49–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 114–188 

MICROLOAN MODERNIZATION ACT OF 2015 

JUNE 25, 2015.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. CHABOT, from the Committee on Small Business, 

submitted the following 

R E P O R T 

together with 

ADDITIONAL VIEWS 

[To accompany H.R. 2670] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Small Business, to whom was referred the bill 

(H.R. 2670) to amend the Small Business Act to provide for expanded participation in the microloan program, and for other purposes, having considered the same, report favorably thereon without amendment and recommend that the bill do pass. 

CONTENTS 

Page 

I. Bill Text ....................................................................................................... 2 

II. Purpose of the Bill and Summary ............................................................. 3 

III. Background and the Need for Legislation ................................................ 3 

IV. Hearings ....................................................................................................... 4 

V. Committee Consideration ........................................................................... 4 

VI. Committee Votes ......................................................................................... 4 

VII. Section-by-Section Analysis of H.R. 2670 .................................................. 8 

VIII. Congressional Budget Cost Estimate ........................................................ 10 

IX. Unfunded Mandates .................................................................................... 10 

X. New Budget Authority, Entitlement Authority and Tax Expenditures 10 

XI. Oversight Findings ...................................................................................... 10 

XII. Statement of Constitutional Authority ...................................................... 10 

XIII. Congressional Accountability Act .............................................................. 10 

XIV. Federal Advisory Committee Statement ................................................... 11 

XV. Statement of No Earmarks ........................................................................ 11 

XVI. Statement of Duplication of Federal Programs ........................................ 11 

XVII. Disclosure of Directed Rule Makings ........................................................ 11 

XVIII. Performance Goals and Objectives ............................................................ 11 


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XIX. Changes in Existing Law Made by the Bill, as Reported ........................ 11 

XX. Additional Views ......................................................................................... 72 

I. BILL TEXT

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

America in Congress assembled, 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Microloan Modernization Act of 2015’’. 

SEC. 2. WAIVERS OF 25/75 RULE. 

(a) WAIVER AUTHORIZED.—Section 7(m)(4)(E)(i) of the Small Business Act (15 

U.S.C. 636(m)(4)(E)(i)) is amended by adding at the end the following: ‘‘The Administrator shall by rule establish a process by which intermediaries may apply for and 

the Administrator may grant a waiver from the requirements of this clause.’’. 

(b) CONTENTS OF RULE.—In the rule required by the amendment made by subsection (a), the Administrator of the Small Business Administration shall require 

any applicant for a waiver to— 

(1) to specify how such applicant will use the additional technical assistance; 

and 

(2) provide assurance in a form provided for by the Administrator in the rule 

that the intermediary will have sufficient funds to provide technical assistance 

to all of the intermediary’s borrowers. 

(c) RULEMAKING REQUIREMENTS.—The rule required by subsection (a) shall be promulgated after notice and the opportunity for comment of not less than 60 days. 

Such regulation shall be codified in the Code of Federal Regulations and shall incorporate any delegation of the Administrator’s authority to approve waivers to any appropriate subsidiary official. 

SEC. 3. MICROLOAN INTERMEDIARY LENDING LIMIT INCREASED. 

Section 7(m)(3)(C) of the Small Business Act (15 U.S.C. 636(m)(3)(C)) is amended 

by striking ‘‘$5,000,000’’ and inserting ‘‘$6,000,000’’. 

SEC. 4. EXTENDED REPAYMENT TERMS. 

Section 7(m)(6) of the Small Business Act (15 U.S.C. 636(m)(6)) is amended by 

adding at the end the following: 

‘‘(F) REPAYMENT TERMS FOR LOANS TO SMALL BUSINESSES.—The Administrator may not impose limitations on the term for repayment of a loan 

made by an intermediary to a small business concern or entrepreneur, except that— 

‘‘(i) in the case of a loan made by an intermediary of $10,000 or less, 

the repayment term shall be not more than 6 years; and 

‘‘(ii) in the case of a loan greater than $10,000, the repayment term 

shall be not more than 10 years.’’. 

SEC. 5. LINES OF CREDIT AUTHORIZED. 

Section 7(m)(6)(A) of the Small Business Act (15 U.S.C. 636(m)(6)(A)) is amended 

by inserting after ‘‘short-term’’ insert ‘‘(including lines of credit)’’. 

SEC. 6. GAO STUDY OF MICROENTERPRISE PARTICIPATION. 

Not later than 120 days after the date of enactment of this Act, the Comptroller 

General of the United States shall complete a study on and report to the Committee 

on Small Business of the House of Representatives on the following: 

(1) The operations (including services provided, structure, size, and area of operation) of a representative sample of— 

(A) intermediaries that are eligible for participation in the microloan program under section 7(m) of the Small Business Act and that do participate; 

and 

(B) intermediaries (including those operated for profit, operated as nonprofits, and those affiliated with a United States institution of higher learning) that are so eligible and that do not participate. 

