFICIAL.-

(A) NOTICE.-The Administrator may serve upon any 

management official a written notice of its intention to remove that management official if, in the opinion of the Administrator, the management official-

(i) willfully and knowingly commits a substantial 

violation of-

(1) this Act; 

(II) any regulation issued under this Act; 

(III) a final cease-and-desist order under this 

Act; or 

(IV) any agreement by the management official, the small business lending company or nonFederally regulated lender under this Act; or 

(ii) willfully and knowingly commits a substantial 

breach of a fiduciary duty of that person as a management official and the violation or breach of fiduciary 

duty is one involving personal dishonesty on the part 

of such management official. 

(B) CONTENTS OF NOTICE.-A notice under subparagraph (A) shall contain a statement of the facts constituting grounds therefor and shall fix a time and place at 

which a hearing, conducted pursuant to sections 554, 556, 

and 557 of title 5, United States Code, will be held thereon. 

(C) HEARING.-

(i) TIMING.-A hearing under subparagraph (B) 

shall be held not earlier than 30 days and later than 

60 days after the date of service of notice of the hearing, unless an earlier or a later date is set by the Administrator at the request of-

(1) the management official, and for good 

cause shown; or 

(II) the Attorney General. 

(ii) CONSENT.-Unless the management official appears at a hearing under this paragraph in person or 

by a duly authorized representative, the management 

official shall be deemed to have consented to the 

issuance of an order of removal under subparagraph 

(A). 

(D) ORDER OF REMOVAL.-

(i) IN GENERAL.-In the event of consent under 

subparagraph (C)(ii), or if upon the record made at a 

hearing under this subsection, the Administrator finds 

that any of the grounds specified in the notice of removal has been established, the Administrator may 

issue such orders of removal from office as the Administrator deems appropriate. 
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Sec. 23 SMALL BUSINESS ACT 248 

(ii) EFFECTIVENESS.-An order under clause (i) 

shall-

(1) take effect 30 days after the date of service 

upon the subject small business lending company 

or non-Federally regulated lender and the management official concerned (except in the case of 

an order issued upon consent as described in subparagraph (C)(ii), which shall become effective at 

the time specified in such order); and 

(II) remain effective and enforceable, except to 

such extent as it is stayed, modified, terminated, 

or set aside by action of the Administrator or a reviewing court in accordance with this section. 

(3) AUTHORITY TO SUSPEND OR PROHIBIT PARTICIPATION.-

(A) IN GENERAL.-In order to protect a small business 

lending company, a non-Federally regulated lender or the 

interests of the Administration or the United States, the 

Administrator may suspend from office or prohibit from 

further participation in any manner in the management or 

conduct of the affairs of a small business lending company 

or a non-Federally regulated lender a management official 

by written notice to such effect served upon the management official. Such suspension or prohibition may prohibit 

the management official from making, servicing, reviewing, approving, or liquidating any loan under section 7(a) 

of this Act. 

(B) EFFECTIVENESS.-A suspension or prohibition 

under subparagraph (A}-

(i) shall take effect upon service of notice under 

paragraph (2); and 

(ii) unless stayed by a court in proceedings authorized by subparagraph (C), shall remain in effect-

(!) pending the completion of the administrative proceedings pursuant to a notice of intention 

to remove served under paragraph (2); and 

(II) until such time as the Administrator dismisses the charges specified in the notice, or, if an 

order of removal or prohibition is issued against the management official, until the effective date of 

any such order. 

(C) JUDICIAL REVIEW OF SUSPENSION PRIOR TO HEARING.-Not later than 10 days after a management official 

is suspended or prohibited from participation under subparagraph (A), the management official may apply to an 

appropriate district court for a stay of the suspension or 

prohibition pending the completion of the administrative 

proceedings pursuant to a notice of intent to remove 

served upon the management official under paragraph (2). 

( 4) AUTHORITY TO SUSPEND ON CRIMINAL CHARGES.-

(A) IN GENERAL.-If a management official is charged 

in any information, indictment, or complaint authorized by 

a United States attorney, with a felony involving dishonesty or breach of trust, the Administrator may, by written 

notice served upon the management official, suspend the 
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249 SMALL BUSINESS ACT Sec. 23 

management official from office or prohibit the management official from further participation in any manner in 

the management or conduct of the affairs of the small 

business lending company or non-Federally regulated lender. 

(B) EFFECTIVENESS.-A suspension or prohibition 

under subparagraph (A) shall remain in effect until the information, indictment, or complaint is finally disposed of, 

or until terminated by the Administrator or upon an order 

of a district court. 

(C) AUTHORITY UPON CONVICTION.-lf a judgment of 

conviction with respect to an offense described in subparagraph (A) is entered against a management official, then 

at such time as the judgment is not subject to further judicial review (and for purposes of this subparagraph shall 

not include any petition for a writ of habeas corpus), the 

Administrator may issue and serve upon the management 

official an order removing the management official, effective upon service of a copy of the order upon the small 

business lending company or non-Federally regulated lender. 

(D) AUTHORITY UPON DISMISSAL OR OTHER DISPOSITION.-A finding of not guilty or other disposition of 

charges described in subparagraph (A) shall not preclude 

the Administrator from instituting proceedings under subsection (e) or (f). 

(5) NOTIFICATION TO SMALL BUSINESS LENDING COMPANY 

OR A NON-FEDERALLY REGULATED LENDER.-Copies of each notice required to be served on a management official under this 

section shall also be served upon the small business lending 

company or non-Federally regulated lender involved. 

(6) FINAL AGENCY ACTION AND JUDICIAL REVIEW.-

(A) ISSUANCE OF ORDERS.-After a hearing under this 

subsection, and not later than 30 days after the Administrator notifies the parties that the case has been submitted 

for final decision, the Administrator shall render a decision 

in the matter (which shall include findings of fact upon 

which its decision is predicated), and shall issue and cause 

to be served upon each party to the proceeding an order 

or orders consistent with this section. The decision of the 

Administrator shall constitute final agency action for purposes of chapter 7 of title 5, United States Code. 

(B) JUDICIAL REVIEW.-An adversely aggrieved party 

shall have 20 days from the date of issuance of the order 

to seek judicial review in an appropriate district court. 

(h) APPOINTMENT OF RECEIVER.-

(1) In any proceeding under subsection (f)(4) or subsection 

(g)(6)(C), the court may take exclusive jurisdiction of a small 

business lending company or a non-Federally regulated lender 

and appoint a receiver to hold and administer the assets of the 

company or lender. 

(2) Upon request of the Administrator, the court may appoint the Administrator as a receiver under paragraph (1). 

(i) POSSESSION OF ASSETS.-
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Sec. 24 SMALL BUSINESS ACT 250 

(1) If a small business lending company or a non-Federally 

regulated lender is not in compliance with capital requirements or is insolvent, the Administrator may take possession 

of the portfolio of loans guaranteed by the Administrator and 

sell such loans to a third party by means of a receiver appointed under subsection (h). 

(2) If a small business lending company or a non-Federally 

regulated lender is not in compliance with capital requirements or is insolvent or otherwise operating in an unsafe and 

unsound condition, the Administrator may take possession of 

servicing activities of loans that are guaranteed by the Administrator and sell such servicing rights to a third party by 

means of a receiver appointed under subsection (h). 

(j) PENALTIES AND FORFEITURES.-

(!) Except as provided in paragraph (2), a small business 

lending company or a non-Federally regulated lender which 

violates any regulation or written directive issued by the Administrator regarding the filing of any regular or special report 

shall pay to the United States a civil penalty of not more than 

$5,000 for each day of the continuance of the failure to file 

such report, unless it is shown that such failure is due to reasonable cause and not due to willful neglect. The civil penalties under this subsection may be enforced in a civil action brought 

by the Administrator. The penalties under this subsection shall 

not apply to any affiliate of a small business lending company 

that procures at least 10 percent of its annual purchasing requirements from small manufacturers. 

(2) The Administrator may by rules and regulations that 

shall be codified in the Code of Federal Regulations, after an 

opportunity for notice and comment, or upon application of an 

interested party, at any time previous to such failure, by order, 

after notice and opportunity for hearing which shall be conducted pursuant to sections 554, 556, and 557 of title 5, United 

States Code, exempt in whole or in part, any small business 

lending company or non-Federally regulated lender from para- graph (1), upon such terms and conditions and for such period 

of time as it deems necessary and appropriate, if the Administrator finds that such action is not inconsistent with the public interest or the protection of the Administration. The Administrator may for the purposes of this section make any alternative requirements appropriate to the situation. 

SEC. 24. [15 U.S.C. 651] (a) The Administrator is authorized 

to make grants to or to enter into contracts with any State for the 

purpose of contracting with small businesses to plant trees on land 

owned or controlled by such State or local government. The Administrator shall require as a condition of any grant (or amendment or 

modification thereof) under this section that the applicant also contribute to the project a sum equal to at least 25 per centum of a 

particular project cost from sources other than the Federal Government. Such non-Federal money may include inkind contributions, 

including the cost or value of providing care and maintenance for 

a period of three years after the planting of the trees, but shall not 

include any value attributable to the land on which the trees are 

to be planted, nor may any part of any grant be used to pay for 
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251 SMALL BUSINESS ACT Sec. 24 

land or land charges: Provided, That not less than one-half of the 

amounts appropriated under this section shall be allocated to each 

State, the District of Columbia, and the Commonwealth of Puerto 

Rico on the basis of the population in each area as compared to the 

total population in all areas as provided by the Census Bureau of 

the Department of Commerce in the annual population estimate or 

the decennial census, whichever is most current. The Administrator may give a priority in awarding the remaining one-half of 

appropriated amounts to applicants who agree to contribute more 

than the requisite 25 per centum, and shall give priority to a proposal to restore an area determined to be a major disaster by the 

President on a date not more than three years prior to the fiscal 

year for which the application is made. 

(b) In order to accomplish the objectives of this section, the Administrator, in consultation with appropriate Federal agencies, 

shall be responsible for formulating a national small business tree 

planting program. Based on this program, a State may submit a 

detailed proposal for tree planting by contract. 

(c) To encourage and develop the capacity of small business 

concerns, to utilize this important segment of our economy, and to 

permit rapid increases in employment opportunities in local communities, grantees are directed to utilize small business contractors 

or concerns in connection with the program established by this section, and shall, to the extent practicable, divide the project to allow 

more than one small business concern to perform the work under 

the project. 

(d) For purposes of this section, agencies of the Federal Government are hereby authorized to cooperate with all grantees and 

with State foresters or other appropriate officials by providing 

without charge, in furtherance of this program, technical services 

with respect to the planting and growing of such trees. 

(e) There are authorized to be appropriated to carry out the objectives of this section, $15,000,000 for fiscal year 1991 and 

$30,000,000 for each of the fiscal years 1995 through 1997, and all 

of such sums may remain available until expended. 

(f) Notwithstanding any other law, rule, or regulation, the administration shall publish in the Federal Register proposed rules 

and regulations implementing this section within sixty days after 

the date of enactment of this section and shall publish final rules 

and regulations within one hundred and twenty days of the date 

of enactment of this section. 

(g) As used in this section: 

(1) the term "local government" includes political subdivisions of a State such as counties, parishes, cities, towns and 

municipalities; 

(2) the term "planting" includes watering, application of 

fertilizer and herbicides, pruning and shaping, and other subsequent care and maintenance for a period of three years after 

the trees are planted; and 

(3) the term "State" includes any agency thereof. 

(h) The Administrator shall submit annually to the President 

and the Congress a report on activities within the scope of this section. 
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Sec. 25 SMALL BUSINESS ACT 252 

SEC. 25. [15 U.S.C. 652] (a) There is hereby established a Central European Small Business Enterprise Development Commission 

(hereinafter in this section referred to as the "Commission"). The 

Commission shall be comprised of a representative of each of the 

following: the Small Business Administration, the Association of 

American Universities, and the Association of Small Business Development Centers. 

(b) The Commission shall develop in Czechoslovakia, Poland 

and Hungary (hereinafter referred to as "designated Central European countries") a self-sustaining system to provide management 

and technical assistance to small business owners. 

(1) Not later than 90 days after the effective date of this 

section, the Commission, in consultation with the Agency for 

International Development, shall enter a contract with one or 

more entities to-

(A) determine the needs of small businesses in the 

designated Central European countries for management 

and technical assistance; 

(B) evaluate appropriate Small Business Development 

Center-programs which might be replicated in order to 

meet the needs of each of such countries; and 

(C) identify and assess the capability of educational institutions in each such country to develop a Small Business Development Center type program. 

(2) Not later than 18 months after the effective date of this 

section, the Commission shall review the recommendations 

submitted to it and shall formulate and contract for the establishment of a three-year management and technical assistance 

demonstration program. 

(c) In order to be eligible to participate, the educational institution in each designated Central European country shall-

(1) obtain the prior approval of the government to conduct 

the program; 

(2) agree to provide partial financial support for the program, either directly or indirectly, during the second and third 

years of the demonstration program; and 

(3) agree to obtain private sector involvement in the delivery of assistance under the program. 

(d) The Commission shall meet and organize not later than 30 

days after the date of enactment of this section. 

(e) Members of the Commission shall serve without pay, except 

they shall be entitled to reimbursement for travel, subsistence, and 

other necessary expenses incurred by them in carrying out their 

functions in the same manner as persons employed intermittently 

in the Federal Government are allowed expenses under section 

5703 of title 5, United States Code. 

(0 Two Commissioners shall constitute a quorum for the transaction of business. Meetings shall be at the call of the Chairperson 

who shall be elected by the Members of the Commission. 

(g) The Commission shall not have any authority to appoint 

staff, but upon request of the Chairperson, the head of any Federal 

department or agency may detail, on a reimbursable basis, any of 

the personnel of such department or agency to the Commission to 

assist in carrying out the Commission's functions under this section 
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253 SMALL BUSINESS ACT Sec. 27 

without regard to section 3341 of title 5 of the United States Code. 

The Administrator of the General Services Administration shall 

provide, on a reimbursable basis, such administrative support services as the Commission may request. 

(h) The Commission shall report to Congress not later than December 1, 1991, and annually thereafter, on the progress in carrying out the provisions of this section. 

(i) There are hereby authorized to be appropriated to the Small 

Business Administration the sum of $3,000,000 for fiscal year 1991, 

$5,000,000 for fiscal year 1992, $2,000,000 for each of fiscal years 

1993 and 1994, and $1,000,000 for fiscal year 1995 to carry out the 

provisions of this section. Such sums shall be disbursed by the 

Small Business Administration as requested by the Commission 

and may remain available until expended. Any authority to enter 

contracts or other spending authority provided for in this section 

is subject to amounts provided for in advance in appropriations 

Acts. 

SEC. 26. [15 U.S.C. 653] OFFICE OF RURAL AFFAIRS. 

(a) There is hereby established in the Small Business Administration an Office of Rural Affairs (hereafter in this section referred 

to as the "Office"). 

(b) The Office shall be headed by a director who shall be appointed by the Administrator not later than 90 days after the date 

of the enactment of this section. 

(c) The Office shall-

(1) strive to achieve an equitable distribution of the financial assistance available from the Administration for small 

business concerns located in rural areas; 

(2) to the extent practicable, compile annual statistics on 

rural areas, including statistics concerning the population, poverty, job creation and retention, unemployment, business failures, and business startups; 

(3) provide information to industries, organizations, and 

State and local governments concerning the assistance available to rural small business concerns through the Administration and through other Federal departments and agencies; 

(4) provide information to industries, organizations, educational institutions, and State and local governments concerning programs administered by private organizations, educational institutions, and Federal, State, and local governments which improve the economic opportunities of rural citizens; and 

(5) work with the United States Tourism and Travel Administration to assist small businesses in rural areas with 

tourism promotion and development. 

SEC. 27. [15 U.S.C. 654] PAUL D. COVERDELL DRUG-FREE WORKPLACE 

PROGRAM. 

(a) DEFINITIONS.-ln this section: 

(1) DRUG-FREE WORKPLACE PROGRAM.-The term "drug-free 

workplace program" means a program that includes-

(A) a written policy, including a clear statement of expectations for workplace behavior, prohibitions against reporting to work or working under the influence of illegal 
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Sec. 27 SMALL BUSINESS ACT 254 

drugs or alcohol, prohibitions against the use or possession 

of illegal drugs in the workplace, and the consequences of 

violating those expectations and prohibitions; 

(B) drug and alcohol abuse prevention training for a 

total of not less than 2 hours for each employee, and additional voluntary drug and alcohol abuse prevention training for employees who are parents; 

(C) employee illegal drug testing, with analysis conducted by a drug testing laboratory certified by the Substance Abuse and Mental Health Services Administration, 

or approved by the College of American Pathologists for forensic drug testing, and a review of each positive test result by a medical review officer; 

(D) employee access to an employee assistance program, including confidential assessment, referral, and 

short-term problem resolution; and 

(E) continuing alcohol and drug abuse prevention education. 

(2) ELIGIBLE INTERMEDIARY.-The term "eligible intermediary" means an organization-

(A) that has not less than 2 years of experience in carrying out drug-free workplace programs; 

(B) that has a drug-free workplace policy in effect; 

(C) that is located in a State, the District of Columbia, 

or a territory of the United States; and 

(D)(i) the purpose of which is-

(1) to develop comprehensive drug-free workplace programs or to supply drug-free workplace 

services; or 

(II) to provide other forms of assistance and 

services to small business concerns; or 

(ii) that is eligible to receive a grant under chapter 2 of the National Narcotics Leadership Act of 1988 

(21 U.S.C. 1521 et seq.). 

(3) EMPLOYEE.-The term "employee" includes any-

(A) applicant for employment; 

(B) employee; 

(C) supervisor; 

(D) manager; 

(E) officer of a small business concern who is active in 

management of the concern; and 

(F) owner of a small business concern who is active in 

management of the concern. 

(4) MEDICAL REVIEW OFFICER.-The term "medical review 

officer"-

(A) means a licensed physician with knowledge of substance abuse disorders; and 

(B) does not include any-

(i) employee of the small business concern; or 

(ii) employee or agent of, or any person having a 

financial interest in, the laboratory for which the illegal drug test results are being reviewed. 

(b) ESTABLISHMENT.-
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255 SMALL BUSINESS ACT Sec. 27 

(1) IN GENERAL.-There is established a drug-free workplace demonstration program, under which the Administrator 

may make grants to, or enter into cooperative agreements or 

contracts with, eligible intermediaries for the purpose of providing financial and technical assistance to small business concerns seeking to establish a drug-free workplace program. 

(2) ADDITIONAL GRANTS FOR TECHNICAL ASSISTANCE.-In 

addition to grants under paragraph (1), the Administrator may 

make grants to, or enter into cooperative agreements or contracts with, any grantee for the purpose of providing, in cooperation with one or more small business development centers, technical assistance to small business concerns seeking to 

establish a drug-free workplace program. 

(3) 2-YEAR GRANTS.-Each grant made under this subsection shall be for a period of 2 years, subject to an annual 

performance review by the Administrator. 

(c) PROMOTION OF EFFECTIVE PRACTICES OF ELIGIBLE INTERMEDIARIES.-

(1) TECHNICAL ASSISTANCE AND INFORMATION.-The Administrator, after consultation with the Director of the Center 

for Substance Abuse and Prevention, shall provide technical 

assistance and information to each eligible intermediary under 

subsection (b) regarding the most effective practices in establishing and carrying out drug-free workplace programs. 

(2) EVALUATION OF PROGRAM.-

(A) DATA COLLECTION AND ANALYSIS.-Each eligible 

intermediary receiving a grant under this section shall establish a system to collect and analyze information regarding the effectiveness of drug-free workplace programs established with assistance provided under this section 

through the intermediary, including information regarding 

any increase or decrease among employees in drug use, 

awareness of the adverse consequences of drug use, and 

absenteeism, injury, and disciplinary problems related to 

drug use. Such system shall conform to such requirements 

as the Administrator, after consultation with the Director 

of the Center for Substance Abuse and Prevention, may 

prescribe. Not more than 5 percent of the amount of each 

grant made under subsection (b) shall be used by the eligible intermediary to carry out this paragraph. 

(B) METHOD OF EVALUATION.-The Administrator, 

after consultation with the Director of the Center for Substance Abuse and Prevention, shall provide technical assistance and guidance to each eligible intermediary receiving a grant under subsection (b) regarding the collection 

and analysis of information to evaluate the effectiveness of 

drug-free workplace programs established with assistance 

provided under this section, including the information referred to in paragraph (1). Such assistance shall include 

the identification of additional information suitable for 

measuring the benefits of drug-free workplace programs to 

the small business concern and to the concern's employees 

and the identification of methods suitable for analyzing 

such information. 
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Sec. 28 SMAll BUSINESS ACT 256 

(d) EVALUATION AND COORDINATION.-Not later than 18 

months after the date of enactment of the Drug-Free Workplace 

Act of 1998, the Administrator, in coordination with the Secretary 

of Labor, the Secretary of Health and Human Services, and the Director of National Drug Control Policy, shall-

(1) evaluate the drug-free workplace programs established 

with assistance made available under this section; and 

(2) submit to Congress a report describing the results of 

the evaluation under paragraph (1). 

(e) CONTRACT AUTHORITY.-In carrying out this section, the 

Administrator may-

(1) contract with public and private entities to provide assistance related to carrying out the program under this section; 

and 

(2) compensate those entities for provision of that assistance. 

(f) CoNSTRUCTION.-Nothing in this section may be construed 

to require an employer who attends a program offered by an intermediary to contract for any service offered by the intermediary. 

(g) AUTHORIZATION.-

(1) IN GENERAL.-There is authorized to be appropriated to 

carry out this section (other than subsection (b)(2)), $5,000,000 

for each of fiscal years 2005 and 2006. Amounts made available under this paragraph shall remain available until expended. 

(2) SMALL BUSINESS DEVELOPMENT CENTERS.-Of the total 

amount made available under paragraph (1) for each of fiscal 

years 2005 and 2006, not more than the greater of 10 percent 

or $500,000 may be used to carry out section 21(c)(3)(T). 

(3) ADDITIONAL AUTHORIZATION FOR TECHNICAL ASSISTANCE 

GRANTS.-There are authorized to be appropriated to carry out 

subsection (b)(2), $1,500,000 for each of fiscal years 2005 and 

2006. Amounts made available under this paragraph shall remain available until expended. 

(4) LIMITATION ON ADMINISTRATIVE COSTS.-Not more than 

5 percent of the total amount made available under this subsection for any fiscal year shall be used for administrative 

costs (determined without regard to the administrative costs of 

eligible intermediaries). 

SEC. 28. [15 U.S.C. 655] PILOT TECHNOLOGY ACCESS PROGRAM. 

(a) ESTABLISHMENT.-The Administration, in consultation with 

the National Institute of Standards and Technology and the National Technical Information Service, shall establish a Pilot Technology Access Program, for making awards under this section to 

Small Business Development Centers (hereinafter in this section 

referred to as "Centers"). 

(b) CRITERIA FOR SELECTION OF CENTERS.-The Administrator 

of the Small Business Administration shall establish competitive, merit-based criteria for the selection of Centers to receive awards 

on the basis of-

(1) the ability of the applicant to carry out the purposes 

described in subsection (d) in a manner relevant to the needs 

of industries in the area served by the Center; 
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257 SMALL BUSINESS ACT Sec. 28 

(2) the ability of the applicant to integrate the implementation of this program with existing Federal and State technical and business assistance resources; and 

(3) the ability of the applicant to continue providing technology access after the termination of this pilot program. 

(c) MATCHING REQUIREMENT.-To be eligible to receive an 

award under this section, an applicant shall provide a matching 

contribution at least equal to that received under such award, not 

more than 50 percent of which may be waived overhead or in-kind 

contributions. 

(d) PuRPOSE OF AWARDS.-Awards made under this section 

shall be for the purpose of increasing access by small businesses to 

on-line data base services that provide technical and business information, and access to technical experts, in a wide range of technologies, through such activities as-

( 1) defraying the cost of access by small businesses to the 

data base services; 

(2) training small businesses in the use of the data base 

services; and 

(3) establishing a public point of access to the data base 

services. 

Activities described in paragraphs (1) through (3) may be carried 

out through contract with a private entity. 

(e) RENEWAL OF AWARDS.-Awards previously made under section 21A of this Act may be renewed under this section. 

CD INTERIM REPORT.-Two years after the date on which the 

first award was issued under section 21A of this Act, the General 

Accounting Office shall submit to the Committee on Small Business 

and the Committee on Science, Space, and Technology of the House 

of Representatives and to the Committee on Small Business and 

the Committee on Commerce, Science, and Transportation of the 

Senate, an interim report on the implementation of the program 

under such section and this section, including the judgments of the 

participating Centers as to its effect on small business productivity 

and innovation. 

(g) FINAL REPORT.-Three years after such date, the General 

Accounting Office shall submit to the Committee on Small Business 

and the Committee on Science, Space, and Technology of the House 

of Representatives and to the Committee on Small Business and 

the Committee on Commerce, Science and Transportation of the 

Senate, a final report evaluating the effectiveness of the Program 

under section 21A and this section in improving small business 

productivity and innovation. 

(h) AUTHORIZATION OF APPROPRIATIONS.-There are authorized 

to be appropriated to the Small Business Administration $5 million 

for each of fiscal years 1992 through 1995 to carry out this section, 

and such amounts may remain available until expended. 

(i) 76 Centers are encouraged to seek funding from Federal and 

non-Federal sources other than those provided for in this section to 

assist small businesses in the identification of appropriate technologies to fill their needs, the transfer of technologies from Federal laboratories, public and private universities, and other public 

76 So in law. 
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Sec. 29 SMALL BUSINESS ACT 258 

and private institutions, the analysis of commercial opportunities 

represented by such technologies, and such other functions as the 

development, business planning, market research, and financial 

packaging required for commercialization. Insofar as such Centers 

pursue these activities, Federal agencies are encouraged to employ 

these Centers to interface with small businesses for such purposes 

as facilitating small business participation in Federal procurement 

and fostering commercialization of Federally-funded research and 

development. 

SEC. 29. [15 U.S.C. 656] WOMEN'S BUSINESS CENTER PROGRAM. 

(a) DEFINITIONS.-In this section-

(!) the term "Assistant Administrator" means the Assistant Administrator of the Office of Women's Business Ownership established under subsection (g); 

(2) the term "private nonprofit organization" means an entity that is described in section 501(c) of the Internal Revenue 

Code of 1986 and exempt from taxation under section 501(a) of 

such Code; 

(3) the term "small business concern owned and controlled 

by women", either startup or existing, includes any small business concern-

(A) that is not less than 51 percent owned by 1 or 

more women; and 

(B) the management and daily business operations of 

which are controlled by 1 or more women; and 

(4) the term "women's business center site" means the location of-

(A) a women's business center; or 

(B) 1 or more women's business centers, established in 

conjunction with another women's business center in another location within a State or region-

(i) that reach a distinct population that would otherwise not be served; 

(ii) whose services are targeted to women; and 

(iii) whose scope, function, and activities are similar to those of the primary women's business center or 

centers in conjunction with which it was established. 

(b) AUTHORITY.-The Administration may provide financial assistance to private nonprofit organizations to conduct 5-year 

projects for the benefit of small business concerns owned and controlled by women. The projects shall provide-

(!) financial assistance, including training and counseling 

in how to apply for and secure business credit and investment 

capital, preparing and presenting financial statements, and 

managing cash flow and other financial operations of a business concern; 

(2) management assistance, including training and counseling in how to plan, organize, staff, direct, and control each 

major activity and function of a small business concern; and 

(3) marketing assistance, including training and counseling in identifying and segmenting domestic and international market opportunities, preparing and executing marketing plans, developing pricing strategies, locating contract 
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259 SMALL BUSINESS ACT Sec. 29 

opportunities, negotiating contracts, and utilizing varying public relations and advertising techniques. 

(c) CONDITIONS OF PARTICIPATION.-

(1) NON-FEDERAL CONTRIBUTIONS.-As a condition of receiving financial assistance authorized by this section, the recipient organization shall agree to obtain, after its application 

has been approved and notice of award has been issued, cash 

contributions from non-Federal sources as follows: 

(A) in the first and second years, 1 non-Federal dollar 

for each 2 Federal dollars; and 

(B) in the third, fourth, and fifth years, 1 non-Federal 

dollar for each Federal dollar. 

(2) FORM OF NON-FEDERAL CONTRIBUTIONS.-Not more 

than one-half of the non-Federal sector matching assistance 

may be in the form of in-kind contributions that are budget line items only, including office equipment and office space. 

(3) FORM OF FEDERAL CONTRIBUTIONS.-The financial assistance authorized pursuant to this section may be made by 

grant, contract, or cooperative agreement and may contain 

such provision, as necessary, to provide for payments in lump 

sum or installments, and in advance or by way of reimbursement. The Administration may disburse up to 25 percent of 

each year's Federal share awarded to a recipient organization 

after notice of the award has been issued and before the nonFederal sector matching funds are obtained. 

(4) FAILURE TO OBTAIN NON-FEDERAL FUNDING.-lf any recipient of assistance fails to obtain the required non-Federal 

contribution during any project, it shall not be eligible thereafter for advance disbursements pursuant to paragraph (3) 

during the remainder of that project, or for any other project 

for which it is or may be funded by the Administration, and 

prior to approving assistance to such organization for any other 

projects, the Administration shall specifically determine whether the Administration believes that the recipient will be able 

to obtain the requisite non-Federal funding and enter a written 

finding setting forth the reasons for making such determination. 

(d) CONTRACT AUTHORITY.-A women's business center may 

enter into a contract with a Federal department or agency to pro- vide specific assistance to women and other underserved small 

business concerns. Performance of such contract should not hinder 

the women's business centers in carrying out the terms of the grant received by the women's business centers from the Administration. 

(e) SUBMISSION OF 5-YEAR PLAN.-Each applicant organization initially shall submit a 5-year plan to the Administration on proposed fundraising and training activities, and a recipient organiza- tion may receive financial assistance under this program for a maximum of 5 years per women's business center site. 

(f) CRITERIA.-The Administration shall evaluate and rank applicants in accordance with predetermined selection criteria that 

shall be stated in terms of relative importance. Such criteria and 

their relative importance shall be made publicly available and stated in each solicitation for applications made by the Administration. 

The criteria shall include-
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Sec. 29 SMALL BUSINESS ACT 260 

(1) the experience of the applicant in conducting programs 

or ongoing efforts designed to impart or upgrade the business 

skills of women business owners or potential owners; 

(2) the present ability of the applicant to commence a 

project within a minimum amount of time; 

(3) the ability of the applicant to provide training and services to a representative number of women who are both socially and economically disadvantaged; and 

(4) the location for the women's business center site proposed by the applicant. 

(g) OFFICE OF WOMEN'S BUSINESS OWNERSHIP.-

(!) ESTABLISHMENT.-There is established within the Administration an Office of Women's Business Ownership, which 

shall be responsible for the administration of the Administration's programs for the development of women's business enterprises (as defined in section 408 of the Women's Business Ownership Act of 1988 (15 U.S.C. 631 note)). The Office of Women's 

Business Ownership shall be administered by an Assistant Administrator, who shall be appointed by the Administrator. 

(2) ASSISTANT ADMINISTRATOR OF THE OFFICE OF WOMEN'S 

BUSINESS OWNERSHIP.-

(A) QUALIFICATION.-The position of Assistant Administrator shall be a Senior Executive Service position under 

section 3132(a)(2) of title 5, United States Code. The Assistant Administrator shall serve as a noncareer appointee (as defined in section 3132(a)(7) of that title). 

(B) RESPONSIBILITIES AND DUTIES.-

(i) RESPONSIBILITIES.-The responsibilities of the 

Assistant Administrator shall be to administer the 

programs and services of the Office of Women's Business Ownership established to assist women entrepreneurs in the areas of-

(1) starting and operating a small business; 

(II) development of management and technical skills; 

(Ill) seeking Federal procurement opportunities; and 

(IV) increasing the opportunity for access to 

capital. 

(ii) DUTIES.-The Assistant Administrator shall-

(1) administer and manage the Women's Business Center program; 

(II) recommend the annual administrative 

and program budgets for the Office of Women's 

Business Ownership (including the budget for the 

Women's Business Center program); 

(Ill) establish appropriate funding levels 

therefore; 

(IV) review the annual budgets submitted by 

each applicant for the Women's Business Center 

program; 

(V) select applicants to participate in the program under this section; 

(VI) implement this section; 
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261 SMALL BUSINESS ACT Sec. 29 

(VII) maintain a clearinghouse to provide for 

the dissemination and exchange of information between women's business centers; 

(VIII) serve as the vice chairperson of the 

Interagency Committee on Women's Business Enterprise; 

(IX) serve as liaison for the National Women's 

Business Council; and 

(X:) advise the Administrator on appointments 

to the Women's Business Council. 

(C) CONSULTATION REQUIREMENTS.-In carrying out 

the responsibilities and duties described in this paragraph, 

the Assistant Administrator shall confer with and seek the 

advice of the Administration officials in areas served by 

the women's business centers. 

(h) PROGRAM EXAMINATION.-

(!) IN GENERAL.-The Administration shall-

(A) develop and implement an annual programmatic 

and financial examination of each women's business center 

established pursuant to this section, pursuant to which 

each such center shall provide to the Administration-

(i) an itemized cost breakdown of actual expenditures for costs incurred during the preceding year; and 

(ii) documentation regarding the amount of matching assistance from non-Federal sources obtained and 

expended by the center during the preceding year in 

order to meet the requirements of subsection (c) and, 

with respect to any in-kind contributions described in 

subsection (c)(2) that were used to satisfy the requirements of subsection (c), verification of the existence 

and valuation of those contributions; and 

(B) analyze the results of each such examination and, 

based on that analysis, make a determination regarding 

the programmatic and financial viability of each women's 

business center. 

(2) CONDITIONS FOR CONTINUED FUNDING.-In determining 

whether to award a contract (as a sustainability grant) under 

subsection (1) or to renew a contract (either as a grant or cooperative agreement) under this section with a women's business 

center, the Administration-

(A) shall consider the results of the most recent examination of the center under paragraph (1); and 

(B) may withhold such award or renewal, if the Administration determines that-

(i) the center has failed to provide any information 

required to be provided under clause (i) or (ii) of paragraph (l)(A), or the information provided by the center 

is inadequate; or 

(ii) the center has failed to provide any information required to be provided by the center for purposes 

of the report of the Administration under subsection 

(j), or the information provided by the center is inadequate. 
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Sec. 29 SMALL BUSINESS ACT 262 

(i) CONTRACT AUTHORITY.-The authority of the Administrator 

to enter into contracts shall be in effect for each fiscal year only 

to the extent and in the amounts as are provided in advance in appropriations Acts. After the Administrator has entered into a contract, either as a grant or a cooperative agreement, with any applicant under this section, it shall not suspend, terminate, or fail to 

renew or extend any such contract unless the Administrator provides the applicant with written notification setting forth the reasons therefore and affords the applicant an opportunity for a hearing, appeal, or other administrative proceeding under chapter 5 of 

title 5, United States Code. 

(j) MANAGEMENT REPORT.-

(1) IN GENERAL.-The Administration shall prepare and 

submit to the Committees on Small Business of the House of 

Representatives and the Senate a report on the effectiveness of 

all projects conducted under this section. 

(2) CONTENTS.-Each report submitted under paragraph 

(1) shall include information concerning, with respect to each 

women's business center established pursuant to this section-

(A) the number of individuals receiving assistance; 

(B) the number of startup business concerns formed; 

(C) the gross receipts of assisted concerns; 

(D) the employment increases or decreases of assisted 

concerns; 

(E) to the maximum extent practicable, increases or 

decreases in profits of assisted concerns; and 

(F) the most recent analysis, as required under subsection (h)(1)(B), and the subsequent determination made 

by the Administration under that subsection. 

(k) AUTHORIZATION OF APPROPRIATIONS.-

(1) IN GENERAL.-There is authorized to be appropriated, 

to remain available until the expiration of the pilot program 

under subsection (1)-

(A) $12,000,000 for fiscal year 2000; 

(B) $12,800,000 for fiscal year 2001; 

(C) $13,700,000 for fiscal year 2002; and 

(D) $14,500,000 for fiscal year 2003. 

(2) UsE OF AMOUNTS.-

(A) IN GENERAL.-Except as provided in subparagraph 

(B), amounts made available under this subsection for fiscal year 1999, and each fiscal year thereafter, may only be 

used for grant awards and may not be used for costs incurred by the Administration in connection with the management and administration of the program under this 

section. 

(B) EXCEPTIONS.-Of the amount made available 

under this subsection for a fiscal year, the following 

amounts shall be available for selection panel costs, postaward conference costs, and costs related to monitoring 

and oversight: 

(i) For fiscal year 2000, 2 percent. 

(ii) For fiscal year 2001, 1.9 percent. 

(iii) For fiscal year 2002, 1.9 percent. 

(iv) For fiscal year 2003, 1.6 percent. 
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(3) EXPEDITED ACQUISITION.-Notwithstanding any other 

provision of law, the Administrator, acting through the Assistant Administrator, may use such expedited acquisition methods as the Administrator determines to be appropriate to carry 

out this section, except that the Administrator shall ensure 

that all small business sources are provided a reasonable opportunity to submit proposals. 

(4) RESERVATION OF FUNDS FOR SUSTAINABILITY PILOT PROGRAM.-

(A) IN GENERAL.-Subject to subparagraph (B), of the 

total amount made available under this subsection for a 

fiscal year, the following amounts shall be reserved for 

sustainability grants under subsection (l): 

(i) For fiscal year 2000, 17 percent. 

(ii) For fiscal year 2001, 18.8 percent. 

(iii) For fiscal year 2002, 30.2 percent. 

(iv) For fiscal year 2003, 30.2 percent. 

(B) USE OF UNAWARDED FUNDS FOR SUSTAINABILITY 

PILOT PROGRAM GRANTS.-If the amount reserved under 

subparagraph (A) for any fiscal year is not fully awarded 

to private nonprofit organizations described in subsection 

(l)(1)(B), the Administration is authorized to use the 

unawarded amount to fund additional women's business 

center sites or to increase funding of existing women's 

business center sites under subsection (b). 

[(l) Repealed effective October 1, 2007 by 8305(b) of Public 

Law 110-28.] 

