II

104TH CONGRESS

1ST SESSION S. 895

To amend the Small Business Act to reduce the level of participation by

the Small Business Administration in certain loans guaranteed by the

Administration, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 8 (legislative day, JUNE 5), 1995

Mr. BOND introduced the following bill; which was read twice and referred to

the Committee on Small Business

A BILL

To amend the Small Business Act to reduce the level of

participation by the Small Business Administration in

certain loans guaranteed by the 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 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Small Business Lend5 ing Enhancement Act of 1995’’.
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1 SEC. 2. REDUCED LEVEL OF PARTICIPATION IN GUARAN2 TEED LOANS.

3 Section 7(a)(2) of the Small Business Act (15 U.S.C.

4 636(a)(2)) is amended to read as follows:

5 ‘‘(2) LEVEL OF PARTICIPATION IN GUARAN6 TEED LOANS.—

7 ‘‘(A) IN GENERAL.—Except as provided in

8 subparagraph (B), in an agreement to partici9 pate in a loan on a deferred basis under this

10 subsection (including a loan made under the

11 Preferred Lenders Program), such participation

12 by the Administration shall be equal to—

13 ‘‘(i) 75 percent of the balance of the

14 financing outstanding at the time of dis15 bursement of the loan, if such balance ex16 ceeds $100,000; or

17 ‘‘(ii) 80 percent of the balance of the

18 financing outstanding at the time of dis19 bursement of the loan, if such balance is

20 less than or equal to $100,000.

21 ‘‘(B) REDUCED PARTICIPATION UPON RE22 QUEST.—

23 ‘‘(i) IN GENERAL.—The guarantee

24 percentage specified by subparagraph (A)

25 for any loan under this subsection may be
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1 reduced upon the request of the participat2 ing lender.

3 ‘‘(ii) PROHIBITION.—The Administra4 tion shall not use the guarantee percentage

5 requested by a participating lender under

6 clause (i) as a criterion for establishing

7 priorities in approving loan guarantee re8 quests under this subsection.

9 ‘‘(C) INTEREST RATE UNDER PREFERRED

10 LENDERS PROGRAM.—

11 ‘‘(i) IN GENERAL.—The maximum in12 terest rate for a loan guaranteed under the

13 Preferred Lenders Program shall not ex14 ceed the maximum interest rate, as deter15 mined by the Administration, applicable to

16 other loans guaranteed under this sub17 section.

18 ‘‘(ii) PREFERRED LENDERS PROGRAM

19 DEFINED.—For purposes of this subpara20 graph, the term ‘Preferred Lenders Pro21 gram’ means any program established by

22 the Administrator, as authorized under the

23 proviso in section 5(b)(7), under which a

24 written agreement between the lender and
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1 the Administration delegates to the

2 lender—

3 ‘‘(I) complete authority to make

4 and close loans with a guarantee from

5 the Administration without obtaining

6 the prior specific approval of the Ad7 ministration; and

8 ‘‘(II) authority to service and liq9 uidate such loans.’’.

10 SEC. 3. GUARANTEE FEES.

11 (a) AMOUNT OF FEES.—Section 7(a)(18) of the

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

13 to read as follows:

14 ‘‘(18) GUARANTEE FEES.—With respect to each

15 loan guaranteed under this subsection (other than a

16 loan that is repayable in 1 year or less), the Admin17 istration shall collect a guarantee fee, which shall be

18 payable by the participating lender and may be

19 charged to the borrower, in an amount equal to the

20 sum of—

21 ‘‘(A) 3 percent of the amount of the de22 ferred participation share of the loan that is

23 less than or equal to $250,000;
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1 ‘‘(B) if the deferred participation share of

2 the loan exceeds $250,000, 4 percent of the dif3 ference between—

4 ‘‘(i) $500,000 or the total deferred

5 participation share of the loan, whichever

6 is less; and

7 ‘‘(ii) $250,000; and

8 ‘‘(C) if the deferred participation share of

9 the loan exceeds $500,000, 5 percent of the dif10 ference between—

11 ‘‘(i) the total deferred participation

12 share of the loan; and

13 ‘‘(ii) $500,000.’’.

14 (b) REPEAL OF PROVISIONS ALLOWING RETENTION

15 OF FEES BY LENDERS.—Section 7(a)(19) of the Small

16 Business Act (15 U.S.C. 636(a)(19)) is amended—

17 (1) in subparagraph (B)—

18 (A) by striking ‘‘shall (i) develop’’ and in19 serting ‘‘shall develop’’; and

20 (B) by striking ‘‘, and (ii)’’ and all that

21 follows through the end of the subparagraph

22 and inserting a period; and

23 (2) by striking subparagraph (C).
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1 SEC. 4. ESTABLISHMENT OF ANNUAL FEE.

2 (a) IN GENERAL.—Section 7(a) of the Small Busi3 ness Act (15 U.S.C. 636(a)) is amended by adding at the

4 end the following new paragraph:

5 ‘‘(23) ANNUAL FEE.—In carrying out this sub6 section, the Administration shall, in accordance with

7 such terms and procedures as the Administration

8 shall establish by regulation, assess and collect an

9 annual fee, which shall be payable by the participat10 ing lender, in an aggregate amount equal to not

11 more than 0.4 percent of the outstanding balance of

12 the deferred participation share of the loan.’’.

13 (b) CONFORMING AMENDMENT.—Section 5(g)(4)(A)

14 of the Small Business Act (15 U.S.C. 634(g)(4)(A)) is

15 amended—

16 (1) by striking the first sentence and inserting

17 the following: ‘‘The Administration may collect a fee

18 for any loan guarantee sold into the secondary mar19 ket under subsection (f) in an amount equal to not

20 more than 50 percent of the portion of the sale price

21 that exceeds 110 percent of the outstanding prin22 cipal amount of the portion of the loan guaranteed

23 by the Administration.’’; and

24 (2) by striking ‘‘fees’’ each place such term ap25 pears and inserting ‘‘fee’’.
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1 SEC. 5. TECHNICAL AMENDMENT.

2 Section 3 of the Small Business Act (15 U.S.C. 632)

3 is amended by adding at the end the following new sub4 section:

5 ‘‘(o) PARTICIPATING LENDER.—For purposes of this

6 Act, the term ‘participating lender’ means any bank or

7 other financial institution that enters into an agreement

8 with the Administration described section 7(a) to provide

9 financing in accordance with that section.’’.

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