109th CONGRESS
1st Session
S. 2162
To
foster local development by facilitating the delivery of financial assistance
to small businesses, and for other purposes.
IN THE
SENATE OF THE UNITED STATES
December
21, 2005
Ms. SNOWE
introduced the following bill; which was read twice and referred to the
Committee on Small Business and Entrepreneurship
A BILL
To
foster local development by facilitating the delivery of financial assistance
to small businesses, 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; DEFINITION.
(a) Short
Title- This Act may be cited as the `Local Development Business Loan Program
Act of 2005'.
(b) Definition-
In this Act, the term `Administrator' means the Administrator of the Small
Business Administration.
SEC. 2. DEVELOPMENT
COMPANY LOAN PROGRAMS.
(a) Title
of Program- Title V of the Small Business Investment Act of 1958 (15 U.S.C.
695 et seq.) is amended by adding at the end the following:
`SEC. 511.
PROGRAM TITLE.
`The programs
authorized by this title shall be known as the `Local Development Business
Loan Program'.'.
(b) Existing
Materials- The Administrator may use informational materials created, or
that were in the process of being created, before the date of enactment
of this Act that do not refer to a program under title V of the Small Business
Investment Act of 1958 (15 U.S.C. 695 et seq.) as the `Local Development
Business Loan Program'.
(c) New Materials-
Any informational materials created by the Administrator on or after the
date of enactment of this Act shall refer to any program under title V of
the Small Business Investment Act of 1958 (15 U.S.C. 695 et seq.) as the
`Local Development Business Loan Program'.
SEC. 3. PROGRAM
AUTHORIZATIONS.
Section 20
of the Small Business Act (15 U.S.C. 631 note) is amended by adding at the
end the following:
`(f) Fiscal
Year 2007- For the program authorized under section 7(a)(13) of this Act
and the Local Development Business Loan Program under the Small Business
Investment Act of 1958, the Administrator is authorized to make $8,000,000,000
in financings, and there are authorized to be appropriated to the Administrator
such sums as may be necessary to carry out such programs.
`(g) Fiscal
Year 2008- For the program authorized under section 7(a)(13) of this Act
and the Local Development Business Loan Program under the Small Business
Investment Act of 1958, the Administrator is authorized to make $8,500,000,000
in financings, and there are authorized to be appropriated to the Administrator
such sums as may be necessary to carry out such programs.'.
SEC. 4. LOAN
LIQUIDATIONS.
Section 510
of the Small Business Investment Act of 1958 (15 U.S.C. 697g) is amended--
(1) by redesignating
subsection (e) as subsection (g); and
(2) by inserting
after subsection (d) the following:
`(1) IN
GENERAL- Any qualified State or local development company which elects
not to apply for authority to foreclose and liquidate defaulted loans
under this section, or which the Administrator determines to be ineligible
for such authority, shall contract with a qualified third-party to perform
foreclosure and liquidation of defaulted loans in its portfolio. The contract
shall be contingent upon approval by the Administrator with respect to
the qualifications of the contractor and the terms and conditions of liquidation
activities.
`(2) COMMENCEMENT-
The provisions of this subsection shall not require any development company
to liquidate defaulted loans until the Administrator has adopted and implemented
a program to compensate and reimburse development companies, as provided
under subsection (f).
`(f) Compensation
and Reimbursement-
`(1) REIMBURSEMENT
OF EXPENSES- The Administrator shall reimburse each qualified State or
local development company for all expenses paid by such company as part
of the foreclosure and liquidation activities, if the expenses--
`(A) were
approved in advance by the Administrator, either specifically or generally;
or
`(B) were
incurred by the development company on an emergency basis without prior
approval from the Administrator, if the Administrator determines that
the expenses were reasonable and appropriate.
`(2) COMPENSATION
FOR RESULTS- The Administrator shall develop a schedule to compensate
and provide an incentive to qualified State or local development companies
that foreclose and liquidate defaulted loans. The schedule shall be based
on a percentage of the net amount recovered, but shall not exceed a maximum
amount. The schedule shall not apply to any foreclosure which is conducted
pursuant to a contract between a development company and a qualified third
party to perform the foreclosure and liquidation.'.
SEC. 5. ADDITIONAL
EQUITY INJECTIONS.