(2) The reasons why intermediaries described in paragraph (1)(B) choose not 

to participate. 

(3) Recommendations on how to encourage increased participation in the 

microloan program by intermediaries described in paragraph (1)(B). 

(4) Recommendations on how to decrease the costs associated with participation in the microloan program for eligible intermediaries. 


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1 Improving Capital Access Programs within the SBA: Hearing before the Subcomm. on Economic Growth, Tax and Capital Access of the House Comm. on Small Business, 114th Cong., 

1st Sess. (2015) (statement of Brandon Napoli, Director of Microlending, Valley Economic Development Center at 4). 

SEC. 7. OFFICE OF ADVOCACY ECONOMIC STUDY OF MANDATORY SAVINGS REQUIREMENT. 

Not later than 120 days after the date of enactment of this Act, the Chief Counsel 

for Advocacy of the Small Business Administration shall submit to the Committee 

on Small Business of the House of Representatives a report on the economic impact 

of a mandatory savings requirement on business concerns eligible to participate in 

the microloan program under section 7(m) of the Small Business Act, including on 

the benefits and costs of such a requirement and recommendations on implementation of such a requirement. 

II. PURPOSE AND BILL SUMMARY

The purpose of H.R. 2670 the ‘‘Microloan Modernization Act of 

2015’’ is to amend the Small Business Act by granting microloan 

intermediaries greater flexibility in providing loans and technical 

assistance to their borrowers. The expectation is that the greater 

flexibility will result in more microlenders participating in the 

Microloan Program overseen by the Small Business Administration 

(SBA). 

III. BACKGROUND AND NEED FOR LEGISLATION

The Microloan Program overseen by the SBA is designed to provide credit for those entrepreneurs that would not otherwise have 

any access to credit, even revolving credit. The SBA jumped into 

the mix with a pilot program in 1991. Congress then created a statutory microloan program to assist low-income individuals who do 

not have the financial or technical resources needed to start and 

operate a small business. In the 1997 reauthorization of the SBA, 

the Microloan Program became permanent. 

The program operates through SBA designated microloan intermediaries. The SBA makes loans at below market rates to the 

intermediaries who then in turn make loans of up to $50,000 to 

borrowers. 15 U.S.C. § 636(m)(3)(F). The SBA provides loans at 

lower interest rates to intermediaries that maintain an average 

loan size of under $7,500. Id. at § 636(m)(3)(F)(iii). Borrowers then 

repay the intermediaries who in turn repay the SBA. The default 

rate on loans made by the SBA to intermediaries is effectively zero. 

Microloan intermediaries are distinguished from other financial 

institutions (banks and credit unions) because they are required to 

provide technical training and assistance to their borrowers. Id. at 

§ 636(m)(1)(B)(ii)–(iii). The technical assistance generally is provided by intermediaries but a certain portion may be obtained from 

outside contractors. Although Congress appropriates funds for a 

portion of technical assistance, intermediaries are required to obtain a portion of such funds from non-federal sources. Id. at 

§ 636(m)(4)(B)(i). 

Only a small fraction of microloan intermediaries in the United 

States participate in the SBA’s Microloan Program—about 150. Despite their small number, their loans have produced nearly 16,000 

jobs.1 H.R. 2670 palliates that situation by granting intermediaries 

greater flexibility to meet the needs of their borrowers and thus inducing increased participation in the program. Despite the greater 

flexibility, H.R. 2670 scrupulously maintains the primary feature of 


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the program—low dollar loans offered to microentrepreneurs along 

with intermediary-provided technical assistance. 

IV. HEARINGS

In the 114th Congress, issues related to the SBA Microloan Program were addressed at a hearing by the Subcommittee on Economic Growth, Tax and Capital Access of the Committee on Small 

Business entitled ‘‘Improving Capital Access Programs within the 

SBA’’ on May 19, 2015. At the hearing, witnesses testified that 

modernization of the Microloan Program was needed to ensure that 

it continues to generate jobs from microbusinesses. 

V. COMMITTEE CONSIDERATION

The Committee on Small Business met in open session, with a 

quorum being present, on June 10, 2015, and ordered H.R. 2670 be 

favorably reported to the House by a voice vote at 12:33 pm. 

Amendment Number One, filed by Ms. Chu of California, would 

have allowed intermediaries to contract their technical assistance, 

training, and operational requirements to third parties. The 

amendment was not agreed to by a recorded vote of 8 yeas and 13 

noes at 12:27 pm. 

