H. R. 923 
One Hundred Eighth Congress 
of the 
United States of America 
AT THE SECOND SESSION 
Begun and held at the City of Washington on Tuesday, 
the twentieth day of January, two thousand and four 
An Act 
To amend the Small Business Investment Act of 1958 to allow certain premier 
certified lenders to elect to maintain an alternative loss reserve. 
Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Premier Certified Lenders Pro-
gram Improvement Act of 2004’’. 
SEC. 2. LOSS RESERVES OF PREMIER CERTIFIED LENDERS TEMPO-
RARILY DETERMINED ON THE BASIS OF OUTSTANDING 
BALANCE OF DEBENTURES. 
Paragraph (6) of section 508(c) of the Small Business Invest-
ment Act of 1958 (15 U.S.C. 697e(c)) is amended— 
(1) by striking ‘‘The Administration’’ and inserting the fol-
lowing: 
‘‘(A) IN GENERAL.—The Administration’’; and 
(2) by adding at the end the following new subparagraph: 
‘‘(B) TEMPORARY REDUCTION BASED ON OUTSTANDING 
BALANCE.—Notwithstanding subparagraph (A), during the 
2-year period beginning on the date that is 90 days after 
the date of the enactment of this subparagraph, the 
Administration shall allow the certified development com-
pany to withdraw from the loss reserve such amounts 
as are in excess of 1 percent of the aggregate outstanding 
balances of debentures to which such loss reserve relates. 
The preceding sentence shall not apply with respect to 
any debenture before 100 percent of the contribution 
described in paragraph (4) with respect to such debenture 
has been made.’’. 
SEC. 3. ALTERNATIVE LOSS RESERVE PILOT PROGRAM FOR CERTAIN 
PREMIER CERTIFIED LENDERS. 
(a) IN GENERAL.—Subsection (c) of section 508 of the Small 
Business Investment Act of 1958 (15 U.S.C. 697e) is amended 
by adding at the end the following new paragraphs: 
‘‘(7) ALTERNATIVE LOSS RESERVE.— 
‘‘(A) ELECTION.—With respect to any eligible calendar 
quarter, any qualified high loss reserve PCL may elect 
to have the requirements of this paragraph apply in lieu 
of the requirements of paragraphs (2) and (4) for such 
quarter. 
‘‘(B) CONTRIBUTIONS.—
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‘‘(i) ORDINARY
RULES
INAPPLICABLE.—Except as 
provided under clause (ii) and paragraph (5), a quali-
fied high loss reserve PCL that makes the election 
described in subparagraph (A) with respect to a cal-
endar quarter shall not be required to make contribu-
tions to its loss reserve during such quarter. 
‘‘(ii) BASED ON LOSS.—A qualified high loss reserve 
PCL that makes the election described in subparagraph 
(A) with respect to any calendar quarter shall, before 
the last day of such quarter, make such contributions 
to its loss reserve as are necessary to ensure that 
the amount of the loss reserve of the PCL is— 
‘‘(I) not less than $100,000; and 
‘‘(II) sufficient, as determined by a qualified 
independent auditor, for the PCL to meet its 
obligations to protect the Federal Government 
from risk of loss. 
‘‘(iii) CERTIFICATION.—Before the end of any cal-
endar quarter for which an election is in effect under 
subparagraph (A), the head of the PCL shall submit 
to the Administrator a certification that the loss 
reserve of the PCL is sufficient to meet such PCL’s 
obligation to protect the Federal Government from risk 
of loss. Such certification shall be in such form and 
submitted in such manner as the Administrator may 
require and shall be signed by the head of such PCL 
and the auditor making the determination under clause 
(ii)(II). 
‘‘(C) DISBURSEMENTS.— 
‘‘(i) ORDINARY RULE INAPPLICABLE.—Paragraph (6) 
shall not apply with respect to any qualified high loss 
reserve PCL for any calendar quarter for which an 
election is in effect under subparagraph (A). 
