79–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 115–645 

MAIN STREET EMPLOYEE OWNERSHIP ACT OF 2018 

APRIL 24, 2018.—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 

[To accompany H.R. 5236] 

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

(H.R. 5236) to expand opportunities available to employee-owned 

business concerns through Small Business Administration loan programs, and for other purposes, having considered the same, report 

favorably thereon with an amendment and recommend that the bill 

as amended do pass. 

CONTENTS 

Page 

I. Purpose of the Bill and Summary ............................................................. 4 

II. Background and the Need for Legislation ................................................ 4 

III. Hearings ....................................................................................................... 5 

IV. Committee Consideration ........................................................................... 5 

V. Committee Votes ......................................................................................... 6 

VI. Section-by-Section Analysis of H.R. 5236 .................................................. 9 

VII. Congressional Budget Office Cost Estimate ............................................. 11 

VIII. Unfunded Mandates .................................................................................... 11 

IX. New Budget Authority, Entitlement Authority and Tax Expenditures 11 

X. Oversight Findings ...................................................................................... 11 

XI. Statement of Constitutional Authority ...................................................... 11 

XII. Congressional Accountability Act .............................................................. 12 

XIII. Federal Advisory Committee Statement ................................................... 12 

XIV. Statement of No Earmarks ........................................................................ 12 

XV. Statement of Duplication of Federal Programs ........................................ 12 

XVI. Disclosure of Directed Rule Makings ........................................................ 12 

XVII. Performance Goals and Objectives ............................................................ 12 

XVIII. Changes in Existing Law Made by the Bill, as Reported ........................ 12 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Main Street Employee Ownership Act of 2018’’. 

2 

SEC. 2. DEFINITIONS. 

In this Act— 

(1) the terms ‘‘Administration’’ and ‘‘Administrator’’ means the Small Business Administration and the Administrator thereof, respectively; 

(2) the term ‘‘cooperative’’ means an entity that is determined to be a cooperative by the Administrator, in accordance with applicable Federal and State laws 

and regulations; 

(3) the term ‘‘employee-owned business concern’’ means— 

(A) a cooperative in which employees are eligible for membership; and 

(B) a qualified employee trust; 

(4) the terms ‘‘qualified employee trust’’ and ‘‘small business concern’’ have 

the meanings given those terms in section 3 of the Small Business Act (15 

U.S.C. 632); and 

(5) the term ‘‘small business development center’’ means a small business development center described in section 21 of the Small Business Act (15 U.S.C. 

648). 

SEC. 3. EXPANSION OF 7(A) LOANS. 

(a) IN GENERAL.—Section 7(a) of the Small Business Act (15 U.S.C. 636(a)) is 

amended— 

(1) in paragraph (15)— 

(A) in subparagraph (A)— 

(i) by striking ‘‘this subsection to qualified employee trusts’’ and inserting ‘‘this subsection— 

‘‘(i) to qualified employee trusts’’; 

(ii) in clause (i), as so designated— 

(I) by inserting ‘‘, and for any transaction costs associated with 

purchasing,’’ after ‘‘purchasing’’; 

(II) by striking the period at the end and inserting ‘‘; and’’; and 

(iii) by adding at the end the following: 

‘‘(ii) to a small business concern under a plan approved by the Administrator, if the proceeds from the loan are only used to make a loan to a 

qualified employee trust, and for any transaction costs associated with making that loan, that results in the qualified employee trust owning at least 

51 percent of the small business concern.’’; 

(B) in subparagraph (B)— 

(i) in the matter preceding clause (i), by inserting ‘‘or by the small 

business concern’’ after ‘‘the trustee of such trust’’; 

(ii) in clause (ii), by striking ‘‘and’’ at the end; 

(iii) in clause (iii), by striking the period at the end and inserting ‘‘, 

and’’; and 

(iv) by adding at the end the following: 

‘‘(iv) with respect to a loan made to a trust, or to a cooperative in accordance with paragraph (35)— 

‘‘(I) a seller of the small business concern may remain involved as an 

officer, director, or key employee of the small business concern when 

a qualified employee trust or cooperative has acquired 100 percent of 

ownership of the small business concern; and 

‘‘(II) any seller of the small business concern who remains as an 

owner of the small business concern, regardless of the percentage of 

ownership interest, shall be required to provide a personal guarantee 

by the Administration.’’; and 

(C) by adding at the end the following: 

‘‘(F) A small business concern that makes a loan to a qualified employee trust 

under subparagraph (A)(ii) is not required to contain the same terms and conditions as the loan made to the small business concern that is guaranteed by the 

Administration under such subparagraph. 

‘‘(G) With respect to a loan made to a qualified employee trust under this 

paragraph, or to a cooperative in accordance with paragraph (35), the Administrator may, as deemed appropriate, elect to not require any mandatory equity 

to be provided by the qualified employee trust or cooperative to make the loan.’’; 

and 

(2) by adding at the end the following: 

‘‘(35) LOANS TO COOPERATIVES.— 

‘‘(A) DEFINITION.—In this paragraph, the term ‘cooperative’ means an entity that is determined to be a cooperative by the Administrator, in accordance with applicable Federal and State laws and regulation. 

‘‘(B) AUTHORITY.—The Administration shall guarantee loans made to a 

cooperative for the purpose described in paragraph (15).’’. 

3 

(b) DELEGATION OF AUTHORITY TO PREFERRED LENDERS.—Section 5(b)(7) of the 

Small Business Act (15 U.S.C. 634(b)(7)) is amended by inserting ‘‘, including loans 

guaranteed under paragraph (15) or (35) of section 7(a)’’ after ‘‘deferred participation 

loans’’. 

SEC. 4. SMALL BUSINESS INVESTMENT COMPANY PROGRAM OUTREACH. 

The Administrator shall provide outreach and educational materials to companies 

licensed under section 301(c) of the Small Business Investment Act of 1958 (15 

U.S.C. 681(c)) to increase the use of funds to make investments in company transitions to employee-owned business concerns. 

SEC. 5. SMALL BUSINESS MICROLOAN PROGRAM OUTREACH. 

The Administrator shall provide outreach and educational materials to intermediaries under section 7(m) of the Small Business Act (15 U.S.C. 636(m)) to increase the use of funds to make loans to employee-owned business concerns, including transitions to employee-owned business concerns. 

SEC. 6. SMALL BUSINESS DEVELOPMENT CENTER OUTREACH AND ASSISTANCE. 

(a) ESTABLISHMENT.—The Administrator shall establish a Small Business Employee Ownership and Cooperatives Promotion Program to offer technical assistance 

and training on the transition to employee ownership through cooperatives and 

qualified employee trusts. 

(b) SMALL BUSINESS DEVELOPMENT CENTERS.— 

(1) IN GENERAL.—In carrying out the program established under subsection 

(a), the Administrator shall enter into agreements with small business development centers under which the centers shall— 

(A) provide access to information and resources on employee ownership 

through cooperatives or qualified employee trusts as a business succession 

strategy; 

(B) conduct training and educational activities; and 

(C) carry out the activities described in subparagraph (U) of section 

21(c)(3) of the Small Business Act (15 U.S.C. 648(c)(3)). 

(2) ADDITIONAL SERVICES.—Section 21(c)(3) of the Small Business Act (15 

U.S.C. 648(c)(3)) is amended— 

(A) in subparagraph (S), by striking ‘‘and’’ at the end; 

(B) in subparagraph (T), by striking the period at the end and inserting 

‘‘; and’’; and 

(C) by adding at the end the following: 

‘‘(U) encouraging and assisting the provision of succession planning to small 

business concerns with a focus on transitioning to cooperatives, as defined in 

section 7(a)(35), and qualified employee trusts (collectively referred to in this 

subparagraph as ‘employee-owned business concerns’), including by— 

‘‘(i) providing training to individuals to promote the successful management, governance, or operation of a business purchased by those individuals 

in the formation of an employee-owned business concern; 

‘‘(ii) assisting employee-owned business concerns that meet applicable size 

standards established under section 3(a) with education and technical assistance with respect to financing and contracting programs administered 

by the Administration; 

‘‘(iii) coordinating with lenders on conducting outreach on financing 

through programs administered by the Administration that may be used to 

support the transition of ownership to employees; 

‘‘(iv) supporting small business concerns in exploring or assessing the possibility of transitioning to an employee-owned business concern; and 

‘‘(v) coordinating with the cooperative development centers of the Department of Agriculture, the land grant extension network, the Manufacturing 

Extension Partnership, community development financial institutions, employee ownership associations and service providers, and local, regional and 

national cooperative associations.’’. 

SEC. 7. INTERAGENCY WORKING GROUP. 

(a) IN GENERAL.—Not later than 90 days after the date of enactment of this Act, 

the Administrator (or a designee of the Administrator) shall coordinate and chair 

an interagency working group, which shall— 

(1) develop recommendations on how Federal programs can promote, support, 

and increase the number of employee-owned business concerns; 

(2) ensure coordination with Federal agencies and national and local employee ownership, cooperative, and small business organizations; and 

(3) publish a report on the activities of the interagency working group that 

is indexed and maintained for public review. 

4 

(b) MEETINGS.—The interagency working group shall meet at such times as determined necessary by the, but not less than biannually. Such meetings may occur in 

person or via electronic resources. 

SEC. 8. AMENDMENT TO REPORT TO CONGRESS ON STATUS OF EMPLOYEE-OWNED FIRMS. 

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

by striking ‘‘Administration.’’ and inserting ‘‘Administration, which shall include— 

‘‘(i) the total number of loans made to employee-owned business concerns that were guaranteed by the Administrator under section 7(a) of 

the Small Business Act (15 U.S.C. 636(a)) or section 502 of the Small 

Business Investment Act of 1958 (15 U.S.C. 696), including the number 

of loans made— 

‘‘(I) to small business concerns owned and controlled by socially 

and economically disadvantaged individuals; and 

‘‘(II) to cooperatives in which employees are eligible for membership; 

‘‘(ii) the total number of financings made to employee-owned business 

concerns by companies licensed under section 301(c) of the Small Business Investment Act of 1958 (15 U.S.C. 696(c)), including the number 

of financings made— 

‘‘(I) to small business concerns owned and controlled by socially 

and economically disadvantaged individuals; and 

‘‘(II) to cooperatives in which employees are eligible for membership; and 

‘‘(iii) any outreach and educational activities conducted by the Administration with respect to employee-owned business concerns.’’. 

SEC. 9. REPORT ON COOPERATIVE LENDING. 

(a) SENSE OF CONGRESS.—It is the sense of Congress that cooperatives have a 

unique business structure and are unable to access the lending programs of the Administration effectively due to loan guarantee requirements that are incompatible 

with the business structure of cooperatives. 

(b) STUDY AND REPORT.— 

(1) STUDY.—The Administrator, in coordination with lenders, stakeholders, 

and Federal agencies, shall study and recommend practical alternatives for cooperatives that will satisfy the loan guarantee requirements of the Administration. 

(2) REPORT.—Not later than 120 days after the date of enactment of this Act, 

the Administrator shall submit to Congress the recommendations developed 

under paragraph (1) and a plan to implement such recommendations. 

SEC. 10. AMENDMENT TO DEFINITION OF QUALIFIED EMPLOYEE TRUST. 

Section 3(c)(2)(A)(ii) of the Small Business Act (15 U.S.C. 632(c)(2)(A)(ii)) is 

amended to read as follows: 

‘‘(ii) which provides that each participant is entitled to direct the plan 

trustee as to the manner of how to vote the qualified employer securities 

(as defined in section 4975(e)(8) of the Internal Revenue Code of 1986), 

which are allocated to the account of such participant with respect to a corporate matter which (by law or charter) must be decided by a vote conducted in accordance with section 409(e) of the Internal Revenue Code of 

1986; and’’. 

I. PURPOSE AND BILL SUMMARY

With the goal of expanding opportunities available to employeeowned small businesses, H.R. 5236, the ‘‘Main Street Employee 

Ownership Act of 2018,’’ aims to provide statutory clarity and comprehensive succession plans to ensure the continued success of employee-owned firms. 

II. BACKGROUND AND NEED FOR LEGISLATION

The ownership structures of American small businesses come in 

numerous forms. From a traditional hierarchical model to a 100 

percent employee-owned structure, small businesses and startups 

have been transforming Main Streets across the nation for years. 

However, with an aging workforces nearing retirement, owners of 

5 

these businesses often lack a formal exit plan to ensure long-term 

success. In addition to absent ownership changeover policies, small 

businesses continue to face a restrained lending environment that 

prevents expansion and job creation. 

This looming crisis can be turned into a unique opportunity to 

strengthen small businesses, reward workers, and invest in our 

Main Street economy by assisting companies with transferring 

ownership to employees through employee stock ownership plans 

(ESOPs) or worker cooperatives. Unfortunately, due to their unique 

ownership structures, these businesses often face uncertainty with 

federal rules and regulations. 

To address the uneven treatment of employee-owned small businesses by the Small Business Administration, H.R. 5236, the ‘‘Main 

Street Employee Ownership Act of 2018’’ aims to provide reforms 

to ensure the continued success of employee-owned firms. Specifically, H.R. 5236 outlines ownership transition plans to ensure 

greater success during changeovers and creates employee-owned 

business outreach plans for the Small Business Investment Company (SBIC) program, the Microloan program, and for the Small 

Business Development Centers (SBDC) program. Additionally, H.R. 

5236 requires an interagency working group for federal agencies to 

share best practices. Finally, this legislation updates reporting statistics to capture accurate data, along with a measure to evaluate 

the Small Business Administration’s (SBA) current utilization of 

employee-owned business loans. 

III. HEARINGS

In the 114th Congress, issues related to employee-owned firms 

were addressed at a hearing by the Committee on Small Business 

entitled ‘‘S is for Savings: Pro-Growth Benefits of Employee-owned 

S Corporations’’ on April 25, 2016. No hearings have been held in 

the 115th Congress. 

IV. COMMITTEE CONSIDERATION

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

quorum being present, on March 14, 2018, and ordered H.R. 5236 

be favorably reported, as amended, to the House via voice vote at 

11:59 A.M. During the markup, one amendment was offered and 

adopted. Disposition of the amendment is addressed below. 

Amendment Number One, filed by Mr. Chabot of Ohio, provides 

technical updates, along with important changes to how the bill 

treats personal guarantees, which is a foundation of SBA’s 7(a) 

loan program. Beyond the technical changes, the underlying bill includes a provision which provides the SBA Administrator with the 

authority to waive the personal guarantee for cooperatives. This 

amendment strikes the waiver provision, and in turn, preserves the 

importance of the personal guarantee. However, understanding the 

personal guarantee produces problems for cooperatives, the amendment requires SBA to coordinate next steps to address disparities 

and provide a workable solution for this important ownership 

structure. Additionally, this amendment reduces the outreach burden on SBA partners by amending the underlying language from 

‘‘establish an outreach program’’ to ‘‘establish outreach and eduVerDate Sep 11 2014 08:31 Apr 26, 2018 Jkt 079010 PO 00000 Frm 00005 Fmt 6659 Sfmt 6602 E:\HR\OC\HR645.XXX HR645
6 

cation material.’’ The amendment was agreed to by a voice vote at 

11:59 A.M. 

V. 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. Via voice 

vote, the Committee reported H.R. 5236, as amended, to the House 

at 11:59 A.M. 

7 


Insert offset folio 9 here HR645.001

COMMITTEE ON SMALL BUSINESS 

TALLY SHEET 

DATE: bllf.-\/! 3' 

BILL NUMBER: '523,(o 

ROLLCALL: 

AMENDlV~UMBER: 

VOTE : <e_y (NO) l 

MEMBER 

--·-

Mr. Chabot, Chairman 

Mr. King 

Mr. Luetkemeyer 

Mr. Brat 

Ms. Radewagen 

Mr. Knight 

Mr. Kelly 

Mr. Blum 

Mr. Comer 

Ms. Gonzalez-Colon 

Mr. Fitzpatrick 

Dr. lVlarshall 

Mr. Norman 

Mr. Curtis 

·~--.. 

-· 

Ms. Vehizquez, Ranking Member 

Mr. Evans 

Ms. Murphy 

Mr. Lawson, J1·. 

Ms. Clarke 

Ms. Chu 

Ms. Adams 

Mr. Espaillat 

Mr. Schneider 

VACANT 

TOTALS 

QUORUM: 

PRESENT: 

\/.V. t\·. s~ 

AYE NO NOT VOTING 

On this vote there were ·--- ayes and ___ nos. 
8 


Insert offset folio 10 here HR645.002

COMMITTEE ON SMALL BUSINESS 

TALLY SHEET 

DATE: 3/iL·-\ 1\? 

BILL NUl\IBER: '52- YJ 

ROLLCALL: 

AMENDl\?5NUl\IBER: 

VOTE: c (NO) 

-----:-:-_:-·----

MEMBER 

Mr. Chabot, Chairman 

Mr. King 

Mr. Luetkemeyer 

Mr. Brat 

Ms. Radewagen 

Mr. Knight 

Mr. Kelly 

Mr. Blum 

Mr. Comer 

Ms. Gonzalez-Colon 

Mr. Fitzpatrick 

Dr. Marshall 

Mr. Norman 

Mr. Curtis 

v.v. l\ ·. s~ --- AYE NO --------

Ms. Velazquez, Ranking Member 

Mr. Evans 

Ms. Murphy 

Mr. Lawson, Jr. 

Ms. Clarke 

Ms.Chu 

Ms. Adams 

Mr. Espaillat 

Mr. Schneider 

TOTALS 

QUORUM: 

PRESENT: 

NOT VOTING 

On this vote there were ____ ayes and _____ nos. 
9 

AMENDMENT TO H.R. 5236 OFFERED BY MR. CHABOT OF OHIO

Page 2, line 6, insert ‘‘, in accordance with applicable Federal and 

State laws and regulations’’ before the semicolon. 

Page 4, line 20, strike ‘‘may’’ and insert ‘‘shall’’. 

Page 5, strike lines 5 through 10 (and redesignate subsequent 

subparagraph accordingly). 

Page 5, line 21, strike ‘‘a corporation’’ and all that follows 

through ‘‘that is’’ on line 22 and insert ‘‘an entity that is’’. 

Page 5, line 25, strike ‘‘; and’’ and insert a period. 

Page 6, strike lines 1 and 2. 

Page 6, strike lines 6 through 13. 

Page 6, beginning on line 21, strike ‘‘establish an outreach program with’’ and insert ‘‘provide outreach and educational materials 

to’’. 

Page 7, beginning on line 5, strike ‘‘establish an outreach program with’’ and insert ‘‘provide outreach and educational materials 

to’’. 