Amendment Number Two, filed by Ms. Chu of California, would 

have allowed eliminated the proportional allocation of loan funds 

that ensures intermediaries in every state have access to SBA 

funds for the purpose of making loans. The amendment was not 

agreed to by a recorded vote of 6 yeas and 15 noes at 12:32 pm. 

VI. COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the recorded votes on the motion to report the legislation and amendments thereto. 

AMENDMENT TO H.R. 2670 

OFFERED BY MS. CHU OF CALIFORNIA

Page 5, after line 12, insert the following: 

SEC. 8. REPEAL OF LIMITATION ON CERTAIN CONTRACTS OF THE 

MICROLOAN PROGRAM. 

Section 7(m)(4)(E) of the Small Business Act (15 U.S.C. 

636(m)(4)(E)) is amended— 

(1) by striking ‘‘BUSINESS CONCERNS’’ and all that follows 

through ‘‘Each intermediary’’ and inserting ‘‘BUSINESS CONCERNS.—Each intermediary’’; and 

(2) by striking clause (ii). 


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AMENDMENT TO H.R. 2670 

OFFERED BY MS. CHU OF CALIFORNIA

Page 5, after line 12, insert the following: 

SEC. 8. AMENDMENT TO THE PARTICIPANTS IN MICROLOAN PROGRAM. 

Section 7(m)(7)(B) of the Small Business Act (15 U.S.C. 

636(m)(7)(B)) is amended— 

(1) in clause (i), by striking ‘‘equal to the sum of’’ and all that 

follows through the period at the end and inserting ‘‘not less 

than $800,000’’; and 

(2) in clause (ii), by striking ‘‘, at the beginning of the third 

quarter of a fiscal year,’’. 


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VII. SECTION-BY-SECTION ANALYSIS OF H.R. 2670 

Section 1. Short title 

This section designates the bill as the ‘‘Microloan Modernization 

Act of 2015.’’ 

Section 2. Waivers of the 25/75 rule 

Congress authorized microloan intermediaries to expend some of 

their technical assistance on providing prospective borrowers technical assistance. The logic undergirding that determination was to 

educate potential borrowers on the challenges of starting a business and ensure that they were ready, willing and able to undertake the effort. While some assistance could be provided to individuals other than borrowers, Congress made the conscious decision to 

ensure that the bulk of technical assistance is provided to borrowers, rather than prospective borrowers, as there are numerous 

other entrepreneurial education outreach programs overseen by the 

SBA that offer such training. That resulted in an allocation allowing up to 25 percent of funds to be expended on pre-borrower education while 75 percent had to be utilized for ongoing technical assistance to intermediary borrowers. 15 U.S.C. § 636(m)(4)(E)(i). 

Section 2 of H.R. 2670 maintains the basic foundation of the 

Microloan Program but recognizes there may be instances in which 

the 25/75 allocation may not be appropriate. The section authorizes 

the SBA to develop by rule (after the opportunity for notice and 

comment to ensure that the SBA actually complies with its own 

regulations on public participation in rulemaking) a process for 

issuing waivers of this 25/75 allocation. Waivers only will be granted if the intermediary demonstrates how it will use the additional 

pre-borrower funds and that the intermediary still will have sufficient funds to provide technical assistance to all of its borrowers. 

In creating this waiver process, the Committee expects that the 

SBA will maintain a high bar on granting waivers; otherwise the 

exception would swallow the underlying premise and the Committee does not intend for the basic 25/75 percent allocation to be 

eliminated through waivers issued by the SBA. 

Section 3. Microloan lending limit increase 

The total amount of loans that an intermediary can make have 

periodically been increased (the last two times in 1997 and 2010 effectively doubled the limit from $2.5 million to $5 million). Congress has not modified the limit since 2010 and the $5 million cap 

acts as a barrier for successful microlending institutions from joining the Microloan Program or staying in the program after reaching the $5 million ceiling. As a result, § 3 of H.R. 2670 raises the 

total amount of loans for any single intermediary to $6 million. The 

modest raise in the cap is not a complete anodyne for low participation rates by the microlender, but the Committee expects that the 

higher lending cap will induce increased participation in the program. Finally, the Committee does not expect that the increase in 

the total amount of loans made by an intermediary will affect the 

SBA’s process for selecting new intermediaries. 


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2The Committee is nonplussed at the different terminology in the same part of the SBA’s regulations but not surprised. Cf. Letter from the Hon. Steve Chabot, Chairman, Committee on 

Small Business to Ms. Mary Frias, Office of Capital Access, SBA at 12, 41 n. 137 (Mar. 27, 2015) 

(noting agency failure to grasp import of lexical alterations of extant agency regulations in new 

rules) (on file with Committee). 

