I

104TH CONGRESS

1ST SESSION H. R. 2150

To amend the Small Business Act and the Small Business Investment Act

of 1958 to reduce the cost to the Federal Government of guaranteeing

certain loans and debentures, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

AUGUST 1, 1995

Mrs. MEYERS of Kansas introduced the following bill; which was referred to

the Committee on Small Business

A BILL

To amend the Small Business Act and the Small Business

Investment Act of 1958 to reduce the cost to the Federal

Government of guaranteeing certain loans and debentures, 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.

4 This Act may be cited as the ‘‘Small Business Credit

5 Efficiency Act of 1995’’.
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1 SEC. 2. FEE FOR LOAN GUARANTEES SOLD ON SECONDARY

2 MARKET.

3 Section 5(g)(4)(A) of the Small Business Act (15

U.S.C. 634(g)(4)(A)) is amended by striking ‘‘4 4 ⁄10 of one

5 percent’’ and inserting ‘‘one-half of 1 percent’’.

6 SEC. 3. GENERAL BUSINESS LOANS.

7 (a) REDUCED LEVEL OF PARTICIPATION IN GUARAN8 TEED LOANS.—Section 7(a)(2) of the Small Business Act

9 (15 U.S.C. 636(a)(2)) is amended to read as follows:

10 ‘‘(2) LEVEL OF PARTICIPATION IN GUARAN11 TEED LOANS.—

12 ‘‘(A) IN GENERAL.—In agreements to par13 ticipate in loans on a deferred basis under this

14 subsection, such participation by the Adminis15 tration shall be—

16 ‘‘(i) equal to 80 percent of the balance

17 of the financing outstanding at the time of

18 disbursement if such financing is less than

19 or equal to $100,000; and

20 ‘‘(ii) equal to 75 percent of the bal21 ance of the financing outstanding at the

22 time of disbursement if such financing is

23 greater than $100,000.

24 ‘‘(B) REDUCED PARTICIPATION.—The

25 guarantee percentage specified by subparagraph

26 (A) for any loan may be reduced upon the re-
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1 quest of the participating lender. The Adminis2 tration shall not use the percent of guarantee

3 requested as a criterion for establishing prior4 ities in approving guarantee requests.

5 ‘‘(C) INTEREST RATE UNDER PREFERRED

6 LENDERS PROGRAM.—The maximum interest

7 rate for a loan guaranteed under the Preferred

8 Lenders Program shall not exceed the maxi9 mum interest rate, as determined by the Ad10 ministration, which is made applicable to other

11 loan guarantees under this subsection.

12 ‘‘(D) PREFERRED LENDERS PROGRAM DE13 FINED.—In this paragraph, the term ‘Preferred

14 Lenders Program’ means a program under

15 which a written agreement between the lender

16 and the Administration delegates to the lend17 er—

18 ‘‘(i) complete authority to make and

19 close loans with a guarantee from the Ad20 ministration without obtaining the prior

21 specific approval of the Administration;

22 and

23 ‘‘(ii) authority to service and liquidate

24 such loans.’’.
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1 (b) GUARANTEE FEES.—Section 7(a)(18) of the

2 Small Business Act (15 U.S.C. 636(a)(18)) is amended

3 to read as follows:

4 ‘‘(18) GUARANTEE FEES.—

5 ‘‘(A) GENERAL FEE.—The Administration

6 shall collect a guarantee fee equal to—

7 ‘‘(i) 2 percent of the gross amount of

8 any loan guaranteed under this subsection

9 of an amount less than $250,000;

10 ‘‘(ii) 2.5 percent of the gross amount

11 of any loan guaranteed under this sub12 section of an amount equal to or greater

13 than $250,000 and less than $500,000; or

14 ‘‘(iii) 3 percent of the gross amount of

15 any loan guaranteed under this subsection

16 of an amount equal to or greater than

17 $500,000.

18 Such fee shall be payable by the participating

19 lending institution and may be charged to the

20 borrower.

21 ‘‘(B) ADDITIONAL FEE TO OFFSET

22 COST.—

23 ‘‘(i) IN GENERAL.—In addition to the

24 guarantee fee to be collected under sub25 paragraph (A), the Administration shall
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1 collect a fee for loans guaranteed under

2 this subsection (other than loans for which

3 a guarantee fee may be collected under

4 section 5(g)(4)(A)) in an amount equal to

5 not more than four-tenths of 1 percent per

6 year of the outstanding principal portion of

7 such loan guaranteed by the Administra8 tion.

9 ‘‘(ii) USE.—Fees collected under

10 clause (i) shall be used solely to offset the

11 cost (as defined by section 502(5) of the

12 Congressional Budget Act of 1974) of

13 guaranteeing loans under this subsection.

14 ‘‘(iii) PAYMENT.—Fees collected

15 under clause (i) shall be payable by the

16 participating lending institution and shall

17 not be charged to the borrower.’’.

18 (c) REPEAL OF PROVISIONS ALLOWING RETENTION

19 OF GUARANTEE FEES BY LENDERS.—Section 7(a)(19) of

20 the Small Business Act (15 U.S.C. 636(a)(19)) is amend21 ed—

22 (1) in subparagraph (B)—

23 (A) by striking ‘‘shall (i) develop’’ and in24 serting ‘‘shall develop’’; and
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1 (B) by striking ‘‘, and (ii)’’ and all that

2 follows before the period at the end; and

3 (2) by striking subparagraph (C).

4 SEC. 4. MODIFICATIONS TO DEVELOPMENT COMPANY DE5 BENTURE PROGRAM.

6 (a) MAXIMUM LOAN AMOUNT.—Section 502(2) of

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

8 696(2)) is amended to read as follows:

9 ‘‘(2) Loans made by the Administration under

10 this section shall be limited to $1,250,000 for each

11 such identifiable small business concern.’’.

12 (b) FEE TO OFFSET COST.—Section 503(b)(3) of the

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

14 697(b)(3)) is amended by inserting before the semicolon

15 the following: ‘‘and includes a one-eighth of 1 percent fee

16 which shall be paid to the Administration and which shall

17 be used solely to offset the cost (as defined by section

18 502(5) of the Congressional Budget Act of 1974) of guar19 anteeing the debenture.’’.

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