Union Calendar No. 396

104TH CONGRESS

2D SESSION H. R. 3719

[Report No. 104–750]

A BILL

To amend the Small Business Act and Small

Business Investment Act of 1958.

AUGUST 2, 1996

Reported with an amendment, committed to the Commitordered to be printed tee of the Whole House on the State of the Union, and
1B

Union Calendar No. 396

104TH CONGRESS

2D SESSION H. R. 3719

[Report No. 104–750]

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

1958.

IN THE HOUSE OF REPRESENTATIVES

JUNE 26, 1996

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

the Committee on Small Business

AUGUST 2, 1996

Reported with an amendment, committed to the Committee of the Whole

House on the State of the Union, and ordered to be printed

[Strike out all after the enacting clause and insert the part printed in italic]

[For text of introduced bill, see copy of bill as introduced on June 26, 1996]

A BILL

To amend the Small Business Act and Small Business

Investment Act of 1958.

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; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Small Business Programs Improvement Act of 1996’’.
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1 (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.

2 SEC. 2. ADMINISTRATOR DEFINED.

3 In this Act, the term ‘‘Administrator’’ means the Ad4 ministrator of the Small Business Administration.

5 SEC. 3. EFFECTIVE DATE.

6 Except as otherwise expressly provided, this Act and

7 the amendments made by this Act shall take effect on Octo8 ber 1, 1996.

9 TITLE I—AMENDMENTS TO

10 SMALL BUSINESS ACT

11 SEC. 101. REFERENCES.

12 Except as otherwise expressly provided, whenever in

13 this title an amendment or repeal is expressed in terms of
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1 an amendment to, or repeal of, a section or other provision,

2 the reference shall be considered to be made to a section or

3 other provision of the Small Business Act (15 U.S.C. 631

4 et seq.).

5 SEC. 102. RISK MANAGEMENT DATABASE.

6 Section 4(b) (15 U.S.C. 633) is amended by inserting

7 after paragraph (2) the following:

8 ‘‘(3) RISK MANAGEMENT DATABASE.—

9 ‘‘(A) ESTABLISHMENT.—The Administra10 tion shall establish, within the management sys11 tem for the loan programs authorized by sub12 sections (a) and (b) of section 7 of this Act and

13 title V of the Small Business Investment Act of

14 1958, a management information system that

15 will generate a database capable of providing

16 timely and accurate information in order to

17 identify loan underwriting, collections, recovery,

18 and liquidation problems.

19 ‘‘(B) INFORMATION TO BE MAINTAINED.—In

20 addition to such other information as the Ad21 ministration considers appropriate, the database

22 established under subparagraph (A) shall, with

23 respect to each loan program described in sub24 paragraph (A), include information relating

25 to—
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1 ‘‘(i) the identity of the institution

2 making the guaranteed loan or issuing the

3 debenture;

4 ‘‘(ii) the identity of the borrower;

5 ‘‘(iii) the total dollar amount of the

6 loan or debenture;

7 ‘‘(iv) the total dollar amount of govern8 ment exposure in each loan;

9 ‘‘(v) the district of the Administration

10 in which the borrower has its principal of11 fice;

12 ‘‘(vi) the borrower’s principal line of

13 business, as identified by Standard Indus14 trial Classification Code (or any successor

15 to that system);

16 ‘‘(vii) the delinquency rate for each

17 program (including number of instances

18 and days overdue);

19 ‘‘(viii) the number of defaults in each

20 program (including losses and recoveries);

21 ‘‘(ix) the number of deferrals or

22 forbearances in each program (including

23 days and number of instances); and

24 ‘‘(x) comparisons on the basis of loan

25 program, lender, Administration district
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1 and region, for all the data elements main2 tained.

3 ‘‘(C) DEADLINE FOR OPERATIONAL CAPA4 BILITY.—The database established under sub5 paragraph (A) shall be operational not later

6 than March 31, 1997, and shall capture data be7 ginning on the first day of the first quarter of

8 fiscal year 1997 beginning after such date and

9 thereafter.’’.

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

11 (a) SERVICING AND LIQUIDATION OF LOANS BY PRE12 FERRED LENDERS.—Section 7(a)(2)(C)(ii)(II) (15 U.S.C.

13 636(a)(2)(C)(ii)(II)) is amended to read as follows:

14 ‘‘(II) complete authority to service

15 and liquidate such loans without ob16 taining the prior specific approval of

17 the Administration for routine servic18 ing and liquidation activities, but

19 shall not take any actions creating an

20 actual or apparent conflict of inter21 est.’’.

22 (b) CERTIFIED LENDERS PROGRAM.—Section 7(a)(19)

23 (15 U.S.C. 636(a)(19)) is amended to read as follows:

24 ‘‘(19)(A) CERTIFIED LENDERS PROGRAM.—
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1 ‘‘(i) ESTABLISHMENT.—In addition to the

2 Preferred Lenders Program authorized by the

3 proviso in section 5(b)(7), the Administration is

4 authorized to establish a Certified Lenders Pro5 gram for lenders who establish their knowledge of

6 Administration laws and regulations concerning

7 the guaranteed loan program and their pro8 ficiency in program requirements.

9 ‘‘(ii) SUSPENSION AND REVOCATION.—The

10 designation of a lender as a certified lender shall

11 be suspended or revoked at any time that the Ad12 ministration determines that the lender is not

13 adhering to its rules and regulations or that the

14 loss experience of the lender is excessive as com15 pared to other lenders, but such suspension or

16 revocation shall not affect any outstanding guar17 antee.

18 ‘‘(B) UNIFORM AND SIMPLIFIED LOAN FORMS.—

19 In order to encourage all lending institutions and

20 other entities making loans authorized under this sub21 section to provide loans of $50,000 or less in guaran22 tees to eligible small business loan applicants, the Ad23 ministration shall develop and allow participating

24 lenders to solely utilize a uniform and simplified loan

25 form for such loans.
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1 ‘‘(C) LOW DOCUMENTATION LOAN PROGRAM.—

2 The Administrator may carry out the low documenta3 tion loan program for loans of $100,000 or less only

4 through Preferred Lenders and Certified Lenders, or

5 lenders with significant experience making small

6 business loans. The Administration shall give special

7 consideration to lenders who have made loans under

8 the authority of this section. The Administrator shall

9 promulgate regulations defining the experience nec10 essary for lenders other than Preferred or Certified

11 Lenders for participation as a lender in the low docu12 mentation loan program no later than 90 days after

13 the date of enactment of this subsection.

