150
but such suspension or revocation shall not affect 
any outstanding guarantee. 
‘‘(C) AUTHORITY TO LIQUIDATE LOANS.—
‘‘(i) IN GENERAL.—The Administrator 
may permit lenders participating in the 
Certified Lenders Program to liquidate 
loans made with a guarantee from the Ad-
ministrator pursuant to a liquidation plan 
approved by the Administrator. 
‘‘(ii) AUTOMATIC
APPROVAL.—If the 
Administrator does not approve or deny a 
request for approval of a liquidation plan 
within 10 business days of the date on 
which the request is made (or with respect 
to any routine liquidation activity under 
such a plan, within 5 business days) such 
request shall be deemed to be approved. 
‘‘(20) MINORITY BUSINESS DEVELOPMENT PRO-
GRAM PARTICIPANTS.—
‘‘(A) IN
GENERAL.—The Administrator 
may make loans either directly or in cooperation 
with banks or other financial institutions 
through agreements to participate on an imme-
diate or deferred (guaranteed) basis to small 
business concerns eligible for assistance under
151
section 8(a). Such assistance may be provided 
only if the Administrator determines that—
‘‘(i) the type and amount of such as-
sistance requested by such concern is not 
otherwise available on reasonable terms 
from other sources; 
‘‘(ii) with such assistance such concern 
has a reasonable prospect for operating 
soundly and profitably within a reasonable 
period of time; 
‘‘(iii) the proceeds of such assistance 
will be used within a reasonable time for 
plant construction, conversion, or expan-
sion, including the acquisition of equip-
ment, facilities, machinery, supplies, or ma-
terial or to supply such concern with work-
ing capital to be used in the manufacture of 
articles, equipment, supplies, or material 
for defense or civilian production or as may 
be necessary to insure a well-balanced na-
tional economy; and 
‘‘(iv) such assistance is of such sound 
value as reasonably to assure that the terms 
under which it is provided will not be 
breached by the small business concern.
152
‘‘(B) MAXIMUM
AMOUNT
OF
LOANS.—No 
loan shall be made under this paragraph if the 
total amount outstanding and committed (by 
participation or otherwise) to the borrower 
would exceed $750,000. 
‘‘(C) MINIMUM PARTICIPATION.—Subject to 
the limitation of subparagraph (B), in agree-
ments to participate in loans on a deferred 
(guaranteed) basis, participation by the Admin-
istrator shall be not less than 85 percent of the 
balance of the financing outstanding at the time 
of disbursement. 
‘‘(D) INTEREST RATE.—The rate of interest 
on financings made on a deferred (guaranteed) 
basis shall be legal and reasonable. 
‘‘(E) METHODS
OF
PARTICIPATION.—No 
immediate participation may be purchased 
under this paragraph unless it is shown that a 
deferred participation is not available. No direct 
financing may be made under this paragraph 
unless it is shown that a participation is un-
available. A direct loan or the Administrator’s 
share of an immediate participation loan made 
pursuant to this paragraph shall be any secured 
debt instrument—
153
‘‘(i) that is subordinated by its terms 
to all other borrowings of the issuer; 
‘‘(ii) the rate of interest on which shall 
not exceed the current average market yield 
on outstanding marketable obligations of the 
United States with remaining periods to 
maturity comparable to the average matu-
rities of such loan and adjusted to the near-
est 1⁄8 of 1 percent; 
‘‘(iii) the term of which is not more 
than 25 years; 
‘‘(iv) the principal on which is amor-
tized at such rate as may be deemed appro-
priate by the Administrator; and 
‘‘(v) the interest on which is payable 
not less often than annually. 
‘‘(21) CLOSURE OF DOD INSTALLATIONS.—
‘‘(A) IN
GENERAL.—The Administrator 
may make loans on a guaranteed basis under the 
authority of this subsection—
‘‘(i) to a small business concern that 
has been (or can reasonably be expected to 
be) detrimentally affected by—
154
‘‘(I) the closure (or substantial re-
duction) of a Department of Defense 
installation; or 
‘‘(II) the termination (or substan-
tial reduction) of a Department of De-
fense program on which such small 
business was a prime contractor or 
subcontractor (or supplier) at any tier; 
or 
‘‘(ii) to a qualified individual or a vet-
eran seeking to establish (or acquire) and 
operate a small business concern. 
‘‘(B) REASONABLE DOUBT GIVEN TO APPLI-
CANT.—Recognizing that greater risk may be as-
sociated with a loan to a small business concern 
described in subparagraph (A)(i), any reasonable 
doubts concerning the firm’s proposed business 
plan for transition to nondefense-related markets 
shall be resolved in favor of the loan applicant 
when making any determination regarding the 
sound value of the proposed loan in accordance 
with paragraph (5). 
‘‘(C) AUTHORIZATION.—Loans pursuant to 
this paragraph shall be authorized in such 
amounts as provided in advance in appropria-
155
tion Acts for the purposes of loans under this 
paragraph. 
‘‘(D) QUALIFIED
INDIVIDUAL.—For pur-
poses of this paragraph a qualified individual 
is—
‘‘(i) a member of the Armed Forces of 
the United States, honorably discharged 
from active duty involuntarily or pursuant 
to a program providing bonuses or other in-
ducements to encourage voluntary separa-
tion or early retirement; 
‘‘(ii) a civilian employee of the Depart-
ment of Defense involuntarily separated 
from Federal service or retired pursuant to 
a program offering inducements to encour-
age early retirement; or 
‘‘(iii) an employee of a prime con-
tractor, subcontractor, or supplier at any 
tier of a Department of Defense program 
whose employment is involuntarily termi-
nated (or voluntarily terminated pursuant 
to a program offering inducements to en-
courage voluntary separation or early re-
tirement) due to the termination (or sub-
156
stantial reduction) of a Department of De-
fense program. 
‘‘(E) JOB CREATION AND COMMUNITY BEN-
EFIT.—In providing assistance under this para-
graph, the Administrator shall develop proce-
dures to ensure, to the maximum extent prac-
ticable, that such assistance is used for projects 
that—
‘‘(i) have the greatest potential for—
‘‘(I) creating new jobs for individ-
uals whose employment is involun-
tarily terminated due to reductions in 
Federal defense expenditures; or 
‘‘(II) preventing the loss of jobs by 
employees of small business concerns 
described in subparagraph (A)(i); and 
‘‘(ii) have substantial potential for 
stimulating new economic activity in com-
munities most affected by reductions in 
Federal defense expenditures. 
‘‘(22) LATE FEES.—The Administrator may per-
mit participating lenders to impose and collect a rea-
sonable penalty fee on late payments of loans guaran-
teed under this subsection in an amount not to exceed
157
5 percent of the monthly loan payment per month 
plus interest. 
‘‘(23) ANNUAL FEE.—
‘‘(A) IN
GENERAL.—With respect to each 
loan guaranteed under this subsection, the Ad-
ministrator shall, in accordance with such terms 
and procedures as the Administrator shall estab-
lish by regulation, assess and collect an annual 
fee in an amount equal to 0.5 percent of the out-
standing balance of the deferred participation 
share of the loan. With respect to loans approved 
during the 2-year period beginning on October 1, 
2002, the annual fee assessed and collected under 
the preceding sentence shall be in an amount 
equal to 0.25 percent of the outstanding balance 
of the deferred participation share of the loan. 