(m) CONTINUED FUNDING FOR CENTERS.-

(1) IN GENERAL.-A nonprofit organization described in 

paragraph (2) shall be eligible to receive, subject to paragraph 

(3), a 3-year grant under this subsection. 

(2) APPLICABILITY.-A nonprofit organization described in 

this paragraph is a nonprofit organization that has received 

funding under subsection (b) or (l). 

(3) APPLICATION AND APPROVAL CRITERIA.-

(A) CRITERIA.-Subject to subparagraph (B), the Administrator shall develop and publish criteria for the consideration and approval of applications by nonprofit organizations under this subsection. 

(B) CONTENTS.-Except as otherwise provided in this 

subsection, the conditions for participation in the grant 

program under this subsection shall be the same as the 

conditions for participation in the program under subsection (l), as in effect on the date of enactment of this Act. 

(C) NOTIFICATION.-Not later than 60 days after the 

date of the deadline to submit applications for each fiscal 

year, the Administrator shall approve or deny any application under this subsection and notify the applicant for each 

such application. 

( 4) AWARD OF GRANTS.-

(A) IN GENERAL.-Subject to the availability of appropriations, the Administrator shall make a grant for the 

Federal share of the cost of activities described in the application to each applicant approved under this subsection. 
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Sec. 29 SMALL BUSINESS ACT 264 

(B) AMOUNT.-A grant under this subsection shall be 

for not more than $150,000, for each year of that grant. 

(C) FEDERAL SHARE.-The Federal share under this 

subsection shall be not more than 50 percent. 

(D) PRIORITY.-In allocating funds made available for 

grants under this section, the Administrator shall give applications under this subsection or subsection (l) priority 

over first-time applications under subsection (b). 

(5) RENEWAL.-

(A) IN GENERAL.-The Administrator may renew a 

grant under this subsection for additional 3-year periods, 

if the nonprofit organization submits an application for 

such renewal at such time, in such manner, and accompanied by such information as the Administrator may establish. 

(B) UNLIMITED RENEWALS.-There shall be no limitation on the number of times a grant may be renewed 

under subparagraph (A). 

(n) PRIVACY REQUIREMENTS.-

(!) IN GENERAL.-A women's business center may not disclose the name, address, or telephone number of any individual 

or small business concern receiving assistance under this section without the consent of such individual or small business 

concern, unless-

(A) the Administrator is ordered to make such a disclosure by a court in any civil or criminal enforcement action initiated by a Federal or State agency; or 

(B) the Administrator considers such a disclosure to be 

necessary for the purpose of conducting a financial audit 

of a women's business center, but a disclosure under this 

subparagraph shall be limited to the information necessary 

for such audit. 

(2) ADMINISTRATION USE OF INFORMATION.-This subsection shall not-

(A) restrict Administration access to program activity 

data; or 

(B) prevent the Administration from using client information (other than the information described in subparagraph (A)) to conduct client surveys. 

(3) REGULATIONS.-The Administrator shall issue regulations to establish standards for requiring disclosures during a 

financial audit under paragraph (l)(B). 

(o) STUDY AND REPORT ON REPRESENTATION OF WOMEN.-

(1) STUDY.-The Administrator shall periodically conduct a 

study to identify industries, as defined under the North American Industry Classification System, underrepresented by small 

business concerns owned and controlled by women. 

(2) REPORT.-Not later than 3 years after the date of enactment of this subsection, and every 5 years thereafter, the 

Administrator 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 on 

the results of each study under paragraph (1) conducted during 

the 5-year period ending on the date of the report. 
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265 SMALL BUSINESS ACT Sec. 30 

SEC. 30. [15 U.S.C. 657) OVERSIGHT OF REGULATORY ENFORCEMENT. 

(a) DEFINITIONS.-For purposes of this section, the term-

( I) "Board" means a Regional Small Business Regulatory 

Fairness Board established under subsection (c); and 

(2) "Ombudsman" means the Small Business and Agriculture Regulatory Enforcement Ombudsman designated under 

subsection (b). 

(b) SBA ENFORCEMENT OMBUDSMAN.-

(!) Not later than 180 days after the date of enactment of 

this section, the Administrator shall designate a Small Business and Agriculture Regulatory Enforcement Ombudsman, 

who shall report directly to the Administrator, utilizing personnel of the Small Business Administration to the extent 

practicable. Other agencies shall assist the Ombudsman and 

take actions as necessary to ensure compliance with the requirements of this section. Nothing in this section is intended 

to replace or diminish the activities of any Ombudsman or 

similar office in any other agency. 

(2) The Ombudsman shall-

(A) work with each agency with regulatory authority 

over small businesses to ensure that small business concerns that receive or are subject to an audit, on-site inspection, compliance assistance effort, or other enforcement related communication or contact by agency personnel are 

provided with a means to comment on the enforcement activity conducted by such personnel; 

(B) establish means to receive comments from small 

business concerns regarding actions by agency employees 

conducting compliance or enforcement activities with respect to the small business concern, means to refer comments to the Inspector General of the affected agency in 

the appropriate circumstances, and otherwise seek to 

maintain the identity of the person and small business 

concern making such comments on a confidential basis to 

the same extent as employee identities are protected under 

section 7 of the Inspector General Act of 1978 (5 U.S.C. 

App.); 

(C) based on substantiated comments received from 

small business concerns and the Boards, annually report 

to Congress and affected agencies evaluating the enforcement activities of agency personnel including a rating of 

the responsiveness to small business of the various regional and program offices of each agency; 

CD) coordinate and report annually on the activities, 

findings and recommendations of the Boards to the Administrator and to the heads of affected agencies; and 

(E) provide the affected agency with an opportunity to 

comment on draft reports prepared under subparagraph 

(C), and include a section of the final report in which the 

affected agency may make such comments as are not addressed by the Ombudsman in revisions to the draft. 

(c) REGIONAL SMALL BUSINESS REGULATORY FAIRNESS 

BOARDS.-
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(1) Not later than 180 days after the date of enactment of 

this section, the Administrator shall establish a Small Business Regulatory Fairness Board in each regional office of the 

Small Business Administration. 

(2) Each Board established under paragraph (1) shall-

(A) meet at least annually to advise the Ombudsman 

on matters of concern to small businesses relating to the 

enforcement activities of agencies; 

(B) report to the Ombudsman on substantiated instances of excessive enforcement actions of agencies 

against small business concerns including any findings or 

recommendations of the Board as to agency enforcement 

policy or practice; and 

(C) prior to publication, provide comment on the annual report of the Ombudsman prepared under subsection 

(b). 

(3) Each Board shall consist of five members, who are owners, operators, or officers of small business concerns, appointed 

by the Administrator, after receiving the recommendations of 

the chair and ranking minority member of the Committees on 

Small Business of the House of Representatives and the Senate. Not more than three of the Board members shall be of the 

same political party. No member shall be an officer or employee of the Federal Government, in either the executive 

branch or the Congress. 

(4) Members of the Board shall serve at the pleasure of the 

Administrator for terms of three years or less. 

(5) The Administrator shall select a chair from among the 

members of the Board who shall serve at the pleasure of the 

Administrator for not more than 1 year as chair. 

(6) A majority of the members of the Board shall constitute 

a quorum for the conduct of business, but a lesser number may 

hold hearings. 

(d) POWERS OF THE BOARDS. 

(1) The Board may hold such hearings and collect such information as appropriate for carrying out this section. 

(2) The Board may use the United States mails in the 

same manner and under the same conditions as other departments and agencies of the Federal Government. 

(3) The Board may accept donations of services necessary 

to conduct its business, provided that the donations and their 

sources are disclosed by the Board. 

(4) Members of the Board shall serve without compensation, provided that, members of the Board shall be allowed 

travel expenses, including per diem in lieu of subsistence, at 

rates authorized for employees of agencies under subchapter I 

of chapter 57 of title 5, United States Code, while away from 

their homes or regular places of business in the performance 

of services for the Board. 

SEC. 31. [15 U.S.C. 657a] HUBZONE PROGRAM. 

(a) IN GENERAL.-There is established within the Administration a program to be carried out by the Administrator to provide 
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267 SMALL BUSINESS ACT Sec. 31 

for Federal contracting assistance to qualified HUBZone small 

business concerns in accordance with this section. 

(b) ELIGIBLE CONTRACTS.-

(!) DEFINITIONS.-ln this subsection-

(A) the term "contracting officer" has the meaning 

given that term in section 27(£)(5) of the Office of Federal 

Procurement Policy Act (41 U.S.C. 423(£)(5)); and 

(B) the term "full and open competition" has the 

meaning given that term in section 4 of the Office of Federal Procurement Policy Act (41 U.S.C. 403). 

(2) AUTHORITY OF CONTRACTING OFFICER.-

(A) SOLE SOURCE CONTRACTS.-A contracting officer 

may award sole source contracts under this section to any 

qualified HUBZone small business concern, if-

(i) the qualified HUBZone small business concern 

is determined to be a responsible contractor with respect to performance of such contract opportunity, and 

the contracting officer does not have a reasonable expectation that 2 or more qualified HUBZone small 

business concerns will submit offers for the contracting opportunity; 

(ii) the anticipated award price of the contract (including options) will not exceed-

(!) $5,000,000, in the case of a contract opportunity assigned a standard industrial classification code for manufacturing; or 

(II) $3,000,000, in the case of all other contract opportunities; and 

(iii) in the estimation of the contracting officer, 

the contract award can be made at a fair and reasonable price. 

(B) RESTRICTED COMPETITION.-A contract opportunity 

may 77 be awarded pursuant to this section on the basis of 

competition restricted to qualified HUBZone small business concerns if the contracting officer has a reasonable 

expectation that not less than 2 qualified HUBZone small 

business concerns will submit offers and that the award 

can be made at a fair market price. 

(C) APPEALS.-Not later than 5 days from the date the 

Administration is notified of a procurement officer's decision not to award a contract opportunity under this section 

to a qualified HUBZone small business concern, the Administrator may notify the contracting officer of the intent 

to appeal the contracting officer's decision, and within 15 

days of such date the Administrator may file a written request for reconsideration of the contracting officer's decision with the Secretary of the department or agency head. 

(3) PRICE EVALUATION PREFERENCE IN FULL AND OPEN COMPETITIONS.-

77 Section 1347(b)(l) and (c)(3)(A) of Public Law 111-240 (124 Stat. 2547) provide for amend- ments to section 3l(b)(2)(B) of the Small Business Act. The two amendments are in conflict with 

each other and as such there is uncertainty as to which amendment should be executed; how- ever, the version shown here reflects the execution of the amendment made by section 

1347(c)(3)(A) of such Public Law. 
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Sec. 31 SMALL BUSINESS ACT 268 

(A) IN GENERAL.-Subject to subparagraph (B), in any 

case in which a contract is to be awarded on the basis of 

full and open competition, the price offered by a qualified 

HUBZone small business concern shall be deemed as being 

lower than the price offered by another offeror (other than 

another small business concern), if the price offered by the 

qualified HUBZone small business concern is not more 

than 10 percent higher than the price offered by the otherwise lowest, responsive, and responsible offeror. 

(B) PROCUREMENT OF COMMODITIES.-For purchases 

by the Secretary of Agriculture of agricultural commodities, the price evaluation preference shall be-

(i) 10 percent, for the portion of a contract to be 

awarded that is not greater than 25 percent of the 

total volume being procured for each commodity in a 

single invitation; 

(ii) 5 percent, for the portion of a contract to be 

awarded that is greater than 25 percent, but not 

greater than 40 percent, of the total volume being procured for each commodity in a single invitation; and 

(iii) zero, for the portion of a contract to be awarded that is greater than 40 percent of the total volume 

being procured for each commodity in a single invitation. 

(C) PROCUREMENT OF COMMODITIES FOR INTERNATIONAL FOOD AID EXPORT OPERATIONS.-The price evaluation preference for purchases of agricultural commodities by the Secretary of Agriculture for export operations 

through international food aid programs administered by 

the Farm Service Agency shall be 5 percent on the first 

portion of a contract to be awarded that is not greater 

than 20 percent of the total volume of each commodity 

being procured in a single invitation. 

(D) TREATMENT OF PREFERENCE.-A contract awarded 

to a HUBZone small business concern under a preference 

described in subparagraph (B) shall not be counted toward 

the fulfillment of any requirement partially set aside for 

competition restricted to small business concerns. 

(4) RELATIONSHIP TO OTHER CONTRACTING PREFERENCES.-

A procurement may not be made from a source on the basis of 

a preference provided in paragraph (2) or (3), if the procurement would otherwise be made from a different source under 

section 4124 or 4125 of title 18, United States Code, or the 

Javits-Wagner-O'Day Act (41 U.S.C. 46 et seq.). 

(c) ENFORCEMENT; PENALTIES.-

(!) VERIFICATION OF ELIGIBILITY.-ln carrying out this section, the Administrator shall establish procedures relating to-

(A) the filing, investigation, and disposition by the Administration of any challenge to the eligibility of a small 

business concern to receive assistance under this section 

(including a challenge, filed by an interested party, relating to the veracity of a certification made or information 

provided to the Administration by a small business concern under section 3(p)(5)); and 
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269 SMALL BUSINESS ACT Sec. 32 

(B) verification by the Administrator of the accuracy of 

any certification made or information provided to the Administration by a small business concern under section 

3(p)(5). 

(2) EXAMINATIONS.-The procedures established under 

paragraph (1) may provide for program examinations (including random program examinations) by the Administrator of 

any small business concern making a certification or providing 

information to the Administrator under section 3(p)(5). 

(3) PROVISION OF DATA.-Upon the request of the Administrator, the Secretary of Labor, the Administrator of the Federal 

Emergency Management Agency, the Secretary of Housing and 

Urban Development, and the Secretary of the Interior (or the 

Assistant Secretary for Indian Affairs), shall promptly provide 

to the Administrator such information as the Administrator determines to be necessary to carry out this subsection. 

(4) PENALTIES.-In addition to the penalties described in 

section 16(d), any small business concern that is determined by 

the Administrator to have misrepresented the status of that 

concern as a "HUBZone small business concern" for purposes 

of this section, shall be subject to-

(A) section 1001 of title 18, United States Code; and 

(B) sections 3729 through 3733 of title 31, United 

States Code. 

(d) AUTHORIZATION OF APPROPRIATIONS.-There is authorized 

to be appropriated to carry out the program established by this section $10,000,000 for each of fiscal years 2004 through 2006. 

SEC. 32. [15 U.S.C. 657b] VETERANS PROGRAMS. 

(a) OFFICE OF VETERANS BUSINESS DEVELOPMENT.-There is 

established in the Administration an Office of Veterans Business 

Development, which shall be administered by the Associate Administrator for Veterans Business Development (in this section referred to as the "Associate Administrator") appointed under section 

4(b)(l). 

(b) ASSOCIATE ADMINISTRATOR FOR VETERANS BUSINESS DEVELOPMENT.-The Associate Administrator-

(!) shall be an appointee in the Senior Executive 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 veterans and small business concerns owned and 

controlled by service-disabled veterans. The Associate Administrator shall act as an ombudsman for full consideration of veterans in all programs of the Administration; and 

(3) shall report to and be responsible directly to the Administrator. 

(c) INTERAGENCY TASK FORCE.-

( I) ESTABLISHMENT.-Not later than 90 days after the date 

of enactment of this subsection, the President shall establish 

an interagency task force to coordinate the efforts of Federal 

agencies necessary to improve capital and business development opportunities for, and ensure achievement of the pre-established Federal contracting goals for, small business con-
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Sec. 32 SMALL BUSINESS ACT 270 

cerns owned and controlled by service-disabled veterans and 

small business concerns owned and controlled by veterans (in 

this section referred to as the "task force"). 

(2) MEMBERSHIP.-The members of the task force shall include-

(A) the Administrator, who shall serve as chairperson 

of the task force; and 

(B) a senior level representative from-

(i) the Department of Veterans Affairs; 

(ii) the Department of Defense; 

(iii) the Administration (in addition to the Administrator); 

(iv) the Department of Labor; 

(v) the Department of the Treasury; 

(vi) the General Services Administration; 

(vii) the Office of Management and Budget; and 

(viii) 4 representatives from a veterans service organization or military organization or association, selected by the President. 

(3) DUTIES.-The task force shall-

(A) consult regularly with veterans service organizations and military organizations in performing the duties 

of the task force; and 

(B) coordinate administrative and regulatory activities 

and develop proposals relating to-

(i) improving capital access and capacity of small 

business concerns owned and controlled by service-disabled veterans and small business concerns owned and 

controlled by veterans through loans, surety bonding, 

and franchising; 

(ii) ensuring achievement of the pre-established 

Federal contracting goals for small business concerns 

owned and controlled by service-disabled veterans and 

small business concerns owned and controlled by veterans through expanded mentor-protege assistance 

and matching such small business concerns with contracting opportunities; 

(iii) increasing the integrity of certifications of status as a small business concern owned and controlled 

by service-disabled veterans or a small business concern owned and controlled by veterans; 

(iv) reducing paperwork and administrative burdens on veterans in accessing business development 

and entrepreneurship opportunities; 

(v) increasing and improving training and counseling services provided to small business concerns 

owned and controlled by veterans; and 

(vi) making other improvements relating to the 

support for veterans business development by the Federal Government. 

(d) PARTICIPATION IN TAP WORKSHOPS.-

(1) IN GENERAL.-The Associate Administrator shall increase veteran outreach by ensuring that Veteran Business 

Outreach Centers regularly participate, on a nationwide basis, 
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271 SMAll BUSINESS ACT Sec. 34 

in the workshops of the Transition Assistance Program of the 

Department of Labor. 

(2) PRESENTATIONS.-In carrying out paragraph (1), a Veteran Business Outreach Center may provide grants to entities 

located in Transition Assistance Program locations to make 

presentations on the opportunities available from the Administration for recently separating or separated veterans. Each 

presentation under this paragraph shall include, at a minimum, a description of the entrepreneurial and business training resources available from the Administration. 

(3) WRITTEN MATERIALS.-The Associate Administrator 

shall-

(A) create written materials that provide comprehensive information on self-employment and veterans entrepreneurship, including information on resources available 

from the Administration on such topics; and 

(B) make the materials created under subparagraph 

(A) available to the Secretary of Labor for inclusion in the 

Transition Assistance Program manual. 

(4) REPORTS.-The Associate Administrator shall submit to 

Congress progress reports on the implementation of this subsection. 

(e) WOMEN VETERANS BUSINESS TRAINING.-The Associate Administrator shall-

(1) compile information on existing resources available to 

women veterans for business training, including resources 

for-

(A) vocational and technical education; 

(B) general business skills, such as marketing and accounting; and 

(C) business assistance programs targeted to women 

veterans; and 

(2) disseminate the information compiled under paragraph 

(1) through Veteran Business Outreach Centers and women's 

business centers. 

(f) AUTHORIZATION OF APPROPRIATIONS.-There are authorized 

to be appropriated to carry out this section-

(1) $1,500,000 for fiscal year 2005; and 

(2) $2,000,000 for fiscal year 2006. 

[Section 33 repealed by section 1699(a) of division A of Public 

Law 112-239.] 

SEC. 34. [15 U.S.C. 657d] FEDERAL AND STATE TECHNOLOGY PARTNERSHIP PROGRAM. 

(a) DEFINITIONS.-In this section and section 35, the following 

definitions apply: 

(1) APPLICANT.-The term "applicant" means an entity, organization, or individual that submits a proposal for an award 

or a cooperative agreement under this section. 

(2) BUSINESS ADVICE AND COUNSELING.-The term "business advice and counseling" means providing advice and assistance on matters described in section 35(c)(2)(B) to small business concerns to guide them through the SBIR and STTR pro-
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Sec. 34 SMALL BUSINESS ACT 272 

gram process, from application to award and successful completion of each phase of the program. 

(3) CATASTROPHIC INCIDENT.-The term "catastrophic incident" means a major disaster that is comparable to the description of a catastrophic incident in the National Response 

Plan of the Administration, or any successor thereto. 

(4) FAST PROGRAM.-The term "FAST program" means the 

Federal and State Technology Partnership Program established under this section. 

(5) MENTOR.-The term "mentor" means an individual described in section 35(c)(2). 

(6) MENTORING NETWORK.-The term "Mentoring Network" 

means an association, organization, coalition, or other entity 

(including an individual) that meets the requirements of section 35(c). 

(7) RECIPIENT.-The term "recipient" means a person that 

receives an award or becomes party to a cooperative agreement 

under this section. 

(8) SBIR PROGRAM.-The term "SBIR program" has the 

same meaning as in section 9(e)(4). 

(9) STATE.-The term "State" means each of the several 

States, the District of Columbia, the Commonwealth of Puerto 

Rico, the Virgin Islands, Guam, and American Samoa. 

(10) STTR PROGRAM.-The term "STTR program" has the 

same meaning as in section 9(e)(6). 

(b) ESTABLISHMENT OF PROGRAM.-The Administrator shall establish a program to be known as the Federal and State Technology Partnership Program, the purpose of which shall be to 

strengthen the technological competitiveness of small business concems in the States. 

(c) GRANTS AND COOPERATIVE AGREEMENTS.-

(!) JOINT REVIEW.-In carrying out the FAST program 

under this section, the Administrator and the SBIR program 

managers at the National Science Foundation and the Department of Defense shall jointly review proposals submitted by applicants and may make awards or enter into cooperative agreements under this section based on the factors for consideration 

set forth in paragraph (2), in order to enhance or develop in 

a State-

(A) technology research and development by small 

business concerns; 

(B) technology transfer from university research to 

technology-based small business concerns; 

(C) technology deployment and diffusion benefiting 

small business concerns; 

(D) the technological capabilities of small business 

concerns through the establishment or operation of consortia comprised of entities, organizations, or individuals, 

including-

(i) State and local development agencies and entities; 

(ii) representatives of technology-based small business concems; 

(iii) industries and emerging companies; 
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273 SMALL BUSINESS ACT Sec. 34 

(iv) universities; and 

(v) small business development centers; and 

(E) outreach, financial support, and technical assistance to technology-based small business concerns participating in or interested in participating in an SBIR program, including initiatives-

(i) to make grants or loans to companies to pay a 

portion or all of the cost of developing SBIR proposals; 

(ii) to establish or operate a Mentoring Network 

within the FAST program to provide business advice 

and counseling that will assist small business concerns that have been identified by FAST program participants, program managers of participating SBIR 

agencies, the Administration, or other entities that are 

knowledgeable about the SBIR and STTR programs as 

good candidates for the SBIR and STTR programs, 

and that would benefit from mentoring, in accordance 

with section 35; 

(iii) to create or participate in a training program 

for individuals providing SBIR outreach and assistance at the State and local levels; and 

(iv) to encourage the commercialization of technology developed through SBIR program funding. 

(2) SELECTION CONSIDERATIONS.-ln making awards or entering into cooperative agreements under this section, the Administrator and the SBIR program managers referred to in 

paragraph (1)-

(A) may only consider proposals by applicants that intend to use a portion of the Federal assistance provided 

under this section to provide outreach, financial support, 

or technical assistance to technology-based small business 

concerns participating in or interested in participating in 

the SBIR program; 

(B) shall consider, at a minimum-

(i) whether the applicant has demonstrated that 

the assistance to be provided would address unmet 

needs of small business concerns in the community, 

and whether it is important to use Federal funding for 

the proposed activities; 

(ii) whether the applicant has demonstrated that 

a need exists to increase the number or success of 

small high-technology businesses in the State, as 

measured by the number of first phase and second 

phase SBIR awards that have historically been received by small business concerns in the State; 

(iii) whether the projected costs of the proposed 

activities are reasonable; 

(iv) whether the proposal integrates and coordinates the proposed activities with other State and 

local programs assisting small high-technology firms 

in the State; 

(v) the manner in which the applicant will measure the results of the activities to be conducted; and 
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Sec. 34 SMALL BUSINESS ACT 274 

(vi) whether the proposal addresses the needs of 

small business concerns-

(!) owned and controlled by women; 

(ll) owned and controlled by minorities; and 

(III) located in areas that have historically not 

participated in the SBIR and STTR programs; and 

(C) shall give special consideration to an applicant 

that is located in an area affected by a catastrophic incident. 

(3) PROPOSAL LIMIT.-Not more than one proposal may be 

submitted for inclusion in the FAST program under this section to provide services in any one State in any 1 fiscal year. 

(4) PROCESS.-Proposals and applications for assistance 

under this section shall be in such form and subject to such 

procedures as the Administrator shall establish. The Administrator shall promulgate regulations establishing standards for 

the consideration of proposals under paragraph (2), including 

standards regarding each of the considerations identified in 

paragraph (2)(B). 

(5) ADDITIONAL ASSISTANCE FOR CATASTROPHIC INCIDENTS.-Upon application by an applicant that receives an 

award or has in effect a cooperative agreement under this section and that is located in an area affected by a catastrophic 

incident, the Administrator may-

(A) provide additional assistance to the applicant; and 

(B) waive the matching requirements under subsection 

(e)(2). 

(d) COOPERATION AND COORDINATION.-ln carrying out the 

FAST program under this section, the Administrator shall cooperate and coordinate with-

(1) Federal agencies required by section 9 to have an SBIR 

program; and 

(2) entities, organizations, and individuals actively engaged in enhancing or developing the technological capabilities 

of small business concerns, including-

(A) State and local development agencies and entities; 

(B) State committees established under the Experimental Program to Stimulate Competitive Research of the 

National Science Foundation (as established under section 

113 of the National Science Foundation Authorization Act 

of 1988 (42 U.S.C. 1862g)); 

(C) State science and technology councils; and 

(D) representatives of technology-based small business 

concerns. 

(e) ADMINISTRATIVE REQUIREMENTS.-

(!) COMPETITIVE BASIS.-Awards and cooperative agreements under this section shall be made or entered into, as applicable, on a competitive basis. 

(2) MATCHING REQUIREMENTS.-

(A) IN GENERAL.-The non-Federal share of the cost of 

an activity (other than a planning activity) carried out 

using an award or under a cooperative agreement under 

this section shall be-
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275 SMALL BUSINESS ACT Sec. 34 

(i) 50 cents for each Federal dollar, in the case of 

a recipient that will serve small business concerns located in one of the 18 States receiving the fewest 

SBIR first phase awards (as described in section 

9( e)( 4)(A) ); 

(ii) except as provided in subparagraph (B), 1 dollar for each Federal dollar, in the case of a recipient 

that will serve small business concerns located in one 

of the 16 States receiving the greatest number of such 

SBIR first phase awards; and 

(iii) except as provided in subparagraph (B), 75 

cents for each Federal dollar, in the case of a recipient 

that will serve small business concerns located in a 

State that is not described in clause (i) or (ii) that is 

receiving such SBIR first phase awards. 

(B) LOW-INCOME AREAS.-The non-Federal share of the 

cost of the activity carried out using an award or under a 

cooperative agreement under this section shall be 50 cents 

for each Federal dollar that will be directly allocated by a 

recipient described in subparagraph (A) to serve small 

business concerns located in a qualified census tract, as 

that term is defined in section 42(d)(5)(C)(ii) of the Internal Revenue Code of 1986. Federal dollars not so allocated 

by that recipient shall be subject to the matching requirements of subparagraph (A). 

(C) TYPES OF FUNDING.-The non-Federal share of the 

cost of an activity carried out by a recipient shall be comprised of not less than 50 percent cash and not more than 

50 percent of indirect costs and in-kind contributions, except that no such costs or contributions may be derived 

from funds from any other Federal program. 

(D) RANKINGS.-For purposes of subparagraph (A), the 

Administrator shall reevaluate the ranking of a State once 

every 2 fiscal years, beginning with fiscal year 2001, based 

on the most recent statistics compiled by the Administrator. 

(3) DURATION.-Awards may be made or cooperative agreements entered into under this section for multiple years, not 

to exceed 5 years in total. 

(f) REPORTS.-

(1) INITIAL REPORT.-Not later than 120 days after the 

date of the enactment of the Small Business Innovation Research Program Reauthorization Act of 2000, the Administrator shall prepare and submit to the Committee on Small 

Business of the Senate and the Committee on Science and the 

Committee on Small Business of the House of Representatives 

a report, which shall include, with respect to the FAST program, including Mentoring Networks-

(A) a description of the structure and procedures of the 

program; 

(B) a management plan for the program; and 

(C) a description of the merit-based review process to 

be used in the program. 
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Sec. 35 SMALL BUSINESS ACT 276 

(2) ANNUAL REPORTS.-The Administrator shall submit an 

annual report to the Committee on Small Business of the Senate and the Committee on Science and the Committee on Small 

Business of the House of Representatives regarding-

(A) the number and amount of awards provided and 

cooperative agreements entered into under the FAST program during the preceding year; 

(B) a list of recipients under this section, including 

their location and the activities being performed with the 

awards made or under the cooperative agreements entered 

into; and 

(C) the Mentoring Networks and the mentoring database, as provided for under section 35, including-

(i) the status of the inclusion of mentoring information in the database required by section 9(k); and 

(ii) the status of the implementation and description of the usage of the Mentoring Networks. 

(g) REVIEWS BY INSPECTOR GENERAL.-

(1) IN GENERAL.-The Inspector General of the Administration shall conduct a review of-

(A) the extent to which recipients under the FAST program are measuring the performance of the activities 

being conducted and the results of such measurements; 

and 

(B) the overall management and effectiveness of the 

FAST program. 

(2) REPORT.-During the first quarter of fiscal year 2004, 

the Inspector General of the Administration shall submit a report to the Committee on Small Business of the Senate and the 

Committee on Science and the Committee on Small Business 

of the House of Representatives on the review conducted under 

paragraph (1). 

(h) PROGRAM LEVELS.-

(1) IN GENERAL.-There is authorized to be appropriated to 

carry out the FAST program, including Mentoring Networks, 

under this section and section 35, $10,000,000 for each of fiscal 

years 2001 through 2005. 

(2) MENTORING DATABASE.-Of the total amount made 

available under paragraph (1) for fiscal years 2001 through 

2005, a reasonable amount, not to exceed a total of $500,000, 

may be used by the Administration to carry out section 35(d). 

(i) TERMINATION.-The authority to carry out the FAST program under this section shall terminate on September 30, 2005. 

SEC. 35, [15 U.S.C. 657e] MENTORING NETWORKS. 

(a) FINDINGS.-Congress finds that-

(1) the SBIR and STTR programs create jobs, increase capacity for technological innovation, and boost international 

competitiveness; 

(2) increasing the quantity of applications from all States 

to the SBIR and STTR programs would enhance competition 

for such awards and the quality of the completed projects; and 

(3) mentoring is a natural complement to the FAST program of reaching out to new companies regarding the SBIR 
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277 SMAU BUSINESS ACT Sec. 35 

and STTR programs as an effective and low-cost way to improve the likelihood that such companies will succeed in such 

programs in developing and commercializing their research. 

(b) AUTHORIZATION FOR MENTORING NETWORKS.-The recipient 

of an award or participant in a cooperative agreement under section 34 may use a reasonable amount of such assistance for the establishment of a Mentoring Network under this section. 

(c) CRITERIA FOR MENTORING NETWORKS.-A Mentoring Network established using assistance under section 34 shall-

(1) provide business advice and counseling to high technology small business concerns located in the State or region 

served by the Mentoring Network and identified under section 

34(c)(l)(E)(ii) as potential candidates for the SBIR or STTR 

programs; 

(2) identify volunteer mentors who-

(A) are persons associated with a small business concern that has successfully completed one or more SBIR or 

STTR funding agreements; and 

(B) have agreed to guide small business concerns 

through all stages of the SBIR or STTR program process, 

including providing assistance relating to-

(i) proposal writing; 

(ii) marketing; 

(iii) Government accounting; 

(iv) Government audits; 

(v) project facilities and equipment; 

(vi) human resources; 

(vii) third phase partners; 

(viii) commercialization; 

(ix) venture capital networking; and 

(x) other matters relevant to the SBIR and STTR 

programs; 

(3) have experience working with small business concerns 

participating in the SBIR and STTR programs; 

(4) contribute information to the national database referred to in subsection (d); and 

(5) agree to reimburse volunteer mentors for out-of-pocket 

expenses related to service as a mentor under this section. 

(d) MENTORING DATABASE.-The Administrator shall-

(1) include in the database required by section 9(k)(l), in 

cooperation with the SBIR, STTR, and FAST programs, information on Mentoring Networks and mentors participating 

under this section, including a description of their areas of expertise; 

(2) work cooperatively with Mentoring Networks to maintain and update the database; 

(3) take such action as may be necessary to aggressively 

promote Mentoring Networks under this section; and 

(4) fulfill the requirements of this subsection either directly or by contract. 
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Sec. 36 SMALL BUSINESS ACT 278 

SEC. 36. [15 U.S.C. 657f] PROCUREMENT PROGRAM FOR SMALL BUSI· 

NESS CONCERNS OWNED AND CONTROLLED BY SERVICE· 

DISABLED VETERANS. 

(a) SOLE SOURCE CONTRACTS.-ln accordance with this section, 

a contracting officer may award a sole source contract to any small 

business concern owned and controlled by service-disabled veterans 

if-

(1) such concern is determined to be a responsible contractor with respect to performance of such contract opportunity and the contracting officer does not have a reasonable 

expectation that 2 or more small business concerns owned and 

controlled by service-disabled veterans will submit offers for 

the contracting opportunity; 

(2) the anticipated award price of the contract (including 

options) will not exceed-

(A) $5,000,000, in the case of a contract opportunity 

assigned a standard industrial classification code for manufacturing; or 

(B) $3,000,000, in the case of any other contract opportunity; and 

(3) in the estimation of the contracting officer, the contract 

award can be made at a fair and reasonable price. 

(b) RESTRICTED COMPETITION.-In accordance with this section, 

a contracting officer may award contracts on the basis of competition restricted to small business concerns owned and controlled by 

service-disabled veterans if the contracting officer has a reasonable 

expectation that not less than 2 small business concerns owned and 

controlled by service-disabled veterans will submit offers and that 

the award can be made at a fair market price. 

(c) RELATIONSHIP TO OTHER CONTRACTING PREFERENCES.-A 

procurement may not be made from a source on the basis of a preference provided under subsection (a) or (b) if the procurement 

would otherwise be made from a different source under section 

4124 or 4125 of title 18, United States Code, or the Javits-WagnerO'Day Act (41 U.S.C. 46 et seq.). 

(d) ENFORCEMENT; PENALTIES.-Rules similar to the rules of 

paragraphs (5) and (6) of section 8(m) shall apply for purposes of 

this section. 

(e) CONTRACTING OFFICER.-For purposes of this section, the 

term "contracting officer" has the meaning given such term in section 27(£)(5) of the Office of Federal Procurement Policy Act (41 

u.s.c. 423(£)(5)). 

SEC. 37. [15 U.S.C. 657i] COORDINATION OF DISASTER ASSISTANCE 

PROGRAMS WITH FEMA. 

(a) COORDINATION REQUIRED.-The Administrator shall ensure 

that the disaster assistance programs of the Administration are coordinated, to the maximum extent practicable, with the disaster assistance programs of the Federal Emergency Management Agency. 

(b) REGULATIONS REQUIRED.-The Administrator, in consultation with the Administrator of the Federal Emergency Management Agency, shall establish regulations to ensure that each application for disaster assistance is submitted as quickly as practicable 

to the Administration or directed to the appropriate agency under 

the circumstances. 
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279 SMALL BUSINESS ACT Sec. 38 

(c) COMPLETION; REVISION.-The initial regulations shall be 

completed not later than 270 days after the date of the enactment 

of the Small Business Disaster Response and Loan Improvements 

Act of 2008. Thereafter, the regulations shall be revised on an annual basis. 

(d) REPORT.-The Administrator shall include a report on the 

regulations whenever the Administration submits the report required by section 43. 

SEC. 38. [15 U.S.C. 657j] INFORMATION TRACKING AND FOLLOW·UP 

SYSTEM FOR DISASTER ASSISTANCE. 

(a) SYSTEM REQUIRED.-The Administrator shall develop, implement, or maintain a centralized information system to track 

communications between personnel of the Administration and applicants for disaster assistance. The system shall ensure that 

whenever an applicant for disaster assistance communicates with 

such personnel on a matter relating to the application, the following information is recorded: 

(1) The method of communication. 

(2) The date of communication. 

(3) The identity of the personnel. 

(4) A summary of the subject matter of the communication. 

(b) FoLLOW-UP REQUIRED.-The Administrator shall ensure 

that an applicant for disaster assistance receives, by telephone, 

mail, or electronic mail, follow-up communications from the Administration at all critical stages of the application process, including 

the following: 

(1) When the Administration determines that additional 

information or documentation is required to process the application. 

(2) When the Administration determines whether to approve or deny the loan. 

(3) When the primary contact person managing the loan 

application has changed. 

(c) REPORT ON WEB PoRTAL FOR DISASTER LOAN APPLICATION 

STATUS.-

(1) IN GENERAL.-Not later than 90 days after the date of 

enactment of this subsection, the Administrator 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 relating to the creation of a web portal to the track the status of applications for disaster assistance under section 7(b). 

(2) CONTENTS.-The report under paragraph (1) shall include-

(A) information on the progress of the Administration 

in implementing the information system under subsection 

(a); 

(B) recommendations from the Administration relating 

to the creation of a web portal for applicants to check the 

status of an application for disaster assistance under section 7(b), including a review of best practices and web portal models from the private sector; 

(C) information on any related costs or staffing needed 

to implement such a web portal; 
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Sec. 39 SMALL BUSINESS ACT 280 

(D) information on whether such a web portal can 

maintain high standards for data privacy and data security; 

(E) information on whether such a web portal will 

minimize redundancy among Administration disaster programs, improve management of the number of inquiries 

made by disaster applicants to employees located in the 

area affected by the disaster and to call centers, and reduce paperwork burdens on disaster victims; and 

(F) such additional information as is determined necessary by the Administrator. 

SEC. 39. [15 U.S.C. 657k] DISASTER PROCESSING REDUNDANCY. 

(a) IN GENERAL.-The Administrator shall ensure that the Administration has in place a facility for disaster loan processing 

that, whenever the Administration's primary facility for disaster 

loan processing becomes unavailable, is able to take over all disaster loan processing from that primary facility within 2 days. 