Section 4. Extended repayment terms 

Intermediaries, as already noted, have an effective default of rate 

of zero irrespective of the repayment rates by their borrowers. As 

a result, intermediaries should be given greater flexibility in developing loan terms with their borrowers. Section 4 of H.R. 2670 permits an intermediary to allow borrowers up to six years for loans 

under $10,000 and up to ten years for loans over $10,000. The Administrator is prohibited from creating any rule or interpretation 

of a rule that would further restrict the length of loan terms. Further, the Committee does not expect the length of the loan term to 

be a factor in the SBA’s selection of intermediaries to participate 

in the Microloan Program. 

Section 5. Lines of credit authorized 

Section 120.120(b) of the SBA’s regulations provides that the proceeds of a microloan may be used for the purchase of inventory, 

supplies, raw materials, and working capital. Section 120.707(a) of 

the SBA’s regulations authorizes microloan borrowers to use their 

loans for working capital and the acquisition of supplies, furniture, 

fixtures, and equipment.2 The Committee is aware that the SBA 

prohibits microloan borrowers from using loan proceeds to fund 

lines of credit despite the fact that it allows borrowers in its 7(a) 

Business Loan Guarantee Program to use the loan for revolving 

working capital. SBA, Standard Operating Procedure 50 10 5 (H), 

at 74 (May 1, 2015). Although not defined by the SBA, the Committee believes that revolving working capital is a line of credit. 

Since § 120.120(b) of the SBA’s regulations treats businesses borrowing through the 7(a) Business Guarantee Loan Program and 

the Microloan Program in an identical matter, the Committee, 

rather than waiting for the SBA to clarify a situation its own language and interpretations created, statutorily authorizes borrowers 

from intermediaries to use their loan proceeds for establishing lines 

of credit. 

Section 6. GAO Study of microenterprise participation 

The Committee is concerned about the low participation rate of 

microloan lenders in the SBA program. However, the Committee is 

uncertain about the reasons for such low participation. Section 6 

authorizes the Comptroller General to examine the Microloan Program. The particular focus is to identify lenders that do not participate and examine their rationale for opting out of the program. It 

asks the Comptroller General to make recommendations for modifications—be they legislative or regulatory—that will induce greater participation by microlenders in the SBA program. 

Section 7. Office of Advocacy Economic Study of Mandatory Savings 

Requirement 

Many of the borrowers of Microloan intermediaries do not even 

have bank accounts. One aspect of the program initiated by Mohammed Yunus, the Bangladeshi Nobel Peace Prize Winner for 


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starting Grameen Bank, is the forced savings requirement for 

Grameen Bank borrowers. This enables the borrowers to build capital. In the United States, such a requirement also would begin the 

long process of establishing borrowers with a credit history—something that is critical to the operation of businesses (irrespective of 

size) in the United States. Currently, no mandatory savings requirement exists for borrowers from intermediaries. Section 7 requires the Office of the Chief Counsel for Advocacy (an independent 

office within the SBA) that studies a variety of economic issues affecting small businesses to examine the economic consequences of 

starting a mandatory savings requirement for microloan borrowers. 

VIII. CONGRESSIONAL BUDGET JUSTIFICATION

The cost estimate prepared by the Director of the Congressional 

Budget Office pursuant to § 402 of the Congressional Budget Act of 

1974 was not submitted timely to the Committee. 

IX. UNFUNDED MANDATES

H.R. 2670 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act, Pub. L. 

No. 104–4, and would impose no costs on state, local or tribal governments. 

X. NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House, the Committee opines that H.R. 2670 will not establish any 

new budget or entitlement authority or create any tax expenditures. 

The legislation modifies certain aspects of the Microloan Program 

but does not change the funds available for operation of the program or the interest rates charged by the SBA to intermediaries. 

As a result, the changes will have no impact on budget authority. 

XI. OVERSIGHT FINDINGS

In accordance with clause 2(b)(1) of rule X of the Rules of the 

House, the oversight findings and recommendations of the Committee on Small Business with respect to the subject matter contained in H.R. 2670 are incorporated into the descriptive portions 

of this report. 

XII. STATEMENT OF CONSTITUTIONAL AUTHORITY

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds that the authority for this 

legislation in Art. I, § 8, cl. 3 of the Constitution of the United 

States. 

XIII. CONGRESSIONAL ACCOUNTABILITY ACT

H.R. 2670 does not relate to the terms and conditions of employment or access to public services or accommodations within the 

meaning of § 102(b)(3) of Pub. L. No. 104–1. 


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XIV. FEDERAL ADVISORY COMMITTEE ACT STATEMENT

H.R. 2670 does not establish or authorize the establishment of 

any new advisory committees as that term is defined in the Federal 

Advisory Committee Act, 5 U.S.C. App. 2. 

