1B
Union Calendar No. 396
104TH CONGRESS
2D SESSION
H. R. 3719
[Report No. 104–750]
To amend the Small Business Act and Small Business Investment Act of
1958.
IN THE HOUSE OF REPRESENTATIVES
JUNE 26, 1996
Mrs. MEYERS of Kansas introduced the following bill; which was referred to
the Committee on Small Business
AUGUST 2, 1996
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on June 26, 1996]
A BILL
To amend the Small Business Act and Small Business
Investment Act of 1958.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Small Business Programs Improvement Act of 1996’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title; table of contents.
Sec. 2. Administrator defined.
Sec. 3. Effective date.
TITLE I—AMENDMENTS TO SMALL BUSINESS ACT
Sec. 101. References.
Sec. 102. Risk management database.
Sec. 103. Section 7(a) loan program.
Sec. 104. Disaster loan program.
Sec. 105. Microloan demonstration program.
Sec. 106. Small business development center program.
Sec. 107. Miscellaneous authorities to provide loans and other financial assist-
ance.
Sec. 108. Small business competitiveness demonstration program.
Sec. 109. Amendment to Small Business Guaranteed Credit Enhancement Act of
1993.
Sec. 110. 1998 authorizations.
Sec. 111. Level of participation for export working capital loans.
TITLE II—AMENDMENTS TO SMALL BUSINESS INVESTMENT ACT
Sec. 201. References.
Sec. 202. Modifications to development company debenture program.
Sec. 203. Required actions upon default.
Sec. 204. Loan liquidation pilot program.
Sec. 205. Registration of certificates.
Sec. 206. Preferred surety bond guarantee program.
SEC. 2. ADMINISTRATOR DEFINED.
In this Act, the term ‘‘Administrator’’ means the Ad-
ministrator of the Small Business Administration.
SEC. 3. EFFECTIVE DATE.
Except as otherwise expressly provided, this Act and
the amendments made by this Act shall take effect on Octo-
ber 1, 1996.
TITLE I—AMENDMENTS TO
SMALL BUSINESS ACT
SEC. 101. REFERENCES.
Except as otherwise expressly provided, whenever in
this title an amendment or repeal is expressed in terms of
an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or
other provision of the Small Business Act (15 U.S.C. 631
et seq.).
SEC. 102. RISK MANAGEMENT DATABASE.
Section 4(b) (15 U.S.C. 633) is amended by inserting
after paragraph (2) the following:
‘‘(3) RISK MANAGEMENT DATABASE.—
‘‘(A) ESTABLISHMENT.—The Administra-
tion shall establish, within the management sys-
tem for the loan programs authorized by sub-
sections (a) and (b) of section 7 of this Act and
title V of the Small Business Investment Act of
1958, a management information system that
will generate a database capable of providing
timely and accurate information in order to
identify loan underwriting, collections, recovery,
and liquidation problems.
‘‘(B) INFORMATION TO BE MAINTAINED.—In
addition to such other information as the Ad-
ministration considers appropriate, the database
established under subparagraph (A) shall, with
respect to each loan program described in sub-
paragraph (A), include information relating
to—
‘‘(i) the identity of the institution
making the guaranteed loan or issuing the
debenture;
‘‘(ii) the identity of the borrower;
‘‘(iii) the total dollar amount of the
loan or debenture;
‘‘(iv) the total dollar amount of govern-
ment exposure in each loan;
‘‘(v) the district of the Administration
in which the borrower has its principal of-
fice;
‘‘(vi) the borrower’s principal line of
business, as identified by Standard Indus-
trial Classification Code (or any successor
to that system);
‘‘(vii) the delinquency rate for each
program (including number of instances
and days overdue);
‘‘(viii) the number of defaults in each
program (including losses and recoveries);
‘‘(ix) the number of deferrals or
forbearances in each program (including
days and number of instances); and
‘‘(x) comparisons on the basis of loan
program, lender, Administration district
and region, for all the data elements main-
tained.