Section 502(3)(B)(ii)
of the Small Business Investment Act of 1958 (15 U.S.C. 696(3)(B)(ii)) is
amended to read as follows:
`(ii)
FUNDING FROM INSTITUTIONS- If a small business concern--
`(I)
provides the minimum contribution required under subparagraph (C),
not less than 50 percent of the total cost of any project financed
under clause (i), (ii), or (iii) of subparagraph (C) shall come
from the institutions described in subclauses (I), (II), and (III)
of clause (i); and
`(II)
provides more than the minimum contribution required under subparagraph
(C), any excess contribution may be used to reduce the amount required
from the institutions described in subclauses (I), (II), and (III)
of clause (i), except that the amount from such institutions may
not be reduced to an amount that is less than the amount of the
loan made by the Administrator.'.
SEC. 6. BUSINESSES
IN LOW-INCOME AREAS.
Section 501(d)(3)(A)
of the Small Business Investment Act of 1958 (15 U.S.C. 695(d)(3)(A)) is
amended by inserting after `business district revitalization,' the following:
`or expansion of businesses in low-income communities which would be eligible
for a new markets tax credit pursuant to section 45D(a) of the Internal
Revenue Code of 1986, or implementing regulations issued thereunder,'.
SEC. 7. COMBINATIONS
OF CERTAIN GOALS.
Section 501(e)
of the Small Business Investment Act of 1958 (15 U.S.C. 695(e)) is amended
by adding at the end the following:
`(7) A small
business concern that is unconditionally owned by more than 1 individual,
or a corporation, the stock of which is owned by more than 1 individual,
shall be deemed to have achieved a public policy goal required under subsection
(d)(3) if a combined ownership share of not less than 51 percent is held
by individuals who are in 1 of the groups described in subparagraph (C)
or (E) of subsection (d)(3).'.
SEC. 8. MAXIMUM
504 AND 7(a) LOAN ELIGIBILITY.
Section 502(2)
of the Small Business Investment Act of 1958 (15 U.S.C. 696(2)) is amended
by adding at the end the following:
`(C) COMBINATION
FINANCING- Notwithstanding any other provision of law, financing under
this title may be provided to a borrower in the maximum amount provided
in this subsection, and a loan guarantee under section 7(a) of the Small
Business Act may be provided to the same borrower in the maximum amount
provided in section 7(a)(3)(A) of such Act, to the extent that the borrower
otherwise qualifies for such assistance.'.
SEC. 9. REFINANCING.
Section 502
of the Small Business Investment Act of 1958 (15 U.S.C. 696) is amended
by adding at the end the following:
`(7) PERMISSIBLE
DEBT REFINANCING-
`(A) IN
GENERAL- Any financing approved under this title may include a limited
amount of debt refinancing.
`(B) EXPANSIONS-
If the project involves expansion of a small business concern which
has existing indebtedness collateralized by fixed assets, any amount
of existing indebtedness that does not exceed 1/2 of the project cost
of the expansion may be refinanced and added to the expansion cost,
providing that--
`(i)
the proceeds of the indebtedness were used to acquire land, including
a building situated thereon, to construct a building thereon, or to
purchase equipment;
`(ii)
the borrower has been current on all payments due on the existing
debt for at least the preceding year; and
`(iii)
the financing under section 504 will provide better terms or rate
of interest than exists on the debt at the time of refinancing.'.
SEC. 10.
FEES.
(a) In General-
Section 503(d) of the Small Business Investment Act of l958 (15 U.S.C. 697(d))
is amended--
(1) by striking
paragraph (2);
(2) by redesignating
paragraph (3) as paragraph (2); and
(3) in paragraph
(2), as so redesignated, by striking `0.125 percent' and inserting `0.185
percent'.
(b) Effective
Date- The amendments made by subsection (a) shall take effect and apply
to loans under section 503(d) of the Small Business Investment Act of l958
(15 U.S.C. 697(d)) approved on or after 30 days after the date of enactment
of this Act.
SEC. 11.
TECHNICAL CORRECTION.
Section 501(e)(2)
of the Small Business Investment Act of 1958 (15 U.S.C. 695(e)(2)) is amended
by striking `outstanding'.
SEC. 12.
SBIA DEFINITIONS.
