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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3719 Engrossed in House (EH)]

  2d Session

                               H. R. 3719

_______________________________________________________________________

                                 AN ACT

  To amend the Small Business Act and Small Business Investment Act of 
                                 1958.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
104th CONGRESS
  2d Session
                                H. R. 3719

_______________________________________________________________________

                                 AN ACT

 
  To amend the Small Business Act and Small Business Investment Act of 
                                 1958.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Small Business 
Programs Improvement Act of 1996''.
    (b) Table of Contents.--

Sec. 1. Short title; table of contents.
Sec. 2. Administrator defined.
Sec. 3. Effective date.
               TITLE I--AMENDMENTS TO SMALL BUSINESS ACT

Sec. 101. References.
Sec. 102. Risk management database.
Sec. 103. Section 7(a) loan program.
Sec. 104. Disaster loan program.
Sec. 105. Microloan demonstration program.
Sec. 106. Small business development center program.
Sec. 107. Miscellaneous authorities to provide loans and other 
                            financial assistance.
Sec. 108. Small business competitiveness demonstration program.
Sec. 109. Amendment to Small Business Guaranteed Credit Enhancement Act 
                            of 1993.
Sec. 110. 1998 authorizations.
Sec. 111. Level of participation for export working capital loans.
         TITLE II--AMENDMENTS TO SMALL BUSINESS INVESTMENT ACT

Sec. 201. References.
Sec. 202. Modifications to development company debenture program.
Sec. 203. Required actions upon default.
Sec. 204. Loan liquidation pilot program.
Sec. 205. Registration of certificates.
Sec. 206. Preferred surety bond guarantee program.
Sec. 207. Sense of the Congress.

SEC. 2. ADMINISTRATOR DEFINED.

    In this Act, the term ``Administrator'' means the Administrator of 
the Small Business Administration.

SEC. 3. EFFECTIVE DATE.

    Except as otherwise expressly provided, this Act and the amendments 
made by this Act shall take effect on October 1, 1996.

               TITLE I--AMENDMENTS TO SMALL BUSINESS ACT

SEC. 101. REFERENCES.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Small Business Act (15 
U.S.C. 631 et seq.).

SEC. 102. RISK MANAGEMENT DATABASE.

    Section 4(b) (15 U.S.C. 633) is amended by inserting after 
paragraph (2) the following:
            ``(3) Risk management database.--
                    ``(A) Establishment.--The Administration shall 
                establish, within the management system for the loan 
                programs authorized by subsections (a) and (b) of 
                section 7 of this Act and title V of the Small Business 
                Investment Act of 1958, a management information system 
                that will generate a database capable of providing 
                timely and accurate information in order to identify 
                loan underwriting, collections, recovery, and 
                liquidation problems.
                    ``(B) Information to be maintained.--In addition to 
                such other information as the Administration considers 
                appropriate, the database established under 
                subparagraph (A) shall, with respect to each loan 
                program described in subparagraph (A), include 
                information relating to--
                            ``(i) the identity of the institution 
                        making the guaranteed loan or issuing the 
                        debenture;
                            ``(ii) the identity of the borrower;
                            ``(iii) the total dollar amount of the loan 
                        or debenture;
                            ``(iv) the total dollar amount of 
                        government exposure in each loan;
                            ``(v) the district of the Administration in 
                        which the borrower has its principal office;
                            ``(vi) the borrower's principal line of 
                        business, as identified by Standard Industrial 
                        Classification Code (or any successor to that 
                        system);
                            ``(vii) the delinquency rate for each 
                        program (including number of instances and days 
                        overdue);
                            ``(viii) the number of defaults in each 
                        program (including losses and recoveries);
                            ``(ix) the number of deferrals or 
                        forbearances in each program (including days 
                        and number of instances); and
                            ``(x) comparisons on the basis of loan 
                        program, lender, Administration district and 
region, for all the data elements maintained.
                    ``(C) Deadline for operational capability.--The 
                database established under subparagraph (A) shall be 
                operational not later than March 31, 1997, and shall 
                capture data beginning on the first day of the first 
                quarter of fiscal year 1997 beginning after such date 
                and thereafter.''.

SEC. 103. SECTION 7(a) LOAN PROGRAM.

