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[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2162 Introduced in Senate (IS)]

109th CONGRESS
  1st Session
                                S. 2162

 To foster local development by facilitating the delivery of financial 
        assistance to small businesses, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           December 21, 2005

   Ms. Snowe introduced the following bill; which was read twice and 
    referred to the Committee on Small Business and Entrepreneurship

_______________________________________________________________________

                                 A BILL

 
 To foster local development by facilitating the delivery of financial 
        assistance to small businesses, and for other purposes.

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

SECTION 1. SHORT TITLE; DEFINITION.

    (a) Short Title.--This Act may be cited as the ``Local Development 
Business Loan Program Act of 2005''.
    (b) Definition.--In this Act, the term ``Administrator'' means the 
Administrator of the Small Business Administration.

SEC. 2. DEVELOPMENT COMPANY LOAN PROGRAMS.

    (a) Title of Program.--Title V of the Small Business Investment Act 
of 1958 (15 U.S.C. 695 et seq.) is amended by adding at the end the 
following:

``SEC. 511. PROGRAM TITLE.

    ``The programs authorized by this title shall be known as the 
`Local Development Business Loan Program'.''.
    (b) Existing Materials.--The Administrator may use informational 
materials created, or that were in the process of being created, before 
the date of enactment of this Act that do not refer to a program under 
title V of the Small Business Investment Act of 1958 (15 U.S.C. 695 et 
seq.) as the ``Local Development Business Loan Program''.
    (c) New Materials.--Any informational materials created by the 
Administrator on or after the date of enactment of this Act shall refer 
to any program under title V of the Small Business Investment Act of 
1958 (15 U.S.C. 695 et seq.) as the ``Local Development Business Loan 
Program''.

SEC. 3. PROGRAM AUTHORIZATIONS.

    Section 20 of the Small Business Act (15 U.S.C. 631 note) is 
amended by adding at the end the following:
    ``(f) Fiscal Year 2007.--For the program authorized under section 
7(a)(13) of this Act and the Local Development Business Loan Program 
under the Small Business Investment Act of 1958, the Administrator is 
authorized to make $8,000,000,000 in financings, and there are 
authorized to be appropriated to the Administrator such sums as may be 
necessary to carry out such programs.
    ``(g) Fiscal Year 2008.--For the program authorized under section 
7(a)(13) of this Act and the Local Development Business Loan Program 
under the Small Business Investment Act of 1958, the Administrator is 
authorized to make $8,500,000,000 in financings, and there are 
authorized to be appropriated to the Administrator such sums as may be 
necessary to carry out such programs.''.

SEC. 4. LOAN LIQUIDATIONS.

    Section 510 of the Small Business Investment Act of 1958 (15 U.S.C. 
697g) is amended--
            (1) by redesignating subsection (e) as subsection (g); and
            (2) by inserting after subsection (d) the following:
    ``(e) Participation.--
            ``(1) In general.--Any qualified State or local development 
        company which elects not to apply for authority to foreclose 
        and liquidate defaulted loans under this section, or which the 
        Administrator determines to be ineligible for such authority, 
        shall contract with a qualified third-party to perform 
        foreclosure and liquidation of defaulted loans in its 
        portfolio. The contract shall be contingent upon approval by 
        the Administrator with respect to the qualifications of the 
        contractor and the terms and conditions of liquidation 
        activities.
            ``(2) Commencement.--The provisions of this subsection 
        shall not require any development company to liquidate 
        defaulted loans until the Administrator has adopted and 
        implemented a program to compensate and reimburse development 
        companies, as provided under subsection (f).
    ``(f) Compensation and Reimbursement.--
            ``(1) Reimbursement of expenses.--The Administrator shall 
        reimburse each qualified State or local development company for 
        all expenses paid by such company as part of the foreclosure 
        and liquidation activities, if the expenses--
                    ``(A) were approved in advance by the 
                Administrator, either specifically or generally; or
                    ``(B) were incurred by the development company on 
                an emergency basis without prior approval from the 
                Administrator, if the Administrator determines that the 
                expenses were reasonable and appropriate.
            ``(2) Compensation for results.--The Administrator shall 
        develop a schedule to compensate and provide an incentive to 
        qualified State or local development companies that foreclose 
        and liquidate defaulted loans. The schedule shall be based on a 
        percentage of the net amount recovered, but shall not exceed a 
        maximum amount. The schedule shall not apply to any foreclosure 
        which is conducted pursuant to a contract between a development 
        company and a qualified third party to perform the foreclosure 
        and liquidation.''.

SEC. 5. ADDITIONAL EQUITY INJECTIONS.