(b) AUTHORIZATION OF APPROPRIATIONS.-There are authorized 

to be appropriated such sums as may be necessary to carry out this 

section. 

SEC. 40. [15 U.S.C. 6571] COMPREHENSIVE DISASTER RESPONSE PLAN. 

(a) PLAN REQUIRED.-The Administrator shall develop, implement, or maintain a comprehensive written disaster response plan. 

The plan shall include the following: 

(1) For each region of the Administration, a description of 

the disasters most likely to occur in that region. 

(2) For each disaster described under paragraph (1)-

(A) an assessment of the disaster; 

(B) an assessment of the demand for Administration 

assistance most likely to occur in response to the disaster; 

(C) an assessment of the needs of the Administration, 

with respect to such resources as information technology, 

telecommunications, human resources, and office space, to 

meet the demand referred to in subparagraph (B); and 

(D) guidelines pursuant to which the Administration 

will coordinate with other Federal agencies and with State 

and local authorities to best respond to the demand referred to in subparagraph (B) and to best use the resources 

referred to in that subparagraph. 

(b) COMPLETION; REVISION.-The first plan required by subsection (a) shall be completed not later than 180 days after the 

date of the enactment of this section. Thereafter, the Administrator 

shall update the plan on an annual basis and following any major 

disaster relating to which the Administrator declares eligibility for 

additional disaster assistance under section 7(b)(9). 

(c) KNOWLEDGE REQUIRED.-The Administrator shall carry out 

subsections (a) and (b) through an individual with substantial 

knowledge in the field of disaster readiness and emergency response. 

(d) REPORT.-The Administrator shall include a report on the 

plan whenever the Administration submits the report required by 

section 43. 
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SEC. 41. [15 U.S.C. 657m] PLANS TO SECURE SUFFICIENT OFFICE 

SPACE. 

(a) PLANS REQUIRED.-The Administrator shall develop longterm plans to secure sufficient office space to accommodate an expanded workforce in times of disaster. 

(b) REPORT.-The Administrator shall include a report on the 

plans developed under subsection (a) each time the Administration 

submits a report required under section 43. 

SEC. 42. [15 U.S.C. 657n] IMMEDIATE DISASTER ASSISTANCE PRO· 

GRAM. 

(a) PROGRAM REQUIRED.-The Administrator shall carry out a 

program, to be known as the Immediate Disaster Assistance program, under which the Administration participates on a deferred 

(guaranteed) basis in 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 $25,000 for businesses affected by a disaster. 

(b) ELIGIBILITY REQUIREMENT.-To receive a loan guaranteed 

under subsection (a), the applicant shall also apply for, and meet 

basic eligibility standards for, a loan under subsection (b) or (c) of 

section 7. 

(c) USE OF PROCEEDS.-A person who receives a loan under 

subsection (b) or (c) of section 7 shall use the proceeds of that loan 

to repay all loans guaranteed under subsection (a), if any, before 

using the proceeds for any other purpose. 

(d) LOAN TERMS.-

(1) No PREPAYMENT PENALTY.-There shall be no prepayment penalty on a loan guaranteed under subsection (a). 

(2) REPAYMENT.-A person who receives a loan guaranteed 

under subsection (a) and who is disapproved for a loan under 

subsection (b) or (c) of section 7, as the case may be, shall 

repay the loan guaranteed under subsection (a) not later than 

the date established by the Administrator, which may not be 

earlier than 10 years after the date on which the loan guaranteed under subsection 7 8 is disbursed. 

(e) APPROVAL OR DISAPPROVAL.-The Administrator shall ensure that each applicant for a loan under the program receives a 

decision approving or disapproving of the application within 36 

hours after the Administration receives the application. 

SEC. 43. [15 U.S.C. 657o] ANNUAL REPORTS ON DISASTER ASSISTANCE. 

Not later than 45 days after the end of a fiscal :year, the Administrator 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 on the disaster assistance operations of the Administration for that fiscal year. The 

report shall-

(1) specify the number of Administration personnel involved in such operations; 

(2) describe any material changes to those operations, such 

as changes to technologies used or to personnel responsibilities; 

(3) describe and assess the effectiveness of the Administration in responding to disasters during that fiscal year, includ78 The word "subsection" probably should be "subsection (a)". 
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Sec. 44 SMALL BUSINESS ACT 282 

ing a description of the number and amounts of loans made for 

damage and for economic injury; and 

(4) describe the plans of the Administration for preparing 

to respond to disasters during the next fiscal year. 

SEC. 44. [15 U.S.C. 657q] CONSOLIDATION OF CONTRACT REQUIRE· 

MENTS. 

(a) DEFINITIONS.-In this section-

(1) the term "Chief Acquisition Officer" means the employee of a Federal agency appointed or designated as the 

Chief Acquisition Officer for the Federal agency under section 

1702(a) of title 41, United States Code; 

(2) the term "consolidation of contract requirements", with 

respect to contract requirements of a Federal agency, means a 

use of a solicitation to obtain offers for a single contract or a 

multiple award contract-

(A) to satisfy 2 or more requirements of the Federal 

agency for goods or services that have been provided to or 

performed for the Federal agency under 2 or more separate 

contracts lower in cost than the total cost of the contract 

for which the offers are solicited; or 

(B) to satisfy requirements of the Federal agency for 

construction projects to be performed at 2 or more discrete 

sites; and 

(3) the term "senior procurement executive" means an official designated under section 1702(c) of title 41, United States 

Code as the senior procurement executive for a Federal agency. 

(b) POLICY.-The head of each Federal agency shall ensure that 

the decisions made by the Federal agency regarding consolidation 

of contract requirements of the Federal agency are made with a 

view to providing small business concerns with appropriate opportunities to participate as prime contractors and subcontractors in 

the procurements of the Federal agency. 

(c) LIMITATION ON UsE OF ACQUISITION STRATEGIES INVOLVING 

CONSOLIDATION.-

(1) IN GENERAL.-The head of a Federal agency may not 

carry out an acquisition strategy that includes a consolidation 

of contract requirements of the Federal agency with a total 

value of more than $2,000,000, unless the senior procurement 

executive or Chief Acquisition Officer for the Federal agency, 

before carrying out the acquisition strategy-

(A) conducts market research; 

(B) identifies any alternative contracting approaches 

that would involve a lesser degree of consolidation of contract requirements; 

(C) makes a written determination that the consolidation of contract requirements is necessary and justified; 

(D) identifies any negative impact by the acquisition 

strategy on contracting with small business concerns; and 

(E) ensures that steps will be taken to include small 

business concerns in the acquisition strategy. 

(2) DETERMINATION THAT CONSOLIDATION IS NECESSARY 

AND JUSTIFIED.-

(A) IN GENERAL.-A senior procurement executive or 

Chief Acquisition Officer may determine that an acquisi-
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283 SMALL BUSINESS ACT Sec. 45 

tion strategy involving a consolidation of contract requirements is necessary and justified for the purposes of paragraph (l)(C) if the benefits of the acquisition strategy substantially exceed the benefits of each of the possible alternative contracting approaches identified under paragraph 

(l)(B). 

(B) SAVINGS IN ADMINISTRATIVE OR PERSONNEL 

COSTS.-For purposes of subparagraph (A), savings in administrative or personnel costs alone do not constitute a 

sufficient justification for a consolidation of contract requirements in a procurement unless the expected total 

amount of the cost savings, as determined by the senior 

procurement executive or Chief Acquisition Officer, is expected to be substantial in relation to the total cost of the 

procurement. 

(C) NOTICE.-Not later than 7 days after making a determination that an acquisition strategy involving a consolidation of contract requirements is necessary and justified under subparagraph (A), the senior procurement executive or Chief Acquisition Officer shall publish a notice on 

a public website that such determination has been made. 

Any solicitation for a procurement related to the acquisition strategy may not be published earlier than 7 days 

after such notice is published. Along with the publication 

of the solicitation, the senior procurement executive or 

Chief Acquisition Officer shall publish a justification for 

the determination, which shall include the information in 

subparagraphs (A) through (E) of paragraph (1). 

(3) BENEFITS TO BE CONSIDERED.-The benefits considered 

for the purposes of paragraphs (1) and (2) may include cost 

and, regardless of whether quantifiable in dollar amounts-

(A) quality; 

(B) acquisition cycle; 

(C) terms and conditions; and 

(D) any other benefit. 

SEC. 45. [15 U.S.C. 657r) MENTOR-PROTEGE PROGRAMS. 

(a) ADMINISTRATION PROGRAM.-

(1) AUTHORITY.-The Administrator is authorized to establish a mentor-protege program for all small business concerns. 

(2) MODEL FOR PROGRAM.-The mentor-protege program 

established under paragraph (1) shall be identical to the mentor-protege program of the Administration for small business 

concerns that participate in the program under section 8(a) (as 

in effect on the date of enactment of this section), except that 

the Administrator may modify the program to the extent necessary given the types of small business concerns included as 

proteges. 

(b) PROGRAMS OF OTHER AGENCIES.-

(!) APPROVAL REQUIRED.-Except as provided in paragraph 

(4), a Federal department or agency may not carry out a mentor-protege program for small business concerns unless-

(A) the head of the department or agency submits a 

plan to the Administrator for the program; and 
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Sec. 45 SMALL BUSINESS ACT 284 

(B) the Administrator approves such plan. 

(2) BASIS FOR APPROVAL.-The Administrator shall approve 

or disapprove a plan submitted under paragraph (1) based on 

whether the program proposed-

(A) will assist proteges to compete for Federal prime 

contracts and subcontracts; and 

(B) complies with the regulations issued under paragraph (3). 

(3) REGULATIONS.-Not later than 270 days after the date 

of enactment of this section, the Administrator shall issue, subject to notice and comment, regulations with respect to mentorprotege programs, which shall ensure that such programs improve the ability of proteges to compete for Federal prime contracts and subcontracts and which shall address, at a minimum, the following: 

(A) Eligibility criteria for program participants, including any restrictions on the number of mentor-protege relationships permitted for each participant. 

(B) The types of developmental assistance to be provided by mentors, including how the assistance provided 

shall improve the competitive viability of the proteges. 

(C) Whether any developmental assistance provided by 

a mentor may affect the status of a program participant as 

a small business concern due to affiliation. 

(D) The length of mentor-protege relationships. 

(E) The effect of mentor-protege relationships on contracting. 

(F) Benefits that may accrue to a mentor as a result 

of program participation. 

(G) Reporting requirements during program participation. 

(H) Postparticipation reporting requirements. 

(I) The need for a mentor-protege pair, if accepted to 

participate as a pair in a mentor-protege program of any 

Federal department or agency, to be accepted to participate as a pair in all Federal mentor-protege programs. 

(J) Actions to be taken to ensure benefits for proteges 

and to protect a protege against actions by a mentor that-

(i) may adversely affect the protege's status as a 

small business concern; or 

(ii) provide disproportionate economic benefits to 

the mentor relative to those provided the protege. 

(K) The types of assistance provided by a mentor to 

assist with compliance with the requirements of contracting with the Federal Government after award of a 

contract or subcontract under this section. 

(4) LIMITATION ON APPLICABILITY.-Paragraph (1) does not 

apply to the following: 

(A) Any mentor-protege program of the Department of 

Defense. 

(B) Any mentoring assistance provided under a Small 

Business Innovation Research Program or a Small Business Technology Transfer Program. 
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285 SMALL BUSINESS ACT . Sec. 45 

(C) Until the date that is 1 year after the date on 

which the Administrator issues regulations under paragraph (3), any Federal department or agency operating a 

mentor-protege program in effect on the date of enactment 

of this section. 

(c) REPORTING.-

(!) IN GENERAL.-Not later than 2 years after the date of 

enactment of this section, and annually thereafter, the Administrator 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 that-

(A) identifies each Federal mentor-protege program; 

(B) specifies the number of participants in each such 

program, including the number of participants that are-

(i) small business concerns; 

(ii) small business concerns owned and controlled 

by service-disabled veterans; 

(iii) qualified HUBZone small business concerns; 

(iv) small business concerns owned and controlled 

by socially and economically disadvantaged individuals; or 

(v) small business concerns owned and controlled 

by women; 

(C) describes the type of assistance provided to proteges under each such program; 

(D) describes the benefits provided to mentors under 

each such program; and 

(E) describes the progress of proteges under each such 

program with respect to competing for Federal prime contracts and subcontracts. 

(2) PROVISION OF INFORMATION.-The head of each Federal 

department or agency carrying out a mentor-protege program 

shall provide to the Administrator, on an annual basis, the information necessary for the Administrator to submit a report 

required under paragraph (1). 

(d) DEFINITIONS.-In this section, the following definitions 

apply: 

(1) MENTOR.-The term "mentor" means a for-profit business concern, of any size, that-

(A) has the ability to assist and commits to assisting 

a protege to compete for Federal prime contracts and subcontracts; and 

(B) satisfies any other requirements imposed by the 

Administrator. 

(2) MENTOR-PROTEGE PROGRAM.-The term "mentor-protege program" means a program that pairs a mentor with a 

protege for the purpose of assisting the protege to compete for 

Federal prime contracts and subcontracts. 

(3) PROTEGE.-The term "protege" means a small business 

concern that-

(A) is eligible to enter into Federal prime contracts 

and subcontracts; and 

(B) satisfies any other requirements imposed by the 

Administrator. 
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Sec. 46 SMALL BUSINESS ACT 286 

(e) CURRENT MENTOR PROTEGE AGREEMENTS.-Mentors and 

proteges with approved agreement in a program operating pursuant to subsection (b)(4)(C) shall be permitted to continue their relationship according to the terms specified in their agreement until 

the expiration date specified in the agreement. 

(f) SUBMISSION OF AGENCY PLANS.-Agencies operating mentor 

protege programs pursuant to subsection (b)(4)(C) shall submit the 

plans specified in subsection (b)(l)(A) to the Administrator within 

6 months of the promulgation of rules required by subsection (b)(3). 

The Administrator shall provide initial comments on each plan 

within 60 days of receipt, and final approval or denial of each plan 

within 180 days after receipt. 

SEC. 46. [15 U.S.C. 657s) LIMITATIONS ON SUBCONTRACTING. 

(a) IN GENERAL.-If awarded a contract under section 8(a), 

8(m), 15(a), 31, or 36, a covered small business concern-

(!) in the case of a contract for services, may not expend 

on subcontractors more than 50 percent of the amount paid to 

the concern under the contract; 

(2) in the case of a contract for supplies (other than from 

a regular dealer in such supplies), may not expend on subcontractors more than 50 percent of the amount, less the cost 

of materials, paid to the concern under the contract; 

(3) in the case of a contract described in paragraphs (1) 

and (2)-

(A) shall determine for which category, services (as described in paragraph (1)) or supplies (as described in paragraph (2)), the greatest percentage of the contract is 

awarded; 

(B) shall determine the amount awarded under the 

contract for that category of services or supplies; and 

(C) may not expend on subcontractors, with respect to 

the amount determined under subparagraph (B), more 

than 50 percent of that amount; and 

(4) in the case of a contract which is principally for supplies from a regular dealer in such supplies, and which is not 

a contract principally for services or construction, shall supply 

the product of a domestic small business manufacturer or processor, unless a waiver of such requirement is granted-

(A) by the Administrator, after reviewing a determination by the applicable contracting officer that no small 

business manufacturer or processor can reasonably be expected to offer a product meeting the specifications (including period for performance) required by the contract; or 

(B) by the Administrator for a product (or class of 

products), after determining that no small business manufacturer or processor is available to participate in the Federal procurement market. 

(b) SIMILARLY SITUATED ENTITIES.-Contract amounts expended by a covered small business concern on a subcontractor 

that is a similarly situated entity shall not be considered subcontracted for purposes of determining whether the covered small 

business concern has violated a requirement established under subsection (a) or (d). 
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287 SMALL BUSINESS ACT Sec. 46 

(c) MODIFICATIONS OF PERCENTAGES.-The Administrator may 

change, by rule (after providing notice and an opportunity for public comment), a percentage specified in paragraphs (1) through (4) 

of subsection (a) if the Administrator determines that such change 

is necessary to reflect conventional industry practices among business concerns that are below the numerical size standard for businesses in that industry category. 

(d) OTHER CONTRACTS.-

(!) IN GENERAL.-With respect to a category of contracts to 

which a requirement under subsection (a) does not apply, the 

Administrator is authorized to establish, by rule (after providing notice and an opportunity for public comment), a requirement that a covered small business concern may not expend on subcontractors more than a specified percentage of the 

amount paid to the concern under a contract in that category. 

(2) UNIFORMITY.-A requirement established under paragraph (1) shall apply to all covered small business concerns. 

(3) CONSTRUCTION PROJECTS.-The Administrator shall establish, through public rulemaking, requirements similar to 

those specified in paragraph (1) to be applicable to contracts 

for general and specialty construction and to contracts for any 

other industry category not otherwise subject to the requirements of such paragraph. The percentage applicable to any 

such requirement shall be determined in accordance with paragraph (1). 

(e) DEFINITIONS.-In this section, the following definitions 

apply: 

(1) COVERED SMALL BUSINESS CONCERN.-The term "covered small business concern" means a business concern that-

(A) with respect to a contract awarded under section 

8(a), is a small business concern eligible to receive contracts under that section; 

(B) with respect to a contract awarded under section 

8(m)-

(i) is a small business concern owned and controlled by women (as defined in that section); or 

(ii) is a small business concern owned and controlled by women (as defined in that section) that is 

not less than 51 percent owned by 1 or more women 

who are economically disadvantaged (and such ownership is determined without regard to any community 

property law); 

(C) with respect to a contract awarded under section 

15(a), is a small business concern; 

(D) with respect to a contract awarded under section 

31, is a qualified HUBZone small business concern; or 

(E) with respect to a contract awarded under section 

36, is a small business concern owned and controlled by 

service-disabled veterans. 

(2) SIMILARLY SITUATED ENTITY.-The term "similarly situated entity" means a subcontractor that-

(A) if a subcontractor for a small business concern, is 

a small business concern; 
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Sec. 47 SMALL BUSINESS ACT 288 

(B) if a subcontractor for a small business concern eligible to receive contracts under section 8(a), is such a concern· 

CC) if a subcontractor for a small business concern 

owned and controlled by women (as defined in section 

8(m)), is such a concern; 

(D) if a subcontractor for a small business concern 

owned and controlled by women (as defined in section 

8(m)) that is not less than 51 percent owned by 1 or more 

women who are economically disadvantaged (and such 

ownership is determined without regard to any community 

property law), is such a concern; 

(E) if a subcontractor for a qualified HUBZone small 

business concern, is such a concern; or 

(F) if a subcontractor for a small business concern 

owned and controlled by service-disabled veterans, is such 

a concern. 

SEC. 47. [15 U.S. C. 631 note] All laws and parts of laws inconsistent with this Act are hereby repealed to the extent of such 

inconsistency. 
SMALL BUSINESS INVESTMENT ACT OF 1958 

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SMALL BUSINESS INVESTMENT ACT OF 1958 

[Public Law 85-699; 72 Stat. 689] 

[As Amended Through P.L. 114-113, Enacted December 18, 2015] 

AN ACT To make equity capital and long-term credit more readily available for 

small-business concerns, and for other purposes. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

TITLE I-SHORT TITLE, STATEMENT OF POLICY, AND 

DEFINITIONS 

SEC. 101. [15 U.S.C. 661 note] SHORT TITLE. 

This Act may be cited as the "Small Business Investment Act 

of 1958". 

STATEMENT OF POLICY 

SEc. 102. [15 U.S.C. 661] It is declared to be the policy of the 

Congress and the purpose of this Act to improve and stimulate the 

national economy in general and the small-business segment thereof in particular by establishing a program to stimulate and supplement the flow of private equity capital and long-term loan funds 

which small-business concerns need for the sound financing of their 

business operations and for their growth, expansion, and modernization, and which are not available in adequate supply: Provided, however, That this policy shall be carried out in such manner as to insure the maximum participation of private financing 

sources. It is the intention of the Congress that in the award of financial assistance under this Act, when practicable, priority be accorded to small business concerns which lease or purchase equipment and supplies which are produced in the United States and 

that small business concerns receiving such assistance be encouraged to continue to lease or purchase such equipment and supplies. 

It is the intention of the Congress that the provisions of this 

Act shall be so administered that any financial assistance provided hereunder shall not result in a substantial increase of unemployment in any area of the country. 

DEFINITIONS 

SEc. 103. [15 U.S.C. 662] As used in this Act-

(1) the term "Administration" means the Small Business 

Administration; 

(2) the term "Administrator" means the Administrator of 

the Small Business Administration; 

1 
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Sec. 103 SMALL BUSINESS INVESTMENT ACT OF 1958 2 

(3) the terms "small business investment company", "company", and "licensee" mean a company approved by the Administration to operate under the provisions of this Act and issued 

a license as provided in section 301; 

(4) the term "State" includes the several States, the Territories and possessions of the United States, the Commonwealth of Puerto Rico, and the District of Columbia; 

(5) the term "small-business concern" shall have the same 

meaning as in the Small Business Act, except that, for purposes of this Act-

(A) an investment by a venture capital firm, investment company (including a small business investment 

company) employee welfare benefit plan or pension plan, 

or trust, foundation, or endowment that is exempt from 

Federal income taxation-

(i) shall not cause a business concern to be 

deemed not independently owned and operated regard- less of the allocation of control during the investment 

period under any investment agreement between the 

business concern and the entity making the investment; 

(ii) shall be disregarded in determining whether a 

business concern satisfies size standards established 

pursuant to section 3(a)(2) of the Small Business Act; 

and 

(iii) shall be disregarded in determining whether 

a small business concern is a smaller enterprise. and 1 

(B) in determining whether a business concern satisfies net income standards established pursuant to section 

3(a)(2) of the Small Business Act, if the business concern 

is not required by law to pay Federal income taxes at the 

enterprise level, but is required to pass income through to 

the shareholders, partners, beneficiaries, or other equi- table owners of the business concern, the net income of the 

business concern shall be determined by allowing a deduction in an amount equal to the sum of-

(i) if the business concern is not required by law 

to pay State (and local, if any) income taxes at the enterprise level, the net income (determined without regard to this subparagraph), multiplied by the marginal State income tax rate (or by the combined State and 

local income tax rates, as applicable) that would have 

applied if the business concern were a corporation; and 

(ii) the net income (so determined) less any deduction for State (and local) income taxes calculated 

under clause (i), multiplied by the marginal Federal 

income tax rate that would have applied if the business concern were a corporation; 

(6) the term "development companies" means enterprises 

incorporated under State law with the authority to promote 

1 The amendment made by section 2(c)(lXB) of Public Law 106-9 should have striken the pe· riod and inserted", and". 
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3 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 103 

and assist the growth and development of small-business concerns in the areas covered by their operations; 

(7) the term "license" means a license issued by the Administration as provided in section 301; 

(8) the term "articles" means articles of incorporation for 

an incorporated body and means the functional equivalent or 

other similar documents specified by the Administrator for 

other business entities; 

(9) the term "private capital"-

(A) means the sum of-

(i) the paid-in capital and paid-in surplus of a corporate licensee, the contributed capital of the partners 

of a partnership licensee, or the equity investment of 

the members of a limited liability company licensee; 

and 

(ii) unfunded binding commitments, from investors that meet criteria established by the Administrator, to contribute capital to the licensee: Provided, 

That such unfunded commitments may be counted as 

private capital for purposes of approval by the Administrator of any request for leverage, but leverage shall 

not be funded based on such commitments; and 

(B) does not include any-

(i) funds borrowed by a licensee from any source; 

(ii) funds obtained through the issuance of leverage; or 

(iii) funds obtained directly or indirectly from any 

Federal, State, or local government, or any government agency or instrumentality, except for-

(I) funds obtained from the business revenues 

(excluding any governmental appropriation) of any 

federally chartered or government-sponsored corporation established prior to October 1, 1987; 

(II) funds invested by an employee welfare 

benefit plan or pension plan; and 

(III) any qualified nonprivate funds (if the investors of the qualified nonprivate funds do not 

control, directly or indirectly, the management, 

board of directors, general partners, or members 

of the licensee); 

(10) the term "leverage" includes-

(A) debentures purchased or guaranteed by the Administration; 

(B) participating securities purchased or guaranteed 

by the Administration; and 

(C) preferred securities outstanding as of October 1, 

1995; 

(11) the term "third party debt" means any indebtedness 

for borrowed money, other than indebtedness owed to the Administration; 

(12) the term "smaller enterprise" means any small business concern that, together with its affiliates-

(A) has-
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Sec. 103 SMALL BUSINESS INVESTMENT ACT OF 1958 4 

(i) a net financial worth of not more than 

$6,000,000, as of the date on which assistance is provided under this Act to that business concern; and 

(ii) an average net income for the 2-year period 

preceding the date on which assistance is provided 

under this Act to that business concern, of not more 

than $2,000,000, after Federal income taxes (excluding 

any carryover losses) except that, for purposes of this 

clause, if the business concern is not required by law 

to pay Federal income taxes at the enterprise level, 

but is required to pass income through to the shareholders, partners, beneficiaries, or other equitable 

owners of the business concern, the net income of the 

business concern shall be determined by allowing a deduction in an amount equal to the sum of-

(1) if the business concern is not required by 

law to pay State (and local, if any) income taxes 

at the enterprise level, the net income (determined without regard to this clause), multiplied 

by the marginal State income tax rate (or by the 

combined State and local income tax rates, as applicable) that would have applied if the business 

concern were a corporation; and 

(II) the net income (so determined) less any 

deduction for State (and local) income taxes calculated under subclause (1), multiplied by the 

marginal Federal income tax rate that would have 

applied if the business concern were a corporation; 

or 

(B) satisfies the standard industrial classification size 

standards established by the Administration for the industry in which the small business concern is primarily engaged; 

(13) the term "qualified nonprivate funds" means any-

(A) funds directly or indirectly invested in any applicant or licensee on or before August 16, 1982, by any Federal agency, other than the Administration, under a provision of law explicitly mandating the inclusion of those 

funds in the definition of the term "private capital"; 

(B) funds directly or indirectly invested in any applicant or licensee by any Federal agency under a provision 

of law enacted after September 4, 1992, explicitly mandating the inclusion of those funds in the definition of the 

term "private capital"; and 

(C) funds invested in any applicant or licensee by one 

or more State or local government entities (including any 

guarantee extended by those entities) in an aggregate 

amount that does not exceed 33 percent of the private capital of the applicant or licensee; 

(14) the terms "employee welfare benefit plan" and "pension plan" have the same meanings as in section 3 of the Employee Retirement Income Security Act of 1974, and are intended to include-
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5 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 201 

(A) public and private pension or retirement plans 

subject to such Act; and 

(B) similar plans not covered by such Act that have 

been established and that are maintained by the Federal 

Government or any State or political subdivision, or any 

agency or instrumentality thereof, for the benefit of employees; 

(15) the term "member" means, with respect to a licensee 

that is a limited liability company, a holder of an ownership 

interest or a person otherwise admitted to membership in the 

limited liability company; 

(16) the term "limited liability company" means a business 

entity that is organized and operating in accordance with a 

State limited liability company statute approved by the Administration; 

(17) the term "long term", when used in connection with 

equity capital or loan funds invested in any small business concern or smaller enterprise, means any period of time not less 

than 1 year; 

(18) the term "Energy Saving debenture" means a deferred 

interest debenture that-

(A) is issued at a discount; 

(B) has a 5-year maturity or a 10-year maturity; 

(C) requires no interest payment or annual charge for 

the first 5 years; 

(D) is restricted to Energy Saving qualified investments; and 

(E) is issued at no cost (as defined in section 502 of 

the Credit Reform Act of 1990) with respect to purchasing 

and guaranteeing the debenture; and 

(19) the term "Energy Saving qualified investment" means 

investment in a small business concern that is primarily engaged in researching, manufacturing, developing, or providing 

products, goods, or services that reduce the use or consumption 

of non-renewable energy resources. 

TITLE II-SMALL BUSINESS INVESTMENT DIVISION OF THE 

SMALL BUSINESS ADMINISTRATION 

ESTABLISHMENT OF SMALL BUSINESS INVESTMENT DIVISION 

SEC. 201. [15 U.S.C. 671] There is hereby established in the 

Small Business Administration a division to be known as the Small 

Business Investment Division. The Division shall be headed by an 

Associate Administrator who shall be appointed by the Administrator, and shall receive compensation at the rate provided by law 

for other Associate Administrators of the Small Business Administration. 
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Sec. 301 SMALL BUSINESS INVESTMENT ACT OF 1958 6 

TITLE III-INVESTMENT DIVISION PROGRAMS 

PART A-SMALL BUSINESS INVESTMENT COMPANIES 

ORGANIZATION OF SMALL BUSINESS INVESTMENT COMPANIES 

SEc. 301. [15 U.S.C. 681] (a) A small business investment 

company shall be an incorporated body, a limited liability company, 

or a limited partnership organized and chartered or otherwise existing under State law solely for the purpose of performing the 

functions and conducting the activities contemplated under this 

title, which, if incorporated, has succession for a period of not less 

than thirty years unless sooner dissolved by its shareholders, and 

if a limited partnership, has succession for a period of not less than 

ten years, and possesses the powers reasonably necessary to perform such functions and conduct such activities. The area in which 

the company is to conduct its operations, and the establishment of 

branch offices or agencies (if authorized by the articles), shall be 

subject to the approval of the Administration. 

(b) The articles of any small business investment company shall specify in general terms the objects for which the company is 

formed, the name assumed by such company, the area or areas in 

which its operations are to be carried on, the place where its prin- cipal office is to be located, and the amount and classes of its 

shares of capital stock. Such articles may contain any other provi- sions not inconsistent with this Act that the company may see fit 

to adopt for the regulation of its business and the conduct of its affairs. Such articles and any amendments thereto adopted from time 

to time shall be subject to the approval of the Administration. 

(c) ISSUANCE OF LICENSE.-

(1) SUBMISSION OF APPLICATION.-Each applicant for a license to operate as a small business investment company under this Act shall submit to the Administrator an application, in a form and including such documentation as may be 

prescribed by the Administrator. 

(2) PROCEDURES.-

(A) STATUS.-Not later than 90 days after the initial 

receipt by the Administrator of an application under this 

subsection, the Administrator shall provide the applicant with a written report detailing the status of the application and any requirements remaining for completion of the 

application. 

(B) APPROVAL OR DISAPPROVAL.-Within a reasonable 

time after receiving a completed application submitted in 

accordance with this subsection and in accordance with 

such requirements as the Administrator may prescribe by 

regulation, the Administrator shall-

(i) approve the application and issue a license for 

such operation to the applicant if the requirements of 

this section are satisfied; or 

(ii) disapprove the application and notify the applicant in writing of the disapproval. 

(3) MATTERS CONSIDERED.-In reviewing and processing 

any application under this subsection, the Administrator-

(A) shall determine whether-
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7 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 301 

(i) the applicant meets the requirements of subsections (a) and (c) of section 302; and 

(ii) the management of the applicant is qualified 

and has the knowledge, experience, and capability necessary to comply with this Act; 

(B) shall take into consideration-

(i) the need for and availability of financing for 

small business concerns in the geographic area in 

which the applicant is to commence business; 

(ii) the general business reputation of the owners 

and management of the applicant; and 

(iii) the probability of successful operations of the 

applicant, including adequate profitability and financial soundness; and 

(C) shall not take into consideration any projected 

shortage or unavailability of leverage. 

(4) EXCEPTION.-

(A) IN GENERAL.-Notwithstanding any other provision 

of this Act, the Administrator may, in the discretion of the 

Administrator and based on a showing of special circumstances and good cause, approve an application and 

issue a license under this subsection with respect to any 

applicant that-

(i) has private capital of not less than $3,000,000; 

(ii) would otherwise be issued a license under this 

subsection, except that the applicant does not satisfy 

the requirements of section 302(a); and 

(iii) has a viable business plan reasonably projecting profitable operations and a reasonable timetable for achieving a level of private capital that satisfies the requirements of section 302(a). 

(B) LEVERAGE.-An applicant licensed pursuant to the 

exception provided in this paragraph shall not be eligible 

to receive leverage as a licensee until the applicant satisfies the requirements of section 302(a), unless the applicant-

(i) files an application for a license not later than 

180 days after the date of enactment of the Small 

Business Reauthorization Act of 1997; 

(ii) is located in a State that is not served by a licensee; and 

(iii) agrees to be limited to 1 tier of leverage available under section 302(b), until the applicant meets 

the requirements of section 302(a). 

(d) [Repealed] 

(e) FEES.-

(1) IN GENERAL.-The Administration may prescribe fees to 

be paid by each applicant for a license to operate as a small 

business investment company under this Act. 

(2) UsE OF AMOUNTS.-Fees collected under this subsection-

(A) shall be deposited in the account for salaries and 

expenses of the Administration; and 
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Sec. 302 SMALL BUSINESS INVESTMENT ACT OF 1958 8 

(B) are authorized to be appropriated solely to cover 

the costs of licensing examinations. 

CAPITAL REQUIREMENTS 2 

SEC. 302. [15 U.S.C. 682] 

(a) .AMOUNT.-

(1) IN GENERAL.-Except as provided in paragraph (2), the 

private capital of each licensee shall be not less than-

(A) $5,000,000; or 

(B) $10,000,000, with respect to each licensee authorized or seeking authority to issue participating securities 

to be purchased or guaranteed by the Administration 

under this Act. 

(2) EXCEPTION.-The Administrator may, in the discretion 

of the Administrator and based on a showing of special circumstances and good cause, permit the private capital of a licensee authorized or seeking authorization to issue participating securities to be purchased or guaranteed by the Administration to be less than $10,000,000, but not less than 

$5,000,000, if the Administrator determines that such action 

would not create or otherwise contribute to an unreasonable 

risk of default or loss to the Federal Government. 

(3) ADEQUACY.-In addition to the requirements of paragraph (1), the Administrator shall-

(A) determine whether the private capital of each licensee is adequate to assure a reasonable prospect that 

the licensee will be operated soundly and profitably, and 

managed actively and prudently in accordance with its articles; and 

(B) determine that the licensee will be able 3 both 

prior to licensing and prior to approving any request for financing, to make periodic payments on any debt of the 

company which is interest bearing and shall take into consideration the income which the company anticipates on 

its contemplated investments, the experience of the company's owners and managers, the history of the company 

as an entity, if any, and the company's financial resources. 

(4) EXEMPTION FROM CAPITAL REQUIREMENTS.-The Administrator may, in the discretion of the Administrator, approve leverage for any licensee licensed under subsection (c) or (d) of 

section 301 before the date of enactment of the Small Business 

Program Improvement Act of 1996 that does not meet the capital requirements of paragraph (1), if-

(A) the licensee certifies in writing that not less 50 

percent of the aggregate dollar amount of its financings 

after the date of enactment of the Small Business Program 

Improvement Act of 1996 will be provided to smaller enterprises; and 

(B) the Administrator determines that such action 

would not create or otherwise contribute to an unreason2 So in law. Probably should read "SEC. 302. CAPITAL REQUIREMENTS.". 3 So in law. A comma should appear after the phrase "will be able". See amendment made 

by section 208(c)(l) of division D of Public Law 104-208 (110 Stat. 3009-742). 
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9 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 303 

able risk of default or loss to the United States Government. 

(b) FINANCIAL INSTITUTION INVESTMENTS.-

( I) CERTAIN BANKS.-Notwithstanding the proVISions of 

section 6(a)(l) of the Bank Holding Company Act of 1956, any 

national bank, or any member bank of the Federal Reserve 

System or nonmember insured bank to the extent permitted 

under applicable State law, may invest in any 1 or more small 

business investment companies, or in any entity established to 

invest solely in small business investment companies, except 

that in no event shall the total amount of such investments of 

any such bank exceed 5 percent of the capital and surplus of 

the bank. 

(2) CERTAIN SAVINGS ASSOCIATIONS.-Notwithstanding any 

other provision of law, any Federal savings association may invest in any one or more small business investment companies, 

or in any entity established to invest solely in small business 

investment companies, except that in no event may the total 

amount of such investments by any such Federal savings association exceed 5 percent of the capital and surplus of the Federal savings association. 

(c) DIVERSIFICATION OF 0WNERSHIP.-The Administrator shall 

ensure that the management of each licensee licensed after the 

date of enactment of the Small Business Program Improvement Act 

of 1996 is sufficiently diversified from and unaffiliated with the 

ownership of the licensee in a manner that ensures independence 

and objectivity in the financial management and oversight of the 

investments and operations of the licensee. 

BORROWING POWER 

SEC. 303. [15 U.S.C. 683] (a) Each small business investment 

company shall have authority to borrow money and to issue its securities, promissory notes, or other obligations under such general 

conditions and subject to such limitations and regulations as the 

Administration may prescribe. 

(b) To encourage the formation and growth of small business 

investment companies the Administration is authorized when authorized in appropriation Acts, to purchase, or to guarantee the 

timely payment of all principal and interest as scheduled on, debentures or participating securities issued by such companies. Such 

purchases or guarantees may be made by the Administration on 

such terms and conditions as it deems appropriate, pursuant to 

regulations issued by the Administration. The full faith and credit 

of the United States is pledged to the payment of all amounts 

which may be required to be paid under any guarantee under this 

subsection. Debentures purchased or guaranteed by the Administration under this subsection shall be subordinate to any other debenture bonds, promissory notes, or other debts and obligations of 

such companies, unless the Administration in its exercise of reasonable investment prudence and in considering the financial 

soundness of such company determines otherwise. Such debentures 

may be issued for a term of not to exceed fifteen years and shall 

bear interest at a rate not less than a rate determined by the Sec-
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Sec. 303 SMALL BUSINESS INVESTMENT ACT OF 1958 10 

retary 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 on such debentures, adjusted to the nearest 

one-eighth of 1 per centum, plus, for debentures obligated after 

September 30, 2001, an additional charge, in an amount established annually by the Administration, as necessary to reduce to 

zero the cost (as defined in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a)) to the Administration of pur- chasing and guaranteeing debentures under this Act, which 

amount may not exceed 1.38 percent per year, and which shall be 

paid to and retained by the Administration. The debentures or par- ticipating securities shall also contain such other terms as the Administration may fix, and shall be subject to the following restrictions and limitations: 

(1) The total amount of debentures and participating securities that may be guaranteed by the Administration and outstanding from a company licensed under section 301(c) of this 

Act shall not exceed 300 per centum of the private capital of 

such company: Provided, That nothing in this paragraph shall 

require any such company that on March 31, 1993, has outstanding debentures in excess of 300 per centum of its private capital to prepay such excess: And provided further, That any such company may apply for an additional debenture guarantee or participating security guarantee with the proceeds to 

be used solely to pay the amount due on such maturing debenture, but the maturity of the new debenture or security shall 

be not later than September 30, 2002. 