‘‘(B) PAYER.—The annual fee assessed 
under subparagraph (A) shall be payable by the 
participating lender and shall not be charged to 
the borrower. 
‘‘(C) AGENTS.—The Administrator may 
contract with any agent to carry out, on behalf 
of the Administrator, the assessment and collec-
tion of annual fees referred to in subparagraph 
(A). Such agent may receive as compensation for
158
services any interest earned on the fees while in 
such agent’s control and prior to the time when 
the agent, pursuant to contract, is required to 
remit the fees to the Administrator. 
‘‘(24) NOTIFICATION
REQUIREMENT.—The Ad-
ministrator shall notify the Committee on Small 
Business of the House of Representatives and the 
Committee on Small Business and Entrepreneurship 
of the Senate not later than 15 days before making 
any significant policy or administrative change af-
fecting the operation of the loan program under this 
subsection, including the establishment of any pilot 
project pursuant to paragraph (25). 
‘‘(25) 
LIMITATION
ON
CONDUCTING
PILOT 
PROJECTS.—
‘‘(A) LIMITATION ON NUMBER.—Not more 
than 10 percent of the total number of loans 
guaranteed in any fiscal year under this sub-
section may be awarded as part of a pilot pro-
gram which is commenced by the Administrator 
on or after January 1, 1994. 
‘‘(B) DOLLAR LIMITATIONS.—
‘‘(i) IN GENERAL.—In the case of any 
pilot program established on or after the 
date of the enactment of this subparagraph,
159
no loan shall be made under such program 
if such loan would result in the total 
amount of loans made during the fiscal 
year under all such programs to be in excess 
of 5 percent of the total amount of loans 
guaranteed in such fiscal year under this 
subsection. 
‘‘(ii) CERTAIN
PRE-EXISTING
PRO-
GRAMS.—In the case of any pilot program 
established before the date of the enactment 
of this subparagraph, no loan shall be made 
under such program if such loan would re-
sult in the total amount of loans made dur-
ing the fiscal year under all such programs 
to be in excess of 15 percent of the total 
amount of loans guaranteed in such fiscal 
year under this subsection. 
‘‘(C) MAXIMUM
TERM.—The duration of 
any pilot program authorized by this paragraph 
shall not exceed 3 years. For purposes of this 
subparagraph, a pilot program shall not be 
treated as a new pilot program solely on the 
basis of a modification or change in a pilot pro-
gram, including the change of its name. With re-
spect to any pilot program in existence on the
160
date of the enactment of this subparagraph, this 
subparagraph shall apply without regard to any 
period ending before such date. 
‘‘(D) REGULATIONS.—With respect to each 
pilot program under this subsection, the Admin-
istrator shall—
‘‘(i) promulgate regulations for such 
program pursuant to section 553(b) of title 
5, United States Code; 
‘‘(ii) provide not less than 60 days for 
notice and comment on such regulations; 
and 
‘‘(iii) ensure that such regulations are 
codified in the Code of Federal Regulations. 
In the case of any pilot program established after 
the date of the enactment of this subparagraph, 
such program shall not go into effect until after 
the requirements of this subparagraph are satis-
fied. 
‘‘(E) PILOT
PROGRAM.—For purposes of 
this paragraph, the term ‘pilot program’ means 
any lending program initiative, project, innova-
tion, or other activity not specifically authorized 
by law.
161
‘‘(26) CALCULATION OF SUBSIDY RATE.—All fees, 
interest, and profits received and retained by the Ad-
ministrator under this subsection shall be included in 
the calculations made by the Director of the Office of 
Management and Budget to offset the cost (as that 
term is defined in section 502 of the Federal Credit 
Reform Act of 1990) to the Administrator of pur-
chasing and guaranteeing loans under this Act. 
‘‘(27) LOW DOCUMENTATION LOAN PROGRAM.—
‘‘(A) IN
GENERAL.—The Administrator 
may issue guarantees under this subsection for 
loans of $150,000 or less with less documentation 
than would otherwise be required by the Admin-
istrator under this subsection. 
‘‘(B) REGULATIONS.—Not later than 120 
days after the date of the enactment of this para-
graph, the Administrator shall promulgate regu-
lations to carry out the provisions of this para-
graph after the opportunity for notice and com-
ment pursuant to section 553(b) of title 5, 
United States Code. Such regulations shall be 
codified in the Code of Federal Regulations. 
‘‘(28) LEASING.—In addition to such other lease 
arrangements as may be authorized by the Adminis-
trator, a borrower may permanently lease to one or
162
more tenants not more than 20 percent of any prop-
erty constructed with the proceeds of a loan guaran-
teed under this subsection, if the borrower perma-
nently occupies and uses not less than 60 percent of 
the total business space in the property. 
‘‘(29) REAL ESTATE APPRAISALS.—With respect 
to a loan under this subsection that is secured by 
commercial real property, an appraisal of such prop-
erty by a State licensed or certified appraiser—
‘‘(A) shall be required by the Administrator 
in connection with any such loan for more than 
$250,000; or 
‘‘(B) may be required by the Administrator 
or the lender in connection with any such loan 
for $250,000 or less, if such appraisal is nec-
essary for appropriate evaluation of credit-
worthiness. 
‘‘(30) OWNERSHIP REQUIREMENTS.—Ownership 
requirements to determine the eligibility of a small 
business concern that applies for assistance under any 
credit program under this Act shall be determined 
without regard to any ownership interest of a spouse 
arising solely from the application of the community 
property laws of a State for purposes of determining 
marital interests.
163
‘‘(31) PREFERRED LENDERS PROGRAM.—
‘‘(A) IN
GENERAL.—There is a Preferred 
Lenders Program. 
‘‘(B) PARTICIPATION.—The Administrator 
may designate a preferred lender under this 
paragraph only if the lender demonstrates 
knowledge of the Small Business Act and the reg-
ulations promulgated thereunder and establishes 
to the satisfaction of the Administrator that it—
‘‘(i) has the ability to process, close, 
service, and liquidate loans; 
‘‘(ii) has the ability to develop and 
analyze complete loan packages; and 
‘‘(iii) has a satisfactory performance 
history of participation in the lending pro-
gram established under this subsection as 
demonstrated by a default rate that does not 
exceed—
‘‘(I) the national average; or 
‘‘(II) in the case any lender which 
made at least 20 percent of its loans in 
Alaska, Hawaii, State-designated en-
terprise zones, enterprise zones, em-
powerment zones, enterprise commu-
nities, or labor surplus areas as deter-
164
mined by the Department of Labor, or 
to small manufacturers, the national 
average plus 2 percentage points. 
‘‘(C) DELEGATED
AUTHORITY.—With re-
spect to loans made under this subsection, pre-
ferred lenders shall, without prior approval of 
the Administrator: 
‘‘(i) Determine creditworthiness and 
eligibility. 
‘‘(ii) Make and close loans with a 
guarantee from the Administrator. 
‘‘(iii) Monitor loan performance. 
‘‘(iv) Service and collect the loans. 
‘‘(v) Foreclose and liquidate loans. 
‘‘(D) PROHIBITED ACTIVITIES.—A preferred 
lender shall not take any action that creates an 
actual or apparent conflict of interest or places 
the Federal Government’s guarantee at signifi-
cant risk beyond the risk associated with loan 
nonperformance. 