    (a) Servicing and Liquidation of Loans by Preferred Lenders.--
Section 7(a)(2)(C)(ii)(II) (15 U.S.C. 636(a)(2)(C)(ii)(II)) is amended 
to read as follows:
                                    ``(II) complete authority to 
                                service and liquidate such loans 
                                without obtaining the prior specific 
                                approval of the Administration for 
                                routine servicing and liquidation 
                                activities, but shall not take any 
                                actions creating an actual or apparent 
                                conflict of interest.''.
    (b) Certified Lenders Program.--Section 7(a)(19) (15 U.S.C. 
636(a)(19)) is amended to read as follows:
            ``(19)(A) Certified lenders program.--
                    ``(i) Establishment.--In addition to the Preferred 
                Lenders Program authorized by the proviso in section 
                5(b)(7), the Administration is authorized to establish 
                a Certified Lenders Program for lenders who establish 
                their knowledge of Administration laws and regulations 
                concerning the guaranteed loan program and their 
                proficiency in program requirements.
                    ``(ii) Suspension and revocation.--The designation 
                of a lender as a certified lender shall be suspended or 
                revoked at any time that the Administration determines 
                that the lender is not adhering to its rules and 
                regulations or that the loss experience of the lender 
                is excessive as compared to other lenders, but such 
                suspension or revocation shall not affect any 
                outstanding guarantee.
            ``(B) Uniform and simplified loan forms.--In order to 
        encourage all lending institutions and other entities making 
        loans authorized under this subsection to provide loans of 
        $50,000 or less in guarantees to eligible small business loan 
        applicants, the Administration shall develop and allow 
        participating lenders to solely utilize a uniform and 
        simplified loan form for such loans.
            ``(C) Low documentation loan program.--The Administrator 
        may carry out the low documentation loan program for loans of 
        $100,000 or less only through Preferred Lenders and Certified 
        Lenders, or lenders with significant experience making small 
        business loans. The Administration shall give special 
        consideration to lenders who have made loans under the 
        authority of this section. The Administrator shall promulgate 
        regulations defining the experience necessary for lenders other 
        than Preferred or Certified Lenders for participation as a 
        lender in the low documentation loan program no later than 90 
        days after the date of enactment of this subsection.
            ``(D) Authority liquidate loans.--
                    ``(i) In general.--Lenders participating in the 
                Certified Lenders Program shall have authority to 
                liquidate loans made with a guarantee from the 
                Administration.
                    ``(ii) Approval.--The Administrator has the 
                authority to require a certified lender to request 
                approval of a routine liquidation activity, and if the 
                Administrator does not approve or deny a request made 
                by a certified lender within a period of 5 business 
                days, such request shall be deemed to be approved.
            ``(E) Low documentation loan program subsidy rate.--The 
        Administrator shall with the assistance of the Director of the 
        Office of Management and Budget establish and monitor, on an 
        annual basis, the subsidy rate for the low documentation loan 
        program, independently of other loans authorized by this 
        section.''.
    (c) Limitation on Conducting Pilot Projects.--Section 7(a) (15 
U.S.C. 636(a)) is amended by adding at the end the following new 
paragraph:
            ``(25) Limitation on conducting pilot projects.--
                    ``(A) In general.--Not more than 10 percent of the 
                total number of loans guaranteed in any fiscal year 
                under this subsection may be awarded as part of a pilot 
                program which is commenced by the Administrator on or 
                after October 1, 1996.
                    ``(B) Pilot program defined.--In this paragraph, 
                the term `pilot program' means any lending program 
                initiative, project, innovation, or other activity not 
                specifically authorized by law.''.
    (d) Securitization of Unguaranteed Portions of SBA Loans.--Section 
5(f)(3) (15 U.S.C. 634(f)(3)) is amended by adding at the end the 
following: ``The Administration may not prohibit a lender from 
securitizing the nonguaranteed portion of any loan made under section 
7(a). In order to reduce the risk of loss to the government in the 
event of default, the Administration may require all lenders 
securitizing, or requesting Administration approval for the 
securitization of the nonguaranteed portion of any loan, to retain 
exposure of up to 10 percent of the amount of the loan, which 
percentage shall be applicable uniformly to both depository 
institutions and other lenders unless the Administrator determines that 
the lender, on a case by case basis, has undertaken other agreements 
which retain an acceptable exposure to loss by the lender in the event 
of default of a loan being securitized.''.
    (e) Conditions on Purchase of Loans.--
            (1) Servicing fee.--Section 5(g)(5) (15 U.S.C. 634(g)(5)) 
        is amended by adding at the end the following:
    ``(C) In the event the Administration pays a claim under a 
guarantee issued under this Act, the servicing fees paid to the lender 
from the earliest date of default to the date of payment of the claim 
shall be no more than the agreed upon rate, minus one percent.''.
            (2) Payment of accrued interest.--Section 7(a)(17) is 
        amended--
                    (A) by striking ``(17) The Administration'' and 
                inserting ``(17)(A) The Administration''; and
                    (B) by adding at the end the following:
            ``(B) Any bank or other lending institution making a claim 
        for payment on the guaranteed portion of a loan made under this 
        subsection shall be paid the accrued interest due on the loan 
        from the earliest date of default to the date of payment of the 
        claim at a rate not to exceed the rate of interest on the loan 
        on the date of default, minus one percent.''.
    (f) Plan for Transfer of Loan Servicing Functions to Centralized 
Centers.--
            (1) Implementation plan required.--The Administrator of the 
        Small Business Administration shall submit a detailed plan for 
        consolidating, in one or more centralized centers, the 
        performance of the various functions relating to the servicing 
        of loans directly made or guaranteed by the Administration 
        pursuant to the Small Business Act, addressing the matters 
        described in paragraph (2) by the deadline specified in 
        paragraph (3).
            (2) Contents of plan.--In addition to such other matters as 
        the Administrator may deem appropriate, the plan required by 
        paragraph (1) shall include--
                    (A) the proposed number and location of such 
