II 

109TH CONGRESS 

2D SESSION S. 2594 

To amend the Small Business Act to reauthorize the loan guarantee program 

under section 7(a) of that Act, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

APRIL 6, 2006 

Mr. KERRY (for himself, Mr. PRYOR, and Ms. LANDRIEU) introduced the following bill; which was read twice and referred to the Committee on Small 

Business and Entrepreneurship 

A BILL 

To amend the Small Business Act to reauthorize the loan 

guarantee program under section 7(a) of that Act, and 

for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; FINDINGS; PURPOSE. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘7(a) Loan Program Reauthorization Act of 2006’’. 

6 (b) FINDINGS.—Congress finds the following: 

7 (1) According to a recent study by the United 

8 States Chamber of Commerce and Business Loan 

9 Express, availability of financing remains 1 of the 


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1 top obstacles to the start-up and growth of small 

2 businesses in the United States, particularly for mi3 norities who are still more likely to use credit cards 

4 to finance their businesses and fear denial from 

5 lenders. 

6 (2) In pursuing its mission of aiding small busi7 nesses, the Small Business Administration (referred 

8 to in this Act as the ‘‘Administration’’) helps small 

9 businesses access capital by guaranteeing loans and 

10 venture capital offered through partnerships with 

11 private-sector lenders and investors. 

12 (3) The loan guaranty program under section 

13 7(a) of the Small Business Act is the largest loan 

14 program of the Administration, and it is intended to 

15 serve small business borrowers who could not other16 wise obtain long-term credit under suitable terms 

17 and conditions from the private sector without a 

18 guarantee from the Administration. 

19 (4) Loans under section 7(a) of the Small Busi20 ness Act have terms of up to 25 years, allowing 

21 small businesses to reduce their monthly payments 

22 and maximize their cash flow. 

23 (5) Loan proceeds can be used for most busi24 ness purposes, including working capital, equipment, 


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1 furniture and fixtures, land and buildings, leasehold 

2 improvements, and debt refinancing. 

3 (6) In helping qualified small businesses to ob4 tain the long-term loans they need for start-up and 

5 expansion, loans under section 7(a) of the Small 

6 Business Act create and retain jobs and promote 

7 economic development in communities throughout 

8 the United States. 

9 (7) In fiscal year 2005, almost 96,000 small 

10 businesses were approved for loans under section 

11 7(a) of the Small Business Act, injecting more than 

12 $15,000,000,000 of capital into local communities 

13 throughout the United States, and creating or re14 taining an estimated 460,000 jobs. 

15 (c) PURPOSES.—The purpose and intent of this Act 

16 are— 

17 (1) to reauthorize the loan program under sec18 tion 7(a) of the Small Business Act for 3 years, with 

19 appropriate funding levels to adequately address the 

20 capital needs of small businesses in the United 

21 States; 

22 (2) to provide small businesses that need fi23 nancing for fixed assets through the loan program 

24 under title V of the Small Business Investment Act 

25 of 1958, and for working capital and equipment fiVerDate Aug 31 2005 20:28 Apr 17, 2006 Jkt 049200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2594.IS S2594

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1 nancing through the loan program under section 

2 7(a) of the Small Business Act, the option of uti3 lizing both loan guaranty programs to their max4 imum amount; 

5 (3) to increase the proportion of small business 

6 loans to minorities and women, addressing concerns 

7 that African Americans, Hispanics, Asians and 

8 women have been receiving far fewer small business 

9 loans relative to their share of the population and 

10 that there has been no statistically significant im11 provement since fiscal year 2001; 

12 (4) to establish a National Preferred Lenders 

13 Program for qualified lenders who would like to op14 erate in other States, streamlining and making uni15 form the application and approval process; 

16 (5) to ensure that lenders who operate nation17 ally are qualified by creating eligibility criteria and 

18 standards; and 

19 (6) to ensure that lenders who fail to meet the 

20 approved eligibility criteria of the National Preferred 

21 Lenders Program are held accountable to the com22 munities they serve. 


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1 SEC. 2. REAUTHORIZATION AND MAXIMUM AMOUNTS. 

2 (a) 7(a) AUTHORIZATION FOR FISCAL YEARS 2007 

3 THROUGH 2009.—Section 20 of the Small Business Act 

4 (15 U.S.C. 631 note) is amended— 

5 (1) by redesignating subsection (j) as sub6 section (f); and 

7 (2) by adding at the end the following: 

8 ‘‘(g) FISCAL YEAR 2007.—For fiscal year 2007, for 

9 the program authorized under section 7(a), the Adminis10 trator is authorized to make $18,500,000,000 in general 

11 business loans, and there are authorized to be appro12 priated to the Administrator such sums as may be nec13 essary to carry out such program. 