‘‘(E) AREA OF OPERATIONS.—The designa-
tion by the Administrator of a lender to partici-
pate in the program established pursuant to this 
paragraph shall authorize the activities described 
in subparagraph (C) only with respect to small
165
business concerns located in areas served by such 
office or offices as the Administrator designates 
with respect to such lender. 
‘‘(F) DESIGNATION
AS
NATIONAL
PRE-
FERRED
LENDERS.—The Administrator, upon 
application, may designate a preferred lender as 
a national preferred lender. A national preferred 
lender may conduct the activities described in 
subparagraph (C) with respect to each area 
served by an office of the Administrator. The Ad-
ministrator shall not grant such designation un-
less the applicant demonstrates—
‘‘(i) operation as a preferred lender in 
at least 5 States or within the territory 
served by at least 10 offices of the Adminis-
trator for a period of not less than 3 years; 
‘‘(ii) issuance of a minimum of 50 
loans per year as a preferred lender; 
‘‘(iii) centralization of approval, loan 
servicing and liquidation functions that 
meet such standards as the Administrator 
may establish by regulations, which are 
promulgated after notice and the oppor-
tunity for public comment not later than
166
180 days after the date of the enactment of 
this clause; 
‘‘(iv) maintenance of uniform written 
policies and procedures on the issuance of 
loans guaranteed under this subsection; 
‘‘(v) maintenance of a portfolio of 
loans guaranteed under this subsection that 
do not exceed the national average default, 
currency, and recovery rates for preferred 
lenders; and 
‘‘(vi) receipt of a substantially satisfac-
tory compliance review rating from the Ad-
ministrator in its most recent audit and ex-
amination as a preferred lender and a 
small business lending company, if applica-
ble, or has received a substantially satisfac-
tory rating as a result of a follow-up re-
view. 
‘‘(G) CORRECTIVE ACTION.—If a national 
preferred lender is deficient with respect to any 
requirement described in subparagraph (F), the 
Administrator shall notify such lender in writ-
ing and shall provide the lender a reasonable pe-
riod of time to conform to such requirements be-
fore taking any corrective action.
167
‘‘(H) SUSPENSION
OR
REVOCATION.—The 
Administrator may, depending upon the severity 
of the failure to comply with the standards set 
forth in this paragraph, suspend or revoke a 
lender’s status as a preferred lender or a na-
tional preferred lender. Any such suspension or 
revocation shall not affect any outstanding guar-
antee. 
‘‘(I) LIMITATION ON DELEGATION.—No au-
thority under this paragraph may be delegated 
to any employee of the Administration who is 
based in a regional or district office. 
‘‘(32) SIMPLIFIED
FORM
FOR
SMALL
GUARAN-
TEES.—The Administrator shall develop and allow 
participating lenders to solely utilize a uniform and 
simplified loan form for loans of $50,000 or less in 
guarantees to eligible applicants. 
‘‘(33) SPECIAL RULE ON AFFILIATION.—A busi-
ness concern applying for assistance under this sub-
section shall be considered small for purposes of this 
subsection without regard to affiliation with another 
business concern if the applicant has no legal recourse 
to have its affiliate repay any of its debt obliga-
tions.’’.
168
(b) DISASTER LOAN PROGRAM.—Subsection (b) of sec-
tion 7 of the Small Business Act (15 U.S.C. 636) is amend-
ed to read as follows: 
‘‘(b) DISASTER LOAN PROGRAM.—
‘‘(1) PHYSICAL LOSS DISASTER LOANS.—
‘‘(A) LOAN AUTHORITY.—Except as to agri-
cultural enterprises, the Administrator may, to 
the extent and in such amounts as provided in 
advance in appropriation Acts, make such loans 
(either directly or in cooperation with banks or 
other lending institutions through agreements to 
participate on an immediate or deferred (guar-
anteed) basis) as the Administrator may deter-
mine to be necessary or appropriate to repair, 
rehabilitate or replace property, real or personal, 
damaged or destroyed by or as a result of nat-
ural or other disasters. 
‘‘(B) LOAN AMOUNT.—The amount of any 
loan made under this paragraph shall be equal 
to 100 percent of the loss except that the amount 
of the loan shall be reduced by—
‘‘(i) any amount covered by insurance 
or otherwise; or
169
‘‘(ii) in the case of a loan used to refi-
nance a mortgage or other lien, any amount 
covered by insurance or otherwise. 
‘‘(C) SPECIAL RULES.—The Administrator 
shall not—
‘‘(i) reduce the loan amount on real es-
tate to below $100,000 unless the amount of 
loss calculated under subparagraph (B) is 
less than $100,000; 
‘‘(ii) reduce the loan amount on per-
sonal property, whether held by a home-
owner or lessee, to below $20,000, unless the 
amount of the loss calculated under sub-
paragraph (B) is less than $20,000; 
‘‘(iii) take into account for purposes of 
subparagraph (B) any sums made available 
for refinancing pursuant to subparagraph 
(D); or 
‘‘(iv) require collateral for loans of 
$10,000 or less. 
‘‘(D) REFINANCINGS.—Such loans may be 
used to refinance any mortgage or other lien 
against a totally destroyed or substantially dam-
aged home or business concern except that the 
Administrator shall not make any loan or guar-
170
antee under this paragraph unless the Adminis-
trator finds—
‘‘(i) the applicant is not able to obtain 
credit elsewhere; 
‘‘(ii) such property is to be repaired, 
rehabilitated, or replaced; and 
‘‘(iii) the amount refinanced shall not 
exceed the amount of physical loss sus-
tained. 
‘‘(E) INCREASE
FOR
MITIGATING
MEAS-
URES.—The Administrator may increase the 
amount of any loan under this subsection by up 
to an additional 20 percent if he determines such 
increase to be necessary or appropriate in order 
to protect the damaged or destroyed property 
from possible future disasters by taking miti-
gating measures, including construction of re-
taining walls and sea walls, grading and 
contouring land, relocating utilities and modi-
fying structures. 
‘‘(2) ECONOMIC INJURY DISASTER LOANS.—
‘‘(A) LOAN AUTHORITY.—Except as to agri-
cultural enterprises (other than small agricul-
tural cooperatives), the Administrator may, to 
the extent and in such amounts as provided in
171
advance in appropriation Acts, make such loans 
(either directly or in cooperation with banks or 
other lending institutions through agreements to 
participate on an immediate or deferred (guar-
anteed) basis as the Administrator may deter-
mine to be necessary or appropriate to any small 
business concern or small agricultural coopera-
tive located in an area affected by a disaster 
(which shall include all of the county in which 
the disaster occurred and counties contiguous to 
the county of the disaster as determined by the 
President or Administrator), if the Adminis-
trator determines that the concern or the cooper-
ative has suffered a substantial economic injury 
as a result of such disaster and if such disaster 
constitutes—
‘‘(i) a major disaster, as determined by 
the President under the Disaster Relief and 
Emergency Assistance Act; or 
‘‘(ii) a natural disaster, as determined 
by the Secretary of Agriculture pursuant to 
the Consolidated Farmers Home Adminis-
tration Act of 1961 (7 U.S.C. 1961); or 
‘‘(iii) a disaster, as determined by the 
Administrator.
