109th CONGRESS
2d Session
S. 2595
To amend the Small Business Investment Act of 1958 to modernize
the treatment of development companies.
IN THE SENATE OF THE UNITED STATES
April 6, 2006
Mr. KERRY (for himself and Mr. PRYOR) introduced the following bill; which
was read twice and referred to the Committee on Small Business and Entrepreneurship
A BILL
To amend the Small Business Investment Act of 1958 to modernize
the treatment of development companies.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS; DEFINITIONS.
(a) Short Title- This Act may be cited as the `504 Loan Program Modernization
Act of 2006'.
(b) Table of Contents- The table of contents for this Act is as follows:
Sec. 1. Short title; table of contents; definitions.
Sec. 2. Findings and purposes.
Sec. 3. Authorizations for 504 Loan Program.
Sec. 4. Certified development company economic development.
Sec. 6. Eligibility of development companies to be designated as certified
development companies; authority to issue debentures; providing an area
of operational authority, funding restrictions, and ethical requirements.
Sec. 7. Conforming amendments.
Sec. 8. Definition of rural areas.
Sec. 9. Businesses in low-income areas.
Sec. 10. Combinations of certain goals.
Sec. 11. Repeal of sunset on reserve requirements for premier certified
lenders.
Sec. 14. Additional equity injections.
Sec. 15. Loan liquidations.
Sec. 17. Maximum 504 and 7(a) loan eligibility.
Sec. 18. Technical correction.
Sec. 19. Premier Certified Lenders Program report.
(c) Definitions- In this Act--
(1) the terms `Administration' and `Administrator' means the Small Business
Administration and the Administrator thereof, respectively;
(2) the term `Premier Certified Lenders Program' means the program established
under section 508(a) of the Small Business Investment Act of 1958 (15
U.S.C. 697e(a)); and
(3) the term `504 Loan Program' means the program to provide financing
to small business concerns by guarantees of loans under title V of the
Small Business Investment Act of 1958 (15 U.S.C. 695 et seq.), which are
funded by debentures guaranteed by the Administrator.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings- Congress finds that--
(1) in pursuing its mission of aiding small businesses, the Administration
provides small businesses with access to credit, primarily by guaranteeing
loans through its 7(a) and 504 Loan Programs;
(2) the 504 Loan Program provides long-term, fixed-rate financing to growing
small businesses for expansion or modernization, primarily of real estate
and large equipment;
(3) the 504 financing is delivered through certified development companies
(in this section referred to as `CDCs'), about 270 typically preexisting
nonprofit corporations, established to contribute to the economic development
of their communities;
(4) during the 5 years preceding the date of enactment of this Act, 504
loans have slightly increased to Hispanics and Asians, but have been flat-level
funded to African Americans, with 2 percent of the loans, and have decreased
in loans to women, from 19 percent to 15 percent;
(5) the CDC industry and the 504 Loan Program have experienced unprecedented
structural changes, such as the shift of all 504 loan processing, loan
servicing and liquidation from 70 Administration district offices to 1
or 2 centers in the country;
(6) in 2004, the Administration adopted regulations that allowed for Statewide
and multistate CDC operations, resulting in increased competition and
program growth in many areas of the country, with limited accountability
measures to ensure that CDCs are investing in local economic development
activities in each State as they expand; and
(7) such changes require Congress to examine the 504 Loan Program and
the industry and set a statutory course that ensures that the intent and
the mission of CDCs and the 504 Loan Program for the future are clearly
established as local economic development.
