104TH CONGRESS
2D SESSION
H. R. 3719
AN ACT
To amend the Small Business Act and Small
Business Investment Act of 1958.
104TH CONGRESS
2D SESSION
H. R. 3719
AN ACT
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. 207. Sense of the Congress.
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 Oc-
tober 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 provi-
sion, 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
Administration 
considers 
appropriate, 
the
database established under subparagraph (A)
shall, with respect to each loan program de-
scribed in subparagraph (A), include informa-
tion 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 gov-
ernment 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
beginning 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 serv-
ice and liquidate such loans without
obtaining the prior specific approval
of the Administration for routine serv-
icing 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 concern-
ing 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 Administration determines that the lender
is not adhering to its rules and regulations or
that the loss experience of the lender is exces-
sive as compared to other lenders, but such sus-
pension or revocation shall not affect any out-
standing guarantee.
‘‘(B) 
UNIFORM
AND
SIMPLIFIED
LOAN
FORMS.—In order to encourage all lending institu-
tions and other entities making loans authorized
under this subsection to provide loans of $50,000 or
less in guarantees to eligible small business loan ap-
plicants, the Administration 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 docu-
mentation loan program for loans of $100,000 or
less only through Preferred Lenders and Certified
Lenders, or lenders with significant experience mak-
ing small business loans. The Administration shall
give special consideration to lenders who have made
loans under the authority of this section. The Ad-
ministrator shall promulgate regulations defining the
experience necessary for lenders other than Pre-
ferred or Certified Lenders for participation as a
lender in the low documentation 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 guaran-
tee 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 with-
in a period of 5 business days, such request
shall be deemed to be approved.
‘‘(E) LOW
DOCUMENTATION
LOAN
PROGRAM
SUBSIDY RATE.—The Administrator shall with the
assistance of the Director of the Office of Manage-
ment and Budget establish and monitor, on an an-
nual basis, the subsidy rate for the low documenta-
tion loan program, independently of other loans au-
thorized 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
percent 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
October 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 Ad-
ministration may not prohibit a lender from securitizing
the nonguaranteed 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 may require
all lenders securitizing, or requesting Administration ap-
proval for the securitization of the nonguaranteed portion
of any loan, to retain exposure of up to 10 percent of the
amount of the loan, which percentage shall be applicable
uniformly to both depository institutions and other lenders
unless the Administrator determines that the lender, on
a case by case basis, has undertaken other agreements
which retain an acceptable exposure to loss by the lender
in the event of default of a loan being securitized.’’.
(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 following:
‘‘(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
making a claim for payment on the guaranteed por-
tion 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
directly 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 ap-
propriate, the plan required by paragraph (1) shall
include—
(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 func-
tions to each proposed center; and
(D) any identified impediments to the
timely execution of the proposed plan (including
adequacy of available financial resources, avail-
ability of needed personnel, facilities, and relat-
ed equipment) and the Administrator’s rec-
ommendations for addressing such impedi-
ments.
(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 enact-
ment of this Act, the Administrator shall issue a request
for proposals regarding the standard review program for
the Preferred Lender Program established by section
5(b)(7) of the Small Business Act (15 U.S.C. 634(b)(7)).
The Administrator shall require such standard review for
each new entrant to the Preferred Lender Program.
(h) INDEPENDENT STUDY OF LOAN PROGRAMS.—
(1) STUDY
REQUIRED.—The Administrator
shall conduct a comprehensive assessment of the
performance of the loan programs authorized by sec-
tion 7(a) of the Small Business Act (15 U.S.C.
636(a)) and title V of the Small Business Invest-
ment Act of 1958 (15 U.S.C. 661) addressing the
matters described in paragraph (2) and resulting in
a report to Congress pursuant to paragraph (5).
(2) MATTERS TO BE ASSESSED.—In addition to
such other matters as the Administrator considers
appropriate, the assessment required by paragraph
(1) shall address, with respect to each loan program
described in paragraph (1) for each of the fiscal
years described in paragraph (3)—
(A) the number and frequency of deferrals
and defaults;
(B) default rates;
(C) comparative loss rates, by—
(i) type of lender (separately address-
ing preferred lenders, certified lenders, and
general participation lenders);
(ii) term of the loan; and
(iii) dollar value of the loan at dis-
bursement; and
(D) the economic models used by the Of-
fice of Management and Budget to calculate the
credit subsidy rate applicable to the loan pro-
grams.
