IIB 
108TH CONGRESS 
1ST SESSION 
H. R. 923
IN THE SENATE OF THE UNITED STATES 
JUNE 25, 2003
Received; read twice and referred to the Committee on Small Business and 
Entrepreneurship 
AN ACT 
To amend the Small Business Investment Act of 1958 to 
allow certain premier certified lenders to elect to main-
tain an alternative loss reserve.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
HR 923 RFS 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Premier Certified 
Lenders Program Improvement Act of 2003’’. 
SEC. 2. LOSS RESERVES OF PREMIER CERTIFIED LENDERS 
TEMPORARILY DETERMINED ON THE BASIS 
OF 
OUTSTANDING 
BALANCE 
OF 
DEBEN-
TURES. 
Paragraph (6) of section 508(c) of the Small Busi-
ness Investment Act of 1958 (15 U.S.C. 697e(c)) is 
amended—
(1) by striking ‘‘The Administration’’ and in-
serting the following: 
‘‘(A) IN GENERAL.—The Administration’’; 
and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(B) TEMPORARY REDUCTION BASED ON 
OUTSTANDING
BALANCE.—Notwithstanding 
subparagraph (A), during the 2-year period be-
ginning on the date that is 90 days after the 
date of the enactment of this subparagraph, the 
Administration shall allow the certified develop-
ment company to withdraw from the loss re-
serve such amounts as are in excess of 1 per-
cent of the aggregate outstanding balances of 
debentures to which such loss reserve relates.
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The preceding sentence shall not apply with re-
spect 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 eli-
gible calendar quarter, any qualified high loss 
reserve PCL may elect to have the requirements 
of this paragraph apply in lieu of the require-
ments of paragraphs (2) and (4) for such quar-
ter. 
‘‘(B) CONTRIBUTIONS.—
‘‘(i) 
ORDINARY
RULES
INAPPLI-
CABLE.—Except as provided under clause 
(ii) and paragraph (5), a qualified high 
loss reserve PCL that makes the election 
described in subparagraph (A) with respect 
to a calendar quarter shall not be required
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to make contributions to its loss reserve 
during such quarter. 
‘‘(ii) BASED
ON
LOSS.—A qualified 
high loss reserve PCL that makes the elec-
tion described in subparagraph (A) with 
respect to any calendar quarter shall, be-
fore 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 calendar 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
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and submitted in such manner as the Ad-
ministrator 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
INAPPLI-
CABLE.—Paragraph (6) shall not apply 
with respect to any qualified high loss re-
serve PCL for any calendar quarter for 
which an election is in effect under sub-
paragraph (A). 
‘‘(ii) EXCESS FUNDS.—At the end of 
each calendar quarter for which an election 
is in effect under subparagraph (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 re-
serve, 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 pro-
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make the contribution to its loss reserve de-
scribed in subparagraph (D). The Adminis-
trator may waive the requirements of this sub-
paragraph. 
‘‘(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 sen-
tence unless the Administrator 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 asso-
ciated with its portfolio of PCLP loans and 
for grading each PCLP loan made by the 
company on the basis of the risk of loss as-
sociated with such loan; and 
‘‘(iii) the company meets or exceeds 4 
or more of the specified risk management 
benchmarks as of the most recent assess-
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ment by the Administration or the Admin-
istration has issued a waiver with respect 
to the requirement of this clause. 
‘‘(G) 
SPECIFIED
RISK
MANAGEMENT 
BENCHMARKS.—For purposes of this para-
graph, the term ‘specified risk management 
benchmarks’ means the following rates, as de-
termined by the Administrator: 
‘‘(i) Currency rate. 
‘‘(ii) Delinquency rate. 
‘‘(iii) Default rate. 
‘‘(iv) Liquidation rate. 
‘‘(v) Loss rate. 
‘‘(H) QUALIFIED
INDEPENDENT
AUDI-
TOR.—For purpose of this paragraph, the term 
‘qualified independent auditor’ means any audi-
tor who—
‘‘(i) is compensated by the qualified 
high loss reserve PCL; 
‘‘(ii) is independent of such PCL; and 
‘‘(iii) has been approved by the Ad-
ministrator during the preceding year. 
‘‘(I) PCLP LOAN.—For purposes of this 
paragraph, the term ‘PCLP loan’ means any 
loan guaranteed under this section.
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‘‘(J) ELIGIBLE CALENDAR QUARTER.—For 
purposes of this paragraph, the term ‘eligible 
calendar quarter’ means—
‘‘(i) the first calendar quarter that be-
gins after the end of the 90-day period be-
ginning with the date of the enactment of 
this paragraph; and 
‘‘(ii) the 7 succeeding calendar quar-
ters. 
‘‘(K) CALENDAR QUARTER.—For purposes 
of this paragraph, the term ‘calendar quarter’ 
means—
‘‘(i) the period which begins on Janu-
ary 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 Octo-
ber 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
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the Federal Register and transmit to the Con-
gress regulations to carry out this paragraph. 
Such regulations shall include provisions relat-
ing to—
‘‘(i) the approval of auditors under 
subparagraph (H); and 
‘‘(ii) the designation of qualified high 
loss reserve PCLs under subparagraph 
(F), including the determination of wheth-
er 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 Administra-
tion 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 Ad-
ministrator 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 pre-
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pared to carry out any functions des-
ignated under subparagraph (B), and 
‘‘(ii) the Office of the Inspector Gen-
eral 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 RE-
LATED TO DEBENTURES ISSUED DURING ELECTION PE-
RIOD.—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 Business Investment Act of 1958 (15 
U.S.C. 697e(b)(2)) is amended by striking ‘‘sub-
section (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.—
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(1) IN
GENERAL.—The Administrator shall 
enter into a contract with a Federal agency experi-
enced in community development lending and finan-
cial regulation or with a member of the Federal Fi-
nancial Institutions Examinations Council to study 
and prepare a report regarding—
(A) the extent to which statutory require-
ments have caused overcapitalization in the loss 
reserves maintained by certified development 
companies participating in the Premier Cer-
tified 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 main-
taining loss reserves that are sufficient to pro-
tect the Federal Government 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 Busi-
ness and Entrepreneurship of the Senate not later 
than 90 days after the date of the enactment of this 
Act.