‘‘(C) DEADLINE
FOR
OPERATIONAL
CAPA-
BILITY.—The database established under sub-
paragraph (A) shall be operational not later
than March 31, 1997, and shall capture data be-
ginning on the first day of the first quarter of
fiscal year 1997 beginning after such date and
thereafter.’’.
SEC. 103. SECTION 7(a) LOAN PROGRAM.
(a) SERVICING AND LIQUIDATION OF LOANS BY PRE-
FERRED LENDERS.—Section 7(a)(2)(C)(ii)(II) (15 U.S.C.
636(a)(2)(C)(ii)(II)) is amended to read as follows:
‘‘(II) complete authority to service
and liquidate such loans without ob-
taining the prior specific approval of
the Administration for routine servic-
ing and liquidation activities, but
shall not take any actions creating an
actual or apparent conflict of inter-
est.’’.
(b) CERTIFIED LENDERS PROGRAM.—Section 7(a)(19)
(15 U.S.C. 636(a)(19)) is amended to read as follows:
‘‘(19)(A) CERTIFIED LENDERS PROGRAM.—
‘‘(i) ESTABLISHMENT.—In addition to the
Preferred Lenders Program authorized by the
proviso in section 5(b)(7), the Administration is
authorized to establish a Certified Lenders Pro-
gram for lenders who establish their knowledge of
Administration laws and regulations concerning
the guaranteed loan program and their pro-
ficiency in program requirements.
‘‘(ii) SUSPENSION AND REVOCATION.—The
designation of a lender as a certified lender shall
be suspended or revoked at any time that the Ad-
ministration determines that the lender is not
adhering to its rules and regulations or that the
loss experience of the lender is excessive as com-
pared to other lenders, but such suspension or
revocation shall not affect any outstanding guar-
antee.
‘‘(B) UNIFORM AND SIMPLIFIED LOAN FORMS.—
In order to encourage all lending institutions and
other entities making loans authorized under this sub-
section to provide loans of $50,000 or less in guaran-
tees to eligible small business loan applicants, the Ad-
ministration shall develop and allow participating
lenders to solely utilize a uniform and simplified loan
form for such loans.
‘‘(C) LOW
DOCUMENTATION
LOAN
PROGRAM.—
The Administrator may carry out the low documenta-
tion loan program for loans of $100,000 or less only
through Preferred Lenders and Certified Lenders, or
lenders with significant experience making small
business loans. The Administration shall give special
consideration to lenders who have made loans under
the authority of this section. The Administrator shall
promulgate regulations defining the experience nec-
essary for lenders other than Preferred or Certified
Lenders for participation as a lender in the low docu-
mentation loan program no later than 90 days after
the date of enactment of this subsection.
‘‘(D) AUTHORITY LIQUIDATE LOANS.—
‘‘(i) IN
GENERAL.—Lenders participating
in the Certified Lenders Program shall have au-
thority to liquidate loans made with a guarantee
from the Administration.
‘‘(ii) APPROVAL.—The Administrator has
the authority to require a certified lender to re-
quest approval of a routine liquidation activity,
and if the Administrator does not approve or
deny a request made by a certified lender within
a period of 3 business days, such request shall be
deemed to be approved.
‘‘(E) LOW DOCUMENTATION LOAN PROGRAM SUB-
SIDY RATE.—The Administrator shall with the assist-
ance of the Director of the Office of Management and
Budget establish and monitor, on an annual basis,
the subsidy rate for the low documentation loan pro-
gram, independently of other loans authorized by this
section.’’.
(c) LIMITATION ON CONDUCTING PILOT PROJECTS.—
Section 7(a) (15 U.S.C. 636(a)) is amended by adding at
the end the following new paragraph:
‘‘(25) 
LIMITATION
ON
CONDUCTING
PILOT
PROJECTS.—
‘‘(A) IN GENERAL.—Not more than 10 per-
cent of the total number of loans guaranteed in
any fiscal year under this subsection may be
awarded as part of a pilot program which is
commenced by the Administrator on or after Oc-
tober 1, 1996.