                centralized loan processing centers;
                    (B) the proposed workload (identified by type and 
                numbers of loans and their geographic origin by the 
                Small Business Administration district office) and 
                staffing of each such center;
                    (C) a detailed, time-phased plan for the transfer 
                of the identified loan servicing functions to each 
                proposed center; and
                    (D) any identified impediments to the timely 
                execution of the proposed plan (including adequacy of 
                available financial resources, availability of needed 
                personnel, facilities, and related equipment) and the 
                Administrator's recommendations for addressing such 
                impediments.
            (3) Deadline for submission.--The plan required by 
        paragraph (1) shall be submitted to the Committees on the Small 
        Business of the House of Representatives and Senate not later 
        than February 28, 1997.
    (g) Preferred Lender Standard Review Program.--Not later than 60 
days after the date of enactment of this Act, the Administrator shall 
issue a request for proposals regarding the standard review program for 
the Preferred Lender Program established by section 5(b)(7) of the 
Small Business Act (15 U.S.C. 634(b)(7)). The Administrator shall 
require such standard review for each new entrant to the Preferred 
Lender Program.
    (h) Independent Study of Loan Programs.--
            (1) Study required.--The Administrator shall conduct a 
        comprehensive assessment of the performance of the loan 
        programs authorized by section 7(a) of the Small Business Act 
        (15 U.S.C. 636(a)) and title V of the Small Business Investment 
        Act of 1958 (15 U.S.C. 661) addressing the matters described in 
        paragraph (2) and resulting in a report to Congress pursuant to 
        paragraph (5).
            (2) Matters to be assessed.--In addition to such other 
        matters as the Administrator considers appropriate, the 
        assessment required by paragraph (1) shall address, with 
        respect to each loan program described in paragraph (1) for 
        each of the fiscal years described in paragraph (3)--
                    (A) the number and frequency of deferrals and 
                defaults;
                    (B) default rates;
                    (C) comparative loss rates, by--
                            (i) type of lender (separately addressing 
                        preferred lenders, certified lenders, and 
                        general participation lenders);
                            (ii) term of the loan; and
                            (iii) dollar value of the loan at 
                        disbursement; and
                    (D) the economic models used by the Office of 
                Management and Budget to calculate the credit subsidy 
                rate applicable to the loan programs.
            (3) Period of assessment.--The assessments undertaken 
        pursuant to paragraph (2) shall address data for the period 
        beginning with the first full fiscal year of the implementation 
        of each loan program described in paragraph (1) through fiscal 
        year 1995.
            (4) Performance by the private sector.--
                    (A) Contractor performance.--A private sector 
                contractor shall be used by the Administrator to 
                conduct the assessment required by paragraph (1) and to 
                prepare the report to Congress required by paragraph 
                (3).
                    (B) Solicitation and award.--The contract shall be 
                awarded pursuant to a solicitation issued not later 
                than 60 days after the date of the enactment of this 
                Act, which shall provide for full and open competition. 
                The Administrator shall make every reasonable effort to 
                award the contract not later that 60 days after the 
                date specified in the solicitation for receipt of 
                proposals.
                    (C) Access to information.--The Administrator shall 
                provide to the contractor access to any information 
                collected by or available to the Administration with 
                regard to the loan programs being assessed. The 
                contractor shall preserve the confidentiality of any 
                information for which confidentiality is protected by 
                law or properly asserted by the person submitting such 
                information.
                    (D) Contract funding.--The Administrator shall fund 
                the cost of the contract from the amounts appropriated 
                for the salaries and expenses of the Administration for 
                fiscal year 1997.
            (5) Report to congress.--
                    (A) Contents.--The contractor shall submit a report 
                of--
                            (i) its analyses of the matters to be 
                        assessed pursuant to paragraph (2); and
                            (ii) its independent recommendations, with 
                        respect to each loan program, regarding--
                                    (I) improving the Administration's 
                                timely collection and subsequent 
                                management of data to measure the 
                                performance of each loan program 
                                described in paragraph (1); and
                                    (II) reducing loss rates for each 
                                such loan program.
                    (B) Submission by contractor.--The contractor shall 
                submit the report required by subparagraph (A) not 
                later than 6 months after the date of the contract 
                award.
                    (C) Submission to congress.--The Administrator 
                shall submit the report received from the contractor 
                pursuant to subparagraph (B) to the Committees on Small 
                Business of the House of Representatives and the Senate 
                within 30 days of receipt of the report. The 
                Administrator shall append his comments, and those of 
                the Office of Management and Budget, if any, to the 
                report.
    (i) General Accounting Office Study.--
            (1) In general.--The General Accounting Office shall 
        conduct a comparison of the cost of liquidation for--
                    (A) loans guaranteed under the Preferred Lenders 
                Program that are authorized by section 7(a) of the 
                Small Business Act (15 U.S.C. 636(a)) and liquidated by 
                the Preferred Lenders;
                    (B) loans made and liquidated by, Preferred 
                Lenders, but not guaranteed under the authority in 
                section 7(a); and
                    (C) loans guaranteed by the Small Business 
                Administration under the authority in section 7(a) and 
                liquidated by the Administration, taking into account 
                all of the related costs incurred by the Federal 
                Government.
            (2) Report.--Not later than 9 months after the date of 
        enactment of this Act the General Accounting Office shall 
        deliver the results of the study to the Committees on Small 
        Business of the House and Senate.