(b) Purposes- The purpose and intent of this Act are--
(1) to make a clear distinction between nonprofit and for-profit lending
practices through the preservation of the CDCs as non-profit economic
development intermediaries that are an essential element in Congress'
and the Administration's mission to assist small businesses to foster
local economic development through job creation and investment in all
our communities;
(2) to reconfirm the statutory intent of CDCs as originally established
in 1958 to provide small business programs, services, and assistance that
for-profit lenders do not provide;
(3) to direct the Administration within 90 days of the date of enactment
of this Act to report to the Committee on Small Business and Entrepreneurship
of the Senate and the Committee on Small Business of the House of Representatives
on how the Administration could implement 1 closing, rather than 2 in
the 504 Loan Program, and potentially save the borrower thousands in funds
and retain outstanding participation of private lenders;
(4) to direct the Administration to report on the utilization of the Premier
Certified Lender Program over the past 3 years, specifically outlining
how many 504 loans have been processed through the program, what difficulties
have been encountered in making these loans, and how the number of loans
in the program could be increased or streamlined;
(5) to establish the expansion of business in low-income communities as
a separate public policy goal to highlight the need for CDCs to include
such goal as a primary objective in future projects and outreach to underserved
populations;
(6) to ensure accountability as CDC operations expand into contiguous
States through timely authorizations by the Administrator to operate in
multistates and require that CDCs use excess funds for local economic
development projects in the area of operations where such funds were generated
and submit an annual report to the Administrator of such projects in each
State of operation;
(7) to provide small businesses which need both long-term fixed asset
financing through the 504 Loan Program and shorter term working capital
and equipment financing through the 7(a) loan program the option of utilizing
both Administration loan guaranty programs to their maximum amount;
(8) to direct the Administration to require that 504 defaulted loan liquidations
and recoveries be processed by CDCs or their designated third-party contractors,
and that CDCs be compensated for the cost of such liquidation activities;
and
(9) to direct the Administration to establish an incentive program directed
to CDCs that foreclose and liquidate defaulted loans.
SEC. 3. AUTHORIZATIONS FOR 504 LOAN PROGRAM.
Section 20 of the Small Business Act (20 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)
and the 504 Loan Program, 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 are necessary to carry out such programs.
`(g) Fiscal Year 2008- For the program authorized under section 7(a)(13)
and the 504 Loan Program, the Administrator is authorized to make $9,500,000,000
in financings, and there are authorized to be appropriated to the Administrator
such sums as are necessary to carry out such programs.
`(h) Fiscal Year 2009- For the program authorized under section 7(a)(13)
and the 504 Loan Program, the Administrator is authorized to make $10,500,000,000
in financings, and there are authorized to be appropriated to the Administrator
such sums as are necessary to carry out such programs.'.
SEC. 4. CERTIFIED DEVELOPMENT COMPANY ECONOMIC DEVELOPMENT.
Section 504 of the Small Business Investment Act of 1958 (15 U.S.C. 697a)
is amended--
(1) by striking the section heading and inserting the following: `private
debenture sales and program name';
(2) by redesignating subsections (a) and (b) as subsections (b) and (c),
respectively; and
(3) by inserting before subsection (b) the following:
`(a) Program Name- The program to provide financing to small business concerns
by guarantees of loans under this title, which are funded by debentures
guaranteed by the Administrator shall be known as the `Certified Development
Company Economic Development Loan Program' or the `504 Loan Program'.'.
SEC. 5. 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
which the Administrator has determined meets the criteria of section 506.'.
SEC. 6. ELIGIBILITY OF DEVELOPMENT COMPANIES TO BE DESIGNATED AS CERTIFIED
DEVELOPMENT COMPANIES; AUTHORITY TO ISSUE DEBENTURES; 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 to read as follows:
`SEC. 506. CERTIFIED DEVELOPMENT COMPANIES.
`(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
prior to 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 504 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
prior to 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 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--
`(A) be not fewer than 25 members of the development company (or owners
or stockholders, if the corporation is a for-profit entity)--
`(i) none of whom may own or control more than 10 percent of the voting
membership of the company; and
`(ii) all of whom shall be residents of the area of operations of
the development company, as specified by the Administrator under subsection
(b); and
`(B) be at least 1 member of the development company from each of--
`(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;
and
`(A) IN GENERAL- The development company shall have a board of directors.
`(B) MEMBERS OF BOARD- Each member of the board of directors of the
development company shall be--
`(i) a member of the development company;
`(ii) elected by the members of the development company; and
`(iii) a resident of the area of operations of the development company,
as specified by the Administrator under subsection (b).
`(C) REPRESENTATION OF ORGANIZATIONS AND INSTITUTIONS- 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.
`(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 504 Loan
Program and handle all aspects of loan approval and servicing, including
liquidation, if appropriate.
`(B) INDEPENDENCE- Except as provided in subparagraph (C), the development
company shall be independently managed and operated to pursue the economic
development mission of the company and shall employ its chief executive
officer directly.
