504 Modernization and Small Manufacturer Enhancement Act of 2021
Bill: S.2231 | Sponsor: Sen. Klobuchar, Amy (D-MN)
Policy area: Commerce

Summary:
504 Modernization and Small Manufacturer Enhancement Act of 2021
This bill modifies the Small Business Administration (SBA) 504 Loan Program, which provides a small business with SBA financing—through a certified development company (CDC) intermediary—for expansion or modernization.
Specifically, the bill adds policy goals, at least one of which a CDC must demonstrate to be eligible for assistance. These include (1) enhancing the ability of a small business to reduce costs by using energy efficient products and generating renewable energy, and (2) aiding the revitalization of any area for which a disaster has been declared or determined. The bill also authorizes a CDC to take specified actions to facilitate the closing of a 504 loan, such as correcting borrower or lender information on loan documents or reallocating up to 10% of the cost of a project.
For small manufacturers, the bill (1) increases the maximum loan amount from $5.5 million to $6.5 million, (2) reduces the amount that they must contribute to project costs, (3) increases job retention requirements, and (4) revises collateral requirements and debt refinancing considerations. Further, each SBA district office must partner with a resource partner to provide certain training for small manufacturers.

To amend the Small Business Investment Act of 1958 to improve the loan 
guaranty program, enhance the ability of small manufacturers to access 
              affordable capital, and for other purposes.

    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 ``504 Modernization and Small 
Manufacturer Enhancement Act of 2021''.

SEC. 2. ADDITIONS TO POLICY GOALS FOR THE DEVELOPMENT COMPANY PROGRAM.

    Section 501(d)(3) of the Small Business Investment Act of 1958 (15 
U.S.C. 695(d)(3)) is amended--
            (1) by redesignating subparagraphs (A) through (L) as 
        subparagraphs (B) through (M), respectively;
            (2) by inserting before subparagraph (B) (as so 
        redesignated) the following:
                    ``(A) workforce development through work-based or 
                work-integrated training, which shall be satisfied by 
                demonstrating that a small business concern that is a 
                subject of the project has--
                            ``(i) a documented in-house training 
                        program, the duration of which is not shorter 
                        than 12 weeks; or
                            ``(ii) entered into a contract with an 
                        entity--
                                    ``(I) to provide trained applicants 
                                for any open position of employment at 
                                the small business concern; and
                                    ``(II) that ensures that any 
                                applicant provided to the small 
                                business concern under subclause (I) 
                                has undergone not fewer than 12 weeks 
                                of training that is relevant to the 
                                open position described in that 
                                subclause,'';
            (3) by amending subparagraph (D) (as so redesignated) to 
        read as follows:
                    ``(D) expansion of minority-owned, employee-owned, 
                or women-owned business development,'';
            (4) in subparagraph (L) (as so redesignated), by striking 
        ``producers, or'' and inserting ``producers,'';
            (5) in subparagraph (M) (as so redesignated), by striking 
        the period at the end and inserting a comma;
            (6) by inserting after subparagraph (M) (as so 
        redesignated) the following new subparagraphs:
                    ``(N) enhanced ability for small business concerns 
                to reduce costs by using energy efficient products and 
                generating renewable energy,
                    ``(O) aid revitalizing of any area for which a 
                disaster has been declared or determined under 
                subparagraph (A), (B), (C), or (E) of section 7(b)(2) 
                of the Small Business Act, or
                    ``(P) expansion of small business concerns with 10 
                or fewer employees.''; and
            (7) in the flush text following subparagraph (P), as added 
        by paragraph (6), by striking ``subparagraphs (J) and (K)'' and 
        inserting ``subparagraphs (K) and (L)''.

SEC. 3. INCREASE IN LOAN AMOUNTS FOR MANUFACTURING LOANS.

    Section 502 of the Small Business Investment Act of 1958 (15 U.S.C. 
696) is amended--
            (1) in the matter preceding paragraph (1), by striking 
        ``The Administration'' and inserting the following:
    ``(a) In General.--The Administration''; and
            (2) in subsection (a), as so designated--
                    (A) in paragraph (2)(A)--
                            (i) in the matter preceding clause (i), by 
                        striking ``section'' and inserting 
                        ``subsection''; and
                            (ii) in clause (iii), by striking 
                        ``$5,500,000'' and inserting ``$6,500,000''; 
                        and
                    (B) in paragraph (3)(A), by striking ``this 
                section'' and inserting ``this subsection''.