Page 10, strike lines 12 and 13 and insert the following: 

(3) publish a report on the activities of the interagency working group that is indexed and maintained for public review. 

At the end of the bill, add the following: 

SEC. 9. REPORT ON COOPERATIVE LENDING. 

(a) SENSE OF CONGRESS.—It is the sense of Congress that cooperatives have a unique business structure and are unable to access the lending programs of the Administration effectively due to 

loan guarantee requirements that are incompatible with the business structure of cooperatives. 

(b) STUDY AND REPORT.— 

(1) STUDY.—The Administrator, in coordination with lenders, 

stakeholders, and Federal agencies, shall study and recommend practical alternatives for cooperatives that will satisfy 

the loan guarantee requirements of the Administration. 

(2) REPORT.—Not later than 120 days after the date of enactment of this Act, the Administrator shall submit to Congress 

the recommendations developed under paragraph (1) and a 

plan to implement such recommendations. 

SEC. 10. AMENDMENT TO DEFINITION OF QUALIFIED EMPLOYEE 

TRUST. 

Section 3(c)(2)(A)(ii) of the Small Business Act (15 U.S.C. 

632(c)(2)(A)(ii)) is amended to read as follows: 

‘‘(ii) which provides that each participant is entitled to direct 

the plan trustee as to the manner of how to vote the qualified 

employer securities (as defined in section 4975(e)(8) of the Internal Revenue Code of 1986), which are allocated to the account of such participant with respect to a corporate matter 

which (by law or charter) must be decided by a vote conducted 

in accordance with section 409(e) of the Internal Revenue Code 

of 1986; and’’. 

VI. SECTION-BY-SECTION ANALYSIS OF H.R. 5236 

Section 1. Short title 

This section designates the bill as the ‘‘The Main Street Employee Ownership Act’’. 

10 

Section 2. Definitions 

This section defines the word ‘‘Administration’’ to mean the 

Small Business Administration, the term ‘‘Administrator’’ to mean 

the Administrator of the Small Business Administration, the term 

‘‘cooperative’’ to mean an entity that is determined to be a cooperative by the Administrator, and the term ‘‘employee-owned business 

concern’’ to mean a cooperative with which employees are eligible 

for membership and a qualified employee trust. Additionally, the 

terms ‘‘qualified employee trust’’ and ‘‘small business concern’’ have 

the meaning provided in Section 3 of the Small Business Act. Finally, the term ‘‘small business development center’’ has the meanings provided in Section 21 of the Small Business Act. 

Section 3. Expansion of 7(a) loans 

This section amends section 7(a) of the Small Business Act by 

adding new clauses and subparagraphs which align current agency 

lending with industry practices, and smooths transitions to employee ownership, and clarifies delegated authority by preferred 

lenders. 

Specifically, this section aligns agency lending with current industry practices to allow lenders to make loans to the company, 

which will then make an internal loan to the employee trust to 

purchase ownership. Additionally, this section codifies in statute a 

recently released SBA policy that allows the seller to stay on as an 

owner, officer, director, or key employee of the company when an 

employee stock ownership plan (ESOP) or cooperative acquires a 

controlling interest (51 percent or more). However, any seller who 

remains as an owner, regardless of percentage of ownership interest, would be required by the SBA to provide a personal guarantee. 

This change will allow sellers to remain available to ensure the 

success of the new employee owners. This section also allows for 

such transaction costs to be financed as part of a 7(a) loan. 

Additionally, this section grants waiver authority to the Administrator on personal guarantee requirements for cooperatives if 

deemed necessary. 

Finally, this section would clarify that the SBA Administrator 

may give authority to lenders participating in the Preferred Lenders Program (PLP) to execute 7(a) ESOP loans. 

Section 4. Small Business Investment Company program outreach 

This section requires the SBA to coordinate with investment 

funds licensed through SBA’s SBIC program to promote employee 

ownership as an area to consider for investment and lending. 

Section 5. Small Business Microloan program outreach 

This section requires the SBA to coordinate with intermediaries 

through the SBA’s Microloan program to promote employee ownership options. 

Section 6. Small Business Development Center outreach and assistance 

This section requires the SBA to work with the nation’s SBDCs 

to provide business succession services, including training, executive education, and one-on-one consulting on employee ownership 

options. 

11 

Section 7. Interagency working group 

This section tasks the SBA with coordinating and chairing an 

interagency working group to develop recommendations to support 

and increase the number of employee-owned businesses, and to increase coordination between federal agencies and private sector employee ownership organizations. 

Section 8. Amendment to report to Congress on status of employeeowned firms 

This section amends an existing reporting requirement in section 

7(a)(15)(E) of the Small Business Act by adding data points to an 

existing congressional report. Reports will now include data on the 

total number of loans made to employee-owned businesses and cooperatives that are guaranteed by the agency. 

VII. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

The cost estimate prepared by the Director of the Congressional 

Budget Office pursuant to 402 of the Congressional Budget Act of 

1974 was not submitted timely to the Committee. 

VIII. UNFUNDED MANDATES

H.R. 5236 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. 

IX. NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY AND TAX

EXPENDITURES

The Committee has not received an estimate of new budget authority contained in the cost estimate prepared by the Director of 

the Congressional Budget Office pursuant to 402 of the Congressional Budget Act of 1974. In compliance with clause 3(c)(2) of rule 

XIII of the Rules of the House, the Committee opines that H.R. 

5236 will not establish any new budget or entitlement authority or 

create any tax expenditures. 

X. 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. 5236 are incorporated into the descriptive portions 

of this report. 

XI. STATEMENT OF CONSTITUTIONAL AUTHORITY

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

of Representatives, the Committee finds that the authority for this 

legislation in Art. I, 8, cl. 1 of the Constitution of the United 

States. 

12 

XII. CONGRESSIONAL ACCOUNTABILITY ACT

H.R. 5236 does not relate to the terms and conditions of employment or access to public services or accommodations within the 

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

XIII. FEDERAL ADVISORY COMMITTEE ACT STATEMENT

H.R. 5236 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. 

XIV. STATEMENT OF NO EARMARKS

Pursuant to clause 9 of rule XXI, H.R. 5236 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. 

XV. 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. 5236 establishes or reauthorizes a program of 

the federal government known to be duplicative of another federal 

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

United States Government Accountability Office pursuant to 21 of 

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

in the most recent catalog of federal domestic assistance. 

XVI. DISCLOSURE OF DIRECTED RULE MAKINGS

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

H.R. 5236 does not direct any rulemaking. 

XVII. 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 in this legislation: 

H.R. 5236 includes a number of provisions designed to expand opportunities available to employee-owned business concerns through SBAs loan programs. 

XVIII. 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. 3. DEFINITIONS. 

(a) SMALL BUSINESS CONCERNS.— 

(1) IN GENERAL.—For the purposes of this Act, a small-business concern, including but not limited to enterprises that are 

13 

engaged in the business of production of food and fiber, ranching and raising of livestock, aquaculture, and all other farming 

and agricultural related industries, shall be deemed to be one 

which is independently owned and operated and which is not 

dominant in its field of operation. 

(2) ESTABLISHMENT OF SIZE STANDARDS.— (A) IN GENERAL.—In addition to the criteria specified in 

paragraph (1), the Administrator may specify detailed definitions or standards by which a business concern may be 

determined to be a small business concern for the purposes 

of this Act or any other Act. 

(B) ADDITIONAL CRITERIA.—The standards described in 

paragraph (1) may utilize number of employees, dollar volume of business, net worth, net income, a combination 

thereof, or other appropriate factors. 

(C) REQUIREMENTS.—Unless specifically authorized by 

statute, no Federal department or agency may prescribe a 

size standard for categorizing a business concern as a 

small business concern, unless such proposed size standard— 

(i) is proposed after an opportunity for public notice 

and comment; 

(ii) provides for determining— 

(I) the size of a manufacturing concern as measured by the manufacturing concern’s average employment based upon employment during each of 

the manufacturing concern’s pay periods for the 

preceding 12 months; 

(II) the size of a business concern providing 

services on the basis of the annual average gross 

receipts of the business concern over a period of 

not less than 3 years; 

(III) the size of other business concerns on the 

basis of data over a period of not less than 3 

years; or 

(IV) other appropriate factors; and 

(iii) is approved by the Administrator. 

(3) VARIATION BY INDUSTRY AND CONSIDERATION OF OTHER

FACTORS.—When establishing or approving any size standard 

pursuant to paragraph (2), the Administrator shall ensure that 

the size standard varies from industry to industry to the extent 

necessary to reflect the differing characteristics of the various 

industries and consider other factors deemed to be relevant by 

the Administrator. 

(4) EXCLUSION OF CERTAIN SECURITY EXPENSES FROM CONSIDERATION FOR PURPOSE OF SMALL BUSINESS SIZE STANDARDS.— 

(A) DETERMINATION REQUIRED.—Not later than 30 days 

after the date of enactment of this paragraph, the Administrator shall review the application of size standards established pursuant to paragraph (2) to small business concerns that are performing contracts in qualified areas and 

determine whether it would be fair and appropriate to exclude from consideration in the average annual gross receipts of such small business concerns any payments made 

to such small business concerns by Federal agencies to reVerDate Sep 11 2014 08:31 Apr 26, 2018 Jkt 079010 PO 00000 Frm 00013 Fmt 6659 Sfmt 6602 E:\HR\OC\HR645.XXX HR645
14 

imburse such small business concerns for the cost of subcontracts entered for the sole purpose of providing security 

services in a qualified area. 

(B) ACTION REQUIRED.—Not later than 60 days after the 

date of enactment of this paragraph, the Administrator 

shall either— 

(i) initiate an adjustment to the size standards, as 

described in subparagraph (A), if the Administrator 

determines that such an adjustment would be fair and 

appropriate; or 

(ii) provide a report to the Committee on Small 

Business and Entrepreneurship of the Senate and the 

Committee on Small Business of the House of Representatives explaining in detail the basis for the determination by the Administrator that such an adjustment would not be fair and appropriate. 

(C) QUALIFIED AREAS.—In this paragraph, the term 

‘‘qualified area’’ means— 

(i) Iraq, 

(ii) Afghanistan, and 

(iii) any foreign country which included a combat 

zone, as that term is defined in section 112(c)(2) of the 

Internal Revenue Code of 1986, at the time of performance of the relevant Federal contract or subcontract. 

(5) ALTERNATIVE SIZE STANDARD.— 

(A) IN GENERAL.—The Administrator shall establish an 

alternative size standard for applicants for business loans 

under section 7(a) and applicants for development company loans under title V of the Small Business Investment 

Act of 1958 (15 U.S.C. 695 et seq.), that uses maximum 

tangible net worth and average net income as an alternative to the use of industry standards. 

(B) INTERIM RULE.—Until the date on which the alternative size standard established under subparagraph (A) is 

in effect, an applicant for a business loan under section 

7(a) or an applicant for a development company loan under 

title V of the Small Business Investment Act of 1958 may 

be eligible for such a loan if— 

(i) the maximum tangible net worth of the applicant 

is not more than $15,000,000; and 

(ii) the average net income after Federal income 

taxes (excluding any carry-over losses) of the applicant 

for the 2 full fiscal years before the date of the application is not more than $5,000,000. 

(6) PROPOSED RULEMAKING.—In conducting rulemaking to revise, modify or establish size standards pursuant to this section, the Administrator shall consider, and address, and make 

publicly available as part of the notice of proposed rulemaking 

and notice of final rule each of the following: 

(A) a detailed description of the industry for which the 

new size standard is proposed; 

(B) an analysis of the competitive environment for that 

industry; 

15 

(C) the approach the Administrator used to develop the 

proposed standard including the source of all data used to 

develop the proposed rule making; and 

(D) the anticipated effect of the proposed rulemaking on 

the industry, including the number of concerns not currently considered small that would be considered small 

under the proposed rule making and the number of concerns currently considered small that would be deemed 

other than small under the proposed rulemaking. 

(7) COMMON SIZE STANDARDS.—In carrying out this subsection, the Administrator may establish or approve a single 

size standard for a grouping of 4-digit North American Industry Classification System codes only if the Administrator 

makes publicly available, not later than the date on which 

such size standard is established or approved, a justification 

demonstrating that such size standard is appropriate for each 

individual industry classification included in the grouping. 

(8) NUMBER OF SIZE STANDARDS.—The Administrator shall 

not limit the number of size standards established pursuant to 

paragraph (2), and shall assign the appropriate size standard 

to each North American Industry Classification System Code. 

(9) PETITIONS FOR RECONSIDERATION OF SIZE STANDARDS.— (A) IN GENERAL.—A person may file a petition for reconsideration with the Office of Hearings and Appeals (as established under section 5(i)) of a size standard revised, 

modified, or established by the Administrator pursuant to 

this subsection. 

(B) TIME LIMIT.—A person filing a petition for reconsideration described in subparagraph (A) shall file such petition not later than 30 days after the publication in the 

Federal Register of the notice of final rule to revise, modify, or establish size standards described in paragraph (6). 

(C) PROCESS FOR AGENCY REVIEW.—The Office of Hearings and Appeals shall use the same process it uses to decide challenges to the size of a small business concern to 

decide a petition for review pursuant to this paragraph. 

(D) JUDICIAL REVIEW.—The publication of a final rule in 

the Federal Register described in subparagraph (B) shall 

be considered final agency action for purposes of seeking 

judicial review. Filing a petition for reconsideration under 

subparagraph (A) shall not be a condition precedent to judicial review of any such size standard. 

(E) RULES OR GUIDANCE.—The Office of Hearings and 

Appeals shall begin accepting petitions for reconsideration 

described in subparagraph (A) after the date on which the 

Administration issues a rule or other guidance implementing this paragraph. Notwithstanding the provisions of 

subparagraph (B), petitions for reconsideration of size 

standards revised, modified, or established in a Federal 

Register final rule published between November 25, 2015, 

and the effective date of such rule or other guidance shall 

be considered timely if filed within 30 days of such effective date. 

(b) For purposes of this Act, any reference to an agency or department of the United States, and the term ‘‘Federal agency,’’ 

16 

shall have the meaning given the term ‘‘agency’’ by section 551(1) 

of title 5, United States Code, but does not include the United 

States Postal Service or the General Accounting Office. 

(c)(1) For purposes of this Act, a qualified employee trust shall 

be eligible for any loan guarantee under section 7(a) with respect 

to a small business concern on the same basis as if such trust were 

the same legal entity as such concern. 

(2) For purposes of this Act, the term ‘‘qualified employee trust’’ 

means, with respect to a small business concern, a trust— 

(A) which forms part of an employee stock ownership plan 

(as defined in section 4975(e)(7) of the Internal Revenue Code 

of 1954)— 

(i) which is maintained by such concern, and 

ø(ii) which provides that each participant in the plan is 

entitle to direct the plan as to the manner in which voting 

rights under qualifying employer securities (as defined in 

section 4975(e)(8) of such Code) which are allocated to the 

account of such participant are to be exercised with respect 

to a corporate matter which (by law or charter) must be 

decided by a majority vote of outstanding common shares 

voted; and¿ 

(ii) which provides that each participant is entitled to direct the plan trustee as to the manner of how to vote the 

qualified employer securities (as defined in section 

4975(e)(8) of the Internal Revenue Code of 1986), which are 

allocated to the account of such participant with respect to 

a corporate matter which (by law or charter) must be decided by a vote conducted in accordance with section 409(e) 

of the Internal Revenue Code of 1986; and 

(B) in the case of any loan guarantee under section 7(a), the 

trustee of which enters into an agreement with the Administrator of which enters into an agreement with the Administrator which is binding on the trust and no such small business concern and which provides that— 

(i) the loan guaranteed under section 7(a) shall be used 

solely for the purchase of qualifying employer securities of 

such concern. 

(ii) all funds acquired by the concern in such purchase 

shall be used by such concern solely for the purposes for 

which such loan was guaranteed, 

(iii) such concern will provide such funds as may be necessary for the timely repayment of such loan, and the 

property of such concern shall be available as security for 

repayment of such loan, and 

(iv) all qualifying employer securities acquired by such 

trust in such purchase shall be allocated to the accounts 

of participants in such plan who are entitled to share in 

such allocation, and each participant has a nonforfeitable 

right, not later than the date such loan is repaid, to all 

such qualifying employer securities which are so allocated 

to the participant’s account. 

(3) Under regulations which may be prescribed by the Administrator, a trust may be treated as a qualified employee trust with 

respect to a small business concern if— 

17 

(A) the trust is maintained by an employee organization 

which represents at least 51 percent of the employee of such 

concern, and 

(B) such concern maintains a plan— 

(i) which is an employee benefit plan which is designed 

to invest primarily in qualifying employer securities (as 

defined in section 4975(e)(8) of the Internal Revenue Code 

of 1954). 

(ii) which provides that each participant in the plan is 

entitled to direct the plan as to the manner in which voting rights under qualifying employer securities which are 

allocated to the account of such participant are to be exercised with respect to a corporate matter which (by law or 

charter) must be decided by a majority vote of the outstanding common shares voted, 

(iii) which provides that each participant who is entitled 

to distribution from the plan has a right, in the case of 

qualifying employer securities which are not readily 

tradable on an established market, to require that the concern repurchase such securities under a fair valuation formula, and 

(iv) which meets such other requirements (similar to requirements applicable to employee ownership plans as defined in section 4975(e)(7) of the Internal Revenue Code of 

1954) as the Administrator may prescribe, and 

(C) in the case of a loan guarantee under section 7(a), such 

organization enters into an agreement with the Administration 

which is described in paragraph (2)(B). 

(d) For purposes of section 7 of this Act, the term ‘‘qualified Indian tribe’’ means an Indian tribe as defined in section 4(a) of the 

Indian Self-Determination and Education Assistance Act, which 

owns and controls 100 per centum of a small business concern. 

(e) For purposes of section 7 of this Act, the term ‘‘public or private organization for the handicapped’’ means one— 

(1) which is organized under the laws of the United States 

or of any State, operated in the interest of handicapped individuals, the net income of which does not insure in whole or 

in part to the benefit of any shareholder or other individual; 

(2) which complies with any applicable occupational health 

and safety standard prescribed by the Secretary of Labor; and 

(3) which, in the production of commodities and in the provision of services during any fiscal year in which it received financial assistance under this subsection, employs handicapped 

individuals for not less than 75 per centum of the man-hours 

required for the production or provision of the commodities or 

services. 

(f) For purposes of section 7 of this Act, the term ‘‘handicapped 

individual’’ means an individual— 

(1) who has a physical, mental, or emotional impairment, defect, ailment, disease, or disability of a permanent nature 

which in any way limits the selection of any type of employment for which the person would otherwise be qualified or 

qualifiable; or 

(2) who is a service-disabled veteran. 