SEC. 104. DISASTER LOAN PROGRAM.

    (a) Interest Rate.--Section 7(c) (15 U.S.C. 636(c)) is amended by 
redesignating paragraphs (6) and (7) as paragraphs (8) and (9), 
respectively, and by inserting after paragraph (5) the following:
            ``(6) Disasters commencing after october 1, 1996.--
        Notwithstanding any other provision of law, the interest rate 
        on the Federal share of any loan made under subsection (b)(1) 
        and (b)(2) on account of a disaster commencing on or after 
        October 1, 1996, shall be in the case of a homeowner, or 
        business, or other concern, including agricultural 
        cooperatives, unable to obtain credit elsewhere, at the 
rate prescribed by the Administration but not more than \3/4\ of the 
rate determined by the Secretary of the Treasury, taking into 
consideration the current average market yield on outstanding 
marketable obligations of the United States with remaining periods to 
maturity comparable to the average maturities of such loans plus an 
additional charge of not to exceed 1 percent per annum as determined by 
the Administrator, and adjusted to the nearest \1/8\ of 1 percent but 
not to exceed 7 per centum per annum.
            ``(7) Liability.--Whoever wrongfully misapplies the 
        proceeds of a loan under subsection (b) shall be liable to the 
        Administrator in an amount equal to 1\1/2\ times the original 
        principal amount of the loan.''.
    (b) Private Sector Loan Servicing Demonstration Program.--
            (1)(A) Demonstration program required.--The Administration 
        shall conduct a demonstration program, within the parameters 
        described in paragraph (2), to evaluate the comparative costs 
        and benefits of having the Administration's portfolio of 
        disaster loans serviced under contract rather than directly by 
        employees of the Administration.
            (B) Initiation date.--Not later than 90 days after the date 
        of enactment of this Act, the Administration shall issue a 
        request for proposals for the program parameters described in 
        paragraph (2).
            (2) Demonstration program parameters.--
                    (A) Loan sample.--The sample of loans for the 
                demonstration program shall be randomly drawn from the 
                Administration's portfolio of loans made pursuant to 
                section 7(b) of the Small Business Act and include 
                20,000 loans for residential properties and 5,000 loans 
                for commercial properties.
                    (B) Contract and options.--The Administration shall 
                solicit and competitively award one or more contracts 
                to service the loans included in the sample of loans 
                described in subparagraph (A) for a term of 2 years 
                with 5 2-year options, each to be awarded subject to 
                subparagraph (C).
                    (C) Assessments of performance.--Prior to award of 
                any contract option, the Administration shall assess 
                the costs and performance of each contractor and 
                compare such costs and such performance to the costs 
                and performance of servicing disaster loans by 
                employees of the Administration. The Administrator 
                shall not exercise a contract option if the cost of 
                performance of the loan servicing by the contractor 
                exceeds the cost of performance of the loan servicing 
                by employees of the Administration. The Administrator 
                may terminate the contract during its initial term (or 
                any subsequent option period), based upon performance 
                and cost criteria specified in the solicitation and 
                included in the contract.
                    (D) Disposition of government furnished property.--
                The contract shall require the contractor to--
                            (i) maintain the confidentiality of the 
                        loan files furnished by the Administration; and
                            (ii) return such loan files and other 
                        Government-furnished property within a 
                        specified period after expiration (or 
                        termination) of the contract.
            (3) Term of demonstration program.--
                    (A) In general.--The demonstration program required 
                by paragraph (1) shall commence on the first day of the 
                first fiscal year quarter after the award of the 
                contract and continue through the last day of the 
                fiscal year quarter at the expiration of the 2-year 
                contract period or any subsequent contract option.
                    (B) Early termination.--If the Administrator 
                terminates each contract pursuant to paragraph (2)(C), 
                the demonstration program shall end on the effective 
                date of such termination.
            (4) Reports.--
                    (A) Interim reports.--The Administrator shall 
                submit to the Committees on Small Business of the House 
                of Representatives and Senate interim reports on the 
                conduct of the demonstration program not later than 60 
                days prior to the expiration of the initial 2-year 
                contract performance period, each subsequent option 
                period, or termination of a contract. The contractor 
                shall be afforded a reasonable opportunity to attach 
                comments to each such report.
                    (B) Final report.--The Administrator shall submit 
                to the Committees on Small Business of the House of 
                Representatives and Senate a final report within 120 
                days of the termination of the demonstration program.
    (c) Definition of Disaster.--(1) Section 3(k) (15 U.S.C. 632(k)) is 
amended by striking ``ocean conditions'' and inserting ``ocean 
conditions, or government action (regulatory or otherwise)''.
    (2) For the purposes of this Act this amendment shall be considered 
effective with respect to any disaster occurring on or after March 1, 
1994.

SEC. 105. MICROLOAN DEMONSTRATION PROGRAM.

    (a) Technical Assistance Grant Requirements.--Section 7(m)(4) (15 
U.S.C. 636(m)(4)) is amended--
            (1) in subparagraph (A) by striking ``25 percent'' and 
        inserting ``20 percent''; and
            (2) in subparagraph (B) by striking ``25 percent'' and 
        inserting ``35 percent''.
    (b) Implementation of Guaranteed Microloan Pilot Program.--
            (1) Action required.--The Administrator shall implement or 
        submit a detailed report explaining the impediments to the 
        implementation of a Guaranteed Microloan Pilot Program pursuant 
        to section 7(m)(12) (15 U.S.C. 636(m)(12)) addressing the 
        matters described in paragraph (2) by the deadline specified in 
        paragraph (3).
            (2) Contents of implementation report.--In addition to such 
        other matters as the Administrator may deem appropriate, the 
        plan required by paragraph (1) shall include any identified 
        impediments to implementation of a Guaranteed Microloan Pilot 
        Program that, in the opinion of the Administrator, require 
        amendments to the program's authorizing legislation, and if 
        such impediments are identified, includes recommendations for 
        such statutory changes.
            (3) Deadline for submission.--The plan required by 
        paragraph (2) shall be submitted to the Committees on Small 
        Business of the House of Representatives and Senate not later 
        than December 1, 1996.
    (c) Limitation on Funding.--In the event that the Administrator 
shall fail to submit the report required by subsection (b)(1) by the 
deadline specified in subsection (b)(3), none of the amounts 
appropriated to carry out the Microloan Program authorized by section 
7(m)(12) of the Small Business Act (15 U.S.C. 636(m)(12)) during fiscal 
year 1997 may be expended until such time as the pilot program is 
implemented or the report is submitted.