14 ‘‘(D) AUTHORITY LIQUIDATE LOANS.—

15 ‘‘(i) IN GENERAL.—Lenders participating

16 in the Certified Lenders Program shall have au17 thority to liquidate loans made with a guarantee

18 from the Administration.

19 ‘‘(ii) APPROVAL.—The Administrator has

20 the authority to require a certified lender to re21 quest approval of a routine liquidation activity,

22 and if the Administrator does not approve or

23 deny a request made by a certified lender within

24 a period of 3 business days, such request shall be

25 deemed to be approved.
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1 ‘‘(E) LOW DOCUMENTATION LOAN PROGRAM SUB2 SIDY RATE.—The Administrator shall with the assist3 ance of the Director of the Office of Management and

4 Budget establish and monitor, on an annual basis,

5 the subsidy rate for the low documentation loan pro6 gram, independently of other loans authorized by this

7 section.’’.

8 (c) LIMITATION ON CONDUCTING PILOT PROJECTS.—

9 Section 7(a) (15 U.S.C. 636(a)) is amended by adding at

10 the end the following new paragraph:

11 ‘‘(25) LIMITATION ON CONDUCTING PILOT

12 PROJECTS.—

13 ‘‘(A) IN GENERAL.—Not more than 10 per14 cent of the total number of loans guaranteed in

15 any fiscal year under this subsection may be

16 awarded as part of a pilot program which is

17 commenced by the Administrator on or after Oc18 tober 1, 1996.

19 ‘‘(B) PILOT PROGRAM DEFINED.—In this

20 paragraph, the term ‘pilot program’ means any

21 lending program initiative, project, innovation,

22 or other activity not specifically authorized by

23 law.’’.

24 (d) SECURITIZATION OF UNGUARANTEED PORTIONS

25 OF SBA LOANS.—Section 5(f)(3) (15 U.S.C. 634(f)(3)) is
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1 amended by adding at the end the following: ‘‘The Adminis2 tration may not prohibit a lender from securitizing the non3 guaranteed portion of any loan made under section 7(a).

4 In order to reduce the risk of loss to the government in the

5 event of default, the Administration shall require all lenders

6 securitizing, or requesting Administration approval for the

7 securitization of the nonguaranteed portion of any loan

8 after August 1, 1996, to retain exposure of up to 10 percent

9 of the amount of the loan, which percentage shall be appli10 cable uniformly to both depository institutions and other

11 lenders.’’.

12 (e) CONDITIONS ON PURCHASE OF LOANS.—

13 (1) SERVICING FEE.—Section 5(g)(5) (15 U.S.C.

14 634(g)(5)) is amended by adding at the end the fol15 lowing:

16 ‘‘(C) In the event the Administration pays a claim

17 under a guarantee issued under this Act, the servicing fees

18 paid to the lender from the earliest date of default to the

19 date of payment of the claim shall be no more than the

20 agreed upon rate, minus one percent.’’.

21 (2) PAYMENT OF ACCRUED INTEREST.—Section

22 7(a)(17) is amended—

23 (A) by striking ‘‘(17) The Administration’’

24 and inserting ‘‘(17)(A) The Administration’’;

25 and
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1 (B) by adding at the end the following:

2 ‘‘(B) Any bank or other lending institution mak3 ing a claim for payment on the guaranteed portion

4 of a loan made under this subsection shall be paid the

5 accrued interest due on the loan from the earliest date

6 of default to the date of payment of the claim at a

7 rate not to exceed the rate of interest on the loan on

8 the date of default, minus one percent.’’.

9 (f) PLAN FOR TRANSFER OF LOAN SERVICING FUNC10 TIONS TO CENTRALIZED CENTERS.—

11 (1) IMPLEMENTATION PLAN REQUIRED.—The

12 Administrator of the Small Business Administration

13 shall submit a detailed plan for consolidating, in one

14 or more centralized centers, the performance of the

15 various functions relating to the servicing of loans di16 rectly made or guaranteed by the Administration

17 pursuant to the Small Business Act, addressing the

18 matters described in paragraph (2) by the deadline

19 specified in paragraph (3).

20 (2) CONTENTS OF PLAN.—In addition to such

21 other matters as the Administrator may deem appro22 priate, the plan required by paragraph (1) shall in23 clude—

24 (A) the proposed number and location of

25 such centralized loan processing centers;
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1 (B) the proposed workload (identified by

2 type and numbers of loans and their geographic

3 origin by the Small Business Administration

4 district office) and staffing of each such center;

5 (C) a detailed, time-phased plan for the

6 transfer of the identified loan servicing functions

7 to each proposed center; and

8 (D) any identified impediments to the time9 ly execution of the proposed plan (including ade10 quacy of available financial resources, availabil11 ity of needed personnel, facilities, and related

12 equipment) and the Administrator’s rec13 ommendations for addressing such impediments.

14 (3) DEADLINE FOR SUBMISSION.—The plan re15 quired by paragraph (1) shall be submitted to the

16 Committees on the Small Business of the House of

17 Representatives and Senate not later than February

18 28, 1997.

19 (g) PREFERRED LENDER STANDARD REVIEW PRO20 GRAM.—Not later than 60 days after the date of enactment

21 of this Act, the Administrator shall issue a request for pro22 posals regarding the standard review program for the Pre23 ferred Lender Program established by section 5(b)(7) of the

24 Small Business Act (15 U.S.C. 634(b)(7)). The Adminis-
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1 trator shall require such standard review for each new en2 trant to the Preferred Lender Program.