`(i) AFFILIATION- A development company may be an affiliate of another
local nonprofit service corporation (other than a development company)
whose mission is to support economic development in the area in which
the development company operates.
`(ii) MEMBERS OF BOARD- 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 boards of directors.
`(iii) STAFFING- Except as provided in clause (iv), a development
company may satisfy the requirement for full-time professional staff
under subparagraph (A) by contracting for the required staffing with
an entity with which the development company is affiliated, including--
`(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 Administrator.
`(iv) RURAL AREAS- A development company located in a rural area,
as defined in section 501(f), may satisfy the requirements of a full-time
professional staff and professional management ability under subparagraph
(A) by contracting with another certified development company that
has such staff and management ability and is located in the same general
area in which the development company is located.
`(v) FOR-PROFIT COMPANIES- A development company that was certified
by the Administrator prior to January 1, 2006, and that has contracted
with a for-profit company to provide professional staff as of such
date may continue to contract for staffing with a for-profit company.
`(1) IN GENERAL- The Administrator shall specify the area in which an
applicant is certified to provide assistance to small business concerns
under this title.
`(2) INITIAL AREA- The Administrator shall not authorize an applicant
to provide assistance under paragraph (1) outside of the State of incorporation
of the development company when first authorizing an applicant to provide
assistance under this title, unless it proposes to operate in a local
economic area under subsection (c).
`(c) Local Economic Area Requirement and Exemption-
`(1) DEFINITION- In this subsection, the term `local economic area' means
an area, as determined by the Administrator, that--
`(A) is in a State other than the State in which a development company
is incorporated;
`(B) shares a border with the area of operations of the development
company; and
`(C) is a part of a local trade area (including a city that is bisected
by a State line and a metropolitan statistical area that is bisected
by a State line) that is contiguous to the area of operations of the
development company.
`(2) EXEMPTION- An applicant operating in a local economic area shall
not be deemed to be operating in a multistate area, and shall not be required
to comply with the requirements of multistate operation.
`(d) Multistate Operation- After a development company has demonstrated
its ability to provide financial assistance in its area of operations, it
may request the Administrator to authorize the development company to operate
as a multistate certified development company and to finance small business
concerns under this title in a State other than the State in which the development
company is incorporated, if --
`(1) such State is contiguous to the State in which the development company
is incorporated, except that the States of Alaska and Hawaii shall be
deemed to be contiguous to any State abutting the Pacific ocean;
`(2) the development company demonstrates its proficiency in making and
servicing loans under the 504 Loan Program by--
`(A) requesting and receiving designation as an accredited lender under
section 507 or a premier certified lender under section 508; and
`(B) meeting or exceeding performance standards established by the Administrator;
`(3) the development company adds additional members of the development
company from such State that--
`(A) meet the requirements of subsection (a)(6); and
`(B) are residents of such State;
`(4) the development company adds at least 1 member to its board of directors
from such State; and
`(5) the development company meets such other criteria or comply with
such conditions as the Administrator may require.
`(e) Processing of Expansion Applications- Not later than 30 days after
the date of receipt of an application under subsection (d), the Administrator
shall determine whether the development company meets the requirements of
subsection (d) and accept or reject the request of a development company
for approval as a multistate company in writing.
`(f) Use of Excess Funds- Any funds generated by a development company from
making 504 loans which remain after payment of staff, operating and overhead
expenses shall be retained by the development company as a reserve for--
`(2) expanding the area in which the certified development company operates
or proposes to operate as a multistate development company under subsection
(d); or
`(3) investment in other local community or economic development activity
in the State from which such funds were generated or in a local economic
area which includes part of the State of incorporation.
`(g) Ethical Requirements-
`(1) DEFINITIONS- In this subsection--
`(A) the term `close relative' means a spouse, parent, child, sibling,
or the spouse of a parent, child, or sibling; and
`(B) the term `position of control' means an officer, member of the
board of directors, manager, chief executive officer, agent involved
in the loan process, key employee or similar management position of
a certified development company and, if the development company is a
for-profit entity, a holder of 20 percent or more of the value of the
stock of the certified development.
