Emerging Business Encouragement Act of 2018

To amend the Small Business Act to provide for contracting preferences and other benefits for emerging business enterprises, and for other purposes. 1. Short title This Act may be cited as the Emerging Business Encouragement Act of 2018 2. Emerging Business Enterprises (a) Designation Section 3 of the Small Business Act ( 15 U.S.C. 632 (dd) Emerging Business Enterprises (1) In general Not later than the date that is one year after the date of enactment of this paragraph, for each industry category for which the Administrator established a size standard under this subsection, the Administrator shall by rule establish procedures for designating a small business concern in that industry category as an emerging business enterprise. Such procedures shall include the criteria under paragraph (2), and a process for appealing decisions of the Administrator on designations. Such a designation shall expire on the date that the small business concern is no longer in compliance with such criteria, except that— (A) in the case of an emerging business enterprise that receives a designation as such but which existed as a business entity prior to such designation, the designation shall not expire by reason of the emerging business enterprise being more than 5 years old; instead, the designation shall expire on the date that is 5 years after the date of the designation; and (B) if the emerging business enterprise exceeds the size limitation described in the criterion under paragraph (2)(A) following designation as an emerging business enterprise, the designation shall expire only if the size is 50 percent or more of the maximum size of a small business concern within that industry category. The rulemaking under this paragraph shall include a procedure for self-certification as an emerging business enterprise, for annual submission of documentation establishing eligibility for designation as an emerging business enterprise, and for periodic audits by the Administrator, or by State or local entities designated by the Administrator, of emerging business enterprises based on such documentation. (2) Criteria for designation The Administrator shall establish criteria for designation of an emerging business enterprise, which shall include the following: (A) Number of employees That the small business concern employs, in the Administrator’s determination a number of employees that is less than the larger of— (i) not more than 10 percent of the number of employees that a small business concern within that industry category may employ, if that small business concern is so classified by reason of a size standard under section 3(a) pertaining to the number of employees of the concern; or (ii) 25 employees. (B) Age of business That the small business concern is not more than 5 years old, beginning on the date on which the business was first registered. (C) Salary requirements That the small business concern does not, in the Administrator’s determination, pay to an individual who owns any part of the concern or who is in a management position a salary greater than 200 percent of the mean annual salary for Managers of Companies and Enterprises or the equivalent from the most recent Employment and Wage Estimates developed by the Secretary of Labor. (3) Public notification The Administrator shall take appropriate action to publicize the establishment of the procedures for designations under this paragraph, including by conducting outreach to eligible small business concerns. (4) Contractor training The Administrator shall provide for training regarding Federal procurement on an Internet Web site of the Administrator, which shall be available to the public at no charge. . (b) Contracting preference Section 15(g)(2) of the Small Business Act (15 U.S.C. (g)(2)) is amended by adding at the end the following: (G) Emerging Business Enterprises (i) In general The head of each Federal agency shall, after consultation with the Administrator, establish goals for participation by emerging business enterprises designated under section 3(a)(6) in not less than 3 percent of all contracts, including prime contracts and subcontracts, for each fiscal year. The head of the agency may give preference in making contract awards to such emerging business enterprises and shall make consistent efforts to annually expand participation by emerging business enterprises from each industry category in procurement contracts of the agency. (ii) Reports (I) Reports from agencies At the conclusion of each fiscal year, the head of each Federal agency shall report to the Administrator on the extent of participation by emerging business enterprises in procurement contracts of such agency. Such reports shall contain appropriate justifications for failure to meet the goals established under this subparagraph. (II) Reports to Congress The Administrator shall annually compile and analyze the reports submitted by the individual agencies pursuant to subclause (I) and shall submit to the President and the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business of the House of Representatives the compilation and analysis, which shall include the following: (aa) The goals in effect for each agency and the agency's performance in attaining such goals. (bb) An analysis of any failure to achieve individual agency goals and the actions planned by such agency (and approved by the Administrator) to achieve the goals in the succeeding fiscal year. (cc) The total number and dollar value of prime contracts and subcontracts awarded to emerging business enterprises. (III) Annual Presidential report on the state of small business The President shall include the information required by subclause (II) in each annual report to the Congress on the state of small business prepared pursuant to section 303(a) of the Small Business Economic Policy Act of 1980 ( 15 U.S.C. 631b(a) . (c) Fee waivers Section 7(a) of the Small Business Act ( 15 U.S.C. 636(a) (35) Fee waivers In the case of any loan under this section to an emerging business enterprise, the Administrator may waive the collection of any fee associated with the origination or guarantee of such a loan, unless— (A) in the case of a fiscal year, the President’s budget for the upcoming fiscal year, submitted to Congress pursuant to section 1105(a) of title 31, United States Code, includes a cost for the program established under this subsection that is above zero; and (B) no adverse effect on the waivers provided under paragraph (31)(G) or (33)(E)(ii). (36) Emerging business enterprises (A) Reports On the date that is one year after the end of the first fiscal year for which a loan is first guaranteed under this subsection, and annually thereafter, each lender making a loan guaranteed under this section shall report to the Administrator the total number of loans made under such section during the preceding fiscal year, the total amount loaned, and the number of waivers under paragraph (35) provided. (B) Verification A lender making a loan guaranteed under this section shall verify the status of a business concern as an emerging business enterprise before issuing a loan. The Administrator shall ensure that applications submitted under this section are required to include sufficient documentation to ensure that a lender can verify such status. (C) Sanction If a business concern has received a loan under this subsection and that business concern has fraudulently misrepresented its status as an emerging business enterprise, that business concern shall repay the amount of the loan to the lender (from which amount the lender shall repay the amount of any guarantee paid on the loan), and shall in addition pay a fine in an amount determined by the Administrator. . 3. Self-Certification Not later than 180 days after the date of enactment of this Act, the Administrator shall by rule establish a process for initial self-certification of emerging business enterprises for purposes of participation in Federal contracts, and eligibility for Express Loans under section 7(a)(31)(G) of the Small Business Act or other loans under section 7(a) of such Act.

Summary: Emerging Business Encouragement Act of 2018 This bill directs the Small Business Administration (SBA) to establish criteria and procedures for small businesses to be designated as emerging business enterprises. The bill provides for various benefits to such enterprises, such as by authorizing the SBA to waive various loan fees, and requires federal agencies to award at least 3% of contracts in each fiscal year to such enterprises.