II 

109TH CONGRESS 

1ST SESSION S. 416 

To establish a pilot program to provide low interest loans to nonprofit, 

community-based lending intermediaries, to provide midsize loans to small 

business concerns, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 17, 2005 

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

to the Committee on Small Business and Entrepreneurship 

A BILL 

To establish a pilot program to provide low interest loans 

to nonprofit, community-based lending intermediaries, to 

provide midsize loans to small business concerns, and 

for other purposes. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Small Business Inter5 mediary Lending Pilot Program Act of 2005’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 
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1 (1) Small and emerging businesses, particularly 

2 startups and businesses that lack sufficient or con3 ventional collateral, continue to face barriers access4 ing midsized loans in amounts between $35,000 and 

5 $200,000, with affordable terms and conditions. 

6 (2) Consolidation in the banking industry has 

7 resulted in a decrease in the number of small, locally 

8 controlled banks with not more than $100,000,000 

9 in assets and has changed the method by which 

10 banks make small business credit decisions with— 

11 (A) credit scoring techniques replacing re12 lationship-based lending, which often works to 

13 the disadvantage of small or startup businesses 

14 that do not conform with a bank’s standardized 

15 credit formulas; and 

16 (B) less flexible terms and conditions, 

17 which are often necessary for small and emerg18 ing businesses. 

19 (3) In the environment described in paragraphs 

20 (1) and (2), nonprofit intermediary lenders, includ21 ing community development corporations, provide fi22 nancial resources that supplement the small business 

23 lending and investments of a bank by— 

24 (A) providing riskier, up front, or subordi25 nated capital; 
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1 (B) offering flexible terms and under2 writing procedures; and 

3 (C) providing technical assistance to busi4 nesses in order to reduce the transaction costs 

5 and risk exposure of banks. 

6 (4) Several Federal programs, including the 

7 Microloan Program under section 7(m) of the Small 

8 Business Act (15 U.S.C. 636(m)) and the Inter9 mediary Relending Program of the Department of 

10 Agriculture, have demonstrated the effectiveness of 

11 working through nonprofit intermediaries to address 

12 the needs of small business concerns that are unable 

13 to access capital through conventional sources. 

14 (5) More than 1,000 nonprofit intermediary 

15 lenders in the United States are— 

16 (A) successfully providing financial and 

17 technical assistance to small and emerging busi18 nesses; 

19 (B) working with banks and other lenders 

20 to leverage additional capital for their business 

21 borrowers; and 

22 (C) creating employment opportunities for 

23 low income individuals through their lending 

24 and business development activities. 
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1 SEC. 3. SMALL BUSINESS INTERMEDIARY LENDING PILOT 

2 PROGRAM. 

3 (a) IN GENERAL.—Section 7 of the Small Business 

4 Act (15 U.S.C. 636) is amended by inserting after sub5 section (k) the following: 

6 ‘‘(l) SMALL BUSINESS INTERMEDIARY LENDING

7 PROGRAM.— 

8 ‘‘(1) DEFINITIONS.—For purposes of this sub9 section— 

10 ‘‘(A) the term ‘intermediary’ means a pri11 vate, nonprofit entity that seeks to borrow, or 

12 has borrowed, funds from the Administration to 

13 provide midsize loans to small business con14 cerns under this subsection, including— 

15 ‘‘(i) a private, nonprofit community 

16 development corporation; 

17 ‘‘(ii) a consortium of private, non18 profit organizations or nonprofit commu19 nity development corporations; 

20 ‘‘(iii) a quasi-governmental economic 

21 development entity (such as a planning 

22 and development district), other than a 

23 State, county, or municipal government; 

24 and 
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1 ‘‘(iv) an agency of or nonprofit entity 

2 established by a Native American Tribal 

3 Government; and 

4 ‘‘(B) the term ‘midsize loan’ means a fixed 

5 rate loan of not less than $35,000 and not 

6 more than $200,000, made by an intermediary 

7 to a startup, newly established, or growing 

8 small business concern. 

9 ‘‘(2) ESTABLISHMENT.—There is established a 

10 3-year small business intermediary lending pilot pro11 gram (referred to in this section as the ‘Program’), 

12 under which the Administration may provide direct 

13 loans to eligible intermediaries, for the purpose of 

14 making fixed interest rate midsize loans to startup, 

15 newly established, and growing small business con16 cerns. 

17 ‘‘(3) PURPOSES.—The purposes of the small 

18 business intermediary lender pilot program are— 

19 ‘‘(A) to assist small business concerns in 

20 those areas suffering from a lack of credit due 

21 to poor economic conditions; 

22 ‘‘(B) to create employment opportunities 

23 for low income individuals; 

24 ‘‘(C) to establish a midsize loan program 

25 to be administered by the Administration to 
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1 provide loans to eligible intermediaries to enable 

2 such intermediaries to provide small scale loans, 

3 particularly loans in amounts averaging not 

4 more than $150,000, to startup, newly estab5 lished, or growing small business concerns for 

6 working capital or the acquisition of materials, 

7 supplies, or equipment; 

8 ‘‘(D) to test the effectiveness of nonprofit 

9 intermediaries— 

10 ‘‘(i) as a delivery system for a midsize 

11 loan program; and 

12 ‘‘(ii) in addressing the credit needs of 

13 small businesses and leveraging other 

14 sources of credit; and 

15 ‘‘(E) to determine the advisability and fea16 sibility of implementing a midsize loan program 

17 nationwide. 

18 ‘‘(4) ELIGIBILITY FOR PARTICIPATION.—An 

19 intermediary shall be eligible to receive loans under 

20 the Program if the intermediary has at least 1 year 

21 of experience making loans to startup, newly estab22 lished, or growing small business concerns. 