`(2) CONFLICT OF INTEREST- A certified development company, and the officers,
employees, and other staff of a certified development company, shall at
all times act ethically and avoid activities which constitute a conflict
of interest or appear to constitute a conflict of interest.
`(3) CONTROL OF MULTIPLE COMPANIES-
`(A) IN GENERAL- No person, either directly or indirectly, may hold
a position of control on more than 1 certified development company.
`(B) RELATIVES- No close relative of an individual who holds a position
of control in a certified development company may hold a position of
control in a certified development company, except for the certified
development company in which the individual serves.
`(4) PROHIBITED CONFLICT IN PROJECT LOANS-
`(A) IN GENERAL- Except as provided in subparagraph (B), no certified
development company may--
`(i) recommend or approve a guarantee of a debenture by the Administrator
as part of a project under the 504 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 directly or indirectly provides financing collateralized by
a first lien on the same property.
`(B) EXCEPTION- A business development company that was participating
as a first mortgage lender under the 504 Loan Program in fiscal year
2004 or 2005, either directly or through an affiliate, may continue
to do so.
`(5) OTHER ECONOMIC DEVELOPMENT ACTIVITIES-
`(A) MULTIPLE PROGRAMS- Operation of multiple programs to assist small
business concerns in order for a certified development company to carry
out its economic development mission shall not be deemed a conflict
of interest for purposes of this section.
`(B) OTHER SOURCES OF FUNDING-
`(i) IN GENERAL- Except as provided in clause (ii), and notwithstanding
any other provision of law, no certified development company may accept
funding from any source, including any department or agency of the
Federal Government--
`(I) if such funding includes any conditions, priorities or restrictions
upon the types of small business concerns to which the certified
development company may provide financial assistance under this
title; or
`(II) if such funding includes any conditions or imposes any requirements,
directly or indirectly, upon any recipient of assistance under this
title.
`(ii) EXCEPTION- Clause (i) shall not apply if the source of funding
described in clause (i) provides all of the financial assistance to
be delivered by the certified development company to the small business
concern and such conditions, priorities, or restrictions are limited
solely to the financial assistance so provided.
`(h) Reporting- A certified development company shall submit an annual report
to the Administration regarding--
`(1) the use of excess funds by the company under subsection (f); and
`(2) the involvement of the company with local economic development activities
in every State in which the certified development company operates.'.
SEC. 7. 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) 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. 8. DEFINITION OF RURAL AREAS.
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 section, the terms `rural' and `rural area' include
any area other than--
`(1) a city or town that has a population greater than 50,000 inhabitants;
and
`(2) the urbanized area contiguous and adjacent to such a city or town.'.
SEC. 9. BUSINESSES IN LOW-INCOME AREAS.
Section 501(d)(3) of the Small Business Investment Act of 1958 (15 U.S.C.
695(d)(3)) is amended--
(1) in subparagraph (G), by striking `or' at the end;
(2) in subparagraph (H), by striking the period at the end and inserting
`, or'; and
(3) by adding at the end the following:
`(I) expansion of businesses in low-income communities (defined as any
area which would be eligible for new markets tax credits under section
45D(a) of the Internal Revenue Code of 1986, or regulations issued thereunder).'.
SEC. 10. COMBINATIONS OF CERTAIN GOALS.
Section 501(d) of the Small Business Investment Act of 1958 (15 U.S.C. 695(d))
is amended by inserting before the undesignated matter at the end the following:
`(4) A small business concern which is owned by more than 1 individual,
or a corporation whose stock is owned by more than 1 individual, shall
be deemed to have achieved a public policy goal under paragraph (3) if
not less than 51 percent of the small business concern is owned by individuals
who are in 1 or a combination of the groups described as public policy
goals in subparagraph (C) and (E) of paragraph (3).'.
SEC. 11. 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 subparagraph 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 the enactment
of this subparagraph, the' and inserting `The'.
SEC. 12. 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 also include
a limited amount of debt refinancing, as described in subparagraph (B).
`(B) EXPANSIONS- If the project for which a financing under this title
is sought involves the 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, if--
`(i) the existing indebtedness was not financed under the 504 Loan
Program or under section 7(a) of the Small Business Act;
`(ii) the proceeds of the indebtedness were used to acquire land,
including a building situated thereon, to construct a building thereon
or to purchase equipment;
`(iii) the borrower has been current on all payments due on the existing
debt for the 1-year period prior to the date on which the application
is submitted; and
`(iv) the financing under the 504 Loan Program will provide better
terms or rate of interest than exists on the existing debt.'.
