I
103D CONGRESS
1ST SESSION
H. R. 3655
To authorize the Small Business Administration to reduce the interest rate
on certain outstanding debentures, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 22, 1993
Mr. LAFALCE introduced the following bill; which was referred to the
Committee on Small Business
A BILL
To authorize the Small Business Administration to reduce
the interest rate on certain outstanding debentures, 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 1993’’.
TITLE II
SEC. 201. BUY-DOWNS AND INTEREST RATE RE-
DUCTIONS.—(a) Upon the request of the issuer, annually
the Administration is authorized to buy-down the interest
rate on any debenture purchased by the Federal Financing
Bank (1) which has been issued by a development com-
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pany pursuant to the provisions of section 503 of the In-
vestment Act or (2) which has been issued by a small busi-
ness investment company pursuant to the provisions of
section 303 of such Act. The buy-down shall be limited
to the current year only. As used in this section, the term
‘‘buy-down’’ means a payment from the Administration to
the Federal Financing Bank in an amount determined by
the Administration to reduce the interest payment for that
year to an amount equal to 7.5 per centum of the out-
standing principal amount of the debenture.
(b) Upon the request of the issuer, annually the Ad-
ministration is authorized to reduce the interest rate on
any debenture issued by a small business investment com-
pany licensed pursuant to the provisions of section 301(d)
of the Investment Act. The reduction shall be limited to
the current year only. The amount of the reduction shall
be an amount determined by the Administration to make
the interest payment for that year equal to 7.5 per centum
of the outstanding principal amount of the debenture, less
the amount of any other reductions or credits otherwise
provided by law.
TITLE III
SEC. 301. PREPAYMENTS.—(a) Annually, after the
regular Appropriations Act has been signed into law pro-
viding funding for the Administration, the Administration
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shall calculate the amount needed to carry out the provi-
sions of section 201 of this Act. If it determines that it
has sufficient funding to fully carry out the buy-downs and
reductions authorized by such section, it shall obtain from
the Federal Financing Bank a computation of the amount
of the prepayment penalty which would be required from
the issuer of each such debenture if it was prepaid as of
the end of the current fiscal year. The Administration
shall also compute the amount of the prepayment penalty
on 301(d) debentures as if such debentures had been sold
to the Federal Financing Bank.
(b) After making the above determinations, the Ad-
ministration shall promptly notify the issuer of each de-
benture subject to the provisions of section 201 of this
Act that it will receive offers from any interested issuer
to prepay the debenture in full. The issuer shall include
in any offer amount of the full prepayment penalty, or
assumed prepayment penalty in the case of a debenture
from a 301(d) issuer, less any amount proposed by the
issuer to be paid by the Administration pursuant to the
provisions of this title. The notification to the issuer shall
include such information as the Administration determines
to be appropriate, but shall include—
(1) the amount of funds available to carry out
this title;
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(2) a computation of the total amount of the
prepayment penalties and assumed prepayment pen-
alties if all issuers prepaid;
(3) the amount of the prepayment penalty or
assumed prepayment penalty for the issuer receiving
the notification;
(4) the time period during which the Adminis-
tration will accept offers; and
(5) a description of the process under which the
Administration will evaluate, give priority to, and ac-
cept submission of offers pursuant to this title.
(c) Within 30 days after termination of the period
for submission of offers, the Administration shall evaluate
each offer and shall assign each a priority. The priority
shall be based upon the per centum of the prepayment
penalty which the issuer offers to pay, with the highest
per centum receiving the highest priority. The Administra-
tion shall approve offers beginning with the one with the
highest priority and continuing until it utilizes all funds
available to carry out this title in the current fiscal year.
SEC. 302. PREPAYING DEVELOPMENT COMPANY DE-
BENTURES.—(a) For purposes of this section, the term
‘‘issuer’’ means the issuer of a debenture which has been
purchased by the Federal Financing Bank pursuant to
section 503 of the Investment Act, and the term ‘‘bor-
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rower’’ means the small business concern whose loan se-
cures a debenture issued pursuant to such section.
(b) The issuer of a debenture purchased by the Fed-
eral Financing Bank and guaranteed by the Small Busi-
ness Administration under section 503 of the Investment
Act may offer to prepay such debenture pursuant to sec-
tion 301 of this Act: Provided, That—
(1) the debenture is outstanding on the date of
enactment of this Act, and neither the loan that se-
cures the debenture nor the debenture is in default
on the date the prepayment is made;
(2) State or personal funds, which may include
refinancing under the programs authorized by sec-
tions 504 and 505 of the Investment Act are used
to prepay the debenture; and
(3) the issuer certifies that the benefits, net of
fees and expenses authorized herein, associated with
prepayment of the debenture are entirely passed
through to the borrower.