(2) MAXIMUM LEVERAGE.-

(A) IN GENERAL.-The maximum amount of outstanding leverage made available to any one company licensed under section 301(c) of this Act may not exceed the 

lesser of-

(i) 300 percent of such company's private capital; 

or 

(ii) $150,000,000. 

(B) MULTIPLE LICENSES UNDER COMMON CONTROL.-

The maximum amount of outstanding leverage made available to two or more companies licensed under section 

301(c) of this Act that are commonly controlled (as determined by the Administrator) and not under capital impairment may not exceed $350,000,000. 

(C) INVESTMENTS IN LOW-INCOME GEOGRAPHIC 

AREAS.-(i) In calculating the outstanding leverage of a 

company for the purposes of subparagraph (A), the Administrator shall not include the amount of the cost basis of 

any equity investment made by the company in a smaller 

enterprise located in a low-income geographic area (as defined in section 351), to the extent that the total of such 

amounts does not exceed 50 percent of the company's private capital. 
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11 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 303 

(ii) 4 The maximum amount of outstanding leverage made available to-

(1) any 1 company described in clause (iii) 

may not exceed the lesser of 300 percent of private 

capital of the company, or $175,000,000; and 

(II) 2 or more companies described in clause 

(iii) that are under common control (as determined 

by the Administrator) may not exceed 

$250,000,000. 

(iii) 4 A company described in this clause is a company licensed under section 301(c) in the first fiscal 

year after the date of enactment of this clause or any 

fiscal year thereafter that certifies in writing that not 

less than 50 percent of the dollar amount of investments of that company shall be made in companies 

that are located in a low-income geographic area (as 

that term is defined in section 351). 

(D) INVESTMENTS IN ENERGY SAVING SMALL BUSINESSES.-

(i) IN GENERAL.-Subject to clause (ii), in calculating the outstanding leverage of a company for purposes of subparagraph (A), the Administrator shall exclude the amount of the cost basis of any Energy Saving qualified investment in a smaller enterprise made 

in the first fiscal year after the date of enactment of 

this subparagraph or any fiscal year thereafter by a 

company licensed in the applicable fiscal year. 

(ii) LIMITATIONS.-

(!) AMOUNT OF EXCLUSION.-The amount excluded under clause (i) for a company shall not exceed 33 percent of the private capital of that company. 

(II) MAXIMUM INVESTMENT.-A company shall 

not make an Energy Saving qualified investment 

in any one entity in an amount equal to more 

than 20 percent of the private capital of that company. 

(III) OTHER TERMS.-The exclusion of 

amounts under clause (i) shall be subject to such 

terms as the Administrator may impose to ensure 

that there is no cost (as that term is defined in 

section 502 of the Federal Credit Reform Act of 

1990 (2 U.S.C. 661a)) with respect to purchasing 

or guaranteeing any debenture involved. 

(3) Subject to the foregoing dollar and percentage limits, a 

company licensed under section 301(c) of this Act may issue 

and have outstanding both guaranteed debentures and participating securities: Provided, That the total amount of participating securities outstanding shall not exceed 200 per centum 

of private capital. 

For purposes of this subsection, the term "venture capital" includes 

such common stock, preferred stock, or other financing with subor- 4 Margin so in law. 
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Sec. 303 SMALL BUSINESS INVESTMENT ACT OF 1958 12 

dination or nonamortization characteristics as the Administration 

determines to be substantially similar to equity financing. 

(c) THIRD PARTY DEBT.-The Administrator-

(!) shall not permit a licensee having outstanding leverage 

to incur third party debt that would create or contribute to an 

unreasonable risk of default or loss to the Federal Government; 

(2) shall permit such licensees to incur third party debt 

only on such terms and subject to such conditions as may be 

established by the Administrator, by regulation or otherwise. 

(d) INVESTMENTS IN SMALLER ENTERPRISES.-The Administrator shall require each licensee, as a condition of approval of an 

application for leverage, to certify in writing that not less than 25 

percent of the aggregate dollar amount of financings of that licensee shall be provided to smaller enterprises. 

(e) CAPITAL IMPAIRMENT.-Before approving any application for 

leverage submitted by a licensee under this Act, the Administrator-

(1) shall determine that the private capital of the licensee 

meets the requirements of section 302(a); and 

(2) shall determine, taking into account the nature of the 

assets of the licensee, the amount and terms of any third party 

debt owed by such licensee, and any other factors determined 

to be relevant by the Administrator, that the private capital of 

the licensee has not been impaired to such an extent that the 

issuance of additional leverage would create or otherwise contribute to an unreasonable risk of default or loss to the Federal 

Government. 

(f) REDEMPTION OR REPURCHASE OF PREFERRED STOCK.-Notwithstanding any other provision of law-

( 1) the Administrator may allow the issuer of any preferred stock sold to the Administration before November 1, 

1989 to redeem or repurchase such stock, upon the payment to 

the Administration of an amount less than the par value of 

such stock, for a repurchase price determined by the Administrator after consideration of all relevant factors, including-

(A) the market value of the stock; 

(B) the value of benefits provided and anticipated to 

accrue to the issuer; 

(C) the amount of dividends paid, accrued, and anticipated; and 

(D) the estimate of the Administrator of any anticipated redemption; and 

(2) any moneys received by the Administration from the 

repurchase of preferred stock shall be available solely to provide debenture leverage to licensees having 50 percent or more 

in aggregate dollar amount of their financings invested in 

smaller enterprises. 

(g) In order to encourage small business investment companies 

to provide equity capital to small businesses, the Administration is 

authorized to guarantee the payment of the redemption price and 

prioritized payments on participating securities issued by such 

companies which are licensed pursuant to section 301(c) of this Act, 

and a trust or a pool acting on behalf of the Administration is authorized to purchase such securities. Such guarantees and pur-
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13 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 303 

chases shall be made on such terms and conditions as the Administration shall establish by regulation. For purposes of this section, 

(A) the term "participating securities" includes preferred stock, a 

preferred limited partnership interest or a similar instrument, including debentures under the terms of which interest is payable 

only to the extent of earnings and (B) the term "prioritized payments" includes dividends on stock, interest on qualifying debentures, or priority returns on preferred limited partnership interests 

which are paid only to the extent of earnings. Participating securities guaranteed under this subsection shall be subject to the following restrictions and limitations, in addition to such other restrictions and limitations as the Administration may determine: 

(1) Participating securities shall be redeemed not later 

than 15 years after their date of issuance for an amount equal 

to 100 per centum of the original issue price plus the amount 

of any accrued prioritized payment: Provided, That if, at the 

time the securities are redeemed, whether as scheduled or in 

advance, the issuing company (A) has not paid all accrued 

prioritized payments in full as provided in paragraph (2) below 

and (B) has not sold or otherwise disposed of all investments 

subject to profit distributions pursuant to paragraph (11), the 

company's obligation to pay accrued and unpaid prioritized 

payments shall continue and payment shall be made from the 

realized gain, if any, on the disposition of such investments, 

but if on disposition there is no realized gain, the obligation to 

pay accrued and unpaid prioritized payments shall be extinguished: Provided further, That in the interim, the company 

shall not make any in-kind distributions of such investments 

unless it pays to the Administration such sums, up to the 

amount of the unrealized appreciation on such investments, as 

may be necessary to pay in full the accrued prioritized payments. 

(2) Prioritized payments on participating securities shall 

be preferred and cumulative and payable out of the retained 

earnings available for distribution, as defined by the Administration, of the issuing company at a 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 on such securities, adjusted 

to the nearest one-eighth of 1 percent, plus, for participating 

securities obligated after September 30, 2001, an additional 

charge, in an amount established annually by the Administration, as necessary to reduce to zero the cost (as defined in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 

661a)) to the Administration of purchasing and guaranteeing 

participating securities under this Act, which amount may not 

exceed 1.46 percent per year, and which shall be paid to and 

retained by the Administration. 

(3) In the event of liquidation of the company, participating securities shall be senior in priority for all purposes to 

all other equity interests in the issuing company, whenever 

created. 
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Sec. 303 SMALL BUSINESS INVESTMENT ACT OF 1958 14 

(4) Any company issuing a participating security under 

this Act shall commit to invest or shall invest an amount equal 

to the outstanding face value of such security solely in equity 

capital. As used in this subsection, "equity capital" means common or preferred stock or a similar instrument, including subordinated debt with equity features which is not amortized and 

which provides for interest payments from appropriate sources, 

as determined by the Administration. 

(5) The only debt (other than leverage obtained in accordance with this title) which any company issuing a participating 

security under this subsection may have outstanding shall be 

temporary debt in amounts limited to not more than 50 per 

centum of private capital. 

(6) The Administration may permit the proceeds of a participating security to be used to pay the principal amount due 

on outstanding debentures guaranteed by the Administration, 

if (A) the company has outstanding equity capital invested in 

an amount equal to the amount of the debentures being refinanced and (B) the Administration receives profit participation 

on such terms and conditions as it may determine, but not to 

exceed the per centums specified in paragraph (11). 

(7) For purposes of computing profit participation under 

paragraph (11), except as otherwise determined by the Administration, the management expenses of any company which 

issues participating securities shall not be greater than 2.5 per 

centum per annum of the combined capital of the company, 

,plus $125,000 if the company's combined capital is less than 

$20,000,000. For purposes of this paragraph, (A) the term 

"combined capital" means the aggregate amount of private capital and outstanding leverage and (B) the term "management 

expenses" includes salaries, office expenses, travel, business 

development, office and equipment rental, bookkeeping and the 

development, investigation and monitoring of investments, but 

does not include the cost of services provided by specialized 

outside consultants, outside lawyers and outside auditors, who 

perform services not generally expected of a venture capital 

company nor does such term include the cost of services provided by any affiliate of the company which are not part of the 

normal process of making and monitoring venture capital investments. 

(8) Notwithstanding paragraph (9), if a company is operating as a limited partnership or as a subchapter S corporation 

or an equivalent pass-through entity for tax purposes and if 

there are no accumulated and unpaid prioritized payments, the 

company may make annual distributions to the partners, 

shareholders, or members in amounts not greater than each 

partner's, shareholder's, or member's maximum tax liability. 

For purposes of this paragraph, the term "maximum tax liability" means the amount of income allocated to each partner, 

shareholder, or member (including an allocation to the Administration as if it were a taxpayer) for Federal income tax purposes in the income tax return filed or to be filed by the company with respect to the fiscal year of the company immediately preceding such distribution, multiplied by the highest 
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15 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 303 

combined marginal Federal and State income tax rates for corporations or individuals, whichever is higher, on each type of 

income included in such return. For purposes of this paragraph, the term "State income tax" means the income tax of 

the State where the company's principal place of business is located. A company may also elect to make a distribution under 

this paragraph at any time during any calendar quarter based 

on an estimate of the maximum tax liability. If a company makes 1 or more interim distributions for a calendar year, and 

the aggregate amount of those distributions exceeds the maximum amount that the company could have distributed based 

on a single annual computation, any subsequent distribution 

by the company under this paragraph shall be reduced by an 

amount equal to the excess amount distributed. 

(9) After making any distributions as provided in paragraph (8), a company with participating securities outstanding 

may distribute the balance of income to its investors, specifically including the Administration, in the per centums speci- fied in paragraph (11), if there are no accumulated and unpaid 

prioritized payments and if all amounts due the Administration pursuant to paragraph (11) have been paid in full, subject 

to the following conditions: 

(A) As of the date of the proposed distribution, if the 

amount of leverage outstanding is more than 200 per centum of the amount of private capital, any amounts distributed shall be made to private investors and to the Administration in the ratio of leverage to private capital. 

(B) As of the date of the proposed distribution, if the 

amount of leverage outstanding is more than 100 per centum but not more than 200 per centum of the amount of 

private capital, 50 per centum of any amounts distributed 

shall be made to the Administration and 50 per centum 

shall be made to the private investors. 

(C) If the amount of leverage outstanding is 100 per 

centum, or less, of the amount of private capital, the ratio 

shall be that for distribution of profits as provided in para- graph (11). 

(D) Any amounts received by the Administration 

under subparagraph (A) or (B) shall be applied first as 

profit participation as provided in paragraph (11) and any 

remainder shall be applied as a prepayment of the principal amount of the participating securities or debentures. 

( 10) After making any distributions pursuant to paragraph 

(8), a company with participating securities outstanding may 

return capital to its investors, specifically including the Administration, if there are no accumulated and unpaid prioritized 

payments and if all amounts due the Administration pursuant 

to paragraph (11) have been paid in full. Any distributions 

under this paragraph shall be made to private investors and 

to the Administration in the ratio of private capital to leverage 

as of the date of the proposed distribution: Provided, That if 

the amount of leverage outstanding is less than 50 per centum 

of the amount of private capital or $10,000,000, whichever is 

less, no distribution shall be required to be made to the Admin-
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Sec. 303 SMAll BUSINESS INVESTMENT ACT OF 1958 16 

istration unless the Administration determines, on a case by 

case basis, to require distributions to the Administration to reduce the amount of outstanding leverage to an amount less 

than $10,000,000. 

(ll)(A) A company which issues participating securities 

shall agree to allocate to the Administration a share of its profits determined by the relationship of its private capital to the 

amount of participating securities guaranteed by the Administration in accordance with the following: 

(i) If the total amount of participating securities is 100 

per centum of private capital or less, the company shall allocate to the Administration a per centum share computed 

as follows: the amount of participating securities divided 

by private capital times 9 per centum. 

(ii) If the total amount of participating securities is 

more than 100 per centum but not greater than 200 per 

centum of private capital, the company shall allocate to 

the Administration a per centum share computed as follows: 

(I) 9 per centum, plus 

(II) 3 per centum of the amount of participating 

securities minus private capital divided by private 

capital. 

(B) Notwithstanding any other provision of this paragraph-

(i) in no event shall the total per centum required by 

this paragraph exceed 12 per centum, unless required pursuant to the provisions of (ii) below, 

(ii) if, on the date the participating securities are marketed, the interest rate on Treasury bonds with a maturity 

of 10 years is a rate other than 8 per centum, the Administration shall adjust the rate specified in paragraph (A) 

above, either higher or lower, by the same per centum by 

which the Treasury bond rate is higher or lower than 8 per 

centum, and 

(iii) this paragraph shall not be construed to create 

any ownership interest of the Administration in the company. 

(12) A company may elect to make an in-kind distribution 

of securities only if such securities are publicly traded and 

marketable. The company shall deposit the Administration's 

share of such securities for disposition with a trustee designated by the Administration or, at its option and with the 

agreement of the company, the Administration may direct the 

company to retain the Administration's share. If the company 

retains the Administration's share, it shall sell the Administration's share and promptly remit the proceeds to the Administration. As used in this paragraph, the term "trustee" means 

a person who is knowledgeable about and proficient in the 

marketing of thinly traded securities. 

(h) The computation of amounts due the Administration under 

participating securities shall be subject to the following terms and 

conditions: 
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17 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 304 

(1) The formula in subsection (g)(ll) shall be computed annually and the Administration shall receive distributions of its 

profit participation at the same time as other investors in the 

company. 

(2) The formula shall not be modified due to an increase 

in the private capital unless the increase is provided for in a 

proposed business plan submitted to and approved by the Administration. 

(3) After distributions have been made, the Administration's share of such distributions shall not be recomputed or reduced. 

(4) If the company prepays or repays the participating securities, the Administration shall receive the requisite participation upon the distribution of profits due to any investments 

held by the company on the date of the repayment or prepayment. 

(5) If a company is licensed on or before March 31, 1993, 

it may elect to exclude from profit participation all investments 

held on that date and in such case the Administration shall determine the amount of the future expenses attributable to such 

prior investment: Provided, That if the company issues participating securities to refinance debentures as authorized in subsection (g)(6), it may not elect to exclude profits on existing investments under this paragraph. 

(i) LEVERAGE FEE.-With respect to leverage granted by the 

Administration to a licensee, the Administration shall collect from 

the licensee a nonrefundable fee in an amount equal to 3 percent 

of the face amount of leverage granted to the licensee in the following manner: 1 percent upon the date on which the Administration enters into any commitment for such leverage with the licensee, and the balance of 2 percent (or 3 percent if no commitment 

has been entered into by the Administration) on the date on which 

the leverage is drawn by the licensee. 

(j) CALCULATION OF SUBSIDY RATE.-All fees, interest, and 

profits received and retained by the Administration under this section 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 debentures and participating securities under this Act. 

(k) ENERGY SAVING DEBENTURES.-ln addition to any other authority under this Act, a small business investment company licensed in the first fiscal year after the date of enactment of this 

subsection or any fiscal year thereafter may issue Energy Saving 

debentures. 

PROVISION OF EQUITY CAPITAL FOR SMALL BUSINESS CONCERNS 

SEc. 304. [15 U.S.C. 684] (a) It shall be a function of each 

small business investment company to provide a source of equity 

capital for incorporated and unincorporated small-business concerns, in such manner and under such terms as the small business 

investment company may fix in accordance with the regulations of 

the Administration. 
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Sec. 305 SMALL BUSINESS INVESTMENT ACT OF 1958 18 

(b) Before any capital is provided to a small-business concern 

under this section-

( I) the company may require such concern to refinance any 

or all of its outstanding indebtedness so that the company is 

the only holder of any evidence of indebtedness of such concern; and 

(2) except as provided in regulations issued by the Administration, such concern shall agree that it will not thereafter 

incur any indebtedness without first securing the approval of 

the company and giving the company the first opportunity to 

finance such indebtedness. 

(c) [Repealed by Pub. L. 90-104, 81 Stat. 271] 

(d) Equity capital provided to incorporated small-business concerns under this section may be provided directly or in cooperation 

with other investors, incorporated or unincorporated, through 

agreements to participate on an immediate basis. 

LONG-TERM LOANS TO SMALL-BUSINESS CONCERNS 

SEC. 305. [15 U.S.C. 685] (a) Each company is authorized to 

make loans, in the manner and subject to the conditions described 

in this section, to incorporated and unincorporated small-business 

concerns in order to provide such concerns with funds needed for 

sound financing, growth, modernization, and expansion. 

(b) Loans made under this section may be made directly or in 

cooperation with other lenders, incorporated or unincorporated, 

through agreements to participate on an immediate or deferred 

basis. 

(c) The maximum rate of interest for the company's share of 

any loan made under this section shall be determined by the Administration: Provided, That the Administration also shall permit 

those companies which have issued debentures pursuant to this Act 

to charge a maximum rate of interest based upon the coupon rate 

of interest on the outstanding debentures, determined on an annual basis, plus such other expenses of the company as may be approved by the Administration. 

(d) Any loan made under this section shall have a maturity not 

exceeding twenty years. 

(e) Any loan made under this section shall be of such sound 

value, or so secured, as reasonably to assure repayment. 

(f) Any company which has made a loan to a small-business 

concern under this section is authorized to extend the maturity of 

or renew such loan for additional periods, not exceeding ten years, 

if the company finds that such extension or renewal will aid in the 

orderly liquidation of such loan. 

AGGREGATE LIMITATIONS 

SEc. 306. [15 U.S.C. 686] 

(a) PERCENTAGE LIMITATION ON PRIVATE CAPITAL.-lf any 

small business investment company has obtained financing from 

the Administrator and such financing remains outstanding, the aggregate amount of securities acquired and for which commitments 

may be issued by such company under the provisions of this title 
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19 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 308 

for any single enterprise shall not, without the approval of the Administrator, exceed 10 percent of the sum of-

(1) the private capital of such company; and 

(2) the total amount of leverage projected by the company 

in the company's business plan that was approved by the Administrator at the time of the grant of the company's license. 

(b) [Repealed by Pub. L. 92-595, 86 Stat. 1316.] 

(c) With respect to obligations or securities acquired prior to 

the effective date of the Small Business Investment Act Amendments of 1967, and with respect to legally binding commitments 

issued prior to such date, the provisions of this section as in effect 

immediately prior to such effective date shall continue to apply. 

EXEMPTIONS 

SEC. 307. (a) Section 3 of the Securities Act of 1933, as amended (15 U.S.C. 77c), is hereby amended by inserting at the end 

thereof the following new subsection (c): 

"(c) The Commission may from time to time by its rules and 

regulations and subject to such terms and conditions as may be 

prescribed therein, add to the securities exempted as provided in 

this section any class of securities issued by a small business investment company under the Small Business Investment Act of 

1958 if it finds, having regard to the purposes of that Act, that the 

enforcement of this Act with respect to such securities is not necessary in the public interest and for the protection of investors." 

(b) Section 304 of the Trust Indenture Act of 1939 (15 U.S.C. 

77ddd) is hereby amended by adding the following subsection (e): 

"(e) The Commission may from time to time by its rules and 

regulations, and subject to such terms and conditions as may be 

prescribed herein, add to the securities exempted as provided in 

this section any class of securities issued by a small business investment company under the Small Business Investment Act of 

1958 if it finds, having regard to the purposes of that Act, that the 

enforcement of this Act with respect to such securities is not necessary in the public interest and for the protection of investors." 

(c) Section 18 of the Investment Company Act of 1940 (15 

U.S.C. 80a-18) is amended by adding at the end thereof the following: 

"(k) The provisions of subparagraphs (A) and (B) of paragraph 

(1) of subsection (a) of this section shall not apply to investment 

companies operating under the Small Business Investment Act of 

1958." 

MISCELLANEOUS 

SEC. 308. [15 U.S.C. 687] (a) Wherever practicable the operations of a small business investment company, including the generation of business, may be undertaken in cooperation with banks 

or other investors or lenders, incorporated or unincorporated, and 

any servicing or initial investigation required for loans or acquisitions of securities by the company under the provisions of this Act 

may be handled through such banks or other investors or lenders 

on a fee basis. Any small business investment company may re-
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Sec. 308 SMALL BUSINESS INVESTMENT ACT OF 1958 20 

ceive fees for services rendered to such banks and other investors 

and lenders. 

(b) Each small business investment company may make use, 

wherever practicable, of the advisory services of the Federal Reserve System and of the Department of Commerce which are available for and useful to industrial and commercial businesses, and 

may provide consulting and advisory services on a fee basis and 

have on its staff persons competent to provide such services. Any Federal Reserve bank is authorized to act as a depository or fiscal 

agent for any company operating under the provisions of this Act. 

Any 5 such company that is licensed before October 1, 2004 and has 

outstanding financings is authorized to invest funds not needed for 

its operations-

(!) in direct obligations of, or obligations guaranteed as to 

principal and interest by, the United States; 

(2) in certificates of deposit or other accounts of federally 

insured banks or other federally insured depository institutions, if the certificates or other accounts mature or are otherwise fully available not more than 1 year after the date of the 

investment; or 

(3) in mutual funds, securities, or other instruments that 

consist of, or represent pooled assets of, investments described 

in paragraphs (1) or (2). 

(c) The Administration is authorized to prescribe regulations 

governing the operations of small business investment companies, 

and to carry out the provisions of this Act, in accordance with the 

purposes of this Act. 

(d) Should any small business investment company violate or 

fail to comply with any of the provisions of this Act or of regulations prescribed hereunder, all of its rights, privileges, and franchises derived therefrom may thereby be forfeited. Before any such 

company shall be declared dissolved, or its rights, privileges, and 

franchises forfeited, any noncompliance with or violation of this Act 

shall be determined and adjudged by a court of the United States 

of competent jurisdiction in a suit brought for that purpose in the 

district, territory, or other place subject to the jurisdiction of the 

United States, in which the principal office of such company is located. Any such suit shall be brought by the United States at the 

instance of the Administration or the Attorney General. 

(e) Except as expressly provided otherwise in this Act, nothing in this Act or in any other provision of law shall be deemed to impose any liability on the United States with respect to any obliga- tions entered into, or stocks issued, or commitments made, by any 

company operating under the provisions of this Act. 

(f) In the performance of, and with respect to the functions, 

powers, and duties vested by this Act, the Administrator and the 

Administration shall (in addition to any authority otherwise vested 

by this Act) have the functions, powers, and duties set forth in the 

Small Business Act, and the provisions of sections 13 and 16 of 

6 Section 202 of the Small Business Reauthorization and Manufacturing Assistance Act of 

2004 (division K of Public Law 108-447; 118 Stat. 3465) provides for an amendment that strikes 

and inserts the last sentence of section 308(b). The amendment instruction probably should have 

included the words "of 1958" after the "Small Business Investment Act" and was executed to reflect the probable intent of Congress. 
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21 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 308 

that Act, insofar as applicable, are extended to the functions of the 

Administrator and the Administration under this Act. 

(g)(l) The Administration shall include in its annual report, 

made pursuant to section lO(a) of the Small Business Act, a full 

and detailed account of its operations under this Act. Such report 

shall set forth the amount of losses sustained by the Government 

as a result of such operations during the preceding fiscal year, together with an estimate of the total losses which the Government 

can reasonably expect to incur as a result of such operations during 

the then current fiscal year. 

(2) In its annual report for the year ending December 31, 1967, 

and in each succeeding annual report made pursuant to section 

lO(a) of the Small Business Act, the Administration shall include 

full and detailed accounts relative to the following matters: 

(A) The Administration's recommendations with respect to 

the feasibility and organization of a small business capital 

bank to encourage private financing of small business investment companies to replace Government financing of such companies. 

(B) The Administration's plans to insure the provision of 

small business investment company financing to all areas of 

the country and to all eligible small business concerns including steps taken to accomplish same. 

(C) Steps taken by the Administration to maximize 

recoupment of Government funds incident to the inauguration 

and administration of the small business investment company 

program and to insure compliance with statutory and regulatory standards relating thereto. 

(D) An accounting by the Bureau of the Budget with respect to Federal expenditures to business by executive agencies, specifying the proportion of said expenditures going to 

business concerns falling above and below small business size 

standards applicable to small business investment companies. 

(E) An accounting by the Treasury Department with respect to tax revenues accruing to the Government from business concerns, incorporated and unincorporated, specifying the 

source of such revenues by concerns falling above and below 

the small business size standards applicable to small business 

investment companies. 

(F) An accounting by the Treasury Department with respect to both tax losses and increased tax revenues related to 

small business investment company financing of both individual and corporate business taxpayers. 

(G) Recommendations to the Treasury Department with 

respect to additional tax incentives to improve and facilitate 

the operations of small business investment companies and to 

encourage the use of their financing facilities by eligible small 

business concerns. 

(H) A report from the Securities and Exchange Commission enumerating actions undertaken by that agency to simplify and minimize the regulatory requirements governing 

small business investment companies under the Federal securities laws and to eliminate overlapping regulation and jurisdic-
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Sec. 308 SMALL BUSINESS INVESTMENT ACT OF 1958 22 

tion as between the Securities and Exchange Commission, the 

Administration, and other agencies of the executive branch. 

(I) A report from the Securities and Exchange Commission 

with respect to actions taken to facilitate and stabilize the access of small business concerns to the securities markets. 

(J) Actions undertaken by the Securities and Exchange 

Commission to simplify compliance by small business investment companies with the requirements of the Investment Company Act of 1940 and to facilitate the election to be taxed as 

regulated investment companies pursuant to section 851 of the 

Internal Revenue Code of 1954. 

(3) In its annual report for the year ending on December 31, 

1993, and in each succeeding annual report made pursuant to section 10(a) of the Small Business Act, the Administration shall include a full and detailed description or account relating to-

(A) the number of small business investment companies 

the Administration licensed, the number of licensees that have 

been placed in liquidation, and the number of licensees that 

have surrendered their licenses in the previous year, identifying the amount of government leverage each has received 

and the type of leverage instruments each has used; 

(B) the amount of government leverage that each licensee 

received in the previous year and the types of leverage instruments each licensee used; 

(C) for each type of financing instrument, the sizes, geographic locations, and other characteristics of the small business investment companies using them, including the extent to 

which the investment companies have used the leverage from 

each instrument to make small business loans, equity investments, or both; and 

(D) the frequency with which each type of investment instrument has been used in the current year and a comparison 

of the current year with previous years. 

(h) CERTIFICATIONS OF ELIGIBILITY.-

(1) CERTIFICATION BY SMALL BUSINESS CONCERN.-Prior to 

receiving financial assistance from a company licensed pursuant to section 301, a small business concern shall certify in 

writing that it meets the eligibility requirements of the Small 

Business Investment Company Program or the Specialized 

Small Business Investment Company Program, as applicable. 

(2) CERTIFICATION BY COMPANY.-Prior to providing financial assistance to a small business concern under this Act, a 

company licensed pursuant section 301 shall certify in writing 

that it has reviewed the application for assistance of the small 

business concern and that all documentation and other information supports the eligibility of the applicant. 

(3) RETENTION OF CERTIFICATIONS.-Certificates made pursuant to paragraphs (1) and (2) shall be retained by the company licensed pursuant to section 301 for the duration of the 

financial assistance. 

(i)(1) The purpose of this subsection is to facilitate the orderly 

and necessary flow of long-term loans and equity funds from small 

business investment companies to small business concerns. 
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23 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 309 

(2) In the case of a business loan, the small business investment company making such loan may charge interest on such loan 

at a rate which does not exceed the maximum rate prescribed by 

regulation by the Administration for loans made by any licensee 

(determined without regard to any State rate incorporated by such 

regulation). In this paragraph, the term "interest" includes only the 

maximum mandatory sum, expressed in dollars or as a percentage 

rate, that is payable with respect to the business loan amount received by the small business concern, and does not include the 

value, if any, of contingent obligations, including warrants, royalty, 

or conversion rights, granting the small business investment company an ownership interest in the equity or increased future revenue of the small business concern receiving the business loan. 

(3) A State law or constitutional provision shall be preempted 

for purposes of paragraph (2) with respect to any loan if such loan 

is made before the date, on or after April 1, 1980, on which such 

State adopts a law or certifies that the voters of such State have 

voted in favor of any provision, constitutional or otherwise, which 

states explicitly and by its terms that such State does not want the 

provisions of this subsection to apply with respect to loans made 

in such State, except that such State law or constitutional or other 

provision shall be preempted in the case of a loan made, on or after 

the date on which such law is adopted or such certification is made, 

pursuant to a commitment to make such loan which was entered 

into on or after April 1, 1980, and prior to the date on which such 

law is adopted or such certification is made. 

( 4)(A) If the maximum rate of interest authorized under paragraph (2) on any loan made by a small business investment company exceeds the rate which would be authorized by applicable 

State law if such State law were not preempted for purposes of this 

subsection, the charging of interest at any rate in excess of the rate 

authorized by paragraph (2) shall be deemed a forfeiture of the 

greater of (i) all interest which the loan carries with it, or (ii) all 

interest which has been agreed to be paid thereon. 

(B) In the case of any loan with respect to which there is a forfeiture of interest under subparagraph (A), the person who paid the 

interest may recover from a small business investment company 

making such loan an amount equal to twice the amount of the interest paid on such loan. Such interest may be recovered in a civil 

action commenced in a court of appropriate jurisdiction not later 

than two years after the most recent payment of interest. 

REVOCATION AND SUSPENSION OF LICENSES; CEASE AND DESIST 

ORDERS 

SEC. 309. [15 U.S.C. 687a] (a) A license may be revoked or 

suspended by the Administration-

(!) for false statements knowingly made in any written 

statement required under this title, or under any regulation 

issued under this title by the Administration; 

(2) if any written statement required under this title, or 

under any regulation issued under this title by the Administrator, fails to state a material fact necessary in order to make 
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Sec. 309 SMALL BUSINESS INVESTMENT ACT OF 1958 24 

the statement not misleading in the light of the circumstances 

under which the statement was made; 

(3) for willful or repeated violation of, or willful or repeated failure to observe, any provision of this Act; 

(4) for willful or repeated violation of or willful or repeated 

failure to observe, any rule or regulation of the Administration 

authorized by this Act; or 

(5) for violation of, or failure to observe, any cease and desist order issued by the Administration under this section. 

(b) Where a licensee or any other person has not complied with 

any provision of this Act, or of any regulation issued pursuant 

thereto by the Administration, or is engaging or is about to engage 

in any acts or practices which constitute or will constitute a violation of such Act or regulation, the Administration may order such 

licensee or other person to cease and desist from such action or failure to act. The Administration may further order such licensee or 

other person to take such action or to refrain from such action as 

the Administration deems necessary to insure compliance with the 

Act and the regulations. The Administration may also suspend the 

license of a licensee, against whom an order has been issued, until 

such licensee complies with such order. 

(c) Before revoking or suspending a license pursuant to subsection (a) or issuing a cease and desist order pursuant to subsection (b), the Administration shall serve upon the licensee and 

any other person involved an order to show cause why an order revoking or suspending the license or a cease and desist order should 

not be issued. Any such order to show cause shall contain a statement of the matters of fact and law asserted by the Administration 

and the legal authority and jurisdiction under which a hearing is 

to be held, and shall set forth that a hearing will be held before 

the Administration at a time and place stated in the order. If after 

hearing, or a waiver thereof, the Administration determines on the 

record that an order revoking or suspending the license or a cease 

and desist order should issue, it shall promptly issue such order, 

which shall include a statement of the findings of the Administration and the grounds and reasons therefor and specify the effective 

date of the order, and shall cause the order to be served on the licensee and any other person involved. 

(d) The Administration may require by subpena the attendance 

and testimony of witnesses and the production of all books, papers, 

and documents relating to the hearing from any place in the 

United States. Witnesses summoned before the Administration 

shall be paid by the party at whose instance they were called the 

same fees and mileage that are paid witnesses in the courts of the 

United States. In case of disobedience to a subpena, the Administration, or any party to a proceeding before the Administration, 

may invoke the aid of any court of the United States in requiring 

the attendance and testimony of witnesses and the production of 

books, papers, and documents. 

(e) An order issued by the Administration under this section 

shall be final and conclusive unless within thirty days after the 

service thereof the licensee, or other person against whom an order 

is issued, appeals to the United States court of appeals for the circuit in which such licensee has its principal place of business by 
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25 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 310 

filing with the clerk of such court a petition praying that the Administration's order be set aside or modified in the manner stated 

in the petition. After the expiration of such thirty days, a petition 

may be filed only by leave of court on a showing of reasonable 

grounds for failure to file the petition theretofore. The clerk of the 

court shall immediately cause a copy of the petition to be delivered 

to the Administration, and the Administration shall thereupon certify and file in the court a transcript of the record upon which the 

order complained of was entered. If before such record is filed the 

Administration amends or sets aside its order, in whole or in part, 

the petitioner may amend the petition within such time as the 

court may determine, on notice to the Administration. The filing of 

a petition for review shall not of itself stay or suspend the operation of the order of the Administration, but the court of appeals 

in its discretion may restrain or suspend, in whole or in part, the 

operation of the order pending the final hearing and determination 

of the petition. The court may affirm, modify, or set aside the order 

of the Administration. If the court determines that the just and 

proper disposition of the case requires the taking of additional evidence, the court shall order the Administration to reopen the hearing for the taking of such evidence, in such manner and upon such 

terms and conditions as the court may deem proper. The Administration may modify its findings as to the facts, or make new findings, by reason of the additional evidence so taken, and it shall file 

its modified or new findings and the amendments, if any, of its 

order, with the record of such additional evidence. No objection to 

an order of the Administration shall be considered by the court unless such objection was urged before the Administration or, if it 

was not so urged, unless there were reasonable grounds for failure 

to do so. The judgment and decree of the court affirming, modifying, or setting aside any such order of the Administration shall 

be subject only to review by the Supreme Court of the United 

States upon certification or certiorari as provided in section 1254 

of title 28, United States Code. 

(f) If any licensee or other person against which or against 

whom an order is issued under this section fails to obey the order, 

the Administration may apply to the United States court of appeals, within the circuit where the licensee has its principal place 

of business, for the enforcement of the order and shall file a transcript of the record upon which the order complained of was entered. Upon the filing of the application the court shall cause notice 

thereof to be served on the licensee or other person. The evidence 

to be considered, the procedure to be followed, and the jurisdiction 

of the court shall be the same as is provided in subsection (e) for 

applications to set aside or modify orders. 

EXAMINATIONS AND INVESTIGATIONS 

SEC. 310. [15 U.S.C. 687b) (a) The Administration may make 

such investigations as it deems necessary to determine whether a 

licensee or any other person has engaged or is about to engage in 

any acts or practices which constitute or will constitute a violation 

of any provision of this Act, or of any rule or regulation under this 

Act, or of any order issued under this Act. The Administration 
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Sec. 310 SMALL BUSINESS INVESTMENT ACT OF 1958 26 

shall permit any person to file with it a statement in writing, 

under oath or otherwise as the Administration shall determine, as 

to all the facts and circumstances concerning the matter to be investigated. For the purpose of any investigation, the Administration is empowered to administer oaths and affirmations, subpena 

witnesses, compel their attendance, take evidence, and require the 

production of any books, papers, and documents which are relevant 

to the inquiry. Such attendance of witnesses and the production of 

any such records may be required from any place in the United 

States. In case of contumacy by, or refusal to obey a subpena 

issued to, any person, including a licensee, the Administration may 

invoke the aid of any court of the United States within the jurisdiction of which such investigation or proceeding is carried on, or 

where such person resides or carries on business, in requiring the 

attendance and testimony of witnesses and the production of books, 

papers, and documents; and such court may issue an order requiring such person to appear before the Administration, there to 

produce records, if so ordered, or to give testimony touching the 

matter under investigation. Any failure to obey such order of the 

court may be punished by such court as a contempt thereof. All 

process in any such case may be served in the judicial district 

whereof such person is an inhabitant or wherever he may be found. 

(b) Each small business investment company shall be subject 

to examinations made by direction of the Investment Division of 

the Administration, which may be conducted with the assistance of 

a private sector entity that has both the qualifications to conduct 

and expertise in conducting such examinations, and the cost of 

such examinations, including the compensation of the examiners, 

may in the discretion of the Administration be assessed against the 

company examined and when so assessed shall be paid by such 

company. Fees collected under this subsection shall be deposited in 

the account for salaries and expenses of the Administration, and 

are authorized to be appropriated solely to cover the costs of examinations and other program oversight activities. Every such company shall make such reports to the Administration at such times 

and in such form as the Administration may require; except that 

the Administration is authorized to exempt from making such reports any such company which is registered under the Investment 

Company Act of 1940 to the extent necessary to avoid duplication 

in reporting requirements. 