18 

(g) For purposes of section 7 of this Act, the term ‘‘energy measures’’ includes— 

(1) solar thermal energy equipment which is either of the active type based upon mechanically forced energy transfer or of 

the passive type based on convective, conductive, or radiant energy transfer or some combination equipment; 

(2) photovoltaic cells and related equipment; 

(3) a product or service the primary purpose of which is conservation of energy through devices or techniques which increase the energy through devices or techniques which increase 

the energy efficiency of existing equipment, methods of operation, or systems which use fossil fuels, and which is on the 

Energy Conservation Measures list of the Secretary of Energy 

or which the Administrator determines to be consistent with 

the intent of this subsection; 

(4) equipment the primary purpose of which is production of 

energy from wood, biological waste, grain, or other biomass 

source of energy; 

(5) equipment the primary purpose of which is industrial cogeneration of energy, district heating, or production of energy 

from industrial waste; 

(6) hydroelectric power equipment; 

(7) wind energy conversion equipment; and 

(8) engineering, architectural, consulting, or other professional services which are necessary or appropriate to aid citizens in using any of the measures described in paragraph (1) 

through (7). 

(h) For purposes of this Act, the term ‘‘credit elsewhere’’ means 

the availability of credit from non-Federal sources on reasonable 

terms and conditions taking into consideration the prevailing rates 

and terms in the community in or near where the concern transacts business, or the homeowner resides, for similar purposes and 

periods of time. 

(i) For purposes of section 7 of this Act, the term ‘‘homeowners’’ 

includes owners and lessees of residential property and also includes personal property. 

(j) For the purposes of this Act, the term ‘‘small agricultural cooperative’’ means an association (corporate or otherwise) acting 

pursuant to the provisions of the Agricultural Marketing Act (12 

U.S.C. 1141j), whose size does not exceed the size standard established by the Administration for other similar agricultural small 

business concerns. In determining such size, the Administration 

shall regard the association as a business concern and shall not include the income or employees of any member shareholder of such 

cooperative. 

(k)(1) For the purposes of this Act, the term ‘‘disaster’’ means a 

sudden event which causes severe damage including, but not limited to, floods, hurricanes, tornadoes, earthquakes, fires, explosions, 

volcanoes, windstorms, landslides or mudslides, tidal waves, commercial fishery failures or fishery resource disasters (as determined 

by the Secretary of Commerce under section 308(b) of the Interjurisdictional Fisheries Act of 1986), ocean conditions resulting in 

the closure of customary fishing waters, riots, civil disorders or 

other catastrophes, except it does not include economic dislocations. 

(2) For purposes of section 7(b)(2), the term ‘‘disaster’’ includes— 

19 

(A) drought; 

(B) below average water levels in the Great Lakes, or on any 

body of water in the United States that supports commerce by 

small business concerns; and 

(C) ice storms and blizzards. 

(l) For purposes of this Act— 

(1) the term ‘‘computer crime’’ means’’— 

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

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

with, a computer owned or utilized by a small business 

concern. 

(m) DEFINITIONS RELATING TO CONTRACTING.—In this Act: 

(1) PRIME CONTRACT.—The term ‘‘prime contract’’ has the 

meaning given such term in section 8701(4) of title 41, United 

States Code. 

(2) PRIME CONTRACTOR.—The term ‘‘prime contractor’’ has 

the meaning given such term in section 8701(5) of title 41, 

United States Code. 

(3) SIMPLIFIED ACQUISITION THRESHOLD.—The term ‘‘simplified acquisition threshold’’ has the meaning given such term 

in section 134 of title 41, United States Code. 

(4) MICRO-PURCHASE THRESHOLD.—The term ‘‘micro-purchase 

threshold’’ has the meaning given such term in section 1902 of 

title 41, United States Code. 

(5) TOTAL PURCHASES AND CONTRACTS FOR PROPERTY AND

SERVICES.—The term ‘‘total purchases and contracts for property and services’’ shall mean total number and total dollar 

amount of contracts and orders for property and services. 

(n) For the purposes of this Act, a small business concern is a 

small business concern owned and controlled by women if— 

(1) at least 51 percent of small business concern is owned by 

one or more women or, in the case of any publicly owned business, at least 51 percent of the stock of which is owned by one 

or more women; and 

(2) the management and daily business operations of the 

business are controlled by one or more women. 

(o) DEFINITIONS OF BUNDLING OF CONTRACT REQUIREMENTS AND

RELATED TERMS.—In this Act: 

(1) BUNDLED CONTRACT.—The term ‘‘bundled contract’’ 

means a contract that is entered into to meet requirements 

that are consolidated in a bundling of contract requirements. 

(2) BUNDLING OF CONTRACT REQUIREMENTS.—The term ‘‘bundling of contract requirements’’ means consolidating 2 or more 

procurement requirements for goods or services previously provided or performed under separate smaller contracts into a solicitation of offers for a single contract that is likely to be unsuitable for award to a small-business concern due to— 

(A) the diversity, size, or specialized nature of the elements of the performance specified; 

(B) the aggregate dollar value of the anticipated award; 

(C) the geographical dispersion of the contract performance sites; or 

(D) any combination of the factors described in subparagraphs (A), (B), and (C). 

20 

(3) SEPARATE SMALLER CONTRACT.—The term ‘‘separate 

smaller contract’’, with respect to a bundling of contract requirements, means a contract that has been performed by 1 or 

more small business concerns or was suitable for award to 1 

or more small business concerns. 

(p) DEFINITIONS RELATING TO HUBZONES.—In this Act: 

(1) HISTORICALLY UNDERUTILIZED BUSINESS ZONE.—The term 

‘‘historically underutilized business zone’’ means any area located within 1 or more— 

(A) qualified census tracts; 

(B) qualified nonmetropolitan counties; 

(C) lands within the external boundaries of an Indian 

reservation; 

(D) redesignated areas; 

(E) base closure areas; or 

(F) qualified disaster areas. 

(2) HUBZONE.—The term ‘‘HUBZone’’ means a historically 

underutilized business zone. 

(3) HUBZONE SMALL BUSINESS CONCERN.—The term 

‘‘HUBZone small business concern’’ means— 

(A) a small business concern that is at least 51 percent 

owned and controlled by United States citizens; 

(B) a small business concern that is— 

(i) an Alaska Native Corporation owned and controlled by Natives (as determined pursuant to section 

29(e)(1) of the Alaska Native Claims Settlement Act 

(43 U.S.C. 1626(e)(1))); or 

(ii) a direct or indirect subsidiary corporation, joint 

venture, or partnership of an Alaska Native Corporation qualifying pursuant to section 29(e)(1) of the Alaska Native Claims Settlement Act (43 U.S.C. 

1626(e)(1)), if that subsidiary, joint venture, or partnership is owned and controlled by Natives (as determined pursuant to section 29(e)(2)) of the Alaska Native Claims Settlement Act (43 U.S.C. 1626(e)(2))); 

(C) a small business concern— 

(i) that is wholly owned by one or more Indian tribal 

governments, or by a corporation that is wholly owned 

by one or more Indian tribal governments; or 

(ii) that is owned in part by one or more Indian tribal governments, or by a corporation that is wholly 

owned by one or more Indian tribal governments, if all 

other owners are either United States citizens or small 

business concerns; 

(D) a small business concern— 

(i) that is wholly owned by one or more Native Hawaiian Organizations (as defined in section 8(a)(15)), 

or by a corporation that is wholly owned by one or 

more Native Hawaiian Organizations; or 

(ii) that is owned in part by one or more Native Hawaiian Organizations, or by a corporation that is wholly owned by one or more Native Hawaiian Organizations, if all other owners are either United States citizens or small business concerns; 

(E) a small business concern that is— 

21 

(i) wholly owned by a community development corporation that has received financial assistance under 

part 1 of subchapter A of the Community Economic 

Development Act of 1981 (42 U.S.C. 9805 et seq.); or 

(ii) owned in part by one or more community development corporations, if all other owners are either 

United States citizens or small business concerns; or 

(F) a small business concern that is— 

(i) a small agricultural cooperative organized or incorporated in the United States; 

(ii) wholly owned by 1 or more small agricultural cooperatives organized or incorporated in the United 

States; or 

(iii) owned in part by 1 or more small agricultural 

cooperatives organized or incorporated in the United 

States, if all owners are small business concerns or 

United States citizens. 

(4) QUALIFIED AREAS.— (A) QUALIFIED CENSUS TRACT.— 

(i) IN GENERAL.—The term ‘‘qualified census tract’’ 

has the meaning given that term in section 

42(d)(5)(B)(ii) of the Internal Revenue Code of 1986. 

(ii) EXCEPTION.—For any metropolitan statistical 

area in the Commonwealth of Puerto Rico, the term 

‘‘qualified census tract’’ has the meaning given that 

term in section 42(d)(5)(B)(ii) of the Internal Revenue 

Code of 1986 as applied without regard to subclause 

(II) of such section, except that this clause shall only 

apply— 

(I) 10 years after the date that the Administrator implements this clause, or 

(II) the date on which the Financial Oversight 

and Management Board for the Commonwealth of 

Puerto Rico created by the Puerto Rico Oversight, 

Management, and Economic Stability Act ceases 

to exist, 

whichever event occurs first. 

(B) QUALIFIED NONMETROPOLITAN COUNTY.—The term 

‘‘qualified nonmetropolitan county’’ means any county— 

(i) that was not located in a metropolitan statistical 

area (as defined in section 143(k)(2)(B) of the Internal 

Revenue Code of 1986) at the time of the most recent 

census taken for purposes of selecting qualified census 

tracts under section 42(d)(5)(C)(ii) of the Internal Revenue Code of 1986; and 

(ii) in which— 

(I) the median household income is less than 80 

percent of the nonmetropolitan State median 

household income, based on the most recent data 

available from the Bureau of the Census of the 

Department of Commerce; 

(II) the unemployment rate is not less than 140 

percent of the average unemployment rate for the 

United States or for the State in which such county is located, whichever is less, based on the most 

22 

recent data available from the Secretary of Labor; 

or 

(III) there is located a difficult development 

area, as designated by the Secretary of Housing 

and Urban Development in accordance with section 42(d)(5)(C)(iii) of the Internal Revenue Code 

of 1986, within Alaska, Hawaii, or any territory or 

possession of the United States outside the 48 

contiguous States. 

(C) REDESIGNATED AREA.—The term ‘‘redesignated area’’ 

means any census tract that ceases to be qualified under 

subparagraph (A) and any nonmetropolitan county that 

ceases to be qualified under subparagraph (B), except that 

a census tract or a nonmetropolitan county may be a ‘‘redesignated area’’ only until the later of— 

(i) the date on which the Census Bureau publicly releases the first results from the 2010 decennial census; 

or 

(ii) 3 years after the date on which the census tract 

or nonmetropolitan county ceased to be so qualified. 

(D) BASE CLOSURE AREA.— (i) IN GENERAL.—Subject to clause (ii), the term 

‘‘base closure area’’ means— 

(I) lands within the external boundaries of a 

military installation that were closed through a 

privatization process under the authority of— 

(aa) the Defense Base Closure and Realignment Act of 1990 (part A of title XXIX of division B of Public Law 101–510; 10 U.S.C. 2687 

note); 

(bb) title II of the Defense Authorization 

Amendments and Base Closure and Realignment Act (Public Law 100–526; 10 U.S.C. 

2687 note); 

(cc) section 2687 of title 10, United States 

Code; or 

(dd) any other provision of law authorizing 

or directing the Secretary of Defense or the 

Secretary of a military department to dispose 

of real property at the military installation for 

purposes relating to base closures of redevelopment, while retaining the authority to enter 

into a leaseback of all or a portion of the property for military use; 

(II) the census tract or nonmetropolitan county 

in which the lands described in subclause (I) are 

wholly contained; 

(III) a census tract or nonmetropolitan county 

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

(IV) a census tract or nonmetropolitan county 

the boundaries of which are contiguous to the area 

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

(ii) LIMITATION.—A base closure area shall be treated as a HUBZone— 

23 

(I) with respect to a census tract or nonmetropolitan county described in clause (i), for a period 

of not less than 8 years, beginning on the date the 

military installation undergoes final closure and 

ending on the date the Administrator makes a 

final determination as to whether or not to implement the applicable designation described in subparagraph (A) or (B) in accordance with the results of the decennial census conducted after the 

area was initially designated as a base closure 

area; and 

(II) if such area was treated as a HUBZone at 

any time after 2010, until such time as the Administrator makes a final determination as to 

whether or not to implement the applicable designation described in subparagraph (A) or (B), 

after the 2020 decennial census. 

(iii) DEFINITIONS.—In this subparagraph: 

(I) CENSUS TRACT.—The term ‘‘census tract’’ 

means a census tract delineated by the United 

States Bureau of the Census in the most recent 

decennial census that is not located in a nonmetropolitan county and does not otherwise qualify as a qualified census tract. 

(II) NONMETROPOLITAN COUNTY.—The term 

‘‘nonmetropolitan county’’ means a county that 

was not located in a metropolitan statistical area 

(as defined in section 143(k)(2)(B) of the Internal 

Revenue Code of 1986) at the time of the most recent census taken for purposes of selecting qualified census tracts and does not otherwise qualify 

as a qualified nonmetropolitan county. 

(E) QUALIFIED DISASTER AREA.— 

(i) IN GENERAL.—Subject to clause (ii), the term 

‘‘qualified disaster area’’ means any census tract or 

nonmetropolitan county located in an area for which 

the President has declared a major disaster under section 401 of the Robert T. Stafford Disaster Relief and 

Emergency Assistance Act (42 U.S.C. 5170) or located 

in an area in which a catastrophic incident has occurred if such census tract or nonmetropolitan county 

ceased to be qualified under subparagraph (A) or (B), 

as applicable, during the period beginning 5 years before the date on which the President declared the 

major disaster or the catastrophic incident occurred 

and ending 2 years after such date, except that such 

census tract or nonmetropolitan county may be a 

‘‘qualified disaster area’’ only— 

(I) in the case of a major disaster declared by 

the President, during the 5-year period beginning 

on the date on which the President declared the 

major disaster for the area in which the census 

tract or nonmetropolitan county, as applicable, is 

located; and 

24 

(II) in the case of a catastrophic incident, during 

the 10-year period beginning on the date on which 

the catastrophic incident occurred in the area in 

which the census tract or nonmetropolitan county, 

as applicable, is located. 

(ii) LIMITATION.—A qualified disaster area described 

in clause (i) shall be treated as a HUBZone for a period of not less than 8 years, beginning on the date the 

Administrator makes a final determination as to 

whether or not to implement the designations described in subparagraphs (A) and (B) in accordance 

with the results of the decennial census conducted 

after the area was initially designated as a qualified 

disaster area. 

(5) QUALIFIED HUBZONE SMALL BUSINESS CONCERN.— 

(A) IN GENERAL.—A HUBZone small business concern is 

‘‘qualified’’, if— 

(i) the small business concern has certified in writing to the Administrator (or the Administrator otherwise determines, based on information submitted to 

the Administrator by the small business concern, or 

based on certification procedures, which shall be established by the Administration by regulation) that— 

(I) it is a HUBZone small business concern— 

(aa) pursuant to subparagraph (A), (B), (C), 

(D), (E), or (F) of paragraph (3), and that its 

principal office is located in a HUBZone and 

not fewer than 35 percent of its employees reside in a HUBZone; 

(bb) pursuant to subparagraph (A), (B), (C), 

(D), (E), or (F) of paragraph (3), that its principal office is located within a base closure 

area and that not fewer than 35 percent of its 

employees reside in such base closure area or 

in another HUBZone; or 

(cc) pursuant to paragraph (3)(C), and not 

fewer than 35 percent of its employees engaged in performing a contract awarded to the 

small business concern on the basis of a preference provided under section 31(b) reside 

within any Indian reservation governed by 

one or more of the tribal government owners, 

or reside within any HUBZone adjoining any 

such Indian reservation; 

(II) the small business concern will attempt to 

maintain the applicable employment percentage 

under subclause (I) during the performance of any 

contract awarded to the small business concern on 

the basis of a preference provided under section 

31(b); and 

(III) with respect to any subcontract entered 

into by the small business concern pursuant to a 

contract awarded to the small business concern 

under section 31, the small business concern will 

25 

ensure that the requirements of section 46 are 

satisfied; and 

(ii) no certification made or information provided by 

the small business concern under clause (i) has been, 

in accordance with the procedures established under 

section 31(c)(1)— 

(I) successfully challenged by an interested 

party; or 

(II) otherwise determined by the Administrator 

to be materially false. 

(B) LIST OF QUALIFIED SMALL BUSINESS CONCERNS.—The 

Administrator shall establish and maintain a list of qualified HUBZone small business concerns, which list shall, to 

the extent practicable— 

(i) once the Administrator has made the certification 

required by subparagraph (A)(i) regarding a qualified 

HUBZone small business concern and has determined 

that subparagraph (A)(ii) does not apply to that concern, include the name, address, and type of business 

with respect to each such small business concern; 

(ii) be updated by the Administrator not less than 

annually; and 

(iii) be provided upon request to any Federal agency 

or other entity. 

(6) NATIVE AMERICAN SMALL BUSINESS CONCERNS.— (A) ALASKA NATIVE CORPORATION.—The term ‘‘Alaska 

Native Corporation’’ has the same meaning as the term 

‘‘Native Corporation’’ in section 3 of the Alaska Native 

Claims Settlement Act (43 U.S.C. 1602). 

(B) ALASKA NATIVE VILLAGE.—The term ‘‘Alaska Native 

Village’’ has the same meaning as the term ‘‘Native village’’ in section 3 of the Alaska Native Claims Settlement 

Act (43 U.S.C. 1602). 

(C) INDIAN RESERVATION.—The term ‘‘Indian reservation’’— 

(i) has the same meaning as the term ‘‘Indian country’’ in section 1151 of title 18, United States Code, except that such term does not include— 

(I) any lands that are located within a State in 

which a tribe did not exercise governmental jurisdiction on the date of the enactment of this paragraph, unless that tribe is recognized after that 

date of the enactment by either an Act of Congress or pursuant to regulations of the Secretary 

of the Interior for the administrative recognition 

that an Indian group exists as an Indian tribe 

(part 83 of title 25, Code of Federal Regulations); 

and 

(II) lands taken into trust or acquired by an Indian tribe after the date of the enactment of this 

paragraph if such lands are not located within the 

external boundaries of an Indian reservation or 

former reservation or are not contiguous to the 

lands held in trust or restricted status on that 

date of the enactment; and 

26 

(ii) in the State of Oklahoma, means lands that— 

(I) are within the jurisdictional areas of an 

Oklahoma Indian tribe (as determined by the Secretary of the Interior); and 

(II) are recognized by the Secretary of the Interior as eligible for trust land status under part 

151 of title 25, Code of Federal Regulations (as in 

effect on the date of the enactment of this paragraph). 

