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[House Report 114-188]
[From the U.S. Government Publishing Office]

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 Expenditure10
  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

 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 non-profits, 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.

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. Sec. 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 
Sec. 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 Sec. 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 
Sec. 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 the program--low 
dollar loans offered to microentrepreneurs along with 
intermediary-provided technical assistance.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------

                              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).
                              ----------                              

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                         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,''.
                              ----------                              

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

             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. Sec. 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, Sec. 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.

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 Sec. 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.
---------------------------------------------------------------------------
    \2\The 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 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 
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 Sec. 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, Sec. 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 Sec. 102(b)(3) of Pub. L. No. 104-1.

             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 Sec. 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, 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 
                        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 program.--In an agreement to 
                participate in a loan on a deferred basis under 
                the Export Working Capital Program established 
                pursuant to paragraph (14)(A), such 
                participation by the Administration shall be 90 
                percent.
                  (E) Participation in international trade 
                loan.--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 
                Administration's share of any direct or 
                immediate participation loan shall not exceed 
                the current average market yield on outstanding 
                marketable obligations of the United States 
                with remaining periods to maturity comparable 
                to the average maturities of such loans and 
                adjusted to the nearest one-eighth of 1 per 
                centum, and an additional amount as determined 
                by the Administration, but not to exceed 1 per 
                centum per annum: Provided, That for those 
                loans to assist any public or private 
                organization for the handicapped or to assist 
                any handicapped individual as provided in 
                paragraph (10) of this subsection, the interest 
                rate shall be 3 per centum per annum.
                  (B) Payment of accrued interest.--
                          (i) In general.--Any bank or other 
                        lending institution making a claim for 
                        payment on the guaranteed portion of a 
                        loan made under this subsection shall 
                        be paid the accrued interest due on the 
                        loan from the earliest date of default 
                        to the date of payment of the claim at 
                        a rate not to exceed the rate of 
                        interest on the loan on the date of 
                        default, minus one percent.
                          (ii) Loans sold on secondary 
                        market.--If a loan described in clause 
                        (i) is sold on the secondary market, 
                        the amount of interest paid to a bank 
                        or other lending institution described 
                        in that clause from the earliest date 
                        of default to the date of payment of 
                        the claim shall be no more than the 
                        agreed upon rate, minus one percent.
                          (iii) Applicability.--Clauses (i) and 
                        (ii) shall not apply to loans made on 
                        or after October 1, 2000.
                  (C) Prepayment charges.--
                          (i) In general.--A borrower who 
                        prepays any loan guaranteed under this 
                        subsection shall remit to the 
                        Administration a subsidy recoupment fee 
                        calculated in accordance with clause 
                        (ii) if--
                                  (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 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.
          (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 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 employee-owned 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.
                          (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 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;
                  (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 business was a prime 
                contractor or subcontractor (or supplier) at 
                any tier; or
          (ii) to a qualified individual or a veteran seeking 
        to establish (or acquire) and operate a small business 
        concern.
  (B) Recognizing that greater risk may be associated with a 
loan to a small business concern described in subparagraph 
(A)(i), any reasonable doubts concerning the firm's proposed 
business plan for transition to nondefense-related markets 
shall be resolved in favor of the loan applicant when making 
any determination regarding the sound value of the proposed 
loan in accordance with paragraph (6).
  (C) Loans pursuant to this paragraph shall be authorized in 
such amounts as provided in advance in appropriation Acts for 