(c) Each small business investment company shall be examined 

at least every two years in such detail so as to determine whether 

or not-

(1) it has engaged solely in lawful activities and those contemplated by this title; 

(2) it has engaged in prohibited conflicts of interest; 

(3) it has acquired or exercised illegal control of an assisted small business; 

(4) it has made investments in small businesses for not 

less than 1 year; 

(5) it has invested more than 20 per centum of its capital 

in any individual small business, if such restriction is applicable; 
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27 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 310 

(6) it has engaged in relending, foreign investments, or 

passive investments; or 

(7) it has charged an interest rate in excess of the maximum permitted by law: 

Provided, That the Administration may waive the examination (A) 

for up to one additional year if, in its discretion, it determines such 

a delay would be appropriate, based upon the amount of debentures being issued by the company and its repayment record, the 

prior operating experience of the company, the contents and results 

of the last examination and the management expertise of the company, or (B) if it is a company whose operations have been suspended while the company is involved in litigation or is in receivership. 

(d) VALUATIONS.-

(!) FREQUENCY OF VALUATIONS.-

(A) IN GENERAL.-Each licensee shall submit to the 

Administrator a written valuation of the loans and investments of the licensee not less often than semiannually or 

otherwise upon the request of the Administrator, except 

that any licensee with no leverage outstanding shall submit such valuations annually, unless the Administrator determines otherwise. 

(B) MATERIAL ADVERSE CHANGES.-Not later than 30 

days after the end of a fiscal quarter of a licensee during 

which a material adverse change in the aggregate valuation of the loans and investments or operations of the licensee occurs, the licensee shall notify the Administrator 

in writing of the nature and extent of that change. 

(C) INDEPENDENT CERTIFICATION.-

(i) IN GENERAL.-Not less than once during each 

fiscal year, each licensee shall submit to the Administrator the financial statements of the licensee, audited 

by an independent certified public accountant approved by the Administrator. 

(ii) AUDIT REQUIREMENTS.-Each audit conducted 

under clause (i) shall include-

(!) a review of the procedures and documentation used by the licensee in preparing the valuations required by this section; and 

(II) a statement by the independent certified 

public accountant that such valuations were prepared in conformity with the valuation criteria applicable to the licensee established in accordance 

with paragraph (2). 

(2) VALUATION CRITERIA.-Each valuation submitted under 

this subsection shall be prepared by the licensee in accordance 

with valuation criteria, which shall-

(A) be established or approved by the Administrator; 

and 

(B) include appropriate safeguards to ensure that the 

noncash assets of a licensee are not overvalued. 
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Sec. 311 SMALL BUSINESS INVESTMENT ACT OF 1958 28 

INJUNCTIONS AND OTHER ORDERS 

SEC. 311. [15 U.S.C. 687c] (a) Whenever, in the judgment of 

the Administration, a licensee or any other person has engaged or 

is about to engage in any acts or practices which constitute or will 

constitute a violation of any provision of this Act, or of any rule or 

regulation under this Act, or of any order issued under this Act, 

the Administration may make application to the proper district 

court of the United States or a United States court of any place 

subject to the jurisdiction of the United States for an order enjoining such acts or practices, or for an order enforcing compliance 

with such provision, rule, regulation, or order, and such courts 

shall have jurisdiction of such actions and, upon a showing by the 

Administration that such licensee or other person has engaged or 

is about to engage in any such acts or practices, a permanent or 

temporary injunction shall be granted without bond. 

(b) In any such proceeding the court as a court of equity may, 

to such extent as it deems necessary, take exclusive jurisdiction of 

the licensee or licensees and the assets thereof, wherever located; 

and the court shall have jurisdiction in any such proceeding to appoint a trustee or receiver to hold or administer under the direction 

of the court the assets so possessed. 

(c) The Administration shall have authority to act as trustee 

or receiver of the licensee. Upon request by the Administration, the 

court may appoint the Administration to act in such capacity unless the court deems such appointment inequitable or otherwise inappropriate by reason of the special circumstances involved. 

CONFLICTS OF INTEREST 

SEC. 312. [15 U.S.C. 687d] For the purpose of controlling conflicts of interest which may be detrimental to small business concerns, to small business investment companies, to the shareholders, 

partners, or members of either, or to the purposes of this Act, the 

Administration shall adopt regulations to govern transactions with 

any officer, director, shareholder, partner, or member of any small 

business investment company, or with any person or concern, in 

which any interest, direct or indirect, financial or otherwise, is held 

by any officer, director, shareholder, partner, or member of (1) any 

small business investment company, or (2) any person or concern 

with an interest, direct or indirect, financial or otherwise, in any 

small business investment company. Such regulations shall include 

appropriate requirements for public disclosure necessary to the 

purposes of this section. 

SEC. 313. [15 U.S.C. 687e] REMOVAL OR SUSPENSION OF MANAGEMENT 

OFFICIALS. 

(a) DEFINITION OF "MANAGEMENT 0FFICIAL".-ln this section, 

the term "management official" means an officer, director, general 

partner, manager, employee, agent, or other participant in the 

management or conduct of the affairs of a licensee. 

(b) REMOVAL OF MANAGEMENT OFFICIALS.-

(1) NOTICE OF REMOVAL.-The Administrator may serve 

upon any management official a written notice of its intention 

to remove that management official whenever, in the opinion 

of the Administrator-
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29 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 313 

(A) such management official-

(i) has willfully and knowingly committed any 

substantial violation of-

(!) this Act; 

(II) any regulation issued under this Act; or 

(Ill) a cease-and-desist order which has become final; or 

(ii) has willfully and knowingly committed or engaged in any act, omission, or practice which constitutes a substantial breach of a fiduciary duty of that 

person as a management official; and 

(B) the violation or breach of fiduciary duty is one involving personal dishonesty on the part of such management official. 

(2) CoNTENTS OF NOTICE.-A notice of intention to remove 

a management official, as provided in paragraph (1), shall contain a statement of the facts constituting grounds therefor, and 

shall fix a time and place at which a hearing will be held 

thereon. 

(3) HEARINGS.-

(A) TIMING.-A hearing described in paragraph (2) 

shall be fixed for a date not earlier than 30 days nor later 

than 60 days after the date of service of notice of the hearing, unless an earlier or a later date is set by the Administrator at the request of-

(i) the management official, and for good cause 

shown; or 

(ii) the Attorney General of the United States. 

(B) CONSENT.-Unless the management official shall 

appear at a hearing described in this paragraph in person 

or by a duly authorized representative, that management 

official shall be deemed to have consented to the issuance 

of an order of removal under paragraph (1). 

(4) ISSUANCE OF ORDER OF REMOVAL.-

(A) IN GENERAL.-In the event of consent under paragraph (3)(B), or if upon the record made at a hearing described in this subsection, the Administrator finds that 

any of the grounds specified in the notice of removal has 

been established, the Administrator may issue such orders 

of removal from office as the Administrator deems appropriate. 

(B) EFFECTIVENESS.-An order under subparagraph 

(A) shall-

(i) become effective at the expiration of 30 days 

after the date of service upon the subject licensee and 

the management official concerned (except in the case 

of an order issued upon consent as described in paragraph (3)(B), which shall become effective at the time 

specified in such order); and 

(ii) remain effective and enforceable, except to 

such extent as it is stayed, modified, terminated, or 

set aside by action of the Administrator or a reviewing 

court in accordance with this section. 

(c) AUTHORITY TO SUSPEND OR PROHIBIT PARTICIPATION.-
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Sec. 313 SMALL BUSINESS INVESTMENT ACT OF 1958 30 

(1) IN GENERAL.-The Administrator may, if the Administrator deems it necessary for the protection of the licensee or 

the interests of the Administration, suspend from office or prohibit from further participation in any manner in the management or conduct of the affairs of the licensee, or both, any 

management official referred to in subsection (b)(1), by written 

notice to such effect served upon the management official. 

(2) EFFECTIVENESS.-A suspension or prohibition under 

paragraph (1)-

(A) shall become effective upon service of notice under 

paragraph (1); and 

(B) unless stayed by a court in proceedings authorized 

by paragraph (3), shall remain in effect-

(i) pending the completion of the administrative 

proceedings pursuant to a notice of intention to remove served under subsection (b); and 

(ii) until such time as the Administrator shall dismiss the charges specified in the notice, or, if an order 

of removal or prohibition is issued against the management official, until the effective date of any such 

order. 

(3) JUDICIAL REVIEW.-Not later than 10 days after any 

management official has been suspended from office or prohibited from participation in the management or conduct of the affairs of a licensee, or both, under paragraph (1), that management official may apply to the United States district court for 

the judicial district in which the home office of the licensee is 

located, or the United States District Court for the District of 

Columbia, for a stay of the suspension or prohibition pending 

the completion of the administrative proceedings pursuant to a 

notice of intent to remove served upon the management official 

under subsection (b), and such court shall have jurisdiction to 

stay such action. 

(d) AUTHORITY TO SUSPEND ON CRIMINAL CHARGES.-

(1) IN GENERAL.-Whenever a management official is 

charged in any information, indictment, or complaint authorized by a United States attorney, with the commission 

of or participation in a felony involving dishonesty or 

breach of trust, the Administrator may, by written notice 

served upon that management official, suspend that management official from office or prohibit that management 

official from further participation in any manner in the 

management or conduct of the affairs of the licensee, or 

both. 

(2) EFFECTIVENESS.-A suspension or prohibition 

under paragraph (1) shall remain in effect until the subject 

information, indictment, or complaint is finally disposed of, 

or until terminated by the Administrator. 

(3) AUTHORITY UPON CONVICTION.-lf a judgment of 

conviction with respect to an offense described in paragraph (1) is entered against a management official, then at 

such time as the judgment is not subject to further appellate review, the Administrator may issue and serve upon 

the management official an order removing that manage-
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31 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 313 

ment official, which removal shall become effective upon 

service of a copy of the order upon the licensee. 

( 4) AUTHORITY UPON DISMISSAL OR OTHER DISPOSITION.-A finding of not guilty or other disposition of 

charges described in paragraph (1) shall not preclude the 

Administrator from thereafter instituting proceedings to 

suspend or remove the management official from office, or 

to prohibit the management official from participation in 

the management or conduct of the affairs of the licensee, 

or both, pursuant to subsection (b) or (c). 

(e) NOTIFICATION TO LICENSEES.-Copies of each notice required to be served on a management official under this section 

shall also be served upon the interested licensee. 

(f) PROCEDURAL PROVISIONS; JUDICIAL REVIEW.-

(1) HEARING VENUE.-Any hearing provided for in this section shall be-

(A) held in the Federal judicial district or in the territory in which the principal office of the licensee is located, 

unless the party afforded the hearing consents to another 

place; and 

(B) conducted in accordance with the provisions of 

chapter 5 of title 5, United States Code. 

(2) ISSUANCE OF ORDERS.-After a hearing provided for in 

this section, and not later than 90 days after the Administrator 

has notified the parties that the case has been submitted for 

final decision, the Administrator shall render a decision in the 

matter (which shall include findings of fact upon which its decision is predicated), and shall issue and cause to be served 

upon each party to the proceeding an order or orders consistent 

with the provisions of this section. 

(3) AUTHORITY TO MODIFY ORDERS.-The Administrator 

may modify, terminate, or set aside any order issued under 

this section-

(A) at any time, upon such notice, and in such manner 

as the Administrator deems proper, unless a petition for 

review is timely filed in a court of appeals of the United 

States, as provided in paragraph (4)(B), and thereafter 

until the record in the proceeding has been filed in accordance with paragraph (4)(C); and 

(B) upon such filing of the record, with permission of 

the court. 

(4) JUDICIAL REVIEW.-

(A) IN GENERAL.-Judicial review of an order issued 

under this section shall be exclusively as provided in this 

subsection. 

(B) PETITION FOR REVIEW.-Any party to a hearing 

provided for in this section may obtain a review of any 

order issued pursuant to paragraph (2) (other than an 

order issued with the consent of the management official 

concerned, or an order issued under subsection (d)), by filing in the court of appeals of the United States for the circuit in which the principal office of the licensee is located, 

or in the United States Court of Appeals for the District 

of Columbia Circuit, not later than 30 days after the date 
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Sec. 314 SMALL BUSINESS INVESTMENT ACT OF 1958 32 

of service of such order, a written petition praying that the 

order of the Administrator be modified, terminated, or set 

aside. 

(C) NOTIFICATION TO ADMINISTRATION.-A copy of apetition filed under subparagraph (B) shall be forthwith 

transmitted by the clerk of the court to the Administrator, 

and thereupon the Administrator shall file in the court the 

record in the proceeding, as provided in section 2112 of 

title 28, United States Code. 

(D) COURT JURISDICTION.-Upon the filing of a petition 

under subparagraph (A)-

(i) the court shall have jurisdiction, which, upon 

the filing of the record under subparagraph (C), shall 

be exclusive, to affirm, modify, terminate, or set aside, 

in whole or in part, the order of the Administrator, except as provided in the last sentence of paragraph 

(3)(B); 

(ii) review of such proceedings shall be had as provided in chapter 7 of title 5, United States Code; and 

(iii) the judgment and decree of the court shall be 

final, except that the judgment and decree shall be 

subject to review by the Supreme Court of the United 

States upon certiorari, as provided in section 1254 of 

title 28, United States Code. 

(E) JUDICIAL REVIEW NOT A STAY.-The commencement 

of proceedings for judicial review under this paragraph 

shall not, unless specifically ordered by the court, operate 

as a stay of any order issued by the Administrator under 

this section. 

UNLAWFUL ACTS AND OMISSIONS BY OFFICERS, DIRECTORS, 

EMPLOYEES, OR AGENTS; BREACH OF FIDUCIARY DUTY 

SEC. 314. [15 U.S.C. 687f] (a) Wherever a licensee violates any 

provision of this Act or regulation issued thereunder by reason of 

its failure to comply with the terms thereof or by reason of its engaging in any act or practice which constitutes or will constitute a 

violation thereof, such violation shall be deemed to be also a violation and an unlawful act on the part of any person who, directly 

or indirectly, authorizes, orders, participates in, or causes, brings 

about, counsels, aids, or abets in the commission of any acts, practices, or transactions which constitute or will constitute, in whole 

or in part, such violation. 

(b) It shall be unlawful for any officer, director, employee, 

agent, or other participant in the management or conduct of the affairs of a licensee to engage in any act or practice, or to omit any 

act, in breach of his fiduciary duty as such officer, director, employee, agent, or participant, if, as a result thereof, the licensee has 

suffered or is in imminent danger of suffering financial loss or 

other damage. 

(c) Except with the written consent of the Administration, it 

shall be unlawful-

(1) for any person hereafter to take office as an officer, director, or employee of a licensee, or to become an agent or par-
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33 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 316 

ticipant in the conduct of the affairs or management of a licensee, if-

(A) he has been convicted of a felony, or any other 

criminal offense involving dishonesty or breach of trust, or 

(B) he has been found civilly liable in damages, or has 

been permanently or temporarily enjoined by an order, 

judgment, or decree of a court of competent jurisdiction, by 

reason of any act or practice involving fraud or beach of 

trust; or 

(2) for any person to continue to serve in any of the abovedescribed capacities, if-

(A) he is hereafter convicted of a felony, or any other 

criminal offense involving dishonesty or beach of trust, or 

(B) he is hereafter found civilly liable in damages or 

is permanently or temporarily enjoined by an order, judgment, or decree of a court of competent jurisdiction, by reason of any act or practice involving fraud or breach of 

trust. 

PENALTIES AND FORFEITURES 

SEC. 315. [15 U.S.C. 687g] (a) Except as provided in subsection (b) of this section, a licensee which violates any regulation 

or written directive issued by the Administrator, requiring the filing of any regular or special report pursuant to section 310(b) of 

this Act, shall forfeit and pay to the United States a civil penalty 

of not more than $100 for each and every day of the continuance 

of the licensee's failure to file such report, unless it is shown that 

such failure is due to reasonable cause and not due to willful neglect. The civil penalties provided for in this section shall accrue 

to the United States and may be recovered in a civil action brought 

by the Administration. 

(b) The Administration may by rules and regulations, or upon 

application of an interested party, at any time previous to such failure, by order, after notice and opportunity for hearing, exempt in 

whole or in part, any small business investment company from the 

provisions of subsection (a) of this section, upon such terms and 

conditions and for such period of time as it deems necessary and 

appropriate, if the Administration funds that such action is not inconsistent with the public interest or the protection of the Administration. The Administration may for the purposes of this section 

make any alternative requirements appropriate to the situation. 

JURISDICTION AND SERVICE OF PROCESS 

SEC. 316. [15 U.S.C. 687h] Any suit or action brought under 

section 308, 309, 311, 313, or 315 by the Administration at law or 

in equity to enforce any liability or duty created by, or to enjoin 

any violation of, this Act, or any rule, regulation, or order promulgated thereunder, shall be brought in the district wherein the licensee maintains its principal office, and process in such cases may 

be served in any district in which the defendant maintains its principal office or transacts business, or wherever the defendant may 

be found. 
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Sec. 317 SMALL BUSINESS INVESTMENT ACT OF 1958 34 

SEC. 317. Section 18 of the Investment Company Act of 1940, 

as amended (15 U.S.C. 80a-18), is further amended by amending 

subsection (k) to read as follows: 

"(k) The provisions of subparagraphs (A) and (B) of paragraph 

(1) of subsection (a) of this section shall not apply to investment 

companies operating under the Small Business Investment Act of 

1958, and the provisions of paragraph (2) of said subsection shall 

not apply to such companies so long as such class of senior security 

shall be held or guaranteed by the Small Business Administration." 

GUARANTEED OBLIGATIONS NOT ELIGIBLE FOR PURCHASE BY FEDERAL 

FINANCING BANK 

SEC. 318. [15 U.S.C. 687k) Nothing in any provision of law 

shall be construed to authorize the Federal Financing Bank to acquire after September 30, 1985-

(1) any obligation the payment of principal or interest on 

which has at any time been guaranteed in whole or in part 

under this title, 

(2) any obligation which is an interest in any obligation described in paragraph (1), or 

(3) any obligation which is secured by, or substantially all 

of the value of which is attributable to, any obligation described in paragraph (1) or (2). 

SEC. 319. [15 U.S.C. 6871] ISSUANCE AND GUARANTEE OF TRUST CER· 

TIFICATES. 

(a) The Administration is authorized to issue trust certificates 

representing ownership of all or a fractional part of debentures 

issued by small business investment companies and guaranteed by 

the Administration under this Act, or participating securities which 

are issued by such companies and purchased and guaranteed pursuant to section 303(g): Provided, That such trust certificates shall 

be based on and backed by a trust or pool approved by the Administration and composed solely of guaranteed debentures or guaranteed participating securities. 

(b) The Administration is authorized, upon such terms and 

conditions as are deemed appropriate, to guarantee the timely payment of the principal of and interest on trust certificates issued by 

the Administration or its agent for purposes of this section. Such 

guarantee shall be limited to the extent of principal and interest 

on the guaranteed debentures or the redemption price of and priority payments on the participating securities, which compose the 

trust or pool. In the event that a debenture in such trust or pool 

is prepaid, or participating securities are redeemed, either voluntarily or involuntarily, or in the event of default of a debenture or 

voluntary or involuntary redemption of a participating security, the 

guarantee of timely payment of principal and interest on the trust 

certificates shall be reduced in proportion to the amount of principal and interest such prepaid debenture or redeemed participating security and priority payments represent in the trust or 

pool. Interest on prepaid or defaulted debentures, or priority payments on participating securities, shall accrue and be guaranteed 

by the Administration only through the date of payment on the 

guarantee. During the term of the trust certificate, it may be called 
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35 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 320 

for redemption due to prepayment or default of all debentures or 

redemption, whether voluntary or involuntary, of all participating 

securities residing in the pool. 

(c) The full faith and credit of the United States is pledged to 

the payment of all amounts which may be required to be paid 

under any guarantee of such trust certificates issued by the Administration or its agent pursuant to this section. 

(d) The Administration shall not collect a fee for any guarantee 

under this section: Provided, That nothing herein shall preclude 

any agent of the Administration from collecting a fee approved by 

the Administration for the functions described in subsection (f)(2) 

of this section. 

(e)(1) In the event the Administration pays a claim under a 

guarantee issued under this section, it shall be subrogated fully to 

the rights satisfied by such payment. 

(2) No State or local law, and no Federal law, shall preclude 

or limit the exercise by the Administration of its ownership rights 

in the debentures or participating securities residing in a trust or 

pool against which trust certificates are issued. 

(f)(1) The Administration shall provide for a central registration of all trust certificates sold pursuant to this section. 

(2) The Administrator shall contract with an agent or agents 

to carry out on behalf of the Administration the pooling and the 

central registration functions of this section including, notwithstanding any other provision of law, maintenance on behalf of and 

under the direction of the Administration, such commercial bank 

accounts or investments in obligations of the United States as may 

be necessary to facilitate trusts or pools backed by debentures or 

participating securities guaranteed under this Act, and the 

issuance of trust certificates to facilitate such poolings. Such agent 

or agents shall provide a fidelity bond or insurance in such 

amounts as the Administration determines to be necessary to fully 

protect the interests of the Government. 

(3) Prior to any sale, the Administrator shall require the seller 

to disclose to a purchaser of a trust certificate issued pursuant to 

this section, information on the terms, conditions, and yield of such 

instrument. 

(4) The Administrator is authorized to regulate brokers and 

dealers in trust certificates sold pursuant to this section. 

(5) Nothing in this subsection shall prohibit the use of a bookentry or other electronic form of registration for trust certificates. 

PERIODIC ISSUANCE OF GUARANTEES AND TRUST CERTIFICATES 

SEc. 320. [15 U.S.C. 687m] The Administration shall issue 

guarantees under section 303 and trust certificates under section 

319 at periodic intervals of not less than every 12 months and shall 

do so at such shorter intervals as its 6 deems appropriate, taking 

into consideration the amount and number of such guarantees or 

trust certificates. 

• So in original. Probably should be "it". 
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Sec. 351 SMALL BUSINESS INVESTMENT ACT OF 1958 36 

PART B-NEW MARKETS VENTURE CAPITAL PROGRAM 

SEC. 351. [15 U.S.C. 689] DEFINITIONS. 

In this part, the following definitions apply: 

(1) DEVELOPMENTAL VENTURE CAPITAL.-The tenn "developmental venture capital" means capital in the form of equity 

capital investments in businesses made with a primary objective of fostering economic development in low-income geographic areas. For the purposes of this paragraph, the tenn 

"equity capital" has the same meaning given such term in section 303(g)(4). 

(2) LoW-INCOME INDIVIDUAL.-The term "low-income individual" means an individual whose income (adjusted for family 

size) does not exceed-

(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. 

(3) LOW-INCOME GEOGRAPHIC AREA.-the 7 term "low-income geographic area" means-

(A) any population census tract (or in the case of an 

area that is not tracted for population census tracts, the 

equivalent county division, as defined by the Bureau of the 

Census of the Department of Commerce for purposes of defining poverty areas), if7 So in law. 

(i) the poverty rate for that census tract is not less 

than 20 percent; 

(ii) in the case of a tract-

(!) that is located within a metropolitan area, 

50 percent or more of the households in that census tract have an income equal to less than 60 

percent of the area median gross income; or 

(II) that is not located within a metropolitan 

area, the median household income for such tract 

does not exceed 80 percent of the statewide median household income; or 

(iii) as determined by the Administrator based on 

objective criteria, a substantial population of low-income individuals reside, an inadequate access to investment capital exists, or other indications of economic distress exist in that census tract; or 

(B) any area located within-

(i) a HUBZone (as defined in section 3(p) of the 

Small Business Act and the implementing regulations 

issued under that section); 

(ii) an urban empowerment zone or urban enterprise community (as designated by the Secretary of 

Housing and Urban Development); or 
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37 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 352 

(iii) a rural empowerment zone or rural enterprise 

community (as designated by the Secretary of Agriculture). 

(4) NEW MARKETS VENTURE CAPITAL COMPANY.-The term 

"New Markets Venture Capital company" means a company 

that-

(A) has been granted final approval by the Administrator under section 354(e); and 

(B) has entered into a participation agreement with 

the Administrator. 

(5) OPERATIONAL ASSISTANCE.-The term "operational assistance" means management, marketing, and other technical 

assistance that assists a small business concern with business 

development. 

(6) PARTICIPATION AGREEMENT.-The term "participation 

agreement" means an agreement, between the Administrator 

and a company granted final approval under section 354(e), 

that-

(A) details the company's operating plan and investment criteria; and 

(B) requires the company to make investments in 

smaller enterprises at least 80 percent of which are located 

in low-income geographic areas. 

(7) SPECIALIZED SMALL BUSINESS INVESTMENT COMPANY.-

The term "specialized small business investment company" 

means any small business investment company that-

(A) invests solely in small business concerns that contribute to a well-balanced national economy by facilitating 

ownership in such concerns by persons whose participation 

in the free enterprise system is hampered because of social 

or economic disadvantages; 

(B) is organized or chartered under State business or 

nonprofit corporations statutes, or formed as a limited 

partnership; and 

(C) was licensed under section 301(d), as in effect before September 30, 1996. 

(8) STATE.-The term "State" means such of the several 

States, the District of Columbia, the Commonwealth of Puerto 

Rico, the Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and any other 

commonwealth, territory, or possession of the United States. 

SEC. 352. (15 U.S.C. 689a] PURPOSES. 

The purposes of the New Markets Venture Capital Program established under this part are-

(1) to promote economic development and the creation of 

wealth and job opportunities in low-income geographic areas 

and among individuals living in such areas by encouraging developmental venture capital investments in smaller enterprises 

primarily located in such areas; and 

(2) to establish a developmental venture capital program, 

with the mission of addressing the unmet equity investment 

needs of small enterprises located in low-income geographic 

areas, to be administered by the Administrator-
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Sec. 353 SMALL BUSINESS INVESTMENT ACT OF 1958 38 

(A) to enter into participation agreements with New 

Markets Venture Capital companies; 

(B) to guarantee debentures of New Markets Venture 

Capital companies to enable each such company to make 

developmental venture capital investments in smaller enterprises in low-income geographic areas; and 

(C) to make grants to New Markets Venture Capital 

companies, and to other entities, for the purpose of providing operational assistance to smaller enterprises financed, or expected to be financed, by such companies. 

SEC. 353. [15 U.S.C. 689b] ESTABLISHMENT. 

In accordance with this part, the Administrator shall establish 

a New Markets Venture Capital Program, under which the Administrator may-

(1) enter into participation agreements with companies 

granted final approval under section 354(e) for the purposes 

set forth in section 352; 

(2) guarantee the debentures issued by New Markets Venture Capital companies as provided in section 355; and 

(3) make grants to New Markets Venture Capital companies, and to other entities, under section 358. 

SEC. 354. [15 U.S.C. 689c] SELECTION OF NEW MARKETS VENTURE CAPITAL COMPANIES. 

(a) ELIGIBILITY.-A company shall be eligible to apply to participate, as a New Markets Venture Capital company, in the program established under this part if-

(1) the company is a newly formed for-profit entity or a 

newly formed for-profit subsidiary of an existing entity; 

(2) the company has a management team with experience 

in community development financing or relevant venture capital financing; and 

(3) the company has a primary objective of economic development of low-income geographic areas. 

(b) APPLICATION.-To participate, as a New Markets Venture 

Capital company, in the program established under this part a 

company meeting the eligibility requirements set forth in subsection (a) shall submit an application to the Administrator that includes-

(1) a business plan describing how the company intends to 

make successful developmental venture capital investments in 

identified low-income geographic areas; 

(2) information regarding the community development finance or relevant venture capital qualifications and general 

reputation of the company's management; 

(3) a description of how the company intends to work with 

community organizations and to seek to address the unmet 

capital needs of the communities served; 

(4) a proposal describing how the company intends to use 

the grant funds provided under this part to provide operational 

assistance to smaller enterprises financed by the company, including information regarding whether the company intends to 

use licensed professionals, when necessary, on the company's 

staff or from an outside entity; 
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39 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 354 

(5) with respect to binding commitments to be made to the 

company under this part, an estimate of the ratio of cash to inkind contributions; 

(6) a description of the criteria to be used to evaluate 

whether and to what extent the company meets the objectives 

of the program established under this part; 

(7) information regarding the management and financial 

strength of any parent firm, affiliated firm, or any other firm 

essential to the success of the company's business plan; and 

(8) such other information as the Administrator may require. 

(c) CONDITIONAL APPROVAL.-

(!) IN GENERAL.-From among companies submitting applications under subsection (b), the Administrator shall, in accordance with this subsection, conditionally approval companies to participate in the New Markets Venture Capital Program. 

(2) SELECTION CRITERIA.-ln selecting companies under 

paragraph (1), the Administrator shall consider the following: 

(A) The likelihood that the company will meet the goal 

of its business plan. 

(B) The experience and background of the company's 

management team. 

(C) The need for developmental venture capital investments in the geographic areas in which the company intends to invest. 

(D) The extent to which the company will concentrate 

its activities on serving the geographic areas in which it 

intends to invest. 

(E) The likelihood that the company will be able to 

satisfy the conditions under subsection (d). 

(F) The extent to which the activities proposed by the 

company will expand economic opportunities in the geographic areas in which the company intends to invest. 

(G) The strength of the company's proposal to provide 

operational assistance under this part as the proposal relates to the ability of the applicant to meet applicable cash 

requirements and properly utilize in-kind contributions, including the use of resources for the services of licensed 

professionals, when necessary, whether provided by persons on the company's staff or by persons outside of the 

company. 

(H) Any other factors deemed appropriate by the Administrator. 

(3) NATIONWIDE DISTRIBUTION.-The Administrator shall 

select companies under paragraph (1) in such a way that promotes investment nationwide. 

(d) REQUIREMENTS To BE MET FOR FINAL APPROVAL.-The Administrator shall grant each conditionally approved company a period of time, not to exceed 2 years, to satisfy the following requirements: 

(1) CAPITAL REQUIREMENT.-Each conditionally approved 

company shall raise not less than $5,000,000 of private capital 

or binding capital commitments from one or more investors 
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Sec. 354 SMALL BUSINESS INVESTMENT ACT OF 1958 40 

(other than agencies or departments of the Federal Government) who met criteria established by the Administrator. 

(2) NONADMINISTRATION RESOURCES FOR OPERATIONAL ASSISTANCE.-

(A) IN GENERAL.-In order to provide operational assistance to smaller enterprises expected to be financed by 

the company, each conditionally approved company-

(i) shall have binding commitments (for contribution in cash or in kind)-

(1) from any sources other than the Small 

Business Administration that meet criteria established by the Administrator; 

(II) payable or available over a multiyear period acceptable to the Administrator (not to exceed 

10 years); and 

(Ill) in an amount not less than 30 percent of 

the total amount of capital and commitments 

raised under paragraph (1); 

(ii) shall have purchased an annuity-

(!) from an insurance company acceptable to 

the Administrator; 

(II) using funds (other than the funds raised 

under paragraph (1)), from any source other than 

the Administrator; and 

(III) that yields cash payments over a 

multiyear period acceptable to the Administrator 

(not to exceed 10 years) in an amount not less 

than 30 percent of the total amount of capital and 

commitments raised under paragraph (1); or 

(iii) shall have binding commitments (for contributions in cash or in kind) of the type described in clause 

(i) and shall have purchased an annuity of the type described in clause (ii), which in the aggregate make 

available, over a multiyear period acceptable to the 

Administrator (not to exceed 10 years), an amount not 

less than 30 percent of the total amount of capital and 

commitments raised under paragraph (1). 

(B) EXCEPTION.-The Administrator may, in the discretion of the Administrator and based upon a showing of 

special circumstances and good cause, consider an applicant to have satisfied the requirements of subparagraph 

(A) if the applicant has-

(i) a viable plan that reasonably projects the capacity of the applicant to raise the amount (in cash or 

in-kind) required under subparagraph (A); and 

(ii) binding commitments in an amount equal to 

not less than 20 percent of the total amount required 

under paragraph (A). 

(C) LIMITATION.-In order to comply with the requirements of subparagraphs (A) and (B), the total amount of 

a company's in-kind contributions may not exceed 50 percent of the company's total contributions. 

(e) FINAL APPROVAL; DESIGNATION.-The Administrator shall, 

with respect to each applicant conditionally approved to operate as 
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41 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 355 

a New Markets Venture Capital company under subsection (c), either-

(1) grant final approval to the applicant to operate as a 

New Markets Venture Capital company under this part and 

designate the applicant as such a company, if the applicant-

(A) satisfies the requirements of subsection (d) on or 

before the expiration of the time period described in that 

subsection; and 

(B) enters into a participation agreement with the Administrator; or 

(2) if the applicant fails to satisfy the requirements of subsection (d) on or before the expiration of the time period described in that subsection, revoke the conditional approval 

granted under that subsection. 

SEC. 355. [15 U.S.C. 689d] DEBENTURES. 

(a) IN GENERAL.-The Administrator may guarantee the timely 

payment of principal and interest, as scheduled, on debentures 

issued by any New Markets Venture Capital company. 

(b) TERMS AND CONDITIONS.-The Administrator may make 

guarantees under this section on such terms and conditions as it 

deems appropriate, except that the term of any debenture guaranteed under this section shall not exceed 15 years. 

(c) FULL FAITH AND CREDIT OF THE UNITED STATES.-The full 

faith and credit of the United States is pledged to pay all amounts 

that may be required to be paid under any guarantee under this 

part. 

(d) MAXIMUM GUARANTEE.-

(!) IN GENERAL.-Under this section, the Administrator 

may guarantee the debentures issued by a New Markets Venture Capital company only to be extent that the total face 

amount of outstanding guaranteed debentures of such company 

does not exceed 150 percent of the private capital of the company, as determined by the Administrator. 

(2) TREATMENT OF CERTAIN FEDERAL FUNDS.-For the purposes of paragraph (1), private capital shall include capital 

that is considered to be Federal funds, if such capital is contributed by an investor other than an agency or department of 

the Federal Government. 

(e) INVESTMENT LIMITATIONS.-

(1) DEFINITION.-ln this subsection, the term "covered New 

Markets Venture Capital company" means a New Markets 

Venture Capital company-

(A) granted final approval by the Administrator under 

section 354(e) on or after March 1, 2002; and 

(B) that has obtained a financing from the Administrator. 

(2) LIMITATION.-Except to the extent approved by the Administrator, a covered New Markets Venture Capital company 

may not acquire or issue commitments for securities under this 

title for any single enterprise in an aggregate amount equal to 

more than 10 percent of the sum of-

(A) the regulatory capital of the covered New Markets 

Venture Capital company; and 
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Sec. 356 SMALL BUSINESS INVESTMENT ACT OF 1958 42 

(B) the total amount of leverage projected in the participation agreement of the covered New Markets Venture 

Capital. 

SEC. 356, [15 U.S.C. 689e] ISSUANCE AND GUARANTEE OF TRUST CERTIFICATES. 

(a) !SSUANCE.-The Administrator may issue trust certificates 

representing ownership of all or a fractional part of debentures 

issued by a New Markets Venture Capital company and guaranteed by the Administrator under this part, if such certificates are 

based on and backed by a trust or pool approved by the Administrator and composed solely of guaranteed debentures. 

(b) GUARANTEE.-

(!) IN GENERAL.-The Administrator may, under such 

terms and conditions as it deems appropriate, guarantee the 

timely payment of the principal of and interest on trust certificates issued by the Administrator or its agents for purposes of 

this section. 

(2) LIMITATION.-Each guarantee under this subsection 

shall be limited to the extent of principal and interest on the 

guaranteed debentures that compose the trust or pool. 

(3) PREPAYMENT OR DEFAULT.-ln the event that a debenture in a trust or pool is prepaid, or in the event of default of 

such a debenture, the guarantee of timely payment of principal 

and interest on the trust certificates shall be reduced in proportion to the amount of principal and interest such prepaid 

debenture represents in the trust or pool. Interest on prepaid 

or defaulted debentures shall accrue and be guaranteed by the 

Administrator only through the date of payment of the guarantee. At any time during its term, a trust certificate may be 

called for redemption due to prepayment or default of all debentures. 

(c) FULL FAITH AND CREDIT OF THE UNITED STATES.-The full 

faith and credit of the United States is pledged to pay all amounts 

that may be required to be paid under any guarantee of a trust certificate issued by the Administrator or its agents under this section. 

(d) FEES.-The Administrator shall not collect a fee for any 

guarantee of a trust certificate under this section, but any agent 

of the Administrator may collect a fee approved by the Administrator for the functions described in subsection (£)(2). 

(e) SUBROGATION AND OWNERSHIP RIGHTS.-

(1) SUBROGATION.-ln the event the Administrator pays a 

claim under a guarantee issued under this section, it shall be 

subrogated fully to the rights satisfied by such payment. 

(2) OWNERSHIP RIGHTS.-No Federal, State, or local law 

shall preclude or limit the exercise by the Administrator of its 

ownership rights in the debentures residing in a trust or pool 

against which trust certificates are issued under this section. 

(f) MANAGEMENT AND ADMINISTRATION.-

(!) REGISTRATION.-The Administrator may provide for a 

central registration of all trust certificates issued under this 

section. 

(2) CONTRACTING OF FUNCTIONS.-
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43 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 358 

(A) IN GENERAL.-The Administrator may contract 

with an agent or agents to carry out on behalf of the Administrator the pooling and the central registration functions provided for in this section including, notwithstanding any other provision of law-

(i) maintenance, on behalf of and under the direction of the Administrator, of such commercial bank accounts or investments in obligations of the United 

States as may be necessary to facilitate the creation of 

trusts or pools backed by debentures guaranteed 

under this part; and 

(ii) the issuance of trust certificates to facilitate 

the creation of such trusts or pools. 

(B) FIDELITY BOND OR INSURANCE REQUIREMENT .-Any 

agent performing functions on behalf of the Administrator 

under this paragraph shall provide a fidelity bond or insurance in such amounts as the Administrator determines 

to be necessary to fully protect the interests of the United 

States. 