SEC. 13. 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 `0.155 percent'.
(b) Reporting- Not later than 2 years after the effective date under subsection
(c), the Administrator shall submit to the Committee on Small Business and
Entrepreneurship of the Senate and the Committee on Small Business of the
House of Representatives a report assessing the impact of the change in
fees under subsection (a)(3) in fostering economic development.
(c) Effective Date- The amendments made by subsection (a) shall take effect
and apply to loans approved under the 504 Loan Program, on or after the
date that is 30 days after the date of enactment of this Act.
(d) Recomputation- Notwithstanding any other provision of law, the Administrator
shall recalculate the amount of the fee to be paid by a borrower under section
503(b)(7) of the Small Business Investment Act of 1958 (15 U.S.C. 697(b)(7))
such that the cost of making guarantees under the 504 Loan Program is zero
after the effective date under subsection (c).
SEC. 14. 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 that
is required to provide a contribution under clause (i), (ii) or (iii)
of subparagraph (C)--
`(I) provides the minimum amount required under such subparagraph,
not less than 50 percent of the total cost of the project shall
come from financing provided by an institution described in subclause
(I), (II), or (III) of clause (i) of this subparagraph; or
`(II) provides more than the minimum amount required under such
subparagraph, any contribution in excess of such minimum amount
may be used to reduce the amount required from an institution described
in subclause (I), (II), or (III) of clause (i) of this subparagraph,
except that the amount from such institution may not be reduced
to an amount equal to or less than the amount of the loan made by
the Administrator.'.
SEC. 15. 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::
`(A) IN GENERAL- Any certified development company that elects not to
apply for authority to foreclose and liquidate defaulted loans under
this section, or that the Administrator determines to be ineligible
for such authority, shall contract with a third-party to perform foreclosure
and liquidation of defaulted loans in its portfolio.
`(B) APPROVAL OF QUALIFICATIONS AND TERMS- A contract under subparagraph
(A) shall be contingent upon approval by the Administrator of the qualifications
of the contractor and the terms and conditions of liquidation activities.
`(2) COMMENCEMENT- This subsection shall not require any certified development
company to liquidate defaulted loans until after the date on which the
Administrator implements a program to compensate and reimburse certified
development companies under subsection (f).
`(f) Compensation and Reimbursement-
`(1) REIMBURSEMENT OF EXPENSES- The Administrator shall reimburse each
certified development company for all expenses paid by such company as
part of 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 certified 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 certified development companies
that foreclose and liquidate defaulted loans, which schedule shall--
`(A) be based on a percentage of the net amount recovered;
`(B) not exceed a maximum amount; and
`(C) not apply to any foreclosure which is conducted under a contract
between a development company and a qualified third-party to perform
the foreclosure and liquidation.'.
SEC. 16. CLOSING COSTS.
Section 503(b)(4) of the Small Business Investment Act of 1958 (15 U.S.C.
697(b)(4)) is amended to read as follows:
`(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. 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- Financing under the 504 Loan Program 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, up to the maximum amount provided
in section 7(a)(3)(A) of such Act.'.
SEC. 18. 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. 19. PREMIER CERTIFIED LENDERS PROGRAM REPORT.
(a) In General- Not later than 90 days after the date of enactment of this
Act, the Administrator shall submit to the Committee on Small Business and
Entrepreneurship of the Senate and the Committee on Small Business of the
House of Representatives a report regarding the operation of the Premier
Certified Lenders Program, during the 3-year period ending on the date of
enactment of this Act.
(b) Contents- The report submitted under subsection (a) shall--
(1) include the number of loans made under the Premier Certified Lenders
Program;
(2) describe any difficulties encountered in making such loans; and
(3) make recommendations, if any, regarding how to increase the number
of loans made under the Premier Certified Lenders Program or streamline
such program.
SEC. 20. REGULATIONS.
The Administrator shall--
(1) publish proposed regulations 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 regulations in final form not later than 120 days after
the date on which proposed regulations are published under paragraph (1).
END