the purposes of loans under this paragraph.
  (D) For purposes of this paragraph a qualified individual 
is--
          (i) a member of the Armed Forces of the United 
        States, honorably discharged from active duty 
        involuntarily or pursuant to a program providing 
        bonuses or other inducements to encourage voluntary 
        separation or early retirement;
          (ii) a civilian employee of the Department of Defense 
        involuntarily separated from Federal service or retired 
        pursuant to 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 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 
        guaranteed under this subsection, if the borrower 
        permanently occupies and uses not less than 60 percent 
        of the total business space in the property.
          (29) Real estate appraisals.--With respect to a loan 
        under this subsection that is secured by commercial 
        real property, an appraisal of such property by a State 
        licensed or certified appraiser--
                  (A) shall be required by the Administration 
                in connection with any such loan for more than 
                $250,000; or
                  (B) may be required by the Administration or 
                the lender in connection with any such loan for 
                $250,000 or less, 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).
                  (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 Administrator shall reduce the fees 
                for covered energy efficiency loans.
                  (C) Duration.--The pilot program shall 
                terminate at the end of the second full fiscal 
                year after the date that the Administrator 
                establishes the pilot program.
                  (D) Maximum participation.--A covered energy 
                efficiency loan shall include the maximum 
                participation levels by the Administrator 
                permitted for loans made under this subsection.
                  (E) Fees.--
                          (i) In general.--The fee on a covered 
                        energy efficiency loan shall be equal 
                        to 50 percent of the fee otherwise 
                        applicable to that loan under paragraph 
                        (18).
                          (ii) Waiver.--The Administrator may 
                        waive clause (i) for a fiscal year if--
                                  (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;
                                  (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
                                  (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
                          (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 deferred (guaranteed) 
        basis), as the Administrator may determine to be 
        necessary or appropriate, to enable small businesses to 
        use mitigation techniques in support of a formal 
        mitigation program established by the Federal Emergency 
        Management Agency, except that no loan or guarantee may 
        be extended to a small business under this subparagraph 
        unless the Administration finds that the small business 
        is otherwise unable to obtain credit for the purposes 
        described in this subparagraph;
          (2) to make sure loans (either directly or in 
        cooperation with banks or other lending institutions 
        through agreements to participate on an immediate or 
        deferred (guaranteed) basis) as the Administration may 
        determine to be necessary or appropriate to any small 
        business concern, private nonprofit organization, or 
        small agricultural cooperative located in an area 
        affected by a disaster, (including drought), with 
        respect to both farm-related and nonfarm-related small 
        business concerns, if the Administration determines 
        that the concern, the organization, or the cooperative 
        has suffered a substantial economic injury as a result 
        of such disaster and if such disaster constitutes--
                  (A) a major disaster, as determined by the 
                President under the Robert T. Stafford Disaster 
                Relief and Emergency Assistance Act (42 U.S.C. 
                5121 et seq.); or
                  (B) a natural disaster, as determined by the 
                Secretary of Agriculture pursuant to section 
                321 of the Consolidated Farm and Rural 
                Development Act (7 U.S.C. 1961), in which case, 
                assistance under this paragraph may be provided 
                to farm-related and nonfarm-related small 
                business concerns, subject to the other 
                applicable requirements of this paragraph; or
                  (C) a disaster, as determined by the 
                Administrator of the Small Business 
                Administration; or
                  (D) if no disaster declaration has been 
                issued pursuant to subparagraph (A), (B), or 
                (C), the Governor of a State in which a 
                disaster has occurred may certify to the Small 
                Business Administration that small business 
                concerns, private nonprofit organizations, or 
                small agricultural cooperatives (1) have 
                suffered economic injury as a result of such 
                disaster, and (2) are in need of financial 
                assistance which is not available on reasonable 
                terms in the disaster stricken area. Not later 
                than 30 days after the date of receipt of such 
                certification by a Governor of a State, the 
                Administration shall respond in writing to that 
                Governor on its determination and the reasons 
                therefore, and may then make such loans as 
                would have been available under this paragraph 
                if a disaster declaration had been issued.
         Provided, That no loan or guarantee shall be extended 
        pursuant to this paragraph (2) unless the 
        Administration finds that the applicant is not able to 
        obtain credit elsewhere.
          (3)(A) In this paragraph--
                  (i) the term ``essential employee'' means an 
                individual who is employed by a small business 
                concern and whose managerial or technical 
                expertise is critical to the successful day-to-
                day operations of that small business concern;