(3) REGULATION OF BROKERS AND DEALERS.-The Administrator may regulate brokers and dealers in trust certificates 

issued under this section. 

(4) ELECTRONIC REGISTRATION.-Nothing in this subsection 

may be construed to prohibit the use of a book-entry or other 

electronic form of registration for trust certificates issued 

under this section. 

SEC. 357. [15 U.S.C. 689f] FEES. 

Except as provided in section 356(d), the Administrator may 

charge such fees as it deems appropriate with respect to any guarantee or grant issued under this part. 

SEC. 358. [15 U.S.C. 689g] OPERATIONAL ASSISTANCE GRANTS. 

(a) IN GENERAL.-

(!) AUTHORITY.-In accordance with this section, the Administrator may make grants to New Markets Venture Capital 

companies and to other entities, as authorized by this part, to 

provide operational assistance to smaller enterprises financed, 

or expected to be financed, by such companies or other entities. 

(2) TERMS.-Grants made under this subsection shall be 

made over a multiyear period not to exceed 10 years, under 

such other terms as the Administrator may require. 

(3) GRANTS TO SPECIALIZED SMALL BUSINESS INVESTMENT 

COMPANIES.-

(A) AUTHORITY.-In accordance with this section, the 

Administrator may make grants to specialized small business investment companies to provide operational assistance to smaller enterprises financed, or expected to be financed, by such companies after the effective date of the 

New Markets Venture Capital Program Act of 2000. 

(B) USE OF FUNDS.-The proceeds of a grant made 

under this paragraph may be used by the company receiving such grant only to provide operational assistance in 

connection with an equity investment (made with capital 

raised after the effective date of the New Markets Venture 
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Sec. 359 SMALL BUSINESS INVESTMENT ACT OF 1958 44 

Capital Program Act of 2000) in a business located in a 

low-income geographic area. 

(C) SUBMISSION OF PLANS.-A specialized small business investment company shall be eligible for a grant 

under this section only if the company submits to the Administrator, in such form and manner as the Administrator may require, a plan for use of the grant. 

(4) GRANT AMOUNT.-

(A) NEW MARKETS VENTURE CAPITAL COMPANIES.-The 

amount of a grant made under this subsection to a New 

Markets Venture Capital company shall be equal to theresources (in cash or in kind) raised by the company under 

section 354(d)(2). 

(B) OTHER ENTITIES.-The amount of a grant made 

under this subsection to any entity other than a New Markets Venture Capital company shall be equal to the resources (in cash or in kind) raised by the entity in accordance with the requirements applicable to New Market 

Venture Capital companies set forth in section 354(d)(2). 

(5) PRO RATA REDUCTIONS.-If the amount made available 

to carry out this section is insufficient for the Administrator to 

provide grants in the amounts provided for in paragraph (4), 

the Administrator shall make pro rata reductions in the 

amounts otherwise payable to each company and entity under 

such paragraph. 

(b) SUPPLEMENTAL GRANTS.-

(1) IN GENERAL.-The Administrator may make supplemental grants to New Markets Venture Capital companies and 

to other entities, as authorized by this part under such terms 

as the Administrator may require, to provide additional operational assistance to smaller enterprises financed, or expected 

to be financed, by the companies. 

(2) MATCHING REQUIREMENT.-The Administrator may require, as a condition of any supplemental grant made under 

this subsection, that the company or entity receiving the grant 

provide from resources (in a cash or in kind), other then s those 

provided by the Administrator, a matching contribution equal 

to the amount of the supplemental grant. 

(c) LIMITATION.-None of the assistance made available under 

this section may be used for any overhead or general and administrative expense of a New Markets Venture Capital company or a 

specialized small business investment company. 

SEC. 359. [15 U.S.C. 689h] BANK PARTICIPATION. 

(a) IN GENERAL.-Except as provided in subsection (b), any national bank, any member bank of the Federal Reserve System, and 

(to the extent permitted under applicable State law) any insured 

bank that is not a member of such system, may invest in any New 

Markets Venture Capital company, or in any entity established to 

invest solely in New Markets Venture Capital companies. 

(b) LIMITATION.-No bank described in subsection (a) may 

make investments described in such subsection that are greater 

than 5 percent of the capital and surplus of the bank. 

8 So in law. The words "other then" in subsection (b)(2) probably should be "other than". 
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45 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 363 

SEC. 360. [15 U.S.C. 689i] FEDERAL FINANCING BANK. 

Section 318 shall not apply to any debenture issued by a New 

Markets Venture Capital company under this part. 

SEC. 361. [15 U.S.C. 689j] REPORTING REQUIREMENT. 

Each New Markets Venture Capital company that participates 

in the program established under this part shall provide to the Administrator such information as the Administrator may require, including-

(1) information related to the measurement criteria that 

the company proposed in its program application; and 

(2) in each case in which the company under this part 

makes an investment in, or a loan or grant to, a business that 

is not located in a low-income geographic area, a report on the 

number and percentage of employees of the business who reside in such areas. 

SEC. 362, [15 U.S.C. 689k] EXAMINATIONS. 

(a) IN GENERAL.-Each New Markets Venture Capital company 

that participates in the program established under this part shall 

be subject to examinations made at the direction of the Investment 

Division of the Small Business Administration in accordance with 

this section. 

(b) ASSISTANCE OF PRIVATE SECTOR ENTITIES.-Examinations 

under this section may be conducted with the assistance of a private sector entity that has both the qualifications and the expertise 

necessary to conduct such examinations. 

(c)9 COSTS.-

(1) AsSESSMENT.-

(A) IN GENERAL.-The Administrator may assess the 

cost of examinations under this section, including compensation of the examiners, against the company examined. 

(B) PAYMENT.-Any company against which the Administrator assesses costs under this paragraph shall pay 

such costs. 

(d) DEPOSIT OF FuNDS.-Funds collected under this section 

shall be deposited in the account for salaries and expenses of the 

Small Business Administration. 

SEC. 363. [15 U.S.C. 6891] INJUNCTIONS AND OTHER ORDERS. 

(a) IN GENERAL.-Whenever, in the judgment of the Administrator, a New Markets Venture Capital company or any other person has engaged or is about to engage in any acts or practices 

which constitute or will constitute a violation of any provision of 

this Act, or of any rule or regulation under this Act, or of any order 

issued under this Act, the Administrator may make application to 

the proper district court of the United States or a United States 

court of any place subject to the jurisdiction of the United States 

for an order enjoining such acts or practices, or for an order enforcing compliance with such provision, rule, regulation, or order, and 

such courts shall have jurisdiction of such actions and, upon a 

showing by the Administrator that such New Markets Venture 

Capital company or other person has engaged or is about to engage 

9 So in Jaw. Subsection (c) should probably have a paragraph (2). 
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Sec. 364 SMALL BUSINESS INVESTMENT ACT OF 1958 46 

in any such acts or practices, a permanent or temporary injunction, 

restraining order, or other order, shall be granted without bond. 

(b) JURISDICTION.-In any proceeding under subsection (a), the 

court as a court of equity may, to such extent as it deems necessary, take exclusive jurisdiction of the New Market Venture Capital company and the assets thereof, wherever located, and the 

court shall have jurisdiction in any such proceeding to appoint a 

trustee or receiver to hold or administer under the direction of the 

court the assets so possessed. 

(c) ADMINISTRATOR As TRUSTEE OR RECEIVER.-

(!) AUTHORITY.-The Administrator may act as trustee or 

receiver of a New Markets Venture Capital company. 

(2) Appointment.-Upon request of the Administrator, the 

court may appoint the Administrator to act as a trustee or receiver of a New Markets Venture Capital company unless the 

court deems such appointment inequitable or otherwise inappropriate by reason of the special circumstances involved. 

SEC. 364. [15 U.S.C. 689m] ADDITIONAL PENALTIES FOR NONCOMPLI· 

ANCE. 

(a) IN GENERAL.-With respect to any New Markets Venture 

Capital company that violates or fails to comply with any of the 

provisions of this Act, of any regulation issued under this Act, or 

of any participation agreement entered into under this Act, the Administrator may in accordance with this section-

(1) void the participation agreement between the Administrator and the company; and 

(2) cause the company to forfeit all of the rights and privileges derived by the company from this Act. 

(b) ADJUDICATION OF NONCOMPLIANCE.-

(!) IN GENERAL.-Before the Administrator may cause a 

New Markets Venture Capital company to forfeit rights or 

privileges under subsection (a), a court of the United States of 

competent jurisdiction must find that the company committed 

a violation, or failed to comply, in a cause of action brought for 

that purpose in the district, territory, or other place subject to 

the jurisdiction of the United States, in which the principal office of the company is located. 

(2) PARTIES AUTHORIZED TO FILE CAUSES OF ACTION.-Each 

cause of action brought by the United States under this subsection shall be brought by the Administrator or by the Attorney General. 

SEC. 365. [15 U.S.C. 689n] UNLAWFUL ACTS AND OMISSIONS; BREACH 

OF FIDUCIARY DUTY. 

(a) PARTIES DEEMED To COMMIT A VIOLATION.-Whenever any 

New Markets Venture Capital company violates any provision of 

this Act, of a regulation issued under this Act, or of a participation 

agreement entered into under this Act, by reason of its failure to 

comply with its terms or by reason of its engaging in any act or 

practice that constitutes or will constitute a violation thereof, such 

violation shall also be deemed to be a violation and an unlawful act 

committed by any person who, directly or indirectly, authorizes, orders, participates in, causes, brings about, counsels, aids, or abets 
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47 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 368 

in the commission of any acts, practices, or transactions that constitute or will constitute, in whole or in part, such violation. 

(b) FIDUCIARY DUTIES.-It shall be unlawful for any officer, director, employee, agent, or other participant in the management or 

conduct of the affairs of a New Markets Venture Capital company 

to engage in any act or practice, or to omit any act or practice, in 

breach of the person's fiduciary duty as such officer, director, employee, agent, or participant if, as a result thereof, the company 

suffers or is in imminent danger of suffering financial loss or other 

damage. 

(c) UNLAWFUL AcTs.-Except with the written consent of the 

Administrator, it shall be unlawful-

(1) for any person to take office as an officer, director, or 

employee of any New Markets Venture Capital company, or to 

become an agent or participant in the conduct of the affairs or 

management of such a company, if the person-

(A) has been convicted of a felony, or any other criminal offense involving dishonesty or breach of trust; or 

(B) has been found civilly liable in damages, or has 

been permanently or temporarily enjoined by an order, 

judgment, or decree of a court of competent jurisdiction, by 

reason of any act or practice involving fraud, or breach of 

trust; and 

(2) for any person continue to serve in any of the capacities 

described in paragraph (1), if-

(A) the person is convicted of a felony, or any other 

criminal offense involving dishonesty or breach of trust; or 

(B) the person is found civilly liable in damages, or is 

permanently or temporarily enjoined by an order, judgment, or decree of a court of competent jurisdiction, by reason of any act or practice involving fraud or breach of 

trust. 

SEC. 366. [15 U.S.C. 689o] REMOVAL OR SUSPENSION OF DffiECTORS 

OR OFFICERS. 

Using the procedures for removing or suspending a director or 

an officer of a licensee set forth in section 313 (to the extent such 

procedures are not inconsistent with the requirements of this part), 

the Administrator may remove or suspend any director or officer of 

any New Markets Venture Capital company. 

SEC. 367. [15 U.S.C. 689p] REGULATIONS. 

The Administrator may issue such regulations as it deems necessary to carry out the provisions of this part in accordance with 

its purposes. 

SEC. 368. [15 U.S.C. 689q] AUTHORIZATIONS OF APPROPRIATIONS. 

(a) IN GENERAL.-There are authorized to be appropriated for 

fiscal years 2001 through 2006, to remain available until expended, 

the following sums: 

(1) Such subsidy budget authority as may be necessary to 

guarantee $150,000,000 of debentures under this part. 

(2) $30,000,000 to make grants under this part. 

(b) FUNDS COLLECTED FOR EXAMINATIONS.-Funds deposited 

under section 362(c)(2) are authorized to be appropriated only for 

the costs of examinations under section 362 and for the costs of 
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Sec. 381 SMALL BUSINESS INVESTMENT ACT OF 1958 48 

other oversight activities with respect to the program established 

under this part. 

PART C-RENEWABLE FUEL CAPITAL 

INVESTMENT PILOT PROGRAM 

SEC. 381. [15 U.S.C. 690] DEFINITIONS. 

In this part: 

(1) OPERATIONAL ASSISTANCE.-The term "operational assistance" means management, marketing, and other technical 

assistance that assists a small business concern with business 

development. 

(2) PARTICIPATION AGREEMENT.-The term "participation 

agreement" means an agreement, between the Administrator 

and a company granted final approval under section 384(e), 

that-

(A) details the operating plan and investment criteria 

of the company; and 

(B) requires the company to make investments in 

smaller enterprises primarily engaged in researching, 

manufacturing, developing, producing, or bringing to market goods, products, or services that generate or support 

the production of renewable energy. 

(3) RENEWABLE ENERGY.-The term "renewable energy" 

means energy derived from resources that are regenerative or 

that cannot be depleted, including solar, wind, ethanol, and 

biodiesel fuels. 

(4) RENEWABLE FUEL CAPITAL INVESTMENT COMPANY.-The 

term "Renewable Fuel Capital Investment company" means a 

company-

(A) that-

(i) has been granted final approval by the Administrator under section 384(e); and 

(ii) has entered into a participation agreement 

with the Administrator; or 

(B) that has received conditional approval under section 384(c). 

(5) STATE.-The term "State" means each of the several 

States, the District of Columbia, the Commonwealth of Puerto 

Rico, the Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and any other 

commonwealth, territory, or possession of the United States. 

(6) VENTURE CAPITAL.-The term "venture capital" means 

capital in the form of equity capital investments, as that term 

is defined in section 303(g)(4). 

SEC. 382. [15 U.S.C. 690a] PURPOSES. 

The purposes of the Renewable Fuel Capital Investment Program established under this part are-

(1) to promote the research, development, manufacture, 

production, and bringing to market of goods, products, or services that generate or support the production of renewable energy by encouraging venture capital investments in smaller enterprises primarily engaged such activities; and 
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49 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 384 

(2) to establish a venture capital program, with the mission of addressing the unmet equity investment needs of smaller enterprises engaged in researching, developing, manufacturing, producing, and bringing to market goods, products, or 

services that generate or support the production of renewable 

energy, to be administered by the Administrator-

(A) to enter into participation agreements with Renewable Fuel Capital Investment companies; 

(B) to guarantee debentures of Renewable Fuel Capital Investment companies to enable each such company to 

make venture capital investments in smaller enterprises 

engaged in the research, development, manufacture, production, and bringing to market of goods, products, or services that generate or support the production of renewable 

energy; and 

(C) to make grants to Renewable Fuel Investment 

Capital companies, and to other entities, for the purpose of 

providing operational assistance to smaller enterprises financed, or expected to be financed, by such companies. 

SEC. 383. [15 U.S.C. 690b] ESTABLISHMENT. 

The Administrator shall establish a Renewable Fuel Capital 

Investment Program, under which the Administrator may-

(1) enter into participation agreements for the purposes described in section 382; and 

(2) guarantee the debentures issued by Renewable Fuel 

Capital Investment companies as provided in section 385. 

SEC. 384. [15 U.S.C. 690c] SELECTION OF RENEWABLE FUEL CAPITAL 

INVESTMENT COMPANIES. 

(a) ELIGIBILITY.-A company is eligible to apply to be designated as a Renewable Fuel Capital Investment company if the 

company-

(1) is a newly formed for-profit entity or a newly formed 

for-profit subsidiary of an existing entity; 

(2) has a management team with experience in alternative 

energy financing or relevant venture capital financing; and 

(3) has a primary objective of investment in smaller enterprises that research, manufacture, develop, produce, or bring to 

market goods, products, or services that generate or support 

the production of renewable energy. 

(b) APPLICATION.-A company desiring to be designated as a 

Renewable Fuel Capital Investment company shall submit an application to the Administrator that includes-

(1) a business plan describing how the company intends to 

make successful venture capital investments in smaller enterprises primarily engaged in the research, manufacture, development, production, or bringing to market of goods, products, 

or services that generate or support the production of renewable energy; 

(2) information regarding the relevant venture capital 

qualifications and general reputation of the management of the 

company; 
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Sec. 384 SMALL BUSINESS INVESTMENT ACT OF 1958 50 

(3) a description of how the company intends to seek to address the unmet capital needs of the smaller enterprises 

served; 

( 4) a proposal describing how the company intends to use 

the grant funds provided under this part to provide operational 

assistance to smaller enterprises financed by the company, including information regarding whether the company has employees with appropriate professional licenses or will contract 

with another entity when the services of such an individual are 

necessary; 

(5) with respect to binding commitments to be made to the 

company under this part, an estimate of the ratio of cash to inkind contributions; 

(6) a description of whether and to what extent the company meets the criteria under subsection (c)(2) and the objectives of the program established under this part; 

(7) information regarding the management and financial 

strength of any parent firm, affiliated firm, or any other firm 

essential to the success of the business plan of the company; 

and 

(8) such other information as the Administrator may require. 

(c) CONDITIONAL APPROVAL.-

(!) IN GENERAL.-From among companies submitting applications under subsection (b), the Administrator shall conditionally approve companies to operate as Renewable Fuel Capital Investment companies. 

(2) SELECTION CRITERIA.-In conditionally approving companies under paragraph (1), the Administrator shall consider-

(A) the likelihood that the company will meet the goal 

of its business plan; 

(B) the experience and background of the management 

team of the company; 

(C) the need for venture capital investments in the geographic areas in which the company intends to invest; 

(D) the extent to which the company will concentrate 

its activities on serving the geographic areas in which it 

intends to invest; 

(E) the likelihood that the company will be able to satisfy the conditions under subsection (d); 

(F) the extent to which the activities proposed by the 

company will expand economic opportunities in the geographic areas in which the company intends to invest; 

(G) the strength of the proposal by the company to 

provide operational assistance under this part as the proposal relates to the ability of the company to meet applicable cash requirements and properly use in-kind contributions, including the use of resources for the services of licensed professionals, when necessary, whether provided by 

employees or contractors; and 

(H) any other factor determined appropriate by the 

Administrator. 

(3) NATIONWIDE DISTRIBUTION.-From among companies 

submitting applications under subsection (b), the Adminis-
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51 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 384 

trator shall consider the selection criteria under paragraph (2) 

and shall, to the maximum extent practicable, approve at least 

one company from each geographic region of the Administration. 

(d) REQUIREMENTS To BE MET FOR FINAL APPROVAL.-

(!) IN GENERAL.-The Administrator shall grant each conditionally approved company 2 years to satisfy the requirements of this subsection. 

(2) CAPITAL REQUIREMENT.-Each conditionally approved 

company shall raise not less than $3,000,000 of private capital 

or binding capital commitments from 1 or more investors 

(which shall not be departments or agencies of the Federal 

Government) who meet criteria established by the Administrator. 

(3) NONADMINISTRATION RESOURCES FOR OPERATIONAL ASSISTANCE.-

(A) IN GENERAL.-In order to provide operational assistance to smaller enterprises expected to be financed by 

the company, each conditionally approved company shall 

have binding commitments (for contribution in cash or inkind)-

(i) from sources other than the Administration 

that meet criteria established by the Administrator; 

and 

(ii) payable or available over a multiyear period 

determined appropriate by the Administrator (not to 

exceed 10 years). 

(B) EXCEPTION.-The Administrator may, in the discretion of the Administrator and based upon a showing of 

special circumstances and good cause, consider an applicant to have satisfied the requirements of subparagraph 

(A) if the applicant has-

(i) a viable plan that reasonably projects the capacity of the applicant to raise the amount (in cash or 

in-kind) required under subparagraph (A); and 

(ii) binding commitments in an amount equal to 

not less than 20 percent of the total amount required 

under paragraph (A). 

(C) LIMITATION.-The total amount of a in-kind contributions by a company shall be not more than 50 percent 

of the total contributions by a company. 

(e) FINAL APPROVAL; DESIGNATION.-The Administrator shall, 

with respect to each applicant conditionally approved under subsection (c)-

(1) grant final approval to the applicant to operate as a Renewable Fuel Capital Investment company under this part and 

designate the applicant as such a company, if the applicant-

(A) satisfies the requirements of subsection (d) on or 

before the expiration of the time period described in that 

subsection; and 

(B) enters into a participation agreement with the Administrator; or 

(2) if the applicant fails to satisfy the requirements of subsection (d) on or before the expiration of the time period de-
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Sec. 385 SMALL BUSINESS INVESTMENT ACT OF 1958 52 

scribed in paragraph (1) of that subsection, revoke the conditional approval granted under that subsection. 

SEC. 385. [15 U.S.C. 690d] DEBENTURES. 

(a) IN GENERAL.-The Administrator may guarantee the timely 

payment of principal and interest, as scheduled, on debentures 

issued by any Renewable Fuel Capital Investment company. 

(b) TERMS AND CONDITIONS.-The Administrator may make 

guarantees under this section on such terms and conditions as it 

determines appropriate, except that-

( 1) the term of any debenture guaranteed under this section shall not exceed 15 years; and 

(2) a debenture guaranteed under this section-

(A) shall carry no front-end or annual fees; 

(B) shall be issued at a discount; 

(C) shall require no interest payments during the 5-

year period beginning on the date the debenture is issued; 

(D) shall be prepayable without penalty after the end 

of the 1-year period beginning on the date the debenture 

is issued; and 

(E) shall require semiannual interest payments after 

the period described in subparagraph (C). 

(c) FULL FAITH AND CREDIT OF THE UNITED STATES.-The full 

faith and credit of the United States is pledged to pay all amounts 

that may be required to be paid under any guarantee under this 

part. 

(d) MAxiMUM GUARANTEE.-

(!) IN GENERAL.-Under this section, the Administrator 

may guarantee the debentures issued by a Renewable Fuel 

Capital Investment company only to the extent that the total 

face amount of outstanding guaranteed debentures of such 

company does not exceed 150 percent of the private capital of 

the company, as determined by the Administrator. 

(2) TREATMENT OF CERTAIN FEDERAL FUNDS.-For the purposes of paragraph (1), private capital shall include capital 

that is considered to be Federal funds, if such capital is contributed by an investor other than a department or agency of 

the Federal Government. 

SEC. 386. [15 U.S.C. 690e] ISSUANCE AND GUARANTEE OF TRUST CERTIFICATES. 

(a) ISSUA<'l"CE.-The Administrator may issue trust certificates 

representing ownership of all or a fractional part of debentures 

issued by a Renewable Fuel Capital Investment company and guaranteed by the Administrator under this part, if such certificates are 

based on and backed by a trust or pool approved by the Administrator and composed solely of guaranteed debentures. 

(b) GUARANTEE.-

(!) IN GENERAL.-The Administrator may, under such 

terms and conditions as it determines appropriate, guarantee 

the timely payment of the principal of and interest on trust 

certificates issued by the Administrator or its agents for purposes of this section. 
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53 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 386 

(2) LIMITATION.-Each guarantee under this subsection 

shall be limited to the extent of principal and interest on the 

guaranteed debentures that compose the trust or pool. 

(3) PREPAYMENT OR DEFAULT.-lf a debenture in a trust or 

pool is prepaid, or in the event of default of such a debenture, 

the guarantee of timely payment of principal and interest on 

the trust certificates shall be reduced in proportion to the 

amount of principal and interest such prepaid debenture represents in the trust or pool. Interest on prepaid or defaulted 

debentures shall accrue and be guaranteed by the Administrator only through the date of payment of the guarantee. At 

any time during its term, a trust certificate may be called for 

redemption due to prepayment or default of all debentures. 

(c) FULL FAITH AND CREDIT OF THE UNITED STATES.-The full 

faith and credit of the United States is pledged to pay all amounts 

that may be required to be paid under any guarantee of a trust certificate issued by the Administrator or its agents under this section. 

(d) FEES.-The Administrator shall not collect a fee for any 

guarantee of a trust certificate under this section, but any agent 

of the Administrator may collect a fee approved by the Administrator for the functions described in subsection (£)(2). 

(e) SUBROGATION AND OWNERSHIP RIGHTS.-

(1) SUBROGATION.-lf the Administrator pays a claim 

under a guarantee issued under this section, it shall be subrogated fully to the rights satisfied by such payment. 

(2) OWNERSHIP RIGHTS.-No Federal, State, or local law 

shall preclude or limit the exercise by the Administrator of its 

ownership rights in the debentures residing in a trust or pool 

against which trust certificates are issued under this section. 

(f) MANAGEMENT AND ADMINISTRATION.-

(!) REGISTRATION.-The Administrator may provide for a 

central registration of all trust certificates issued under this 

section. 

(2) CONTRACTING OF FUNCTIONS.-

(A) IN GENERAL.-The Administrator may contract 

with an agent or agents to carry out on behalf of the Administrator the pooling and the central registration functions provided for in this section, including, not withstanding any other provision of law-

(i) maintenance, on behalf of and under the direction of the Administrator, of such commercial bank accounts or investments in obligations of the United 

States as may be necessary to facilitate the creation of 

trusts or pools backed by debentures guaranteed 

under this part; and 

(ii) the issuance of trust certificates to facilitate 

the creation of such trusts or pools. 

(B) FIDELITY BOND OR INSURANCE REQUIREMENT.-Any 

agent performing functions on behalf of the Administrator 

under this paragraph shall provide a fidelity bond or insurance in such amounts as the Administrator determines 

to be necessary to fully protect the interests of the United 

States. 
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Sec. 387 SMALL BUSINESS INVESTMENT ACT OF 1958 54 

(3) REGULATION OF BROKERS AND DEALERS.-The Administrator may regulate brokers and dealers in trust certificates 

issued under this section. 

(4) ELECTRONIC REGISTRATION.-Nothing in this subsection 

may be construed to prohibit the use of a book-entry or other 

electronic form of registration for trust certificates issued 

under this section. 

SEC. 387. [15 U.S.C. 690f] FEES. 

(a) IN GENERAL.-Except as provided in section 386(d), the Administrator may charge such fees as it determines appropriate with 

respect to any guarantee or grant issued under this part, in an 

amount established annually by the Administrator, as necessary to 

reduce to zero the cost (as defined in section 502 of the Federal 

Credit Reform Act of 1990) to the Administration of purchasing and 

guaranteeing debentures under this part, which amounts shall be 

paid to and retained by the Administration. 

(b) OFFSET.-The Administrator may, as provided by section 

388, offset fees charged and collected under subsection (a). 

SEC. 388. [15 U.S.C. 690g] FEE CONTRffiUTION. 

(a) IN GENERAL.-To the extent that amounts are made available to the Administrator for the purpose of fee contributions, the 

Administrator shall contribute to fees paid by the Renewable Fuel 

Capital Investment companies under section 387. 

(b) ANNUAL AnJUSTMENT.-Each fee contribution under subsection (a) shall be effective for 1 fiscal year and shall be adjusted 

as necessary for each fiscal year thereafter to ensure that amounts 

under subsection (a) are fully used. The fee contribution for a fiscal 

year shall be based on the outstanding commitments made and the 

guarantees and grants that the Administrator projects will be 

made during that fiscal year, given the program level authorized 

by law for that fiscal year and any other factors that the Administrator determines appropriate. 

SEC. 389. [15 U.S.C. 690h] OPERATIONAL ASSISTANCE GRANTS. 

(a) IN GENERAL.-

(1) AUTHORITY.-The Administrator may make grants to 

Renewable Fuel Capital Investment companies to provide operational assistance to smaller enterprises financed, or expected 

to be financed, by such companies or other entities. 

(2) TERMS.-A grant under this subsection shall be made 

over a multiyear period not to exceed 10 years, under such 

other terms as the Administrator may require. 

(3) GRANT AMOUNT.-The amount of a grant made under 

this subsection to a Renewable Fuel Capital Investment company shall be equal to the lesser of-

(A) 10 percent of the resources (in cash or in-kind) 

raised by the company under section 384(d)(2); or 

(B) $1,000,000. 

(4) PRO RATA REDUCTIONS.-If the amount made available 

to carry out this section is insufficient for the Administrator to 

provide grants in the amounts provided for in paragraph (3), 

the Administrator shall make pro rata reductions in the 

amounts otherwise payable to each company and entity under 

such paragraph. 
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55 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 391 

(5) GRANTS TO CONDITIONALLY APPROVED COMPANIES.-

(A) IN GENERAL.-Subject to subparagraphs (B) and 

(C), upon the request of a company conditionally approved 

under section 384(c), the Administrator shall make a grant 

to the company under this subsection. 

(B) REPAYMENT BY COMPANIES NOT APPROVED.-If a 

company receives a grant under this paragraph and does 

not enter into a participation agreement for final approval, 

the company shall, subject to controlling Federal law, 

repay the amount of the grant to the Administrator. 

(C) DEDUCTION OF GRANT TO APPROVED COMPANY.-If 

a company receives a grant under this paragraph and receives final approval under section 384(e), the Administrator shall deduct the amount of the grant from the total 

grant amount the company receives for operational assistance. 

(D) AMOUNT OF GRANT.-No company may receive a 

grant of more than $100,000 under this paragraph. 

(b) SUPPLEMENTAL GRANTS.-

(1) IN GENERAL.-The Administrator may make supplemental grants to Renewable Fuel Capital Investment companies and to other entities, as authorized by this part, under 

such terms as the Administrator may require, to provide additional operational assistance to smaller enterprises financed, or 

expected to be financed, by the companies. 

(2) MATCHING REQUIREMENT.-The Administrator may require, as a condition of any supplemental grant made under 

this subsection, that the company or entity receiving the grant 

provide from resources (in a cash or in kind), other then 10 

those provided by the Administrator, a matching contribution 

equal to the amount of the supplemental grant. 

(c) LIMITATION.-None of the assistance made available under 

this section may be used for any overhead or general and administrative expense of a Renewable Fuel Capital Investment company. 

SEC. 390. [15 U.S.C. 690i] BANK PARTICIPATION. 

(a) IN GENERAL.-Except as provided in subsection (b), any national bank, any member bank of the Federal Reserve System, and 

(to the extent permitted under applicable State law) any insured 

bank that is not a member of such system, may invest in any Renewable Fuel Capital Investment company, or in any entity established to invest solely in Renewable Fuel Capital Investment companies. 

(b) LIMITATION.-No bank described in subsection (a) may 

make investments described in such subsection that are greater 

than 5 percent of the capital and surplus of the bank. 

SEC. 391. [15 U.S.C. 690j] FEDERAL FINANCING BANK. 

Notwithstanding section 318, the Federal Financing Bank may 

acquire a debenture issued by a Renewable Fuel Capital Investment company under this part. 

10 So in law. The words "other then" in subsection (b)(2) probably should be "other than". 
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Sec. 392 SMALL BUSINESS INVESTMENT ACT OF 1958 56 

SEC. 392. [15 U.S.C. 690k] REPORTING REQUIREMENT. 

Each Renewable Fuel Capital Investment company that participates in the program established under this part shall provide 

to the Administrator such information as the Administrator may 

require, including-

(!) information related to the measurement criteria that 

the company proposed in its program application; and 

(2) in each case in which the company makes, under this 

part, an investment in, or a loan or a grant to, a business that 

is not primarily engaged in the research, development, manufacture, or bringing to market or renewable energy sources, a 

report on the nature, origin, and revenues of the business in 

which investments are made. 

SEC. 393. [15 U.S.C. 6901] EXAMINATIONS. 

(a) IN GENERAL.-Each Renewable Fuel Capital Investment 

company that participates in the program established under this 

part shall be subject to examinations made at the direction of the 

Investment Division of the Administration in accordance with this 

section. 

(b) ASSISTANCE OF PRIVATE SECTOR ENTITIES.-Examinations 

under this section may be conducted with the assistance of a private sector entity that has both the qualifications and the expertise 

necessary to conduct such examinations. 

(c) COSTS.-

(1) ASSESSMENT.-

(A) IN GENERAL.-The Administrator may assess the 

cost of examinations under this section, including compensation of the examiners, against the company examined. 

(B) PAYMENT.-Any company against which the Administrator assesses costs under this paragraph shall pay 

such costs. 

(2) DEPOSIT OF FUNDS.-Funds collected under this section 

shall be deposited in the account for salaries and expenses of 

the Administration. 

SEC. 394. [15 U.S.C. 690m] MISCELLANEOUS. 

To the extent such procedures are not inconsistent with the requirements of this part, the Administrator may take such action as 

set forth in sections 309, 311, 312, and 314 and an officer, director, 

employee, agent, or other participant in the management or conduct of the affairs of a Renewable Fuel Capital Investment company shall be subject to the requirements of such sections. 

SEC. 395. [15 U.S.C. 690n] REMOVAL OR SUSPENSION OF DIRECTORS 

OR OFFICERS. 

Using the procedures for removing or suspending a director or 

an officer of a licensee set forth in section 313 (to the extent such 

procedures are not inconsistent with the requirements of this part), 

the Administrator may remove or suspend any director or officer of 

any Renewable Fuel Capital Investment company. 

SEC. 396. [15 U.S.C. 690o] REGULATIONS. 

The Administrator may issue such regulations as the Administrator determines necessary to carry out the provisions of this part 

in accordance with its purposes. 
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57 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 401 

SEC. 397. [15 U.S.C. 690p) AUTHORIZATIONS OF APPROPRIATIONS. 

(a) IN GENERAL.-Subject to the availability of appropriations, 

the Administrator is authorized to make $15,000,000 in operational 

assistance grants under section 389 for each of fiscal years 2008 

and 2009. 

(b) FUNDS COLLECTED FOR EXAMINATIONS.-Funds deposited 

under section 393(c)(2) are authorized to be appropriated only for 

the costs of examinations under section 393 and for the costs of 

other oversight activities with respect to the program established 

under this part. 

SEC. 398. [15 U.S.C. 690q) TERMINATION. 

The program under this part shall terminate at the end of the 

second full fiscal year after the date that the Administrator establishes the program under this part. 

TITLE IV-GUARANTEES 

PART A-LEASE GUARANTEES 

AUTHORITY OF THE ADMINISTRATION 

SEC. 401. [15 U.S.C. 692] (a) The Administration may, whenever it determines such action to be necessary or desirable, and 

upon such terms and conditions as it may prescribe, guarantee the 

payment of rentals under leases of commercial and industrial property entered into by small business concerns to enable such concerns to obtain such leases. Any such guarantee may be made or 

effected either directly or in cooperation with any qualified surety 

company or other qualified company through a participation agreement with such company. The foregoing powers shall be subject, 

however, to the following restrictions and limitations: 

(1) No guarantee shall be issued by the Administration (A) 

if a guarantee meeting the requirements of the applicant is 

otherwise available on reasonable terms, and (B) unless the 

Administration determines that there exists a reasonable expectation that the small business concern in behalf of which 

the guarantee is issued will perform the covenants and conditions of the lease. 

(2) The Administration shall, to the greatest extent practicable, exercise the powers conferred by this section in cooperation with qualified surety or other companies on a participation basis. 

(b) The Administration shall fix a uniform annual fee for its 

share of any guarantee under this section which shall be payable 

in advance at such time as may be prescribed by the Administrator. The amount of any such fee shall be determined in accordance with sound actuarial practices and procedures, to the extent 

practicable, but in no case shall such amount exceed, on the Administration's share of any guarantee made under this part, 2% 

per centum per annum of the minimum annual guaranteed rental 

payable under any guarantee lease: Provided, That the Administration shall fix the lowest fee that experience under the program established hereby has shown to be justified .. The Administration 

may also fix such uniform fees for the processing of applications for 

guarantees under this section as the Administrator determines are 
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Sec. 402 SMALL BUSINESS INVESTMENT ACT OF 1958 58 

reasonable and necessary to pay the administrative expenses that 

are incurred in connection therewith. 

(c) In connection with the guarantee of rentals under any lease 

pursuant to authority conferred by this section, the Administrator 

may require, in order to minimize the financial risk assumed under 

suchguarantee--

(1) that the lessee pay an amount, not to exceed one-fourth 

of the minimum guaranteed annual rental required under the 

lease, which shall be held in escrow and shall be available (A) 

to meet rental charges accruing in any month for which the 

lessee is in default, or (B) if no default occurs during the term 

of the lease, for application (with accrued interest) toward final 

payments of rental charges under the lease; 

(2) that upon occurrence of a default under the lease, the 

lessor shall, as a condition precedent to enforcing any claim 

under the lease guarantee, utilize the entire period, for which 

there are funds available in escrow for payment of rentals, in 

reasonably diligent efforts to eliminate or minimize losses, by 

releasing the commercial or industrial property covered by the 

lease to another qualified tenant, and no claim shall be made 

or paid under the guarantee until such effort has been made 

and such escrow funds have been exhausted; 

(3) that any guarantor of the lease will become a successor 

of the lessor for the purpose of collecting from a lessee in default rentals which are in arrears and with respect to which 

the lessor has received payment under a guarantee made pursuant to this section; and 

(4) such other provisions, not inconsistent with the purposes of this part, as the Administrator may in his discretion 

require. 

POWERS 

SEC. 402. [15 U.S.C. 693] Without limiting the authority conferred upon the Administrator and the Administration by section 

201 of this Act, the Administrator and the Administration shall 

have, in the performance of and with respect to the functions, powers, and duties conferred by this part, all the authority and be subject to the same conditions prescribed in section 5(b) of the Small 

Business Act with respect to loans, including the authority to execute subleases, assignments of lease and new leases with any person, firm, organization, or other entity, in order to aid in the liquidation of obligations of the Administration hereunder. 

FUND 

SEc. 403. [15 U.S.C. 694] [Repealed by Pub. L. 100-590, 102 

Stat. 2995.] 

POLLUTION CONTROL 

SEC. 404. [15 U.S.C. 694-1] (a) For purposes of this section, 

the term--
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59 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 404 

(1) 11 "pollution control facilities" means such property 

{both real and personal) as the Administration in its discretion 

determines is likely to help prevent, reduce, abate, or control 

noise, air or water pollution or contamination by removing, altering, disposing or storing pollutants, contaminants, wastes, 

or heat, and such property (both real and personal) as the Administration determines will be used for the collection, storage, 

treatment, utilization, processing, or final disposal of solid or 

liquid waste. 