    Section 502(3)(B)(ii) of the Small Business Investment Act of 1958 
(15 U.S.C. 696(3)(B)(ii)) is amended to read as follows:
                            ``(ii) Funding from institutions.--If a 
                        small business concern--
                                    ``(I) provides the minimum 
                                contribution required under 
                                subparagraph (C), not less than 50 
                                percent of the total cost of any 
                                project financed under clause (i), 
                                (ii), or (iii) of subparagraph (C) 
                                shall come from the institutions 
                                described in subclauses (I), (II), and 
                                (III) of clause (i); and
                                    ``(II) provides more than the 
                                minimum contribution required under 
                                subparagraph (C), any excess 
                                contribution may be used to reduce the 
                                amount required from the institutions 
                                described in subclauses (I), (II), and 
                                (III) of clause (i), except that the 
                                amount from such institutions may not 
                                be reduced to an amount that is less 
                                than the amount of the loan made by the 
                                Administrator.''.

SEC. 6. BUSINESSES IN LOW-INCOME AREAS.

    Section 501(d)(3)(A) of the Small Business Investment Act of 1958 
(15 U.S.C. 695(d)(3)(A)) is amended by inserting after ``business 
district revitalization,'' the following: ``or expansion of businesses 
in low-income communities which would be eligible for a new markets tax 
credit pursuant to section 45D(a) of the Internal Revenue Code of 1986, 
or implementing regulations issued thereunder,''.

SEC. 7. COMBINATIONS OF CERTAIN GOALS.

    Section 501(e) of the Small Business Investment Act of 1958 (15 
U.S.C. 695(e)) is amended by adding at the end the following:
            ``(7) A small business concern that is unconditionally 
        owned by more than 1 individual, or a corporation, the stock of 
        which is owned by more than 1 individual, shall be deemed to 
        have achieved a public policy goal required under subsection 
        (d)(3) if a combined ownership share of not less than 51 
        percent is held by individuals who are in 1 of the groups 
        described in subparagraph (C) or (E) of subsection (d)(3).''.

SEC. 8. MAXIMUM 504 AND 7(A) LOAN ELIGIBILITY.

    Section 502(2) of the Small Business Investment Act of 1958 (15 
U.S.C. 696(2)) is amended by adding at the end the following:
                    ``(C) Combination financing.--Notwithstanding any 
                other provision of law, financing under this title may 
                be provided to a borrower in the maximum amount 
                provided in this subsection, and a loan guarantee under 
                section 7(a) of the Small Business Act may be provided 
                to the same borrower in the maximum amount provided in 
                section 7(a)(3)(A) of such Act, to the extent that the 
                borrower otherwise qualifies for such assistance.''.

SEC. 9. REFINANCING.

    Section 502 of the Small Business Investment Act of 1958 (15 U.S.C. 
696) is amended by adding at the end the following:
            ``(7) Permissible debt refinancing.--
                    ``(A) In general.--Any financing approved under 
                this title may include a limited amount of debt 
                refinancing.
                    ``(B) Expansions.--If the project involves 
                expansion of a small business concern which has 
                existing indebtedness collateralized by fixed assets, 
                any amount of existing indebtedness that does not 
                exceed \1/2\ of the project cost of the expansion may 
                be refinanced and added to the expansion cost, 
                providing that--
                            ``(i) the proceeds of the indebtedness were 
                        used to acquire land, including a building 
                        situated thereon, to construct a building 
                        thereon, or to purchase equipment;
                            ``(ii) the borrower has been current on all 
                        payments due on the existing debt for at least 
                        the preceding year; and
                            ``(iii) the financing under section 504 
                        will provide better terms or rate of interest 
                        than exists on the debt at the time of 
                        refinancing.''.

SEC. 10. FEES.

    (a) In General.--Section 503(d) of the Small Business Investment 
Act of l958 (15 U.S.C. 697(d)) is amended--
            (1) by striking paragraph (2);
            (2) by redesignating paragraph (3) as paragraph (2); and
            (3) in paragraph (2), as so redesignated, by striking 
        ``0.125 percent'' and inserting ``0.185 percent''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect and apply to loans under section 503(d) of the Small 
Business Investment Act of l958 (15 U.S.C. 697(d)) approved on or after 
30 days after the date of enactment of this Act.

SEC. 11. TECHNICAL CORRECTION.

    Section 501(e)(2) of the Small Business Investment Act of 1958 (15 
U.S.C. 695(e)(2)) is amended by striking ``outstanding''.

SEC. 12. SBIA DEFINITIONS.

