89–010 

Calendar No. 634 

115TH CONGRESS REPORT " ! SENATE 2d Session 115–438 

SMALL BUSINESS ACCESS TO CAPITAL AND EFFICIENCY 

(ACE) ACT 

DECEMBER 19, 2018.—Ordered to be printed 

Mr. RISCH, from the Committee on Small Business and 

Entrepreneurship, submitted the following 

R E P O R T 

[To accompany S. 3553] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Small Business and Entrepreneurship, to 

which was referred the bill (S. 3553) to amend the Small Business 

Investment Act to align the real estate appraisal thresholds under 

the section 504 program of the Small Business Administration with 

the threshold used by the Federal banking regulators, and for other 

purposes, having considered the same, reports favorably thereon 

without amendment and recommends that the bill do pass. 

I. INTRODUCTION

The Small Business Access to Capital and Efficiency (ACE) Act 

was introduced by Chairman James E. Risch on October 5, 2018. 

The bill amends the Small Business Investment Act of 1958 to 

align the appraisal threshold amount for SBA’s 504 loan guaranty 

program to the Federal banking regulators’ threshold amount for 

commercial real estate transactions, or the lesser amount of the 

three Federal banking regulators’ (Federal Reserve System, Federal Deposit Insurance Corporation and Comptroller of the Currency) threshold for commercial real estate transactions, if there is 

a discrepancy. The bill was approved unanimously by a roll call 

vote as part of a six-bill manager’s package. 

II. HISTORY (PURPOSE & NEED FOR LEGISLATION)

The Small Business Administration (SBA) administers a number 

of loan programs to provide access to capital to fit the needs of enVerDate Sep 11 2014 02:05 Dec 28, 2018 Jkt 089010 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\SR438.XXX SR438

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1Dilger, Robert Jay. Updated November 7, 2018. Small Business Administration 504/CDC 

Loan Guaranty Program. Retrieved from: http://www.crs.gov/Reports/R41184. 2 Id. 

3OCC: 12 CFR 34.42(d); Federal Reserve: 12 CFR 225.62(d); and FDIC: 12 CFR 323.2(d). 

trepreneurs and small businesses who are unable to obtain conventional credit. One of these programs, the 504/Certified Development 

Company (CDC) Loan Program, provides long-term, fixed rate financing that is used to acquire fixed assets for expansion or modernization. These loans are made available through Certified Development Companies (CDCs), which serve as SBA’s community 

based partners for providing 504 loans. 504 loans are structured 

with a third-party lender providing 50 percent of the financing 

(taking the first lien position), the CDC providing up to 40 percent 

of the financing through a SBA guaranteed debenture (taking the 

second lien position), and the applicant providing at least 10 percent of the financing.1

The 504/CDC loan guaranty program is unique amongst SBA’s 

loan products in part due to its requirements with regard to economic development. A business must create or retain one job for 

every $65,000 guaranteed by the SBA, while small manufacturers 

must create or retain a ratio of one job for every $100,000 guaranteed. As an alternative to the job creation requirement, a business 

may qualify if it meets a community development or public policy 

goal and the CDC lender maintains its portfolio job average requirement. Community development goals include: improving, diversifying or stabilizing the local economy; stimulating other business development; bringing new income into the community; assisting manufacturing firms; or assisting businesses in Labor Surplus 

Areas. Conversely, public policy goals that qualify include: revitalizing a business district of a community with a written revitalization or redevelopment plan; expanding exports; expanding small 

businesses owned and controlled by women; expanding small businesses owned and controlled by veterans; expanding minority business development; aiding rural development; and increasing productivity and competitiveness. 

The 504/CDC loan guaranty program provides an important option for borrowers seeking financing for major fixed assets such as 

land, buildings, equipment, and machinery, while providing an economic benefit to the community. In FY 2018, the SBA approved 

5,874 504 loans amounting to nearly $4.8 billion.2

Because of the long-term, fixed-rate terms associated with the 

504/CDC loan guaranty program and its focus on fixed assets, the 

program is often used to secure real estate for small businesses. 

Since 2000, the SBA loan programs have required appraisals for 

commercial real estate transactions consistent with the appraisal 

threshold level set by the Federal banking regulators for conventional commercial real estate loans in 1994.3 While the threshold 

level for conventional commercial real estate loans is set by regulation, the threshold level for 504 commercial real estate loans is set 

by statute under the Small Business Investment Act of 1958. 

On April 9, 2018, after a year of dialogue with industry stakeholders, the Board of Governors of the Federal Reserve (Federal 

Reserve), the Federal Deposit Insurance Corporation (FDIC), and 

the Office of the Comptroller of the Currency (OCC) together issued 

a final rule increasing the appraisal threshold for commercial real 


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4 83 FR 15019. 

5The manager’s package included: the substitute amendment for S. 2679, the Veterans Small 

Business Enhancement Act; S. 3552, the 7(a) Real Estate Appraisal Harmonization Act; S. 3553, 

the Small Business Access to Capital and Efficiency Act; S. 3554, a bill to extend effective date 

for the sunset for collateral requirements for Small Business Administration disaster loans; S. 

3561, the National Guard and Reserve Entrepreneurship Support Act; and S. 3562, the Small 

Business Runway Extension Act of 2018. 

estate loans from $250,000 to $500,000.4 Part of the impetus for 

this change stems from the increase in commercial property values 

since the threshold was established in 1994; due to these increased 

values, financial institutions were required to get formal appraisals 

on a larger proportion of transactions than when the standard was 

originally set. Additionally, through the rulemaking process, regulators determined that the increase in the number of appraisals required may contribute to a higher burden and cost to financial institutions. Regulators concluded that increasing this threshold 

would reduce the burden for both rural and non-rural institutions 

while posing no threat to the safety and soundness of financial institutions. 