172
‘‘(B) STATE CERTIFICATION.—If no disaster 
declaration has been issued under subparagraph 
(A), the Governor of a State in which a disaster 
has occurred may certify to the Administrator 
that small business concerns or small agricul-
tural cooperatives have suffered economic injury 
as a result of such disaster and are in need of 
financial assistance which is not available on 
reasonable terms in the disaster stricken area. 
Upon receipt of such certification, the Adminis-
trator may then make such loans as would have 
been available under this paragraph if a disaster 
declaration had been issued. 
‘‘(C) UNABLE
TO
OBTAIN
CREDIT
ELSE-
WHERE.—No loan or guarantee shall be extended 
pursuant to this paragraph unless the Adminis-
trator finds that the applicant is not able to ob-
tain credit elsewhere. 
‘‘(3) ESSENTIAL EMPLOYEES CALLED TO ACTIVE 
DUTY.—
‘‘(A) DEFINITIONS.—For purposes of this 
paragraph: 
‘‘(i) ESSENTIAL EMPLOYEE.—The term 
‘essential employee’ means an individual 
who is employed by a small business con-
173
cern and whose managerial or technical ex-
pertise is critical to the successful day-to-
day operations of that small business con-
cern. 
‘‘(ii) 
PERIOD
OF
MILITARY
CON-
FLICT.—The term ‘period of military con-
flict’ has the meaning given the term in 
subsection (n)(1). 
‘‘(iii) SUBSTANTIAL
ECONOMIC
IN-
JURY.—The term ‘substantial economic in-
jury’ means an economic harm to a busi-
ness concern that results in the inability of 
the business concern—
‘‘(I) to meet its obligations as they 
mature; 
‘‘(II) to pay its ordinary and nec-
essary operating expenses; or 
‘‘(III) to market, produce, or pro-
vide a product or service ordinarily 
marketed, produced, or provided by the 
business concern. 
‘‘(B) LOAN
AUTHORITY.—The Adminis-
trator may make such disaster loans (either di-
rectly or in cooperation with banks or other 
lending institutions through agreements to par-
174
ticipate on an immediate or deferred basis) to 
assist a small business concern that has suffered 
or that is likely to suffer substantial economic 
injury as the result of an essential employee of 
such small business concern being ordered to ac-
tive military duty during a period of military 
conflict. 
‘‘(C) PERIOD
OF
ELIGIBILITY.—A small 
business concern described in subparagraph (B) 
shall be eligible to apply for assistance under 
this paragraph during the period beginning on 
the date on which the essential employee is or-
dered to active duty and ending on the date that 
is 90 days after the date on which such essential 
employee is discharged or released from active 
duty. 
‘‘(D) INTEREST RATE.—Any loan or guar-
antee extended pursuant to this paragraph shall 
be made at the same interest rate as economic 
injury disaster loans under paragraph (2). 
‘‘(E) MAXIMUM
LOAN
AMOUNT.—No loan 
may be made under this paragraph, either di-
rectly or in cooperation with banks or other 
lending institutions through agreements to par-
ticipate on an immediate or deferred basis, if the
175
total amount outstanding and committed to the 
borrower under this subsection would exceed 
$1,500,000, unless the applicant can establish 
pursuant to regulations promulgated by the Ad-
ministrator pursuant to paragraph (9) that this 
maximum should be waived. 
‘‘(F) NO
DISASTER
DECLARATION
RE-
QUIRED.—For purposes of assistance under this 
paragraph, no declaration of a disaster area 
shall be required. 
‘‘(4) SPECIAL RULE TO DETERMINE SMALL CON-
CERNS.—For purposes of this subsection, a business 
concern and an agricultural cooperative are consid-
ered small if the business concern or agricultural co-
operative has 500 or fewer employees. 
‘‘(5) MAXIMUM TERM.—Except as provided in 
paragraph (6), no loan under this subsection, includ-
ing renewals and extensions thereof, may be made for 
a period or periods exceeding 30 years. No loan de-
scribed in paragraph (11)(D)(iii) shall be made for a 
period or periods exceeding 3 years. 
‘‘(6) SUSPENSION OF PAYMENTS.—
‘‘(A) IN
GENERAL.—The Administrator 
may consent to a suspension in the payment of 
principal and interest charges on, and to an ex-
176
tension in the maturity of, the Federal share of 
any loan under this subsection for a period of 
not to exceed 5 years, if—
‘‘(i) the borrower under such loan is a 
homeowner or a small business concern; 
‘‘(ii) the loan was made to enable—
‘‘(I) such homeowner to repair or 
replace his home; or 
‘‘(II) such concern to repair or re-
place plant or equipment which was 
damaged or destroyed as the result of a 
disaster described in clause (i) or (ii) 
of paragraph (2)(A); and 
‘‘(iii) the Administrator determines 
such action is necessary to avoid severe fi-
nancial hardship. 
‘‘(B) 
PURCHASE
OF
NON-FEDERAL 
SHARE.—During any period in which principal 
and interest charges are suspended on the Fed-
eral share of any loan under this paragraph, the 
Administrator shall, upon the request of any per-
son, firm, or corporation having a participation 
in such loan, purchase such participation, or as-
sume the obligation of the borrower, for the bal-
ance of such period, to make principal and in-
177
terest payments on the non-Federal share of such 
loan. No such payments shall be made by the Ad-
ministrator in behalf of any borrower unless—
‘‘(i) the Administrator determines that 
such action is necessary in order to avoid a 
default; and 
‘‘(ii) the borrower agrees to make pay-
ments to the Administration in an aggre-
gate amount equal to the amount paid in 
its behalf by the Administrator, in such 
manner and at such times (during or after 
the term of the loan) as the Administrator 
shall determine having due regard to the 
purposes sought to be achieved by this 
clause. 
‘‘(7) ADDITIONAL
DISASTER
AREAS.—The Ad-
ministrator shall promulgate regulations for deter-
mining under what circumstances loans can be made 
under paragraph (2)(A) in counties beyond the coun-
ties designated pursuant to clause (i), (ii), or (iii) of 
paragraph (2)(A). 
‘‘(8) CIVIL PENALTY FOR MISUSE OF LOAN.—
Whoever wrongfully misapplies the proceeds of a loan 
obtained under this subsection shall be civilly liable
178
to the Administrator in an amount equal to 150 per-
cent of the original principal amount of the loan. 
‘‘(9) MAXIMUM
LOAN
AMOUNT.—The Adminis-
trator shall establish by regulation the maximum 
amount of indebtedness which may be committed to 
any borrower under this subsection. Such regulation 
shall be codified in the Code of Federal Regulations 
and shall specify the conditions under which the Ad-
ministrator shall waive any such maximum based on 
the need to speed economic recovery of the region. 
‘‘(10) MAXIMUM GUARANTEED PARTICIPATION.—
In agreements to participate in loans on a deferred 
basis under this subsection, such participation by the 
Administrator shall not be in excess of 90 percent of 
the balance of the loan outstanding at the time of dis-
bursement. 
