I
105TH CONGRESS
1ST SESSION
H. R. 1985
To amend the Small Business Investment Act of 1958, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 19, 1997
Mr. LAFALCE (for himself, Mr. TALENT, Mr. SISISKY, Mr. WEYGAND, and
Mr. PASCRELL) introduced the following bill; which was referred to the
Committee on Small Business
A BILL
To amend the Small Business Investment Act of 1958, 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 ‘‘Certified Development
Company Enhancement and Improvement Act of 1997’’.
SEC. 2. Section 20 of the Small Business Act (15
U.S.C. 631 note) is amended by inserting the following
new subsection:
‘‘(r) The following program levels are authorized in
financings as provided in section 7(a)(13) and section 504
of the Small Business Investment Act of 1958:
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‘‘(1) $3,000,000,000 for fiscal year 1998;
‘‘(2) $3,500,000,000 for fiscal year 1999; and
‘‘(3) $4,500,000,000 for fiscal year 2000.’’.
SEC. 3. Section 503 of the Small Business Invest-
ment Act of 1958 (15 U.S.C. 697) is amended—
(a) by striking subsection (b)(7)(A) and insert-
ing the following:
‘‘(A) assesses and collects a fee, which
shall be payable by the borrower, in an amount
equal to 0.9375 percent per year of the out-
standing balance of the loan; and’’;
(b) by striking from subsection (d)(2) ‘‘equal to
50 basis points’’ and inserting ‘‘equal to not more
than 50 basis points’’;
(c) by adding the following at the end of sub-
section (d)(2): ‘‘The amount of the fee authorized
herein shall be established annually by the Adminis-
tration in the minimal amount necessary to reduce
the cost (as that term is defined in section 502 of
the Federal Credit Reform Act of 1990) to the Ad-
ministration of purchasing and guaranteeing deben-
tures under this Act to zero.’’; and
(d) by striking from subsection (f) ‘‘1997’’ and
inserting ‘‘2000’’.
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SEC. 4. Section 508(a) of the Small Business Invest-
ment Act of 1958 (15 U.S.C. 697e(a)) is amended by
striking ‘‘not more than 15’’.
SEC. 5. Section 508(b)(2) of the Small Business In-
vestment Act of 1958 (15 U.S.C. 697e(b)(2)) is amended
by striking paragraphs (A) and (B) and inserting:
‘‘(A) is an active certified development
company in good standing and has been an ac-
tive participant in the accredited lenders pro-
gram during the entire 12-month period preced-
ing the date on which the company submits an
application under paragraph (1), except that
the Administration may waive this requirement
if the company is qualified to participate in the
accredited lenders program;
‘‘(B) has a history (i) of submitting to the
Administration adequately analyzed debenture
guarantee application packages and (ii) of prop-
erly closing section 504 loans and servicing its
loan portfolio; and’’.
SEC. 6. Section 508(c) of the Small Business Invest-
ment Act of 1958 (15 U.S.C. 697e(c)) is amended to read
as follows:
‘‘(c) LOSS RESERVE.—
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‘‘(1) ESTABLISHMENT.—A company designated
as a premier certified lender shall establish a loss re-
serve for financings approved pursuant to this sec-
tion.
‘‘(2) AMOUNT.—The amount of the loss reserve
shall be equal to 10 percent of the amount of the
company’s exposure as determined under subsection
(b)(2)(C).
‘‘(3) ASSETS.—The loss reserve shall be com-
prised of any combination of the following types of
assets:
‘‘(A) segregated funds on deposit in an ac-
count or accounts with a federally insured de-
pository institution or institutions selected by
the company, subject to a collateral assignment
in favor of, and in a format acceptable to, the
Administration; or
‘‘(B) irrevocable letter or letters of credit,
with a collateral assignment in favor of, and a
commercially reasonable format acceptable to,
the Administration.
