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[Senate Report 115-453]
[From the U.S. Government Publishing Office]

115th Congress   }                                            {   Report
                                 SENATE
 2d Session      }                                            {  115-453

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TO EXTEND THE EFFECTIVE DATE FOR THE SUNSET FOR COLLATERAL REQUIREMENTS 
            FOR SMALL BUSINESS ADMINISTRATION DISASTER LOANS

                                _______
                                

               December 20, 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. 3554]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 3554) to extend the effective 
date for the sunset for collateral requirements for Small 
Business Administration disaster loans, having considered the 
same, reports favorably thereon without amendment and 
recommends that the bill do pass.

                            I. INTRODUCTION

    A bill to extend the effective date for the sunset for 
collateral requirements for Small Business Administration 
disaster loans (S. 3554) was introduced by Senator John Kennedy 
for himself, and Senator Marco Rubio on October 5, 2018. 
Senator Cory A. Booker is also a cosponsor.
    This bill amends the RISE After Disaster Act of 2015 to 
extend the sunset for collateral requirements for Small 
Business Administration disaster loans from three to four 
years.
    The bill was approved unanimously by a roll call vote as 
part of a manager's package.

              II. HISTORY (PURPOSE & NEED FOR LEGISLATION)

    In August of 2005, Hurricane Katrina struck the 
Southeastern United States, significantly impacting the New 
Orleans, Louisiana area. The devastation and loss of life left 
in its wake was catastrophic, making it one of the worst 
natural disasters in U.S. history. In the aftermath of a 
disaster of this scale, the recovery process is extensive. 
Recovery efforts were prolonged, and thousands of small 
businesses were shuttered.
    The primary provider of federal disaster assistance loans 
for private sector, non-agricultural, disaster victims is the 
Small Business Administration's Office of Disaster Assistance. 
Following Hurricane Katrina, a series of hearings and 
roundtables highlighted shortcomings in the recovery process 
following large disasters and found that small businesses 
require additional aid in their recovery.
    In October of 2012, Hurricane Sandy hit the Northeastern 
United States, causing widespread damage to businesses and 
residents. A 2014 Government Accountability Office report 
assessed the disaster response efforts found deficiencies in 
the Small Business Administration's loan processing speed and 
staff allocation, as well as various information technology 
issues. In an effort to improve the small business lending 
system after these disasters, Congress passed the Recovery 
Improvements for Small Entities After Disaster Act of 2015, or 
RISE Act, to address the shortcomings with disaster loans. The 
RISE Act, which was signed into law on November 25, 2015, eased 
the credit requirements for small business disaster lending to 
ensure that small businesses could quickly access capital after 
a disaster. One provision of the RISE Act raised the unsecured 
limit from $14,000 to $25,000 for physical damage loans made in 
response to disasters that are declared by the Administrator of 
the SBA. If the provision is not extended, the collateral 
threshold for these loans would revert back to $14,000 on 
November 25, 2018.
    Towards the end of the 115th Congress several senators, 
particularly those from states that had been recently effected 
by hurricanes, advocated for an extension, by one year, of the 
reduced collateral requirements to help small business owners 
in these coastal states that were still in the process of 
rebuilding. After the Committee markup, the full Senate passed 
the bill unanimously on November 15, 2018. The next day the 
full House passed the bill unanimously and President Trump 
signed it into law on November 29, 2018 (P.L. 115-280).

                      III. HEARINGS & ROUNDTABLES

    In the 115th Congress, the Committee held a hearing on 
September 27, 2017, entitled, ``An Early Review of SBA's 
Response to the 2017 Hurricanes.'' During the hearing, Mr. 
Daniel Davis, President and CEO of the JAX Chamber of Commerce 
in Jacksonville, Florida, stated his concern that small 
businesses have less collateral after a disaster, making it 
more difficult to obtain loans.

                        IV. DESCRIPTION OF BILL

    This bill would extend, by one year, changes to collateral 
requirements for unsecured disaster loans for physical injury 
made under the 2015 RISE Act (P.L. 114-88). The disaster loan 
collateral section of the RISE Act included a 3 year sunset 
clause under Sec. 2102(b), meaning that the changes to the 
disaster loan program expire on November 25, 2018. This change 
has a minimal impact on subsidy costs.

                           V. 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 S. 3554, a bill to extend the effective 
date for the sunset for collateral requirements for Small 
Business Administration disaster loans, was approved 
unanimously by a roll call vote as part of a manager's package. 
Senators Risch, Rubio, Paul, Scott, Ernst, Inhofe, Young, Enzi, 
Rounds, Kennedy, Cardin, Cantwell, Shaheen, Heitkamp, Markey, 
Booker, Coons, Hirono, and Duckworth voted for the bill.

                           VI. 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 be will be equal to the amounts discussed in 
the following letter from the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 31, 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. 3554, a bill to 
extend the effective date for the sunset for collateral 
requirements for Small Business Administration disaster loans.
    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.

S. 3554--A Bill To Extend the Effective Date for the Sunset for 
        Collateral Requirements for Small Business Administration 
        Disaster Loans

    Under current law, the Small Business Administration (SBA) 
does not require collateral for loans of $25,000 or less under 
its disaster loan program. That threshold reverts to $14,000 on 
November 25, 2018, for home or business loans for nonmajor 
physical disasters. S. 3554 would extend the $25,000 threshold 
for those loans for one year.
    Using information from the SBA, CBO expects that 
implementing S. 3554 could slightly increase the volume of 
loans made under the disaster loan program in 2019. However, 
the SBA generally does not deny a loan application if a 
borrower lacks the specified collateral, as long as the agency 
is reasonably sure that the loan can be repaid. For those 
reasons, CBO estimates that the bill would have an 
insignificant effect on the estimated subsidy cost of disaster 
loans; such spending would be subject to the availability of 
appropriated funds.\1\ Using information from the SBA on the 
costs of similar activities, CBO estimates that implementing 
the bill would cost the agency less than $500,000 to update 
program requirements.
---------------------------------------------------------------------------
    \1\The estimated subsidy cost is the estimated long-term cost to 
the government, calculated on a net-present-value basis. Present value 
is a single number that expresses a flow of current and future income 
(or payments) in terms of an equivalent lump sum received (or paid) at 
a specific time. That value depends on the rate of interest (called the 
discount rate) used to translate future cash flows into current 
dollars.
---------------------------------------------------------------------------
    Enacting S. 3554 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting S. 3554 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    S. 3554 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Stephen Rabent. 
The estimate was reviewed by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

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

                   VIII. SECTION-BY-SECTION ANALYSIS

Section 1: Extension of sunset for collateral requirements for SBA 
        disaster loans

    This section amends the sunset clause in section 2102(b) of 
the RISE After Disaster Act of 2015, by striking ``3 years'' 
and inserting ``4 years''.
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