(2) 11 "person" includes corporations, companies, associations, firms, partnerships, societies, joint stock companies, 

States, territories, and possessions of the United States, or 

subdivisions of any of the foregoing, and the District of Columbia, as well as individuals. 

{3) 11 "qualified contract" means a lease, sublease, loan 

agreement, installment sales contract, or similar instrument, 

entered into between a small business concern and any person. 

(b) The Administration may, whenever it determines that 

small business concerns are or are likely to be at an operational 

or financing disadvantage with other business concerns with respect to the planning, design, or installation of pollution control facilities, or the obtaining of financing therefor (including financing 

by means of revenue bonds issued by States, political subdivisions 

thereof, or other public bodies), guarantee the payment of rentals 

or other amounts due under qualified contracts. Any such guarantee may be made or effected either directly or in cooperation 

with any qualified surety company or other qualified company 

through a participation agreement with such company. The foregoing powers shall be subject, however, to the following restrictions 

and limitations: 

(1) Notwithstanding any other law, rule, or regulation or 

fiscal policy to the contrary, the guarantee authorized in the 

case of pollution control facilities or property shall be issued 

when such property is acquired by the use of proceeds from industrial revenue bonds which provide the holders interest 

which is exempt from Federal income tax, and the Administration is expressly prohibited from denying such guarantee due 

to the property being so acquired. 

{2) Any such guarantee shall be for the full amount of payments due under such qualified contract and shall be a full 

faith and credit obligation of the United States. 

(3) No guarantee shall be issued by the Administration unless the Administration determines that there exists a reasonable expectation that the small business concern in behalf of 

which the guarantee is issued will perform the covenants and 

conditions of the qualified contract. 

(c) The Administration shall fix a uniform annual fee for any 

guarantee issued under this section which shall be payable at such 

time and under such conditions as may be prescribed by the Administrator. The fee shall be set at an amount which the Administration deems reasonable and necessary and shall be subject to 

11 So in originaL Paragraphs (1)-(3) start with lowercase letters and end with periods (see 90 

Stat. 663). 
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Sec. 405 SMALL BUSINESS INVESTMENT ACT OF 1958 60 

periodic review in order that the lowest fee that experience under 

the program shows to be justified will be placed into effect. In no 

case shall such amount be less than 1 per centum or more than 3% 

per centum per annum of the minimum annual guaranteed rental 

payable under any qualified contract guaranteed under this section. The Administration may also fix such uniform fees for the 

processing of applications for guarantees under this section as the 

Administrator determines are reasonable and necessary to pay the 

administrative expenses that are incurred in connection therewith. 

(d) In connection with the guarantee of rentals under any 

qualified contract pursuant to authority conferred by this section, 

the Administrator may require, in order to minimize the financial 

risk assumed under such guarantee-

(!) that the lessee pay an amount, not to exceed one-fourth 

of the average annual payments for which a guarantee is 

issued under this section, which shall be held in escrow and 

shall be available (A) to meet rental charges accruing in any 

month for which the lessee is in default, or (B) if no default 

occurs during the term of the qualified contract, for application 

(with accrued interest) toward final payments of rental charges 

under the qualified contract; 

(2) that upon occurrence of a default under the qualified 

contract, the lessor shall, as a condition precedent to enforcing 

any claim under the qualified contract guarantee, utilize the 

entire period, for which there are funds available in escrow for 

payment of rentals, in reasonable diligent efforts to eliminate 

or minimize losses, by releasing the property covered by the 

qualified contract to another qualified lessee, and no claim 

shall be made or paid under the guarantee until such effort 

has been made and such escrow funds have been exhausted; 

(3) that any guarantor of the qualified contract will become 

a successor of the lessor for the purpose of collecting from a 

lessee in default rentals which are in arrears and with respect 

to which the lessor has received payment under a guarantee 

made pursuant to this section; and 

( 4) such other provisions, not inconsistent with the purposes of this section as the Administrator may in his discretion 

require. 

(e) Any guarantee issued under this section may be assigned 

with the permission of the Administration by the person to whom 

the payments under qualified contracts are due. 

(f) Section 402 shall apply to the administration of this section. 

FUND 

SEC. 405. [15 U.S.C. 694-2] There is hereby created within 

the Treasury a separate fund for guarantees which shall be available to the Administrator without fiscal year limitations as a revolving fund for the purpose of section 404. All amounts received 

by the Administrator, including any moneys, property, or assets derived by him from his operations in connection with section 404 

shall be deposited in the fund. All expenses and payments, excluding administrative expenses, pursuant to operations of the Administrator under section 404 shall be paid from the fund. Moneys in 
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61 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 410 

the fund not needed for the payment of current operating expenses 

or for the payment of claims arising under this part may be invested in bonds or other obligations of, or bonds or other obligations guaranteed as to principal and interest by, the United States; 

except that moneys provided as capital for the fund shall not be so 

invested. 

PART B-SURETY BOND GUARANTEES 

DEFINITIONS 

SEC. 410. [15 U.S.C. 694a] As used in this part-

(1) The term "bid bond" means a bond conditioned upon the 

bidder on a contract entering into the contract, if he receives the 

award thereof, and furnishing the prescribed payment bond and 

performance bond. 

(2) The term "payment bond" means a bond conditioned upon 

the payment by the principal of money to persons under contract 

with him. 

(3) The term "performance bond" means a bond conditioned 

upon the completion by the principal of a contract in accordance 

with its terms. 

(4) The term "surety" means the person who, (A) under the 

terms of a bid bond, undertakes to pay a sum of money to the obligee in the event the principal breaches the conditions of the bond, 

(B) under the terms of a performance bond, undertakes to incur the 

cost of fulfilling the terms of a contract in the event the principal 

breaches the conditions of the contract, (C) under the terms of a 

payment bond, undertakes to make payment to all persons supplying labor and material in the prosecution of the work provided 

for in the contract if the principal fails to make prompt payment, 

or (D) is an agent, independent agent, underwriter, or any other 

company or individual empowered to act on behalf of such person. 

(5) The term "obligee" means (A) in the case of a bid bond, the 

person requesting bids for the performance of a contract, or (B) in 

the case of a payment bond or performance bond, the person who 

has contracted with a principal for the completion of the contract 

and to whom the obligation of the surety runs in the event of a 

breach by the principal of the conditions of a payment bond or performance bond. 

(6) The term "principal" means (A) in the case of a bid bond, 

a person bidding for the award of a contract, or (B) the person primarily liable to complete a contract for the obligee, or to make payments to other persons in respect of such contract, and for whose 

performance of his obligation the surety is bound under the terms 

of a payment or performance bond. A principal may be a prime contractor or a subcontractor. 

(7) The term "prime contractor" means the person with whom 

the obligee has contracted to perform the contract. 

(8) The term "subcontractor" means a person who has contracted with a prime contractor or with another subcontractor to 

perform a contract. 

(9) Notwithstanding any other provision of law or any rule, 

regulation, or order of the Administration, for purpose of sections 

410, 411, and 412 the term "small business concern" means a busi-
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Sec. 411 SMALL BUSINESS INVESTMENT ACT OF 1958 62 

ness concern that meets the size standard for the primary industry 

in which such business concern, and the affiliates of such business 

concern, is engaged, as determined by the Administrator in accordance with the North American Industry Classification System. 

AUTHORITY OF THE ADMINISTRATION 

SEC. 411. [15 U.S.C. 694b] (a)(l)(A) The Administration may, 

upon such terms and conditions as it may prescribe, guarantee and 

enter into commitments to guarantee any surety against loss resulting from a breach of the terms of a bid bond, payment bond, 

performance bond, or bonds ancillary thereto, by a principal on any 

total work order or contract amount at the time of bond execution 

that does not exceed $6,500,000, as adjusted for inflation in accordance with section 1908 of title 41, United States Code. 

(B) The Administrator may guarantee a surety under subparagraph (A) for a total work order or contract amount that does not 

exceed $10,000,000, if a contracting officer of a Federal agency certifies that such a guarantee is necessary. 

(2) The terms and conditions of said guarantees and commitments may vary from surety to surety on the basis of the Administration's experience with the particular surety. 

(3) 12 The Administration may authorize any surety, without 

further administration 13 approval, to issue, monitor, and service 

such bonds subject to the Administration's guarantee. 

(4) No such guarantee may be issued, unless-

(A) the person who would be principal under the bond is 

a small business concern; 

(B) the bond is required in order for such person to bid on 

a contract, or to serve as a prime contractor or subcontractor 

thereon; 

(C) such person is not able to obtain such bond on reasonable terms and conditions without a guarantee under this section; and 

(D) there is a reasonable expectation that such principal 

will perform the covenants and conditions of the contract with 

respect to which such bond is required, and the terms and conditions of such bond are reasonable in the light of the risks involved and the extent of the surety's participation. 

(5)(A) The Administration shall promptly act upon an application from a surety to participate in the Preferred Surety Bond 

Guarantee Program, authorized by paragraph (3), in accordance 

with criteria and procedures established in regulations pursuant to 

subsection (d). 

(B) The Administration is authorized to reduce the allotment 

of bond guarantee authority or terminate the participation of a surety in the Preferred Surety Program Guarantee Program based on 

12 Section 207 of the Preferred Surety Bond Guarantee Program Act of 1988 (P.L. 100-590; 

15 U.S.C. 694b note), as amended, was repealed by section 203(c) of the Small Business Reauthorization and Manufacturing Assistance Act of 2004 (Division K of Public Law 108-44 7; 118 

Stat. 3466). Section 207 prior to the enactment of Public Law 108-447 provides as follows: 

SEC. 207. SUNSET. 

The provisions contained in section 4ll(a)(3) of the Small Business Investment Act of 1958 

(15 U.S.C. 694b(a)(3)) shall cease to be effective after September 30, 2003. 13 So in original. Probably should be capitalized. 
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63 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 411 

the rate of participation of such surety during the 4 most recent 

fiscal year quarters compared to the median rate of participation 

by the other sureties in the program. 

(b) Subject to the provisions of this section, in connection with 

the issuance by the Administration of a guarantee to a surety as 

provided by subsection (a), the Administration may agree to indemnify such surety against a loss sustained by such surety in avoiding 

or attempting to avoid a breach of the terms of a bond guaranteed 

by the Administration pursuant to subsection (a): Provided, however 

(1) prior to making any payment under this subsection, the 

Administration shall first determine that a breach of the terms 

of such bond was imminent; 

(2) a surety must obtain approval from the Administration 

prior to making any payments pursuant to this subsection unless the surety is participating under the authority of subsection (a)(3); and 

(3) no payment by the Administration pursuant to this 

subsection shall exceed 10 per centum of the contract price unless the Administrator determines that a greater payment 

should be made as a result of a finding by the Administrator 

that the surety's loss sustained in avoiding or attempting to 

avoid such breach was necessary and reasonable. 

In no event shall the Administration pay a surety pursuant to this 

subsection an amount exceeding the guaranteed share of the bond 

available to such surety pursuant to subsection (a). 

(c) Any guarantee or agreement to indemnify under this section shall obligate the Administration to pay to the surety a sum-

(1) 1 not to exceed 70 per centum of the loss incurred and 

paid by a surety authorized to issue bonds subject to the Administration's guarantee under subsection (a)(3); 

[Note: Effective on November 25, 2016, section 874(b) of Public 

Law 114-92 amends 4ll(c)(1) to read as follows:) 

(1) not to exceed 90 per centum of the loss incurred and 

paid by a surety authorized to issue bonds subject to the Administration's guarantee under subsection (a)(3); 

(2) not to exceed 90 per centum of the loss incurred and 

paid in the case of a surety requiring the Administration's specific approval for the issuance of such bond, but in no event 

may the Administration make any duplicate payment pursuant 

to subsection (b) or any other subsection; 

(3) equal to 90 per centum of the loss incurred and paid 

in the case of a surety requiring the administration's 14 specific 

approval for the issuance of a bond, if-

(A) the total amount of the contract at the time of execution of the bond or bonds is $100,000 or less, or 

(B) the bond was issued to a small business concern 

owned and controlled by socially and economically dis1 For version of law for section 41l(c)(l), as amended by section 874(b) of Division A of Public 

Law 114-92, see note below. 14 So in original. Probably should be capitalized. 
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Sec. 411 SMALL BUSINESS INVESTMENT ACT OF 1958 64 

advantaged individuals as defined by section 8(d) of the 

Small Business Act, or to a qualified HUBZone small business concern (as defined in section 3(p) of the Small Business Act); or 

(4) determined pursuant to subsection (b), if applicable. 

(d) The Administration may establish and periodically review 

regulations for participating sureties which shall require such sureties to meet Administration standards for underwriting, claim practices, and loss ratios. 

(e) REIMBURSEMENT OF SURETY; CONDITIONS.-Pursuant to any 

such guarantee or agreement, the Administration shall reimburse 

the surety, as provided in subsection (c) of this section, except that 

the Administration shall be relieved of liability (in whole or in part 

within the discretion of the Administration) if-

(1) the surety obtained such guarantee or agreement, or 

applied for such reimbursement, by fraud or material misrepresentation, 

(2) the total contract amount at the time of execution of 

the bond or bonds exceeds $6,500,000, 

(3) the surety has breached a material term or condition 

of such guarantee agreement, or 

(4) the surety has substantially violated the regulations 

promulgated by the Administration pursuant to subsection (d). 

(f) The Administration may, upon such terms and conditions as 

it may prescribe, adopt a procedure for reimbursing a surety for its 

paid losses billed each month, based upon prior monthly payments 

to such surety, with subsequent adjustments after such disbursement. 

(g)( 1) Each participating surety shall make reports to the Administration at such times and in such form as the Administration 

may require. 

(2) The Administration may at all reasonable times audit, in 

the offices of a participating surety, all documents, files, books, 

records, and other material relevant to the Administration's guarantee, commitments to guarantee, or agreements to indemnify any 

surety pursuant to this section. 

(3) Each surety participating under the authority of paragraph 

(3) of subsection (a) shall be audited at least once every three years 

by examiners selected and approved by the Administration. 

(h) The Administration shall administer this Part on a prudent 

and economically justifiable basis and establish such fee or fees for 

small business concerns and premium or premiums for sureties as 

it deems reasonable and necessary, to be payable at such time and 

under such conditions as may be determined by the Administration. 

(i) The provisions of section 402 shall apply in the administration of this section. 

(j) For bonds made or executed with the prior approval of the 

Administration, the Administration shall not deny liability to a 

surety based upon material information that was provided as part 

of the guarantee application. 
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65 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 501 

FUND 

SEC. 412. [15 U.S.C. 694c] (a) There is hereby created within 

the Treasury a separate fund for guarantees which shall be available to the Administrator without fiscal year limitation as a revolving fund for the purposes of this part. All amounts received by the 

Administrator, including any moneys, property, or assets derived 

by him from his operations in connection with this part, shall be 

deposited in the fund. All expenses and payments, excluding administrative expenses, pursuant to operations of the Administrator 

under this part shall be paid from the fund. 

(b) Such sums as may be appropriated to the Fund to carry out 

the programs authorized by this part shall be without fiscal year 

limitation. 

TITLE V-LOANS TO STATE AND LOCAL DEVELOPMENT 

COMPANIES 

STATE DEVELOPMENT COMPANIES 

SEC. 501. [15 U.S.C. 695] (a) The Congress hereby finds and 

declares that the purpose of this title is to foster economic development and to create or preserve job opportunities in both urban and 

rural areas by providing long-term financing for small business 

concerns through the development company program authorized by 

this title. 

(b) The Administration is authorized to make loans to State development companies to assist in carrying out the purposes of this 

Act. Any funds advanced under this subsection shall be in exchange for obligations of the development company which bear interest at such rate, and contain such other terms, as the Administration may fix, and funds may be so advanced without regard to 

the use and investment by the development company of funds secured by it from other sources. 

(c) The total amount of obligations purchased and outstanding 

at any one time by the Administration under this section from any 

one State development company shall not exceed the total amount 

borrowed by it from all other sources. Funds advanced to a State 

development company under this section shall be treated on an 

equal basis with those funds borrowed by such company after the 

date of the enactment of this Act, regardless of source, which have 

the highest priority, except when this requirement is waived by the 

Administrator. 

(d) In order to qualifY for assistance under this title, the development company must demonstrate that the project to be funded 

is directed toward at least one of the following economic development objectives-

(!) the creation of job opportunities within two years of the 

completion of the project or the preservation or retention of 

jobs attributable to the project; 

(2) improving the economy of the locality, such as stimulating other business development in the community, bringing 

new income into the area, or assisting the community in diversifying and stabilizing its economy; or 
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Sec. 501 SMALL BUSINESS INVESTMENT ACT OF 1958 66 

(3) the achievement of one or more of the following public 

policy goals: 

(A) business district revitalization, 

(B) expansion of exports, 

(C) expansion of minority business development or 

women-owned business development, 

(D) rural development, 

(E) expansion of small business concerns owned and 

controlled by veterans, as defined in section 3(q) of the 

Small Business Act (15 U.S.C. 632(q)), especially servicedisabled veterans, as defined in such section 3(q), 

(F) enhanced economic competition, including the advancement of technology, plan retooling, conversion to robotics, or competition with imports, 

(G) changes necessitated by Federal budget cutbacks, 

including defense related industries, 

(H) business restructuring arising from Federally 

mandated standards or policies affecting the environment 

or the safety and health of employees, 

(I) reduction of energy consumption by at least 10 percent, 

(J) increased use of sustainable design, including designs that reduce the use of greenhouse gas emitting fossil 

fuels, or low-impact design to produce buildings that reduce the use of non-renewable resources and minimize environmental impact, 

(K) plant, equipment and process upgrades of renewable energy sources such as the small-scale production of 

energy for individual buildings or communities consumption, commonly known as micropower, or renewable fuels 

producers including biodiesel and ethanol producers, or 

(L) reduction of rates of unemployment in labor surplus areas, as such areas are determined by the Secretary 

of Labor. 

If eligibility is based upon the criteria set forth in paragraph (2) 

or (3), the project need not meet the job creation or job preservation 

criteria developed by the Administration if the overall portfolio of 

the development company meets or exceeds such job creation or retention criteria. In subparagraphs (J) and (K), terms have the 

meanings given those terms under the Leadership in Energy and 

Environmental Design (LEED) standard for green building certification, as determined by the Administrator. 

(e)(1) A project meets the objective set forth in subsection {d)(1) 

if the project creates or retains one job for every $65,000 15 guaranteed by the Administration, except that the amount is $100,000 in 

the case of a project of a small manufacturer. 

(2) Paragraph (1) does not apply to a project for which eligibility is based on the objectives set forth in paragraph (2) or (3) of 

subsection (d), if the development company's portfolio of out15 'fhe amendment made by section 504(b) of division A of Public Law 111-5 should have re- ferred to section 501(e)(l) and (2) of the "Small Business Investment Act of 1958" not the "Small 

Business Investment Act". Such amendment was executed to reflect the probable intent of Congress, 
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67 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 502 

standing debentures creates or retains one job for every $65,000 15 

guaranteed by the Administration. 

(3) For projects in Alaska, Hawaii, State-designated enterprise 

zones, empowerment zones and enterprise communities, labor surplus areas, as determined by the Secretary of Labor, and for other 

areas designated by the Administrator, the development company's 

portfolio may average not more than $75,000 per job created or retained. 

(4) Loans for projects of small manufacturers shall be excluded 

from calculations under paragraph (2) or (3). 

(5) Under regulations prescribed by the Administrator, the Administrator may waive, on a case-by-case basis or by regulation, 

any requirement of this subsection (other than paragraph (4)). 

With respect to any waiver the Administrator is prohibited from 

adopting a dollar amount that is lower than the amounts set forth 

in paragraphs (1), (2), and (3). 

(6) As used in this subsection, the term "small manufacturer" 

means a small business concern-

(A) the primary business of which is classified in sector 31, 

32, or 33 of the North American Industrial Classification System; and 

(B) all of the production facilities of which are located in 

the United States. 

LOANS FOR PLANT ACQUISITION, CONSTRUCTION, CONVERSION, AND 

EXPANSION 

SEC. 502. [15 U.S.C. 696] The Administration may, in addition 

to its authority under section 501, make loans for plant acquisition, 

construction, conversion or expansion, including the acquisition of 

land, to State and local development companies, and such loans 

may be made or effected either directly or in cooperation with 

banks or other lending institutions through agreements to participate on an immediate or deferred basis: Provided, however, That 

the foregoing powers shall be subject to the following restrictions 

and limitations: 

(1) UsE OF PROCEEDS.-The proceeds of any such loan shall 

be used solely by the borrower to assist 1 or more identifiable 

small business concerns and for a sound business purpose ap- proved by the Administration. 

(2) MAXIMUM AMOUNT.-

(A) IN GENERAL.-Loans made by the Administration 

under this section shall be limited to-

(i) $5,000,000 for each small business concern if 

the loan proceeds will not be directed toward a goal or 

project described in clause (ii), (iii), (iv), or (v); 

(ii) $5,000,000 for each small business concern if 

the loan proceeds will be directed toward 1 or more of 

the public policy goals described under section 

501(d)(3); 

(iii) $5,500,000 for each project of a small manufacturer; 

(iv) $5,500,000 for each project that reduces the 

borrower's energy consumption by at least 10 percent; 

and 
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Sec. 502 SMALL BUSINESS INVESTMENT ACT OF 1958 68 

(v) $5,500,000 for each project that generates renewable energy or renewable fuels, such as biodiesel 

or ethanol production. 

(B) DEFINITION.-As used in this paragraph, the term 

"small manufacturer" means a small business concern-

(i) the primary business of which is classified in 

sector 31, 32, or 33 of the North American Industrial 

Classification System; and 

(ii) all of the production facilities of which are located in the United States. 

(3) CRITERIA FOR ASSISTANCE.-

(A) IN GENERAL.-Any development company assisted 

under this section or section 503 of this title must meet 

the criteria established by the Administration, including 

the extent of participation to be required or amount of 

paid-in capital to be used in each instance as is determined to be reasonable by the Administration. 

(B) COMMUNITY INJECTION FUNDS.-

(i) SOURCES OF FUNDS.-Community injection 

funds may be derived, in whole or in part, from-

(l) State or local governments; 

(II) banks or other financial institutions; 

(Ill) foundations or other not-for-profit institutions; or 

(IV) the small business concern (or its owners, 

stockholders, or affiliates) receiving assistance 

through a body authorized by this title. 

(ii) FUNDING FROM INSTITUTIONS.-Not less than 

50 percent of the total cost of any project financed pursuant to clauses (i), (ii), or (iii) of subparagraph (C) 

shall come from the institutions described in subclauses (I), (II), and (Ill) of clause (i). 

(C) FUNDING FROM A SMALL BUSINESS CONCERN.-The 

small business concern (or its owners, stockholders, or affiliates) receiving assistance through a body authorized by 

this title shall provide-

(i) at least 15 percent of the total cost of the 

project financed, if the small business concern has 

been in operation for a period of 2 years or less; 

(ii) at least 15 percent of the total cost of the 

project financed if the project involves the construction 

of a limited or single purpose building or structure; 

(iii) at least 20 percent of the total cost of the 

project financed if the project involves both of the conditions set forth in clauses (i) and (ii); or 

(iv) at least 10 percent of the total cost of the 

project financed, in all other circumstances, at the discretion of the development company. 

(D) SELLER FINANCING.-Seller-provided financing may 

be used to meet the requirements of subparagraph (B), if 

the seller subordinates the interest of the seller in the 

property to the debenture guaranteed by the Administration. 

(E) COLLATERALIZATION.-
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69 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 502 

(i) IN GENERAL.-The collateral provided by the 

small business concern shall generally include a subordinate lien position on the property being financed 

under this title, and is only 1 of the factors to be evaluated in the credit determination. Additional collateral 

shall be required only if the Administration determines, on a case-by-case basis, that additional security 

is necessary to protect the interest of the Govemment. 

(ii) APPRAISALS.-With respect to commercial real 

property provided by the small business concem as 

collateral, an appraisal of the property by a State licensed or certified appraiser-

(!) shall be required by the Administration before disbursement of the loan if the estimated 

value of that property is more than $250,000; or 

(II) may be required by the Administration or 

the lender before disbursement of the loan if the 

estimated value of that property is $250,000 or 

less, and such appraisal is necessary for appropriate evaluation of creditworthiness. 

(4) If the project is to construct a new facility, up to 33 per 

centum of the total project may be leased, if reasonable projections of growth demonstrate that the assisted small business 

concern will need additional space within three years and will 

fully utilize such additional space within ten years. 

(5) LIMITATION ON LEASING.-Jn addition to any portion of 

the project permitted to be leased under paragraph (4), not to 

exceed 20 percent of the project may be leased by the assisted 

small business to 1 or more other tenants, if the assisted small 

business occupies permanently and uses not less than a total 

of 60 percent of the space in the project after the execution of 

any leases authorized under this section. 

(6) OWNERSHIP REQUIREMENTS.-Ownership requirements 

to determine the eligibility of a small business concem that applies for assistance under any credit program under this title 

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. 

(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, any amount of existing indebtedness that does not exceed 50 percent 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 existing indebtedness is collateralized by 

fixed assets; 
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Sec. 502 SMALL BUSINESS INVESTMENT ACT OF 1958 70 

(iii) the existing indebtedness was incurred for the 

benefit of the small business concern; 

(iv) the financing under this title will be used only 

for refinancing existing indebtedness or costs relating 

to the project financed under this title; 

(v) the financing under this title will provide a 

substantial benefit to the borrower when prepayment 

penalties, financing fees, and other financing costs are 

accounted for; 

(vi) 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 

(vii) the financing under section 504 will provide 

better terms or rate of interest than the existing indebtedness at the time of refinancing. 

[Note: Section 521(a) of division E of Public Law 114-113 provides: 

Subparagraph (C) of section 502(7) of the Small Business Investment Act of 1958 (15 U.S.C. 696(7)), as in effect on September 25, 

2012, shall be in effect in any fiscal year during which the cost to 

the Federal Government of making guarantees under such subparagraph (C) and section 503 of the Small Business Investment 

Act of 1958 (15 U.S.C. 697) is zero, except that subclause (l)(bb) 

and subclause (II) of clause (iv) of such subparagraph (C) shall not 

be in effect; unless, upon application by a development company 

and after determining that the refinance loan is needed for good 

cause, the Administrator of the Small Business Administration 

waives this paragraph, a development company shall limit its 

financings under section 502 of the Small Business Investment Act 

of 1958 (15 U.S.C. 696) so that, during any fiscal year, new 

financings under such subparagraph (C) shall not exceed 50 percent of the dollars loaned under title V of the Small Business Investment Act of 1958 (15 U.S.C. 695 et seq.) during the previous 

fiscal year; and clause (iv)(l)(aa) of such subparagraph (C) shall be 

applied by substituting ''job creation and retention" for ''job creation". Effective on September 27, 2012, subparagraph (C) of section 502(7) of the Small Business Investment Act of 1958 (15 

U.S.C. 696(7)) was repealed by section 1122(b) of Public Law 111-

240. Prior to such amendment having taken effect, subparagraph (C) read as follows:] 

(C) REFINANCING NOT INVOLVING EXPANSIONS.-

(i) DEFINITIONS.-ln this subparagraph-

([) the term "borrower" means a small business concern that submits an application to a development company for financing under this subparagraph; 

(ll) the term "eligible fixed asset" means tangible property relating to which the Administrator 

may provide financing under this section; and 

(Ill) the term "qualified debt" means indebtedness-

(aa) that-
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71 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 502 

(AA) was incurred not less than 2 

years before the date of the application for 

assistance under this subparagraph; 

(BB) is a commercial loan; 

(CC) is not subject to a guarantee by a Federal agency; 

(DD) the proceeds of which were used 

to acquire an eligible fixed asset; 

(EE) was incurred for the benefit of 

the small business concern; and 

(FF) is collateralized by eligible fixed 

assets; and 

(bb) for which the borrower has been cur- rent on all payments for not less than 1 year 

before the date of the application. 

(ii) AUTHORITY.-A project that does not involve 

the expansion of a small business concern may include 

the refinancing of qualified debt if-

(!) the amount of the financing is not more 

than 90 percent of the value of the collateral for 

the financing, except that, if the appraised value of 

the eligible fixed assets serving as collateral for the 

financing is less than the amount equal to 125 percent of the amount of the financing, the borrower 

may provide additional cash or other collateral to 

eliminate any deficiency; 

(!!) the borrower has been in operation for all 

of the 2-year period ending on the date of the loan; 

and 

(Ill) for a financing for which the Administrator determines there will be an additional cost 

attributable to the refinancing of the qualified 

debt, the borrower agrees to pay a fee in an amount equal to the anticipated additional cost. 

(iii) FINANCING FOR BUSINESS EXPENSES.-

(!) FINANCING FOR BUSINESS EXPENSES.-The 

Administrator may provide financing to a borrower that receives financing that includes a refinancing of qualified debt under clause (ii), in addition to the refinancing under clause (ii), to be 

used solely for the payment of business expenses. 

(!!) APPLICATION FOR FINANCING.-An application for financing under subclause (!) shall include-

(aa) a specific description of the expenses 

for which the additional financing is re- quested; and 

(bb) an itemization of the amount of each 

expense. 

(Ill) CONDITION ON ADDITIONAL FINANCING.-

A borrower may not use any part of the financing 

under this clause for non-business purposes. 

(iv) LOANS BASED ON JOBS.-

(!) JOB CREATION AND RETENTION GOALS.-
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Sec. 503 SMALL BUSINESS INVESTMENT ACT OF 1958 72 

(aa) IN GENERAL.-The Administrator 

may provide financing under this subpara- graph for a borrower that meets the job creation goals under subsection (d) or (e) of sec· 

tion 501. 

(bb) ALTERNATE JOB RETENTION GOAL.-

The Administrator may provide financing 

under this subparagraph to a borrower that 

does not meet the goals described in item (aa) 

in an amount that is not more than the product obtained by multiplying the number of employees of the borrower by $65,000. 

(ll) NUMBER OF EMPLOYEES.-For purposes of 

subclause (I), the number of employees of a borrower is equal to the sum of-

( aa) the number of full-time employees of 

the borrower on the date on which the borrower applies for a loan under this subparagraph; and 

(bb) the product obtained by multiplying-

(AA) the number of part-time employees of the borrower on the date on which 

the borrower applies for a loan under this 

subparagraph; by 

(BB) the quotient obtained by dividing the average number of hours each part 

time employee of the borrower works each 

week by 40. 

(v) NONDELEGATION.-Notwithstanding section 

508(e), the Administrator may not permit a premier 

certified lender to approve or disapprove an application 

for assistance under this subparagraph. 

(vi) TOTAL AMOUNT OF LOANS.-The Administrator 

may provide not more than a total of $7,500,000,000 of 

financing under this subparagraph for each fiscal year. 

DEVELOPMENT COMPANY DEBENTURES 

SEC. 503. [15 U.S.C. 697] (a)(l) Except as provided in subsection (b), the Administration may guarantee the timely payment 

of all principal and interest as scheduled on any debenture issued 

by any qualified State or local development company. 

(2) Such guarantees may be made on such terms and conditions as the Administration may by regulation determine to be appropriate: Provided, That the Administration shall not decline to 

issue such guarantee when the ownership interests of the small 

business concern and the ownership interests of the property to be 

financed with the proceeds of a loan made pursuant to subsection 

(b)(l) are not identical because one or more of the following classes 

of relatives have an ownership interest in either the small business 

concern or the property: father, mother, son, daughter, wife, husband, brother, or sister: Provided further, That the Administrator 

or his designee has determined on a case-by-case basis that such 
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73 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 503 

ownership interest, such guarantee, and the proceeds of such loan, 

will substantially benefit the small business concern. 

(3) The full faith and credit of the United States is pledged to 

the payment of all amounts guaranteed under this subsection. 

(4) Any debenture issued by any State or local development 

company with respect to which a guarantee is made under this 

subsection, may be subordinated by the Administration to any 

other debenture, promissory note, or other debt or obligation of 

such company. 

(b) No guarantee may be made with respect to any debenture 

under subsection (a) unless-

(1) such debenture is issued for the purpose of making one 

or more loans to small business concerns, the proceeds of 

which shall be used by such concern for the purposes set forth 

in section 502; 

(2) necessary funds for making such loans are not available to such company from private sources on reasonable 

terms; 

(3) the interest rate on such debentures is not less than 

the rate of interest determined by the Secretary of the Treasury for purposes of section 303(b); 

(4) the aggregate amount of such debenture does not exceed the amount of loans to be made from the proceeds of such 

debenture (other than any excess attributable to the administrative costs of such loans); 

(5) the amount of any loan to be made from such proceeds 

does not exceed an amount equal to 50 percent of the cost of 

the project with respect to which such loan is made; 

(6) the Administration approves each loan to be made from 

such proceeds; and 

(7) with respect to each loan made from the proceeds of 

such debenture, the Administration-

(A) assesses and collects a fee, which shall be payable 

by the borrower, in an amount established annually by the 

Administration, which amount shall not exceed-

(i) the lesser ofl6_ 

(I) 

16 0.9375 percent per year of the outstanding balance of the loan; and 

(ll) 16 the minimum amount necessary to reduce the cost (as defined in section 502 of the Federal Credit Reform Act of 1990) to the Administration of purchasing and guaranteeing debentures 

under this Act to zero; and 

(ii) 16 50 percent of the amount established under 

clause (i) in the case of a loan made during the 2-year 

period beginning on October 1, 2002, for the life of the 

loan; and 

(B) uses the proceeds of such fee to offset the cost (as 

such term is defined in section 502 of the Federal Credit 

16 Section 6(b)(1) of the Small Business Investment Company Amendments Act of 2001 (P.L. 

107-100; 115 Stat. 971) made amendments to this subparagraph, which have been executed. 

Pursuant to subsection (e) of such section (115 Stat. 972), the "amendments made by this section 

shall become effective on October 1, 2002". 
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Sec. 503 SMALL BUSINESS INVESTMENT ACT OF 1958 74 

Reform Act of 1990) to the Administration of making guarantees under subsection (a). 

(c)(l) The purpose of this subsection is to facilitate the orderly 

and necessary flow of long-term loans from certified development 

companies to small business concerns. 

(2) Notwithstanding the provisions of the constitution or 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 commercial loan which funds any portion of the 

cost of the project financed pursuant to this section or section 504 

which is not funded by a debenture guaranteed under this section 

shall be a rate which is established by the Administrator of the 

Small Business Administration under the authority of this section. 

(3) The Administrator is authorized and directed to establish 

and publish quarterly a maximum legal interest rate for any commercial loan which funds any portion of the cost of the project financed pursuant to this section or section 504 which is not funded 

by a debenture guaranteed under this section. 

(d) CHARGES FOR ADMINISTRATION EXPENSES.-

(1) LEVEL OF CHARGES.-The Administration may impose 

an additional charge for administrative expenses with respect 

to each debenture for which payment of principal and interest 

is guaranteed under subsection (a). 

(2) PARTICIPATION FEE.-The Administration shall collect a 

one-time fee in an amount equal to 50 basis points on the total 

participation in any project of any institution described in subclause (!), (II), or (III) of section 502(3)(B)(i). Such fee shall be 

imposed only when the participation of the institution will occupy a senior credit position to that of the development company. All proceeds of the fee shall be used to offset the cost (as 

that term is defined in section 502 of the Credit Reform Act 

of 1990) to the Administration of making guarantees under 

subsection (a). 

(3) DEVELOPMENT COMPANY FEE.-The Administration 

shall collect annually from each development company a fee of 

0.125 percent of the outstanding principal balance of any guaranteed debenture authorized by the Administration after September 30, 1996. Such fee shall be derived from the servicing 

fees collected by the development company pursuant to regulation, and shall not be derived from any additional fees imposed 

on small business concerns. All proceeds of the fee shall be 

used to offset the cost (as that term is defined in section 502 

of the Credit Reform Act of 1990) to the Administration of 

making guarantees under subsection (a). 

(e)(1) For purposes of this section, the term "qualified State or 

local development company" means any State or local development 

company which, as determined by the Administration, has-

(A) a full-time professional staff; 

(B) professional management ability (including adequate 

accounting, legal, and business-servicing abilities); and 

(C) a board of directors, or membership, which meets on a 

regular basis to make management decisions for such company, including decisions relating to the making and servicing 

of loans by such company. 
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75 SMALl BUSINESS INVESTMENT ACT OF 1958 Sec. 503 

(2) A company in a rural area shall be deemed to have satisfied 

the requirements of a full-time professional staff and professional 

management ability if it contracts with another certified development company which has such staff and management ability and 

which is located in the same general area to provide such services. 

SEc. 503 (e)(3). 17 Notwithstanding any other provision of law, 

qualified State or local development companies shall be authorized 

to prepare applications for deferred participation loans under Section 18 7(a) of the Small Business Act, to service such loans and to 

charge a reasonable fee for servicing such loans. 

(f) EFFECTIVE DATE.-The fees authorized by subsections (b) 

and (d) shall apply to financings approved by the Administration 

on or after October 1, 1996. 

(g) CALCULATION OF SUBSIDY R.ATE.-All fees, interest, and 

profits received and retained by the Administration under this section 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 debentures under this Act. 

(h) REQUIRED ACTIONS UPON DEFAULT.-

(1) INITIAL ACTIONS.-Not later than the 45th day after the 

date on which a payment on a loan funded through a debenture guaranteed under this section is due and not received, the 

Administration shall-

(A) take all necessary steps to bring such a loan current; or 

(B) implement a formal written deferral agreement. 

(2) PuRCHASE OR ACCELERATION OF DEBENTURE.-Not later 

than the 65th day after the date on which a payment on a loan 

described in paragraph (1) is due and not received, and absent 

a formal written deferral agreement, the administration shall 

take all necessary steps to purchase or accelerate the debenture. 

(3) PREPAYMENT PENALTIES.-With respect to the portion 

of any project derived from funds set forth in section 502(3), 

the Administration-

(A) shall negotiate the elimination of any prepayment 

penalties or late fees on defaulted loans made prior to September 30, 1996; 

(B) shall not pay any prepayment penalty or late fee 

on the default based purchase of loans issued after September 30, 1996; and 

(C) for any project financed after September 30, 1996, 

shall not pay any default interest rate higher than the interest rate on the note prior to the date of default. 