3 (h) INDEPENDENT STUDY OF LOAN PROGRAMS.—

4 (1) STUDY REQUIRED.—The Administrator shall

5 conduct a comprehensive assessment of the perform6 ance of the loan programs authorized by section 7(a)

7 of the Small Business Act (15 U.S.C. 636(a)) and

8 title V of the Small Business Investment Act of 1958

9 (15 U.S.C. 661) addressing the matters described in

10 paragraph (2) and resulting in a report to Congress

11 pursuant to paragraph (5).

12 (2) MATTERS TO BE ASSESSED.—In addition to

13 such other matters as the Administrator considers ap14 propriate, the assessment required by paragraph (1)

15 shall address, with respect to each loan program de16 scribed in paragraph (1) for each of the fiscal years

17 described in paragraph (3)—

18 (A) the number and frequency of deferrals

19 and defaults;

20 (B) default rates;

21 (C) comparative loss rates, by—

22 (i) type of lender (separately address23 ing preferred lenders, certified lenders, and

24 general participation lenders);

25 (ii) term of the loan; and
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1 (iii) dollar value of the loan at dis2 bursement; and

3 (D) the economic models used by the Office

4 of Management and Budget to calculate the cred5 it subsidy rate applicable to the loan programs.

6 (3) PERIOD OF ASSESSMENT.—The assessments

7 undertaken pursuant to paragraph (2) shall address

8 data for the period beginning with the first full fiscal

9 year of the implementation of each loan program de10 scribed in paragraph (1) through fiscal year 1995.

11 (4) PERFORMANCE BY THE PRIVATE SECTOR.—

12 (A) CONTRACTOR PERFORMANCE.—A pri13 vate sector contractor shall be used by the Ad14 ministrator to conduct the assessment required

15 by paragraph (1) and to prepare the report to

16 Congress required by paragraph (3).

17 (B) SOLICITATION AND AWARD.—The con18 tract shall be awarded pursuant to a solicitation

19 issued not later than 60 days after the date of

20 the enactment of this Act, which shall provide for

21 full and open competition. The Administrator

22 shall make every reasonable effort to award the

23 contract not later that 60 days after the date

24 specified in the solicitation for receipt of propos25 als.
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1 (C) ACCESS TO INFORMATION.—The Admin2 istrator shall provide to the contractor access to

3 any information collected by or available to the

4 Administration with regard to the loan pro5 grams being assessed. The contractor shall pre6 serve the confidentiality of any information for

7 which confidentiality is protected by law or

8 properly asserted by the person submitting such

9 information.

10 (D) CONTRACT FUNDING.—The Adminis11 trator shall fund the cost of the contract from the

12 amounts appropriated for the salaries and ex13 penses of the Administration for fiscal year

14 1997.

15 (5) REPORT TO CONGRESS.—

16 (A) CONTENTS.—The contractor shall sub17 mit a report of—

18 (i) its analyses of the matters to be as19 sessed pursuant to paragraph (2); and

20 (ii) its independent recommendations,

21 with respect to each loan program, regard22 ing—

23 (I) improving the Administra24 tion’s timely collection and subsequent

25 management of data to measure the
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1 performance of each loan program de2 scribed in paragraph (1); and

3 (II) reducing loss rates for each

4 such loan program.

5 (B) SUBMISSION BY CONTRACTOR.—The

6 contractor shall submit the report required by

7 subparagraph (A) not later than 6 months after

8 the date of the contract award.

9 (C) SUBMISSION TO CONGRESS.—The Ad10 ministrator shall submit the report received from

11 the contractor pursuant to subparagraph (B) to

12 the Committees on Small Business of the House

13 of Representatives and the Senate within 30

14 days of receipt of the report. The Administrator

15 shall append his comments, and those of the Of16 fice of Management and Budget, if any, to the

17 report.

18 (i) GENERAL ACCOUNTING OFFICE STUDY.—

19 (1) IN GENERAL.—The General Accounting Of20 fice shall conduct a comparison of the cost of liquida21 tion for—

22 (A) loans guaranteed under the Preferred

23 Lenders Program that are authorized by section

24 7(a) of the Small Business Act (15 U.S.C.

25 636(a)) and liquidated by the Preferred Lenders;
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1 (B) loans made and liquidated by, Preferred

2 Lenders, but not guaranteed under the authority

3 in section 7(a); and

4 (C) loans guaranteed by the Small Business

5 Administration under the authority in section

6 7(a) and liquidated by the Administration, tak7 ing into account all of the related costs incurred

8 by the Federal Government.

9 (2) REPORT.—Not later than 9 months after the

10 date of enactment of this Act the General Accounting

11 Office shall deliver the results of the study to the Com12 mittees on Small Business of the House and Senate.

13 SEC. 104. DISASTER LOAN PROGRAM.

14 (a) INTEREST RATE.—Section 7(c) (15 U.S.C. 636(c))

15 is amended by redesignating paragraphs (6) and (7) as

16 paragraphs (8) and (9), respectively, and by inserting after

17 paragraph (5) the following:

18 ‘‘(6) DISASTERS COMMENCING AFTER OCTOBER 1,

19 1996.—Notwithstanding any other provision of law,

20 the interest rate on the Federal share of any loan

21 made under subsection (b)(1) and (b)(2) on account

22 of a disaster commencing on or after October 1, 1996,

23 shall be in the case of a homeowner, or business, or

24 other concern, including agricultural cooperatives,

25 unable to obtain credit elsewhere, at the rate pre-
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scribed by the Administration but not more than 3 1 ⁄4

2 of the rate determined by the Secretary of the Treas3 ury, taking into consideration the current average

4 market yield on outstanding marketable obligations of

5 the United States with remaining periods to maturity

6 comparable to the average maturities of such loans

7 plus an additional charge of not to exceed 1 percent

8 per annum as determined by the Administrator, and

adjusted to the nearest 1 9 ⁄8 of 1 percent.

10 ‘‘(7) LIABILITY.—Whoever wrongfully misapplies

11 the proceeds of a loan under subsection (b) shall be

12 liable to the Administrator in an amount equal to

11 13 ⁄2 times the original principal amount of the loan.’’.