Section 103
of the Small Business Investment Act of 1958 (15 U.S.C. 662) is amended--
(1) by striking
paragraph (6) and inserting the following:
`(6) the
term `development company' means an entity incorporated under State law
with the authority to promote and assist the growth and development of
small business concerns in the areas in which it is authorized to operate
by the Administrator;';
(2) in paragraph
(16), by striking `and' at the end;
(3) in paragraph
(17), by striking the period at the end and inserting `; and'; and
(4) by adding
at the end the following:
`(18) the
term `certified development company' means a development company that
the Administrator has certified meets the criteria of section 506.'.
SEC. 13.
REPEAL OF SUNSET ON RESERVE REQUIREMENTS FOR PREMIER CERTIFIED LENDERS.
Section 508(c)(6)(B)
of the Small Business Investment Act of 1958 (15 U.S.C. 697e(c)(6)(B)) is
amended--
(1) in the
heading, by striking `TEMPORARY REDUCTION' and inserting `REDUCTION';
and
(2) by striking
`Notwithstanding subparagraph (A), during the 2-year period beginning
on the date that is 90 days after the date of enactment of this subparagraph,
the' and inserting `The'.
SEC. 14.
ELIGIBILITY OF DEVELOPMENT COMPANIES TO BE DESIGNATED AS CERTIFIED DEVELOPMENT
COMPANIES AND AUTHORITY TO ISSUE DEBENTURES; AND PROVIDING AN AREA OF OPERATIONAL
AUTHORITY, FUNDING RESTRICTIONS, AND ETHICAL REQUIREMENTS.
Section 506
of the Small Business Investment Act of 1958 (15 U.S.C. 697c) is amended--
(1) in the
heading, by striking `restrictions on development company assistance'
and inserting `certified development companies'; and
(2) by inserting
before `Notwithstanding any other provision of law' the following:
`(a) Authority
to Issue Debentures- A development company may issue debentures under this
title if the Administrator certifies that the company meets the following
criteria:
`(A) IN
GENERAL- Except as provided in subparagraph (B), the development company
shall be a small business concern with fewer than 500 employees, and
shall not be under the control of any entity that does not meet the
size standards established by the Administrator for a small business
concern.
`(B) EXCEPTION-
Any development company that was certified by the Administrator before
December 31, 2005, may continue to issue debentures under this title.
`(2) PURPOSE-
A primary purpose of the development company shall be to benefit the community
by fostering economic development to create and preserve jobs and stimulate
private investment.
`(3) PRIMARY
FUNCTION- A primary function of the development company shall be to accomplish
its purpose by providing long term financing to small business concerns
under the Local Development Business Loan Program. The development company
may also provide or support other local economic development activities
to assist the community.
`(A) IN
GENERAL- Except as provided in subparagraph (B), the development company
shall be a nonprofit corporation.
`(B) EXCEPTION-
A development company certified by the Administrator before January
1, 1987, may continue to issue debentures under this title and retain
its status as a for-profit enterprise.
`(5) GOOD
STANDING- The development company--
`(A) shall
be in good standing in the State in which such company is incorporated
and in any other State in which it conducts business; and
`(B) shall
be in compliance with all laws, including taxation requirements, in
the State in which such company is incorporated and in any other State
in which it conducts business.
`(6) MEMBERSHIP
OF DEVELOPMENT COMPANY- There shall be--
`(A) not
fewer than 25 members of the development company (or owners or stockholders,
if the corporation is a for-profit entity) none of whom may own or control
more than 10 percent of the voting membership of the company; and
`(B) at
least 1 member of the development company (none of whom is in a position
to control the development company) from each of the following:
`(i)
Government organizations that are responsible for economic development.
`(ii)
Financial institutions that provide commercial long term fixed asset
financing.
`(iii)
Community organizations that are dedicated to economic development.
`(A) IN
GENERAL- The development company shall have a board of directors.
`(B) MEMBERS
OF BOARD- Each member of the board of directors shall be--
`(i)
a member of the development company; and
`(ii)
elected by a majority of the members of the development company.
`(C) REPRESENTATION
OF ORGANIZATIONS AND INSTITUTIONS-
`(i)
IN GENERAL- There shall be at least 1 member of the board of directors
from not fewer than 3 of the 4 organizations and institutions described
in paragraph (6)(B), none of whom is in a position to control the
development company.