(3) PERIOD OF ASSESSMENT.—The assessments
undertaken pursuant to paragraph (2) shall address
data for the period beginning with the first full fiscal
year of the implementation of each loan program de-
scribed in paragraph (1) through fiscal year 1995.
(4) PERFORMANCE BY THE PRIVATE SECTOR.—
(A) CONTRACTOR PERFORMANCE.—A pri-
vate sector contractor shall be used by the Ad-
ministrator to conduct the assessment required
by paragraph (1) and to prepare the report to
Congress required by paragraph (3).
(B) SOLICITATION AND AWARD.—The con-
tract shall be awarded pursuant to a solicitation
issued not later than 60 days after the date of
the enactment of this Act, which shall provide
for full and open competition. The Adminis-
trator shall make every reasonable effort to
award the contract not later that 60 days after
the date specified in the solicitation for receipt
of proposals.
(C) ACCESS TO INFORMATION.—The Ad-
ministrator shall provide to the contractor ac-
cess to any information collected by or available
to the Administration with regard to the loan
programs being assessed. The contractor shall
preserve the confidentiality of any information
for which confidentiality is protected by law or
properly asserted by the person submitting such
information.
(D) CONTRACT FUNDING.—The Adminis-
trator shall fund the cost of the contract from
the amounts appropriated for the salaries and
House of Representatives and the Senate within
30 days of receipt of the report. The Adminis-
trator shall append his comments, and those of
the Office of Management and Budget, if any,
to the report.
(i) GENERAL ACCOUNTING OFFICE STUDY.—
(1) IN GENERAL.—The General Accounting Of-
fice shall conduct a comparison of the cost of liq-
uidation for—
(A) loans guaranteed under the Preferred
Lenders Program that are authorized by section
7(a) of the Small Business Act (15 U.S.C.
636(a)) and liquidated by the Preferred Lend-
ers;
(B) loans made and liquidated by, Pre-
ferred Lenders, but not guaranteed under the
authority in section 7(a); and
(C) loans guaranteed by the Small Busi-
ness Administration under the authority in sec-
tion 7(a) and liquidated by the Administration,
taking into account all of the related costs in-
curred by the Federal Government.
(2) REPORT.—Not later than 9 months after
the date of enactment of this Act the General Ac-
counting Office shall deliver the results of the study
to the Committees on Small Business of the House
and Senate.
SEC. 104. DISASTER LOAN PROGRAM.
(a) INTEREST
RATE.—Section 7(c) (15 U.S.C.
636(c)) is amended by redesignating paragraphs (6) and
(7) as paragraphs (8) and (9), respectively, and by insert-
ing after paragraph (5) the following:
‘‘(6) DISASTERS COMMENCING AFTER OCTOBER
1, 1996.—Notwithstanding any other provision of
law, the interest rate on the Federal share of any
loan made under subsection (b)(1) and (b)(2) on ac-
count of a disaster commencing on or after October
1, 1996, shall be in the case of a homeowner, or
business, or other concern, including agricultural co-
operatives, unable to obtain credit elsewhere, at the
rate prescribed by the Administration but not more
than 3⁄4 of the rate determined by the Secretary of
the Treasury, taking into consideration the current
average market yield on outstanding marketable ob-
ligations of the United States with remaining peri-
ods to maturity comparable to the average matu-
rities of such loans plus an additional charge of not
to exceed 1 percent per annum as determined by the
Administrator, and adjusted to the nearest 1⁄8 of 1
percent but not to exceed 7 per centum per annum.
‘‘(7) 
LIABILITY.—Whoever 
wrongfully
misapplies the proceeds of a loan under subsection
(b) shall be liable to the Administrator in an amount
equal to 11⁄2 times the original principal amount of
the loan.’’.
(b) PRIVATE SECTOR LOAN SERVICING DEMONSTRA-
TION PROGRAM.—
(1)(A) 
DEMONSTRATION
PROGRAM
RE-
QUIRED.—The Administration shall conduct a dem-
onstration program, within the parameters described
in paragraph (2), to evaluate the comparative costs
and benefits of having the Administration’s portfolio
of disaster loans serviced under contract rather than
directly by employees of the Administration.