SEC. 106. SMALL BUSINESS DEVELOPMENT CENTER PROGRAM.

    (a) Associate Administrator for Small Business Development 
Centers.--
            (1) Duties.--Section 21(h) (15 U.S.C. 648(h)) is amended to 
        read as follows:
    ``(h) Associate Administrator for Small Business Development 
Centers.--
            ``(1) Appointment and compensation.--The Administrator 
        shall appoint an Associate Administrator for Small Business 
        Development Centers who shall report to an official who is not 
        more than one level below the Office of the Administrator and 
        who shall serve without regard to the provisions of title 5 
        governing appointments in the competitive service, and without 
        regard to chapter 51, and subchapter III of chapter 53 of such 
        title relating to classification and General Schedule pay 
        rates, but at a rate not less than the rate of GS-17 of the 
        General Schedule.
            ``(2) Duties.--
                    ``(A) In general.--The sole responsibility of the 
                Associate Administrator for Small Business Development 
                Centers shall be to administer the small business 
                development center program. Duties of the position 
                shall include, but are not limited to, recommending the 
                annual program budget, reviewing the annual budgets 
                submitted by each applicant, establishing appropriate 
                funding levels therefore, selecting applicants to 
                participate in this program, implementing the 
                provisions of this section, maintaining a clearinghouse 
                to provide for the dissemination and exchange of 
                information between small business development centers 
                and conducting audits of recipients of grants under 
                this section.
                    ``(B) Consultation requirements.--In carrying out 
                the duties described in this subsection, the Associate 
                Administrator shall confer with and seek the advice of 
                the Board established by subsection (i) and 
                Administration officials in areas served by the small 
                business development centers; however, the Associate 
                Administrator shall be responsible for the management 
                and administration of the program and shall not be 
                subject to the approval or concurrence of such 
                Administration officials.''.
            (2) References to associate administrator.--Section 21 (15 
        U.S.C. 648) is amended--
                    (A) in subsection (c)(7) by striking ``Deputy 
                Associate Administrator of the Small Business 
                Development Center program'' and inserting ``Associate 
                Administrator for Small Business Development Centers''; 
                and
                    (B) in subsection (i)(2) by striking ``Deputy 
                Associate Administrator for Management Assistance'' and 
                inserting ``Associate Administrator for Small Business 
                Development Centers''.
    (b) Extension or Renewal of Cooperative Agreements.--Section 
21(k)(3) (15 U.S.C. 648(k)(3)) is amended to read as follows:
            ``(3) Extension or renewal of cooperative agreements.--
                    ``(A) In general.--In extending or renewing a 
                cooperative agreement of a small business development 
                center, the Administration shall consider the results 
                of the examination and certification program conducted 
                pursuant to paragraphs (1) and (2).
                    ``(B) Certification requirement.--After September 
                30, 2000, the Administration may not renew or extend 
                any cooperative agreement with a small business 
                development center unless the center has been approved 
                under the certification program conducted pursuant to 
                this subsection; except that the Associate 
                Administrator for Small Business Development Centers 
                may waive such certification requirement, in the 
                discretion of the Associate Administrator, upon a 
                showing that the center is making a good faith effort 
                to obtain certification.''.
    (c) Technical Correction.--Section 21(l) (15 U.S.C. 648(l)) is 
amended to read as follows:
    ``(l) Contract Authority.--The authority to enter into contracts 
shall be in effect for each fiscal year only to the extent and in the 
amounts as are provided in advance in appropriations Acts. After the 
administration has entered a contract, either as a grant or a 
cooperative agreement, with any applicant under this section, it shall 
not suspend, terminate, or fail to renew or extend any such contract 
unless the Administration provides the applicant with written 
notification setting forth the reasons therefore and affording the 
applicant an opportunity for a hearing, appeal, or other administrative 
proceeding under the provisions of chapter 5 of title 5, United States 
Code.''.

SEC. 107. MISCELLANEOUS AUTHORITIES TO PROVIDE LOANS AND OTHER 
              FINANCIAL ASSISTANCE.

    (a) Funding Limitation; Seminars.--Section 7(d) (15 U.S.C. 636(d)) 
is amended--
            (1) by striking ``(d)(1)'' and inserting ``(d)''; and
            (2) by striking paragraph (2).
    (b) Trade Adjustment Loans.--Section 7(e) (15 U.S.C. 636(e)) is 
amended to read as follows:
    ``(e) [RESERVED].''.
    (c) Waiver of Credit Elsewhere Test for Colleges and 
Universities.--Section 7(f) (15 U.S.C. 636(f)) is amended to read as 
follows:
    ``(f) [RESERVED].''.
    (d) Loans to Small Business Concerns for Solar Energy and Energy 
Conservation Measures.--Section 7(l) (15 U.S.C. 636(l)) is amended to 
read as follows:
    ``(l) [RESERVED].''.

SEC. 108. SMALL BUSINESS COMPETITIVENESS DEMONSTRATION PROGRAM.