SEC. 4. IMPROVEMENTS TO 504 LOAN CLOSING PROCEDURE.

    Title V of the Small Business Investment Act of 1958 (15 U.S.C. 695 
et seq.) is amended--
            (1) in section 502, as amended by section 3, by adding at 
        the end the following new subsections:
    ``(b) Closing.--
            ``(1) Authority of certain development companies.--An 
        accredited lender certified company may take any of the 
        following actions to facilitate the closing of a loan made 
        under subsection (a):
                    ``(A) Reallocate the cost of the project with 
                respect to which the loan is made in an amount that is 
                not more than 10 percent of the overall cost of the 
                project.
                    ``(B) Correct any name that is applicable to the 
                loan, including the name of any borrower, guarantor, 
                eligible passive company described in subparagraph 
                (C)(i), and operating company described in subparagraph 
                (C)(ii).
                    ``(C) Form any of the following to receive proceeds 
                of the loan:
                            ``(i) An eligible passive company that 
                        complies with section 120.111 of title 13, Code 
                        of Federal Regulations, or any successor 
                        regulation.
                            ``(ii) If an eligible passive company is 
                        formed under clause (i), an operating company 
                        with respect to that eligible passive company.
                    ``(D) Correct the address of any property with 
                respect to which the loan is made.
                    ``(E) Correct the name of any interim lender or 
                third-party lender.
                    ``(F) Change any third-party lender or interim 
                lender if that lender is a financial institution that 
                is regulated by the Federal Government or a State 
                government.
                    ``(G) Make a guarantor a co-borrower or a co-
                borrower a guarantor.
                    ``(H) Add a guarantor that does not change 
                ownership with respect to the loan.
                    ``(I) Reduce the amount of standby debt before the 
                closing as a result of regularly scheduled payments.
                    ``(J) Reduce the cost of the project with respect 
                to which the loan is made.
            ``(2) Fees.--The Administrator shall--
                    ``(A) issue a rule regarding the amount of a 
                closing fee that may be financed in a debenture that is 
                issued by a certified development company to make one 
                or more loans to small business concerns, the proceeds 
                of which are used by that concern for the purposes 
                described in subsection (a), except that such amount 
                shall be not less than $3,500; and
                    ``(B) periodically update the rule issued under 
                subparagraph (A).
            ``(3) No adverse change and financial statement.--Before 
        the closing with respect to a loan made under subsection (a), 
        the borrower and any operating company shall--
                    ``(A) make the certification required under section 
                120.892 of title 13, Code of Federal Regulations, or 
                any successor regulation; and
                    ``(B) submit to the certified development company a 
                financial statement that is not more than 180 days old, 
                which the company shall certify not later than 120 days 
                before the date on which the certified development 
                company issues a debenture with respect to the project 
                to which the loan relates.
    ``(c) Accredited Lender Certified Company Defined.--In this 
section, the term `accredited lender certified company' means a 
certified development company that meets the requirements under section 
507(b), including a certified development company that the 
Administration has designated as an accredited lender under such 
section 507(b).''; and
            (2) by adding at the end the following new section:

``SEC. 511. CLOSING AND OVERSIGHT.

    ``(a) SBA District Counsels.--Beginning on the date of enactment of 
this section, with respect to the program established under this title, 
district counsels of the Administration shall be subject to the same 
requirements, and shall have the same authority and responsibilities, 
as in effect with respect to that program on the day before the date of 
enactment of this section, except that--
            ``(1) the Office of Credit Risk Management of the 
        Administration shall have the responsibility for all duties 
        relating to conducting file reviews of loans made under this 
        title; and
            ``(2) district counsels of the Administration shall not 
        have any responsibility relating to the review of closing 
        packages with respect to a loan made under this title.
    ``(b) Designated Attorneys.--For the purposes of this title, the 
following provisions and requirements shall apply with respect to a 
designated attorney of a certified development company:
            ``(1) A designated attorney that meets the requirements 
        determined under paragraph (2) shall be responsible for 
        certifying documents relating to the closing of a loan 
        described in this title.
            ``(2) The Administrator may determine any continuing 
        education requirements that the designated attorney shall be 
        required to satisfy in order to be permitted to close a loan 
        made under this title.
            ``(3) If, as of the date of enactment of this section, a 
        certified development company does not have a designated 
        attorney, during the 270-day period beginning on that date of 
        enactment, the certified development company may identify such 
        an attorney, subject to the approval of the Administrator.''.