(7) AGRICULTURAL COMMODITY.—The term ‘‘agricultural commodity’’ has the same meaning as in section 102 of the Agricultural Trade Act of 1978 (7 U.S.C. 5602). 

(q) DEFINITIONS RELATING TO VETERANS.—In this Act, the following definitions apply: 

(1) SERVICE-DISABLED VETERAN.—The term ‘‘service-disabled 

veteran’’ means a veteran with a disability that is service-connected (as defined in section 101(16) of title 38, United States 

Code). 

(2) SMALL BUSINESS CONCERN OWNED AND CONTROLLED BY

SERVICE-DISABLED VETERANS.—The term ‘‘small business concern owned and controlled by service-disabled veterans’’ means 

a small business concern— 

(A) not less than 51 percent of which is owned by one 

or more service-disabled veterans or, in the case of any 

publicly owned business, not less than 51 percent of the 

stock of which is owned by one or more service-disabled 

veterans; and 

(B) the management and daily business operations of 

which are controlled by one or more service-disabled veterans or, in the case of a veteran with permanent and severe disability, the spouse or permanent caregiver of such 

veteran. 

(3) SMALL BUSINESS CONCERN OWNED AND CONTROLLED BY

VETERANS.—The term ‘‘small business concern owned and controlled by veterans’’ means a small business concern— 

(A) not less than 51 percent of which is owned by one 

or more veterans or, in the case of any publicly owned 

business, not less than 51 percent of the stock of which is 

owned by one or more veterans; and 

(B) the management and daily business operations of 

which are controlled by one or more veterans. 

(4) VETERAN.—The term ‘‘veteran’’ has the meaning given 

the term in section 101(2) of title 38, United States Code. 

(5) RELIEF FROM TIME LIMITATIONS.— 

(A) IN GENERAL.—Any time limitation on any qualification, certification, or period of participation imposed under 

this Act on any program that is available to small business 

concerns shall be extended for a small business concern 

that— 

(i) is owned and controlled by— 

(I) a veteran who was called or ordered to active 

duty under a provision of law specified in section 

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

after September 11, 2001; or 

27 

(II) a service-disabled veteran who became such 

a veteran due to an injury or illness incurred or 

aggravated in the active military, naval, or air 

service during a period of active duty pursuant to 

a call or order to active duty under a provision of 

law referred to in subclause (I) on or after September 11, 2001; and 

(ii) was subject to the time limitation during such 

period of active duty. 

(B) DURATION.—Upon submission of proper documentation to the Administrator, the extension of a time limitation under subparagraph (A) shall be equal to the period 

of time that such veteran who owned or controlled such a 

concern was on active duty as described in that subparagraph. 

(C) EXCEPTION FOR PROGRAMS SUBJECT TO FEDERAL

CREDIT REFORM ACT OF 1990.—The provisions of subparagraphs (A) and (B) shall not apply to any programs subject 

to the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et 

seq.). 

(r) DEFINITIONS RELATING TO SMALL BUSINESS LENDING COMPA- NIES.—As used in section 23 of this Act: 

(1) SMALL BUSINESS LENDING COMPANY.—The term ‘‘small 

business lending company’’ means a business concern that is 

authorized by the Administrator to make loans pursuant to 

section 7(a) and whose lending activities are not subject to regulation by any Federal or State regulatory agency. 

(2) NON-FEDERALLY REGULATED SBA LENDER.—The term 

‘‘non-Federally regulated SBA lender’’ means a business concern if— 

(A) such concern is authorized by the Administrator to 

make loans under section 7; 

(B) such concern is subject to regulation by a State; and 

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

(s) MAJOR DISASTER.—In this Act, the term ‘‘major disaster’’ has 

the meaning given that term in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 

5122). 

(t) SMALL BUSINESS DEVELOPMENT CENTER.—In this Act, the 

term ‘‘small business development center’’ means a small business 

development center described in section 21. 

(u) REGION OF THE ADMINISTRATION.—In this Act, the term ‘‘region of the Administration’’ means the geographic area served by 

a regional office of the Administration established under section 

4(a). 

(v) MULTIPLE AWARD CONTRACT.—In this Act, the term ‘‘multiple 

award contract’’ means— 

(1) a multiple award task order contract or delivery order 

contract that is entered into under the authority of sections 

303H through 303K of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 253h through 253k); and 

(2) any other indefinite delivery, indefinite quantity contract 

that is entered into by the head of a Federal agency with 2 or 

more sources pursuant to the same solicitation. 

28 

(w) PRESUMPTION.— (1) IN GENERAL.—In every contract, subcontract, cooperative 

agreement, cooperative research and development agreement, 

or grant which is set aside, reserved, or otherwise classified as 

intended for award to small business concerns, there shall be 

a presumption of loss to the United States based on the total 

amount expended on the contract, subcontract, cooperative 

agreement, cooperative research and development agreement, 

or grant whenever it is established that a business concern 

other than a small business concern willfully sought and received the award by misrepresentation. 

(2) DEEMED CERTIFICATIONS.—The following actions shall be 

deemed affirmative, willful, and intentional certifications of 

small business size and status: 

(A) Submission of a bid or proposal for a Federal grant, 

contract, subcontract, cooperative agreement, or cooperative research and development agreement reserved, set 

aside, or otherwise classified as intended for award to 

small business concerns. 

(B) Submission of a bid or proposal for a Federal grant, 

contract, subcontract, cooperative agreement, or cooperative research and development agreement which in any 

way encourages a Federal agency to classify the bid or proposal, if awarded, as an award to a small business concern. 

(C) Registration on any Federal electronic database for 

the purpose of being considered for award of a Federal 

grant, contract, subcontract, cooperative agreement, or cooperative research agreement, as a small business concern. 

(3) CERTIFICATION BY SIGNATURE OF RESPONSIBLE OFFICIAL.— 

(A) IN GENERAL.—Each solicitation, bid, or application 

for a Federal contract, subcontract, or grant shall contain 

a certification concerning the small business size and status of a business concern seeking the Federal contract, 

subcontract, or grant. 

(B) CONTENT OF CERTIFICATIONS.—A certification that a 

business concern qualifies as a small business concern of 

the exact size and status claimed by the business concern 

for purposes of bidding on a Federal contract or subcontract, or applying for a Federal grant, shall contain the 

signature of an authorized official on the same page on 

which the certification is contained. 

(4) REGULATIONS.—The Administrator shall promulgate regulations to provide adequate protections to individuals and 

business concerns from liability under this subsection in cases 

of unintentional errors, technical malfunctions, and other similar situations. 

(x) ANNUAL CERTIFICATION.— 

(1) IN GENERAL.—Each business certified as a small business 

concern under this Act shall annually certify its small business 

size and, if appropriate, its small business status, by means of 

a confirming entry on the Online Representations and Certifications Application database of the Administration, or any successor thereto. 

(2) REGULATIONS.—Not later than 1 year after the date of 

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29 

tion with the Inspector General and the Chief Counsel for Advocacy of the Administration, shall promulgate regulations to 

ensure that— 

(A) no business concern continues to be certified as a 

small business concern on the Online Representations and 

Certifications Application database of the Administration, 

or any successor thereto, without fulfilling the requirements for annual certification under this subsection; and 

(B) the requirements of this subsection are implemented 

in a manner presenting the least possible regulatory burden on small business concerns. 

(y) POLICY ON PROSECUTIONS OF SMALL BUSINESS SIZE AND STA- TUS FRAUD.—Not later than 1 year after the date of enactment of 

this subsection, the Administrator, in consultation with the Attorney General, shall issue a Government-wide policy on prosecution 

of small business size and status fraud, which shall direct Federal 

agencies to appropriately publicize the policy. 

(z) AQUACULTURE BUSINESS DISASTER ASSISTANCE.—Subject to 

section 18(a) and notwithstanding section 18(b)(1), the Administrator may provide disaster assistance under section 7(b)(2) to 

aquaculture enterprises that are small businesses. 

(aa) VENTURE CAPITAL OPERATING COMPANY.—In this Act, the 

term ‘‘venture capital operating company’’ means an entity described in clause (i), (v), or (vi) of section 121.103(b)(5) of title 13, 

Code of Federal Regulations (or any successor thereto). 

(bb) HEDGE FUND.—In this Act, the term ‘‘hedge fund’’ has the 

meaning given that term in section 13(h)(2) of the Bank Holding 

Company Act of 1956 (12 U.S.C. 1851(h)(2)). 

(cc) PRIVATE EQUITY FIRM.—In this Act, the term ‘‘private equity 

firm’’ has the meaning given the term ‘‘private equity fund’’ in section 13(h)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 

1851(h)(2)). 

(dd) DEFINITIONS PERTAINING TO SUBCONTRACTING.—In this Act: 

(1) SUBCONTRACT.—The term ‘‘subcontract’’ means a legally 

binding agreement between a contractor that is already under 

contract to another party to perform work, and a third party, 

hereinafter referred to as the subcontractor, for the subcontractor to perform a part, or all, of the work that the contractor 

has undertaken. 

(2) FIRST TIER SUBCONTRACTOR.—The term ‘‘first tier subcontractor’’ means a subcontractor who has a subcontract directly 

with the prime contractor. 

(3) AT ANY TIER.—The term ‘‘at any tier’’ means any subcontractor other than a subcontractor who is a first tier subcontractor. 

* * * * * * * 

SEC. 5. (a) The Administration shall have power to adopt, alter, 

and use a seal, which shall be judicially noticed. The Administrator 

is authorized, subject to the civil-service and classification laws, to 

select, employ, appoint, and fix the compensation of such officers, 

employees, attorneys, and agents as shall be necessary to carry out 

the provisions of this Act; to define their authority and duties; and 

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

to pay the costs of qualification of certain of them as notaries public. The Administration, with the consent of any board, commission, 

30 

independent establishment, or executive department of the Government, may avail itself on a reimbursable or nonreimbursable basis 

of the use of information, services, facilities (including any field 

service thereof), officers, and employees thereof, in carrying out the 

provisions of this Act. 

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

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

may— 

(1) sue and be sued in any court of record of a State having 

general jurisdiction, or in any United States district court, and 

jurisdiction is conferred upon such district court to determine 

such controversies without regard to the amount in controversy; but no attachment, injunction, garnishment, or other 

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

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

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

in his discretion and upon such terms and conditions and for 

such consideration as the Administrator shall determine to be 

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

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

compromise all obligations assigned to or held by him and all 

legal or equitable rights accruing to him in connection with the 

payment of such loans until such time as such obligations may 

be referred to the Attorney General for suit or collection; 

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

conditions and for such consideration as the Administrator 

shall determine to be reasonable, any real property conveyed 

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

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

authority to obtain deficiency judgments or otherwise in the 

case of mortgages assigned to the Administrator. Section 3709 

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

not be construed to apply to any contract of hazard insurance 

or to any purchase or contract for services or supplies on account of property obtained by the Administrator as a result of 

loans made under this Act if the premium therefor or the 

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

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

mortgages and any other written instrument relating to real 

property or any interest therein acquired by the Administrator 

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

Administrator or by any officer or agent appointed by him 

without the execution of any express delegation of power or 

power of attorney. Nothing in this section shall be construed 

to prevent the Administrator form delegating such power by 

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

or agent he may appoint; 

31 

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

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

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

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

Act; 

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

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

under the provisions of this Act: Provided, That with respect 

to deferred participation loans, including loans guaranteed 

under paragraph (15) or (35) of section 7(a), the Administrator 

may, in the discretion of and pursuant to regulations promulgated by the Administrator, authorize participating lending institutions to take actions relating to loan servicing on behalf of 

the Administrator, including determining eligibility and creditworthiness and loan monitoring, collection, and liquidation. 

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

subsistence expenses, in accordance with the Travel Expense 

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

months in connection with any disaster referred to in section 

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

area and any other temporary posts of duty and return upon 

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

six months if the Administrator determines the extension is 

necessary to continue efficient disaster loan making activities; 

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

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

such gratuitous services and facilities as may, from time to 

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

(10) upon purchase by the Administration of any deferred 

participation entered into under section 7 of this Act, continue 

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

by the participating institution on the amount so purchased for 

the remaining term of the indebtedness; 

(11) make sure such investigations as he deems necessary to 

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

about to engage in any acts or practices which constitute or 

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

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

this Act. The Administration shall permit any person to file 

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

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

purpose of any investigation, the Administration is empowered 

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32 

pel their attendance, take evidence, and require the production 

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

inquiry. Such attendance of witnesses and the production of 

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

States. In case of contumacy by, or refusal to obey a subpena 

issued to, any person, including a recipient or participant, the 

Administration may invoke the aid of any court of the United 

States within the jurisdiction of which such investigation or 

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

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

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

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

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

any such case may be served in the judicial district whereof 

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

(12) impose, retain, and use only those fees which are specifically authorized by law or which are in effect on September 30, 

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

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

appropriations Acts, impose, retain, and utilize, additional 

fees— 

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

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

release or substitution of a guarantor, reamortization, or 

similar action; 

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

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

financings under title III of the Small Business Investment 

Act of 1958 for which the applicant requests a commitment 

from the Administration for funding during the following 

year; and 

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

production and dissemination of compilations of information produced by the Administration under the authority of 

this Act and the Small Business Investment Act of 1958; 

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

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

generated the excess amounts; and 

(14) require any lender authorized to make loans under section 7 of this Act to pay examination and review fees, which 

shall be deposited in the account for salaries and expenses of 

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

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

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33 

graphic reporting services, by contract or appointment, and in such 

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

classification laws and, except in the case of stenographic reporting 

services by organizations, without regard to the civil-service and 

classification laws and, except in the case of stenographic reporting 

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

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

equivalent of the highest rate payable under section 5332 of title 

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

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

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

States Code. 

(d) Section 3648 of the Revised Statutes (31 U.S.C. 529) shall not 

apply to prepayments of rentals made by the Administration on 

safety deposit boxes used by the Administration for the safeguarding of instruments held as security for loans or for the safeguarding of other documents. 

(e)(1) Subject to the requirements and conditions contained in 

this subsection, upon application by a small business concern 

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

make the required payments under such loan or may suspend such 

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

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

be required from the small business concern. 

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

not to exceed 5 years any small business concern’s obligation under 

this subsection only if— 

(A) without such undertaking or suspension of the obligation, 

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

Administration, become insolvent or remain insolvent; 

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

small business concern would, in the sole discretion of the Administration, become or remain a viable small business entity; 

and 

(C) the small business concern executes an agreement in 

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

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

7(i)(1) of this Act, the Administration may extend the maturity of 

any loan on which the Administration undertakes or suspends the 

obligation pursuant to this subsection for a corresponding period of 

time. 

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

be achieved herein, small require the small business concern to 

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

which such obligation was undertaken or suspended, either— 

34 

(i) by periodic payments not less in amount or less frequently 

falling due than those which were due under the loan during 

such period, or 

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

Administration and the small business concern, or 

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

and clause (ii). 

(B) In addition to requiring the small business concern to execute 

the agreement described in subparagraph (A), the Administration 

shall, prior to the undertaking or suspension of the obligation, take 

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

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

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

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

Act may be sold by the lender, and by any subsequent holder, consistent with regulations on such sales as the Administration shall 

establish, subject to the following limitations: 

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

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

property closed and that the lender has substantially complied 

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

and approve only materials not previously approved; 

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

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

(C) each loan, except each loan made under section 7(a)(14), 

shall have been fully disbursed to the borrower prior to any 

sale. 

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

remain obligated under its guarantee agreement with the Administration, and shall continue to service the loan in a manner consistent with the terms and conditions of such agreement. 

(3) The Administration shall develop such procedures as are necessary for the facilitation, administration, and promotion of secondary market operations, and for assessing the increase of small 

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

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

sale of the unguaranteed portion of any loan made under section 

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

under which such sales can be permitted, including maintenance of 

appropriate reserve requirements and other safeguards to protect 

the safety and soundness of the program. 

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

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

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

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

35 

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

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

(g)(1) The Administration is authorized to issue trust certificates 

representing ownership of all or a fractional part of the guaranteed 

portion of one or more loans which have been guaranteed by the 

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

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

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

pool approved by the Administration and composed solely of the entire guaranteed portion of such loans. 

(2) The Administration is authorized, upon such terms and conditions as are deemed appropriate, to guarantee the timely payment 

of the principal of and interest on trust certificates issued by the 

Administration or its agent for purposes of this subsection. Such 

guarantee shall be limited to the extent of principal and interest 

on the guaranteed portions of loans which compose the trust or 

pool. In the event that a loan in such trust or pool is prepaid, either voluntarily or in the event of default, the guarantee of timely 

payment of principal and interest on the trust certificates shall be 

reduced in proportion to the amount of principal and interest such 

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

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

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

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

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

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

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

guarantee sold into the secondary market under subsection (f) 

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

of the sale price that exceeds 110 percent of the outstanding 

principal amount of the portion of the loan guaranteed by the 

Administration. Any such fee imposed by the Administration 

shall be collected by the Administration or by the agent which 

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

shall be paid to the Administration and used solely to reduce 

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

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

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

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

described in subsection (h)(2). 

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

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

per month plus interest. 

(C) The Administration may contract with an agent to 

carry out, on behalf of the Administration, the assessment 

and collection of the annual fee established under section 

7(a)(23). The agent may receive, as compensation for services, any interest earned on the fee while in the control of 

36 

the agent before the time at which the agent is contractually required to remit the fee to the Administration. 

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

guarantee issued under this subsection, it shall be subrogated fully 

to the rights satisfied by such payment. 

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

limit the exercise by the Administration of its ownership rights in 

the portions of loans constituting the trust or pool against which 

the trust certificates are issued. 

(6) If the amount of the guaranteed portion of any loan under section 7(a) is more than $500,000, the Administrator shall, upon 

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

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

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

any loan guarantee divided under this paragraph may be included 

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

the same pool. 

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

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

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

this section; 

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

Administration the central registration functions of this 

section and the issuance of trust certificates to facilitate 

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

be necessary to fully protect the interest of the Government; 

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

purchaser of the guaranteed portion of a loan guaranteed 

under this Act and to the purchaser of a trust certificate 

issued pursuant to subsection (g), information on the 

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

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

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

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

or fewer guaranteed loans per year; and 

(D) have the authority to regulate brokers and dealers in 

guaranteed loans and trust certificates sold pursuant to 

subsection (f) and (g) of this section. 