    Section 103 of the Small Business Investment Act of 1958 (15 U.S.C. 
662) is amended--
            (1) by striking paragraph (6) and inserting the following:
            ``(6) the term `development company' means an entity 
        incorporated under State law with the authority to promote and 
        assist the growth and development of small business concerns in 
        the areas in which it is authorized to operate by the 
        Administrator;'';
            (2) in paragraph (16), by striking ``and'' at the end;
            (3) in paragraph (17), by striking the period at the end 
        and inserting ``; and''; and
            (4) by adding at the end the following:
            ``(18) the term `certified development company' means a 
        development company that the Administrator has certified meets 
        the criteria of section 506.''.

SEC. 13. REPEAL OF SUNSET ON RESERVE REQUIREMENTS FOR PREMIER CERTIFIED 
              LENDERS.

    Section 508(c)(6)(B) of the Small Business Investment Act of 1958 
(15 U.S.C. 697e(c)(6)(B)) is amended--
            (1) in the heading, by striking ``Temporary reduction'' and 
        inserting ``Reduction''; and
            (2) by striking ``Notwithstanding subparagraph (A), during 
        the 2-year period beginning on the date that is 90 days after 
        the date of enactment of this subparagraph, the'' and inserting 
        ``The''.

SEC. 14. ELIGIBILITY OF DEVELOPMENT COMPANIES TO BE DESIGNATED AS 
              CERTIFIED DEVELOPMENT COMPANIES AND AUTHORITY TO ISSUE 
              DEBENTURES; AND PROVIDING AN AREA OF OPERATIONAL 
              AUTHORITY, FUNDING RESTRICTIONS, AND ETHICAL 
              REQUIREMENTS.

