I

105TH CONGRESS

1ST SESSION H. R. 974

To amend title 10, United States Code, to restore the Department of Defense

loan guarantee program for small and medium-sized business concerns

that are economically dependent on defense expenditures.

IN THE HOUSE OF REPRESENTATIVES

MARCH 6, 1997

Mr. FORBES (for himself and Mrs. MCCARTHY of New York) introduced the

following bill; which was referred to the Committee on National Security

A BILL

To amend title 10, United States Code, to restore the Department of Defense loan guarantee program for small

and medium-sized business concerns that are economically dependent on defense expenditures.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. RESTORATION OF LOAN GUARANTEE PRO4 GRAM FOR DEFENSE DEPENDENT SMALL

5 AND MEDIUM-SIZED BUSINESS CONCERNS.

6 (a) DELTA LOAN GUARANTEE PROGRAM.—(1)

7 Chapter 148 of title 10, United States Code, is amended

8 by inserting before section 2525 the following new section:
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1 ‘‘§ 2524. Loan guarantees for defense dependent small

2 and medium-sized business concerns

3 ‘‘(a) LOAN GUARANTEES AUTHORIZED.—The Sec4 retary of Defense may provide support under this section

5 for programs sponsored by the Federal Government, re6 gional entities, States, local governments, and private enti7 ties and nonprofit organizations that assist small business

8 concerns and medium-sized business concerns that are

9 economically dependent on defense expenditures to acquire

10 dual-use capabilities through the provision of loan guaran11 tees to such business concerns under the terms and condi12 tions specified under this section and other applicable law.

13 ‘‘(b) TRANSFER OF ADMINISTRATION.—(1) The Sec14 retary of Defense may enter into a memorandum of under15 standing with the Administrator of the Small Business

16 Administration, the Administrator of the Economic Devel17 opment Administration of the Department of Commerce,

18 or the head of any other Federal agency having expertise

19 regarding the provision of loan guarantees, under which

20 the agency may—

21 ‘‘(A) process applications for loan guarantees

22 under this section;

23 ‘‘(B) guarantee repayment of the resulting

24 loans; and
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1 ‘‘(C) provide any other services to the Secretary

2 to administer the loan guarantee program under this

3 section.

4 ‘‘(2) From funds made available for the loan guaran5 tee program under this section, the Secretary of Defense

6 may transfer to the agency or agencies that are parties

7 to the memorandum of understanding such sums as may

8 be necessary for the agency or agencies to carry out activi9 ties under the loan guarantee program.

10 ‘‘(3) The Secretary of Defense shall enter into the

11 memorandum of understanding authorized by paragraph

12 (1) within 60 days after the date of the enactment of this

13 section.

14 ‘‘(c) CONDITION ON OPERATION.—The Secretary

15 shall carry out the loan guarantee program authorized

16 under this section during any fiscal year for which funds

17 are specifically made available to cover the costs of loan

18 guarantees to be issued pursuant to such section.

19 ‘‘(d) SPECIAL REQUIREMENTS REGARDING LOAN

20 GUARANTEES.—(1) Competitive procedures shall be used

21 in the selection of small business concerns and medium22 sized business concerns to receive loan guarantees under

23 this section.
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1 ‘‘(2) The criteria used for the selection of a small

2 business concern or medium-sized business concern to re3 ceive a loan guarantee under this section shall include the

4 following:

5 ‘‘(A) The extent to which the loans to be guar6 anteed would support the retention of defense work7 ers whose employment would otherwise be perma8 nently or temporarily terminated as a result of re9 ductions in expenditures by the United States for

10 defense, the termination or cancellation of a defense

11 contract, the failure to proceed with an approved

12 major weapon system, the merger or consolidation of

13 the operations of a defense contractor, or the closure

14 or realignment of a military installation.

15 ‘‘(B) The extent to which the loans to be guar16 anteed would stimulate job creation and new eco17 nomic activities in communities most adversely af18 fected by reductions in expenditures by the United

19 States for defense, the termination or cancellation of

20 a defense contract, the failure to proceed with an ap21 proved major weapon system, the merger or consoli22 dation of the operations of a defense contractor, or

23 the closure or realignment of a military installation.