14 ‘‘(h) FISCAL YEAR 2008.—For fiscal year 2008, for 

15 the program authorized under section 7(a), the Adminis16 trator is authorized to make $19,500,000,000 in general 

17 business loans, and there are authorized to be appro18 priated to the Administrator such sums as may be nec19 essary to carry out such program. 

20 ‘‘(i) FISCAL YEAR 2009.—For fiscal year 2009, for 

21 the program authorized under section 7(a), the Adminis22 trator is authorized to make $20,500,000,000 in general 

23 business loans, and there are authorized to be appro24 priated to the Administrator such sums as may be nec25 essary to carry out such program.’’. 


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1 (b) MAXIMUM AMOUNT AND COORDINATION OF SBA 

2 LOANS.— 

3 (1) IN GENERAL.—Section 7(a)(3)(A) of the 

4 Small Business Act (15 U.S.C. 636(a)(3)(A)) is 

5 amended by striking ‘‘would exceed $1,500,000 (or 

6 if the gross loan amount would exceed $2,000,000)’’ 

7 and inserting ‘‘(excluding any amounts outstanding 

8 or committed under title V of the Small Business In9 vestment Act of 1958) would exceed $2,250,000 (or 

10 if the gross loan amount would exceed $3,000,000)’’. 

11 (2) REPORTING.—Not later than 90 days after 

12 the date of enactment of this Act, and annually 

13 thereafter, the Administrator shall submit a report 

14 to Congress that— 

15 (A) includes the number of small business 

16 concerns (as that term is defined in section 3 

17 of the Small Business Act (15 U.S.C. 632)) 

18 that have financings under both section 7(a) of 

19 the Small Business Act (15 U.S.C. 636(a)) and 

20 title V of the Small Business Investment Act of 

21 1958 (15 U.S.C. 695 et seq.) during the pre22 ceding year; and 

23 (B) describes the total amount and general 

24 performance of the financings described in sub25 paragraph (A). 


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1 SEC. 3. FEES. 

2 Section 7(a)(23) of the Small Business Act (15 

3 U.S.C. 636(a)(23)) is amended by striking subparagraph 

4 (C) and inserting the following: 

5 ‘‘(C) LOWERING OF FEES.— 

6 ‘‘(i) IN GENERAL.—If the fees paid by 

7 all small business borrowers and by lenders 

8 for guarantees under this subsection, or 

9 the sum of such fees plus any amount ap10 propriated to carry out this subsection, as 

11 applicable, is more than the amount nec12 essary to equal the cost to the Administra13 tion of making such guarantees, the Ad14 ministrator shall reduce fees paid by small 

15 business borrowers and lenders under 

16 clauses (i) through (iv) of paragraph 

17 (18)(A) and subparagraph (A) of this 

18 paragraph. 

19 ‘‘(ii) MAXIMUM.—The fees paid by 

20 small business borrowers and lenders for 

21 guarantees under this subsection may not 

22 be increased above the maximum level au23 thorized under the amendments made by 

24 division K of the Consolidated Appropria25 tions Act, 2005 (Public Law 108–447; 118 

26 Stat. 3441).’’. 


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1 SEC. 4. ALTERNATIVE SIZE STANDARD. 

2 Section 3(a) of the Small Business Act (15 U.S.C. 

3 632(a)) is amended by adding at the end the following: 

4 ‘‘(4) OPTIONAL SIZE STANDARD.— 

5 ‘‘(A) IN GENERAL.—The Administrator shall 

6 establish, by rule, an optional size standard for busi7 ness loan applicants under section 7(a) and develop8 ment company loan applicants under title V of the 

9 Small Business Investment Act of 1958, which uti10 lizes maximum tangible net worth and average net 

11 income as an alternative to the use of industry 

12 standards. 

13 ‘‘(B) INTERIM RULE.—Until the date on which 

14 the optional size standards established under sub15 paragraph (A) are in effect, the alternative size 

16 standard in section 121.301(b) of title 13, Code of 

17 Federal Regulations, or any successor thereto shall 

18 apply to business loan applicants under section 7(a) 

19 and development company loan applicants under 

20 title V of the Small Business Investment Act of 

21 1958.’’. 