(B) INITIATION DATE.—Not later than 90 days
after the date of enactment of this Act, the Adminis-
tration shall issue a request for proposals for the
program parameters described in paragraph (2).
(2) 
DEMONSTRATION
PROGRAM
PARAM-
ETERS.—
(A) LOAN SAMPLE.—The sample of loans
for the demonstration program shall be ran-
domly drawn from the Administration’s port-
folio of loans made pursuant to section 7(b) of
the Small Business Act and include 20,000
loans for residential properties and 5,000 loans
for commercial properties.
(B) CONTRACT
AND
OPTIONS.—The Ad-
ministration shall solicit and competitively
award one or more contracts to service the
loans included in the sample of loans described
in subparagraph (A) for a term of 2 years with
5 2-year options, each to be awarded subject to
subparagraph (C).
(C) ASSESSMENTS
OF
PERFORMANCE.—
Prior to award of any contract option, the Ad-
ministration shall assess the costs and perform-
ance of each contractor and compare such costs
and such performance to the costs and perform-
ance of servicing disaster loans by employees of
the Administration. The Administrator shall not
exercise a contract option if the cost of per-
formance of the loan servicing by the contractor
exceeds the cost of performance of the loan
servicing by employees of the Administration.
The Administrator may terminate the contract
during its initial term (or any subsequent op-
tion period), based upon performance and cost
criteria specified in the solicitation and included
in the contract.
(D) DISPOSITION OF GOVERNMENT FUR-
NISHED PROPERTY.—The contract shall require
the contractor to—
(i) maintain the confidentiality of the
loan files furnished by the Administration;
and
(ii) return such loan files and other
Government-furnished property within a
specified period after expiration (or termi-
nation) of the contract.
(3) TERM OF DEMONSTRATION PROGRAM.—
(A) IN GENERAL.—The demonstration pro-
gram required by paragraph (1) shall com-
mence on the first day of the first fiscal year
quarter after the award of the contract and
continue through the last day of the fiscal year
quarter at the expiration of the 2-year contract
period or any subsequent contract option.
(B) EARLY TERMINATION.—If the Admin-
istrator terminates each contract pursuant to
paragraph (2)(C), the demonstration program
shall end on the effective date of such termi-
nation.
(4) REPORTS.—
(A) INTERIM
REPORTS.—The Adminis-
trator shall submit to the Committees on Small
Business of the House of Representatives and
Senate interim reports on the conduct of the
demonstration program not later than 60 days
prior to the expiration of the initial 2-year con-
tract performance period, each subsequent op-
tion period, or termination of a contract. The
contractor shall be afforded a reasonable oppor-
tunity to attach comments to each such report.
(B) FINAL
REPORT.—The Administrator
shall submit to the Committees on Small Busi-
ness of the House of Representatives and Sen-
ate a final report within 120 days of the termi-
nation of the demonstration program.
(c) DEFINITION OF DISASTER.—(1) Section 3(k) (15
U.S.C. 632(k)) is amended by striking ‘‘ocean conditions’’
and inserting ‘‘ocean conditions, or government action
(regulatory or otherwise)’’.
(2) For the purposes of this Act this amendment shall
be considered effective with respect to any disaster occur-
ring on or after March 1, 1994.
SEC. 105. MICROLOAN DEMONSTRATION PROGRAM.
(a) TECHNICAL
ASSISTANCE
GRANT
REQUIRE-
MENTS.—Section 7(m)(4) (15 U.S.C. 636(m)(4)) is
amended—
(1) in subparagraph (A) by striking ‘‘25 per-
cent’’ and inserting ‘‘20 percent’’; and
(2) in subparagraph (B) by striking ‘‘25 per-
cent’’ and inserting ‘‘35 percent’’.
(b) IMPLEMENTATION OF GUARANTEED MICROLOAN
PILOT PROGRAM.—
(1) ACTION
REQUIRED.—The Administrator
shall implement or submit a detailed report explain-
ing the impediments to the implementation of a
Guaranteed Microloan Pilot Program pursuant to
section 7(m)(12) (15 U.S.C. 636(m)(12)) addressing
the matters described in paragraph (2) by the dead-
line specified in paragraph (3).