(i) 

19 Two-YEAR WAIVER OF FEES.-The Administration may 

not assess or collect any up front guarantee fee with respect to 

17 Section 8 of Public Law 101-515 (104 Stat. 2144) inserted this designation. Probably should 

have inserted new paragraph in subsection (e). '

8 So in original. 19 Section 6(b)(2) of the Small Business Investment Company Amendments Act of 2001 (P.L. 

107-100; 115 Stat. 971) added this subsection to section 503. Pursuant to subsection (e) of such 

Continued 
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Sec. 504 SMALL BUSINESS INVESTMENT ACT OF 1958 76 

loans made under this title during the 2-year period beginning on 

October 1, 2002. 

PRIVATE DEBENTURE SALES 

SEc. 504. [15 U.S.C. 697a] (a) Notwithstanding any other law, 

rule, or regulation, the Administration shall sell to investors, either 

publicly or by private placement, debentures pursuant to section 

503 of this title as follows: 

(1) Of the program levels otherwise authorized by law for 

fiscal year 1986, an amount not to exceed $200,000,000. 

(2) Of the program levels otherwise authorized by law for 

fiscal years 1987 and 1988, an amount not to exceed 

$425,000,000. 

(3) All of the program levels authorized for fiscal year 1989 

and subsequent fiscal years. 

(b) Nothing in any provision of law shall be construed to authorize the Federal Financing Bank to acquire-

(1) any obligation the payment of principal or interest on 

which at any time has been guaranteed in whole or in part 

under section 503 of this title and which is being sold pursuant 

to the provisions of the program authorized in this section; 

(2) any obligation which is an interest in any obligation described in paragraph (1); or 

(3) any obligation which is secured by, or substantially all 

of the value of which is attributable to, any obligation described in paragraph (1) or (2). 

POOLING OF DEBENTURES 

SEC. 505. [15 U.S.C. 697b] (a) The Administration is authorized to issue trust certificates representing ownership of all or a 

fractional part of debentures issued by State or local development 

companies and guaranteed by the Administration under this Act: 

Provided, That such trust certificates shall be based on and backed 

by a trust or pool approved by the Administration and composed 

solely of guaranteed debentures. 

(b) The Administration is authorized, upon such terms and 

conditions as are deemed appropriate, to guarantee the timely payment of the principal of and interest on trust certificates issued by the Administration or its agent for purposes of this section. Such 

guarantee shall be limited to the extent of principal and interest 

on the guaranteed debentures which compose the trust or pool. In 

the event that a debenture in such trust or pool is prepaid, either 

voluntarily or in the event of default, the guarantee of timely payment of principal and interest on the trust certificates shall be reduced in proportion to the amount of principal and interest such 

prepaid debenture represents in the trust or pool. Interest on pre- paid or defaulted debentures shall accrue and be guaranteed by the 

Administration only through the date of payment on the guarantee. 

During the term of the trust certificate, it may be called for redemption due to prepayment or default of all debentures constituting the pool. 

section (115 Stat. 972), the "amendments made by this section shall become effective on October 

1, 2002". 
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77 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 506 

(c) The full faith and credit of the United States is pledged to 

the payment of all amounts which may be required to be paid under any guarantee of such trust certificates issued by the Administration or its agent pursuant to this section. 

(d) The Administration shall not collect any fee for any guarantee under this section: Provided, That nothing herein shall pre- clude any agent of the Administration from collecting a fee approved by the Administration for the functions described in subsection (f)(2) of this section. 

(e)(1) In the event the Administration pays a claim under a 

guarantee issued under this section, it shall be subrogated fully to 

the rights satisfied by such payment. 

(2) No State or local law, and no Federal law, shall preclude 

or limit the exercise by the Administration of its ownership rights in the debentures constituting the trust or pool against which the 

trust certificates are issued. 

(f)(1) The Administration shall-

(A) provide for a central registration of all trust certificates 

sold pursuant to this section; 

(B) contract with an agent to carry out on behalf of the Administration the central registration functions of this section 

and the issuance of trust certificates to facilitate poolings; such 

agent shall provide a fidelity bond or insurance in such 

amounts as the Administration determines to be necessary to 

fully protect the interests of the Government; 

(C) prior to any sale, require the seller to disclose to a purchaser of a trust certificate issued pursuant to this section, information on the terms, conditions, and yield of such instrument; and 

(D) have the authority to regulate brokers and dealers in 

trust certificates sold pursuant to this section. 

(2) Nothing in this subsection shall prohibit the utilization of 

a book-entry or other electronic form of registration for trust certificates. 

RESTRICTIONS ON DEVELOPMENT COMPANY ASSISTANCE 

SEC. 506. [15 U.S.C. 697c] Notwithstanding any other provisions of law: (1) on or after May 1, 1991, no development company 

may accept funding from any source, including but not limited to 

any department or agency of the United States Government, if 

such funding includes any conditions, priorities or restrictions upon the types of small businesses to which they may provide financial 

assistance under this title or if it includes any conditions or imposes any requirements, directly or indirectly, upon any recipient of assistance under this title; and (2) before such date, no department or agency of the United States Government which provides funding to any development company shall impose any condition, 

priority or restriction upon the type of small business which receives financing under this title nor shall it include any condition 

or impose any requirement, directly or indirectly upon any recipient of assistance under this title: Provided, That the foregoing shall 

not affect any such conditions, priorities or restrictions if the department or agency also provides all of the financial assistance to 

be delivered by the development company to the small business 
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Sec. 507 SMALL BUSINESS INVESTMENT ACT OF 1958 78 

and such conditions, priorities or restrictions are limited solely to 

the financial assistance so provided. 

SEC. 507. [15 U.S.C. 697d] ACCREDITED LENDERS PROGRAM, 

(a) ESTABLISHMENT.-The Administration is authorized to establish an Accredited Lenders Program for qualified State and local 

development companies that meet the requirements of subsection 

(b). 

(b) REQUIREMENTS.-The Administration may designate a 

qualified State or local development company as an accredited 

lender if such company-

(!) has been an active participant in the Development 

Company Program authorized by sections 502, 503, and 504 for 

not less than the preceding 12 months; 

(2) has well-trained, qualified personnel who are knowledgeable in the Administration's lending policies and procedures for such Development Company Program; 

(3) has the ability to process, close, and service financing 

for plant and equipment under such Development Company 

Program; 

(4) has a loss rate on the company's debentures that is reasonable and acceptable to the Administration; 

(5) has a history of submitting to the Administration complete and accurate debenture guaranty application packages; and 

(6) has demonstrated the ability to serve small business 

credit needs for financing plant and equipment through the 

Development Company Program. 

(c) EXPEDITED PROCESSING OF LOAN APPLICATIONS.-The Administration shall develop an expedited procedure for processing a 

loan application or servicing action submitted by a qualified State 

or local development company that has been designated as an accredited lender in accordance with subsection (b). 

(d) SUSPENSION OR REVOCATION OF DESIGNATION.-

(!) IN GENERAL.-The designation of a qualified State or 

local development company as an accredited lender may be 

suspended or revoked if the Administration determines that-

(A) the development company has not continued to 

meet the criteria for eligibility under subsection (b); or 

(B) the development company has failed to adhere to 

the Administration's rules and regulations or is violating 

any other applicable provision of law. 

(2) EFFECT.-A suspension or revocation under paragraph 

(1) shall not affect any outstanding debenture guarantee. 

(e) DEFINITION.-For purposes of this section, the term "quali- fied State or local development company" has the same meaning as 

in section 503(e). 

SEC, 508. 20 [15 U.S.C. 697e] PREMIER CERTIFIED LENDERS PROGRAM. 

(a) ESTABLISHMENT.-The Administration may establish a Premier Certified Lenders Program for certified development companies that meet the requirements of subsection (b). 

20 Section 508 was added by section 217 of P.L. 103-403 (108 Stat. 4185). Section 217(b), as amended, provides for the repeal of section 508, effective on October 1, 2000. Sections 305 and 

306 of the Small Business Reauthorization Act of 2000, as enacted into law by section 1(aX9l 
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79 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 508 

(b) REQUIREMENTS.-

(1) APPLICATION.-To be eligible to participate in the Premier Certified Lenders Program established under subsection 

(a), a certified development company shall prepare and submit 

to the Administration an application at such time, in such 

manner, and containing such information as the Administration may require. 

(2) DESIGNATION.-The Administration may designate a 

certified development company as a premier certified lender-

(A) if the company is an active certified development 

company in good standing and has been an active participant in the accredited lenders program during the entire 

12-month period preceding the date on which the company 

submits an application under paragraph (1), except that 

the Administration may waive this requirement if the company is qualified to participate in the accredited lenders 

program; 

(B) if the company has a history of-

(i) submitting to the Administration adequately 

analyzed debenture guarantee application packages; 

and 

(ii) of properly closing section 504 loans and servicing its loan portfolio; 

(C) if the company agrees to assume and to reimburse 

the Administration for 10 percent of any loss sustained by 

the Administration as a result of default by the company 

in the payment of principal or interest on a debenture 

issued by such company and guaranteed by the Administration under this section (15 percent in the case of any 

such loss attributable to a debenture issued by the company during any period for which an election is in effect 

under subsection (c)(7) for such company); and 

(D) the Administrator determines, with respect to the 

company, that the loss reserve established in accordance 

with subsection (c) is sufficient for the company to meet its 

obligations to protect the Federal Government from risk of 

loss. 

(3) APPLICABILITY OF CRITERIA AFTER DESIGNATION.-The 

Administrator may revoke the designation of a certified development company as a premier certified lender under this section at any time, if the Administrator determines that the certified development company does not meet any requirement described in subparagraphs (A) through (D) of paragraph (2). 

(c) Loss RESERVE.-

(1) ESTABLISHMENT.-A company designated as a premier 

certified lender shall establish a loss reserve for financing approved pursuant to this section. 

(2) AMOUNT.-The amount of each loss reserve established 

under paragraph (1) shall be 10 percent of the amount of the 

company's exposure, as determined under subsection (b)(2)(C). 

of Public Law 106-554, repealed section 217(b) and amended section 508, effective on December 

21, 2000. 
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Sec. 508 SMALL BUSINESS INVESTMENT ACT OF 1958 80 

(3) ASSETS.-Each loss reserve established under paragraph (1) shall be comprised of-

(A) segregated funds on deposit in an· account or accounts with a federally insured depository institution or 

institutions selected by the company, subject to a collateral 

assignment in favor of, and in a format acceptable to, the 

Administration; 

{B) irrevocable letter or letters of credit, with a collateral assignment in favor of, and a commercially reasonable 

format acceptable to, the Administration; or 

(C) any combination of the assets described in subparagraphs (A) and (B). 

(4) CONTRIBUTIONS.-The company shall make contributions to the loss reserve, either cash or letters of credit as provided above, in the following amounts and at the following intervals: 

(A) 50 percent when a debenture is closed. 

(B) 25 percent additional not later than 1 year after a 

debenture is closed. 

(C) 25 percent additional not later than 2 years after 

a debenture is closed. 

(5) REPLENISHMENT.-If a loss has been sustained by the 

Administration, any portion of the loss reserve, and other 

funds provided by the premier company as necessary, may be 

used to reimburse the Administration for the premier company's share of the loss as provided in subsection (b)(2)(C). If 

the company utilizes the reserve, within 30 days it shall replace an equivalent amount of funds. 

(6) DISBURSEMENTS.-

(A) IN GENERAL.-The Administration shall allow the 

certified development company to withdraw from the loss 

reserve amounts attributable to any debenture that has 

been repaid. 

(B) TEMPORARY REDUCTION BASED ON OUTSTANDING 

BALANCE.-Notwithstanding subparagraph (A), during the 

2-year period beginning on the date that is 90 days after 

the date of the enactment of this subparagraph, the Administration shall allow the certified development company to withdraw from the loss reserve such amounts as 

are in excess of 1 percent of the aggregate outstanding balances of debentures to which such loss reserve relates. The 

preceding sentence shall not apply with respect to any debenture before 100 percent of the contribution described in 

paragraph (4) with respect to such debenture has been 

made. 

(7) ALTERNATIVE LOSS RESERVE.-

(A) ELECTION.-With respect to any eligible calendar 

quarter, any qualified high loss reserve PCL may elect to 

have the requirements of this paragraph apply in lieu of 

the requirements of paragraphs (2) and (4) for such quarter. 

(B) CONTRIBUTIONS.-

(i) ORDINARY RULES INAPPLICABLE.-Except as provided under clause (ii) and paragraph (5), a qualified 
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81 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 508 

high loss reserve PCL that makes the election described in subparagraph (A) with respect to a calendar 

quarter shall not be required to make contributions to 

its loss reserve during such quarter. 

(ii) BASED ON LOSS.-A qualified high loss reserve 

PCL that makes the election described in subparagraph (A) with respect to any calendar quarter shall, 

before the last day of such quarter, make such contributions to its loss reserve as are necessary to ensure 

that the amount of the loss reserve of the PCL is-

(I) not less than $100,000; and 

(II) sufficient, as determined by a qualified 

independent auditor, for the PCL to meet its obligations to protect the Federal Government from 

risk of loss. 

(iii) CERTIFICATION.-Before the end of any calendar quarter for which an election is in effect under 

subparagraph (A), the head of the PCL shall submit to 

the Administrator a certification that the loss reserve 

of the PCL is sufficient to meet such PCL's obligation 

to protect the Federal Government from risk of loss. 

Such certification shall be in such form and submitted 

in such manner as the Administrator may require and 

shall be signed by the head of such PCL and the auditor making the determination under clause (ii)(II). 

(C) DISBURSEMENTS.-

(i) ORDINARY RULE INAPPLICABLE.-Paragraph (6) 

shall not apply with respect to any qualified high loss 

reserve PCL for any calendar quarter for which an 

election is in effect under subparagraph (A). 

(ii) EXCESS FUNDS.-At the end of each calendar 

quarter for which an election is in effect under subparagraph (A), the Administration shall allow the 

qualified high loss reserve PCL to withdraw from its 

loss reserve the excess of-

(l) the amount of the loss reserve, over 

(II) the greater of $100,000 or the amount 

which is determined under subparagraph (B)(ii) to 

be sufficient to meet the PCL's obligation to protect the Federal Government from risk of loss. 

(D) RECONTRIBUTION.-lf the requirements of this 

paragraph apply to a qualified high loss reserve PCL for 

any calendar quarter and cease to apply to such PCL for 

any subsequent calendar quarter, such PCL shall make a 

contribution to its loss reserve in such amount as the Administrator may determine provided that such amount 

does not exceed the amount which would result in the total 

amount in the loss reserve being equal to the amount 

which would have been in such loss reserve had this paragraph never applied to such PCL. The Administrator may 

require that such payment be made as a single payment 

or as a series of payments. 

(E) RISK MANAGEMENT.-If a qualified high loss reserve PCL fails to meet the requirement of subparagraph 
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Sec. 508 SMALL BUSINESS INVESTMENT ACT OF 1958 82 

(F)(iii) during any period for which an election is in effect 

under subparagraph (A) and such failure continues for 180 

days, the requirements of paragraphs (2), (4), and (6) shall 

apply to such PCL as of the end of such 180-day period 

and such PCL shall make the contribution to its loss reserve described in subparagraph (D). The Administrator 

may waive the requirements ofthis subparagraph. 

(F) QUALIFIED HIGH LOSS RESERVE PCL.-The term 

"qualified high loss reserve PCL" means, with respect to 

any calendar year, any premier certified lender designated 

by the Administrator as a qualified high loss reserve PCL 

for such year. The Administrator shall not designate a 

company under the preceding sentence unless the Administrator determines that-

(i) the amount of the loss reserve of the company 

is not less than $100,000; 

(ii) the company has established and is utilizing 

an appropriate and effective process for analyzing the 

risk of loss associated with its portfolio of PCLP loans 

and for grading each PCLP loan made by the company 

on the basis of the risk of loss associated with such 

loan; and 

(iii) the company meets or exceeds 4 or more of 

the specified risk management benchmarks as of the 

most recent assessment by the Administration or the 

Administration has issued a waiver with respect to the 

requirement of this clause. 

(G) SPECIFIED RISK MANAGEMENT BENCHMARKS.-For 

purposes of this paragraph, the term "specified risk management benchmarks" means the following rates, as determined by the Administrator: 

(i) Currency rate. 

(ii) Delinquency rate. 

(iii) Default rate. 

(iv) Liquidation rate. 

(v) Loss rate. 

(H) QUALIFIED INDEPENDENT AUDITOR.-For purposes 

of this paragraph, the term "qualified independent auditor" means any auditor who--

(i) is compensated by the qualified high loss reserve PCL; 

(ii) is independent of such PCL; and 

(iii) has been approved by the Administrator during the preceding year. 

(I) PCLP LOAN.-For purposes of this paragraph, the 

term "PCLP loan" means any loan guaranteed under this 

section. 

(J) ELIGIBLE CALENDAR QUARTER.-For purposes of 

this paragraph, the term "eligible calendar quarter" 

means-

(i) the first calendar quarter that begins after the 

end of the 90-day period beginning with the date of 

the enactment of this paragraph; and 

(ii) the 7 succeeding calendar quarters. 
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83 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 508 

(K) CALENDAR QUARTER.-For purposes of this paragraph, the term "calendar quarter" means-

(i) the period which begins on January 1 and ends 

on March 31 of each year; 

(ii) the period which begins on April 1 and ends 

on June 30 of each year; 

(iii) the period which begins on July 1 and ends on 

September 30 of each year; and 

(iv) the period which begins on October 1 and ends 

on December 31 of each year. 

(L) REGULATIONS.-Not later than 45 days after the 

date of the enactment of this paragraph, the Administrator 

shall publish in the Federal Register and transmit to the 

Congress regulations to carry out this paragraph. Such 

regulations shall include provisions relating to-

(i) the approval of auditors under subparagraph 

(H); and 

(ii) the designation of qualified high loss reserve 

PCLs under subparagraph (F), including the determination of whether a process for analyzing risk of 

loss is appropriate and effective for purposes of subparagraph (F)(ii). 

(8) BUREAU OF PCLP OVERSIGHT.-

(A) EsTABLISHMENT.-There is hereby established in 

the Small Business Administration a bureau to be known 

as the Bureau of PCLP Oversight. 

(B) PuRPOSE.-The Bureau of PCLP Oversight shall 

carry out such functions of the Administration under this 

subsection as the Administrator may designate. 

(C) DEADLINE.-Not later than 90 days after the date 

of the enactment of this Act-

(i) the Administrator shall ensure that the Bureau 

of PCLP Oversight is prepared to carry out any functions designated under subparagraph (B), and 

(ii) the Office of the Inspector General of the Administration shall report to the Congress on the preparedness of the Bureau of PCLP Oversight to carry 

out such functions. 

(d) SALE OF CERTAIN DEFAULTED LOANS.-

(1) NOTICE.-If, upon default in repayment, the Administration acquires a loan guaranteed under this section and identifies such loan for inclusion in a bulk asset sale of defaulted 

or repurchased loans or other financings, it shall give prior notice thereof to any certified development company which has a 

contingent liability under this section. The notice shall be 

given to the company as soon as possible after the financing is 

identified, but not less than 90 days before the date the Administration first makes any records on such financing available for examination by prospective purchasers prior to its offering in a package of loans for bulk sale. 

(2) LIMITATIONS.-The Administration shall not offer any 

loan described in paragraph (1) as part of a bulk sale unless 

it-
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Sec. 508 SMALL BUSINESS INVESTMENT ACT OF 1958 84 

(A) provides prospective purchasers with the opportunity to examine the Administration's records with respect to such loan; and 

(B) provides the notice required by paragraph (1). 

(e) LOAN APPROVAL AUTHORITY.-

( I) IN GENERAL.-Notwithstanding section 503(b)(6), and 

subject to such terms and conditions as the Administration 

may establish, the Administration may permit a company designated as a premier certified lender under this section to approve, authorize, close, service, foreclose, litigate (except that 

the Administration may monitor the conduct of any such litigation to which a premier certified lender is a party), and liquidate loans that are funded with the proceeds of a debenture 

issued by such company and may authorize the guarantee of 

such debenture. 

(2) ScOPE OF REVIEW.-The approval of a loan by a premier certified lender shall be subject to final approval as to eligibility of any guarantee by the Administration pursuant to 

section 503(a), but such final approval shall not include review 

of decisions by the lender involving creditworthiness, loan closing, or compliance with legal requirements imposed by law or 

regulation. 

(f) REVIEW.-Mter the issuance and sale of debentures under 

this section, the Administration, at intervals not greater than 12 

months, shall review the financings made by each premier certified 

lender. The review shall include the lender's credit decisions and 

general compliance with the eligibility requirements for each financing approved under the program authorized under this section. 

The Administration shall consider the findings of the review in carrying out its responsibilities under subsection (g), but such review 

shall not affect any outstanding debenture guarantee. 

(g) SUSPENSION OR REVOCATION.-The designation of a certified 

development company as a premier certified lender may be suspended or revoked if the Administration determines that the company-

(1) has not continued to meet the criteria for eligibility 

under subsection (b); 

(2) has not established or maintained the loss reserve required under subsection (c); 

(3) is failing to adhere to the Administration's rules and 

regulations; or 

(4) is violating any other applicable provision of law. 

(h) EFFECT OF SUSPENSION OR REVOCATION.-A suspension or 

revocation under subsection (g) shall not affect any outstanding debenture guarantee. 

(i) PROGRAM GoALs.-Each certified development company participating in the program under this section shall establish a goal 

of processing a minimum of not less than 50 percent of the loan 

applications for assistance under section 504 pursuant to the program authorized under this section. 

G) REPORT.-Not later than 1 year after the date of enactment 

of this Act, and annually thereafter, the Administration shall report to the Committees on Small Business of the Senate and the 
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85 SMAll BUSINESS INVESTMENT ACT OF 1958 Sec. 509 

House of Representatives on the implementation of this section. 

Each report shall include-

(!) the number of certified development companies designated as premier certified lenders; 

(2) the debenture guarantee volume of such companies; 

(3) a comparison of the loss rate for premier certified lenders to the loss rate for accredited and other lenders, specifically 

comparing default rates and recovery rates on liquidations; and 

(4) such other information as the Administration deems 

appropriate. 

SEC. 509. [15 U.S.C. 697f] PREPAYMENT OF DEVELOPMENT COMPANY 

DEBENTURES. 

(a) IN GENERAL.-

(!) PREPAYMENT AUTHORIZED.-Subject to the requirements set forth in subsection (b), an issuer of a debenture purchased by the Federal Financing Bank and guaranteed by the 

Administration under this Act may, at the election of the borrower (in the case of a loan under section 503) or the issuer 

(in the case of a small business investment company) and with 

the approval of the Administration, prepay such debenture in 

accordance with the provisions of this section. 

(2) PROCEDURE.-

(A) IN GENERAL.-In making a prepayment under 

paragraph (1)-

(i) the borrower (in the case of a loan under section 503) or the issuer (in the case of a small business 

investment company) shall pay to the Federal Financing Bank an amount that is equal to the sum of the 

unpaid principal balance due on the debenture as of 

the date of the prepayment (plus accrued interest at 

the coupon rate on the debenture) and the amount of 

the repurchase premium described in subparagraph 

(B); and 

(ii) the Administration shall pay to the Federal Financing Bank the difference between the repurchase 

premium paid by the borrower under this subsection 

and the repurchase premium that the Federal Financing Bank would otherwise have received. 

(B) REPURCHASE PREMIUM.-

(i) IN GENERAL.-For purposes of subparagraph 

(A)(i), the repurchase premium is the amount equal to 

the product of-

(I) the unpaid principal balance due on the 

debenture on the date of prepayment; and 

(II) the applicable percentage rate, as determined in accordance with clauses (ii) and (iii). 

(ii) APPLICABLE PERCENTAGE RATE.-For purposes 

of clause (i)(II), the applicable percentage rate 

means-

(!) with respect to a 10-year term loan, 8.5 

percent; 

(II) with respect to a 15-year term loan, 9.5 

percent; 
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Sec. 509 SMALL BUSINESS INVESTMENT ACT OF 1958 86 

(III) with respect to a 20-year term loan, 10.5 

percent; and 

(IV) with respect to a 25-year term loan, 11.5 

percent. 

(iii) ADJUSTMENTS TO APPLICABLE PERCENTAGE 

RATE.-The percentage rates described in clause (ii) 

shall be increased or decreased by the Administration 

by a factor not to exceed one-third, if the same factor 

is applied in each case and if the Administration determines that an adjustment is necessary, based on 

the number of borrowers having given notice of their 

intent to participate, in order to make the program 

(including the amounts appropriated for this purpose 

under Public Law 103-317) result in no substantial 

net gain or loss of revenue to the Federal Financing 

Bank or to the Administration. Amounts collected in 

excess of the amount necessary to ensure revenue neutrality shall be refunded to the borrowers. 

(b) REQUIREMENTS.-For purposes of subsection (a), the requirements of this subsection are that-

(1) the debenture is outstanding and neither the loan that 

secures the debenture, if any, nor the debenture is in default 

on the date on which the prepayment is made; 

(2) State, local, or personal funds, or the proceeds of a refinancing in accordance with subsection (d) of this section under 

the programs authorized by this title, are used to prepay or 

roll over the debenture; and 

(3) with respect to a debenture issued under section 503, 

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 PREPAYMENT FEES OR PENALTIES.-No fees or penalties 

other than those specified in this section may be imposed on the 

issuer, the borrower, the Administration, or any fund or account 

administered by the Administration as the result of a prepayment 

under this section. 

(d) REFINANCING LIMITATIONS.-

(1) IN GENERAL.-The refinancing of a debenture under 

sections 504 and 505, in accordance with subsection (b)(2)-

(A) shall not exceed the amount necessary to prepay 

existing debentures, including all costs associated with the 

refinancing and any applicable prepayment penalty or repurchase premium; and 

(B) except as provided in paragraphs (2) and (3), shall 

be subject to the provisions of sections 504 and 505 and 

the rules and regulations promulgated thereunder, including rules and regulations governing payment of authorized 

expenses, commissions, fees, and discounts to brokers and 

dealers in trust certificates issued pursuant to section 505. 

(2) JoB CREATION.-An applicant for refinancing under section 504 of a loan made pursuant to section 503 shall not be 

required to demonstrate that a requisite number of jobs will be 

created with the proceeds of a refinancing. 
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87 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 510 

(3) LOAN PROCESSING FEE.-To cover the cost of loan packaging, processing, and other administrative functions, a development company that provides refinancing under subsection 

(b)(2) may impose a one-time loan processing fee, not to exceed 

0.5 percent of the principal amount of the loan. 

(4) NEW DEBENTURES.-Issuers of debentures under title 

III may issue new debentures in accordance with such title in 

order to prepay existing debentures as authorized in this section. 

(5) PRELIMINARY NOTICE.-

(A) IN GENERAL.-The Administration shall use certified mail and other reasonable means to notify each eligible borrower of the prepayment program provided in this 

title. Each preliminary notice shall specify the range and 

dollar amount of repurchase premiums which could be required of that borrower in order to participate in the program. In carrying out this program, the Administration 

shall provide a period of not less than 45 days following 

the receipt of such notice by the borrower during which the 

borrower must notify the Administration of the borrower's 

intent to participate in the program. The Administration 

shall require that a borrower who gives notice of its intent 

to participate to make an earnest money deposit of $1,000 

which shall not be refundable but which shall be credited 

toward the final repurchase premium. 

(B) DEFINITION.-For purposes of this paragraph, the 

term "borrower", in the case of a small business investment company or a specialized small business investment 

company, means "issuer". 

(6) FINAL NOTICE.-Based upon the response to the preliminary notice under paragraph (5), the Administration shall 

make a final computation of the necessary prepayment premiums and shall notify each qualified respondent of the results 

of such computation. Each qualified respondent shall be afforded not less than 4 months to complete the prepayment. 

(e) DEFINITIONS.-For purposes of this section-

(1) the term "issuer" meansCA) the qualified State or local development company 

that issued a debenture pursuant to section 503, which has 

been purchased by the Federal Financing Bank; and 

(B) a small business investment company licensed pursuant to section 301; or 

(2) the term "borrower" means a small business concern 

whose loan secures a debenture issued pursuant to section 503. 

(f) REGULATIONS.-Not later than 30 days after the date of enactment of this section, the Administration shall promulgate such 

regulations as may be necessary to carry out this section. 

(g) AUTHORIZATION.-There are authorized to be appropriated 

$30,000,000 to carry out the provisions of The Small Business Prepayment Penalty Relief Act of 1994. 

SEC. 510. [15 U.S.C. 697g] FORECLOSURE AND LIQUIDATION OF LOANS. 

(a) DELEGATION OF AUTHORITY.-In accordance with this section, the Administration shall delegate to any qualified State or 
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Sec. 510 SMALL BUSINESS INVESTMENT ACT OF 1958 88 

local development company (as defined in section 503(e)) that 

meets the eligibility requirements of subsection (b)(l) the authority 

to foreclose and liquidate, or to otherwise treat in accordance with 

this section, defaulted loans in its portfolio that are funded with 

the proceeds of debentures guaranteed by the Administration 

under section 503. 

(b) ELIGIBILITY FOR DELEGATION.-

(!) REQUIREMENTS.-A qualified State or local development 

company shall be eligible for a delegation of authority under 

subsection (a) if-

(A) the company-

(i) has participated in the loan liquidation pilot 

program established by the Small Business Programs 

Improvement Act of 1996 (15 U.S.C. 695 note), as in 

effect on the day before promulgation of final regulations by the Administration implementing this section; 

(ii) is participating in the Premier Certified Lenders Program under section 508; or 

(iii) during the 3 fiscal years immediately prior to 

seeking such a delegation, has made an average of not 

less than 10 loans per year that are funded with the 

proceeds of debentures guaranteed under section 503; 

and 

(B) the company-

(i) has one or more employees-

(!) with not less than 2 years of substantive, 

decision-making experience in administering the 

liquidation and workout of problem loans secured 

in a manner substantially similar to loans funded 

with the proceeds of debentures guaranteed under 

section 503; and 

(II) who have completed a training program 

on loan liquidation developed by the Administration in conjunction with qualified State and local 

development companies that meet the requirements of this paragraph; or 

(ii) submits to the Administration documentation 

demonstrating that the company has contracted with 

a qualified third-party to perform any liquidation activities and secures the approval of the contract by the 

Administration with respect to the qualifications of 

the contractor and the terms and conditions of liquidation activities. 

(2) CONFIRMATION.-On request the Administration shall 

examine the qualifications of any company described in subsection (a) to determine if such company is eligible for the delegation of authority under this section. If the Administration 

determines that a company is not eligible, the Administration 

shall provide the company with the reasons for such ineligibility. 

(c) SCOPE OF DELEGATED AUTHORITY.-

(!) IN GENERAL.-Each qualified State or local development company to which the Administration delegates authority 
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89 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 510 

under section (a) may with respect to any loan described in 

subsection (a)-

(A) perform all liquidation and foreclosure functions, 

including the purchase in accordance with this subsection 

of any other indebtedness secured by the property securing 

the loan, in a reasonable and sound manner according to 

commercially accepted practices, pursuant to a liquidation 

plan approved in advance by the Administration under 

paragraph (2)(A); 

(B) litigate any matter relating to the performance of 

the functions described in subparagraph (A), except that 

the Administration may-

(i) defend or bring any claim if-

(1) the outcome of the litigation may adversely 

affect the Administration's management of the 

loan program established under section 502; or 

(II) the Administration is entitled to legal 

remedies not available to a qualified State or local 

development company and such remedies will benefit either the Administration or the qualified 

State or local development company; or 

(ii) oversee the conduct of any such litigation; and 

(C) take other appropriate actions to mitigate loan 

losses in lieu of total liquidation or foreclosures, including 

the restructuring of a loan in accordance with prudent 

loan servicing practices and pursuant to a workout plan 

approved in advance by the Administration under paragraph (2)(C). 

(2) ADMINISTRATION APPROVAL.-

(A) LIQUIDATION PLAN.-

(i) IN GENERAL.-Before carrying out functions described in paragraph (l)(A), a qualified State or local 

development company shall submit to the Administration a proposed liquidation plan. 

(ii) ADMINISTRATION ACTION ON PLAN.-

(1) TIMING.-Not later than 15 business days 

after a liquidation plan is received by the Administration under clause (i), the Administration shall 

approve or reject the plan. 

(II) NOTICE OF NO DECISION.-With respect to 

any plan that cannot be approved or denied within the 15-day period required by subclause (!), the 

Administration shall within such period provide in 

accordance with subparagraph (E) notice to the 

company that submitted the plan. 

(iii) ROUTINE ACTIONS.-In carrying out functions 

described in paragraph (l)(A), a qualified State or 

local development company may undertake routine actions not addressed in a liquidation plan without obtaining additional approval from the Administration. 

(B) PuRCHASE OF INDEBTEDNESS.-

(i) IN GENERAL.-In carrying out functions described in paragraph (l)(A), a qualified State or local 

development company shall submit to the Administra-
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Sec. 510 SMALL BUSINESS INVESTMENT ACT OF 1958 90 

tion a request for written approval before committing 

the Administration to the purchase of any other indebtedness secured by the property securing a defaulted loan. 

(ii) ADMINISTRATION ACTION ON REQUEST.-

(!) TIMING.-Not later than 15 business days 

after receiving a request under clause (i), the Administration shall approve or deny the request. 

(II) NOTICE OF NO DECISION.-With respect to 

any request that cannot be approved or denied 

within the 15-day period required by subclause (1), 

the Administration shall within such period provide in accordance with subparagraph (E) notice 

to the company that submitted the request. 

(C) WORKOUT PLAN.-

(i) IN GENERAL.-In carrying out functions described in paragraph (1)(C), a qualified State or local 

development company shall submit to the Administration a proposed workout plan. 

(ii) ADMINISTRATION ACTION ON PLAN.-

(1) TIMING.-Not later than 15 business days 

after a workout plan is received by the Administration under clause (i), the Administration shall 

approve or reject the plan. 

(II) NOTICE OF NO DECISION.-With respect to 

any workout plan that cannot be approved or denied within the 15-day period required by subclause (1), the Administration shall within such 

period provide in accordance with subparagraph 

(E) notice to the company that submitted the plan. 

(D) COMPROMISE OF INDEBTEDNESS.-ln carrying out 

functions described in paragraph (1)(A), a qualified State 

or local development company may-

(i) consider an offer made by an obligor to compromise the debt for less than the full amount owing; 

and 

(ii) pursuant to such an offer, release any obligor 

or other party contingently liable, if the company secures the written approval of the Administration. 

(E) CONTENTS OF NOTICE OF NO DECISION .-Any notice 

provided by the Administration under subparagraph (A)(ii)(Il), (B)(ii)(Il), or (C)(ii){Il)-

(i) shall be in writing; 

(ii) shall state the specific reason for the Administration's inability to act on a plan or request; 

(iii) shall include an estimate of the additional 

time required by the Administration to act on the plan 

or request; and 

(iv) if the Administration cannot act because insufficient information or documentation was provided 

by the company submitting the plan or request, shall 

specifY the nature of such additional information or 

documentation. 
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91 SMALL BUSINESS INVESTMENT ACT OF 1958 Sec. 510 

(3) CONFLICT OF INTEREST.-ln carrying out functions described in paragraph (1), a qualified State or local development 

company shall take no action that would result in an actual or 

apparent conflict of interest between the company (or any employee of the company) and any third party lender, associate 

of a third party lender, or any other person participating in a 

liquidation, foreclosure, or loss mitigation action. 

(d) SUSPENSION OR REVOCATION OF AUTHORITY.-The Administration may revoke or suspend a delegation of authority under this 

section to any qualified State or local development company, if the 

Administration determines that the company-

(1) does not meet the requirements of subsection (b)(1); 

(2) has violated any applicable rule or regulation of the Administration or any other applicable law; or 

(3) fails to comply with any reporting requirement that 

may be established by the Administration relating to carrying 

out of functions described in paragraph (1). 

(e) REPORT.-

(1) IN GENERAL.-Based on information provided by qualified State and local development companies and the Administration, the Administration shall annually submit to the Committees on Small Business of the House of Representatives and 

of the Senate a report on the results of delegation of authority 

under this section. 

(2) CONTENTS.-Each report submitted under paragraph 

(1) shall include the following information: 

(A) With respect to each loan foreclosed or liquidated 

by a qualified State or local development company under 

this section, or for which losses were otherwise mitigated 

by the company pursuant to a workout plan under this 

section-

(i) the total cost of the project financed with the 

loan; 

(ii) the total original dollar amount guaranteed by 

the Administration; 

(iii) the total dollar amount of the loan at the time 

of liquidation, foreclosure, or mitigation of loss; 

(iv) the total dollar losses resulting from the liquidation, foreclosure, or mitigation of loss; and 

(v) the total recoveries resulting from the liquidation, foreclosure, or mitigation of loss, both as a percentage of the amount guaranteed and the total cost 

of the project financed. 

(B) With respect to each qualified State or local development company to which authority is delegated under 

this section, the totals of each of the amounts described in 

clauses (i) through (v) of subparagraph (A). 

(C) With respect to all loans subject to foreclosure, liquidation, or mitigation under this section, the totals of 

each of the amounts described in clauses (i) through ( v) of 

subparagraph (A). 

(D) A comparison between-
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Sec. 510 SMALL BUSINESS INVESTMENT ACT OF 1958 92 

(i) the information provided under subparagraph 

(C) with respect to the 12-month period preceding the 

date on which the report is submitted; and 

(ii) the same information with respect to loans 

foreclosed and liquidated, or otherwise treated, by the 

Administration during the same period. 

(E) The number of times that the Administration has 

failed to approve or reject a liquidation plan in accordance 

with subparagraph (A)(i), a workout plan in accordance 

with subparagraph (C)(i), or to approve or deny a request 

for purchase of indebtedness under subparagraph (B)(i), 

including specific information regarding the reasons for 

the Administration's failure and any delays that resulted. 

TITLE VI-CHANGES IN FEDERAL RESERVE AUTHORITY 

[Omitted as no longer current] 

TITLE VII-CRIMINAL PENALTIES 

[This title amends the United States Code to include certain 

actions by persons affiliated with or dealing with SBIC's as Federal 

crimes. The provisions have been amended from time to time to include various agencies.]