22 SEC. 5. MINORITY SMALL BUSINESS DEVELOPMENT. 

23 (a) IN GENERAL.—The Small Business Act (15 

24 U.S.C. 631 et seq.) is amended— 

25 (1) by redesignating section 37 as section 38; 

26 and 


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1 (2) by inserting after section 36 the following: 

2 ‘‘SEC. 37. MINORITY SMALL BUSINESS DEVELOPMENT. 

3 ‘‘(a) OFFICE OF MINORITY SMALL BUSINESS DE4 VELOPMENT.—There is established in the Administration 

5 an Office of Minority Small Business Development, which 

6 shall be administered by the Associate Administrator for 

7 Minority Small Business Development (in this section re8 ferred to as the ‘Associate Administrator’) appointed 

9 under section 4(b)(1). 

10 ‘‘(b) ASSOCIATE ADMINISTRATOR FOR MINORITY

11 SMALL BUSINESS DEVELOPMENT.—The Associate Ad12 ministrator— 

13 ‘‘(1) shall be either— 

14 ‘‘(A) an appointee in the Senior Executive 

15 Service who is a career appointee; or 

16 ‘‘(B) an employee in the competitive serv17 ice. 

18 ‘‘(2) shall be responsible for the formulation, 

19 execution, and promotion of policies and programs of 

20 the Administration that provide assistance to small 

21 business concerns owned and controlled by minori22 ties; 

23 ‘‘(3) shall act as an ombudsman for full consid24 eration of minorities in all programs of the Adminis25 tration (including those under section 7(j) and 8(a)); 


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1 ‘‘(4) shall work with the Associate Deputy Ad2 ministrator for Capital Access to increase the pro3 portion of loans and loan dollars, and investments 

4 and investment dollars, going to minorities through 

5 the finance programs under this Act and the Small 

6 Business Investment Act of 1958 (including sub7 sections (a), (b), and (m) of section 7 of this Act 

8 and the programs under part A and B of title III 

9 and title V of the Small Business Investment Act of 

10 1958); 

11 ‘‘(5) shall work with the Associate Deputy Ad12 ministrator for Entrepreneurial Development to in13 crease the proportion of counseling and training that 

14 goes to minorities through the entrepreneurial devel15 opment programs of the Administration; 

16 ‘‘(6) shall work with the Associate Deputy Ad17 ministrator for Government Contracting and Minor18 ity Enterprise Development to increase the propor19 tion of contracts, including through the Small Busi20 ness Innovation Research Program and the Small 

21 Business Technology Transfer Program, to minori22 ties; 

23 ‘‘(7) shall work with the partners of the Admin24 istration, trade associations, and business groups to 

25 identify and carry out policies and procedures to 


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1 more effectively market the resources of the Admin2 istration to minorities; 

3 ‘‘(8) shall work with the Office of Field Oper4 ations to ensure that district offices and regional of5 fices have adequate staff, funding, and other re6 sources to market the programs of the Administra7 tion to meet the objectives described in paragraphs 

8 (4) through (7); and 

9 ‘‘(9) shall report to and be responsible directly 

10 to the Administrator. 

11 ‘‘(c) AUTHORIZATION OF APPROPRIATIONS.—There 

12 are authorized to be appropriated to carry out this sec13 tion— 

14 ‘‘(1) $5,000,000 for fiscal year 2007; 

15 ‘‘(2) $5,000,000 for fiscal year 2008; and 

16 ‘‘(3) $5,000,000 for fiscal year 2009.’’. 

17 (b) CONFORMING AMENDMENTS.—Section 4(b)(1) of 

18 the Small Business Act (15 U.S.C. 633(b)(1)) is amended 

19 in sixth sentence, by striking ‘‘Minority Small Business 

20 and Capital Ownership Development’’ and all that follows 

21 through the end of the sentence and inserting ‘‘Minority 

22 Small Business Development.’’. 


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1 SEC. 6. NATIONAL PREFERRED LENDERS PROGRAM. 

2 (a) IN GENERAL.—Section 7(a) of the Small Busi3 ness Act (15 U.S.C. 636(a)) is amended by adding at the 

4 end the following: 

5 ‘‘(32) NATIONAL PREFERRED LENDERS PRO6 GRAM.— 

7 ‘‘(A) DEFINITIONS.—In this paragraph— 

8 ‘‘(i) the term ‘national preferred lend9 er’ means a lender authorized by the Ad10 ministrator to participate in the National 

11 Preferred Lenders Program; 

12 ‘‘(ii) the term ‘National Preferred 

13 Lenders Program’ means the program es14 tablished under subparagraph (B); and 

15 ‘‘(iii) the term ‘Preferred Lenders 

16 Program’ has the meaning given the term 

17 in paragraph (2)(C)(ii). 