14 (b) PRIVATE SECTOR LOAN SERVICING DEMONSTRA15 TION PROGRAM.—

16 (1)(A) DEMONSTRATION PROGRAM REQUIRED.—

17 The Administration shall conduct a demonstration

18 program, within the parameters described in para19 graph (2), to evaluate the comparative costs and bene20 fits of having the Administration’s portfolio of disas21 ter loans serviced under contract rather than directly

22 by employees of the Administration.

23 (B) INITIATION DATE.—Not later than 90 days

24 after the date of enactment of this Act, the Adminis-
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1 tration shall issue a request for proposals for the pro2 gram parameters described in paragraph (2).

3 (2) DEMONSTRATION PROGRAM PARAMETERS.—

4 (A) LOAN SAMPLE.—The sample of loans for

5 the demonstration program shall be randomly

6 drawn from the Administration’s portfolio of

7 loans made pursuant to section 7(b) of the Small

8 Business Act and include 20,000 loans for resi9 dential properties and 5,000 loans for commer10 cial properties.

11 (B) CONTRACT AND OPTIONS.—The Admin12 istration shall solicit and competitively award

13 one or more contracts to service the loans in14 cluded in the sample of loans described in sub15 paragraph (A) for a term of 2 years with 5 2-

16 year options, each to be awarded subject to sub17 paragraph (C).

18 (C) ASSESSMENTS OF PERFORMANCE.—

19 Prior to award of any contract option, the Ad20 ministration shall assess the costs and perform21 ance of each contractor and compare such costs

22 and such performance to the costs and perform23 ance of servicing disaster loans by employees of

24 the Administration. The Administrator shall not

25 exercise a contract option if the cost of perform-
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1 ance of the loan servicing by the contractor ex2 ceeds the cost of performance of the loan servic3 ing by employees of the Administration. The Ad4 ministrator may terminate the contract during

5 its initial term (or any subsequent option pe6 riod), based upon performance and cost criteria

7 specified in the solicitation and included in the

8 contract.

9 (D) DISPOSITION OF GOVERNMENT FUR10 NISHED PROPERTY.—The contract shall require

11 the contractor to—

12 (i) maintain the confidentiality of the

13 loan files furnished by the Administration;

14 and

15 (ii) return such loan files and other

16 Government-furnished property within a

17 specified period after expiration (or termi18 nation) of the contract.

19 (3) TERM OF DEMONSTRATION PROGRAM.—

20 (A) IN GENERAL.—The demonstration pro21 gram required by paragraph (1) shall commence

22 on the first day of the first fiscal year quarter

23 after the award of the contract and continue

24 through the last day of the fiscal year quarter at
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1 the expiration of the 2-year contract period or

2 any subsequent contract option.

3 (B) EARLY TERMINATION.—If the Adminis4 trator terminates each contract pursuant to

5 paragraph (2)(C), the demonstration program

6 shall end on the effective date of such termi7 nation.

8 (4) REPORTS.—

9 (A) INTERIM REPORTS.—The Administrator

10 shall submit to the Committees on Small Busi11 ness of the House of Representatives and Senate

12 interim reports on the conduct of the demonstra13 tion program not later than 60 days prior to the

14 expiration of the initial 2-year contract perform15 ance period, each subsequent option period, or

16 termination of a contract. The contractor shall

17 be afforded a reasonable opportunity to attach

18 comments to each such report.

19 (B) FINAL REPORT.—The Administrator

20 shall submit to the Committees on Small Busi21 ness of the House of Representatives and Senate

22 a final report within 120 days of the termi23 nation of the demonstration program.

24 (c) DEFINITION OF DISASTER.—(1) Section 3(k) (15

25 U.S.C. 632(k)) is amended by striking ‘‘ocean conditions’’
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1 and inserting ‘‘ocean conditions, or government action (reg2 ulatory or otherwise)’’.

3 (2) For the purposes of this Act this amendment shall

4 be considered effective with respect to any disaster occurring

5 on or after March 1, 1994.

6 SEC. 105. MICROLOAN DEMONSTRATION PROGRAM.

7 (a) TECHNICAL ASSISTANCE GRANT REQUIRE8 MENTS.—Section 7(m)(4) (15 U.S.C. 636(m)(4)) is amend9 ed—

10 (1) in subparagraph (A) by striking ‘‘25 per11 cent’’ and inserting ‘‘20 percent’’; and

12 (2) in subparagraph (B) by striking ‘‘25 per13 cent’’ and inserting ‘‘35 percent’’.

14 (b) IMPLEMENTATION OF GUARANTEED MICROLOAN

15 PILOT PROGRAM.—

16 (1) ACTION REQUIRED.—The Administrator

17 shall implement or submit a detailed report explain18 ing the impediments to the implementation of a

19 Guaranteed Microloan Pilot Program pursuant to

20 section 7(m)(12) (15 U.S.C. 636(m)(12)) addressing

21 the matters described in paragraph (2) by the dead22 line specified in paragraph (3).

23 (2) CONTENTS OF IMPLEMENTATION REPORT.—

24 In addition to such other matters as the Adminis25 trator may deem appropriate, the plan required by
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1 paragraph (1) shall include any identified impedi2 ments to implementation of a Guaranteed Microloan

3 Pilot Program that, in the opinion of the Adminis4 trator, require amendments to the program’s author5 izing legislation, and if such impediments are identi6 fied, includes recommendations for such statutory

7 changes.

8 (3) DEADLINE FOR SUBMISSION.—The plan re9 quired by paragraph (2) shall be submitted to the

10 Committees on Small Business of the House of Rep11 resentatives and Senate not later than December 1,

12 1996.

13 (c) LIMITATION ON FUNDING.—In the event that the

14 Administrator shall fail to submit the report required by

15 subsection (b)(1) by the deadline specified in subsection

16 (b)(3), none of the amounts appropriated to carry out the

17 Microloan Program authorized by section 7(m)(12) of the

18 Small Business Act (15 U.S.C. 636(m)(12)) during fiscal

19 year 1997 may be expended until such time as the pilot

20 program is implemented or the report is submitted.