‘‘(11) INTEREST RATE.—The interest rate on the 
Federal share of any loan made under paragraph (1) 
or (2) shall not exceed the rate of interest which is in 
effect at the time of the occurrence of the disaster but 
shall otherwise be—
‘‘(A) in the case of a homeowner unable to 
secure credit elsewhere, the rate prescribed by the 
Administration but not more than 1⁄2 the rate 
determined by the Secretary of the Treasury tak-
179
ing into consideration the current average mar-
ket yield on outstanding marketable obligations 
of the United States with remaining periods to 
maturity comparable to the average maturities of 
such loan plus an additional charge of not to ex-
ceed 1 percent per year as determined by the Ad-
ministrator, and adjusted to the nearest 1⁄8 of 1 
percent, but not to exceed 4 percent per year; 
‘‘(B) in the case of a homeowner able to se-
cure credit elsewhere, the rate prescribed by the 
Administration but not more than the rate deter-
mined by the Secretary of the Treasury taking 
into consideration the current average market 
yield on outstanding marketable obligations of 
the United States with remaining periods to ma-
turity comparable to the average maturities of 
such loans plus an additional charge of not to 
exceed 1 percent per year as determined by the 
Administrator, and adjusted to the nearest 1⁄8 of 
1 percent, but not to exceed 8 percent per year; 
‘‘(C) in the case of a business or other con-
cern, including agricultural cooperatives, unable 
to obtain credit elsewhere, not to exceed 4 percent 
per year; or
180
‘‘(D) in the case of a business concern able 
to obtain credit elsewhere, the rate prescribed by 
the Administration but not to excess of the lowest 
of—
‘‘(i) the rate prevailing in the private 
market for similar loans, 
‘‘(ii) the rate prescribed by the Admin-
istration as the maximum interest rate for 
deferred participation (guaranteed) loans 
under subsection (a), or 
‘‘(iii) 8 percent per year. 
‘‘(12) NOTICE TO BORROWERS.—
‘‘(A) IN
GENERAL.—The Administrator 
shall ensure that each borrower under this sub-
section receives a notice described in subpara-
graph (B) upon applying for any loan under 
this subsection and upon the disbursement of any 
loan under this subsection. 
‘‘(B) CONTENTS OF NOTICE.—A notice is 
described in this subparagraph if such notice in-
cludes the following information with respect to 
loans made under this subsection: 
‘‘(i) A description of the collection 
practices of the Administration for such 
loans, including a description of any ac-
181
tions the Administrator may take to collect 
a delinquent or non-current loan. 
‘‘(ii) A description of the practices of 
the Administration with respect to selling 
the rights and interests of the Administra-
tion in such loans, including a description 
of the effects of such a sale on the borrower. 
‘‘(iii) A description of the rights of the 
borrower with respect to such loan under 
applicable Federal laws. 
‘‘(iv) A telephone number for con-
tacting the Administrator regarding such 
loan.’’. 
(c) EXTENSION OR RENEWAL.—Subsection (c) of sec-
tion 7 of the Small Business Act (15 U.S.C. 636) is amend-
ed to read as follows: 
‘‘(c) EXTENSION OR RENEWAL.—
‘‘(1) IN GENERAL.—The Administrator may fur-
ther extend the maturity of or renew any loan made 
pursuant to this section for additional periods not to 
exceed 10 years beyond the period stated therein, if 
such extension or renewal will aid in the orderly liq-
uidation of such loan.
182
‘‘(2) LIMITATION.—No loan made under sub-
section (b) shall be extended under this subsection if 
the loan has a maturity in excess of 20 years.’’. 
(d) MICROLOAN PROGRAM.—Subsection (m) of section 
7 of the Small Business Act (15 U.S.C. 636) is amended 
to read as follows:
‘‘(m) MICROLOAN PROGRAM.—
‘‘(1) PURPOSES.—The purposes of the Microloan 
Program are—
‘‘(A) to assist women, low-income, veteran, 
and minority entrepreneurs and business owners, 
small manufacturers, and other individuals pos-
sessing the capability to operate successful busi-
ness concerns; 
‘‘(B) to assist small business concerns in 
those areas suffering from a lack of credit due to 
economic downturns; 
‘‘(C) to establish a microloan program to be 
administered by the Administrator—
‘‘(i) to make loans to eligible inter-
mediaries to enable such intermediaries to 
provide small-scale loans, particularly loans 
in amounts averaging not more than 
$10,000, to startup, newly established, or 
growing small business concerns for working
183
capital or the acquisition of materials, sup-
plies, or equipment; 
‘‘(ii) to make grants to eligible inter-
mediaries that, together with non-Federal 
matching funds, will enable such inter-
mediaries to provide intensive marketing, 
management, and technical assistance to 
microloan borrowers; 
‘‘(iii) to make grants to eligible non-
profit entities that, together with non-Fed-
eral matching funds, will enable such enti-
ties to provide intensive marketing, man-
agement, and technical assistance to assist 
low-income entrepreneurs and other low-in-
come individuals obtain private sector fi-
nancing for their businesses, with or with-
out loan guarantees; 
‘‘(iv) to report to the Committee on 
Small Business and Entrepreneurship of 
the Senate and the Committee on Small 
Business of the House of Representatives on 
the effectiveness of the microloan program 
and the advisability and feasibility of im-
plementing such a program nationwide; 
and
184
‘‘(v) to establish a welfare-to-entrepre-
neurship microloan initiative, which shall 
be administered by the Administrator, in 
order to test the feasibility of supplementing 
the technical assistance grants provided 
under this subsection to individuals who are 
receiving assistance under the State pro-
gram funded under part A of title IV of the 
Social Security Act (42 U.S.C. 601 et seq.), 
or under any comparable State funded 
means tested program of assistance for low-
income individuals, in order to adequately 
assist those individuals in establishing 
small businesses and eliminating their de-
pendence on that assistance. 
‘‘(2) ESTABLISHMENT.—There is a Microloan 
Program, under which the Administrator may, con-
sistent with the requirements of this subsection—
‘‘(A) make direct loans to eligible inter-
mediaries for the purpose of making short-term, 
fixed interest rate microloans to startup, newly 
established, and growing small business concerns; 
‘‘(B) in conjunction with such loans make 
grants to such intermediaries for the purpose of 
providing intensive marketing, management, and
185
technical assistance to small business concerns 
that are borrowers under this subsection; and 
‘‘(C) make grants to nonprofit entities for 
the purpose of providing marketing, manage-
ment, and technical assistance to low-income in-
dividuals seeking to start or enlarge their own 
businesses, if such assistance includes working 
with the grant recipient to secure loans in 
amounts not to exceed $50,000 from private sec-
tor lending institutions, with or without a loan 
guarantee from the nonprofit entity. 
‘‘(3) 
ELIGIBILITY
FOR
PARTICIPATION.—An 
intermediary shall be eligible to receive loans and 
grants under subparagraphs (B) and (C) of para-
graph (2) if it has at least 1 year of experience mak-
ing microloans to startup, newly established, or grow-
ing small business concerns and providing, as an in-
tegral part of its microloan program, intensive mar-
keting, management, and technical assistance to its 
borrowers or equivalent experience, as determined by 
the Administrator provided that the equivalent expe-
rience evidences the capability of the intermediary to 
assist microloan borrowers.