XV. STATEMENT OF NO EARMARKS

Pursuant to clause 9 of rule XXI, H.R. 2670 does not contain any 

congressional earmarks, limited tax benefits or limited tariff benefits as defined in subsections (d), (e) or (f) of clause 9 of rule XXI 

of the Rules of the House. 

XVI. STATEMENT OF DUPLICATION OF FEDERAL PROGRAMS

Pursuant to clause 3(c) of the rule XIII of the Rules of the House, 

no provision of H.R. 2670 establishes or reauthorizes a program of 

the federal government known to be duplicative of another federal 

program, a program that was included in any report from the 

United States Government Accountability Office pursuant to § 21 of 

Pub. L. No. 111–139, or a program related to a program identified 

in the most recent catalog of federal domestic assistance. 

XVII. DISCLOSURE OF DIRECTED RULE MAKINGS

Pursuant to clause 3(c) of rule XIII of the Rules of the House, 

H.R. 2670 directs the SBA to conduct one rulemaking for the purpose of establishing a process by which intermediaries can obtain 

waiver of the 25/75 allocation rule. Absent direction from Congress, 

the Committee is concerned that the SBA will not follow its public 

participation rules with respect to rulemaking. 

XVIII. PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House, 

the Committee establishes the following performance-related goals 

and objectives this legislation: 

H.R. 2670 amends the Small Business Act to provide 

greater flexibility to microloan intermediaries in order for 

them to meet the capital needs of microenterprises. 

XIX. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 

SMALL BUSINESS ACT 

* * * * * * * 

SEC. 7. (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, 


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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.—No financial assistance shall 

be extended pursuant to this subsection if the applicant 

can obtain credit elsewhere. No immediate participation 

may be purchased unless it is shown that a deferred participation is not available; and no direct financing may be 

made unless it is shown that a participation is not available. 

(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. 

(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) 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) 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.— 

(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 


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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— 

(I) 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 PRO- GRAM.—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.—In 

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 

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 AdminisVerDate Sep 11 2014 04:10 Jul 01, 2015 Jkt 049006 PO 00000 Frm 00013 Fmt 6659 Sfmt 6602 E:\HR\OC\HR188.XXX HR188

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tration’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— 

(I) 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— 

(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 


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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 

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 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 rehabilitation 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. 


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(12)(A) 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) 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.— 

(I) 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. 

(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 


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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 401(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 employeeowned firms assisted by the Administration. 

(16) INTERNATIONAL TRADE.— (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. 


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(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— 

(I) this paragraph; 

(II) paragraph (14); or 

(III) paragraph (34). 

(ii) AVAILABILITY OF LIST.—The Administrator 

shall— 

(I) 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 


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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 

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

(C) Authority to liquidate loans.— 

(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.—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)(10) 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; 


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(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 a well-balanced 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: 

(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. 

(21)(A) 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— 

(I) 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 busiVerDate Sep 11 2014 04:10 Jul 01, 2015 Jkt 049006 PO 00000 Frm 00020 Fmt 6659 Sfmt 6602 E:\HR\OC\HR188.XXX HR188

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ness 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 

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) JOB CREATION AND COMMUNITY BENEFIT.—In 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— 

(I) 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 


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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) 

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, 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) 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 


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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 connec- tion 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, 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 ‘‘express lender’’ means any lender authorized by the Administration to participate in the 

Express Loan Program. 

(ii) 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. 

(iii) 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). 


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(F) EXPRESS LOANS FOR RENEWABLE ENERGY AND ENERGY

EFFICIENCY.— 

(i) DEFINITIONS.—In this subparagraph— 

(I) the term ‘‘biomass’’— 

(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 

(III) 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— 

(I) purchasing a renewable energy system; or 

(II) carrying out an energy efficiency project for 

a small business concern. 

(32) LOANS FOR ENERGY EFFICIENT TECHNOLOGIES.— 

(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 ‘‘covered energy efficiency loan’’ means 

a loan— 

(I) 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 AdminisVerDate Sep 11 2014 04:10 Jul 01, 2015 Jkt 049006 PO 00000 Frm 00024 Fmt 6659 Sfmt 6602 E:\HR\OC\HR188.XXX HR188

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trator 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— 

(I) 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 

(III) 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— 

(I) the number of covered energy efficiency loans 

for which fees were reduced under the pilot program; 


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(II) a description of the energy efficiency savings 

with the pilot program; 

(III) 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 Administrator 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— 

(I) 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 

(III) 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 


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(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— 

(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; 

(III) 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; 

(III) 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 


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(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. 