21 SEC. 106. SMALL BUSINESS DEVELOPMENT CENTER PRO22 GRAM.

23 (a) ASSOCIATE ADMINISTRATOR FOR SMALL BUSINESS

24 DEVELOPMENT CENTERS.—
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1 (1) DUTIES.—Section 21(h) (15 U.S.C. 648(h))

2 is amended to read as follows:

3 ‘‘(h) ASSOCIATE ADMINISTRATOR FOR SMALL BUSI4 NESS DEVELOPMENT CENTERS.—

5 ‘‘(1) APPOINTMENT AND COMPENSATION.—The

6 Administrator shall appoint an Associate Adminis7 trator for Small Business Development Centers who

8 shall report to an official who is not more than one

9 level below the Office of the Administrator and who

10 shall serve without regard to the provisions of title 5

11 governing appointments in the competitive service,

12 and without regard to chapter 51, and subchapter III

13 of chapter 53 of such title relating to classification

14 and General Schedule pay rates, but at a rate not less

15 than the rate of GS17 of the General Schedule.

16 ‘‘(2) DUTIES.—

17 ‘‘(A) IN GENERAL.—The sole responsibility

18 of the Associate Administrator for Small Busi19 ness Development Centers shall be to administer

20 the small business development center program.

21 Duties of the position shall include, but are not

22 limited to, recommending the annual program

23 budget, reviewing the annual budgets submitted

24 by each applicant, establishing appropriate

25 funding levels therefore, selecting applicants to
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1 participate in this program, implementing the

2 provisions of this section, maintaining a clear3 inghouse to provide for the dissemination and

4 exchange of information between small business

5 development centers and conducting audits of re6 cipients of grants under this section.

7 ‘‘(B) CONSULTATION REQUIREMENTS.—In

8 carrying out the duties described in this sub9 section, the Associate Administrator shall confer

10 with and seek the advice of the Board established

11 by subsection (i) and Administration officials in

12 areas served by the small business development

13 centers; however, the Associate Administrator

14 shall be responsible for the management and ad15 ministration of the program and shall not be

16 subject to the approval or concurrence of such

17 Administration officials.’’.

18 (2) REFERENCES TO ASSOCIATE ADMINIS19 TRATOR.—Section 21 (15 U.S.C. 648) is amended—

20 (A) in subsection (c)(7) by striking ‘‘Deputy

21 Associate Administrator of the Small Business

22 Development Center program’’ and inserting

23 ‘‘Associate Administrator for Small Business De24 velopment Centers’’; and
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1 (B) in subsection (i)(2) by striking ‘‘Deputy

2 Associate Administrator for Management Assist3 ance’’ and inserting ‘‘Associate Administrator

4 for Small Business Development Centers’’.

5 (b) EXTENSION OR RENEWAL OF COOPERATIVE

6 AGREEMENTS.—Section 21(k)(3) (15 U.S.C. 648(k)(3)) is

7 amended to read as follows:

8 ‘‘(3) EXTENSION OR RENEWAL OF COOPERATIVE

9 AGREEMENTS.—

10 ‘‘(A) IN GENERAL.—In extending or renew11 ing a cooperative agreement of a small business

12 development center, the Administration shall

13 consider the results of the examination and cer14 tification program conducted pursuant to para15 graphs (1) and (2).

16 ‘‘(B) CERTIFICATION REQUIREMENT.—After

17 September 30, 2000, the Administration may not

18 renew or extend any cooperative agreement with

19 a small business development center unless the

20 center has been approved under the certification

21 program conducted pursuant to this subsection;

22 except that the Associate Administrator for

23 Small Business Development Centers may waive

24 such certification requirement, in the discretion

25 of the Associate Administrator, upon a showing
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1 that the center is making a good faith effort to

2 obtain certification.’’.

3 (c) TECHNICAL CORRECTION.—Section 21(l) (15

4 U.S.C. 648(l)) is amended to read as follows:

5 ‘‘(l) CONTRACT AUTHORITY.—The authority to enter

6 into contracts shall be in effect for each fiscal year only

7 to the extent and in the amounts as are provided in advance

8 in appropriations Acts. After the administration has en9 tered a contract, either as a grant or a cooperative agree10 ment, with any applicant under this section, it shall not

11 suspend, terminate, or fail to renew or extend any such con12 tract unless the Administration provides the applicant with

13 written notification setting forth the reasons therefore and

14 affording the applicant an opportunity for a hearing, ap15 peal, or other administrative proceeding under the provi16 sions of chapter 5 of title 5, United States Code.’’.

17 SEC. 107. MISCELLANEOUS AUTHORITIES TO PROVIDE

18 LOANS AND OTHER FINANCIAL ASSISTANCE.

19 (a) FUNDING LIMITATION; SEMINARS.—Section 7(d)

20 (15 U.S.C. 636(d)) is amended—

21 (1) by striking ‘‘(d)(1)’’ and inserting ‘‘(d)’’; and

22 (2) by striking paragraph (2).

23 (b) TRADE ADJUSTMENT LOANS.—Section 7(e) (15

24 U.S.C. 636(e)) is amended to read as follows:

25 ‘‘(e) ƒRESERVED≈.’’.
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1 (c) WAIVER OF CREDIT ELSEWHERE TEST FOR COL2 LEGES AND UNIVERSITIES.—Section 7(f) (15 U.S.C. 636(f))

3 is amended to read as follows:

4 ‘‘(f) ƒRESERVED≈.’’.

5 (d) LOANS TO SMALL BUSINESS CONCERNS FOR

6 SOLAR ENERGY AND ENERGY CONSERVATION MEAS7 URES.—Section 7(l) (15 U.S.C. 636(l)) is amended to read

8 as follows:

9 ‘‘(l) ƒRESERVED≈.’’.

10 SEC. 108. SMALL BUSINESS COMPETITIVENESS DEM11 ONSTRATION PROGRAM.

12 (a) EXTENSION OF DEMONSTRATION PROGRAM.—Sec13 tion 711(c) of the Small Business Competitiveness Dem14 onstration Program Act of 1988 (15 U.S.C. 644 note; 102

15 Stat. 3890) is amended by striking ‘‘September 30, 1996’’

16 and inserting ‘‘September 30, 2000’’.