‘‘(ii) EXCESS FUNDS.—At the end of each calendar 
quarter for which an election is in effect under subpara-
graph (A), the Administration shall allow the qualified 
high loss reserve PCL to withdraw from its loss reserve 
the excess of— 
‘‘(I) the amount of the loss reserve, over 
‘‘(II) the greater of $100,000 or the amount 
which is determined under subparagraph (B)(ii) 
to be sufficient to meet the PCL’s obligation to 
protect the Federal Government from risk of loss. 
‘‘(D) RECONTRIBUTION.—If the requirements of this 
paragraph apply to a qualified high loss reserve PCL for 
any calendar quarter and cease to apply to such PCL 
for any subsequent calendar quarter, such PCL shall make 
a contribution to its loss reserve in such amount as the 
Administrator may determine provided that such amount 
does not exceed the amount which would result in the 
total amount in the loss reserve being equal to the amount 
which would have been in such loss reserve had this para-
graph never applied to such PCL. The Administrator may 
require that such payment be made as a single payment 
or as a series of payments. 
‘‘(E) RISK
MANAGEMENT.—If a qualified high loss 
reserve PCL fails to meet the requirement of subparagraph
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(F)(iii) during any period for which an election is in effect 
under subparagraph (A) and such failure continues for 
180 days, the requirements of paragraphs (2), (4), and 
(6) shall apply to such PCL as of the end of such 180- 
day period and such PCL shall make the contribution to 
its loss reserve described in subparagraph (D). The 
Administrator may waive the requirements of this subpara-
graph. 
‘‘(F) QUALIFIED
HIGH
LOSS
RESERVE
PCL.—The term 
‘qualified high loss reserve PCL’ means, with respect to 
any calendar year, any premier certified lender designated 
by the Administrator as a qualified high loss reserve PCL 
for such year. The Administrator shall not designate a 
company under the preceding sentence unless the Adminis-
trator determines that— 
‘‘(i) the amount of the loss reserve of the company 
is not less than $100,000; 
‘‘(ii) the company has established and is utilizing 
an appropriate and effective process for analyzing the 
risk of loss associated with its portfolio of PCLP loans 
and for grading each PCLP loan made by the company 
on the basis of the risk of loss associated with such 
loan; and 
‘‘(iii) the company meets or exceeds 4 or more 
of the specified risk management benchmarks as of 
the most recent assessment by the Administration or 
the Administration has issued a waiver with respect 
to the requirement of this clause. 
‘‘(G) SPECIFIED RISK MANAGEMENT BENCHMARKS.—For 
purposes of this paragraph, the term ‘specified risk manage-
ment benchmarks’ means the following rates, as deter-
mined by the Administrator: 
‘‘(i) Currency rate. 
‘‘(ii) Delinquency rate. 
‘‘(iii) Default rate. 
‘‘(iv) Liquidation rate. 
‘‘(v) Loss rate. 
‘‘(H) QUALIFIED INDEPENDENT AUDITOR.—For purposes 
of this paragraph, the term ‘qualified independent auditor’ 
means any auditor who— 
‘‘(i) is compensated by the qualified high loss 
reserve PCL; 
‘‘(ii) is independent of such PCL; and 
‘‘(iii) has been approved by the Administrator 
during the preceding year. 
‘‘(I) PCLP LOAN.—For purposes of this paragraph, the 
term ‘PCLP loan’ means any loan guaranteed under this 
section. 
‘‘(J) ELIGIBLE
CALENDAR
QUARTER.—For purposes of 
this paragraph, the term ‘eligible calendar quarter’ 
means— 
‘‘(i) the first calendar quarter that begins after 
the end of the 90-day period beginning with the date 
of the enactment of this paragraph; and 
‘‘(ii) the 7 succeeding calendar quarters. 