18 ‘‘(B) ESTABLISHMENT OF PROGRAM.—In 

19 addition to the Preferred Lenders Program, the 

20 Administrator shall establish a National Pre21 ferred Lenders Program, under which the Ad22 ministrator may authorize a preferred lender to 

23 operate in any area served by a district office 

24 of the Administration. 

25 ‘‘(C) ELIGIBILITY CRITERIA.— 


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1 ‘‘(i) IN GENERAL.—Not later than 60 

2 days after the date of enactment of this 

3 paragraph, the Administrator shall estab4 lish, by rule, eligibility criteria for national 

5 preferred lenders. 

6 ‘‘(ii) CONSIDERATIONS.—The eligi7 bility criteria established by the Adminis8 trator under clause (i) may include consid9 eration of whether the lender has— 

10 ‘‘(I) satisfactorily operated as a 

11 preferred lender in areas encom12 passing all or part of the territory in 

13 not fewer than 5 district offices of the 

14 Administration for a minimum of 3 

15 years in each territory; 

16 ‘‘(II) centralized loan approval, 

17 servicing, and liquidation functions 

18 and processes that are satisfactory to 

19 the Administration; 

20 ‘‘(III) uniform written policies 

21 and procedures relating to loans 

22 under this subsection, including the 

23 processing of loans under the Pre24 ferred Lenders Program; 


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1 ‘‘(IV) an average rate of per2 formance in currency rate, default 

3 rate, and recovery rate for loans made 

4 under the Preferred Lenders Program 

5 that is equal to or better than the na6 tional average rate of performance in 

7 such categories for all loans under 

8 this subsection; and 

9 ‘‘(V) received a generally satis10 factory or substantially satisfactory 

11 compliance review rating from the Ad12 ministrator in its most recent audit 

13 and examination as a preferred lender 

14 and a small business lending com15 pany, if applicable, or an in compli16 ance rating, as a result of a follow-up 

17 review. 

18 ‘‘(D) DELEGATED AUTHORITY.— 

19 ‘‘(i) IN GENERAL.—The Administrator 

20 shall authorize a national preferred lender 

21 to take certain action relating to the serv22 icing of loans on behalf of the Adminis23 trator under section 5(b)(7), including au24 thorizing the lender— 


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1 ‘‘(I) to make and close a loan 

2 guaranteed by the Administrator, 

3 without obtaining the prior specific 

4 approval of the Administrator; and 

5 ‘‘(II) to service and liquidate a 

6 loan, without obtaining the prior spe7 cific approval of the Administrator for 

8 routine servicing and liquidation ac9 tivities. 

10 ‘‘(ii) LIMITATION.—In exercising any 

11 authority delegated under clause (i), a na12 tional preferred lender may not take any 

13 action that creates an actual or apparent 

14 conflict of interest. 

15 ‘‘(E) CORRECTIVE ACTION.—If a national 

16 preferred lender fails to continue to meet the 

17 eligibility criteria established under subpara18 graph (C)(i), the Administrator shall notify the 

19 lender of the deficiency and allow a reasonable 

20 period of time for the lender to correct the defi21 ciency. 

22 ‘‘(F) SUSPENSION OR REVOCATION.— 

23 ‘‘(i) IN GENERAL.—The Administrator 

24 shall suspend or revoke the authorization 

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1 pate in the National Preferred Lenders 

2 Program, if the Administrator determines 

3 that the lender— 

4 ‘‘(I) is not adhering to the rules 

5 and regulations of the Administration 

6 applicable to such lender; or 

7 ‘‘(II) after the date on which a 

8 period of time for correction of defi9 ciencies under subparagraph (F) ex10 pires, has failed to meet the eligibility 

11 criteria established under subpara12 graph (C)(i). 

13 ‘‘(ii) OUTSTANDING GUARANTEES.— 

14 Any suspension or revocation under clause 

15 (i) shall not affect any guarantee in effect 

16 on the date of such suspension or revoca17 tion.’’. 

18 (b) CONFORMING AMENDMENT.—Section 7(a)(2)(C) 

19 of the Small Business Act (15 U.S.C. 636(a)(2)(C)) is 

20 amended— 

21 (1) in the subparagraph heading, by inserting 

22 ‘‘AND NATIONAL PREFERRED LENDERS PROGRAM’’ 

23 before the period at the end; and 


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1 (2) by inserting ‘‘or the National Preferred 

2 Lenders Program under paragraph (32)’’ after 

3 ‘‘Preferred Lenders Program’’. 

Æ 


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