(2) 
CONTENTS
OF
IMPLEMENTATION
RE-
PORT.—In addition to such other matters as the Ad-
ministrator may deem appropriate, the plan required
by paragraph (1) shall include any identified impedi-
ments to implementation of a Guaranteed Microloan
Pilot Program that, in the opinion of the Adminis-
trator, require amendments to the program’s author-
izing legislation, and if such impediments are identi-
fied, includes recommendations for such statutory
changes.
(3) DEADLINE FOR SUBMISSION.—The plan re-
quired by paragraph (2) shall be submitted to the
Committees on Small Business of the House of Rep-
resentatives and Senate not later than December 1,
1996.
(c) LIMITATION ON FUNDING.—In the event that the
Administrator shall fail to submit the report required by
subsection (b)(1) by the deadline specified in subsection
(b)(3), none of the amounts appropriated to carry out the
Microloan Program authorized by section 7(m)(12) of the
Small Business Act (15 U.S.C. 636(m)(12)) during fiscal
year 1997 may be expended until such time as the pilot
program is implemented or the report is submitted.
SEC. 106. SMALL BUSINESS DEVELOPMENT CENTER PRO-
GRAM.
(a) ASSOCIATE ADMINISTRATOR FOR SMALL BUSI-
NESS DEVELOPMENT CENTERS.—
(1) DUTIES.—Section 21(h) (15 U.S.C. 648(h))
is amended to read as follows:
‘‘(h) ASSOCIATE ADMINISTRATOR FOR SMALL BUSI-
NESS DEVELOPMENT CENTERS.—
‘‘(1) APPOINTMENT AND COMPENSATION.—The
Administrator shall appoint an Associate Adminis-
trator for Small Business Development Centers who
shall report to an official who is not more than one
level below the Office of the Administrator and who
shall serve without regard to the provisions of title
5 governing appointments in the competitive service,
and without regard to chapter 51, and subchapter
III of chapter 53 of such title relating to classifica-
tion and General Schedule pay rates, but at a rate
not less than the rate of GS–17 of the General
Schedule.
‘‘(2) DUTIES.—
‘‘(A) IN GENERAL.—The sole responsibility
of the Associate Administrator for Small Busi-
ness Development Centers shall be to admin-
ister the small business development center pro-
gram. Duties of the position shall include, but
are not limited to, recommending the annual
program budget, reviewing the annual budgets
submitted by each applicant, establishing appro-
priate funding levels therefore, selecting appli-
cants to participate in this program, implement-
ing the provisions of this section, maintaining a
clearinghouse to provide for the dissemination
and exchange of information between small
business development centers and conducting
audits of recipients of grants under this section.
‘‘(B) CONSULTATION REQUIREMENTS.—In
carrying out the duties described in this sub-
section, the Associate Administrator shall con-
fer with and seek the advice of the Board estab-
lished by subsection (i) and Administration offi-
cials in areas served by the small business de-
velopment centers; however, the Associate Ad-
ministrator shall be responsible for the manage-
ment and administration of the program and
shall not be subject to the approval or concur-
rence of such Administration officials.’’.
(2) REFERENCES
TO
ASSOCIATE
ADMINIS-
TRATOR.—Section 21 (15 U.S.C. 648) is amended—
(A) in subsection (c)(7) by striking ‘‘Dep-
uty Associate Administrator of the Small Busi-
ness Development Center program’’ and insert-
ing ‘‘Associate Administrator for Small Busi-
ness Development Centers’’; and
(B) in subsection (i)(2) by striking ‘‘Dep-
uty Associate Administrator for Management
Assistance’’ and inserting ‘‘Associate Adminis-
trator for Small Business Development Cen-
ters’’.
(b) EXTENSION
OR RENEWAL
OF COOPERATIVE
AGREEMENTS.—Section 21(k)(3) (15 U.S.C. 648(k)(3)) is
amended to read as follows:
‘‘(3) EXTENSION OR RENEWAL OF COOPERA-
TIVE AGREEMENTS.—
‘‘(A) IN
GENERAL.—In extending or re-
newing a cooperative agreement of a small busi-
ness development center, the Administration
shall consider the results of the examination
and certification program conducted pursuant
to paragraphs (1) and (2).