186
‘‘(4) INTERMEDIARY APPLICATIONS.—As part of 
its application for a loan, each intermediary shall 
submit a description to the Administrator of—
‘‘(A) the type of businesses to be assisted; 
‘‘(B) the size and range of loans to be made; 
‘‘(C) the geographic area to be served and 
its economic, poverty, and unemployment char-
acteristics; 
‘‘(D) the status of small business concerns 
in the area to be served and an analysis of their 
credit and technical assistance needs; 
‘‘(E) any marketing, management, and 
technical assistance to be provided in connection 
with a loan made under this subsection; 
‘‘(F) the local economic credit markets, in-
cluding the costs associated with obtaining credit 
locally; 
‘‘(G) the qualifications of the applicant to 
carry out the purpose of this subsection; and 
‘‘(H) any plan to involve other technical as-
sistance providers (such as volunteers recruited 
under section 12(b) or counselors from small 
business development centers) or private sector 
lenders in assisting selected business concerns.
187
‘‘(5) SELECTION OF INTERMEDIARIES.—In select-
ing intermediaries to participate in the program es-
tablished under this subsection, the Administrator 
shall give priority to those applicants that provide 
loans in amounts averaging not more than $10,000 
and to those applicants that primarily serve small 
manufacturers. 
‘‘(6) INTERMEDIARY CONTRIBUTION.—As a con-
dition of any loan made to an intermediary under 
this subsection, the Administrator shall require the 
intermediary to contribute not less than 15 percent of 
the loan amount in cash from non-Federal sources. 
‘‘(7) LOANS TO INTERMEDIARIES.—
‘‘(A) LOAN LIMITS.—No loan shall be made 
under this subsection if the total amount out-
standing and committed to one intermediary 
(excluding outstanding grants) from the business 
loan and investment fund established by this Act 
would, as a result of such loan, exceed $750,000 
in the first year of such intermediary’s partici-
pation in the program, and $3,500,000 in the re-
maining years of the intermediary’s participa-
tion in the program.
189
Administrator to an intermediary that 
makes loans to small business concerns and 
entrepreneurs averaging not more than 
$10,000, shall bear an interest rate that is 
2 percentage points below the rate deter-
mined by the Secretary of the Treasury for 
obligations of the United States with a pe-
riod of maturity of 5 years, adjusted to the 
nearest 1⁄8 of 1 percent. 
‘‘(iii) MULTIPLE SITES OR OFFICES.—
Clause (ii) shall apply to each separate 
loan-making site or office of an inter-
mediary only if such site or office meets the 
requirements of that clause. 
‘‘(iv) RATE
BASIS.—The applicable 
rate of interest under this subparagraph 
shall—
‘‘(I) be applied retroactively for 
the first year of an intermediary’s par-
ticipation in the program, based upon 
the actual lending practices of the 
intermediary as determined by the Ad-
ministrator prior to the end of such 
year; and
190
‘‘(II) be based in the second and 
subsequent years of an intermediary’s 
participation in the program, upon the 
actual lending practices of the inter-
mediary during the term of the 
intermediary’s participation in the 
program. 
‘‘(8) LOSS RESERVE OF INTERMEDIARIES.—
‘‘(A) IN
GENERAL.—The Administrator 
shall, by regulation to be codified in the Code of 
Federal Regulations, require each intermediary 
to establish a loan loss reserve fund, and to 
maintain such reserve fund until all obligations 
owed to the Administrator under this subsection 
are repaid. 
‘‘(B) AMOUNT OF RESERVE FUND.—The Ad-
ministrator shall require the loan loss reserve 
fund of an intermediary to be maintained at a 
level equal to 15 percent of the outstanding bal-
ance of the notes receivable owed to the inter-
mediary. 
‘‘(C) REDUCTION OF REQUIRED AMOUNT.—
Notwithstanding subparagraph (B), the Admin-
istrator may reduce the annual loan loss reserve 
requirement of an intermediary to reflect the ac-
191
tual average loan loss rate for the intermediary 
during the preceding 5-year period, except that 
in no case shall the loan loss reserve be reduced 
to less than 10 percent of the outstanding bal-
ance of the notes receivable owed to the inter-
mediary. The Administrator may reduce the an-
nual loan loss reserve requirement of an inter-
mediary under this subparagraph only if the 
intermediary demonstrates to the satisfaction of 
the Administrator that—
‘‘(i) the average annual loss rate for 
the intermediary during the preceding 5-
year period is less than 15 percent; and 
‘‘(ii) no other factors exist that may 
impair the ability of the intermediary to 
repay all obligations owed to the Adminis-
trator under this subsection. 
‘‘(D) REVIEW
BY
ADMINISTRATOR.—After 
the initial 5 years of an intermediary’s partici-
pation in the program authorized by this sub-
section, the Administrator shall, at the request of 
the intermediary, conduct a review of the annual 
loss rate of the intermediary. Any intermediary 
that requests a reduction in its loan loss reserve
192
shall be reviewed based on the most recent 5-year 
period preceding the request. 
‘‘(9) LOANS
TO
SMALL
BUSINESS
CONCERNS 
FROM ELIGIBLE INTERMEDIARIES.—
‘‘(A) IN
GENERAL.—An eligible inter-
mediary shall make fixed rate loans to startup, 
newly established, and growing small business 
concerns from the funds made available to it 
under paragraph (7) for working capital and the 
acquisition of materials, supplies, furniture, fix-
tures, and equipment. 
‘‘(B) LOAN AMOUNT.—To the extent prac-
ticable, each intermediary that operates a 
microloan program under this subsection shall 
maintain a microloan portfolio with an average 
loan size of not more than $15,000. An inter-
mediary may make a loan under this subsection 
of more than $20,000 to a small business concern 
only if such small business concern demonstrates 
that it is unable to obtain credit elsewhere at 
comparable interest rates and that it has good 
prospects for success. In no case shall an inter-
mediary make a loan under this subsection of 
more than $50,000, or have outstanding or com-
mitted to any 1 borrower more than $50,000.
193
‘‘(C) INTEREST
LIMIT.—Notwithstanding 
any State limitation on the rate or amount of 
interest that may be charged, taken, received, or 
reserved on a loan, the maximum rate of interest 
to be charged on a microloan funded under this 
subsection shall not exceed the rate of interest ap-
plicable to a loan made to an intermediary by 
the Administrator—
‘‘(i) in the case of a loan of more than 
$10,000 made by the intermediary to a 
small business concern or entrepreneur by 
more than 7.75 percentage points; and 
‘‘(ii) in the case of a loan of not more 
than $10,000 made by the intermediary to 
a small business concern or entrepreneur by 
more than 8.5 percentage points. 
‘‘(D) REVIEW RESTRICTION.—The Adminis-
trator shall not review individual microloans 
made by intermediaries prior to approval. 
‘‘(E) ESTABLISHMENT OF CHILD CARE OR 
TRANSPORTATION BUSINESSES.—In addition to 
other eligible small businesses concerns, bor-
rowers under any program under this subsection 
may include individuals who will use the loan 
proceeds to establish for-profit or nonprofit child
194
care establishments or businesses providing for-
profit transportation services. 
‘‘(10) PROGRAM FUNDING FOR MICROLOANS.—
‘‘(A) NUMBER
OF
PARTICIPANTS.—Under 
the program authorized by this subsection, the 
Administrator may fund, on a competitive basis, 
not more than 300 intermediaries. 