    Section 506 of the Small Business Investment Act of 1958 (15 U.S.C. 
697c) is amended--
            (1) in the heading, by striking ``restrictions on 
        development company assistance'' and inserting ``certified 
        development companies''; and
            (2) by inserting before ``Notwithstanding any other 
        provision of law'' the following:
    ``(a) Authority to Issue Debentures.--A development company may 
issue debentures under this title if the Administrator certifies that 
the company meets the following criteria:
            ``(1) Size.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the development company shall be a 
                small business concern with fewer than 500 employees, 
                and shall not be under the control of any entity that 
                does not meet the size standards established by the 
                Administrator for a small business concern.
                    ``(B) Exception.--Any development company that was 
                certified by the Administrator before December 31, 
                2005, may continue to issue debentures under this 
                title.
            ``(2) Purpose.--A primary purpose of the development 
        company shall be to benefit the community by fostering economic 
        development to create and preserve jobs and stimulate private 
        investment.
            ``(3) Primary function.--A primary function of the 
        development company shall be to accomplish its purpose by 
        providing long term financing to small business concerns under 
        the Local Development Business Loan Program. The development 
        company may also provide or support other local economic 
        development activities to assist the community.
            ``(4) Nonprofit status.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the development company shall be a 
                nonprofit corporation.
                    ``(B) Exception.--A development company certified 
                by the Administrator before January 1, 1987, may 
                continue to issue debentures under this title and 
                retain its status as a for-profit enterprise.
            ``(5) Good standing.--The development company--
                    ``(A) shall be in good standing in the State in 
                which such company is incorporated and in any other 
                State in which it conducts business; and
                    ``(B) shall be in compliance with all laws, 
                including taxation requirements, in the State in which 
                such company is incorporated and in any other State in 
                which it conducts business.
            ``(6) Membership of development company.--There shall be--
                    ``(A) not fewer than 25 members of the development 
                company (or owners or stockholders, if the corporation 
                is a for-profit entity) none of whom may own or control 
                more than 10 percent of the voting membership of the 
                company; and
                    ``(B) at least 1 member of the development company 
                (none of whom is in a position to control the 
                development company) from each of the following:
                            ``(i) Government organizations that are 
                        responsible for economic development.
                            ``(ii) Financial institutions that provide 
                        commercial long term fixed asset financing.
                            ``(iii) Community organizations that are 
                        dedicated to economic development.
                            ``(iv) Businesses.
            ``(7) Board of directors.--
                    ``(A) In general.--The development company shall 
                have a board of directors.
                    ``(B) Members of board.--Each member of the board 
                of directors shall be--
                            ``(i) a member of the development company; 
                        and
                            ``(ii) elected by a majority of the members 
                        of the development company.
                    ``(C) Representation of organizations and 
                institutions.--
                            ``(i) In general.--There shall be at least 
                        1 member of the board of directors from not 
                        fewer than 3 of the 4 organizations and 
                        institutions described in paragraph (6)(B), 
                        none of whom is in a position to control the 
                        development company.
                            ``(ii) Maximum percentage.--Not more than 
                        50 percent of the members of the board of 
                        directors shall be from any 1 of the 
                        organizations and institutions described in 
                        paragraph (6)(B).
                    ``(D) Meetings.--The board of directors of the 
                development company shall meet on a regular basis to 
                make policy decisions for such company.
            ``(8) Professional management and staff.--
                    ``(A) In general.--The development company shall 
                have full-time professional management, including a 
                chief executive officer to manage daily operations and 
                a full-time professional staff qualified to market the 
                Local Development Business Loan Program and handle all 
                aspects of loan approval and servicing, including 
                liquidation, if appropriate.
                    ``(B) Independent management and operation.--Except 
                as provided in paragraph (9), the development company 
                shall be independently managed and operated to pursue 
                the economic development purpose of the company and 
                shall employ directly the chief executive officer.
            ``(9) Management and operation exceptions.--
                    ``(A) Affiliation.--A development company may be an 
                affiliate of another local nonprofit service 
                corporation (other than a development company), a 
                purpose of which is to support economic development in 
                the area in which the development company operates.
                    ``(B) Staffing.--A development company may satisfy 
                the requirement for full-time professional staff under 
                paragraph (8)(A) by contracting for the required 
                staffing with--
                            ``(i) a local nonprofit service 
                        corporation;
                            ``(ii) a nonprofit affiliate of a local 
                        nonprofit service corporation;
                            ``(iii) an entity wholly or partially 
                        operated by a governmental agency; or
                            ``(iv) another entity approved by the 
                        Administration.
                    ``(C) Directors.--A development company and a local 
                nonprofit service corporation with which it is 
                affiliated may have in common some, but not all, 
                members of their respective board of directors.
                    ``(D) Rural areas.--A development company in a 
                rural area may satisfy the requirements of a full-time 
                professional staff and professional management ability 
                under paragraph (8)(A) by contracting for such services 
                with another certified development company that--
                            ``(i) has such staff and management 
                        ability; and
                            ``(ii) is located in the same State as the 
                        development company or in a State that is 
                        contiguous to the State in which the 
                        development company is located.
                    ``(E) Previously certified.--A development company 
                that, on or before December 31, 2005, was certified by 
                the Administrator and had contracted with a for-profit 
                company to provide staffing and management services, 
                may continue to do so.
    ``(b) Use of Excess Funds.--Any funds generated by a certified 
development company from making loans under section 503 or 504 that 
remain unexpended after payment of staff, operating, and overhead 
expenses shall be retained by the certified development company as a 
reserve for--
            ``(1) future operations;
            ``(2) expanding the area in which the certified development 
        company operates through the methods authorized by this Act; or
            ``(3) investment in other local economic development 
        activity in the State from which such funds were generated.
    ``(c) Ethical Requirements.--
            ``(1) In general.--A certified development company and the 
        officers, employees, and other staff of the company shall at 
        all times act ethically and avoid activities which constitute a 
        conflict of interest or appear to constitute a conflict of 
        interest.
            ``(2) Prohibited conflict in project loans.--
                    ``(A) In general.--No certified development company 
                may--
                            ``(i) recommend or approve a guarantee of a 
                        debenture by the Administrator under the Local 
                        Business Development Loan Program that is 
                        collateralized by a second lien position on the 
                        property being constructed or acquired; and
                            ``(ii) provide, or be affiliated with a 
                        corporation or other entity which provides, 
                        financing collateralized by a first lien on the 
                        same property.
                    ``(B) Exception.--During the 2-year period 
                beginning on the date of enactment of this subsection, 
                a certified development company that was participating 
                as a first mortgage lender for the Local Business 
                Development Loan Program in either of fiscal years 2004 
                or 2005 may continue to do so.
            ``(3) Other economic development activities.--It shall not 
        be a conflict of interest for a certified development company 
        to operate multiple programs to assist small business concerns 
        as part of carrying out its economic development purpose.
    ``(d) Multistate Operations.--
            ``(1) Authorization.--Notwithstanding any other provision 
        of law, the Administrator shall permit a certified development 
        company to make loans in any State that is contiguous to the 
        State of incorporation of that certified development company, 
        only if such company--
                    ``(A) is--
                            ``(i) an accredited lender under section 
                        507; or
                            ``(ii) a premier certified lender under 
                        section 508;
                    ``(B) has a membership that contains not fewer than 
                25 members from each State in which the company makes 
                loans;
                    ``(C) has a board of directors that contains not 
                fewer than 1 member from each State in which the 
                company makes loans; and
                    ``(D) maintains not fewer than 1 loan committee, 
                which shall have not fewer than 1 member from each 
                State in which the company makes loans; and
                    ``(E) submits to the Administrator, in writing--
                            ``(i) a notice of the intention of the 
                        company to make loans in multiple States;
                            ``(ii) the names of the States in which the 
                        company intends to make loans;
                            ``(iii) a detailed statement of how the 
                        company will comply with this paragraph, 
                        including a list of the members described in 
                        subparagraph (B).
            ``(2) Review.--The Administrator shall verify whether a 
        certified development company satisfies the requirements of 
        paragraph (1) on an expedited basis and, not later than 30 days 
        after the date on which the Administrator receives the 
        statement described in paragraph (1)(E)(iii), the Administrator 
        shall determine whether such company satisfies such criteria 
        and provide notice to such company.
            ``(3) Loan committee participation.--For any loan made by a 
        company described in paragraph (1), not fewer than 1 member of 
        the loan committee from the State in which the loan is to be 
        made shall participate in the review of such loan.
            ``(4) Aggregate accounting.--A company described in 
        paragraph (1) may maintain an aggregate accounting of all 
        revenue and expenses of the company for purposes of this title.
            ``(5) Directors.--Notwithstanding any other provision of 
        law, a person may serve on the board of directors, but not as 
        an officer, of more than 1 certified development company if 
        none of the certified development companies on which the person 
        serves as a member of the board of directors are located or 
        operate in the same area.
            ``(6) Local job creation requirements.--Any certified 
        development company making loans in multiple States shall 
        satisfy any applicable job creation or retention requirements 
        separately for each such State. Such a company shall not count 
        jobs created or retained in 1 State towards any applicable job 
        creation or retention requirement in another State.
            ``(7) Contiguous states.--For purposes of this subsection, 
        the States of Alaska and Hawaii shall be deemed to be 
        contiguous to any State abutting the Pacific ocean.
    ``(e) Restrictions on Development Company Assistance.--''.