‘‘(B) 
CERTIFICATION
REQUIREMENT.—
After September 30, 2000, the Administration
may not renew or extend any cooperative agree-
ment with a small business development center
unless the center has been approved under the
certification program conducted pursuant to
this subsection; except that the Associate Ad-
ministrator for Small Business Development
Centers may waive such certification require-
ment, in the discretion of the Associate Admin-
istrator, upon a showing that the center is mak-
ing a good faith effort to obtain certification.’’.
(c) TECHNICAL CORRECTION.—Section 21(l) (15
U.S.C. 648(l)) is amended to read as follows:
‘‘(l) CONTRACT AUTHORITY.—The authority to enter
into contracts shall be in effect for each fiscal year only
to the extent and in the amounts as are provided in ad-
vance in appropriations Acts. After the administration has
entered a contract, either as a grant or a cooperative
agreement, with any applicant under this section, it shall
not suspend, terminate, or fail to renew or extend any
such contract unless the Administration provides the ap-
plicant with written notification setting forth the reasons
therefore and affording the applicant an opportunity for
a hearing, appeal, or other administrative proceeding
under the provisions of chapter 5 of title 5, United States
Code.’’.
SEC. 107. MISCELLANEOUS AUTHORITIES TO PROVIDE
LOANS AND OTHER FINANCIAL ASSISTANCE.
(a) FUNDING LIMITATION; SEMINARS.—Section 7(d)
(15 U.S.C. 636(d)) is amended—
(1) by striking ‘‘(d)(1)’’ and inserting ‘‘(d)’’;
and
(2) by striking paragraph (2).
(b) TRADE ADJUSTMENT LOANS.—Section 7(e) (15
U.S.C. 636(e)) is amended to read as follows:
‘‘(e) øRESERVED¿.’’.
(c) WAIVER OF CREDIT ELSEWHERE TEST FOR COL-
LEGES
AND UNIVERSITIES.—Section 7(f) (15 U.S.C.
636(f)) is amended to read as follows:
‘‘(f) øRESERVED¿.’’.
(d) LOANS
TO SMALL BUSINESS CONCERNS
FOR
SOLAR ENERGY
AND ENERGY CONSERVATION MEAS-
URES.—Section 7(l) (15 U.S.C. 636(l)) is amended to
read as follows:
‘‘(l) øRESERVED¿.’’.
SEC. 
108. 
SMALL 
BUSINESS 
COMPETITIVENESS 
DEM-
ONSTRATION PROGRAM.
(a) EXTENSION OF DEMONSTRATION PROGRAM.—
Section 711(c) of the Small Business Competitiveness
Demonstration Program Act of 1988 (15 U.S.C. 644 note;
102 Stat. 3890) is amended by striking ‘‘September 30,
1996’’ and inserting ‘‘September 30, 2000’’.
(b) REPORTING OF SUBCONTRACT PARTICIPATION IN
CONTRACTS
FOR ARCHITECTURAL
AND ENGINEERING
SERVICES.—Section 714(b)(5) of the Small Business
Competitiveness Demonstration Program Act of 1988 (15
U.S.C. 644 note; 102 Stat. 3892) is amended to read as
follows:
‘‘(5) DURATION.—The system described in sub-
section (a) shall be established not later than Octo-
ber 1, 1996 (or as soon as practicable thereafter on
the first day of a subsequent quarter of fiscal year
1997), and shall terminate on September 30,
2000.’’.
(c) REFERENCES TO ARCHITECTURAL AND ENGI-
NEERING SERVICES.—
(1) IN GENERAL.—The Small Business Com-
petitiveness Demonstration Program Act of 1988
(15 U.S.C. 644 note; 102 Stat. 3889 et seq.) is
amended in subsections (a)(3) and (d) by striking
‘‘surveying and mapping’’ and inserting ‘‘surveying,
mapping, and landscape architecture’’.
(2) DESIGNATED INDUSTRY GROUPS.—Section
717(d) of the Small Business Competitiveness Dem-
onstration Program Act of 1988 (15 U.S.C. 644
note; 102 Stat. 3894) is amended by inserting
‘‘standard industrial classification codes 0781 (if
identified as pertaining to architecture services),’’
after ‘‘(if identified as pertaining to mapping serv-
ices),’’.