‘‘(B) MINIMUM ALLOCATION.—Subject to the 
availability of appropriations, of the total 
amount of new loan funds made available for 
award under this subsection in each fiscal year, 
the Administrator shall make available for 
award in each State an amount equal to the sum 
of—
‘‘(i) the lesser of—
‘‘(I) $800,000; or 
‘‘(II) 1⁄55 of the total amount of 
new loan funds made available for 
award under this subsection for that 
fiscal year; and 
‘‘(ii) any additional amount, as deter-
mined by the Administrator. 
‘‘(C) REDISTRIBUTION.—If, at the begin-
ning of the third quarter of a fiscal year, the Ad-
ministrator determines that any portion of the
195
amount made available to carry out this sub-
section is unlikely to be made available under 
subparagraph (B) during that fiscal year, the 
Administrator may make that portion available 
for award in any one or more States without re-
gard to subparagraph (B). 
‘‘(11) EQUITABLE
DISTRIBUTION
OF
INTER-
MEDIARIES.—In approving microloan program appli-
cants and providing funding to intermediaries under 
this subsection, the Administrator shall select and 
provide funding to such intermediaries as will ensure 
appropriate availability of loans for small businesses 
in all industries located throughout each State, par-
ticularly those located in urban and in rural areas. 
‘‘(12) MARKETING, MANAGEMENT
AND
TECH-
NICAL
ASSISTANCE
GRANTS
TO
INTERMEDIARIES.—
The Administrator may make grants described in 
paragraph (2)(B) in accordance with the following re-
quirements: 
‘‘(A) GRANT
AMOUNTS.—Except as other-
wise provided in subparagraph (C) and subject 
to subparagraph (B), each intermediary that re-
ceives a loan under this subsection shall be eligi-
ble to receive a grant to provide marketing, man-
agement, and technical assistance to small busi-
196
ness concerns that are borrowers under this sub-
section. Except as provided in subparagraph (C), 
each intermediary meeting the requirements of 
subparagraph (B) may receive a grant of not 
more than 25 percent of the total outstanding 
balance of loans made to it under this subsection. 
‘‘(B) CONTRIBUTION.—As a condition of 
any grant made under subparagraph (A), the 
Administrator shall require the intermediary to 
contribute an amount equal to 25 percent of the 
amount of the grant, obtained solely from non-
Federal sources. In addition to cash or other di-
rect funding, the contribution may include indi-
rect costs or in-kind contributions paid for under 
non-Federal programs. 
‘‘(C) ADDITIONAL
TECHNICAL
ASSISTANCE 
GRANTS FOR MAKING CERTAIN LOANS.—
‘‘(i) IN GENERAL.—Each intermediary 
that has a portfolio of loans made under 
this subsection that averages not more than 
$10,000 
during 
the 
period 
of 
the 
intermediary’s participation in the pro-
gram shall be eligible to receive a grant 
equal to 5 percent of the total outstanding 
balance of loans made to the intermediary
197
under this subsection, in addition to grants 
made under subparagraph (A). 
‘‘(ii) PURPOSES.—A grant awarded 
under clause (i) may be used to provide 
marketing, management, and technical as-
sistance to small business concerns that are 
borrowers under this subsection. 
‘‘(iii) 
CONTRIBUTION
EXCEPTION.—
The contribution requirements in subpara-
graph (B) do not apply to grants made 
under this subparagraph. 
‘‘(D) ELIGIBILITY FOR MULTIPLE SITES OR 
OFFICES.—The eligibility for a grant described 
in subparagraph (A) or (C) shall be determined 
separately for each loan-making site or office of 
an intermediary. 
‘‘(E) ASSISTANCE TO CERTAIN SMALL BUSI-
NESS CONCERNS.—Each intermediary may ex-
pend grant funds received under this subsection 
to provide information and technical assistance 
to small business concerns that are prospective 
borrowers under this subsection and may enter 
into contracts with third parties to provide such 
information and assistance.
198
‘‘(13) PRIVATE SECTOR BORROWING TECHNICAL 
ASSISTANCE GRANTS.—Grants described in paragraph 
(2)(C) shall be subject to the following requirements: 
‘‘(A) GRANT AMOUNTS.—Subject to the re-
quirements of subparagraph (B), the Adminis-
trator may make not more than 55 grants annu-
ally, each in amounts not to exceed $200,000 for 
the purposes specified in paragraph (2)(C). 
‘‘(B) CONTRIBUTION.—As a condition of 
any grant made under subparagraph (A), the 
Administrator shall require the grant recipient 
to contribute an amount equal to 20 percent of 
the amount of the grant, obtained solely from 
non-Federal sources. In addition to cash or other 
direct funding, the contribution may include in-
direct costs or in-kind contributions paid for 
under non-Federal programs. 
‘‘(14) GRANTS FOR MANAGEMENT, MARKETING, 
TECHNICAL ASSISTANCE, AND RELATED SERVICES.—
‘‘(A) IN
GENERAL.—The Administrator 
may procure technical assistance for inter-
mediaries participating in the Microloan Pro-
gram to ensure that such intermediaries have the 
knowledge, skills, and understanding of micro-
199
lending practices necessary to operate successful 
microloan programs. 
‘‘(B) ASSISTANCE AMOUNT.—The Adminis-
trator shall transfer 7 percent of its annual ap-
propriation for loans and loan guarantees under 
this subsection to the Administration’s Salaries 
and Expense Account for the specific purpose of 
providing 1 or more technical assistance grants 
to experienced microlending organizations and 
national and regional nonprofit organizations 
that have demonstrated experience in providing 
training support for microenterprise development 
and financing to achieve the purpose set forth in 
subparagraph (A). 
‘‘(C) 
WELFARE-TO-ENTREPRENEURSHIP 
MICROLOAN
INITIATIVE.—Of 
amounts 
made 
available to carry out the welfare-to-entrepre-
neurship microloan initiative in any fiscal year, 
the Administrator may use not more than 5 per-
cent to provide technical assistance, either di-
rectly or through contractors, to welfare-to-entre-
preneurship microloan initiative grantees, to en-
sure that, as grantees, they have the knowledge, 
skills, and understanding of microlending and 
welfare-to-entrepreneurship transition, and other
200
related issues, to operate a successful welfare-to-
entrepreneurship microloan initiative. 
‘‘(15) EVALUATION OF WELFARE-TO-ENTREPRE-
NEURSHIP MICROLOAN INITIATIVE.—On January 31, 
1999, and annually thereafter, the Administrator 
shall submit to the Committee on Small Business of 
the House of Representatives and the Committee on 
Small Business and Entrepreneurship of the Senate a 
report on the welfare-to-entrepreneurship microloan 
initiative, including a description of the amounts 
made available to carry out such initiative. 
‘‘(16) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) INTERMEDIARY.—The term ‘inter-
mediary’ means—
‘‘(i) a private, nonprofit entity; 
‘‘(ii) a private, nonprofit community 
development corporation; 
‘‘(iii) a consortium of private, non-
profit organizations or nonprofit commu-
nity development corporations; 
‘‘(iv) a quasi-governmental economic 
development entity (such as a planning and 
development district), other than a State,
201
county, municipal government, or any 
agency thereof, if—
‘‘(I) no application is received 
from an eligible nonprofit organiza-
tion; or 
‘‘(II) the Administrator deter-
mines that the needs of a region or geo-
graphic area are not adequately served 
by an existing, eligible nonprofit orga-
nization that has submitted an appli-
cation; or 
‘‘(v) an agency of or nonprofit entity 
established by a Native American Tribal 
Government, that seeks to borrow or has 
borrowed funds from the Administrator to 
make microloans to small business concerns 
under this subsection. 