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

and any interest earned on any funds collected by the agent 

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

time at which the agent is contractually required to transfer 

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

certificates, as appropriate. 

(3) Nothing in this subsection shall prohibit the utilization of 

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

certificates. The Administration may, with the consent of the 

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

Federal Reserve System. 

37 

(i) OFFICE OF HEARINGS AND APPEALS.— 

(1) ESTABLISHMENT.— 

(A) OFFICE.—There is established in the Administration 

an Office of Hearings and Appeals— 

(i) to impartially decide matters relating to program 

decisions of the Administrator— 

(I) for which Congress requires a hearing on the 

record; or 

(II) that the Administrator designates for hearing by regulation; and 

(ii) which shall contain the office of the Administration that handles requests submitted pursuant to sections 552 of title 5, United States Code (commonly referred to as the ‘‘Freedom of Information Act’’) and 

maintains records pursuant to section 552a of title 5, 

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

(B) JURISDICTION.— 

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

the Office of Hearings and Appeals shall hear appeals 

of agency actions under or pursuant to this Act, the 

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

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

(ii) EXCEPTION.—The Office of Hearings and Appeals 

shall not adjudicate disputes that require a hearing on 

the record, except disputes pertaining to the small 

business programs described in this Act. 

(C) ASSOCIATE ADMINISTRATOR.—The head of the Office 

of Hearings and Appeals shall be the Chief Hearing Officer 

appointed under section 4(b)(1), who shall be responsible 

to the Administrator. 

(2) CHIEF HEARING OFFICER DUTIES.— 

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

(i) be a career appointee in the Senior Executive 

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

the District of Columbia; and 

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

(B) ALTERNATIVE DISPUTE RESOLUTION.—The Chief Hearing Officer may assign a matter for mediation or other 

means of alternative dispute resolution. 

(3) HEARING OFFICERS.— 

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

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

(B) CONDITIONS OF EMPLOYMENT.—A Hearing Officer appointed under this paragraph— 

(i) shall serve in the excepted service as an employee 

of the Administration under section 2103 of title 5, 

United States Code, and under the supervision of the 

Chief Hearing Officer; 

38 

(ii) shall be classified at a position to which section 

5376 of title 5, United States Code, applies; and 

(iii) shall be compensated at a rate not exceeding 

the maximum rate payable under such section. 

(C) AUTHORITY; POWERS.—Notwithstanding section 

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

(i) a Hearing Officer may hear cases arising under 

section 554 of such title; 

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

(iii) the relevant provisions of subchapter II of chapter 5 of such title (except for section 556(b) of such 

title) shall apply to such Hearing Officer. 

(D) TREATMENT OF CURRENT PERSONNEL.—An individual 

serving as a Judge in the Office of Hearings and Appeals 

(as that position and office are designated in section 

134.101 of title 13, Code of Federal Regulations) on the effective date of this subsection shall be considered as qualified to be, and redesignated as, a Hearing Officer. 

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

‘‘Hearing Officer’’ means an individual appointed or redesignated under this subsection who is an attorney licensed by a 

State, commonwealth, territory or possession of the United 

States, or the District of Columbia. 

* * * * * * * 

SEC. 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.— (i) IN GENERAL.—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. 

(ii) LIQUIDITY.—On and after October 1, 2015, the 

Administrator may not guarantee a loan under this 

subsection if the lender determines that the borrower 

is unable to obtain credit elsewhere solely because the 

liquidity of the lender depends upon the guaranteed 

portion of the loan being sold on the secondary market. 

39 

(B) BACKGROUND CHECKS.—Prior to the approval of any 

loan made pursuant to this subsection, or section 503 of 

the Small Business Investment Act of 1958, the Administrator may verify the applicant’s criminal background, or 

lack thereof, through the best available means, including, 

if possible, use of the National Crime Information Center 

computer system at the Federal Bureau of Investigation. 

(C) LENDING LIMITS OF LENDERS.—On and after October 

1, 2015, the Administrator may not guarantee a loan 

under this subsection if the sole purpose for requesting the 

guarantee is to allow the lender to exceed the legal lending 

limit of the lender. 

(2) LEVEL OF PARTICIPATION IN GUARANTEED LOANS.— 

(A) IN GENERAL.—Except as provided in subparagraphs 

(B), (D), and (E), in an agreement to participate in a loan 

on a deferred basis under this subsection (including a loan 

made under the Preferred Lenders Program), such participation by the Administration shall be equal to— 

(i) 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 PRO- GRAM.— 

(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 

40 

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 

41 

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 

42 

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 subVerDate Sep 11 2014 08:31 Apr 26, 2018 Jkt 079010 PO 00000 Frm 00042 Fmt 6659 Sfmt 6602 E:\HR\OC\HR645.XXX HR645
43 

section, 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 øthis 

subsection to qualified employee trusts¿ this subsection— 

(i)to qualified employee trusts to qualified employee 

trusts with respect to a small business concern for the purpose of purchasing, and for any transaction costs associated with 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 concernø.¿; and 

(ii) to a small business concern under a plan approved by 

the Administrator, if the proceeds from the loan are only 

used to make a loan to a qualified employee trust, and for 

any transaction costs associated with making that loan, 

that results in the qualified employee trust owning at least 

51 percent of the small business concern. 

(B) The plan requiring the Administrator’s approval under 

subparagraph (A) shall be submitted to the Administration by 

the trustee of such trust or by the small business concern with 

its application for the guarantee. Such plan shall include an 

44 

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, øand¿ 

(iii) there will be adequate management to assure management expertise and continuityø.¿, and 

(iv) with respect to a loan made to a trust, or to a cooperative in accordance with paragraph (35)— 

(I) a seller of the small business concern may remain 

involved as an officer, director, or key employee of the 

small business concern when a qualified employee trust 

or cooperative has acquired 100 percent of ownership of 

the small business concern; and 

(II) any seller of the small business concern who remains as an owner of the small business concern, regardless of the percentage of ownership interest, shall 

be required to provide a personal guarantee by the Administration. 

(C) In determining whether to guarantee any loan under this 

paragraph, the individual business experience or personal assets of employee-owners shall not be used as criteria, except inasmuch as certain employee-owners may assume managerial 

responsibilities, in which case business experience may be considered. 

(D) For purposes of this paragraph, a corporation which is 

controlled by any other person shall be treated as a small business concern if such corporation would, after the plan described in subparagraph (B) is carried out, be treated as a 

small business concern. 

(E) The Administration shall compile a separate list of applications for assistance under this paragraph, indicating which 

applications were accepted and which were denied, and shall 

report periodically to the Congress on the status of employeeowned firms assisted by the øAdministration.¿ Administration, 

which shall include— 

(i) the total number of loans made to employee-owned 

business concerns that were guaranteed by the Administrator under section 7(a) of the Small Business Act (15 

U.S.C. 636(a)) or section 502 of the Small Business Investment Act of 1958 (15 U.S.C. 696), including the number of 

loans made— 

(I) to small business concerns owned and controlled 

by socially and economically disadvantaged individuals; and 

(II) to cooperatives in which employees are eligible 

for membership; 

45 

(ii) the total number of financings made to employeeowned business concerns by companies licensed under section 301(c) of the Small Business Investment Act of 1958 

(15 U.S.C. 696(c)), including the number of financings 

made— 

(I) to small business concerns owned and controlled 

by socially and economically disadvantaged individuals; and 

(II) to cooperatives in which employees are eligible 

for membership; and 

(iii) any outreach and educational activities conducted by 

the Administration with respect to employee-owned business concerns. 

(F) A small business concern that makes a loan to a qualified 

employee trust under subparagraph (A)(ii) is not required to 

contain the same terms and conditions as the loan made to the 

small business concern that is guaranteed by the Administration under such subparagraph. 

(G) With respect to a loan made to a qualified employee trust 

under this paragraph, or to a cooperative in accordance with 

paragraph (35), the Administrator may, as deemed appropriate, 

elect to not require any mandatory equity to be provided by the 

qualified employee trust or cooperative to make the loan. 

(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, 

46 

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. 

47 

(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 civilVerDate Sep 11 2014 08:31 Apr 26, 2018 Jkt 079010 PO 00000 Frm 00047 Fmt 6659 Sfmt 6602 E:\HR\OC\HR645.XXX HR645
48 

ian 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 

49 

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. 

50 

(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 connec- tion with any such loan for more than $250,000; or 

51 

(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 ‘‘disaster area’’ means the area for 

which the President has declared a major disaster, 

during the 5-year period beginning on the date of the 

declaration. 

(ii) The term ‘‘express lender’’ means any lender authorized by the Administration to participate in the 

Express Loan Program. 

(iii) The term ‘‘express loan’’ means any loan made 

pursuant to this paragraph in which a lender utilizes 

to the maximum extent practicable its own loan analyses, procedures, and documentation. 

(iv) The term ‘‘Express Loan Program’’ means the 

program for express loans established by the Administration under paragraph (25)(B), as in existence on 

April 5, 2004, with a guaranty rate of not more than 

50 percent. 

(B) RESTRICTION TO EXPRESS LENDER.—The authority to 

make an express loan shall be limited to those lenders 

deemed qualified to make such loans by the Administration. Designation as an express lender for purposes of 

making an express loan shall not prohibit such lender from 

taking any other action authorized by the Administration 

for that lender pursuant to this subsection. 

(C) GRANDFATHERING OF EXISTING LENDERS.—Any express lender shall retain such designation unless the Administration determines that the express lender has violated the law or regulations promulgated by the Administration or modifies the requirements to be an express lender and the lender no longer satisfies those requirements. 

(D) MAXIMUM LOAN AMOUNT.—The maximum loan 

amount under the Express Loan Program is $350,000. 

(E) OPTION TO PARTICIPATE.—Except as otherwise provided in this paragraph, the Administration shall take no 

regulatory, policy, or administrative action, without regard 

to whether such action requires notification pursuant to 

paragraph (24), that has the effect of requiring a lender to 

make an express loan pursuant to subparagraph (D). 

(F) EXPRESS LOANS FOR RENEWABLE ENERGY AND ENERGY

EFFICIENCY.— 

(i) DEFINITIONS.—In this subparagraph— 

(I) the term ‘‘biomass’’— 

52 

(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. 

(G) GUARANTEE FEE WAIVER FOR VETERANS.— 

(i) GUARANTEE FEE WAIVER.—The Administrator 

may not collect a guarantee fee described in paragraph 

(18) in connection with a loan made under this paragraph to a veteran or spouse of a veteran on or after 

October 1, 2015. 

(ii) EXCEPTION.—If the President’s budget for the 

upcoming fiscal year, submitted to Congress pursuant 

to section 1105(a) of title 31, United States Code, includes a cost for the program established under this 

subsection that is above zero, the requirements of 

clause (i) shall not apply to loans made during such 

upcoming fiscal year. 

(iii) DEFINITION.—In this subparagraph, the term 

‘‘veteran or spouse of a veteran’’ means— 

(I) a veteran, as defined in section 3(q)(4); 

(II) an individual who is eligible to participate 

in the Transition Assistance Program established 

under section 1144 of title 10, United States Code; 

53 

(III) a member of a reserve component of the 

Armed Forces named in section 10101 of title 10, 

United States Code; 

(IV) the spouse of an individual described in 

subclause (I), (II), or (III); or 

(V) the surviving spouse (as defined in section 

101 of title 38, United States Code) of an individual described in subclause (I), (II), or (III) who 

died while serving on active duty or as a result of 

a disability that is service-connected (as defined in 

such section). 

(H) RECOVERY OPPORTUNITY LOANS.— 

(i) IN GENERAL.—The Administrator may guarantee 

an express loan to a small business concern located in 

a disaster area in accordance with this subparagraph. 

(ii) MAXIMUMS.—For a loan guaranteed under clause 

(i)— 

(I) the maximum loan amount is $150,000; and 

(II) the guarantee rate shall be not more than 

85 percent. 

(iii) OVERALL CAP.—A loan guaranteed under clause 

(i) shall not be counted in determining the amount of 

loans made to a borrower for purposes of subparagraph (D). 

(iv) OPERATIONS.—A small business concern receiving a loan guaranteed under clause (i) shall certify 

that the small business concern was in operation on 

the date on which the applicable major disaster occurred as a condition of receiving the loan. 

(v) REPAYMENT ABILITY.—A loan guaranteed under 

clause (i) may only be made to a small business concern that demonstrates, to the satisfaction of the Administrator, sufficient capacity to repay the loan. 

(vi) TIMING OF PAYMENT OF GUARANTEES.— 

(I) IN GENERAL.—Not later than 90 days after 

the date on which a request for purchase is filed 

with the Administrator, the Administrator shall 

determine whether to pay the guaranteed portion 

of the loan. 

(II) RECAPTURE.—Notwithstanding any other 

provision of law, unless there is a subsequent 

finding of fraud by a court of competent jurisdiction relating to a loan guaranteed under clause (i), 

on and after the date that is 6 months after the 

date on which the Administrator determines to 

pay the guaranteed portion of the loan, the Administrator may not attempt to recapture the paid 

guarantee. 

(vii) FEES.— (I) IN GENERAL.—Unless the Administrator has 

waived the guarantee fee that would otherwise be 

collected by the Administrator under paragraph 

(18) for a loan guaranteed under clause (i), and 

except as provided in subclause (II), the guarantee 

fee for the loan shall be equal to the guarantee fee 

54 

that the Administrator would collect if the guarantee rate for the loan was 50 percent. 

(II) EXCEPTION.—Subclause (I) shall not apply if 

the cost of carrying out the program under this 

subsection in a fiscal year is more than zero and 

such cost is directly attributable to the cost of 

guaranteeing loans under clause (i). 

(viii) RULES.—Not later than 270 days after the date 

of enactment of this subparagraph, the Administrator 

shall promulgate rules to carry out this subparagraph. 

(32) LOANS FOR ENERGY EFFICIENT TECHNOLOGIES.— 

(A) DEFINITIONS.—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. 

55 

(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. 

56 

(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.— 

57 

(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. 

(35) LOANS TO COOPERATIVES.— 

(A) DEFINITION.—In this paragraph, the term ‘‘cooperative’’ means an entity that is determined to be a cooperative 

by the Administrator, in accordance with applicable Federal and State laws and regulation. 

58 

(B) AUTHORITY.—The Administration shall guarantee 

loans made to a cooperative for the purpose described in 

paragraph (15). 

(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— 

(i) construction of retaining walls and sea walls; 

(ii) grading and contouring land; and 

(iii) relocating utilities and modifying structures, including construction of a safe room or similar storm shelter designed to protect property and occupants from tornadoes or 

other natural disasters, if such safe room or similar storm 

shelter is constructed in accordance with applicable standards issued by the Federal Emergency Management Agency; 

(B) to refinance any mortgage or other lien against a totally 

destroyed or substantially damaged home or business concern: 

Provided, That no loan or guarantee shall be extended unless 

the Administration finds that (i) the applicant is not able to obtain credit elsewhere; (ii) such property is to be repaired, rehabilitated, or replaced; (iii) the amount refinanced shall not exceed the amount of physical loss sustained; and (iv) such 

amount shall be reduced to the extent such mortgage or lien 

is satisfied by insurance or otherwise; and 

(C) during fiscal years 2000 through 2004, to establish a 

predisaster mitigation program to make such loans (either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate or 

deferred (guaranteed) basis), as the Administrator may determine to be necessary or appropriate, to enable small businesses to use mitigation techniques in support of a formal mitigation program established by the Federal Emergency Management Agency, except that no loan or guarantee may be extended to a small business under this subparagraph unless the 

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

(2) to make such loans (either directly or in cooperation with 

banks or other lending institutions through agreements to parVerDate Sep 11 2014 08:31 Apr 26, 2018 Jkt 079010 PO 00000 Frm 00058 Fmt 6659 Sfmt 6602 E:\HR\OC\HR645.XXX HR645
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ticipate 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. 

60 

(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 

61 

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 

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62 

aster (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.— 

63 

(A) IN GENERAL.—If the President declares a major disaster, the Administrator may declare eligibility for additional disaster assistance in accordance with this paragraph. 

(B) THRESHOLD.—A major disaster for which the Administrator declares eligibility for additional disaster assistance under this paragraph shall— 

(i) have resulted in extraordinary levels of casualties 

or damage or disruption severely affecting the population (including mass evacuations), infrastructure, environment, economy, national morale, or government 

functions in an area; 

(ii) be comparable to the description of a catastrophic incident in the National Response Plan of the 

Administration, or any successor thereto, unless there 

is no successor to such plan, in which case this clause 

shall have no force or effect; and 

(iii) be of such size and scope that— 

(I) the disaster assistance programs under the 

other paragraphs under this subsection are incapable of providing adequate and timely assistance to individuals or business concerns located 

within the disaster area; or 

(II) a significant number of business concerns 

outside the disaster area have suffered disasterrelated substantial economic injury as a result of 

the incident. 

(C) ADDITIONAL ECONOMIC INJURY DISASTER LOAN 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 procVerDate Sep 11 2014 08:31 Apr 26, 2018 Jkt 079010 PO 00000 Frm 00063 Fmt 6659 Sfmt 6602 E:\HR\OC\HR645.XXX HR645
64 

essing 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. 

(10) REDUCING CLOSING AND DISBURSEMENT DELAYS.—The 

Administrator shall provide a clear and concise notification on 

all application materials for loans made under this subsection 

and on relevant websites notifying an applicant that the applicant may submit all documentation necessary for the approval 

of the loan at the time of application and that failure to submit 

all documentation could delay the approval and disbursement 

of the loan. 

(11) INCREASING TRANSPARENCY IN LOAN APPROVALS.—The 

Administrator shall establish and implement clear, written 

policies and procedures for analyzing the ability of a loan applicant to repay a loan made under this subsection. 

(12) ADDITIONAL AWARDS TO SMALL BUSINESS DEVELOPMENT

CENTERS, WOMEN’S BUSINESS CENTERS, AND SCORE FOR DIS- ASTER RECOVERY.— (A) IN GENERAL.—The Administration may provide financial assistance to a small business development center, 

a women’s business center described in section 29, the 

65 

Service Corps of Retired Executives, or any proposed consortium of such individuals or entities to spur disaster recovery and growth of small business concerns located in an 

area for which the President has declared a major disaster. 

(B) FORM OF FINANCIAL ASSISTANCE.—Financial assistance provided under this paragraph shall be in the form 

of a grant, contract, or cooperative agreement. 

(C) NO MATCHING FUNDS REQUIRED.—Matching funds 

shall not be required for any grant, contract, or cooperative 

agreement under this paragraph. 