‘‘(B) PILOT
PROGRAM
DEFINED.—In this
paragraph, the term ‘pilot program’ means any
lending program initiative, project, innovation,
or other activity not specifically authorized by
law.’’.
(d) SECURITIZATION OF UNGUARANTEED PORTIONS
OF SBA LOANS.—Section 5(f)(3) (15 U.S.C. 634(f)(3)) is
amended by adding at the end the following: ‘‘The Adminis-
tration may not prohibit a lender from securitizing the non-
guaranteed portion of any loan made under section 7(a).
In order to reduce the risk of loss to the government in the
event of default, the Administration shall require all lenders
securitizing, or requesting Administration approval for the
securitization of the nonguaranteed portion of any loan
after August 1, 1996, to retain exposure of up to 10 percent
of the amount of the loan, which percentage shall be appli-
cable uniformly to both depository institutions and other
lenders.’’.
(e) CONDITIONS ON PURCHASE OF LOANS.—
(1) SERVICING FEE.—Section 5(g)(5) (15 U.S.C.
634(g)(5)) is amended by adding at the end the fol-
lowing:
‘‘(C) In the event the Administration pays a claim
under a guarantee issued under this Act, the servicing fees
paid to the lender from the earliest date of default to the
date of payment of the claim shall be no more than the
agreed upon rate, minus one percent.’’.
(2) PAYMENT OF ACCRUED INTEREST.—Section
7(a)(17) is amended—
(A) by striking ‘‘(17) The Administration’’
and inserting ‘‘(17)(A) The Administration’’;
and
(B) by adding at the end the following:
‘‘(B) Any bank or other lending institution mak-
ing a claim for payment on the guaranteed portion
of a loan made under this subsection shall be paid the
accrued interest due on the loan from the earliest date
of default to the date of payment of the claim at a
rate not to exceed the rate of interest on the loan on
the date of default, minus one percent.’’.
(f) PLAN FOR TRANSFER OF LOAN SERVICING FUNC-
TIONS TO CENTRALIZED CENTERS.—
(1) IMPLEMENTATION
PLAN
REQUIRED.—The
Administrator of the Small Business Administration
shall submit a detailed plan for consolidating, in one
or more centralized centers, the performance of the
various functions relating to the servicing of loans di-
rectly made or guaranteed by the Administration
pursuant to the Small Business Act, addressing the
matters described in paragraph (2) by the deadline
specified in paragraph (3).
(2) CONTENTS OF PLAN.—In addition to such
other matters as the Administrator may deem appro-
priate, the plan required by paragraph (1) shall in-
clude—
(A) the proposed number and location of
such centralized loan processing centers;
(B) the proposed workload (identified by
type and numbers of loans and their geographic
origin by the Small Business Administration
district office) and staffing of each such center;
(C) a detailed, time-phased plan for the
transfer of the identified loan servicing functions
to each proposed center; and
(D) any identified impediments to the time-
ly execution of the proposed plan (including ade-
quacy of available financial resources, availabil-
ity of needed personnel, facilities, and related
equipment) 
and 
the 
Administrator’s 
rec-
ommendations for addressing such impediments.
(3) DEADLINE FOR SUBMISSION.—The plan re-
quired by paragraph (1) shall be submitted to the
Committees on the Small Business of the House of
Representatives and Senate not later than February
28, 1997.
(g) PREFERRED LENDER STANDARD REVIEW PRO-
GRAM.—Not later than 60 days after the date of enactment
of this Act, the Administrator shall issue a request for pro-
posals regarding the standard review program for the Pre-
ferred Lender Program established by section 5(b)(7) of the
Small Business Act (15 U.S.C. 634(b)(7)). The Adminis-