(d) REPORTS TO CONGRESS.—
(1) IN GENERAL.—Section 716 of the Small
Business Competitiveness Demonstration Program
Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3893)
is amended—
Act of 1993 (Public Law 103–81; 15 U.S.C. 631 note)
is amended by striking the item relating to section 7.
SEC. 110. 1998 AUTHORIZATIONS.
Section 20 (15 U.S.C. 631 note) is amended—
(1) in subsection (p), by striking ‘‘authorized
for fiscal year 1997’’ and inserting ‘‘authorized for
each of fiscal years 1997 and 1998’’;
(2) by striking subsection (p)(3)(B) and by in-
serting the following:
‘‘(B) $268,000,000 in guarantees of de-
bentures; and’’;
(3) in subsection (q)(1) by striking ‘‘fiscal year
1997’’ and inserting ‘‘each of fiscal years 1997 and
1998’’; and
(4) in subsection (q)(2) by striking ‘‘year 1997’’
and inserting ‘‘years 1997 and 1998’’.
SEC. 111. LEVEL OF PARTICIPATION FOR EXPORT WORK-
ING CAPITAL LOANS.
Section 7(a)(2) (15 U.S.C. 636(a)(2)) is amended by
adding at the end the following:
‘‘(D) 
PARTICIPATION
UNDER
EXPORT
WORKING CAPITAL PROGRAM.—Notwithstanding
subparagraph (A), in an agreement to partici-
pate in a loan on a deferred basis under the
Export Working Capital Program established
pursuant to paragraph (14)(A), such participa-
tion by the Administration shall be equal to the
rate specified under this paragraph as in effect
on the day before the date of the enactment of
the Small Business Lending Enhancement Act
of 1995.’’.
TITLE 
II—AMENDMENTS 
TO
SMALL 
BUSINESS 
INVEST-
MENT ACT
SEC. 201. 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 provi-
sion, the reference shall be considered to be made to a
section or other provision of the Small Business Invest-
ment Act of 1958 (15 U.S.C. 661 et seq.).
SEC. 202. MODIFICATIONS TO DEVELOPMENT COMPANY
DEBENTURE PROGRAM.
(a) DECREASED LOAN TO VALUE RATIOS.—Section
502(3) (15 U.S.C. 696(3)) is amended to read as follows:
‘‘(3) CRITERIA FOR ASSISTANCE.—
‘‘(A) IN GENERAL.—Any development com-
pany assisted under this section or section 503
of this title must meet the criteria established
by the Administration, including the extent of
participation to be required or amount of paid-
in capital to be used in each instance as is de-
termined to be reasonable by the Administra-
tion.
‘‘(B) COMMUNITY INJECTION FUNDS.—
‘‘(i) SOURCES
OF
FUNDS.—Commu-
nity injection funds may be derived, in
whole or in part, from—
‘‘(I) State or local governments;
‘‘(II) banks or other financial in-
stitutions;
‘‘(III) foundations or other not-
for-profit institutions; or
‘‘(IV) the small business concern
(or its owners, stockholders, or affili-
ates) receiving assistance through a
body authorized by this title.
‘‘(ii) 
FUNDING
FROM
INSTITU-
TIONS.—Not less than 50 percent of the
total cost of any project financed pursuant
to clauses (i), (ii), or (iii) of subparagraph
(C) shall come from the institutions de-
scribed in subclauses (I), (II), and (III) of
clause (i).
‘‘(C) FUNDING FROM A SMALL BUSINESS
CONCERN.—The small business concern (or its
owners, stockholders, or affiliates) receiving as-
sistance through a body authorized by this title
shall provide—
‘‘(i) at least 15 percent of the total
cost of the project financed, if the small
business concern has been in operation for
a period of 2 years or less;
‘‘(ii) at least 15 percent of the total
cost of the project financed if the project
involves the construction of a limited or
single purpose building or structure;
‘‘(iii) at least 20 percent of the total
cost of the project financed if the project
involves both of the conditions set forth in
clauses (i) and (ii); or
‘‘(iv) at least 10 percent of the total
cost of the project financed, in all other
circumstances, at the discretion of the de-
velopment company.’’.
(b) GUARANTEE FEE FOR DEVELOPMENT COMPANY
DEBENTURES.—Section 
503(b)(7)(A) 
(15 
U.S.C.
