104TH CONGRESS

1ST SESSION S. 895

AN ACT

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 lend2 er—

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.—

15 ‘‘(A) IN GENERAL.—With respect to each

16 loan guaranteed under this subsection (other

17 than a loan that is repayable in 1 year or less),

18 the Administration shall collect a guarantee fee,

19 which shall be payable by the participating

20 lender and may be charged to the borrower, in

21 an amount equal to the sum of—

22 ‘‘(i) 2.5 percent of the amount of the

23 deferred participation share of the loan

24 that is less than or equal to $250,000;
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1 ‘‘(ii) if the deferred participation

2 share of the loan exceeds $250,000, 3 per3 cent of the difference between—

4 ‘‘(I) $500,000 or the total de5 ferred participation share of the loan,

6 whichever is less; and

7 ‘‘(II) $250,000; and

8 ‘‘(iii) if the deferred participation

9 share of the loan exceeds $500,000, 3.5

10 percent of the difference between—

11 ‘‘(I) $750,000 or the total de12 ferred participation share of the loan,

13 whichever is less; and

14 ‘‘(II) $500,000.

15 ‘‘(B) EXCEPTION FOR CERTAIN LOANS.—

16 Notwithstanding subparagraph (A), if the total

17 deferred participation share of a loan guaran18 teed under this subsection is less than or equal

19 to $80,000, the guarantee fee collected under

20 subparagraph (A) shall be in an amount equal

21 to 2 percent of the total deferred participation

22 share of the loan.

23 ‘‘(C) DISCRETIONARY INCREASE.—Not24 withstanding subparagraphs (A) and (B), dur25 ing the 90-day period beginning on the first day
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1 of any fiscal year, the Administration may in2 crease the guarantee fee collected under this

3 paragraph by an amount not to exceed 0.375

4 percent of the total deferred participation share

5 of the loan, if the Administration—

6 ‘‘(i) determines that such action is

7 necessary to meet projected borrower de8 mand for loans under this subsection dur9 ing that fiscal year, based on the subsidy

10 cost of the loan program under this sub11 section and amounts provided in advance

12 for such program in appropriations Acts;

13 and

14 ‘‘(ii) not less than 15 days prior to

15 imposing any such increase, notifies the

16 Committees on Small Business of the Sen17 ate and the House of Representatives of

18 the determination made under clause (i).’’.

19 (b) REPEAL OF PROVISIONS ALLOWING RETENTION

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

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

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 through the end of the subparagraph

3 and inserting a period; and

4 (2) by striking subparagraph (C).

5 SEC. 4. ESTABLISHMENT OF ANNUAL FEE.

6 (a) IN GENERAL.—Section 7(a) of the Small Busi7 ness Act (15 U.S.C. 636(a)) is amended by adding at the

8 end the following new paragraph:

9 ‘‘(23) ANNUAL FEE.—

10 ‘‘(A) IN GENERAL.—With respect to each

11 loan guaranteed under this subsection, the Ad12 ministration shall, in accordance with such

13 terms and procedures as the Administration

14 shall establish by regulation, assess and collect

15 an annual fee in an amount equal to 0.5 per16 cent of the outstanding balance of the deferred

17 participation share of the loan.

18 ‘‘(B) PAYER.—The annual fee assessed

19 under subparagraph (A) shall be payable by the

20 participating lender and shall not be charged to

21 the borrower.’’.

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

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

24 amended—
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1 (1) by striking the first sentence and inserting

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

3 for any loan guarantee sold into the secondary mar4 ket under subsection (f) in an amount equal to not

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

6 that exceeds 110 percent of the outstanding prin7 cipal amount of the portion of the loan guaranteed

8 by the Administration.’’; and

9 (2) by striking ‘‘fees’’ each place such term ap10 pears and inserting ‘‘fee’’.

11 SEC. 5. NOTIFICATION REQUIREMENT.

12 (a) IN GENERAL.—Section 7(a) of the Small Busi13 ness Act (15 U.S.C. 636(a)) is amended by adding at the

14 end the following new paragraph:

15 ‘‘(24) NOTIFICATION REQUIREMENT.—The Ad16 ministration shall notify the Committees on Small

17 Business of the Senate and the House of Represent18 atives not later than 15 days before making any sig19 nificant policy or administrative change affecting the

20 operation of the loan program under this sub21 section.’’.

22 SEC. 6. DEVELOPMENT COMPANY DEBENTURES.

23 Section 503(b) of the Small Business Investment Act

24 of 1958 (15 U.S.C. 697(b)) is amended—
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1 (1) in paragraph (5), by striking ‘‘and’’ at the

2 end;

3 (2) in paragraph (6), by striking the period at

4 the end and inserting ‘‘; and’’; and

5 (3) by adding at the end the following new

6 paragraph:

7 ‘‘(7) with respect to each loan made from the

8 proceeds of such debenture, the Administration—

9 ‘‘(A) assesses and collects a fee, which

10 shall be payable by the borrower, in an amount

11 equal to 0.0625 percent per year of the out12 standing balance of the loan; and

13 ‘‘(B) uses the proceeds of such fee to offset

14 the cost (as such term is defined in section 502

15 of the Federal Credit Reform Act of 1990) to

16 the Administration of making guarantees under

17 subsection (a).’’.

18 SEC. 7. PILOT PREFERRED SURETY BOND GUARANTEE

19 PROGRAM EXTENSION.

20 Section 207 of the Small Business Administration

21 Reauthorization and Amendment Act of 1988 (15 U.S.C.
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1 694b note) is amended by striking ‘‘September 30, 1995’’

2 and inserting ‘‘September 30, 1997’’.

Passed the Senate August 11 (legislative day, July

10), 1995.

Attest:

Secretary.
104TH CONGRESS

1ST SESSION S. 895

AN ACT

To amend the Small Business Act to reduce the

Administration, and for other purposes.ministration in certain loans guaranteed by thelevel of participation by the Small Business Ad-