SEC. 5. CERTIFIED DEVELOPMENT COMPANY LOANS FOR SMALL MANUFACTURERS.

    (a) Contribution Requirement.--Section 502(a)(3)(C) of the Small 
Business Investment Act of 1958, as designated by section 3, is 
amended--
            (1) by redesignating clauses (i), (ii), (iii), and (iv) as 
        subclauses (I), (II), (III), and (IV), respectively, and 
        adjusting the margins of such subclauses accordingly;
            (2) by inserting before subclause (I), as so redesignated, 
        the following:
                            ``(i) for a small business concern that is 
                        not a small manufacturer (as defined in section 
                        501(e)(7))--'';
            (3) in subclause (III), as so redesignated, by striking 
        ``clauses (i) and (ii)'' and inserting ``subclauses (I) and 
        (II)'';
            (4) in subclause (IV) as so redesignated, by striking the 
        period and the end and inserting ``; or''; and
            (5) by adding at the end the following:
                            ``(ii) for a small manufacturer (as defined 
                        in section 501(e)(7))--
                                    ``(I) at least 5 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 5 percent of the 
                                total cost of the project financed, if 
                                the project involves a limited or 
                                single purpose building or structure;
                                    ``(III) at least 10 percent of the 
                                total cost of the project financed if 
                                the project involves both of the 
                                conditions set forth in subclauses (I) 
                                and (II); or
                                    ``(IV) at least 5 percent of the 
                                total cost of the project financed, in 
                                all other circumstances, at the 
                                discretion of the development 
                                company.''.
    (b) Creation or Retention of Jobs Requirement.--Section 501(e) of 
the Small Business Investment Act of 1958 (15 U.S.C. 695(e)) is 
amended--
            (1) in paragraph (1), by striking ``creates or retains'' 
        and all that follows through the period at the end and 
        inserting ``creates or retains 1 job for every $75,000 
        guaranteed by the Administration, except that the amount is 
        $150,000 in the case of a project of a small manufacturer.'';
            (2) in paragraph (2), by striking ``creates or retains'' 
        and all that follows through the period at the end and 
        inserting ``creates or retains 1 job for every $75,000 
        guaranteed by the Administration, except that the amount is 
        $150,000 in the case of a project of a small manufacturer.'';
            (3) by redesignating paragraph (6) as paragraph (7); and
            (4) by inserting after paragraph (5) the following:
    ``(6) For a loan for a project directed toward the creation of job 
opportunities under subsection (d)(1), the Administrator shall publish 
on the website of the Administration the number of jobs created or 
retained under the project as of the date that is 2 years after the 
completion (as determined based on information provided by the 
development company) of the project.''.
    (c) Collateral Requirements.--Section 502(a)(3)(E)(i) of the Small 
Business Investment Act of 1958, as designated by section 3, is amended 
by adding at the end the following: ``Additional collateral shall not 
be required in the case of a small manufacturer (as defined in section 
501(e)(7)).''.
    (d) Debt Refinancing.--Section 502(a)(7)(B) of the Small Business 
Investment Act of 1958, as designated by section 3, is amended--
            (1) in the matter preceding clause (i), by inserting ``(or 
        in the case of a small manufacturer (as defined in section 
        501(e)(7)), that does not exceed 100 percent of the project 
        cost of the expansion)'' after ``cost of the expansion'';
            (2) in clause (v), by adding ``and'' at the end;
            (3) by striking clause (vi); and
            (4) by redesignating clause (vii) as clause (vi).
    (e) Amount of Guaranteed Debenture.--Section 503(a) of the Small 
Business Investment Act of 1958 (15 U.S.C. 697(a)) is amended by adding 
at the end the following:
    ``(5) Any debenture issued by a State or local development company 
to a small manufacturer (as defined in section 501(e)(7)) with respect 
to which a guarantee is made under this subsection shall be in an 
amount equal to not more than 50 percent of the cost of the project 
with respect to which such debenture is issued, without regard to 
whether good cause has been shown.''.

SEC. 6. ASSISTANCE FOR SMALL MANUFACTURERS.