    (a) Extension of Demonstration Program.--Section 711(c) of the 
Small Business Competitiveness Demonstration Program Act of 1988 (15 
U.S.C. 644 note; 102 Stat. 3890) is amended by striking ``September 30, 
1996'' and inserting ``September 30, 2000''.
    (b) Reporting of Subcontract Participation in Contracts for 
Architectural and Engineering Services.--Section 714(b)(5) of the Small 
Business Competitiveness Demonstration Program Act of 1988 (15 U.S.C. 
644 note; 102 Stat. 3892) is amended to read as follows:
            ``(5) Duration.--The system described in subsection (a) 
        shall be established not later than October 1, 1996 (or as soon 
        as practicable thereafter on the first day of a subsequent 
        quarter of fiscal year 1997), and shall terminate on September 
        30, 2000.''.
    (c) References to Architectural and Engineering Services.--
            (1) In general.--The Small Business Competitiveness 
        Demonstration Program Act of 1988 (15 U.S.C. 644 note; 102 
        Stat. 3889 et seq.) is amended in subsections (a)(3) and (d) by 
        striking ``surveying and mapping'' and inserting ``surveying, 
        mapping, and landscape architecture''.
            (2) Designated industry groups.--Section 717(d) of the 
        Small Business Competitiveness Demonstration Program Act of 
        1988 (15 U.S.C. 644 note; 102 Stat. 3894) is amended by 
        inserting ``standard industrial classification codes 0781 (if 
        identified as pertaining to architecture services),'' after 
        ``(if identified as pertaining to mapping services),''.
    (d) Reports to Congress.--
            (1) In general.--Section 716 of the Small Business 
        Competitiveness Demonstration Program Act of 1988 (15 U.S.C. 
        644 note; 102 Stat. 3893) is amended--
                    (A) in subsection (a), by striking ``fiscal year 
                1991 and 1995'' and inserting ``each of fiscal years 
                1991 through 1999'';
                    (B) in subsection (a), by striking ``results'' and 
                inserting ``cumulative results''; and
                    (C) in subsection (c), by striking ``1996'' and 
                inserting ``1999''.
            (2) Cumulative report through fiscal year 1995.--A 
        cumulative report of the results of the Small Business 
        Competitiveness Demonstration Program for fiscal years 1991 
        through 1995 shall be submitted not later than 60 days after 
        the date of the enactment of this Act pursuant to section 
        716(a) of the Small Business Competitiveness Demonstration 
        Program Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3893), as 
        amended by paragraph (1) of this subsection.

SEC. 109. AMENDMENT TO SMALL BUSINESS GUARANTEED CREDIT ENHANCEMENT ACT 
              OF 1993.

    (a) Section 7 of the Small Business Guaranteed Credit Enhancement 
Act of 1993 (Public Law 103-81; 15 U.S.C. 634 note) is repealed 
effective September 29, 1996.
    (b) Clerical Amendment.--The table of contents for the Small 
Business Guaranteed Credit Enhancement Act of 1993 (Public Law 103-81; 
15 U.S.C. 631 note) is amended by striking the item relating to section 
7.

SEC. 110. 1998 AUTHORIZATIONS.

    Section 20 (15 U.S.C. 631 note) is amended--
            (1) in subsection (p), by striking ``authorized for fiscal 
        year 1997'' and inserting ``authorized for each of fiscal years 
        1997 and 1998'';
            (2) by striking subsection (p)(3)(B) and by inserting the 
        following:
                    ``(B) $268,000,000 in guarantees of debentures; 
                and'';
            (3) in subsection (q)(1) by striking ``fiscal year 1997'' 
        and inserting ``each of fiscal years 1997 and 1998''; and
            (4) in subsection (q)(2) by striking ``year 1997'' and 
        inserting ``years 1997 and 1998''.

SEC. 111. LEVEL OF PARTICIPATION FOR EXPORT WORKING CAPITAL LOANS.

    Section 7(a)(2) (15 U.S.C. 636(a)(2)) is amended by adding at the 
end the following:
                    ``(D) Participation under export working capital 
                program.--Notwithstanding subparagraph (A), in an 
                agreement to participate in a loan on a deferred basis 
                under the Export Working Capital Program established 
                pursuant to paragraph (14)(A), such participation by 
                the Administration shall be equal to the rate specified 
                under this paragraph as in effect on the day before the 
                date of the enactment of the Small Business Lending 
                Enhancement Act of 1995.''.

         TITLE II--AMENDMENTS TO SMALL BUSINESS INVESTMENT ACT

SEC. 201. REFERENCES.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Small Business 
Investment Act of 1958 (15 U.S.C. 661 et seq.).

SEC. 202. MODIFICATIONS TO DEVELOPMENT COMPANY DEBENTURE PROGRAM.

