Investing in America's Small Businesses Act of 2016

To encourage initiatives for financial products and services that are appropriate and accessible for millions of American small businesses that do not have access to the financial mainstream. 1. Short title This Act may be cited as the Investing in America’s Small Businesses Act of 2016 2. Findings The Congress finds the following: (1) Small businesses in underserved areas have for generations been unable to access affordable credit. (2) A 2013 report commissioned by the U.S. Small Business Administration shows the major constraint limiting the growth, expansion, and wealth creation of small firms—especially women- and minority-owned businesses—is inadequate capital. (3) Small businesses revitalize communities by creating jobs, and also contribute to the local tax base, which helps finance investments in schools, hospitals, infrastructure, and public safety. (4) A 2015 report from the Carsey School of Public Policy at the University of New Hampshire found that 79 percent of CDFI loan volume went to borrowers from underserved populations. (5) During the financial crisis, CDFI loan funds expanded their activity to meet increased demand from borrowers that could not access traditional lending. From 2006 to 2009, the median fund deployment ratio grew 3.1 percent annually. (6) After Superstorm Sandy, CDFIs launched disaster recovery loan programs and reached out to affected businesses and organizations to provide credit to help grocery stores and social service organizations re-open to help communities in need. (7) A 2014 report by the Dardin School of Business at the University of Virginia found that despite serving predominately low-income markets, CDFI banks and credit unions had virtually the same level of performance as mainstream financial institutions. 3. Grants to establish loan-loss reserve funds for small business lending (a) In general The Community Development Banking and Financial Institutions Act of 1994 ( 12 U.S.C. 4701 et seq. 123. Grants to establish loan-loss reserve funds for small business lending (a) Purposes The purposes of this section are— (1) to make financial assistance available from the Fund in order to help community development financial institutions defray the costs of operating small business loan programs, by providing the amounts necessary for such institutions to establish their own loan loss reserve funds to mitigate some of the losses on such small business loan programs; (2) to encourage community development financial institutions to establish and maintain small business loan programs that would help provide borrowers access to mainstream financial institutions and combat high cost small business lending; and (3) to encourage community development financial institutions to expand the development services they offer and to serve new investment areas and new targeted populations. (b) Grants (1) Loan-loss reserve fund grants (A) In general The Fund shall make grants to community development financial institutions to enable such institutions to establish a loan-loss reserve fund in order to defray the costs of a small business loan program established or maintained by such institution. (B) Application A community development financial institution that wishes to receive a grant under this paragraph shall submit an application to the Administrator in such form and manner and containing such information as the Administrator may require. (C) Matching requirement A community development financial institution shall provide non-Federal matching funds in an amount equal to 50 percent of the amount of any grant received under this paragraph. (D) Use of funds Any grant amounts received by a community development financial institution under this paragraph— (i) may not be used by such institution to provide direct loans to small businesses; (ii) may be used by such institution to help recapture a portion or all of a defaulted loan made under the small business loan program of such institution on or after the date of the enactment of this section; and (iii) may be used to designate and utilize a fiscal agent for services normally provided by such an agent. (2) Technical assistance grants (A) In general The Fund shall make technical assistance grants to community development financial institutions to create, support, or maintain a small business loan program. Any grant amounts received under this paragraph may be used for— (i) technology, staff support, staff capacity building, and other costs associated with establishing, supporting, or maintaining a small business loan program; and (ii) establishing, supporting, or maintaining technical assistance programs for borrowers. (B) Application A community development financial institution that wishes to receive a grant under this paragraph shall submit an application to the Administrator in such form and manner and containing such information as the Administrator may require. (c) Reports For each fiscal year for which grants are made under this section, the Administrator shall submit a report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate containing a description of the activities funded and amounts distributed under this section for such fiscal year, as well as measurable results of such actions. (d) Authorization of appropriations (1) In general There are authorized to be appropriated to the Fund $25,000,000 for each of fiscal years 2017 to 2022 to carry out this section. (2) Administrative costs There are authorized to be appropriated to the Fund $2,000,000 for each of fiscal years 2017 to 2022 for the administrative costs of carrying out this section. (e) Definitions For purposes of this section: (1) Small business The term small business small business concern 15 U.S.C. 632(a) (2) Small business loan program The term small business loan program (A) are made in amounts not exceeding $50,000; (B) have no pre-payment penalty; and (C) meet any other affordability requirements as may be established by the Administrator. . (b) Conforming amendment The table of contents for the Riegle Community Development and Regulatory Improvement Act of 1994 is amended by inserting after the item relating to section 121 the following: Sec. 122. Grants to establish loan-loss reserve funds. Sec. 123. Grants to establish loan-loss reserve funds for small business lending. .

Summary: Investing in America's Small Businesses Act of 2016 This bill amends the Community Development Banking and Financial Institutions Act of 1994 to require the Community Development Financial Institutions Fund to make grants to community development financial institutions to enable such institutions to establish a loan-loss reserve fund to defray the costs of a small business loan program. The bill defines "small business loan program" as a program in which a community development financial institution offers loans to small businesses that: (1) are made in amounts up to $50,000, (2) have no prepayment penalty, and (3) meet any affordability requirements established by Administrator of the Fund. A community development financial institution must provide non-federal matching funds equal to 50% of the amount of any grant received. The bill prohibits the use of such grants to make direct loans to small businesses. A community development financial institution may use such a grant to: (1) help recapture a portion or all of a defaulted loan made under its small business loan program, and (2) designate and utilize a fiscal agent for services the agent normally provides. The Fund shall make technical assistance grants to community development financial institutions to create, support, or maintain such a program.