I

103D CONGRESS

2D SESSION H. R. 4686

To provide limited relief from high interest rates in certain debentures guaranteed or purchased by the Small Business Administration, and for other

purposes.

IN THE HOUSE OF REPRESENTATIVES

JUNE 30, 1994

Mr. LAFALCE introduced the following bill; which was referred to the

Committee on Small Business

A BILL

To provide limited relief from high interest rates in certain

debentures guaranteed or purchased by the Small Business Administration, 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 That this Act may be cited as the ‘‘Small Business Pre4 payment Penalty Relief Act of 1994’’.

5 SEC. 2. MODIFICATION OF DEVELOPMENT COMPANY DE6 BENTURE INTEREST RATES.

7 (a) IN GENERAL.—Upon the request of the issuer

8 and the concurrence of the borrower, the Small Business

9 Administration is authorized to transfer to the Federal Fi-
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1 nancing Bank such sums as may be necessary to carry

2 out the provisions of this section in order to reduce the

3 interest rate on a debenture issued by a certified develop4 ment company. The reduction shall be effective January

5 2, 1995 and shall apply for the remainder of the term

6 of the debenture.

7 (b) INTEREST RATE MODIFICATION.—Upon receipt

8 of such payment, the Federal Financing Bank shall mod9 ify the interest rate of each debenture for which the pay10 ment is made. No other change shall be made in the terms

11 and conditions of the debenture, and the modification in

12 the interest rate shall not be construed as new budget au13 thority nor require any additional appropriation for credit

14 subsidy on account of the modification.

15 (c) DEFINITIONS.—For the purposes of this sec16 tion—

17 (1) the term ‘‘issuer’’ means the issuer of a de18 benture pursuant to section 503 of the Small Busi19 ness Investment Act of 1958 which has been pur20 chased by the Federal Financing Bank if the deben21 ture is outstanding on the date of enactment of this

22 Act, and neither the loan that secures the debenture

23 nor the debenture is in default on such date; and
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1 (2) the term ‘‘borrower’’ means the small busi2 ness concern whose loan secures a debenture issued

3 pursuant to such section.

4 (d) OTHER RIGHTS.—A modification of the interest

5 rate on a debenture as authorized in this section shall not

6 affect any rights or options of the issuer or borrower which

7 are otherwise authorized by contract or by law.

8 (e) REFINANCING.—Debentures authorized by sec9 tions 504 and 505 of the Small Business Investment Act

10 of 1958 may be used to refinance debentures issued under

11 section 503 of such Act if the amount of the new financing

12 is limited to such amounts as are needed to repay the ex13 isting debenture, including any prepayment penalty im14 posed by the Federal Financing Bank. Any such refinanc15 ing shall be subject to all of the other provisions of sec16 tions 504 and 505 of such Act and the rules and regula17 tions of the Administration promulgated thereunder, in18 cluding, but not limited to, rules and regulations govern19 ing payment of authorized expenses and commissions, fees

20 and discounts to brokers and dealers in trust certificates

21 issued pursuant to section 505: Provided, however, That

22 no applicant for refinancing under section 504 of this Act

23 need demonstrate that the requisite number of jobs will

24 be created or preserved with the proceeds of such refinanc25 ing: And provided further, That a development company
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1 which provides refinancing under this subsection shall be

2 limited to a loan processing fee not to exceed one-half of

3 one percent to cover the cost of packaging, processing and

4 other nonlegal staff functions.

5 SEC. 3. MODIFICATION OF SMALL BUSINESS INVESTMENT

6 COMPANY DEBENTURE INTEREST RATES.

7 (a) IN GENERAL.—Upon the request of the issuer,

8 the Small Business Administration is authorized to trans9 fer to the Federal Financing Bank such sums as may be

10 necessary to carry out the provisions of this section in

11 order to reduce the interest rate on a debenture issued

12 by a Small Business Investment Company under the provi13 sions of title III of the Small Business Investment Act

14 of 1958. The reduction shall be effective January 2, 1995

15 and shall apply for the remainder of the term of the deben16 ture.

17 (b) INTEREST RATE MODIFICATION.—Upon receipt

18 of such payment, the Federal Financing Bank shall mod19 ify the interest rate of each debenture for which the pay20 ment is made. No other change shall be made in the terms

21 and conditions of the debenture, and the modification in

22 the interest rate shall not be construed as new budget au23 thority nor require any additional appropriation for credit

24 subsidy on account of the modification.
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1 (c) DEFINITIONS.—For the purposes of this section,

2 the term ‘‘issuer’’ means the issuer of a debenture pursu3 ant to section 303 of the Small Business Investment Act

4 of 1958 which has been purchased by the Federal Financ5 ing Bank if the debenture is outstanding on the date of

6 enactment of this Act, and is not in default on such date.

7 (d) OTHER RIGHTS.—A modification of the interest

8 rate on a debenture as authorized in this section shall not

9 affect any rights or options of the issuer which are other10 wise authorized by contract or by law.

11 SEC. 4. MODIFICATION OF SPECIALIZED SMALL BUSINESS

12 INVESTMENT COMPANY DEBENTURE INTER13 EST RATES.

14 (a) INTEREST RATE MODIFICATION.—Upon the re15 quest of the issuer, the Small Business Administration is

16 authorized to modify the interest rate on a debenture is17 sued by a Small Business Investment Company licensed

18 under the provisions of section 301(d) of the Small Busi19 ness Investment Act of 1958. The reduction shall be effec20 tive January 2, 1995 and shall apply for the remainder

21 of the term of the debenture. No other change shall be

22 made in the terms and conditions of the debenture, and

23 the modification in the interest rate shall not be construed

24 as new budget authority nor require any additional appro25 priation for credit subsidy on account of the modification.
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1 (b) DEFINITIONS.—For the purposes of this section,

2 the term ‘‘issuer’’ means a Specialized Small Business In3 vestment Company licensed under the provisions of section

4 301(d) of the Small Business Investment Act of 1958

5 which has issued a debenture which has been funded by

6 the Small Business Administration providing the deben7 ture is outstanding on the date of enactment of this Act

8 and is not in default on such date.

9 (c) OTHER RIGHTS.—A modification of the interest

10 rate on a debenture as authorized in this section shall not

11 affect any rights or options of the issuer which are other12 wise authorized by contract or by law.

13 SEC. 5. INTEREST RATE REDUCTIONS.

14 (a) IN GENERAL.—Upon enactment of an Appropria15 tions Act providing funds to carry out the provisions of

16 this Act and limited to amounts specifically provided in

17 advance in Appropriations Acts, the Small Business Ad18 ministration shall evaluate the outstanding portfolio of de19 bentures which are eligible for interest rate relief under

20 this Act. The Administration shall apply the funds appro21 priated to carry out this Act in order to reduce the highest

22 interest rate on all eligible debentures to a uniform rate.
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1 (b) AUTHORIZATION.—There are authorized to be ap2 propriated $30,000,000 to carry out the provisions of this

3 Act in fiscal year 1995.

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