‘‘(4) CONTRIBUTIONS.—The company shall
make contributions to the loss reserve, either cash or
letters of credit as provided above, in the following
amounts and at the following intervals;
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‘‘(A) 50 percent when a debenture is
closed;
‘‘(B) 25 percent additional not later than
1 year after a debenture is closed; and
‘‘(C) 25 percent additional not later than
2 years after a debenture is closed.
‘‘(5) REPLENISHMENT.—If a loss has been sus-
tained by the Administration, any portion of the loss
reserve, and other funds provided by the premier
company as necessary, may be used to reimburse the
Administration for the company’s 10 percent share
of the loss as provided in subsection (b)(2)(C). If the
company utilizes the reserve, within 30 days it shall
replace an equivalent amount of funds.
‘‘(6) 
DISBURSEMENTS.—The 
Administration
shall allow the certified development company to
withdraw from the loss reserve amounts attributable
to any debenture which has been repaid.’’
SEC. 7. Section 508 of the Small Business Invest-
ment Act of 1958 (15 U.S.C. 697e) is amended by insert-
ing the following after subsection (d) and by redesignating
subsections (e) to (i) as (f) to (j):
‘‘(e) PROGRAM GOALS.—Certified development com-
panies participating in this program shall establish a goal
of processing a minimum of at least 50 percent of their
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loan applications for section 504 assistance pursuant to
the premier certified lender program authorized in this
section.’’.
SEC. 8. Section 508(g) of the Small Business Invest-
ment Act of 1958 (15 U.S.C. 697e(g)), as redesignated
herein, is amended by striking ‘‘State or local’’ and insert-
ing ‘‘certified’’.
SEC. 9. Section 508(h) of the Small Business Invest-
ment Act of 1958 (15U.S.C. 697e(h)), as redesignated
herein, is amended—
(1) by striking ‘‘EFFECT OF SUSPENSION OR
DESIGNATION’’ and inserting ‘‘EFFECT OF SUSPEN-
SION OR REVOCATION’’; and
(2) by striking ‘‘under subsection (f)’’ and in-
serting ‘‘under subsection (g)’’.
SEC. 10. Section 508(i) of the Small Business Invest-
ment Act of 1958 (15 U.S.C. 697e(i)), as redesignated
herein, is amended to read as follows:
‘‘(i) REGULATIONS.—Not later than 90 days after the
date of enactment of this section, the Administration shall
promulgate regulations to carry out this section. Not later
than 120 days after the date of enactment, the Adminis-
tration shall issue program guidelines and implement the
changes made herein.’’.
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SEC. 11. Section 508(j) of the Small Business Invest-
ment Act of 1958 (15 U.S.C. 697e(j)), as redesignated
herein, is amended by striking ‘‘other lenders’’ and insert-
ing ‘‘other lenders, specifically comparing default rates
and recovery rates on liquidations’’.
SEC. 12. Section 217(b) of Public Law 103–403 (108
Stat. 4185) is repealed.
SEC. 13. Section 508(d) of the Small Business In-
vestment Act of 1958 (15 U.S.C. 697e(d)) is amended by
striking ‘‘to approve loans’’ and inserting ‘‘to approve, au-
thorize, close, service, and liquidate loans’’.
SEC. 14. Section 502(1) of the Small Business In-
vestment Act of 1958 (15 U.S.C. 696(1)) is amended to
read as follows:
‘‘(1) The proceeds of any such loan shall be
used solely by such borrower or borrowers to assist
an identifiable small-business or businesses and for
a sound business purpose approved by the Adminis-
tration.’’.
SEC. 15. Section 502 of the Small Business Invest-
ment Act of 1958 (15 U.S.C. 696) is amended by adding
the following new subsection:
‘‘(5) Not to exceed 25 per centum of the project
may be leased by the assisted small business: Pro-
vided, That the tenant is a small business concern:
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impose such a requirement on a case-by-case
basis.’’.
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