`(ii)
MAXIMUM PERCENTAGE- Not more than 50 percent of the members of the
board of directors shall be from any 1 of the organizations and institutions
described in paragraph (6)(B).
`(D) MEETINGS-
The board of directors of the development company shall meet on a regular
basis to make policy decisions for such company.
`(8) PROFESSIONAL
MANAGEMENT AND STAFF-
`(A) IN
GENERAL- The development company shall have full-time professional management,
including a chief executive officer to manage daily operations and a
full-time professional staff qualified to market the Local Development
Business Loan Program and handle all aspects of loan approval and servicing,
including liquidation, if appropriate.
`(B) INDEPENDENT
MANAGEMENT AND OPERATION- Except as provided in paragraph (9), the development
company shall be independently managed and operated to pursue the economic
development purpose of the company and shall employ directly the chief
executive officer.
`(9) MANAGEMENT
AND OPERATION EXCEPTIONS-
`(A) AFFILIATION-
A development company may be an affiliate of another local nonprofit
service corporation (other than a development company), a purpose of
which is to support economic development in the area in which the development
company operates.
`(B) STAFFING-
A development company may satisfy the requirement for full-time professional
staff under paragraph (8)(A) by contracting for the required staffing
with--
`(i)
a local nonprofit service corporation;
`(ii)
a nonprofit affiliate of a local nonprofit service corporation;
`(iii)
an entity wholly or partially operated by a governmental agency; or
`(iv)
another entity approved by the Administration.
`(C) DIRECTORS-
A development company and a local nonprofit service corporation with
which it is affiliated may have in common some, but not all, members
of their respective board of directors.
`(D) RURAL
AREAS- A development company in a rural area may satisfy the requirements
of a full-time professional staff and professional management ability
under paragraph (8)(A) by contracting for such services with another
certified development company that--
`(i)
has such staff and management ability; and
`(ii)
is located in the same State as the development company or in a State
that is contiguous to the State in which the development company is
located.
`(E) PREVIOUSLY
CERTIFIED- A development company that, on or before December 31, 2005,
was certified by the Administrator and had contracted with a for-profit
company to provide staffing and management services, may continue to
do so.
`(b) Use of
Excess Funds- Any funds generated by a certified development company from
making loans under section 503 or 504 that remain unexpended after payment
of staff, operating, and overhead expenses shall be retained by the certified
development company as a reserve for--
`(2) expanding
the area in which the certified development company operates through the
methods authorized by this Act; or
`(3) investment
in other local economic development activity in the State from which such
funds were generated.
`(c) Ethical
Requirements-
`(1) IN
GENERAL- A certified development company and the officers, employees,
and other staff of the company shall at all times act ethically and avoid
activities which constitute a conflict of interest or appear to constitute
a conflict of interest.
`(2) PROHIBITED
CONFLICT IN PROJECT LOANS-
`(A) IN
GENERAL- No certified development company may--
`(i)
recommend or approve a guarantee of a debenture by the Administrator
under the Local Business Development Loan Program that is collateralized
by a second lien position on the property being constructed or acquired;
and
`(ii)
provide, or be affiliated with a corporation or other entity which
provides, financing collateralized by a first lien on the same property.
`(B) EXCEPTION-
During the 2-year period beginning on the date of enactment of this
subsection, a certified development company that was participating as
a first mortgage lender for the Local Business Development Loan Program
in either of fiscal years 2004 or 2005 may continue to do so.
`(3) OTHER
ECONOMIC DEVELOPMENT ACTIVITIES- It shall not be a conflict of interest
for a certified development company to operate multiple programs to assist
small business concerns as part of carrying out its economic development
purpose.
`(d) Multistate
Operations-
`(1) AUTHORIZATION-
Notwithstanding any other provision of law, the Administrator shall permit
a certified development company to make loans in any State that is contiguous
to the State of incorporation of that certified development company, only
if such company--
`(i)
an accredited lender under section 507; or
`(ii)
a premier certified lender under section 508;
`(B) has
a membership that contains not fewer than 25 members from each State
in which the company makes loans;
`(C) has
a board of directors that contains not fewer than 1 member from each
State in which the company makes loans; and
`(D) maintains
not fewer than 1 loan committee, which shall have not fewer than 1 member
from each State in which the company makes loans; and
`(E) submits
to the Administrator, in writing--
`(i)
a notice of the intention of the company to make loans in multiple
States;
`(ii)
the names of the States in which the company intends to make loans;
`(iii)
a detailed statement of how the company will comply with this paragraph,
including a list of the members described in subparagraph (B).