‘‘(B) MICROLOAN.—The term ‘microloan’ 
means a fixed rate loan of not more than 
$50,000, made by an intermediary to a startup, 
newly established, or growing small business con-
cern. 
‘‘(C) RURAL AREA.—The term ‘rural area’ 
means any political subdivision or unincor-
porated area—
202
‘‘(i) in a nonmetropolitan county (as 
defined by the Secretary of Agriculture) or 
its equivalent thereof; or 
‘‘(ii) in a metropolitan county or its 
equivalent that has a resident population of 
less than 20,000 if the Administrator has 
determined such political subdivision or 
area to be rural.’’. 
(e) REPEAL OF CERTAIN PROVISIONS OF SECTION 7 
OF THE SMALL BUSINESS ACT.—Section 7 of the Small 
Business Act (15 U.S.C. 636) is amended—
(1) by striking subsection (d) and inserting the 
following: 
‘‘(d) [RESERVED].’’; 
(2) by striking subsection (h) and inserting the 
following: 
‘‘(h) [RESERVED].’’; 
(3) by striking subsection (j) and inserting the 
following: 
‘‘(j) [RESERVED].’’; and 
(4) by striking subsection (k) and inserting the 
following: 
‘‘(k) [RESERVED].’’. 
(f) CONTINUATION OF TEMPORARY PREDISASTER MITI-
GATION PROGRAM.—
203
(1) IN GENERAL.—There is a predisaster mitiga-
tion program under which the Administrator may 
make, under section 7(b)(1) of the Small Business Act 
(15 U.S.C. 636(b)(1)) such loans (either directly or in 
cooperation with banks or other lending institutions 
through agreements to participate on an immediate 
or deferred (guaranteed) basis), as the Administrator 
may determine to be necessary or appropriate, to en-
able small businesses to use mitigation techniques in 
support of a formal mitigation program established 
by the Federal Emergency Management Agency, ex-
cept that no loan or guarantee may be extended to a 
small business under this paragraph unless the Ad-
ministrator finds that the small business is otherwise 
unable to obtain credit for the purposes described in 
this paragraph. 
(2) TERMINATION.—No loan shall be made under 
this subsection after September 30, 2004. 
(g) EFFECTIVE DATE.—The amendments made under 
this section shall apply to loans and grants made, and other 
assistance provided, after the date of the enactment of this 
Act.
204
SEC. 208. GOVERNMENT CONTRACT AND BUSINESS DEVEL-
OPMENT ASSISTANCE FOR SMALL BUSINESS 
CONCERNS, ETC. 
(a) IN GENERAL.—Section 8 of the Small Business Act 
(15 U.S.C. 637) is amended by striking subsections (a), (b), 
and (c) and inserting the following new subsections: 
‘‘(a) GOVERNMENT CONTRACT AND BUSINESS DEVEL-
OPMENT ASSISTANCE FOR SMALL BUSINESS CONCERNS.—
‘‘(1) ESTABLISHMENT.—There is within the Ad-
ministration a program to be carried out by the Ad-
ministrator to enhance the competitive viability of 
program participants by providing Government con-
tract and business development assistance to program 
participants consistent with the requirements of this 
section. 
‘‘(2)(A) CONTRACT AUTHORITY.—The Adminis-
trator shall, to the extent that Administrator deter-
mines it to be necessary or appropriate, enter into 
any contract with any contracting officer obligating 
the Administrator to furnish goods or service to the 
Government. 
‘‘(B) NEGOTIATION
WITH
CONTRACTING
OFFI-
CER.—In any case in which the Administrator cer-
tifies to a contracting officer that the Administrator 
is competent and responsible to perform any procure-
ment contract to be let by such officer, such officer
205
may let such procurement contract to the Adminis-
trator upon such terms and conditions as may be 
agreed upon between the Administrator and such offi-
cer. 
‘‘(C) FAIR MARKET PRICE RESTRICTION.—A con-
tracting officer shall not let a contract for goods or 
services under this paragraph if the amount of such 
contract exceeds the fair market price of such goods 
or services. 
‘‘(D) APPEAL OF CONTRACTING OFFICER DECI-
SION.—(i) Whenever the Administrator and a con-
tracting officer fail to agree, the matter shall be sub-
mitted for determination by the Administrator to the 
head of the agency of the contracting officer. 
‘‘(ii) Not later than 5 days from the date the Ad-
ministrator is notified of a contracting officer’s ad-
verse decision, the Administrator may notify the con-
tracting officer of the intent to appeal such adverse 
decision, and within 15 days of such date the Admin-
istrator shall file a written request for a reconsider-
ation of the adverse decision with head of the agency. 
‘‘(iii) For purposes of this subparagraph, a con-
tracting officer’s adverse decision includes a decision 
not to make available for award pursuant to this sub-
section a particular procurement requirement or the
206
failure to agree on the terms and conditions of a con-
tract to be awarded noncompetitively under the au-
thority of this subsection. 
‘‘(iv) Upon receipt of the notice of intent to ap-
peal, the head of the agency shall suspend further ac-
tion regarding the procurement until a written deci-
sion on the Administrator’s request for reconsider-
ation has been issued by such agency head, unless the 
head of the agency makes a written determination 
that urgent and compelling circumstances which sig-
nificantly affect interests of the United States will not 
permit waiting for a reconsideration of the adverse 
decision. 
‘‘(v) If the Administrator’s request for reconsid-
eration is denied, the head of the agency shall specify 
the reasons why the selected firm was determined to 
be incapable to perform the procurement requirement, 
and the findings supporting such determination, 
which shall be made a part of the contract file for the 
requirement. 
‘‘(E) DETERMINATION OF UNSUITABILITY.—If a 
contracting officer requests the Administrator to make 
the certification described in subparagraph (B) with 
respect to any contract that the Administrator deter-
mines is not suitable for award under this subsection,
304
‘‘(5)(A) The procurement center representatives and 
technical advisers assigned pursuant to this subsection shall 
be—
‘‘(i) full-time employees of the Administration; 
and 
‘‘(ii) fully qualified, technically trained, and fa-
miliar with the supplies and services procured by the 
major procurement center to which they are assigned. 
‘‘(B) In addition to the requirements of subparagraph 
(A), each procurement center representative, and at least 
one technical adviser assigned to such representative, shall 
be an accredited engineer. 
‘‘(C) The Administrator shall establish personnel posi-
tions for procurement representatives and advisers assigned 
pursuant to this subsection which are classified at a grade 
level of the General Schedule sufficient to attract and retain 
highly qualified personnel. 
‘‘(6) For purposes of this subsection, the term ‘major 
procurement center’ means a procurement center that, in 
the opinion of the Administrator, purchases substantial dol-
lar amounts of other than commercial items and which has 
the potential to incur significant savings as the result of 
the placement of a procurement center representative. 
‘‘(7)(A) At such times as the Administrator deems ap-
propriate, the procurement center representative shall con-