Because the threshold for SBA’s 504/CDC loan guaranty program 

is set at $250,000 in statute, legislation is required to harmonize 

and modernize SBA’s loan program requirements with the threshold set by Federal banking regulators. 

III. DESCRIPTION OF BILL

The bill amends the Small Business Investment Act of 1958 to 

align the appraisal threshold amount for SBA’s 504 loan guaranty 

program to the Federal banking regulators’ threshold amount for 

commercial real estate transactions, or the lesser amount of the 

three Federal banking regulators’ (Federal Reserve System, Federal Deposit Insurance Corporation and Comptroller of the Currency) threshold for commercial real estate transactions, if there is 

a discrepancy. This change ensures that the 504 loan guaranty program’s appraisal threshold is always in harmony with the Federal 

banking threshold for conventional loans. 

IV. COMMITTEE VOTE

In compliance with rule XXVI (7)(b) of the Standing Rules of the 

Senate, the following vote was recorded on October 11, 2018. 

A motion to adopt the Small Business Access to Capital and Efficiency (ACE) Act, a bill to amend the Small Business Investment 

Act of 1958 to align the real estate appraisal thresholds under the 

section 504 loan guaranty program of the Small Business Administration to bring those thresholds into line with the thresholds used 

by the Federal banking regulators, and for other purposes, was approved unanimously, by a roll call vote of 19–0, as part of a sixbill manager’s package.5 Senators Risch, Cardin, Rubio, Paul, 

Scott, Ernst, Inhofe, Young, Enzi, Rounds, Kennedy, Cantwell, Shaheen, Heitkamp, Markey, Booker, Coons, Hirono, and Duckworth 

voted for the bill. 

V. COST ESTIMATE

In compliance with rule XXVI (11)(a)(1) of the Standing Rules of 

the Senate, the Committee estimates the cost of the legislation will 


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be equal to the amounts discussed in the following letter from the 

Congressional Budget Office: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, October 15, 2018. 

Hon. JAMES E. RISCH, 

Chairman, Committee on Small Business and Entrepreneurship, 

U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 3553, the Small Business 

ACE Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Stephen Rabent. 

Sincerely, 

KEITH HALL, Director. 

Enclosure. 

Under current law, small businesses that receive loans under the 

Small Business Administration’s (SBA’s) 504/Certified Development 

Company Loan program are required to receive an appraisal on 

commercial real property used as collateral in securing those loans 

if the estimated value of the property is $250,000 or greater. S. 

3553 would raise that threshold to the lowest of the thresholds 

used by the Board of Governors of the Federal Reserve System, the 

Comptroller of the Currency, and the Federal Deposit Insurance 

Corporation to determine when a commercial real estate transaction requires an appraisal. The threshold for all three agencies 

is currently $500,000. 

Using information from the SBA on the costs of similar activities, 

CBO estimates that implementing the bill would cost less than 

$500,000 for the agency to update its program rules; such spending 

would be subject to the availability of appropriated funds. CBO also 

estimates that any change in the subsidy cost of SBA loans, which 

is subject to appropriation, would also be insignificant. 

Enacting S. 3553 would not affect direct spending or revenues; 

therefore, pay-as-you-go procedures do not apply. 

CBO estimates that enacting S. 3553 would not increase net direct spending or on-budget deficits in any of the four consecutive 

10-year periods beginning in 2029. S. 3553 contains no intergovernmental or private-sector mandates as defined in the Unfunded 

Mandates Reform Act. 

On August 13, 2018, CBO transmitted a cost estimate for H.R. 

6348, the Small Business ACE Act, as ordered reported by the 

House Committee on Small Business on July 18, 2018. The two 

pieces of legislation are similar and CBO’s estimates of their budgetary effects is the same. 

The CBO staff contact for this estimate is Stephen Rabent. The 

estimate was reviewed by H. Samuel Papenfuss, Deputy Assistant 

Director for Budget Analysis. 

VI. EVALUATION OF REGULATORY IMPACT

In compliance with rule XXVI (11)(b) of the Standing Rules of the 

Senate, it is the opinion of the Committee that no significant addiVerDate Sep 11 2014 02:05 Dec 28, 2018 Jkt 089010 PO 00000 Frm 00004 Fmt 6659 Sfmt 6602 E:\HR\OC\SR438.XXX SR438

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tional regulatory impact will be incurred in carrying out the provisions of this legislation. 

VII. SECTION-BY-SECTION ANALYSIS

Section 1: Short title 

This section provides the short title for the Act, the ‘‘Small Business Access to Capital and Efficiency Act’’ or the ‘‘Small Business 

ACE Act.’’ 

Section 2: Appraisal thresholds 

This section amends section 502(3)(E)(ii) of the Small Business 

Investment Act of 1958 (15 U.S.C. 696(3)(E)(ii)) by updating the 

SBA’s 504/CDC loan guaranty program’s commercial real estate 

threshold to parallel the threshold set by Federal banking regulators for conventional commercial real estate loans. 

This section does not specify a dollar amount for 504 commercial 

real estate loans, but rather modernizes the statute to match the 

504 appraisal threshold to the lowest level set by the Federal banking regulators, should they differ. Currently, the regulators have 

together set this level at $500,000 as of April 9, 2018. This language is important to ensure lenders who provide SBA products 

along with their conventional products—most of whom are federally regulated—do not have an added layer of complexity managing 

two different appraisal thresholds, while guaranteeing small business borrowers who cannot obtain credit elsewhere are not required 

to get an appraisal on loans that conventional borrowers do not 

have to obtain. This language also provides long-term clarity and 

certainty to lenders and borrowers by unifying the 504 program’s 

appraisal threshold with the Federal banking regulators threshold 

moving forward. 

Æ 


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