17 (b) REPORTING OF SUBCONTRACT PARTICIPATION IN

18 CONTRACTS FOR ARCHITECTURAL AND ENGINEERING

19 SERVICES.—Section 714(b)(5) of the Small Business Com20 petitiveness Demonstration Program Act of 1988 (15 U.S.C.

21 644 note; 102 Stat. 3892) is amended to read as follows:

22 ‘‘(5) DURATION.—The system described in sub23 section (a) shall be established not later than October

24 1, 1996 (or as soon as practicable thereafter on the
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1 first day of a subsequent quarter of fiscal year 1997),

2 and shall terminate on September 30, 2000.’’.

3 (c) REFERENCES TO ARCHITECTURAL AND ENGINEER4 ING SERVICES.—

5 (1) IN GENERAL.—The Small Business Competi6 tiveness Demonstration Program Act of 1988 (15

7 U.S.C. 644 note; 102 Stat. 3889 et seq.) is amended

8 in subsections (a)(3) and (d) by striking ‘‘surveying

9 and mapping’’ and inserting ‘‘surveying, mapping,

10 and landscape architecture’’.

11 (2) DESIGNATED INDUSTRY GROUPS.—Section

12 717(d) of the Small Business Competitiveness Dem13 onstration Program Act of 1988 (15 U.S.C. 644 note;

14 102 Stat. 3894) is amended by inserting ‘‘standard

15 industrial classification codes 0781 (if identified as

16 pertaining to architecture services),’’ after ‘‘(if identi17 fied as pertaining to mapping services),’’.

18 (d) REPORTS TO CONGRESS.—

19 (1) IN GENERAL.—Section 716 of the Small

20 Business Competitiveness Demonstration Program

21 Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3893) is

22 amended—

23 (A) in subsection (a), by striking ‘‘fiscal

24 year 1991 and 1995’’ and inserting ‘‘each of fis25 cal years 1991 through 1999’’;
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1 (B) in subsection (a), by striking ‘‘results’’

2 and inserting ‘‘cumulative results’’; and

3 (C) in subsection (c), by striking ‘‘1996’’

4 and inserting ‘‘1999’’.

5 (2) CUMULATIVE REPORT THROUGH FISCAL

6 YEAR 1995.—A cumulative report of the results of the

7 Small Business Competitiveness Demonstration Pro8 gram for fiscal years 1991 through 1995 shall be sub9 mitted not later than 60 days after the date of the en10 actment of this Act pursuant to section 716(a) of the

11 Small Business Competitiveness Demonstration Pro12 gram Act of 1988 (15 U.S.C. 644 note; 102 Stat.

13 3893), as amended by paragraph (1) of this sub14 section.

15 SEC. 109. AMENDMENT TO SMALL BUSINESS GUARANTEED

16 CREDIT ENHANCEMENT ACT OF 1993.

17 (a) Section 7 of the Small Business Guaranteed Credit

18 Enhancement Act of 1993 (Public Law 10381; 15 U.S.C.

19 634 note) is repealed effective September 29, 1996.

20 (b) CLERICAL AMENDMENT.—The table of contents for

21 the Small Business Guaranteed Credit Enhancement Act of

22 1993 (Public Law 103–81; 15 U.S.C. 631 note) is amended

23 by striking the item relating to section 7.

24 SEC. 110. 1998 AUTHORIZATIONS.

25 Section 20 (15 U.S.C. 631 note) is amended—
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1 (1) in subsection (p), by striking ‘‘authorized for

2 fiscal year 1997’’ and inserting ‘‘authorized for each

3 of fiscal years 1997 and 1998’’;

4 (2) by striking subsection (p)(3)(B) and by in5 serting the following:

6 ‘‘(B) $268,000,000 in guarantees of deben7 tures; and’’;

8 (3) in subsection (q)(1) by striking ‘‘fiscal year

9 1997’’ and inserting ‘‘each of fiscal years 1997 and

10 1998’’; and

11 (4) in subsection (q)(2) by striking ‘‘year 1997’’

12 and inserting ‘‘years 1997 and 1998’’.

13 SEC. 111. LEVEL OF PARTICIPATION FOR EXPORT WORKING

14 CAPITAL LOANS.

15 Section 7(a)(2) (15 U.S.C. 636(a)(2)) is amended by

16 adding at the end the following:

17 ‘‘(D) PARTICIPATION UNDER EXPORT WORK18 ING CAPITAL PROGRAM.—Notwithstanding sub19 paragraph (A), in an agreement to participate

20 in a loan on a deferred basis under the Export

21 Working Capital Program established pursuant

22 to paragraph (14)(A), such participation by the

23 Administration shall be equal to the rate speci24 fied under this paragraph as in effect on the day
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1 before the date of the enactment of the Small

2 Business Lending Enhancement Act of 1995.’’.

3 TITLE II—AMENDMENTS TO

4 SMALL BUSINESS INVEST5 MENT ACT

6 SEC. 201. REFERENCES.

7 Except as otherwise expressly provided, whenever in

8 this title an amendment or repeal is expressed in terms of

9 an amendment to, or repeal of, a section or other provision,

10 the reference shall be considered to be made to a section or

11 other provision of the Small Business Investment Act of

12 1958 (15 U.S.C. 661 et seq.).

13 SEC. 202. MODIFICATIONS TO DEVELOPMENT COMPANY DE14 BENTURE PROGRAM.

15 (a) DECREASED LOAN TO VALUE RATIOS.—Section

16 502(3) (15 U.S.C. 696(3)) is amended to read as follows:

17 ‘‘(3) CRITERIA FOR ASSISTANCE.—

18 ‘‘(A) IN GENERAL.—Any development com19 pany assisted under this section or section 503

20 of this title must meet the criteria established by

21 the Administration, including the extent of par22 ticipation to be required or amount of paid-in

23 capital to be used in each instance as is deter24 mined to be reasonable by the Administration.