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

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

(1)(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, but not limited to, 

construction of retaining walls and sea walls, grading and 

contouring land, relocating utilities and modifying structures; 

(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 

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nesses 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 

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 


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(iii) the term ‘‘substantial economic injury’’ means an 

economic harm to a business concern that results in the inability of the business concern— 

(I) to meet its obligations as they mature; 

(II) to pay its ordinary and necessary operating expenses; or 

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

make a determination regarding such applications prior to 


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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.—If 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 information regarding assistance available from the Federal 

Emergency Management Agency; 


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(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.—In 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.— (A) AGGREGATE LOAN AMOUNTS.—Except as provided in 

subparagraph (B), and notwithstanding any other provision of law, the aggregate loan amount outstanding and 


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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— 

(I) 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 ASSIST- ANCE.— 

(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.— (I) IN GENERAL.—If 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 

15 days, the Administrator shall give priority to 

the processing of such applications submitted by 


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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.—If 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.—In 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— 

(I) 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— 

(I) 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. 

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) 

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place 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 

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 paraVerDate Sep 11 2014 04:10 Jul 01, 2015 Jkt 049006 PO 00000 Frm 00035 Fmt 6659 Sfmt 6602 E:\HR\OC\HR188.XXX HR188

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graph, 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 

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— 


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(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 Act to a disaster loan under paragraph (1) (2) 

of this subsection. 

(c) PRIVATE DISASTER LOANS.— 

(1) DEFINITIONS.—In 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)(1) 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 is— 

(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.— 


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(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. 

(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 


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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. 

(d)(1) 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) 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 

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istration’s share of loans made pursuant to paragraph (1) of 

subsection (b)— 

(A) 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) 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 

sources 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 


emcdonald on DSK67QTVN1PROD with HEARING
41 

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) Notwithstanding the provisions of any other law, the interest rate on the Federal share of any loan made under subsection (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 


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42 

this subparagraph shall be limited to a maximum term of 

7 years. 

(6) 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 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). 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 Agriculture or the Administrator of the Small Business Administration. 

(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) 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 

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quire the borrower to pay any non-amortized amount for the first 

five years after repayment begins. 

(e) [RESERVED]. 

(f) [RESERVED]. 

(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 receives 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 sub- section 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)(1)(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)(1) 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 


emcdonald on DSK67QTVN1PROD with HEARING
44 

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 private 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 


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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 

if such relocation would result in an increase in unemployment in 

the area of original location. 

(j)(1) 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), 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 


emcdonald on DSK67QTVN1PROD with HEARING
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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, 

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. 

(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) 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). 

(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; 


emcdonald on DSK67QTVN1PROD with HEARING
47 

(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 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 

(III) 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 thereof) 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) 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 Business Opportunity Specialist 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 serving at the time of the 

date of enactment of the National Defense Authorization Act 

for Fiscal Year 2013 may continue to serve as a Business Opportunity Specialist for a period of 5 years beginning on that 

date of enactment without such a certification. 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). 


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(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 personnel conditions which are likely to impede the small 

business concern from receiving contracts other than 

those awarded under section 8(a). 

(III) 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— 

(I) 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), 


emcdonald on DSK67QTVN1PROD with HEARING
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(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 effective 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 8(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 8(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. 


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(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 

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). 

(I)(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 

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ness 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 

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)(I) 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. 

(III) 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). 

(11)(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) 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. 


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(ii) Except as provided in clause (iii), any individual 

upon whom eligibility is based pursuant to section 8(a)(4) 

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— 

(I) 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 

(II) 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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(vi) 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) 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 

(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 

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cerns 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: 

(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 exemptions shall apply only to contracts awarded pursuant to section 

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

subparagraph only if— 

(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 IV 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 


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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 Investment Act of 

1998. 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 any 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 upgraded employee has provided a similar assurance to remain within the employ of such concern for such period; if 

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; 


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(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) 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. 

(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 (10)(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: 


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(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 preceding 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. 


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(k) In carrying out its functions under subsections 7(i), 7(j), and 

8(a) of this Act, the Administration is authorized— 

(1) 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; 

(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— 

(I) 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— 

(I) 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— 


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(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 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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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— 

(I) 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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(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— 

(I) 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 lowincome 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— 

(I) 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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(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.—In 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 

ø$5,000,000¿ $6,000,000 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 (III), 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.—After 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 may 

reduce the annual loan loss reserve requirement of an 


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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. 

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

under this paragraph shall— 


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(I) 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) 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) 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. 

(C) ADDITIONAL TECHNICAL ASSISTANCE GRANTS FOR MAKING CERTAIN LOANS.— 

(i) 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 

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cated 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 (1)(B)(ii) to provide information and technical assistance to small business concerns that are prospective borrowers under this subsection. The Administrator shall by rule establish a 

process by which intermediaries may apply for and the 

Administrator may grant a waiver from the requirements of this clause. 