‘‘(K) CALENDAR QUARTER.—For purposes of this para-
graph, the term ‘calendar quarter’ means—
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‘‘(i) the period which begins on January 1 and 
ends on March 31 of each year; 
‘‘(ii) the period which begins on April 1 and ends 
on June 30 of each year; 
‘‘(iii) the period which begins on July 1 and ends 
on September 30 of each year; and 
‘‘(iv) the period which begins on October 1 and 
ends on December 31 of each year. 
‘‘(L) REGULATIONS.—Not later than 45 days after the 
date of the enactment of this paragraph, the Administrator 
shall publish in the Federal Register and transmit to the 
Congress regulations to carry out this paragraph. Such 
regulations shall include provisions relating to— 
‘‘(i) the approval of auditors under subparagraph 
(H); and 
‘‘(ii) the designation of qualified high loss reserve 
PCLs under subparagraph (F), including the deter-
mination of whether a process for analyzing risk of 
loss is appropriate and effective for purposes of 
subparagraph (F)(ii). 
‘‘(8) BUREAU OF PCLP OVERSIGHT.— 
‘‘(A) ESTABLISHMENT.—There is hereby established in 
the Small Business Administration a bureau to be known 
as the Bureau of PCLP Oversight. 
‘‘(B) PURPOSE.—The Bureau of PCLP Oversight shall 
carry out such functions of the Administration under this 
subsection as the Administrator may designate. 
‘‘(C) DEADLINE.—Not later than 90 days after the date 
of the enactment of this Act— 
‘‘(i) the Administrator shall ensure that the Bureau 
of PCLP Oversight is prepared to carry out any func-
tions designated under subparagraph (B), and 
‘‘(ii) the Office of the Inspector General of the 
Administration shall report to the Congress on the 
preparedness of the Bureau of PCLP Oversight to carry 
out such functions.’’. 
(b) INCREASED
REIMBURSEMENT
FOR
LOSSES
RELATED
TO 
DEBENTURES ISSUED DURING ELECTION PERIOD.—Subparagraph (C) 
of section 508(b)(2) of the Small Business Investment Act of 1958 
(15 U.S.C. 697e(b)(2)) is amended by inserting ‘‘(15 percent in 
the case of any such loss attributable to a debenture issued by 
the company during any period for which an election is in effect 
under subsection (c)(7) for such company)’’ before ‘‘; and’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Subparagraph (D) of section 508(b)(2) of the Small Busi-
ness Investment Act of 1958 (15 U.S.C. 697e(b)(2)) is amended 
by striking ‘‘subsection (c)(2)’’ and inserting ‘‘subsection (c)’’. 
(2) Paragraph (5) of section 508(c) of the Small Business 
Investment Act of 1958 (15 U.S.C. 697e(c)) is amended by 
striking ‘‘10 percent’’. 
(d) STUDY AND REPORT.— 
(1) IN GENERAL.—The Administrator shall enter into a con-
tract with a Federal agency experienced in community develop-
ment lending and financial regulation or with a member of 
the Federal Financial Institutions Examinations Council to 
study and prepare a report regarding—
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(A) the extent to which statutory requirements have 
caused overcapitalization in the loss reserves maintained 
by certified development companies participating in the 
Premier Certified Lenders Program established under sec-
tion 508 of the Small Business Investment Act of 1958 
(15 U.S.C. 697e); and 
(B) alternatives for establishing and maintaining loss 
reserves that are sufficient to protect the Federal Govern-
ment from the risk of loss associated with loans guaranteed 
under such Program. 
(2) TRANSMISSION
OF
REPORT.—The report described in 
paragraph (1) shall be transmitted to the Committee on Small 
Business of the House of Representatives and the Committee 
on Small Business and Entrepreneurship of the Senate not 
later than 90 days after the date of the enactment of this 
Act. 
(3) LIMITATION.—The amount of the contract described in 
paragraph (1) shall not exceed $75,000. 
Speaker of the House of Representatives. 
Vice President of the United States and
President of the Senate.