23 ‘‘(5) LOANS TO INTERMEDIARIES.— 

24 ‘‘(A) APPLICATION.—Each intermediary 

25 desiring a loan under this subsection shall sub-
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1 mit an application to the Administration that 

2 describes— 

3 ‘‘(i) the type of small business con4 cerns to be assisted; 

5 ‘‘(ii) the size and range of loans to be 

6 made; 

7 ‘‘(iii) the geographic area to be served 

8 and its economic, poverty, and unemploy9 ment characteristics; 

10 ‘‘(iv) the status of small business con11 cerns in the area to be served and an anal12 ysis of the availability of credit; and 

13 ‘‘(v) the qualifications of the applicant 

14 to carry out this subsection. 

15 ‘‘(B) LOAN LIMITS.—Notwithstanding sub16 section (a)(3), no loan may be made to an 

17 intermediary under this subsection if the total 

18 amount outstanding and committed to the 

19 intermediary from the business loan and invest20 ment fund established by this Act would, as a 

21 result of such loan, exceed $1,000,000 during 

22 the participation of the intermediary in the Pro23 gram. 
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1 ‘‘(C) LOAN DURATION.—Loans made by 

2 the Administration under this subsection shall 

3 be for a maximum term of 20 years. 

4 ‘‘(D) APPLICABLE INTEREST RATES.— 

5 Loans made by the Administration to an inter6 mediary under the Program shall bear an an7 nual interest rate equal to 1.00 percent. 

8 ‘‘(E) FEES; COLLATERAL.—The Adminis9 tration may not charge any fees or require col10 lateral with respect to any loan made to an 

11 intermediary under this subsection. 

12 ‘‘(F) LEVERAGE.—Any loan to a small 

13 business concern under this subsection shall not 

14 exceed 75 percent of the total cost of the 

15 project funded by such loan, with the remaining 

16 funds being leveraged from other sources, in17 cluding— 

18 ‘‘(i) banks or credit unions; 

19 ‘‘(ii) community development financial 

20 institutions; and 

21 ‘‘(iii) other sources with funds avail22 able to the intermediary lender. 

23 ‘‘(G) DELAYED PAYMENTS.—The Adminis24 tration shall not require the repayment of prin25 cipal or interest on a loan made to an inter-
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1 mediary under the Program during the first 2 

2 years of the loan. 

3 ‘‘(6) PROGRAM FUNDING FOR MIDSIZE

4 LOANS.— 

5 ‘‘(A) NUMBER OF PARTICIPANTS.—Under 

6 the Program, the Administration may provide 

7 loans, on a competitive basis, to not more than 

8 20 intermediaries. 

9 ‘‘(B) EQUITABLE DISTRIBUTION OF INTER10 MEDIARIES.—The Administration shall select 

11 and provide funding under the Program to such 

12 intermediaries as will ensure geographic diver13 sity and representation of urban and rural com14 munities. 

15 ‘‘(7) REPORT TO CONGRESS.— 

16 ‘‘(A) INITIAL REPORT.—Not later than 30 

17 months after the date of enactment of the 

18 Small Business Intermediary Lending Pilot 

19 Program Act of 2005, the Administration shall 

20 submit a report containing an evaluation of the 

21 effectiveness of the Program to— 

22 ‘‘(i) the Committee on Small Business 

23 and Entrepreneurship of the Senate; and 

24 ‘‘(ii) the Committee on Small Busi25 ness of the House of Representatives. 
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1 ‘‘(B) ANNUAL REPORT.—Not later than 12 

2 months after the date of enactment of the 

3 Small Business Intermediary Lending Pilot 

4 Program Act of 2005, and annually thereafter, 

5 the Administration shall submit a report con6 taining an evaluation of the effectiveness of the 

7 Program to the Committees described in sub8 paragraph (A). 

9 ‘‘(C) CONTENTS.—The reports submitted 

10 under subparagraphs (A) and (B) shall in11 clude— 

12 ‘‘(i) the numbers and locations of the 

13 intermediaries receiving funds to provide 

14 midsize loans; 

15 ‘‘(ii) the amounts of each loan to an 

16 intermediary; 

17 ‘‘(iii) the numbers and amounts of 

18 midsize loans made by intermediaries to 

19 small business concerns; 

20 ‘‘(iv) the repayment history of each 

21 intermediary; 

22 ‘‘(v) a description of the loan portfolio 

23 of each intermediary, including the extent 

24 to which it provides midsize loans to small 
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1 business concerns in rural and economi2 cally depressed areas; 

3 ‘‘(vi) an estimate of the number of low 

4 income individuals who have been em5 ployed as a direct result of the Program; 

6 and 

7 ‘‘(vii) any recommendations for legis8 lative changes that would improve the op9 eration of the Program.’’. 

10 (b) RULEMAKING AUTHORITY.—Not later than 180 

11 days after the date of enactment of this Act, the Adminis12 trator shall issue regulations to carry out the amendment 

13 made by section 7(l) of the Small Business Act, as added 

14 by subsection (a). 

15 (c) AUTHORIZATION OF APPROPRIATIONS.— 

16 (1) IN GENERAL.—There are authorized to be 

17 appropriated to the Small Business Administration 

18 such sums as may be necessary for each of the fiscal 

19 years 2006 through 2008 to provide $20,000,000 in 

20 loans under section 7(l) of the Small Business Act, 

21 as added by subsection (a). 

22 (2) AVAILABILITY.—Any amounts appropriated 

23 pursuant to paragraph (1) shall remain available 

24 until expended. 

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