(D) REQUIREMENTS.—A recipient of financial assistance 

under this paragraph shall provide counseling, training, 

and other related services, such as promoting long-term resiliency, to small business concerns and entrepreneurs impacted by a major disaster. 

(E) PERFORMANCE.— 

(i) IN GENERAL.—The Administrator, in cooperation 

with the recipients of financial assistance under this 

paragraph, shall establish metrics and goals for performance of grants, contracts, and cooperative agreements under this paragraph, which shall include recovery of sales, recovery of employment, reestablishment of business premises, and establishment of new 

small business concerns. 

(ii) USE OF ESTIMATES.—The Administrator shall 

base the goals and metrics for performance established 

under clause (i), in part, on the estimates of disaster 

impact prepared by the Office of Disaster Assistance 

for purposes of estimating loan-making requirements. 

(F) TERM.— 

(i) IN GENERAL.—The term of any grant, contract, or 

cooperative agreement under this paragraph shall be 

for not more than 2 years. 

(ii) EXTENSION.—The Administrator may make 1 extension of a grant, contract, or cooperative agreement 

under this paragraph for a period of not more than 1 

year, upon a showing of good cause and need for the 

extension. 

(G) EXEMPTION FROM OTHER PROGRAM REQUIREMENTS.— Financial assistance provided under this paragraph is in 

addition to, and wholly separate from, any other form of 

assistance provided by the Administrator under this Act. 

(H) COMPETITIVE BASIS.—The Administration shall 

award financial assistance under this paragraph on a competitive basis. 

(13) SUPPLEMENTAL ASSISTANCE FOR CONTRACTOR MALFEASANCE.— 

(A) IN GENERAL.—If a contractor or other person engages 

in malfeasance in connection with repairs to, rehabilitation 

of, or replacement of real or personal property relating to 

which a loan was made under this subsection and the malfeasance results in substantial economic damage to the recipient of the loan or substantial risks to health or safety, 

upon receiving documentation of the substantial economic 

damage or the substantial risk to health and safety from 

66 

an independent loss verifier, and subject to subparagraph 

(B), the Administrator may increase the amount of the 

loan under this subsection, as necessary for the cost of repairs, rehabilitation, or replacement needed to address the 

cause of the economic damage or health or safety risk. 

(B) REQUIREMENTS.—The Administrator may only increase the amount of a loan under subparagraph (A) upon 

receiving an appropriate certification from the borrower 

and person performing the mitigation attesting to the reasonableness of the mitigation costs and an assignment of 

any proceeds received from the person engaging in the 

malfeasance. The assignment of proceeds recovered from 

the person engaging in the malfeasance shall be equal to 

the amount of the loan under this section. Any mitigation 

activities shall be subject to audit and independent 

verification of completeness and cost reasonableness. 

(14) BUSINESS RECOVERY CENTERS.— 

(A) IN GENERAL.—The Administrator, acting through the 

district offices of the Administration, shall identify locations that may be used as recovery centers by the Administration in the event of a disaster declared under this subsection or a major disaster. 

(B) REQUIREMENTS FOR IDENTIFICATION.—Each district 

office of the Administration shall— 

(i) identify a location described in subparagraph (A) 

in each county, parish, or similar unit of general local 

government in the area served by the district office; 

and 

(ii) ensure that the locations identified under subparagraph (A) may be used as a recovery center without cost to the Government, to the extent practicable. 

(15) INCREASED OVERSIGHT OF ECONOMIC INJURY DISASTER

LOANS.—The Administrator shall increase oversight of entities 

receiving loans under paragraph (2), and may consider— 

(A) scheduled site visits to ensure borrower eligibility 

and compliance with requirements established by the Administrator; and 

(B) reviews of the use of the loan proceeds by an entity 

described in paragraph (2) to ensure compliance with requirements established by the Administrator. 

No loan under this subsection, including renewals and extensions 

thereof, may be made for a period or periods exceeding thirty years: 

Provided, That the Administrator may consent to a suspension in 

the payment of principal and interest charges on, and to an extension in the maturity of, the Federal share of any loan under this 

subsection for a period not to exceed five years, if (A) the borrower 

under such loan is a homeowner or a small business concern, (B) 

the loan was made to enable (i) such homeowner to repair or replace his home, or (ii) such concern to repair or replace plant or 

equipment which was damaged or destroyed as the result of a disaster meeting the requirements of clause (A) or (B) of paragraph 

(2) of this subsection, and (C) the Administrator determines such 

action is necessary to avoid severe financial hardship: Provided further, That the provisions of paragraph (1) of subsection (d) of this 

section shall not be applicable to any such loan having a maturity 

67 

in excess of twenty years. Notwithstanding any other provision of 

law, and except as provided in subsection (d), the interest rate on 

the Administration’s share of any loan made under subsection (b), 

shall not exceed the average annual interest rate on all interestbearing obligations of the United States then forming a part of the 

public debt as computed at the end of the fiscal year next preceding 

the date of the loan and adjusted to the nearest one-eight of 1 per 

centum plus one-quarter of 1 per centum: Provided, however, That 

the interest rate for loans made under paragraphs (1) and (2) hereof shall not exceed the rate of interest which is in effect at the time 

of the occurrence of the disaster. In agreements to participate in 

loans on a deferred basis under this subsection, such participation 

by the Administration shall not be in excess of 90 per centum of 

the balance of the loan outstanding at the time of disbursement. 

Notwithstanding any other provision of law, the interest rate on 

the Administration’s share of any loan made pursuant to paragraph (1) of this subsection to repair or replace a primary residence 

and/or replace or repair damaged or destroyed personal property, 

less the amount of compensation by insurance or otherwise, with 

respect to a disaster occurring on or after July 1, 1976, and prior 

to October 1, 1978, shall be: 1 per centum on the amount of such 

loan not exceeding $10,000, and 3 per centum on the amount of 

such loan over $10,000 but not exceeding $40,000. The interest rate 

on the Administration’s share of the first $250,000 of all other 

loans made pursuant to paragraph (1) of this subsection, with respect to a disaster occurring on or after July 1, 1976, and prior to 

October 1, 1978, shall be 3 per centum. All repayments of principal 

on the Administration’s share of any loan made under the above 

provisions shall first be applied to reduce the principal sum of such 

loan which bears interest at the lower rates provided in this paragraph. The principal amount of any loan made pursuant to paragraph (1) in connection with a disaster which occurs on or after 

April 1, 1977, but prior to January 1, 1978, may be increased by 

such amount, but not more than $2,000, as the Administration determines to be reasonable in light of the amount and nature of loss, 

damage, or injury sustained in order to finance the installation of 

insulation in the property which was lost, damaged, or injured, if 

the uninsured, damaged portion of the property is 10 per centum 

or more of the market value of the property at the time of the disaster. No later than June 1, 1978, the Administration shall prepare 

and transmit to the Select Committee on Small Business of the 

Senate, the Committee on Small Business of the House of Representatives, and the Committee of the Senate and House of Representatives having jurisdiction over measures relating to energy 

conservation, a report on its activities under this paragraph, including therein an evaluation of the effect of such activities on encouraging the installation of insulation in property which is repaired or replaced after a disaster which is subject to this 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, 

68 

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. 

69 

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 

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graph 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 

71 

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 

72 

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; 

73 

(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 

74 

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 $25,000 or less (or such higher 

amount as the Administrator determines appropriate in the 

event of a disaster) which are made under paragraph (1) of 

subsection (b): Provided further, That the Administrator, in obtaining the best available collateral for a loan of not more than 

$200,000 under paragraph (1) or (2) of subsection (b) relating 

to damage to or destruction of the property of, or economic injury to, a small business concern, shall not require the owner 

of the small business concern to use the primary residence of 

the owner as collateral if the Administrator determines that 

the owner has other assets of equal quality and with a value 

equal to or greater than the amount of the loan that could be 

used as collateral for the loan: Provided further, That nothing 

in the preceding proviso may be construed to reduce the 

amount of collateral required by the Administrator in connection with a loan described in the preceding proviso or to modify 

the standards used to evaluate the quality (rather than the 

type) of such collateral. Employees of concerns sharing a common business premises shall be aggregated in determining 

‘‘major source of employment’’ status for nonprofit applicants 

owning such premises. 

With respect to any loan which is outstanding on the date of enactment of this paragraph and which was made on account of a disaster commencing on or after October 1, 1982, the Administrator 

shall made such change in the interest rate on the balance of such 

loan as is required herein effective as of the date of enactment. 

(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. 

(8) DISASTER LOANS FOR SUPERSTORM SANDY.— (A) IN GENERAL.—Notwithstanding any other provision 

of law, and subject to the same requirements and procedures that are used to make loans pursuant to subsection 

(b), a small business concern, homeowner, nonprofit entity, 

or renter that was located within an area and during the 

75 

time period with respect to which a major disaster was declared by the President under section 401 of the Robert T. 

Stafford Disaster Relief and Emergency Assistance Act (42 

U.S.C. 5170) by reason of Superstorm Sandy may apply to 

the Administrator— 

(i) for a loan to repair, rehabilitate, or replace property damaged or destroyed by reason of Superstorm 

Sandy; or 

(ii) if such a small business concern has suffered 

substantial economic injury by reason of Superstorm 

Sandy, for a loan to assist such a small business concern. 

(B) TIMING.—The Administrator shall select loan recipients and make available loans for a period of not less than 

1 year after the date on which the Administrator carries 

out this authority. 

(C) INSPECTOR GENERAL REVIEW.—Not later than 6 

months after the date on which the Administrator begins 

carrying out this authority, the Inspector General of the 

Administration shall initiate a review of the controls for 

ensuring applicant eligibility for loans made under this 

paragraph. 

(e) The Administration shall not fund any Small Business Development Center or any variation thereof, except as authorized in 

section 21 of this Act. 

(f) 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 reVerDate Sep 11 2014 08:31 Apr 26, 2018 Jkt 079010 PO 00000 Frm 00075 Fmt 6659 Sfmt 6602 E:\HR\OC\HR645.XXX HR645
76 

ceives financial assistance under this subsection, employs 

handicapped individuals for not less than 75 per centum of 

the man-hours required for the production or provision of 

the commodities or services; or 

(B) to assist any handicapped individual in establishing, acquiring, or operating a small business concern. 

(2) The Administration’s share of any loan made under this subsection shall not exceed $350,000, nor may any such loan be made 

if the total amount outstanding and committed (by participation or 

otherwise) to the borrower from the business loan and investment 

fund established by section 4(c)(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 

77 

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. 

78 

(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. 

79 

(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 

80 

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 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). 

81 

(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; 

82 

(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. 

83 

(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). 

84 

(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). 

85 

(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. 

86 

(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, 

87 

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 Innovation and Opportunity Act. The Administration shall, in consultation with 

the Secretary of Labor, promulgate rules and regulations to implement this subparagraph that establish acceptable training 

and upgrading performance standards and provide for such 

monitoring or audit requirements as may be necessary to ensure the integrity of the training effort. No financial assistance 

shall be granted under the subparagraph unless the Administrator determines that— 

88 

(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)(i) The transfer of technology or surplus property owned 

by the United States to such a concern. Activities designed to 

effect such transfer shall be developed in cooperation with the 

heads of Federal agencies and shall include the transfer by 

grant, license, or sale of such technology or property to such a 

concern. Such property may be transferred to Program Participants on a priority basis. Technology or property transferred 

under this subparagraph shall be used by the concern during 

the normal conduct of its business operation and shall not be 

sold or transferred to any other party (other than the Government) during such concern’s term of participation in the Program and for one year thereafter. 

(ii)(I) In this clause— 

(aa) the term ‘‘covered period’’ means the 2-year period beginning on the date on which the President declared the applicable major disaster; and 

(bb) the term ‘‘disaster area’’ means the area for 

which the President has declared a major disaster, 

during the covered period. 

89 

(II) The Administrator may transfer technology or surplus property under clause (i) on a priority basis to a small 

business concern located in a disaster area if— 

(aa) the small business concern meets the requirements for such a transfer, without regard to whether 

the small business concern is a Program Participant; 

and 

(bb) for a small business concern that is a Program 

Participant, on and after the date on which the President declared the applicable major disaster, the small 

business concern has not received property under this 

subparagraph on the basis of the status of the small 

business concern as a Program Participant. 

(III) For any transfer of property under this clause to a 

small business concern, the terms and conditions shall be 

the same as a transfer to a Program Participant, except 

that the small business concern shall agree not to sell or 

transfer the property to any party other than the Federal 

Government during the covered period. 

(IV) A small business concern that receives a transfer of 

property under this clause may not receive a transfer of 

property under clause (i) during the covered period. 

(V) If a small business concern sells or transfers property in violation of the agreement described in subclause 

(III), the Administrator may initiate proceedings to prohibit the small business concern from receiving a transfer 

of property under this clause or clause (i), in addition to 

any other remedy available to the Administrator. 

(G) Training assistance whereby the Administration shall 

conduct training sessions to assist individuals and enterprises 

eligible to receive contracts under section 8(a) in the development of business principles and strategies to enhance their 

ability to successfully compete for contracts in the marketplace. 

(H) Joint ventures, leader-follower arrangements, and 

teaming agreements between the Program Participant and 

other Program Participants and other business concerns with 

respect to contracting opportunities for the research, development, full-scale engineering or production of major systems. 

Such activities shall be undertaken on the basis of programs 

developed by the agency responsible for the procurement of the 

major system, with the assistance of the Administration. 

(I) Transitional management business planning training and 

technical assistance. 

(J) Program Participants in the developmental stage of Program participation shall be eligible for the assistance provided 

by subparagraphs (A), (B), (C), (D), (E), (F), and (G). 

(14) Program Participants in the transitional stage of Program 

participation shall be eligible for the assistance provided by subparagraphs (A), (B), (F), (G), (H), and (I) of paragraph (13). 

(15) Subject to the provisions of paragraph (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— 

90 

(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. 

91 

(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 

92 

(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 

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93 

ing 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 

94 

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 lowincome individuals seeking to start or enlarge their own 

businesses, if such assistance includes working with the 

grant recipient to secure loans in amounts not to exceed 

$50,000 from private sector lending institutions, with or 

without a loan guarantee from the nonprofit entity. 

(2) ELIGIBILITY FOR PARTICIPATION.—An intermediary shall 

be eligible to receive loans and grants under subparagraphs 

(B)(i) and (B)(ii) of paragraph (1) if it— 

(A) meets the definition in paragraph (10); and 

(B) has at least 1 year of experience making microloans 

to startup, newly established, or growing small business 

concerns and providing, as an integral part of its microloan 

program, intensive marketing, management, and technical 

assistance to its borrowers. 

(3) LOANS TO INTERMEDIARIES.— 

95 

(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 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 

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96 

trator 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 

97 

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 nonFederal sources. In addition to cash or other direct funding, the contribution may include indirect costs or in-kind 

contributions paid for under non-Federal programs. 

98 

(C) ADDITIONAL TECHNICAL ASSISTANCE GRANTS FOR MAK- ING 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 CON- CERNS.— 

(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. 

(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 

99 

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 inkind contributions paid for under non-Federal programs. 

100 

(6) LOANS TO SMALL BUSINESS CONCERNS FROM ELIGIBLE

INTERMEDIARIES.— 

(A) IN GENERAL.—An eligible intermediary shall make 

short-term, fixed rate loans to startup, newly established, 

and growing small business concerns from the funds made 

available to it under subparagraph (B)(i) of paragraph (1) 

for working capital and the acquisition of materials, supplies, furniture, fixtures, and equipment. 

(B) PORTFOLIO REQUIREMENT.—To the extent practicable, 

each intermediary that operates a microloan program 

under this subsection shall maintain a microloan portfolio 

with an average loan size of not more than $15,000. 

(C) INTEREST LIMIT.—Notwithstanding any provision of 

the laws of any State or the constitution of any State pertaining to the rate or amount of interest that may be 

charged, taken, received, or reserved on a loan, the maximum rate of interest to be charged on a microloan funded 

under this subsection shall not exceed the rate of interest 

applicable to a loan made to an intermediary by the Administration— 

(i) in the case of a loan of more than $7,500 made 

by the intermediary to a small business concern or entrepreneur by more than 7.75 percentage points; and 

(ii) in the case of a loan of not more than $7,500 

made by the intermediary to a small business concern 

or entrepreneur by more than 8.5 percentage points. 

(D) REVIEW RESTRICTION.—The Administration shall not 

review individual microloans made by intermediaries prior 

to approval. 

(E) ESTABLISHMENT OF CHILD CARE OR TRANSPORTATION

BUSINESSES.—In addition to other eligible small businesses 

concerns, borrowers under any program under this subsection may include individuals who will use the loan proceeds to establish for-profit or nonprofit child care establishments or businesses providing for-profit transportation 

services. 

(7) PROGRAM FUNDING FOR MICROLOANS.— 

(A) NUMBER OF PARTICIPANTS.—Under the program authorized by this subsection, the Administration may fund, 

on a competitive basis, not more than 300 intermediaries. 

(B) ALLOCATION.— 

(i) MINIMUM ALLOCATION.—Subject to the availability of appropriations, of the total amount of new 

loan funds made available for award under this subsection in each fiscal year, the Administration shall 

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 

101 

(II) any additional amount, as determined by 

the Administration. 

(ii) REDISTRIBUTION.—If, at the beginning of the 

third quarter of a fiscal year, the Administration determines that any portion of the amount made available to carry out this subsection is unlikely to be made 

available under clause (i) during that fiscal year, the 

Administration may make that portion available for 

award in any one or more States (including the District of Columbia, the Commonwealth of Puerto Rico, 

the United States Virgin Islands, Guam, and American Samoa) without regard to clause (i). 

(8) EQUITABLE DISTRIBUTION OF INTERMEDIARIES.—In approving microloan program applicants and providing funding to 

intermediaries under this subsection, the Administration shall 

select and provide funding to such intermediaries as will ensure appropriate availability of loans for small businesses in 

all industries located throughout each State, particularly those 

located in urban and in rural areas. 

(9) GRANTS FOR MANAGEMENT, MARKETING, TECHNICAL AS- SISTANCE, AND RELATED SERVICES.— (A) IN GENERAL.—The Administration may procure technical assistance for intermediaries participating in the 

Microloan Program to ensure that such intermediaries 

have the knowledge, skills, and understanding of microlending practices necessary to operate successful microloan 

programs. 

(B) ASSISTANCE AMOUNT.—The Administration shall 

transfer 7 percent of its annual appropriation for loans and 

loan guarantees under this subsection to the Administration’s Salaries and Expense Account for the specific purpose of providing 1 or more technical assistance grants to 

experienced microlending organizations and national and 

regional nonprofit organizations that have demonstrated 

experience in providing training support for microenterprise development and financing. to achieve the purpose 

set forth in subparagraph (A). 