697(b)(7)(A)) is amended by striking ‘‘0.125 percent’’ and
inserting ‘‘0.9375 percent’’.
(c) FEES TO OFFSET SUBSIDY COST.—Section
503(d) (15 U.S.C. 697(d)) is amended to read as follows:
‘‘(d) CHARGES FOR ADMINISTRATION EXPENSES.—
‘‘(1) LEVEL OF CHARGES.—The Administration
may impose an additional charge for administrative
expenses with respect to each debenture for which
payment of principal and interest is guaranteed
under subsection (a).
‘‘(2) PARTICIPATION FEE.—The Administration
shall also impose a one-time fee of 50 basis points
on the total participation in any project of any insti-
tution described in subclause (I), (II), or (III) of
section 502(3)(B)(i). Such fee shall be imposed only
when the participation of the institution will occupy
a senior credit position to that of the development
company. Such fee shall be collected by the develop-
ment company, forwarded to the Administration,
and used to offset the cost (as such term is defined
in section 502 of the Credit Reform Act of 1990) to
the Administration of making guarantees under sub-
section (a).
‘‘(3) DEVELOPMENT COMPANY FEE.—The Ad-
ministration shall collect annually from each devel-
opment company a fee of 0.125 percent of the out-
standing principal balance of any guaranteed deben-
ture authorized by the Administration after Septem-
ber 30, 1996. Such fee shall be derived from the
servicing fees collected by the development company
pursuant to regulation, and shall not be derived
from any additional fees imposed on small business
concerns. All proceeds of the fee shall be used to off-
set the cost (as such term is defined in section 502
of the Credit Reform Act of 1990) to the Adminis-
tration of making guarantees under subsection (a).’’.
(d) EFFECTIVE DATE.—Section 503 (15 U.S.C. 697)
is amended by adding at the end the following:
‘‘(f) EFFECTIVE DATE.—The fees authorized by sub-
sections (b) and (c) shall apply to financings approved by
the Administration on or after October 1, 1996, but shall
not apply to financings approved by the Administration
on or after October 1, 1997.’’.
SEC. 203. REQUIRED ACTIONS UPON DEFAULT.
Section 503 (15 U.S.C. 697) is amended by adding
at the end the following:
‘‘(g) REQUIRED ACTIONS UPON DEFAULT.—
‘‘(1) DEADLINES.—
‘‘(A) INITIAL
ACTIONS.—Not later than
the 45th day after the date on which a payment
on a loan funded through a debenture guaran-
teed under this section is due and not received,
the Administration shall—
‘‘(i) take all necessary steps to bring
such a loan current; or
‘‘(ii) implement a formal written de-
ferral agreement.
‘‘(B) PURCHASE OR ACCELERATION OF DE-
BENTURE.—Not later than the 65th day after
the date on which a payment on a loan de-
scribed in subparagraph (A) is due and not re-
ceived, and absent a formal written deferral
agreement, the Administration shall take all
necessary steps to purchase or accelerate the
debenture.
‘‘(2) PREPAYMENT PENALTIES.—The Adminis-
tration shall, with respect to the portion of any
project derived from funds set forth in section
502(3)—
‘‘(A) negotiate the elimination of any pre-
payment penalties or late fees on defaulted
loans made prior to September 30, 1996;
‘‘(B) decline to pay any prepayment pen-
alty or late fee on the default based purchase
of loans issued after September 30, 1996; and
‘‘(C) for any project financed after Sep-
tember 30, 1996, decline to pay any default in-
terest rate higher than the interest rate on the
note prior to the date of default.’’.
SEC. 204. LOAN LIQUIDATION PILOT PROGRAM.
(a) IN GENERAL.—The Administrator shall carry out
a loan liquidation pilot program (in this section referred
to as the ‘‘pilot program’’) in accordance with the require-
ments of this section.
(b) SELECTION
OF DEVELOPMENT COMPANIES.—
Not later than 90 days after the date of the enactment
of this Act, the Administrator shall allow not less than
15 development companies authorized to make loans and
issue debentures under title V of the Small Business In-
vestment Act of 1958 to participate in the pilot program.