    (a) Decreased Loan to Value Ratios.--Section 502(3) (15 U.S.C. 
696(3)) is amended to read as follows:
            ``(3) Criteria for assistance.--
                    ``(A) In general.--Any development company assisted 
                under this section or section 503 of this title must 
                meet the criteria established by the Administration, 
                including the extent of participation to be required or 
                amount of paid-in capital to be used in each instance 
                as is determined to be reasonable by the 
                Administration.
                    ``(B) Community injection funds.--
                            ``(i) Sources of funds.--Community 
                        injection funds may be derived, in whole or in 
                        part, from--
                                    ``(I) State or local governments;
                                    ``(II) banks or other financial 
                                institutions;
                                    ``(III) foundations or other not-
                                for-profit institutions; or
                                    ``(IV) the small business concern 
                                (or its owners, stockholders, or 
                                affiliates) receiving assistance 
                                through a body authorized by this 
                                title.
                            ``(ii) Funding from institutions.--Not less 
                        than 50 percent of the total cost of any 
                        project financed pursuant to clauses (i), (ii), 
                        or (iii) of subparagraph (C) shall come from 
                        the institutions described in subclauses (I), 
                        (II), and (III) of clause (i).
                    ``(C) Funding from a small business concern.--The 
                small business concern (or its owners, stockholders, or 
                affiliates) receiving assistance through a body 
                authorized by this title shall provide--
                            ``(i) at least 15 percent of the total cost 
                        of the project financed, if the small 
business concern has been in operation for a period of 2 years or less;
                            ``(ii) at least 15 percent of the total 
                        cost of the project financed if the project 
                        involves the construction of a limited or 
                        single purpose building or structure;
                            ``(iii) at least 20 percent of the total 
                        cost of the project financed if the project 
                        involves both of the conditions set forth in 
                        clauses (i) and (ii); or
                            ``(iv) at least 10 percent of the total 
                        cost of the project financed, in all other 
                        circumstances, at the discretion of the 
                        development company.''.
    (b) Guarantee Fee for Development Company Debentures.--Section 
503(b)(7)(A) (15 U.S.C. 697(b)(7)(A)) is amended by striking ``0.125 
percent'' and inserting ``0.9375 percent''.
    (c) Fees To Offset Subsidy Cost.--Section 503(d) (15 U.S.C. 697(d)) 
is amended to read as follows:
    ``(d) Charges for Administration Expenses.--
            ``(1) Level of charges.--The Administration may impose an 
        additional charge for administrative expenses with respect to 
        each debenture for which payment of principal and interest is 
        guaranteed under subsection (a).
            ``(2) Participation fee.--The Administration shall also 
        impose a one-time fee of 50 basis points on the total 
        participation in any project of any institution described in 
        subclause (I), (II), or (III) of section 502(3)(B)(i). Such fee 
        shall be imposed only when the participation of the institution 
        will occupy a senior credit position to that of the development 
        company. Such fee shall be collected by the development 
        company, forwarded to the Administration, and used to offset 
        the cost (as such term is defined in section 502 of the Credit 
        Reform Act of 1990) to the Administration of making guarantees 
        under subsection (a).
            ``(3) Development company fee.--The Administration shall 
        collect annually from each development company a fee of 0.125 
        percent of the outstanding principal balance of any guaranteed 
        debenture authorized by the Administration after September 30, 
        1996. Such fee shall be derived from the servicing fees 
        collected by the development company pursuant to regulation, 
        and shall not be derived from any additional fees imposed on 
        small business concerns. All proceeds of the fee shall be used 
        to offset the cost (as such term is defined in section 502 of 
        the Credit Reform Act of 1990) to the Administration of making 
        guarantees under subsection (a).''.
    (d) Effective Date.--Section 503 (15 U.S.C. 697) is amended by 
adding at the end the following:
    ``(f) Effective Date.--The fees authorized by subsections (b) and 
(c) shall apply to financings approved by the Administration on or 
after October 1, 1996, but shall not apply to financings approved by 
the Administration on or after October 1, 1997.''.

SEC. 203. REQUIRED ACTIONS UPON DEFAULT.

    Section 503 (15 U.S.C. 697) is amended by adding at the end the 
following:
    ``(g) Required Actions Upon Default.--
            ``(1) Deadlines.--
                    ``(A) Initial actions.--Not later than the 45th day 
                after the date on which a payment on a loan funded 
                through a debenture guaranteed under this section is 
                due and not received, the Administration shall--
                            ``(i) take all necessary steps to bring 
                        such a loan current; or
                            ``(ii) implement a formal written deferral 
                        agreement.
                    ``(B) Purchase or acceleration of debenture.--Not 
                later than the 65th day after the date on which a 
                payment on a loan described in subparagraph (A) is due 
                and not received, and absent a formal written deferral 
                agreement, the Administration shall take all necessary 
                steps to purchase or accelerate the debenture.
            ``(2) Prepayment penalties.--The Administration shall, with 
        respect to the portion of any project derived from funds set 
        forth in section 502(3)--
                    ``(A) negotiate the elimination of any prepayment 
                penalties or late fees on defaulted loans made prior to 
                September 30, 1996;
                    ``(B) decline to pay any prepayment penalty or late 
                fee on the default based purchase of loans issued after 
                September 30, 1996; and
                    ``(C) for any project financed after September 30, 
                1996, decline to pay any default interest rate higher 
                than the interest rate on the note prior to the date of 
                default.''.

SEC. 204. LOAN LIQUIDATION PILOT PROGRAM.