24 ‘‘(C) The extent to which the loans to be guar25 anteed would be used to acquire (or permit the use
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1 of other funds to acquire) capital equipment to mod2 ernize or expand the facilities of the borrower to en3 able the borrower to remain in the national tech4 nology and industrial base available to the Depart5 ment of Defense.

6 ‘‘(3) Except as provided in paragraph (4), to be eligi7 ble for a loan guarantee under this section, a borrower

8 must demonstrate to the satisfaction of the Secretary that,

9 during any one of the seven preceding operating years of

10 the borrower, at least 25 percent of the value of the bor11 rower’s sales were derived from—

12 ‘‘(A) contracts with the Department of Defense

13 or the defense-related activities of the Department of

14 Energy; or

15 ‘‘(B) subcontracts in support of defense-related

16 prime contracts.

17 ‘‘(4)(A) An individual described in subparagraph (B)

18 shall be eligible for a loan guarantee under this section

19 to establish, or acquire and operate, a small business con20 cern in an area that the Secretary determines is (or rea21 sonably can be expected to be) detrimentally affected by

22 reductions in defense spending, the termination or can23 cellation of a defense contract, the failure to proceed with
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1 an approved major weapon system, the merger or consoli2 dation of the operations of a defense contractor, or the

3 closure or realignment of a military installation.

4 ‘‘(B) An individual referred to in subparagraph (A)

5 is an individual—

6 ‘‘(i) who is a former employee of the Depart7 ment of Defense or a defense contractor; and

8 ‘‘(ii) whose employment was terminated as a re9 sult of reductions in defense spending, the termi10 nation or cancellation of a defense contract, the fail11 ure to proceed with an approved major weapon sys12 tem, the merger or consolidation of the operations of

13 a defense contractor, or the closure or realignment

14 of a military installation.

15 ‘‘(e) MAXIMUM AMOUNT OF LOAN PRINCIPAL.—The

16 maximum amount of loan principal for which the Sec17 retary may provide a guarantee under this section during

18 a fiscal year may not exceed—

19 ‘‘(1) $1,250,000, with respect to a small busi20 ness concern; and

21 ‘‘(2) $10,000,000 with respect to a medium22 sized business concern.

23 ‘‘(f) LOAN GUARANTY RATE.—The maximum allow24 able guarantee percentage for loans guaranteed under this

25 section may not exceed 90 percent.
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1 ‘‘(g) ALLOCATION OF FUNDS BETWEEN SMALL AND

2 MEDIUM BUSINESSES.—The total amount available for a

3 fiscal year to cover the costs of loan guarantees under this

4 section shall be divided between small business concerns

5 and medium-sized business concerns as follows:

6 ‘‘(A) 60 percent for small business concerns.

7 ‘‘(B) 40 percent for medium-sized business con8 cerns.

9 ‘‘(h) MEDIUM-SIZED BUSINESS CONCERN DE10 FINED.—In this section, the term ‘medium-sized business

11 concern’ means a business concern that is not more than

12 two times the maximum size specified by the Adminis13 trator of the Small Business Administration for purposes

14 of determining whether a business concern furnishing a

15 product or service is a small business concern.’’.

16 (2) The table of sections at the beginning of sub17 chapter IV of such chapter is amended by inserting before

18 the item relating to section 2525 the following new item:

‘‘2524. Loan guarantees for defense dependent small- and medium-sized business concerns.’’.

19 (b) CONTINUED AVAILABILITY OF EXISTING

20 FUNDS.—The funds made available under the second pro21 viso under the heading ‘‘RESEARCH, DEVELOPMENT,

22 TEST AND EVALUATION, DEFENSE-WIDE’’ in Public Law

23 103–335 (108 Stat. 2613) shall be available until Septem24 ber 30, 1999—
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1 (1) to cover the costs (as defined in section

2 502(5) of the Federal Credit Reform Act of 1990 (2

3 U.S.C. 661a(5))) of loan guarantees issued under

4 section 2524 of title 10, United States Code, as

5 added by subsection (a); and

6 (2) to cover the reasonable costs of the adminis7 tration of loan guarantees referred to in such sec8 tion.

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