    Title V of the Small Business Investment Act of 1958 (15 U.S.C. 695 
et seq.), as amended by section 4(2), is further amended by adding at 
the end the following new section:

``SEC. 512. ASSISTANCE FOR SMALL MANUFACTURERS.

    ``(a) In General.--The Administrator shall ensure that each 
district office of the Administration partners with not less than 1 
resource partner to provide training to small business concerns 
assigned a North American Industry Classification System code for 
manufacturing on obtaining assistance under the program carried out 
under this title, including with respect to the application process 
under that program and partnering with development companies under this 
title.
    ``(b) Resource Partner Defined.--In this section, the term 
`resource partner' means--
            ``(1) a small business development center (defined in 
        section 3 of the Small Business Act);
            ``(2) a women's business center (described under section 29 
        of such Act);
            ``(3) a chapter of the Service Corps of Retired Executives 
        (established under section 8(b)(1)(B) of such Act); and
            ``(4) a Veteran Business Outreach Center (described under 
        section 32 of such Act).''.

SEC. 7. LEASING RULES FOR NEW FACILITIES AND EXISTING BUILDINGS.

    (a) In General.--Section 502(a) of the Small Business Investment 
Act of 1958, as designated by section 3, is amended by striking 
paragraphs (4) and (5) and inserting the following new paragraphs:
            ``(4) New facilities.--
                    ``(A) In general.--With respect to a project to 
                construct a new facility, an assisted small business 
                concern may permanently lease not more than 20 percent 
                of the project if such concern--
                            ``(i) permanently occupies and uses not 
                        less than 60 percent of the project;
                            ``(ii) plans to occupy and use an 
                        additional portion of the project that is not 
                        permanently leased not later than 3 years after 
                        receipt of assistance under this section; and
                            ``(iii) plans to permanently occupy and use 
                        80 percent of the project not later than 10 
                        years after receipt of such assistance.
                    ``(B) Small manufacturers.--With respect to an 
                assisted small business concern that is a small 
                manufacturer (as defined in section 501(e)(7)), 
                subparagraph (A)(i) shall apply with `50 percent' 
                substituted for `60 percent'.
            ``(5) Existing buildings.--With respect to a project to 
        acquire, renovate, or reconstruct an existing building, the 
        following shall apply:
                    ``(A) Occupancy requirements.--The assisted small 
                business concern may permanently lease not more than 50 
                percent of the project if the concern permanently 
                occupies and uses not less than 50 percent of the 
                project.
                    ``(B) Exception.--The assisted small business 
                concern may permanently lease more than 50 percent of 
                the project if--
                            ``(i) such concern--
                                    ``(I) has occupied and used the 
                                existing building for a consecutive 12-
                                month period before submitting an 
                                application for assistance under this 
                                section;
                                    ``(II) agrees to permanently use 
                                less than 50 percent of the existing 
                                building and permanently lease more 
                                than 50 percent for a consecutive 12-
                                month period after receiving such 
                                assistance; and
                                    ``(III) affirms that the existing 
                                building is appropriate for current and 
                                reasonably anticipated needs; and
                            ``(ii) the development company assisting 
                        such project--
                                    ``(I) provides written notice to 
                                the Administrator on the date on which 
                                the development company closes the loan 
                                for such project; and
                                    ``(II) once each year during the 
                                first 5 years of the loan, and once 
                                every 2 years for the remainder of the 
                                loan--
                                            ``(aa) conducts an 
                                        examination of the assisted 
                                        small business concern to 
                                        ensure the concern is not a 
                                        real estate development 
                                        business; and
                                            ``(bb) files with the 
                                        Administrator an anti-investor 
                                        certification signed by the 
                                        development company and the 
                                        assisted small business 
                                        concern.
                    ``(C) Lease term.--Any residential lease made under 
                this paragraph shall be for a term of not more than 1 
                year, and any commercial lease made under this 
                paragraph shall be for a term of not more than 5 
                years.''.
    (b) Report.--Not later than 5 years after the date of the enactment 
of this Act, the Administrator of the Small Business Administration 
shall submit to Congress a report analyzing the impact of the 
amendments made by this section on access to capital for small business 
concerns (as defined under section 3 of the Small Business Act (15 
U.S.C. 632)), and recommending whether similar notice, examination, and 
certifications requirements should be made to the program established 
under section 7(a) of the Small Business Act (15 U.S.C. 636(a)).
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