The development companies admitted shall agree not to
take any action that would create a potential conflict of
interest involving the development company, the third
party lender, or an associate of the third party lender. In
order to qualify to participate in the pilot, each develop-
ment company shall—
(1) have a minimum of 6 years experience in
the program established by such title V;
(2) have made, during the last 6 fiscal years, an
average of 10 loans per year through the program
established by such title V; and
(3) have a minimum of 2 years experience, ei-
ther independently or through an agent, in liquidat-
ing loans under the authority of a Federal, State, or
other lending program.
(c) AUTHORITY
OF DEVELOPMENT COMPANIES.—
The development companies selected under subsection (b)
shall, for all loans in their portfolio of loans made through
debentures guaranteed under title V of the Small Business
Investment Act of 1958 that are in default after the date
of enactment of this Act, be authorized to—
(1) perform all liquidation and foreclosure func-
tions, including the acceleration or purchase of com-
munity injection funds, subject to such company ob-
taining prior written approval from the Adminis-
trator before committing the agency to purchase any
other indebtedness secured by the property: Pro-
vided, That the Administrator shall approve or deny
a request for such purchase within a period of 5
business days; and
(2) liquidate such loans in a reasonable and
sound manner and according to commercially accept-
ed practices pursuant to a liquidation plan approved
by the administrator in advance of its implementa-
tion. If the Administrator does not approve or deny
a request made by a certified development company
within a period of 5 business days, such request
shall be deemed to be approved.
(d) AUTHORITY OF THE ADMINISTRATOR.—In carry-
ing out the pilot program, the Administrator shall—
(1) have full authority to deny participation in
the pilot program or rescind the authority granted
any development company under this section upon a
10-day written notice stating the reasons for the de-
nial or rescission; and
(2) implement the pilot program no later than
90 days after the admission of the development com-
panies specified in subsection (b).
(e) REPORT.—
(1) IN
GENERAL.—The Administrator shall
issue a report on the results of the pilot program to
the Committees on Small Business of the House of
Representatives and the Senate. The report shall in-
clude information relating to—
(A) the total dollar amount of each loan
and project liquidated;
(B) the total dollar amount guaranteed by
the Administration;
(C) total dollar losses;
(D) total recoveries both as percentage of
the amount guaranteed and the total cost of the
project; and
(E) a comparison of the pilot program in-
formation with the same information for liq-
uidation conducted outside the pilot program
over the period of time.
(2) REPORTING PERIOD.—The report shall be
based on data from, and issued not later than 90
days after the close of, the first eight 8 fiscal quar-
ters of the pilot program’s operation after the date
of implementation.
SEC. 205. REGISTRATION OF CERTIFICATES.
(a) CERTIFICATES SOLD PURSUANT TO SMALL BUSI-
NESS ACT.—Section 5(h) of the Small Business Act (15
U.S.C. 634(h)) is amended—
(1) by redesignating paragraphs (1) through
(4) as subparagraphs (A) through (D);
(2) by striking ‘‘(h)’’ and inserting ‘‘(h)(1)’’;
(3) by striking subparagraph (A), as redesig-
nated by paragraph (1) of this subsection, and in-
serting the following:
‘‘(A) provide for a central registration of all
loans and trust certificates sold pursuant to sub-
sections (f) and (g) of this section;’’; and
(4) by adding at the end the following:
‘‘(2) Nothing in this subsection shall prohibit the uti-
lization of a book-entry or other electronic form of reg-
istration for trust certificates. The Administration may,
with the consent of the Secretary of the Treasury, use the
book-entry system of the Federal Reserve System.’’.
(b) CERTIFICATES SOLD PURSUANT TO SMALL BUSI-
NESS INVESTMENT COMPANY PROGRAM.—Section 321(f)
(15 U.S.C. 6871(f)) is amended—
(1) in paragraph (1) by striking ‘‘Such central
registration shall include’’ and all that follows
through the period at the end of the paragraph; and
(2) by adding at the end the following:
‘‘(5) Nothing in this subsection shall prohibit the use
of a book-entry or other electronic form of registration for
trust certificates.’’.
(c) CERTIFICATES SOLD PURSUANT TO DEVELOP-
MENT COMPANY PROGRAM.—Section 505(f) (15 U.S.C.
697b(f)) is amended—
(1) by redesignating paragraphs (1) through
(4) as subparagraphs (A) through (D);
(2) by striking ‘‘(f)’’ and inserting ‘‘(f)(1)’’;