    (a) In General.--The Administrator shall carry out a loan 
liquidation pilot program (in this section referred to as the ``pilot 
program'') in accordance with the requirements of this section.
    (b) Selection of Development Companies.--Not later than 90 days 
after the date of the enactment of this Act, the Administrator shall 
allow not less than 15 development companies authorized to make loans 
and issue debentures under title V of the Small Business Investment Act 
of 1958 to participate in the pilot program. The development companies 
admitted shall agree not to take any action that would create a 
potential conflict of interest involving the development company, the 
third party lender, or an associate of the third party lender. In order 
to qualify to participate in the pilot, each development company 
shall--
            (1) have a minimum of 6 years experience in the program 
        established by such title V;
            (2) have made, during the last 6 fiscal years, an average 
        of 10 loans per year through the program established by such 
        title V; and
            (3) have a minimum of 2 years experience, either 
        independently or through an agent, in liquidating loans under 
        the authority of a Federal, State, or other lending program.
    (c) Authority of Development Companies.--The development companies 
selected under subsection (b) shall, for all loans in their portfolio 
of loans made through debentures guaranteed under title V of the Small 
Business Investment Act of 1958 that are in default after the date of 
enactment of this Act, be authorized to--
            (1) perform all liquidation and foreclosure functions, 
        including the acceleration or purchase of community injection 
        funds, subject to such company obtaining prior written approval 
        from the Administrator before committing the agency to purchase 
        any other indebtedness secured by the property: Provided, That 
        the Administrator shall approve or deny a request for such 
        purchase within a period of 5 business days; and
            (2) liquidate such loans in a reasonable and sound manner 
        and according to commercially accepted practices pursuant to a 
        liquidation plan approved by the administrator in advance of 
        its implementation. If the Administrator does not approve or 
        deny a request made by a certified development company within a 
        period of 5 business days, such request shall be deemed to be 
        approved.
    (d) Authority of the Administrator.--In carrying out the pilot 
program, the Administrator shall--
            (1) have full authority to deny participation in the pilot 
        program or rescind the authority granted any development 
        company under this section upon a 10-day written notice stating 
        the reasons for the denial or rescission; and
            (2) implement the pilot program no later than 90 days after 
        the admission of the development companies specified in 
        subsection (b).
    (e) Report.--
            (1) In general.--The Administrator shall issue a report on 
        the results of the pilot program to the Committees on Small 
        Business of the House of Representatives and the Senate. The 
        report shall include information relating to--
                    (A) the total dollar amount of each loan and 
                project liquidated;
                    (B) the total dollar amount guaranteed by the 
                Administration;
                    (C) total dollar losses;
                    (D) total recoveries both as percentage of the 
                amount guaranteed and the total cost of the project; 
                and
                    (E) a comparison of the pilot program information 
                with the same information for liquidation conducted 
                outside the pilot program over the period of time.
            (2) Reporting period.--The report shall be based on data 
        from, and issued not later than 90 days after the close of, the 
        first eight 8 fiscal quarters of the pilot program's operation 
        after the date of implementation.

SEC. 205. REGISTRATION OF CERTIFICATES.

    (a) Certificates Sold Pursuant to Small Business Act.--Section 5(h) 
of the Small Business Act (15 U.S.C. 634(h)) is amended--
            (1) by redesignating paragraphs (1) through (4) as 
        subparagraphs (A) through (D);
            (2) by striking ``(h)'' and inserting ``(h)(1)'';
            (3) by striking subparagraph (A), as redesignated by 
        paragraph (1) of this subsection, and inserting the following:
            ``(A) provide for a central registration of all loans and 
        trust certificates sold pursuant to subsections (f) and (g) of 
        this section;''; and
            (4) by adding at the end the following:
    ``(2) Nothing in this subsection shall prohibit the utilization of 
a book-entry or other electronic form of registration for trust 
certificates. The Administration may, with the consent of the Secretary 
of the Treasury, use the book-entry system of the Federal Reserve 
System.''.
    (b) Certificates Sold Pursuant to Small Business Investment Company 
Program.--Section 321(f) (15 U.S.C. 6871(f)) is amended--
            (1) in paragraph (1) by striking ``Such central 
        registration shall include'' and all that follows through the 
        period at the end of the paragraph; and
            (2) by adding at the end the following:
    ``(5) Nothing in this subsection shall prohibit the use of a book-
entry or other electronic form of registration for trust 
certificates.''.
    (c) Certificates Sold Pursuant to Development Company Program.--
Section 505(f) (15 U.S.C. 697b(f)) is amended--
            (1) by redesignating paragraphs (1) through (4) as 
        subparagraphs (A) through (D);
            (2) by striking ``(f)'' and inserting ``(f)(1)'';
            (3) by striking subparagraph (A), as redesignated by 
        paragraph (1) of this subsection, and inserting the following:
            ``(A) provide for a central registration of all trust 
        certificates sold pursuant to this section;'' and
            (4) by adding at the end the following:
    ``(2) Nothing in this subsection shall prohibit the utilization of 
a book-entry or other electronic form of registration for trust 
certificates.''.

SEC. 206. PREFERRED SURETY BOND GUARANTEE PROGRAM.

    (a) Admissions of Additional Program Participants.--Section 411(a) 
(15 U.S.C. 694(a)) is amended by adding a new paragraph (5), as 
follows:
    ``(5)(A) The Administration shall promptly act upon an application 
from a surety to participate in the Preferred Surety Bond Guarantee 
Program, authorized by paragraph (3), in accordance with criteria and 
procedures established in regulations pursuant to subsection (d).
    ``(B) The Administration is authorized to reduce the allotment of 
bond guarantee authority or terminate the participation of a surety in 
the Preferred Surety Bond Guarantee Program based on the rate of 
participation of such surety during the 4 most recent fiscal year 
quarters compared to the median rate of participation by the other 
sureties in the program.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to applications received (or pending substantive 
evaluation) on or after October 1, 1995.

SEC. 207. SENSE OF THE CONGRESS.

    It is the sense of the Congress that the subsidy models prepared by 
the Office of Management and Budget relative to loan programs sponsored 
by the United States Small Business Administration have a tendency to:
            (1) overestimate potential risks of loss; and
            (2) overemphasize historical losses that may be anomolous 
        and do not truly reflect the success of the programs as a 
        whole.
    Consequently, Congress mandates the independent study in section 
103(h) with hopes of improving the ability of the Office of Management 
and Budget to more accurately reflect the budgetary implications of 
such programs.

            Passed the House of Representatives September 5, 1996.

            Attest:

                                                                 Clerk.
```