I
105TH CONGRESS
1ST SESSION
H. R. 974
To amend title 10, United States Code, to restore the Department of Defense
loan guarantee program for small and medium-sized business concerns
that are economically dependent on defense expenditures.
IN THE HOUSE OF REPRESENTATIVES
MARCH 6, 1997
Mr. FORBES (for himself and Mrs. MCCARTHY of New York) introduced the
following bill; which was referred to the Committee on National Security
A BILL
To amend title 10, United States Code, to restore the De-
partment of Defense loan guarantee program for small
and medium-sized business concerns that are economi-
cally dependent on defense expenditures.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. RESTORATION OF LOAN GUARANTEE PRO-
GRAM FOR DEFENSE DEPENDENT SMALL
AND MEDIUM-SIZED BUSINESS CONCERNS.
(a) DELTA LOAN
GUARANTEE
PROGRAM.—(1)
Chapter 148 of title 10, United States Code, is amended
by inserting before section 2525 the following new section:
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‘‘§ 2524. Loan guarantees for defense dependent small
and medium-sized business concerns
‘‘(a) LOAN GUARANTEES AUTHORIZED.—The Sec-
retary of Defense may provide support under this section
for programs sponsored by the Federal Government, re-
gional entities, States, local governments, and private enti-
ties and nonprofit organizations that assist small business
concerns and medium-sized business concerns that are
economically dependent on defense expenditures to acquire
dual-use capabilities through the provision of loan guaran-
tees to such business concerns under the terms and condi-
tions specified under this section and other applicable law.
‘‘(b) TRANSFER OF ADMINISTRATION.—(1) The Sec-
retary of Defense may enter into a memorandum of under-
standing with the Administrator of the Small Business
Administration, the Administrator of the Economic Devel-
opment Administration of the Department of Commerce,
or the head of any other Federal agency having expertise
regarding the provision of loan guarantees, under which
the agency may—
‘‘(A) process applications for loan guarantees
under this section;
‘‘(B) guarantee repayment of the resulting
loans; and
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‘‘(C) provide any other services to the Secretary
to administer the loan guarantee program under this
section.
‘‘(2) From funds made available for the loan guaran-
tee program under this section, the Secretary of Defense
may transfer to the agency or agencies that are parties
to the memorandum of understanding such sums as may
be necessary for the agency or agencies to carry out activi-
ties under the loan guarantee program.
‘‘(3) The Secretary of Defense shall enter into the
memorandum of understanding authorized by paragraph
(1) within 60 days after the date of the enactment of this
section.
‘‘(c) CONDITION
ON OPERATION.—The Secretary
shall carry out the loan guarantee program authorized
under this section during any fiscal year for which funds
are specifically made available to cover the costs of loan
guarantees to be issued pursuant to such section.
‘‘(d) SPECIAL REQUIREMENTS REGARDING LOAN
GUARANTEES.—(1) Competitive procedures shall be used
in the selection of small business concerns and medium-
sized business concerns to receive loan guarantees under
this section.
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of other funds to acquire) capital equipment to mod-
ernize or expand the facilities of the borrower to en-
able the borrower to remain in the national tech-
nology and industrial base available to the Depart-
ment of Defense.
‘‘(3) Except as provided in paragraph (4), to be eligi-
ble for a loan guarantee under this section, a borrower
must demonstrate to the satisfaction of the Secretary that,
during any one of the seven preceding operating years of
the borrower, at least 25 percent of the value of the bor-
rower’s sales were derived from—
‘‘(A) contracts with the Department of Defense
or the defense-related activities of the Department of
Energy; or
‘‘(B) subcontracts in support of defense-related
prime contracts.
‘‘(4)(A) An individual described in subparagraph (B)
shall be eligible for a loan guarantee under this section
to establish, or acquire and operate, a small business con-
cern in an area that the Secretary determines is (or rea-
sonably can be expected to be) detrimentally affected by
reductions in defense spending, the termination or can-
cellation of a defense contract, the failure to proceed with
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an approved major weapon system, the merger or consoli-
dation of the operations of a defense contractor, or the
closure or realignment of a military installation.
‘‘(B) An individual referred to in subparagraph (A)
is an individual—
‘‘(i) who is a former employee of the Depart-
ment of Defense or a defense contractor; and
‘‘(ii) whose employment was terminated as a re-
sult of reductions in defense spending, the termi-
nation or cancellation of a defense contract, the fail-
ure to proceed with an approved major weapon sys-
tem, the merger or consolidation of the operations of
a defense contractor, or the closure or realignment
of a military installation.
‘‘(e) MAXIMUM AMOUNT OF LOAN PRINCIPAL.—The
maximum amount of loan principal for which the Sec-
retary may provide a guarantee under this section during
a fiscal year may not exceed—
‘‘(1) $1,250,000, with respect to a small busi-
ness concern; and
‘‘(2) $10,000,000 with respect to a medium-
sized business concern.
‘‘(f) LOAN GUARANTY RATE.—The maximum allow-
able guarantee percentage for loans guaranteed under this
section may not exceed 90 percent.
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‘‘(g) ALLOCATION OF FUNDS BETWEEN SMALL AND
MEDIUM BUSINESSES.—The total amount available for a
fiscal year to cover the costs of loan guarantees under this
section shall be divided between small business concerns
and medium-sized business concerns as follows:
‘‘(A) 60 percent for small business concerns.
‘‘(B) 40 percent for medium-sized business con-
cerns.
‘‘(h) MEDIUM-SIZED
BUSINESS
CONCERN
DE-
FINED.—In this section, the term ‘medium-sized business
concern’ means a business concern that is not more than
two times the maximum size specified by the Adminis-
trator of the Small Business Administration for purposes
of determining whether a business concern furnishing a
product or service is a small business concern.’’.
(2) The table of sections at the beginning of sub-
chapter IV of such chapter is amended by inserting before
the item relating to section 2525 the following new item:
‘‘2524. Loan guarantees for defense dependent small- and medium-sized busi-
ness concerns.’’.
(b) 
CONTINUED
AVAILABILITY
OF
EXISTING
FUNDS.—The funds made available under the second pro-
viso under the heading ‘‘RESEARCH, DEVELOPMENT,
TEST AND EVALUATION, DEFENSE-WIDE’’ in Public Law
103–335 (108 Stat. 2613) shall be available until Septem-
ber 30, 1999—
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(1) to cover the costs (as defined in section
502(5) of the Federal Credit Reform Act of 1990 (2
U.S.C. 661a(5))) of loan guarantees issued under
section 2524 of title 10, United States Code, as
added by subsection (a); and
(2) to cover the reasonable costs of the adminis-
tration of loan guarantees referred to in such sec-
tion.
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