(C) WELFARE-TO-WORK MICROLOAN INITIATIVE.—Of 

amounts made available to carry out the welfare-to-work 

microloan initiative under paragraph (1)(A)(iv) in any fiscal year, the Administration may use not more than 5 percent to provide technical assistance, either directly or 

through contractors, to welfare-to-work microloan initiative grantees, to ensure that, as grantees, they have the 

knowledge, skills, and understanding of microlending and 

welfare-to-work transition, and other related issues, to operate a successful welfare-to-work microloan initiative. 

(10) REPORT TO CONGRESS.—On November 1, 1995, the Administration shall submit to the Committees on Small Business of the Senate and the House of Representatives a report, 

including the Administration’s evaluation of the effectiveness 

of the first 31⁄2 years of the microloan program and the following: 

(A) the numbers and locations of the intermediaries 

funded to conduct microloan programs; 

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(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 

103 

(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.— 

104 

(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. 

* * * * * * * 

SEC. 21. (a)(1) The Administration is authorized to make grants 

(including contracts and cooperative agreements) to any State government or any agency thereof, any regional entity, any State-chartered development, credit or finance corporation, any women’s business center operating pursuant to section 29, any public or private 

institution of higher education, including but not limited to any 

land-grant college or university, any college or school of business, 

engineering, commerce, or agriculture, community college or junior 

college, or to any entity formed by two or more of the above entities 

(herein referred to as ‘‘applicants’’) to assist in establishing small 

business development centers and to any such labor for: small business oriented employment or natural resources development programs; studies, research, and counseling concerning the managing, 

financing, and operation of small business enterprises, management and technical assistance regarding small business participation in international markets, export promotion and technology 

105 

transfer; delivery or distribution of such services and information; 

providing access to business analysts who can refer small business 

concerns to available experts; and, to the extent practicable, providing assistance in furtherance of the Small Business Development Center Cyber Strategy developed under section 1841(a) of the 

National Defense Authorization Act for Fiscal Year 2017: Provided, 

That after December 31, 1990, the Administration shall not make 

a grant to any applicant other than an institution of higher education or a women’s business center operating pursuant to section 

29 as a Small Business Development Center unless the applicant 

was receiving a grant (including a contract or cooperative agreement) on such date. The Administration shall require any applicant 

for a small business development center grant with performance 

commencing on or after January 1, 1992 to have its own budget 

and to primarily utilize institutions of higher education and women’s business centers operating pursuant to section 29 to provide 

services to the small business community. The term of such grants 

shall be made on a calendar year basis or to coincide with the Federal fiscal year. 

(2) COOPERATION TO PROVIDE INTERNATIONAL TRADE SERV- ICES.— (A) INFORMATION AND SERVICES.—The small business development centers shall work in close cooperation with the 

Administration’s regional and local offices, the Department 

of Commerce, appropriate Federal, State and local agencies (including State trade agencies), and the small business community to serve as an active information dissemination and service delivery mechanism for existing trade 

promotion, trade finance, trade adjustment, trade remedy 

and trade data collection programs of particular utility for 

small businesses. 

(B) COOPERATION WITH STATE TRADE AGENCIES AND EXPORT ASSISTANCE CENTERS.—A small business development 

center that counsels a small business concern on issues relating to international trade shall— 

(i) consult with State trade agencies and Export Assistance Centers to provide appropriate services to the 

small business concern; and 

(ii) as necessary, refer the small business concern to 

a State trade agency or an Export Assistance Center 

for further counseling or assistance. 

(C) DEFINITION.—In this paragraph, the term ‘‘Export 

Assistance Center’’ has the same meaning as in section 22. 

(3) The Small Business Development Center Program shall be 

under the general management and oversight of the Administration for the delivery of programs and services to the small business 

community. Such programs and services shall be jointly developed, 

negotiated, and agreed upon, with full participation of both parties, 

pursuant to an executed cooperative agreement between the Small 

Business Development Center applicant and the Administration. 

(A) Small business development centers are authorized to form 

an association to pursue matters of common concern. If more than 

a majority of the small business development centers which are operating pursuant to agreements with the Administration are members of such an association, the Administration is authorized and 

106 

directed to recognize the existence and activities of such an association and to consult with it and develop documents (i) announcing 

the annual scope of activities pursuant to this section, (ii) requesting proposals to deliver assistance as provided in this section and 

(iii) governing the general operations and administration of the 

Small Business Development Center Program, specifically including the development of regulations and a uniform negotiated cooperative agreement for use on an annual basis when entering into 

individual negotiated agreements with small business development 

centers. 

(B) Provisions governing audits, cost principles and administrative requirements for Federal grants, contracts and cooperative 

agreements which are included in uniform requirements of Office 

of Management and Budget (OMB) Circulars shall be incorporated 

by reference and shall not be set forth in summary or other form 

in regulations. 

(C) Whereas On an annual basis, the Small Business Development Center shall review and coordinate public and private 

partnerships and cosponsorships with the Administration for 

the purpose of more efficiently leveraging available resources 

on a National and a State basis. 

(4) SMALL BUSINESS DEVELOPMENT CENTER PROGRAM LEVEL.— (A) IN GENERAL.—The Administration shall require as a condition of any grant (or amendment or modification thereof) 

made to an applicant under this section, that a matching 

amount (excluding any fees collected from recipients of such 

assistance) equal to the amount of such grant be provided from 

sources other than the Federal Government, to be comprised of 

not less than 50 percent cash and not more than 50 percent 

of indirect costs and in-kind contributions. 

(B) RESTRICTION.—The matching amount described in subparagraph (A) shall not include any indirect costs or in-kind 

contributions derived from any Federal program. 

(C) FUNDING FORMULA.— 

(i) IN GENERAL.—Subject to clause (iii), the amount of a 

formula grant received by a State under this subparagraph 

shall be equal to an amount determined in accordance 

with the following formula: 

(I) The annual amount made available under section 

20(a) for the Small Business Development Center Program, less any reductions made for expenses authorized by clause (v) of this subparagraph, shall be divided on a pro rata basis, based on the percentage of 

the population of each State, as compared to the population of the United States. 

(II) If the pro rata amount calculated under subclause (I) for any State is less than the minimum 

funding level under clause (iii), the Administration 

shall determine the aggregate amount necessary to 

achieve that minimum funding level for each such 

State. 

(III) The aggregate amount calculated under subclause (II) shall be deducted from the amount calculated under subclause (I) for States eligible to receive more than the minimum funding level. The deVerDate Sep 11 2014 08:31 Apr 26, 2018 Jkt 079010 PO 00000 Frm 00106 Fmt 6659 Sfmt 6602 E:\HR\OC\HR645.XXX HR645
107 

ductions shall be made on a pro rata basis, based on 

the population of each such State, as compared to the 

total population of all such States. 

(IV) The aggregate amount deducted under subclause (III) shall be added to the grants of those States 

that are not eligible to receive more than the minimum funding level in order to achieve the minimum 

funding level for each such State, except that the eligible amount of a grant to any State shall not be reduced to an amount below the minimum funding level. 

(ii) GRANT DETERMINATION.—The amount of a grant that 

a State is eligible to apply for under this subparagraph 

shall be the amount determined under clause (i), subject to 

any modifications required under clause (iii), and shall be 

based on the amount available for the fiscal year in which 

performance of the grant commences, but not including 

amounts distributed in accordance with clause (iv). The 

amount of a grant received by a State under any provision 

of this subparagraph shall not exceed the amount of 

matching funds from sources other than the Federal Government, as required under subparagraph (A). 

(iii) MINIMUM FUNDING LEVEL.—The amount of the minimum funding level for each State shall be determined for 

each fiscal year based on the amount made available for 

that fiscal year to carry out this section, as follows: 

(I) If the amount made available is not less than 

$81,500,000 and not more than $90,000,000, the minimum funding level shall be $500,000. 

(II) If the amount made available is less than 

$81,500,000, the minimum funding level shall be the 

remainder of $500,000 minus a percentage of $500,000 

equal to the percentage amount by which the amount 

made available is less than $81,500,000. 

(III) If the amount made available is more than 

$90,000,000, the minimum funding level shall be the 

sum of $500,000 plus a percentage of $500,000 equal 

to the percentage amount by which the amount made 

available exceeds $90,000,000. 

(iv) DISTRIBUTIONS.—Subject to clause (iii), if any State 

does not apply for, or use, its full funding eligibility for a 

fiscal year, the Administration shall distribute the remaining funds as follows: 

(I) If the grant to any State is less than the amount 

received by that State in fiscal year 2000, the Administration shall distribute such remaining funds, on a 

pro rata basis, based on the percentage of shortage of 

each such State, as compared to the total amount of 

such remaining funds available, to the extent necessary in order to increase the amount of the grant to 

the amount received by that State in fiscal year 2000, 

or until such funds are exhausted, whichever first occurs. 

(II) If any funds remain after the application of subclause (I), the remaining amount may be distributed 

as supplemental grants to any State, as the AdminisVerDate Sep 11 2014 08:31 Apr 26, 2018 Jkt 079010 PO 00000 Frm 00107 Fmt 6659 Sfmt 6602 E:\HR\OC\HR645.XXX HR645
108 

tration determines, in its discretion, to be appropriate, 

after consultation with the association referred to in 

subsection (a)(3)(A). 

(v) USE OF AMOUNTS.— 

(I) IN GENERAL.—Of the amounts made available in 

any fiscal year to carry out this section— 

(aa) not more than $500,000 may be used by the 

Administration to pay expenses enumerated in 

subparagraphs (B) through (D) of section 20(a)(1); 

and 

(bb) not more than $500,000 may be used by the 

Administration to pay the examination expenses 

enumerated in section 20(a)(1)(E). 

(II) LIMITATION.—No funds described in subclause 

(I) may be used for examination expenses under section 20(a)(1)(E) if the usage would reduce the amount 

of grants made available under clause (i)(I) of this subparagraph to less than $85,000,000 (after excluding 

any amounts provided in appropriations Acts, or accompanying report language, for specific institutions 

or for purposes other than the general small business 

development center program) or would further reduce 

the amount of such grants below such amount. 

(vi) EXCLUSIONS.—Grants provided to a State by the Administration or another Federal agency to carry out subsection (a)(6) or (c)(3)(G), or for supplemental grants set 

forth in clause (iv)(II) of this subparagraph, shall not be 

included in the calculation of maximum funding for a 

State under clause (ii) of this subparagraph. 

(vii) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated to carry out this subparagraph— 

(I) $130,000,000 for fiscal year 2005; and 

(II) $135,000,000 for fiscal year 2006. 

(viii) LIMITATION.—From the funds appropriated pursuant to clause (vii), the Administration shall reserve not 

less than $1,000,000 in each fiscal year to develop portable 

assistance for startup and sustainability non-matching 

grant programs to be conducted by eligible small business 

development centers in communities that are economically 

challenged as a result of a business or government facility 

down sizing or closing, which has resulted in the loss of 

jobs or small business instability. A non-matching grant 

under this clause shall not exceed $100,000, and shall be 

used for small business development center personnel expenses and related small business programs and services. 

(ix) STATE DEFINED.—In this subparagraph, the term 

‘‘State’’ means each of the several States, the District of 

Columbia, the Commonwealth of Puerto Rico, the Virgin 

Islands, Guam, and American Samoa. 

(5) FEDERAL CONTRACTS WITH SMALL BUSINESS DEVELOPMENT

CENTERS.— 

(A) IN GENERAL.—Subject to the conditions set forth in subparagraph (B), a small business development center may enter 

109 

into a contract with a Federal department or agency to provide 

specific assistance to small business concerns. 

(B) CONTRACT PREREQUISITES.—Before bidding on a contract 

described in subparagraph (A), a small business development 

center shall receive approval from the Associate Administrator 

of the small business development center program of the subject and general scope of the contract. Each approval under 

subparagraph (A) shall be based upon a determination that the 

contract will provide assistance to small business concerns and 

that performance of the contract will not hinder the small business development center in carrying out the terms of the grant 

received by the small business development center from the 

Administration. 

(C) EXEMPTION FROM MATCHING REQUIREMENT.—A contract 

under this paragraph shall not be subject to the matching 

funds or eligibility requirements of paragraph (4). 

(D) ADDITIONAL PROVISION.—Notwithstanding any other provision of law, a contract for assistance under this paragraph 

shall not be applied to any Federal department or agency’s 

small business, woman-owned business, or socially and economically disadvantaged business contracting goal under section 15(g). 

(6) Any applicant which is funded by the Administration as 

a Small Business Development Center may apply for an additional grant to be used solely to assist— 

(A) with the development and enhancement of exports by 

small business concerns; 

(B) in technology transfer; and 

(C) with outreach, development, and enhancement of minority-owned small business startups or expansions, 

HUBZone small business concerns, veteran-owned small 

business startups or expansions, and women-owned small 

business startups or expansions, in communities impacted 

by base closings or military or corporate downsizing, or in 

rural or underserved communities; 

as provided under subparagraphs (B) through (G) of subsection 

(c)(3). Applicants for such additional grants shall comply with 

all of the provisions of this section, including providing matching funds, except that funding under this paragraph shall be 

effective for any fiscal year to the extent provided in advance 

in appropriations Acts and shall be in addition to the dollar 

program limitations specified in paragraphs (4) and (5). No recipient of funds under this paragraph shall receive a grant 

which would exceed its pro rata share of a $15,000,000 program based upon the populations to be served by the Small 

Business Development Center as compared to the total population of the United States. The minimum amount of eligibility 

for any State shall be $100,000. 

(7) PRIVACY REQUIREMENTS.— 

(A) IN GENERAL.—A small business development center, 

consortium of small business development centers, or contractor or agent of a small business development center 

may not disclose the name, address, or telephone number 

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110 

sistance under this section without the consent of such individual or small business concern, unless— 

(i) the Administrator is ordered to make such a disclosure by a court in any civil or criminal enforcement 

action initiated by a Federal or State agency; or 

(ii) the Administrator considers such a disclosure to 

be necessary for the purpose of conducting a financial 

audit of a small business development center, but a 

disclosure under this clause shall be limited to the information necessary for such audit. 

(B) ADMINISTRATOR USE OF INFORMATION.—This section 

shall not— 

(i) restrict Administrator access to program activity 

data; or 

(ii) prevent the Administrator from using client information to conduct client surveys. 

(C) REGULATIONS.— 

(i) IN GENERAL.—The Administrator shall issue regulations to establish standards— 

(I) for disclosures with respect to financial audits under subparagraph (A)(ii); and 

(II) for client surveys under subparagraph 

(B)(ii), including standards for oversight of such 

surveys and for dissemination and use of client information. 

(ii) MAXIMUM PRIVACY PROTECTION.—Regulations 

under this subparagraph, shall, to the extent practicable, provide for the maximum amount of privacy 

protection. 

(iii) INSPECTOR GENERAL.—Until the effective date of 

regulations under this subparagraph, any client survey and the use of such information shall be approved 

by the Inspector General who shall include such approval in his semi-annual report. 

(8) CYBERSECURITY ASSISTANCE.— (A) IN GENERAL.—The Department of Homeland Security, and any other Federal department or agency in coordination with the Department of Homeland Security, 

may leverage small business development centers to provide assistance to small business concerns by disseminating information relating to cybersecurity risks and 

other homeland security matters to help small business 

concerns in developing or enhancing cybersecurity infrastructure, awareness of cyber threat indicators, and cyber 

training programs for employees. 

(B) DEFINITIONS.—In this paragraph, the terms ‘‘cybersecurity risk’’ and ‘‘cyber threat indicator’’ have the meanings given such terms, respectively, under section 227(a) of 

the Homeland Security Act of 2002 (6 U.S.C. 148(a)). 

(b)(1) Financial assistance shall not be made available to any applicant if approving such assistance would be inconsistent with a 

plan for the area involved which has been adopted by an agency 

recognized by the State government as authorized to do so and approved by the Administration in accordance with the standards and 

requirements established pursuant to this section. 

111 

(2) An applicant may apply to participate in the program by submitting to the Administration for approval a plan naming those authorized in subsection (a) to participate in the program, the geographic area to be served, the services that it would provide, the 

method for delivering services, a budget, and any other information 

and assurances the Administration may require to insure that the 

applicant will carry out the activities eligible for assistance. The 

Administration is authorized to approve, conditionally approve or 

reject a plan or combination of plans submitted. In all cases, the 

Administration shall review plans for conformity with the plan submitted pursuant to paragraph (1) of this subsection, and with a 

view toward providing small business with the most comprehensive 

and coordinated assistance in the State or part thereof to be 

served. 

(3) ASSISTANCE TO OUT-OF-STATE SMALL BUSINESS CONCERNS.— 

(A) IN GENERAL.—At the discretion of the Administration, the Administration is authorized to permit a small 

business development center to provide advice, information 

and assistance, as described in subsection (c), to small 

businesses located outside the State, but only to the extent 

such businesses are located within close geographical proximity to the small business development center, as determined by the Administration. 

(B) DISASTER RECOVERY ASSISTANCE.— (i) IN GENERAL.—At the discretion of the Administrator, the Administrator may authorize a small business development center to provide advice, information, and assistance, as described in subsection (c), to 

a small business concern located outside of the State, 

without regard to geographic proximity to the small 

business development center, if the small business 

concern is located in an area for which the President 

has declared a major disaster. 

(ii) TERM.— (I) IN GENERAL.—A small business development 

center may provide advice, information, and assistance to a small business concern under clause 

(i) for a period of not more than 2 years after the 

date on which the President declared a major disaster for the area in which the small business concern is located. 

(II) EXTENSION.—The Administrator may, at the 

discretion of the Administrator, extend the period 

described in subclause (I). 

(iii) CONTINUITY OF SERVICES.—A small business development center that provides counselors to an area 

described in clause (i) shall, to the maximum extent 

practicable, ensure continuity of services in any State 

in which the small business development center otherwise provides services. 

(iv) ACCESS TO DISASTER RECOVERY FACILITIES.—For 

purposes of this subparagraph, the Administrator 

shall, to the maximum extent practicable, permit the 

personnel of a small business development center to 

112 

use any site or facility designated by the Administrator for use to provide disaster recovery assistance. 

(c)(1) Applicants receiving grants under this section shall assist 

small businesses in solving problems concerning operations, manufacturing, engineering, technology exchange and development, personnel administration, marketing, sales, merchandising, finance, 

accounting, business strategy development, and other disciplines 

required for small business growth and expansion, innovation, increased productivity, and management improvement, and for decreasing industry economic concentrations. Applicants receiving 

grants under this section may also assist small businesses by providing, where appropriate, education on the requirements applicable to small businesses under the regulations issued under section 

38 of the Arms Export Control Act (22 U.S.C. 2778) and on compliance with those requirements. 