`(2) REVIEW-
The Administrator shall verify whether a certified development company
satisfies the requirements of paragraph (1) on an expedited basis and,
not later than 30 days after the date on which the Administrator receives
the statement described in paragraph (1)(E)(iii), the Administrator shall
determine whether such company satisfies such criteria and provide notice
to such company.
`(3) LOAN
COMMITTEE PARTICIPATION- For any loan made by a company described in paragraph
(1), not fewer than 1 member of the loan committee from the State in which
the loan is to be made shall participate in the review of such loan.
`(4) AGGREGATE
ACCOUNTING- A company described in paragraph (1) may maintain an aggregate
accounting of all revenue and expenses of the company for purposes of
this title.
`(5) DIRECTORS-
Notwithstanding any other provision of law, a person may serve on the
board of directors, but not as an officer, of more than 1 certified development
company if none of the certified development companies on which the person
serves as a member of the board of directors are located or operate in
the same area.
`(6) LOCAL
JOB CREATION REQUIREMENTS- Any certified development company making loans
in multiple States shall satisfy any applicable job creation or retention
requirements separately for each such State. Such a company shall not
count jobs created or retained in 1 State towards any applicable job creation
or retention requirement in another State.
`(7) CONTIGUOUS
STATES- For purposes of this subsection, the States of Alaska and Hawaii
shall be deemed to be contiguous to any State abutting the Pacific ocean.
`(e) Restrictions
on Development Company Assistance- '.
SEC. 15.
CONFORMING AMENDMENTS.
Section 503
of the Small Business Investment Act of 1958 (15 U.S.C. 697) is amended--
(1) in subsection
(a)(1), by striking `qualified State or local development company' and
inserting `certified development company'; and
(2) by striking
subsection (e) and inserting the following:
`(e) Section
7(a) LOANS- Notwithstanding any other provision of law, a certified development
company is authorized to prepare applications for deferred participation
loans under section 7(a) of the Small Business Act, to service such loans,
and to charge a reasonable fee for servicing such loans.'.
SEC. 16.
CLOSING COSTS.
Section 503(b)
of the Small Business Investment Act of 1958 (15 U.S.C. 697(b)) is amended
by striking paragraph (4) and inserting the following:
`(4) the
aggregate amount of such debenture does not exceed the amount of the loans
to be made from the proceeds of such debenture plus, at the election of
the borrower, other amounts attributable to the administrative and closing
costs of such loans, except for the attorney fees of the borrower;'.
SEC. 17.
DEFINITION OF RURAL.
Section 501
of the Small Business Investment Act of 1958 (15 U.S.C. 695) is amended
by adding at the end the following:
`(f) As used
in this title, the term `rural' shall include any area that is not--
`(1) a city
or town that has a population greater than 50,000 inhabitants; or
`(2) the
urbanized area contiguous and adjacent to a city or town described in
paragraph (1).'.
SEC. 18.
REGULATIONS AND EFFECTIVE DATE.
(a) In General-
Except as provided in subsection (b), the Administrator shall--
(1) publish
proposed rules to implement this Act and the amendments made by this Act
not later than 120 days after the date of enactment of this Act; and
(2) publish
such rules in final form not later than 120 days after the date of publication
under paragraph (1).
(b) Multistate
Operations- As soon as is practicable after the date of enactment of this
Act, the Administrator shall promulgate regulations to implement section
506(d) of the Small Business Investment Act of 1958, as added by section
14 of this Act. Such regulations shall become effective not later than 120
days after the date of enactment of this Act.
(1) IN GENERAL-
Except as provided in paragraph (2) and section 10(b), this Act and the
amendments made by this Act shall become effective 240 days after the
date of enactment of this Act, regardless of whether the Administrator
has promulgated the regulations required under subsection (a).
(2) MULTISTATE
OPERATIONS- Section 506(d) of the Small Business Investment Act of 1958,
as added by section 14 of this Act, shall become effective 120 days after
the date of enactment of this Act, regardless of whether the Administrator
has promulgated the regulations required under subsection (b).
END
