A bill to amend title IV of the Small Business Investment Act of 1958, relating to a pilot program for credit enhancement guarantees on pools of non-SBA loans.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Credit Liquidity Act 
of 2003''.

SEC. 2. PILOT PROGRAM FOR GUARANTEES ON POOLS OF NON-SBA LOANS.

    Title IV of the Small Business Investment Act of 1958 (15 U.S.C. 
692 et seq.) is amended by adding at the end the following:

                ``Part C--Credit Enhancement Guarantees

    ``Sec. 420. (a)(1) The Administration is authorized, upon such 
terms and conditions as it may prescribe, in order to encourage lenders 
to increase the availability of small business financing by improving 
such lenders' access to reasonable sources of funding, to provide a 
credit enhancement guarantee, or commitment to guarantee, of the timely 
payment of a portion of the principal and interest on securities issued 
and managed by not less than 2 qualified entities authorized and 
approved by the Administration.
    ``(2) The entities authorized under this subsection to act as 
issuers and managers of pools or trusts of loans shall be well-
capitalized, as defined by the Administration, and shall maintain 
sufficient reserves to allow securities to be issued representing 
interests in each pool or trust that are rated as investment grade by a 
nationally-recognized rating agency.
    ``(3) The authority of the entities authorized under this 
subsection shall be reviewed annually by the Administration and may be 
renewed upon the satisfactory completion of such review.
    ``(4) The Administration shall set and maintain standards for 
entities authorized under this subsection, including standards relating 
to delinquency, default, liquidation, and loss rates.
    ``(5) If an entity authorized under this subsection fails to meet 
the standards set pursuant to paragraph (4), the Administration may 
terminate the entity's participation in the pilot program under this 
subsection.
    ``(b)(1)(A) The Administration may provide its credit enhancement 
guarantees in respect of securities that represent interests in, or 
other obligations issued by, a trust, pool, or other entity whose 
assets (other than the Administration's credit enhancement guarantee 
and credit enhancements provided by other parties) consist of loans 
made to small business concerns.
    ``(B) As used in this paragraph, the term `small business concern' 
has the meaning given that term in either the Small Business Act (15 
U.S.C. 631 et seq.) or this Act (15 U.S.C. 661 et seq.).
    ``(2) The credit enhancement guarantees provided by the 
Administration under paragraph (1) shall be second-loss guarantees that 
are only available after the full payment of credit enhancement 
guarantees offered by the entities authorized to act as issuers and 
managers of pools or trusts of loans under this section.
    ``(3) A pool or trust of loans shall not be eligible for guarantees 
under this section--
            ``(A) if the value of such loans exceeds $350,000,000 in 
        fiscal year 2004;
            ``(B) if the value of such loans exceeds $400,000,000 in 
        fiscal year 2005; or
            ``(C) if the value of such loans exceeds $450,000,000 in 
        fiscal year 2006.
    ``(4) All loans under paragraph (1) shall be originated, purchased, 
or assembled and managed consistent with requirements prescribed by the 
Administration in connection with this credit enhancement guarantee 
program.
    ``(5) The Administration shall prescribe requirements to be 
observed by the issuers and managers of the securities covered by 
credit enhancement guarantees to ensure the safety and soundness of the 
credit enhancement guarantee program.
    ``(c) The full faith and credit of the United States is pledged to 
the payment of all amounts the Administration may be required to pay as 
a result of credit enhancement guarantees under this section.
    ``(d)(1) The Administration may issue credit enhancement guarantees 
in an amount--
            ``(A) not to exceed $2,100,000,000 in fiscal year 2004;
            ``(B) not to exceed $3,250,000,000 in fiscal year 2005; and
            ``(C) not to exceed $4,500,000,000 in fiscal year 2006.
    ``(2) The Administration shall set the percentage and priority of 
each credit enhancement guarantee on issued securities at a level not 
to exceed 25 percent of the value of the securities so that the amount 
of the Administration's anticipated net loss (if any) as a result of 
such guarantee is fully reserved in a credit subsidy account funded 
wholly by fees collected by the Administration from the issuers or 
managers of the pool or trust.
    ``(3) The Administration shall charge and collect a fee from the 
issuer based on the Administration's guaranteed amount of issued 
securities, and the amount of such fee shall equal the estimated credit 
subsidy cost of the Administration's credit enhancement guarantee.
    ``(4) The fees provided for under this subsection shall be adjusted 
annually, as necessary, by the Administration.
    ``(5) The Federal government shall not appropriate any funds to 
finance credit enhancement guarantees under this section.
    ``(e) Report and Analysis.--
            ``(1) Report.--
                    ``(A) In general.--During the development and 
                implementation of the pilot program, the Administrator 
                shall submit a report on the status of the pilot 
                program under this section to Congress in each annual 
                budget request and performance plan.
                    ``(B) Contents.--The report submitted under 
                subparagraph (A) shall include, among other items, 
                information about the loans in the pools or trusts, 
                including delinquency, default, loss, and recovery 
                rates.
            ``(2) Analysis and report.--Not later than December 30, 
        2005, the Comptroller General shall--
                    ``(A) conduct an analysis of the pilot program 
                under this section; and
                    ``(B) submit a report to Congress that contains a 
                summary of the analysis conducted under subparagraph 
                (A) and a description of any effects, not attributable 
                to other causes, of the pilot program on the lending 
                programs under section 7(a) of the Small Business Act 
                (15 U.S.C. 636(a)) and title V of this Act.
            ``(3) Implementation.--
                    ``(A) Report.--After completing operational 
                guidelines to carry out the pilot program under this 
                section, the Administration shall submit a report, 
                which describes the method in which the pilot program 
                will be implemented, to--
                            ``(i) the Committee on Small Business and 
                        Entrepreneurship of the Senate; and
                            ``(ii) the Committee on Small Business of 
                        the House of Representatives.
                    ``(B) Timing.--The Administration shall not 
                implement the pilot program under this section until 
                the date that is 50 days after the report has been 
                submitted under subparagraph (A).
    ``(f) Sunset Provision.--This section shall remain in effect until 
September 30, 2006.''.

Summary: Small Business Credit Liquidity Act of 2003 - Amends the Small Business Investment Act of 1958 to authorize the Small Business Administration (SBA), in order to encourage lenders to increase the availability of small business financing by improving lender access to reasonable funding sources, to provide a credit enhancement guarantee of, or a commitment to guarantee, a portion of the principal and interest on securities issued and managed by not less than two qualified entities authorized and approved by the SBA. Requires the SBA to set and maintain standards for qualified entities, including standards relating to delinquency, default, liquidation, and loss rates.

Makes the SBA's credit enhancement guarantees second-loss guarantees, available only after the full payment of guarantees offered by the qualified entities authorized to act as issuers and managers of pools or trusts of loans. Provides loan pool or trust requirements and credit enhancement limits for FY 2004 through 2006. Directs the SBA to charge and collect a fee from issuers based on the SBA's guaranteed amount of issued securities.