(2) A small business development center shall provide services as 

close as possible to small businesses by providing extension services and utilizing satellite locations when necessary. The facilities 

and staff of each Small Business Development Center shall be located in such places as to provide maximum accessibility and benefits to the small businesses which the center is intended to serve. 

To the extent possible, it also shall make full use of other Federal 

and State government programs that are concerned with aiding 

small business. A small business development center shall have— 

(A) a full-time staff, including a full-time director who shall 

have the authority to make expenditures under the center’s 

budget and who shall manage the program activities; 

(B) access to business analysts to counsel, assist, and inform 

small business clients; 

(C) access to technology transfer agent to provide state or art 

technology to small businesses through coupling with national 

and regional technology data sources; 

(D) access to information specialists to assist in providing information searches and referrals to small business; 

(E) access to part-time professional specialists to conduct research or to provide counseling assistance whenever the need 

arises; 

(F) access to laboratory and adaptive engineering facilities; 

and 

(G) access to cybersecurity specialists to counsel, assist, and 

inform small business concern clients, in furtherance of the 

Small Business Development Center Cyber Strategy developed 

under section 1841(a) of the National Defense Authorization 

Act for Fiscal Year 2017. 

(3) Services provided by a small business development center 

shall include, but shall not be limited to— 

(A) furnishing one-to-one individual counseling to small businesses, including— 

(i) working with individuals to increase awareness of 

basic credit practices and credit requirements; 

(ii) working with individuals to develop business plans, 

financial packages, credit applications, and contract proposals; 

(iii) working with the Administration to develop and provide informational tools for use in working with individVerDate Sep 11 2014 08:31 Apr 26, 2018 Jkt 079010 PO 00000 Frm 00112 Fmt 6659 Sfmt 6602 E:\HR\OC\HR645.XXX HR645
113 

uals on pre-business startup planning, existing business 

expansion, and export planning; and 

(iv) working with individuals referred by the local offices 

of the Administration and Administration participating 

lenders; 

(B) assisting in technology transfer, research and development, including applied research, and coupling from existing 

sources to small businesses, including— 

(i) working to increase the access of small businesses to 

the capabilities of automated flexible manufacturing systems; 

(ii) working through existing networks and developing 

new networks for technology transfer that encourage partnership between the small business and academic communities to help commercialize university-based research and 

development and introduce university-based engineers and 

scientists to their counterparts in small technology-based 

firms; and 

(iii) exploring the viability of developing shared production facilities, under appropriate circumstances; 

(C) in cooperation with the Department of Commerce and 

other relevant Federal agencies, actively assisting small businesses in exporting by identifying and developing potential export markets, facilitating export transactions, developing linkages between United States small business firms and 

prescreened foreign buyers, assisting small businesses to participate in international trade shows, assisting small businesses in obtaining export financing, and facilitating the development or reorientation of marketing and production strategies; where appropriate, the Small Business Development Center and the Administration may work in cooperation with the 

State to establish a State international trade center for these 

purposes; 

(D) developing a program in conjunction with the Export-Import Bank and local and regional Administration offices that 

will enable Small Business Development Centers to serve as 

an information network and to assist small business applicants 

for Export-Import Bank financing programs, and otherwise 

identify and help to make available export financing programs 

to small businesses; 

(E) working closely with the small business community, 

small business consultants, State agencies, universities and 

other appropriate groups to make translation services more 

readily available to small business firms doing business, or attempting to develop business, in foreign markets; 

(F) in providing assistance under this subsection, applicants 

shall cooperate with the Department of Commerce and other 

relevant Federal agencies to increase access to available export 

market information systems, including the CIMS system; 

(G) assisting small businesses to develop and implement 

strategic business plans to timely and effectively respond to 

the planned closure (or reduction) of a Department of Defense 

facility within the community, or actual or projected reductions 

in such firms’ business base due to the actual or projected terVerDate Sep 11 2014 08:31 Apr 26, 2018 Jkt 079010 PO 00000 Frm 00113 Fmt 6659 Sfmt 6602 E:\HR\OC\HR645.XXX HR645
114 

mination (or reduction) of a Department of Defense program or 

a contract in support of such program— 

(i) by developing broad economic assessments of the adverse impacts of— 

(I) the closure (or reduction) of the Department of 

Defense facility on the small business concerns providing goods or services to such facility or to the military and civilian personnel currently stationed or 

working at such facility; and 

(II) the termination (or reduction) of a Department 

of Defense program (or contracts under such program) 

on the small business concerns participating in such 

program as a prime contractor, subcontractor or supplier at any tier; 

(ii) by developing, in conjunction with appropriate Federal, State, and local governmental entities and other private sector organizations, the parameters of a transition 

adjustment program adaptable to the needs of individual 

small business concerns; 

(iii) by conducting appropriate programs to inform the 

affected small business community regarding the anticipated adverse impacts identified under clause (i) and the 

economic adjustment assistance available to such firms; 

and 

(iv) by assisting small business concerns to develop and 

implement an individualized transition business plan. 

(H) maintaining current information concerning Federal, 

State, and local regulations that affect small businesses and 

counsel small businesses on methods of compliance. Counseling 

and technology development shall be provided when necessary 

to help small businesses find solutions for complying with environmental, energy, health, safety, and other Federal, State, 

and local regulations; 

(I) coordinating and conducting research into technical and 

general small business problems for which there are no ready 

solutions; 

(J) providing and maintaining a comprehensive library that 

contains current information and statistical data needed by 

small businesses; 

(K) maintaining a working relationship and open communications with the financial and investment communities, legal 

associations, local and regional private consultants, and local 

and regional small business groups and associations in order 

to help address the various needs of the small business community; 

(L) conducting in-depth surveys for local small business 

groups in order to develop general information regarding the 

local economy and general small businesses strengths and 

weaknesses in the locality; 

(M) in cooperation with the Department of Commerce, the 

Administration and other relevant Federal agencies, actively 

assisting rural small businesses in exporting by identifying 

and developing potential export markets for rural small businesses, facilitating export transactions for rural small businesses, developing linkages between United States’ rural small 

115 

businesses and prescreened foreign buyers, assisting rural 

small businesses to participate in international trade shows, 

assisting rural small businesses in obtaining export financing 

and developing marketing and production strategies; 

(N) assisting rural small businesses— 

(i) in developing marketing and production strategies 

that will enable them to better compete in the domestic 

market— 

(ii) by providing technical assistance needed by rural 

small businesses; 

(iii) by making available managerial assistance to rural 

small business concerns; and 

(iv) by providing information and assistance in obtaining 

financing for business startups and expansion; 

(O) in conjunction with the United States Travel and Tourism Administration, assist rural small business in developing 

the tourism potential of rural communities by— 

(i) identifying the cultural, historic, recreational, and 

scenic resources of such communities; 

(ii) providing assistance to small businesses in developing tourism marketing and promotion plans relating to 

tourism in rural areas; and 

(iii) assisting small business concerns to obtain capital 

for starting or expanding businesses primarily serving 

tourists; 

(P) maintaining lists of local and regional private consultants 

to whom small business can be referred; 

(Q) providing information to small business concerns regarding compliance with regulatory requirements; 

(R) developing informational publications, establishing resource centers of reference materials, and distributing compliance guides published under section 312(a) of the Small Business Regulatory Enforcement Fairness Act of 1996; 

(S) providing small business owners with access to a wide 

variety of export-related information by establishing on-line 

computer linkages between small business development centers and an international trade data information network with 

ties to the Export Assistance Center program; øand¿ 

(T) providing information and assistance to small business 

concerns with respect to establishing drug-free workplace programs on or before October 1, 2006ø.¿; and 

(U) encouraging and assisting the provision of succession 

planning to small business concerns with a focus on 

transitioning to cooperatives, as defined in section 7(a)(35), and 

qualified employee trusts (collectively referred to in this subparagraph as ‘‘employee-owned business concerns’’), including 

by— 

(i) providing training to individuals to promote the successful management, governance, or operation of a business 

purchased by those individuals in the formation of an employee-owned business concern; 

(ii) assisting employee-owned business concerns that meet 

applicable size standards established under section 3(a) 

with education and technical assistance with respect to fiVerDate Sep 11 2014 08:31 Apr 26, 2018 Jkt 079010 PO 00000 Frm 00115 Fmt 6659 Sfmt 6603 E:\HR\OC\HR645.XXX HR645
116 

nancing and contracting programs administered by the Administration; 

(iii) coordinating with lenders on conducting outreach on 

financing through programs administered by the Administration that may be used to support the transition of ownership to employees; 

(iv) supporting small business concerns in exploring or 

assessing the possibility of transitioning to an employeeowned business concern; and 

(v) coordinating with the cooperative development centers 

of the Department of Agriculture, the land grant extension 

network, the Manufacturing Extension Partnership, community development financial institutions, employee ownership associations and service providers, and local, regional 

and national cooperative associations. 

(4) A small business development center shall continue to upgrade and modify its services, as needed, in order to meet the 

changing and evolving needs of the small business community. 

(5) In addition to the methods prescribed in section 21(c)(2), a 

small business development center shall utilize and compensate as 

one of its resources qualified small business vendors, including but 

not limited to, private management consultants, private consulting 

engineers and private testing laboratories, to provide services as 

described in this subsection to small businesses on behalf of such 

small business development center. 

(6) In any State (A) in which the Administration has not made 

a grant pursuant to paragraph (1) of subsection (a), or (B) in which 

no application for a grant has been made by a Small Business Development Center pursuant to paragraph (6) of such subsection 

within 60 days after the effective date of any grant under subsection (a)(1) to such center or the date the Administration notifies 

the grantee funded under subsection (a)(1) that funds are available 

for grant applications pursuant to subsection (a)(6), whichever date 

occurs last, the Administration may make grants to a non-profit 

entity in that State to carry out the activities specified in paragraph (6) of subsection (a). Any such applicants shall comply with 

the matching funds requirement of paragraph (4) of subsection (a). 

Such grants shall be effective for any fiscal year only to the extent 

provided in advance in appropriations Acts, and each State shall be 

limited to the pro rata share provisions of paragraph (6) of subsection (a). 

(7) In performing the services identified in paragraph (3), the 

Small Business Development Centers shall work in close cooperation with the Administration’s regional and local offices, 

the local small business community, and appropriate State and 

local agencies. 

(8) The Associate Administrator for Small Business Development Centers, in consultation with the Small Business Development Centers, shall develop and implement an information 

sharing system. Subject to amounts approved in advance in appropriations Acts, the Administration may make grants or 

enter cooperative agreements with one or more centers to carry 

out the provisions of this paragraph. Said grants or cooperative 

agreements shall be awarded for periods of no more than five 

years duration. The matching funds provisions of subsection (a) 

117 

shall not be applicable to grants or cooperative agreements 

under this paragraph. The system shall— 

(A) allow Small Business Development Centers participating in the program to exchange information about their 

programs; and 

(B) provide information central to technology transfer. 

(d) Where appropriate, the Small Business Development Centers 

shall work in conjunction with the relevant State agency and the 

Department of Commerce to develop a comprehensive plan for enhancing the export potential of small businesses located within the 

State. This plan may involve the cofunding and staffing of a State 

Office of International Trade within the State Small Business Development Center, using joint State and Federal funding, and any 

other appropriate measures directed at improving the export performance of small businesses within the State. 

(e) Laboratories operated and funded by the Federal Government 

are authorized and directed to cooperate with the Administration 

in developing and establishing programs to support small business 

development centers by making facilities and equipment available; 

providing experiment station capabilities in adaptive engineering; 

providing library and technical information processing capabilities; 

and providing professional staff for consulting. The Administration 

is authorized to reimburse the laboratories for such services. 

(f) The National Science Foundation is authorized and directed 

to cooperate with the Administration and with the Small Business 

Development Centers in developing and establishing programs to 

support the centers. 

(g) NATIONAL AERONAUTICS AND SPACE ADMINISTRATION AND REGIONAL TECHNOLOGY TRANSFER CENTERS.—The National Aeronautics and Space Administration and regional technology transfer 

centers supported by the National Aeronautics and Space Administration are authorized and directed to cooperate with small business development centers participating in the program. 

(h) ASSOCIATE ADMINISTRATOR FOR SMALL BUSINESS DEVELOPMENT CENTERS.— (1) APPOINTMENT AND COMPENSATION.—The Administrator 

shall appoint an Associate Administrator for Small Business 

Development Centers who shall report to an official who is not 

more than one level below the Office of the Administrator and 

who shall serve without regard to the provisions of title 5, governing appointments in the competitive service, and without 

regard to chapter 51, and subchapter III of chapter 53 of such 

title relating to classification and General Schedule pay rates, 

but at a rate not less than the rate of GS–17 of the General 

Schedule. 

(2) DUTIES.— 

(A) IN GENERAL.—The sole responsibility of the Associate 

Administrator for Small Business Development Centers 

shall be to administer the small business development center program. Duties of the position shall include recommending the annual program budget, reviewing the annual 

budgets submitted by each applicant, establishing appropriate funding levels therefore, selecting applicants to participate in this program, implementing the provisions of 

this section, maintaining a clearinghouse to provide for the 

118 

dissemination and exchange of information between small 

business development centers and conducting audits of recipients of grants under this section. 

(B) CONSULTATION REQUIREMENTS.—In carrying out the 

duties described in this subsection, the Associate Administrator shall confer with and seek the advice of the Board 

established by subsection (i) and Administration officials 

in areas served by the small business development centers; 

however, the Associate Administrator shall be responsible 

for the management and administration of the program 

and shall not be subject to the approval or concurrence of 

such Administration officials. 

(i)(1) There is established a National Small Business Development Center Advisory Board (herein referred to as ‘‘Board’’) which 

shall consist of nine members appointed from civilian life by the 

Administrator and who shall be persons of outstanding qualifications known to be familiar and sympathetic with small business 

needs and problems. No more than three members shall be from 

universities or their affiliates and six shall be from small businesses or associations representing small businesses. At the time 

of the appointment of the Board, the Administrator shall designate 

one-third of the members and at least one from each category 

whose term shall end in two years from the date of appointment, 

a second third whose term shall end in three years from the date 

of appointment, and the final third whose term shall end in four 

years from the date of appointment. Succeeding Boards shall have 

three-year terms, with one-third of the Board changing each year. 

(2) The Board shall elect a Chairman and advise, counsel, and 

confer with the Associate Administrator for Small Business Development Centers in carrying out the duties described in this section. 

The Board shall meet at least semiannually and at the call of the 

Chairman of the Board. Each member of the Board shall be entitled to be compensated at the rate not in excess of the per diem 

equivalent of the highest rate of pay for individuals occupying the 

position under GS–18 of the General Schedule for each day engaged in activities of the Board and shall be entitled to be reimbursed for expenses as a member of the Board. 

(j)(1) Each small business development center shall establish an 

advisory board. 

(2) Each small business development center advisory board shall 

elect a chairman and advise, counsel, and confer with the director 

of the small business development center on all policy matters pertaining to the operation of the small business development center, 

including who may be eligible to receive assistance from, and how 

local and regional private consultants may participate with the 

small business development center. 

(k) PROGRAM EXAMINATION AND ACCREDITATION.— 

(1) EXAMINATION.—Not later than 180 days after the date of 

enactment of this subsection, the Administration shall develop 

and implement a biennial programmatic and financial examination of each small business development center established 

pursuant to this section. 

(2) ACCREDITATION.—The Administration may provide financial support, by contract or otherwise, to the association auVerDate Sep 11 2014 08:31 Apr 26, 2018 Jkt 079010 PO 00000 Frm 00118 Fmt 6659 Sfmt 6602 E:\HR\OC\HR645.XXX HR645
119 

thorized by subsection (a)(3)(A) for the purpose of developing a 

small business development center accreditation program. 

(3) EXTENSION OR RENEWAL OF COOPERATIVE AGREEMENTS.— (A) IN GENERAL.—In extending or renewing a cooperative 

agreement of a small business development center, the Administration shall consider the results of the examination 

and accreditation program conducted pursuant to paragraphs (1) and (2). 

(B) ACCREDITATION REQUIREMENT.—After September 30, 

2000, the Administration may not renew or extend any cooperative agreement with a small business development 

center unless the center has been approved under the accreditation program conducted pursuant to this subsection, 

except that the Associate Administrator for Small Business 

Development Centers may waive such accreditation requirement, in the discretion of the Associate Administrator, upon a showing that the center is making a good 

faith effort to obtain accreditation. 

(l) CONTRACT AUTHORITY.—The authority to enter into contracts 

shall be in effect for each fiscal year only to the extent and in the 

amounts as are provided in advance in appropriations Acts. After 

the administration has entered a contract, either as a grant or a 

cooperative agreement, with any applicant under this section, it 

shall not suspend, terminate, or fail to renew or extend any such 

contract unless the Administration provides the applicant with 

written notification setting forth the reasons therefore and affording the applicant an opportunity for a hearing, appeal, or other administrative proceeding under the provisions of chapter 5 of title 5, 

United States Code. If any contract or cooperative agreement under 

this section with an entity that is covered by this section is not renewed or extended, any award of a successor contract or cooperative agreement under this section to another entity shall be made 

on a competitive basis. 

(m) PROHIBITION ON CERTAIN FEES.—A small business development center shall not impose or otherwise collect a fee or other 

compensation in connection with the provision of counseling services under this section. 

(n) VETERANS ASSISTANCE AND SERVICES PROGRAM.— (1) IN GENERAL.—A small business development center may 

apply for a grant under this subsection to carry out a veterans 

assistance and services program. 

(2) ELEMENTS OF PROGRAM.—Under a program carried out 

with a grant under this subsection, a small business development center shall— 

(A) create a marketing campaign to promote awareness 

and education of the services of the center that are available to veterans, and to target the campaign toward veterans, service-disabled veterans, military units, Federal 

agencies, and veterans organizations; 

(B) use technology-assisted online counseling and distance learning technology to overcome the impediments to 

entrepreneurship faced by veterans and members of the 

Armed Forces; and 

(C) increase coordination among organizations that assist veterans, including by establishing virtual integration 

120 

of service providers and offerings for a one-stop point of 

contact for veterans who are entrepreneurs or owners of 

small business concerns. 

(3) AMOUNT OF GRANTS.—A grant under this subsection shall be for not less than $75,000 and not more than $250,000. 

(4) FUNDING.—Subject to amounts approved in advance in 

appropriations Acts, the Administration may make grants or 

enter into cooperative agreements to carry out the provisions 

of this subsection. 

* * * * * * * 

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