                  (ii) the term ``period of military conflict'' 
                has the meaning given the term in subsection 
                (n)(1); and
                  (iii) the term ``substantial economic 
                injury'' means an economic harm to a business 
                concern that results in the inability of the 
                business concern--
                          (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 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;
                  (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 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 
                                disaster-related substantial 
                                economic injury as a result of 
                                the incident.
                  (C) Additional economic injury disaster loan 
                assistance.--
                          (i) In general.--If the Administrator 
                        declares eligibility for additional 
                        disaster assistance under this 
                        paragraph, the Administrator may make 
                        such loans under this subparagraph 
                        (either directly or in cooperation with 
                        banks or other lending institutions 
                        through agreements to participate on an 
                        immediate or deferred basis) as the 
                        Administrator determines appropriate to 
                        eligible small business concerns 
                        located anywhere in the United States.
                          (ii) Processing time.--
                                  (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 
                                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) the loan 
was made to enable (i) such homeowner to repair or replace his 
home, or (ii) such concern to repair or replace plant or 
equipment which was damaged or destroyed as the result of a 
disaster meeting the requirements of clause (A) or (B) of 
paragraph (2) of this subsection, and (C) the Administrator 
determines such action is necessary to avoid severe financial 
hardship: Provided further, That the provisions of paragraph 
(1) of subsection (d) of this section shall not be applicable 
to any such loan having a maturity in excess of twenty years. 
Notwithstanding any other provision of law, and except as 
provided in subsection (d), the interest rate on the 
Administration's share of any loan made under subsection (b), 
shall not exceed the average annual interest rate on all 
interest-bearing 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 paragraph, and its 
recommendations with respect to the continuation, modification, 
or termination of such activities.
  In the administration of the disaster loan program under 
paragraphs (1) and (2) of this subsection, in the case of 
property loss or damage or injury resulting from a major 
disaster as determined by the President or a disaster as 
determined by the Administrator which occurs on or after 
January 1, 1971, and prior to July 1, 1973, the Small Business 
Administration, to the extent such loss or damage or injury is 
not compensated for by insurance or otherwise--
          (A) may make any loan for repair, rehabilitation, or 
        replacement of property damaged or destroyed without 
        regard to whether the required financial assistance is 
        otherwise available from private sources;
          (B) may, in the case of the total destruction or 
        substantial property damage of a home or business 
        concern, refinance any mortgage or other liens 
        outstanding against the destroyed or damaged property 
        if such project is to be repaired, rehabilitated, or 
        replaced, except that (1) in the case of a business 
        concern, the amount refinanced shall not exceed the 
        amount of the physical loss sustained, and (2) in the 
        case of a home, the amount of each monthly payment of 
        principal and interest on the loan after refinancing 
        under this clause shall be not less than the amount of 
        each such payment made prior to such refinancing;
          (C) may, in the case of a loan made under clause (A) 
        or a mortgage or other lien refinanced under clause (B) 
        in connection with the destruction of, or substantial 
        damage to, property owned and used as a residence by an 
        individual who by reason of retirement, disability, or 
        other similar circumstances relies for support on 
        survivor, disability, or retirement benefits under a 
        pension, insurance, or other program, consent to the 
        suspension of the payments of the principal of that 
        loan, mortgage, or lien during the lifetime of that 
        individual and his souse for so long as the 
        Administration determines that making such payments 
        would constitute a substantial hardship;
          (D) shall, notwithstanding the provisions of any 
        other law and upon presentation by the applicant of 
        proof of loss or damage or injury and a bona fide 
        estimate of cost of repair, rehabilitation, or 
        replacement, cancel the principal of any loan made to 
        cover a loss or damage or injury resulting from such 
        disaster, except that--
                  (i) with respect to a loan made in connection 
                with a disaster occurring on or after January 
                1, 1971 but prior to January 1, 1972, the total 
                amount so canceled shall not exceed $2,500, and 
                the interest on the balance of the loan shall 
                be at a rate of 3 per centum per annum; and
                  (ii) with respect to a loan made in 
                connection with a disaster occurring on or 
                after January 1, 1972 but prior to July 1, 
                1973, the total amount so canceled shall not 
                exceed $5,000, and the interest on the balance 
                of the loan shall be at a rate of 1 per centum 
                per annum.
  With respect to any loan referred to in clause (D) which is 
outstanding on the date of enactment of this paragraph, the 
Administrator shall--
          (i) make sure change in the interest rate on the 
        balance of such loan as is required under that clause 
        effective as of such date of enactment; and
          (ii) in applying the limitation set forth in that 
        clause with respect to the total amount of such loan 