SEC. 15. CONFORMING AMENDMENTS.

    Section 503 of the Small Business Investment Act of 1958 (15 U.S.C. 
697) is amended--
            (1) in subsection (a)(1), by striking ``qualified State or 
        local development company'' and inserting ``certified 
        development company''; and
            (2) by striking subsection (e) and inserting the following:
    ``(e) Section 7(a) Loans.--Notwithstanding any other provision of 
law, a certified development company is authorized to prepare 
applications for deferred participation loans under section 7(a) of the 
Small Business Act, to service such loans, and to charge a reasonable 
fee for servicing such loans.''.

SEC. 16. CLOSING COSTS.

    Section 503(b) of the Small Business Investment Act of 1958 (15 
U.S.C. 697(b)) is amended by striking paragraph (4) and inserting the 
following:
            ``(4) the aggregate amount of such debenture does not 
        exceed the amount of the loans to be made from the proceeds of 
        such debenture plus, at the election of the borrower, other 
        amounts attributable to the administrative and closing costs of 
        such loans, except for the attorney fees of the borrower;''.

SEC. 17. DEFINITION OF RURAL.

    Section 501 of the Small Business Investment Act of 1958 (15 U.S.C. 
695) is amended by adding at the end the following:
    ``(f) As used in this title, the term `rural' shall include any 
area that is not--
            ``(1) a city or town that has a population greater than 
        50,000 inhabitants; or
            ``(2) the urbanized area contiguous and adjacent to a city 
        or town described in paragraph (1).''.

SEC. 18. REGULATIONS AND EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b), the 
Administrator shall--
            (1) publish proposed rules to implement this Act and the 
        amendments made by this Act not later than 120 days after the 
        date of enactment of this Act; and
            (2) publish such rules in final form not later than 120 
        days after the date of publication under paragraph (1).
    (b) Multistate Operations.--As soon as is practicable after the 
date of enactment of this Act, the Administrator shall promulgate 
regulations to implement section 506(d) of the Small Business 
Investment Act of 1958, as added by section 14 of this Act. Such 
regulations shall become effective not later than 120 days after the 
date of enactment of this Act.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2) and 
        section 10(b), this Act and the amendments made by this Act 
        shall become effective 240 days after the date of enactment of 
        this Act, regardless of whether the Administrator has 
        promulgated the regulations required under subsection (a).
            (2) Multistate operations.--Section 506(d) of the Small 
        Business Investment Act of 1958, as added by section 14 of this 
        Act, shall become effective 120 days after the date of 
        enactment of this Act, regardless of whether the Administrator 
        has promulgated the regulations required under subsection (b).
                                 <all>
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