I
103D CONGRESS
2D SESSION
H. R. 4686
To provide limited relief from high interest rates in certain debentures guaran-
teed or purchased by the Small Business Administration, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 30, 1994
Mr. LAFALCE introduced the following bill; which was referred to the
Committee on Small Business
A BILL
To provide limited relief from high interest rates in certain
debentures guaranteed or purchased by the Small Busi-
ness Administration, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
That this Act may be cited as the ‘‘Small Business Pre-
payment Penalty Relief Act of 1994’’.
SEC. 2. MODIFICATION OF DEVELOPMENT COMPANY DE-
BENTURE INTEREST RATES.
(a) IN GENERAL.—Upon the request of the issuer
and the concurrence of the borrower, the Small Business
Administration is authorized to transfer to the Federal Fi-
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nancing Bank such sums as may be necessary to carry
out the provisions of this section in order to reduce the
interest rate on a debenture issued by a certified develop-
ment company. The reduction shall be effective January
2, 1995 and shall apply for the remainder of the term
of the debenture.
(b) INTEREST RATE MODIFICATION.—Upon receipt
of such payment, the Federal Financing Bank shall mod-
ify the interest rate of each debenture for which the pay-
ment is made. No other change shall be made in the terms
and conditions of the debenture, and the modification in
the interest rate shall not be construed as new budget au-
thority nor require any additional appropriation for credit
subsidy on account of the modification.
(c) DEFINITIONS.—For the purposes of this sec-
tion—
(1) the term ‘‘issuer’’ means the issuer of a de-
benture pursuant to section 503 of the Small Busi-
ness Investment Act of 1958 which has been pur-
chased by the Federal Financing Bank if the deben-
ture is outstanding on the date of enactment of this
Act, and neither the loan that secures the debenture
nor the debenture is in default on such date; and
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(2) the term ‘‘borrower’’ means the small busi-
ness concern whose loan secures a debenture issued
pursuant to such section.
(d) OTHER RIGHTS.—A modification of the interest
rate on a debenture as authorized in this section shall not
affect any rights or options of the issuer or borrower which
are otherwise authorized by contract or by law.
(e) REFINANCING.—Debentures authorized by sec-
tions 504 and 505 of the Small Business Investment Act
of 1958 may be used to refinance debentures issued under
section 503 of such Act if the amount of the new financing
is limited to such amounts as are needed to repay the ex-
isting debenture, including any prepayment penalty im-
posed by the Federal Financing Bank. Any such refinanc-
ing shall be subject to all of the other provisions of sec-
tions 504 and 505 of such Act and the rules and regula-
tions of the Administration promulgated thereunder, in-
cluding, but not limited to, rules and regulations govern-
ing payment of authorized expenses and commissions, fees
and discounts to brokers and dealers in trust certificates
issued pursuant to section 505: Provided, however, That
no applicant for refinancing under section 504 of this Act
need demonstrate that the requisite number of jobs will
be created or preserved with the proceeds of such refinanc-
ing: And provided further, That a development company
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which provides refinancing under this subsection shall be
limited to a loan processing fee not to exceed one-half of
one percent to cover the cost of packaging, processing and
other nonlegal staff functions.
SEC. 3. MODIFICATION OF SMALL BUSINESS INVESTMENT
COMPANY DEBENTURE INTEREST RATES.
(a) IN GENERAL.—Upon the request of the issuer,
the Small Business Administration is authorized to trans-
fer to the Federal Financing Bank such sums as may be
necessary to carry out the provisions of this section in
order to reduce the interest rate on a debenture issued
by a Small Business Investment Company under the provi-
sions of title III of the Small Business Investment Act
of 1958. The reduction shall be effective January 2, 1995
and shall apply for the remainder of the term of the deben-
ture.
(b) INTEREST RATE MODIFICATION.—Upon receipt
of such payment, the Federal Financing Bank shall mod-
ify the interest rate of each debenture for which the pay-
ment is made. No other change shall be made in the terms
and conditions of the debenture, and the modification in
the interest rate shall not be construed as new budget au-
thority nor require any additional appropriation for credit
subsidy on account of the modification.