(ii) TECHNICAL ASSISTANCE.—An intermediary may 

expend not more than 25 percent of the funds received 

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

(ii) ELIGIBLE RECIPIENTS; GRANT AMOUNTS.—In 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. 


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(iii) USE OF GRANT AMOUNTS.—Grants under this 

subparagraph— 

(I) 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 IV 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— 

(I) 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). 

(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 (including lines of credit), fixed rate loans to 

startup, newly established, and growing small business 


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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. 

(F) REPAYMENT TERMS FOR LOANS TO SMALL BUSI- NESSES.—The Administrator may not impose limitations on 

the term for repayment of a loan made by an intermediary 

to a small business concern or entrepreneur, except that— 

(i) in the case of a loan made by an intermediary of 

$10,000 or less, the repayment term shall be not more 

than 6 years; and 

(ii) in the case of a loan greater than $10,000, the repayment term shall be not more than 10 years. 

(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 

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— 

(I) the lesser of— 


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(aa) $800,000; or 

(bb) 1⁄55 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 AS- SISTANCE, 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. 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 (1)(A)(iv) in any fiscal year, the Administration may use not more than 5 percent to provide technical assistance, either directly or 

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 


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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— 

(I) 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— 

(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 

(D) 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 


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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.—In lieu of making direct loans to intermediaries as authorized in paragraph 

(1)(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.—In 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 INITIA- TIVE.—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.— (1) DEFINITIONS.—In 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. 

(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 reVerDate Sep 11 2014 04:10 Jul 01, 2015 Jkt 049006 PO 00000 Frm 00070 Fmt 6659 Sfmt 6601 E:\HR\OC\HR188.XXX HR188

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servist, 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 

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. 

* * * * * * * 


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XX. ADDITIONAL VIEWS

BACKGROUND

The Microloan program provides very small loans to start-up, 

newly established, or growing small business concerns. Under this 

program, the SBA makes funds available to nonprofit community 

based lenders (intermediaries) which, in turn, make loans to eligible borrowers in amounts up to a maximum of $50,000. The average loan size is about $14,000. Applications are submitted to the 

local intermediary and all credit decisions are made on that level. 

Loan terms vary according to the size of the loan, the planned use 

of funds, the requirements of the intermediary lender, and the 

needs of the small business borrower. 

Beyond increases to the maximum business loan size and the 

intermediary borrowing cap in 2010, the program remains substantially the same as when it was first enacted as a five-year pilot program back in 1991. In that time, a number of the program’s requirements have been identified as in need of modernization to better deploy capital. 

First, lenders are limited to using no more than 25% of their TA 

grant to prepare borrowers before a loan is made (‘‘pre-loan’’), while 

75% is reserved for ‘‘post-loan’’ assistance. This is known as the 25/ 

75 rule. Lenders have raised concerns that the rigid formula results in costly inefficiencies and prevents them from adequately addressing the needs of each borrower. 

Intermediaries are prevented from having more than $5 million 

in outstanding loans from the SBA. Many active and qualified 

intermediaries have hit the cap and are prevented from borrowing 

additional funds. As a result, deserving small businesses in their 

geographic operating area are denied capital through no fault of 

their own. 

Currently, the maximum term of a microloan is six years for the 

borrower to repay the intermediary. The original 6-year term was 

set in 1991 when the microloan limit was $10,000. With the change 

in the size of the loans, particularly for larger loans of up to 

$50,000, a longer time period would lower monthly payments for 

borrowers, improve cash flow, and increase the likelihood of success. 

Finally, not all businesses need a fixed-rate term loan. Sometimes a more flexible line of credit is the better product for a small 

business that has cyclic or uneven cash flow. Entrepreneurs often 

turn to personal credit cards (a line of credit product) to fund 

startups and microbusiness. Owners that have to turn to a credit 

card—if they can get one—typically pay interest rates that are 

higher than that on a microloan. However, SBA has prohibited 

lines of credit as an eligible use of funds in the microloan SOP. 


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LEGISLATION

Introduced by Representative Moulton (D–MA), H.R. 2670, the 

‘‘Microloan Modernization Act of 2015’’ would address the shortcomings of the program described above. Specifically, the legislation would create a waiver process to the 25/75 rule, increase the 

intermediary lending cap, increase the maximum repayment term, 

permit lines of credit, and authorize two studies to on intermediary 

program participation and the feasibility of adopting a mandatory 

savings component for borrowers. 

Waiver process for use of technical assistance (TA) grant funds provides flexibility 

To provide flexibility for use of TA grants, section two of the bill 

would allow intermediaries to apply to SBA for waiver of the ‘‘25/ 

75’’ rule in accordance with standards promulgated by the SBA. In 

seeking the waiver, intermediaries would, at a minimum, have to 

explain how they would utilize the additional pre-loan TA as well 

as provide assurances that enough TA would remain to properly 

support all ‘‘post-loan’’ borrowers. 