        which may be canceled, consider as part of the amount 
        so canceled any part of such loan which was previously 
        canceled pursuant to section 231 of the Disaster Relief 
        Act of 1970.
  Whoever wrongfully misapplies the proceeds of a loan obtained 
under this subsection shall be civilly liable to the 
Administrator in an amount equal to one-and-one-half times the 
original principal amount of the loan.
          (E) A State grant made on or prior to July 1, 1979, 
        shall not be considered compensation for the purpose of 
        applying the provisions of section 312(a) of the 
        Disaster Relief and Emergency Assistance 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.--
                  (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 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 1, 1978, and prior the effective date of this 
        Act, on the Administration'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 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 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 
making loans under subsection (b), the Administrator shall not 
require the borrower to pay any non-amortized amount for the 
first five years after repayment begins.
  (e) [RESERVED].
  (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 
subsection shall not exceed $350,000, nor may any such loan be 
made if the total amount outstanding and committed (by 
participation or otherwise) to the borrower from the business 
loan and investment fund established by section 4(c)(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 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 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 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;
                  (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).
                  (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),
                          (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.
          (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 Participant's performance 
                regarding attainment of business activity 
                targets during periodic reviews of such 
                Participant's business plan; and
                  (V) authorize the Administration to take 
                appropriate remedial measures with respect to a 
                Program Participant that has failed to attain a 
                required business activity target 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.
                  (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;
          (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 to 
        increase significantly contract awards to small 
        business concerns owned and controlled by socially and 
        economically disadvantaged individuals. When 
        considering such increase the Administration shall give 
        due consideration to those industrial categories where 
        Federal purchases have been substantial but where the 
        participation rate of such concerns has been limited.
  (12)(A) The Administration shall segment the Capital 
Ownership Development Program into two stages: a developmental 
stage; and a transitional stage.
  (B) The developmental stage of program participation shall be 
designed to assist the concern in its effort to overcome its 
economic disadvantage by providing such assistance as may be 
necessary and appropriate to access its markets and to 
strengthen its financial and managerial skills.
  (C) The transitional stage of program participation shall be 
designed to overcome, insofar as practicable, the remaining 
elements of economic disadvantage and to prepare such concern 
for graduation from the program.
  (13) A Program Participant, if otherwise eligible, shall be 
qualified to receive the following assistance during the stages 
of program participation specified in paragraph 12:
          (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 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;
                  (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:
          (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.
  (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--
                  (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 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
                  (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 low-income individuals seeking to start or 
                enlarge their own businesses, if such 
                assistance includes working with the grant 
                recipient to secure loans in amounts not to 
                exceed $50,000 from private sector lending 
                institutions, with or without a loan guarantee 
                from the nonprofit entity.
          (2) Eligibility for participation.--An intermediary 
        shall be eligible to receive loans and grants under 
        subparagraphs (B)(i) and (B)(ii) of paragraph (1) if 
        it--
                  (A) meets the definition in paragraph (10); 
                and
                  (B) has at least 1 year of experience making 
                microloans to startup, newly established, or 
                growing small business concerns and providing, 
                as an integral part of its microloan program, 
                intensive marketing, management, and technical 
                assistance to its borrowers.
          (3) Loans to intermediaries.--
                  (A) Intermediary applications.--(i) In 
                general.--As part of its application for a 
                loan, each intermediary shall submit a 
                description to the Administration of--
                          (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;
                          (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 [$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 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--
                                  (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 non-Federal 
                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 percent of its 
                                loans to small business 
                                concerns located in or owned by 
                                one or more residents of an 
                                economically distressed area; 
                                or
                                  (II) the intermediary has a 
                                portfolio of loans made under 