(c) No fees or penalties other than those specified in
this section may be imposed as a condition of such prepay-
ment against the issuer or the borrower, or the Adminis-
tration or any fund or account administered by the Admin-
istration, except as provided in this Act. If the debenture
is prepaid or refinanced other than through section 504,
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the issuer may require the borrower or pay a fee to the
issuer in an amount equal to one-half of one percent of
the unpaid principal balance of the debenture. If a deben-
ture is refinanced with a guarantee pursuant to section
504, the issuer may require the borrower to pay a fee to
the issuer in an amount equal to one-fourth of one percent
of the unpaid balance of the debenture.
(d) Debentures refinanced under section 504 shall be
subject to all of the other provisions of sections 504 and
505 of the Investment Act and the rules and regulations
of the Administration promulgated thereunder, including,
but not limited to, payment of authorized expenses and
commissions, fees and discounts to brokers and dealers in
trust certificates issued pursuant to section 505: Provided
however, That the issuer shall be deemed to have waived
any origination fee on the new debenture to which it other-
wise would have been entitled.
SEC. 303. PREPAYING SPECIALIZED SMALL BUSI-
NESS INVESTMENT COMPANY DEBENTURES.—(a) Any
specialized small business investment company which is
the issuer of a debenture purchased by the Administration
under title III of the Investment Act may offer to prepay
the debenture pursuant to the provisions of section 301
of this Act: Provided, That—
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(1) the debenture is outstanding on the date of
enactment of this Act and is not in default on the
date the prepayment is made; and
(2) personal funds, which may include refinanc-
ing with proceeds of debentures under title III of the
Investment Act, are used to prepay the debenture,
except that if new guaranteed debenture proceeds
are utilized, the length of time of the interest rate
reduction authorized by such title shall be reduced
by the length of time the issuer received an interest
rate reduction on the debenture being prepaid.
(b) No fees or penalties other than those specified
in this section may be imposed as a condition of such pre-
payment against the issuer, the Administration or any
fund or account administered by the Administration, ex-
cept as expressly provided herein.
SEC. 304. PREPAYING REGULAR SMALL BUSINESS
INVESTMENT COMPANY DEBENTURES.—(a) Any small
business investment company which is the issuer of a de-
benture guaranteed by the Administration under title III
of the Investment Act and purchased by the Federal Fi-
nancing Bank may offer to prepay the debenture pursuant
to section 301 of this Act: Provided, That—
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(1) the debenture is outstanding on the date of
enactment of this Act and is not in default on the
date the prepayment is made; and
(2) personal funds, which may include refinanc-
ing with proceeds of guaranteed debentures under
title III of the Investment Act, are used to prepay
the debenture.
(b) No fees or penalties other than those specified
in this section may be imposed as a condition of such pre-
payment against the issuer, the Administration or any
fund or account administered by the Administration, ex-
cept as expressly provided herein.
(c) Debentures refinanced under title III of the In-
vestment Act shall be subject to all of the other provisions
of such Act, including, but not limited to, payment of au-
thorized expenses and commissions, fees or discounts to
brokers and dealers in trust certificates issued pursuant
to section 321.
TITLE IV
SEC. 401. MISCELLANEOUS PROVISIONS.—(a) The
provisions of this Act are exercisable at the option of the
borrower under section 302 of this Act or at the option
of a small business investment company under sections
303 and 304 of this Act and are in addition to any prepay-
ment options otherwise authorized by law.
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(b) Within sixty days of the date of enactment of this
Act, the Small Business Administration shall issue regula-
tions to implement this Act.
(c) Any new credit or spending authority provided for
in this Act is subject to amounts provided for in advance
in appropriations acts.
SEC. 402. AUTHORIZATION.—(a) There are author-
ized to be appropriated such sums as may be necessary
to carry out the provisions of this Act.
(b) In the administration of this Act, the Administra-
tion shall not obligate any funds pursuant to title III of
this Act in any fiscal year unless it has provided the full
amount of assistance authorized and requested pursuant
to title II of this Act.
(c) If sufficient funds are not appropriated for any
fiscal year to fully carry out the buy-downs and reductions
authorized and requested pursuant to title II of this Act,
the Administration shall buy-down and reduce the interest
rates to the extent that funds are available for that year,
but may not utilize any funds to carry out title III.
SEC. 403. As used in this Act—
(a) the term ‘‘Administration’’ means the Small
Business Administration; and
(b) the term ‘‘Investment Act’’ means the Small
Business Investment Act of 1958.