25 ‘‘(B) COMMUNITY INJECTION FUNDS.—
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1 ‘‘(i) SOURCES OF FUNDS.—Community

2 injection funds may be derived, in whole or

3 in part, from—

4 ‘‘(I) State or local governments;

5 ‘‘(II) banks or other financial in6 stitutions;

7 ‘‘(III) foundations or other not8 for-profit institutions; or

9 ‘‘(IV) the small business concern

10 (or its owners, stockholders, or affili11 ates) receiving assistance through a

12 body authorized by this title.

13 ‘‘(ii) FUNDING FROM INSTITUTIONS.—

14 Not less than 50 percent of the total cost of

15 any project financed pursuant to clauses

16 (i), (ii), or (iii) of subparagraph (C) shall

17 come from the institutions described in sub18 clauses (I), (II), and (III) of clause (i).

19 ‘‘(C) FUNDING FROM A SMALL BUSINESS

20 CONCERN.—The small business concern (or its

21 owners, stockholders, or affiliates) receiving as22 sistance through a body authorized by this title

23 shall provide—

24 ‘‘(i) at least 15 percent of the total cost

25 of the project financed, if the small business
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1 concern has been in operation for a period

2 of 2 years or less;

3 ‘‘(ii) at least 15 percent of the total

4 cost of the project financed if the project in5 volves the construction of a limited or single

6 purpose building or structure;

7 ‘‘(iii) at least 20 percent of the total

8 cost of the project financed if the project in9 volves both of the conditions set forth in

10 clauses (i) and (ii); or

11 ‘‘(iv) at least 10 percent of the total

12 cost of the project financed, in all other cir13 cumstances, at the discretion of the develop14 ment company.’’.

15 (b) GUARANTEE FEE FOR DEVELOPMENT COMPANY

16 DEBENTURES.—Section 503(b)(7)(A) (15 U.S.C.

17 697(b)(7)(A)) is amended by striking ‘‘0.125 percent’’ and

18 inserting ‘‘0.8125 percent’’.

19 (c) FEES TO OFFSET SUBSIDY COST.—Section 503(d)

20 (15 U.S.C. 697(d)) is amended to read as follows:

21 ‘‘(d) CHARGES FOR ADMINISTRATION EXPENSES.—

22 ‘‘(1) LEVEL OF CHARGES.—The Administration

23 may impose an additional charge for administrative

24 expenses with respect to each debenture for which
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1 payment of principal and interest is guaranteed

2 under subsection (a).

3 ‘‘(2) PARTICIPATION FEE.—The Administration

4 shall also impose a one-time fee of 50 basis points on

5 the total participation in any project of any institu6 tion described in subclause (I), (II), or (III) of section

7 502(3)(B)(i). Such fee shall be imposed only when the

8 participation of the institution will occupy a senior

9 credit position to that of the development company.

10 Such fee shall be collected by the development com11 pany, forwarded to the Administration, and used to

12 offset the cost (as such term is defined in section 502

13 of the Credit Reform Act of 1990) to the Administra14 tion of making guarantees under subsection (a).

15 ‘‘(3) DEVELOPMENT COMPANY FEE.—The Ad16 ministration shall collect annually from each develop17 ment company a fee of 0.125 percent of the outstand18 ing principal balance of any guaranteed debenture

19 authorized by the Administration after September 30,

20 1996. Such fee shall be derived from the servicing fees

21 collected by the development company pursuant to

22 regulation, and shall not be derived from any addi23 tional fees imposed on small business concerns. All

24 proceeds of the fee shall be used to offset the cost (as

25 such term is defined in section 502 of the Credit Re-
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1 form Act of 1990) to the Administration of making

2 guarantees under subsection (a).’’.

3 (d) EFFECTIVE DATE.—Section 503 (15 U.S.C. 697)

4 is amended by adding at the end the following:

5 ‘‘(f) EFFECTIVE DATE.—The fees authorized by sub6 sections (b) and (c) shall apply to financings approved by

7 the Administration on or after October 1, 1996, but shall

8 not apply to financings approved by the Administration

9 on or after October 1, 1997.’’.

10 SEC. 203. REQUIRED ACTIONS UPON DEFAULT.

11 Section 503 (15 U.S.C. 697) is amended by adding

12 at the end the following:

13 ‘‘(g) REQUIRED ACTIONS UPON DEFAULT.—

14 ‘‘(1) DEADLINES.—

15 ‘‘(A) INITIAL ACTIONS.—Not later than the

16 45th day after the date on which a payment on

17 a loan funded through a debenture guaranteed

18 under this section is due and not received, the

19 Administration shall—

20 ‘‘(i) take all necessary steps to bring

21 such a loan current; or

22 ‘‘(ii) implement a formal written defer23 ral agreement.

24 ‘‘(B) PURCHASE OR ACCELERATION OF DE25 BENTURE.—Not later than the 65th day after the
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1 date on which a payment on a loan described in

2 subparagraph (A) is due and not received, and

3 absent a formal written deferral agreement, the

4 Administration shall take all necessary steps to

5 purchase or accelerate the debenture.

6 ‘‘(2) PREPAYMENT PENALTIES.—The Adminis7 tration shall, with respect to the portion of any

8 project derived from funds set forth in section

9 502(3)—

10 ‘‘(A) negotiate the elimination of any pre11 payment penalties or late fees on defaulted loans

12 made prior to September 30, 1996;

13 ‘‘(B) decline to pay any prepayment pen14 alty or late fee on the default based purchase of

15 loans issued after September 30, 1996; and

16 ‘‘(C) for any project financed after Septem17 ber 30, 1996, decline to pay any default interest

18 rate higher than the interest rate on the note

19 prior to the date of default.’’.