                                this subsection that averages 
                                not more than $10,000 during 
                                the period of the 
                                intermediary's participation in 
                                the program.
                          (ii) Purposes.--A grant awarded under 
                        clause (i) may be used to provide 
                        marketing, management, and technical 
                        assistance to small business concerns 
                        that are borrowers under this 
                        subsection.
                          (iii) Contribution exception.--The 
                        contribution requirements in 
                        subparagraph (B) do not apply to grants 
                        made under this subparagraph.
                  (D) Eligibility for multiple sites or 
                offices.--The eligibility for a grant described 
                in subparagraph (A) or (C) shall be determined 
                separately for each loan-making site or office 
                of 1 intermediary.
                  (E) Assistance to certain small business 
                concerns.--
                          (i) In general.--Each intermediary 
                        may expend an amount not to exceed 25 
                        percent of the grant funds received 
                        under paragraph (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.
                          (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 in-kind 
                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 
                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 
                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.
          (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--
                                          (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 
        assistance, and related services.--
                  (A) In general.--The Administration may 
                procure technical assistance for intermediaries 
                participating in the Microloan Program to 
                ensure that such intermediaries have the 
                knowledge, skills, and understanding of 
                microlending practices necessary to operate 
                successful microloan programs.
                  (B) Assistance amount.--The Administration 
                shall transfer 7 percent of its annual 
                appropriation for loans and loan guarantees 
                under this subsection to the Administration's 
                Salaries and Expense Account for the specific 
                purpose of providing 1 or more technical 
                assistance grants to experienced microlending 
                organizations and national and regional 
                nonprofit organizations that have demonstrated 
                experience in providing training support for 
                microenterprise development and financing. 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 of the first 3\1/2\ 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 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 
        initiative.--On January 31, 1999, and annually 
        thereafter, the Administration shall submit to the 
        Committees on Small Business of the House of 
        Representatives and the Senate a report on any monies 
        distributed pursuant to paragraph (4)(F).
  (n) Repayment Deferred for Active Duty Reservists.--
          (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 
                        reservist, who is an essential 
                        employee, was ordered to active duty.
          (2) Deferral of direct loans.--
                  (A) In general.--The Administration shall, 
                upon written request, defer repayment of 
                principal and interest due on a direct loan 
                made under subsection (a) or (b), if such loan 
                was incurred by a qualified borrower.
                  (B) Period of deferral.--The period of 
                deferral for repayment under this paragraph 
                shall begin on the date on which the eligible 
                reservist is ordered to active duty and shall 
                terminate on the date that is 180 days after 
                the date such eligible reservist is discharged 
                or released from active duty.
                  (C) Interest rate reduction during 
                deferral.--Notwithstanding any other provision 
                of law, during the period of deferral described 
                in subparagraph (B), the Administration may, in 
                its discretion, reduce the interest rate on any 
                loan qualifying for a deferral under this 
                paragraph.
          (3) Deferral of loan guarantees and other 
        financings.--The Administration shall--
                  (A) encourage intermediaries participating in 
                the program under subsection (m) to defer 
                repayment of a loan made with proceeds made 
                available under that subsection, if such loan 
                was incurred by a small business concern that 
                is eligible to apply for assistance under 
                subsection (b)(3); and
                  (B) not later than 30 days after the date of 
                the enactment of this subsection, establish 
                guidelines to--
                          (i) encourage lenders and other 
                        intermediaries to defer repayment of, 
                        or provide other relief relating to, 
                        loan guarantees under subsection (a) 
                        and financings under section 504 of the 
                        Small Business Investment Act of 1958 
                        that were incurred by small business 
                        concerns that are eligible to apply for 
                        assistance under subsection (b)(3), and 
                        loan guarantees provided under 
                        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.

           *       *       *       *       *       *       *

                          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.

                              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.
    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 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. Velazquez.

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