A waiver process would provide intermediaries with the flexibility to provide additional pre-loan technical assistance when the 

need arises and allow for monitoring by SBA. Additionally, a waiver process would minimize the chances for fraud, waste and abuse 

and ensures the majority of TA grant money remains available for 

actual borrowers. 

Increase in the intermediary lending limit expands access to capital 

Section three of the bill would increase the lending limit to $6 

million, a 20 percent increase. Increasing the cap will allow lenders 

to continue to meet demand at no additional cost to the taxpayer. 

This will help high performing intermediaries make more loans at 

a reduced cost which ultimately helps borrowers. 

Increase in repayment term assists small business borrowers 

Under section four, the current six year repayment period would 

continue to apply to loans up to $10,000. A prepayment term of up 

to 10 years would be allowed for loans greater than $10,000. This 

coincides with the repayment term on intermediary loans with the 

SBA. Within the limits of this section, the exact length of the term 

of each loan will be determined by the borrower and intermediary; 

SBA cannot further constrain the minimum or maximum term for 

a certain loan size by regulation or SOP. 

Providing a longer repayment period for larger loans will reduce 

monthly payments and make the loan more manageable for borrowers. With greater flexibility in repayment terms, borrowers 

have greater control to manage their debt, which can potentially 

enhance their profitability and success. 

Permitting lines of credit gives borrowers more flexibility 

This provision would strike the SBA’s unilateral prohibition on 

lines of credit and would help deserving small businesses that do 

not fit the needs of a traditional term loan access lower-cost capital. 


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Allowing lines of credit is an opportunity to assist more borrowers. The service sector provides microenterprise opportunities— 

plumbers, maid service, day care, etc.—that are the types of businesses that don’t have large up-front costs and would be better 

served by a line of credit. Currently, borrowers have to go back to 

the microlender each time they are cash-strapped for inventory to 

request a new loan. This drives up costs for both borrowers and 

lenders. 

Studying the U.S. microenterprise industry to increase 7(m) program participation 

According to the Aspen Institute, there are approximately 800 

microenterprise programs (MEP) in the U.S. However, less than 

200 of those participate in the 7(m) program. Further, the 7(m) 

program only made 4,000 loans last year across an unevenly distributed lending network, while the entire MEP industry made 

over 24,000 loans and served 48,000 businesses according to an 

Aspen Institute survey. Because SBA does not collect data beyond 

those that participate in 7(m), a study is necessary to understand 

how the non-7(m) microlenders operate and provide services to borrowers. 

Section six would require a GAO study of the U.S. microlending 

industry, both 7(m) and non-participants. Specifically, GAO would: 

1. Examine the operations (services provided, structure, size, 

area of operation) of a representative sample of both 7(m) participants and non-participant MEPs, 

2. Examine why non-participant MEPs are not part of the 7(m) 

program, 

3. Examine the current university-based MEPs for feasibility as 

7(m) participants, and 

4. Make recommendations on ways to improve the 7(m) program 

and increase participation. 

This study is a necessary step toward improving the reach and 

effectiveness of the microloan program. Once it is known why less 

than 20% of microenterprise programs participate in 7(m) and why 

the 7(m) program does not have full geographic distribution across 

the country, additional reforms can be made. 

Studying the economic impact and feasibility of a mandatory savings requirement for the 7(m) program 

Many successful microloan programs overseas have a mandatory 

savings component. A small portion of each payment is directed 

into a savings account for the borrower to draw from in the future. 

Mandatory savings have been shown to provide a number of benefits, including deferring the costs of default, helping the unbanked 

and underbanked transition into the mainstream financial sector, 

and providing a source of collateral on which to borrow more funding in the future. While this model has had great success in the 

Third World, it is unclear what impact it would have on U.S. 

microborrowers that operate in a completely different economic and 

regulatory environment. 

Section seven of the bill would require the SBA’s Office of Advocacy to conduct a study on the economic impact of a mandatory 

savings requirement on microbusinesses. Specifically, the Office of 


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Advocacy would investigate the benefits and costs of such a requirement and make recommendations on implementation. 

This study is a necessary step to determine the feasibility of a 

savings component to the microloan program. Studies show that 

having savings is just as important to microenterprises as access 

to credit. Savings help owners meet the challenges of unforeseen 

expenses and give them a better chance at sustainability. If the 

study finds the 7(m) program would benefit from a savings component, reforms can be proposed at that time. 

NYDIA M. VELA ́ ZQUEZ. 

Æ 


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