20 SEC. 204. LOAN LIQUIDATION PILOT PROGRAM.

21 (a) IN GENERAL.—The Administrator shall carry out

22 a loan liquidation pilot program (in this section referred

23 to as the ‘‘pilot program’’) in accordance with the require24 ments of this section.
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1 (b) SELECTION OF DEVELOPMENT COMPANIES.—Not

2 later than 90 days after the date of the enactment of this

3 Act, the Administrator shall allow not less than 15 develop4 ment companies authorized to make loans and issue deben5 tures under title V of the Small Business Investment Act

6 of 1958 to participate in the pilot program. The develop7 ment companies admitted shall agree not to take any action

8 that would create a potential conflict of interest involving

9 the development company, the third party lender, or an as10 sociate of the third party lender. In order to qualify to par11 ticipate in the pilot, each development company shall—

12 (1) have a minimum of 6 years experience in the

13 program established by such title V;

14 (2) have made, during the last 6 fiscal years, an

15 average of 10 loans per year through the program es16 tablished by such title V; and

17 (3) have a minimum of 2 years experience, either

18 independently or through an agent, in liquidating

19 loans under the authority of a Federal, State, or other

20 lending program.

21 (c) AUTHORITY OF DEVELOPMENT COMPANIES.—The

22 development companies selected under subsection (b) shall,

23 for all loans in their portfolio of loans made through deben24 tures guaranteed under title V of the Small Business Invest-
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1 ment Act of 1958 that are in default after the date of enact2 ment of this Act, be authorized to—

3 (1) perform all liquidation and foreclosure func4 tions, including the acceleration or purchase of com5 munity injection funds; and

6 (2) liquidate such loans in a reasonable and

7 sound manner and according to commercially accept8 ed practices.

9 (d) AUTHORITY OF THE ADMINISTRATOR.—In carry10 ing out the pilot program, the Administrator shall—

11 (1) have full authority to deny participation in

12 the pilot program or rescind the authority granted

13 any development company under this section upon a

14 10-day written notice stating the reasons for the de15 nial or rescission; and

16 (2) implement the pilot program no later than

17 90 days after the admission of the development com18 panies specified in subsection (b).

19 (e) REPORT.—

20 (1) IN GENERAL.—The Administrator shall issue

21 a report on the results of the pilot program to the

22 Committees on Small Business of the House of Rep23 resentatives and the Senate. The report shall include

24 information relating to—
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1 (A) the total dollar amount of each loan

2 and project liquidated;

3 (B) the total dollar amount guaranteed by

4 the Administration;

5 (C) total dollar losses;

6 (D) total recoveries both as percentage of the

7 amount guaranteed and the total cost of the

8 project; and

9 (E) a comparison of the pilot program in10 formation with the same information for liquida11 tion conducted outside the pilot program over the

12 period of time.

13 (2) REPORTING PERIOD.—The report shall be

14 based on data from, and issued not later than 90

15 days after the close of, the first eight 8 fiscal quarters

16 of the pilot program’s operation after the date of im17 plementation.

18 SEC. 205. REGISTRATION OF CERTIFICATES.

19 (a) CERTIFICATES SOLD PURSUANT TO SMALL BUSI20 NESS ACT.—Section 5(h) of the Small Business Act (15

21 U.S.C. 634(h)) is amended—

22 (1) by redesignating paragraphs (1) through (4)

23 as subparagraphs (A) through (D);

24 (2) by striking ‘‘(h)’’ and inserting ‘‘(h)(1)’’;
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1 (3) by striking subparagraph (A), as redesig2 nated by paragraph (1) of this subsection, and insert3 ing the following:

4 ‘‘(A) provide for a central registration of all

5 loans and trust certificates sold pursuant to sub6 sections (f) and (g) of this section;’’; and

7 (4) by adding at the end the following:

8 ‘‘(2) Nothing in this subsection shall prohibit the utili9 zation of a book-entry or other electronic form of registra10 tion for trust certificates. The Administration may, with

11 the consent of the Secretary of the Treasury, use the book12 entry system of the Federal Reserve System.’’.

13 (b) CERTIFICATES SOLD PURSUANT TO SMALL BUSI14 NESS INVESTMENT COMPANY PROGRAM.—Section 321(f)

15 (15 U.S.C. 6871(f)) is amended—

16 (1) in paragraph (1) by striking ‘‘Such central

17 registration shall include’’ and all that follows

18 through the period at the end of the paragraph; and

19 (2) by adding at the end the following:

20 ‘‘(5) Nothing in this subsection shall prohibit the use

21 of a book-entry or other electronic form of registration for

22 trust certificates.’’.

23 (c) CERTIFICATES SOLD PURSUANT TO DEVELOPMENT

24 COMPANY PROGRAM.—Section 505(f) (15 U.S.C. 697b(f)) is

25 amended—
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1 (1) by redesignating paragraphs (1) through (4)

2 as subparagraphs (A) through (D);

3 (2) by striking ‘‘(f)’’ and inserting ‘‘(f)(1)’’;

4 (3) by striking subparagraph (A), as redesig5 nated by paragraph (1) of this subsection, and insert6 ing the following:

7 ‘‘(A) provide for a central registration of all

8 trust certificates sold pursuant to this section;’’ and

9 (4) by adding at the end the following:

10 ‘‘(2) Nothing in this subsection shall prohibit the utili11 zation of a book-entry or other electronic form of registra12 tion for trust certificates.’’.

13 SEC. 206. PREFERRED SURETY BOND GUARANTEE PRO14 GRAM.

15 (a) ADMISSIONS OF ADDITIONAL PROGRAM PARTICI16 PANTS.—Section 411(a) (15 U.S.C. 694(a)) is amended by

17 adding a new paragraph (5), as follows:

18 ‘‘(5)(A) The Administration shall promptly act upon

19 an application from a surety to participate in the Preferred

20 Surety Bond Guarantee Program, authorized by paragraph

21 (3), in accordance with criteria and procedures established

22 in regulations pursuant to subsection (d).

23 ‘‘(B) The Administration is authorized to reduce the

24 allotment of bond guarantee authority or terminate the par25 ticipation of a surety in the Preferred Surety Bond Guar-
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1 antee Program based on the rate of participation of such

2 surety during the 4 most recent fiscal year quarters com3 pared to the median rate of participation by the other sure4 ties in the program.’’.

5 (b) EFFECTIVE DATE.—The amendments made by sub6 section (a) shall apply with respect to applications received

7 (or pending substantive evaluation) on or after October 1,

8 1995.